2016
Annual Report
2016
Annual Report
2016
Sustainability Report
at a glance2016
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Annual Report publications
The Annual Report, Sustainability Report and Swisscom at a glance are
part of Swisscom’s Annual Report 2016.
The three publications are available online at: swisscom.ch/report2016
The “best companion in the networked world” concept
Digitisation is changing our lives, our behaviour and our
needs. Regardless of how vastly our customers’ needs diff er,
we still want to address each of those needs individually.
Because nothing feels better than knowing you have a
reliable partner at your side.
The images on the cover of the 2016 reports symbolise
the collaboration between our customers and Swisscom.
From left to right:
Annual Report:
Sustainability Report: Jucker Farm in Seegräben, with customer Martin Jucker
Swisscom at a glance: Swisscom Shop in Zurich, with customer Therese G.
Impact Hub in Zurich, customer Ava AG with Lea von Bidder
We would like to thank our customers and employees
who took the time to have these pictures taken.
Welcome
to the country
of possibilities
Swisscom is connecting Switzerland: we accompany
and support our customers in today’s networked world
with our network, products and services, and offer them
only the best – everywhere and anytime.
Swisscom assumes responsibility: together with the
Swiss population, we are committed to our country.
Swisscom promotes skilled employees: people who want
to help shape Switzerland’s digital future.
Visiting the Impact Hub
in Berne
Hansueli
Loosli
Urs
Schaeppi
Shareholders’ letter
Dear Shareholders
Swisscom held its ground during a challenging 2016. An impressive
market performance helped Swisscom generate stable revenue and
retain its strong market position. Large investments ensure that the
Swisscom network infrastructure stays fit for the future. Fastweb
continues to develop nicely and the company boosted its revenue,
operating income and customer numbers in 2016.
Swisscom holds its ground in a challenging environment
At CHF 11,643 million (–0.3%), Swisscom’s net revenue was practically on a par with the previous
year. This is a remarkable achievement given current price pressure and the market environment.
Compared with the prior year, Swisscom increased its operating income before depreciation and
amortisation (EBITDA) by CHF 195 million or 4.8% to CHF 4,293 million primarily as a result of
non-recurring items in the prior year. On a like-for-like basis, EBITDA fell slightly by 1.2%. Cost cut-
ting and growth at Fastweb were unable to compensate for declining returns in the Swiss core
business. Net income rose by 17.8% to CHF 1,604 million, largely due to non-recurring items. At
CHF 2,416 million, Group-wide capital expenditure was roughly on a par with last year (+0.3%).
Swisscom maintains its strong market position in Switzerland
Net revenue in the Swiss core business declined by CHF 105 million or 1.1% year-on-year to
CHF 9,440 million. While revenue from telecommunications services fell as a result of increasing
competitive pressure and lower roaming prices, revenue in the solutions business with corporate
customers increased. The number of revenue generating units (RGU) dropped by 96,000 or 0.8% to
12.4 million as a result of market saturation. Nevertheless, the Company maintained or, as in the
case of Swisscom TV, even increased its market shares. Operating income before depreciation and
amortisation (EBITDA) rose by CHF 85 million or 2.4% to CHF 3,686 million. After adjustments for
non-recurring items, EBITDA fell by CHF 125 million or 3.2% due to pressure on pricing, higher costs
for roaming and subscriber acquisition as well as low subscription growth. Capital expenditure in
Switzerland remained high at CHF 1,774 million (–2.6%).
Successful business year at Fastweb in 2016
Fastweb acquired many new customers in the broadband business (+7.0% to 2.36 million) and
boosted its revenue by EUR 59 million to EUR 1,795 million (+3.4%) as a result. Operating income
before depreciation and amortisation (EBITDA) rose by EUR 85 million or 14.8% to EUR 661 million.
Excluding non-recurring items, the increase amounted to EUR 45 million or 8.0%. Fastweb contin-
ues to make progress on the expansion of its network. 810,000 customers were connected to the
company’s own ultrafast broadband network at the end of 2016 (+25% year-on-year), which rep-
resents around one-third of all Fastweb broadband customers. The Fastweb network now extends
to around 100 towns and cities in Italy, thus covering 30% of the population or 7.5 million house-
holds. Capital expenditure at Fastweb grew by 7.4% to EUR 581 million due to accelerated broad-
band expansion.
Swisscom share performance in 2016
The Swisscom share price fell by 9.3% in 2016. In terms of total shareholder return (share price
movement and dividend payout), Swisscom achieved –5.4% thanks to the high dividend yield. The
Swisscom share outperformed the Stoxx Europe 600 Telecommunications Index (–16.9% in CHF;
–15.8% in EUR). Payment of an unchanged ordinary dividend of CHF 22 per share will be proposed to
the Annual General Meeting of Shareholders. This is equivalent to a total dividend payout of
CHF 1,140 million. Swisscom is thus upholding the principle of continuity in its dividend policy.
Digitisation as an opportunity and challenge
Digitisation is changing both our economy and our society. Networking between people, applications
and devices is intensifying with each passing year and billions of devices are already interconnected.
Processes previously involving tedious manual work are being digitised. We are producing new
services more quickly and cost-effectively in the cloud. Not only are our infrastructures being
controlled from the cloud, but physical devices themselves are being migrated to the cloud
(virtualisation) as well. This digital environment is giving rise to new business models and
behaviours. Instead of buying, people rent and share (sharing economy) and new platforms emerge.
In this way, digitisation is permeating our everyday lives and the world we work in. Swisscom views
digitisation as both an opportunity and a challenge. Constantly available high-performance
networks and infrastructures form the backbone of all digitisation projects. Swisscom’s infrastructure
and ICT expertise are opening up excellent opportunities for the company to sustain this success in
nearly every area of business and daily life. Yet at the same time, we see the economic and social
changes that accompany digitisation. We therefore make an effort to embrace our responsibility as
a company through a variety of different initiatives and commitments.
More challenging market environment
Competition is extremely fierce in the Swiss ICT sector. The number of telephone lines connected
through the fixed telephone network is dropping by more than 200,000 lines per year. 2016 marked
the first year in which we were unable to offset this decline and the trend is set to continue in the
years ahead. In the business customer market, too, cost pressure and falling margins triggered by
an intense price war with our competitors have not gone unnoticed.
Global, web-based foreign providers have stepped up their activities in our markets as well. While
these competitors have mainly been gearing their products toward private users up until now, they
are increasingly extending their offers to business customers and forming partnerships to launch
efficient, scalable products and services.
Demands for data security on the rise
Increasing connectivity and digitisation are producing ever-increasing volumes of data. Accordingly,
the public spotlight is not only shifting to the careful use of data, but also security. At Swisscom, the
responsible, secure handling of information takes centre stage. We want industry and society to be
able to leverage the opportunities offered by smart data to their advantage.
Swisscom has the right product portfolio and capabilities needed to continue growing in the infor-
mation security market. We already fend off 99% of all hacker, phishing or spam attacks with our
current resources.
What we stand for
As a partner, pioneer and shaper, Swisscom aspires to offer its customers the very best in today’s
networked world. As an exemplary company offering digitisation solutions, we let people choose
flexibly how to interact, work and live. As a technology partner, Swisscom helps companies improve
their products, processes and marketing and, in doing so, remain competitive. We thereby
strengthen and promote all of Switzerland as a business location.
Building the best infrastructure – the basis for the networked world
A networked world is only as strong as its infrastructure. In keeping with that maxim, Swisscom
has been investing in a future-oriented mix of network technologies for several years. In 2016,
Swisscom invested nearly CHF 1.8 billion in Switzerland alone and further investments of the same
magnitude are planned for 2017 as well. Switzerland boasts one of the best telecommunications
infrastructures in the world. With 99% of coverage boasting speeds in excess of 30 Mbps, it is
already close to achieving the broadband objective of 100% coverage with 30 Mbps as set forth in
the EU’s Digital Agenda 2020.
By the end of 2016, Swisscom had already provided more than 3.5 million ultrafast broadband
connections (>50 Mbps). Swift expansion has made it possible for more than 94% of all homes and
businesses to use Swisscom TV. In 2016, Swisscom defined new strategic objectives for its expan-
sion of the broadband infrastructure via the fixed telephone network: the majority of people living
in any given Swiss municipality should have access to higher bandwidths by the end of 2021. To this
end, some 90% of all homes and businesses will have a minimum bandwidth of 80 Mbps by the end
of 2021 – with around 85% of those achieving speeds of 100 Mbps or higher.
At the heart of the Swisscom network is IP technology (Internet Protocol). This not only forms the
basis for Internet services, but also for Swisscom TV and voice telephony, to name a few examples.
Swisscom is planning to switch all of its products and services over to IP by the end of 2017, so that
its All IP customers can take advantage of the many opportunities offered by the digital world. All
IP customers can block annoying advertising calls, for instance, by activating the free filter for
unwanted advertising calls on their fixed-line connection. 1.5 million customers had already migrated
to IP as at the end of 2016. The changeover is proceeding as planned.
We doubled revenue from cloud-based infrastructure (Dynamic Computing Services) in 2016 and
more than 270 customers and partners are now using dynamic infrastructures. Given the cloud
and ICT infrastructures’ ability to help us simplify processes and facilitate innovative business
models, they are a key competitive advantage in this digitised world. Customers can focus more on
their business and outsource ICT services, and we are able to meet the IT needs of our customers
more quickly and effectively than in the past through increased standardisation and virtualisation.
In 2016, Swisscom became the first provider in Switzerland to set up an additional network dedi-
cated to the Internet of Things. This Low Power Network is operated separately from the mobile
phone network and forms the basis for the Internet of Things which will interconnect millions of
sensors in future. Through all of these investments and innovations, Swisscom plays a pivotal role
in shaping the markets where it does business.
Offering the best experiences – to set Swisscom apart from the rest
The market environment is changing at an accelerating pace and offerings are easily copied.
Companies are only successful if they design experiences to engender a strong emotional bond and
create enthusiastic, loyal customers. In everything it does, Swisscom wants to make a trustworthy,
simple and inspiring impression. We put people and their relationships at the centre of all of our
thoughts and actions. We go up against global competition with the very best we have to offer: our
employees. They are on site in municipalities both large and small, visit customers at their homes
and provide advice over the phone or via online chats. Our customer experiences are designed so
that they feel the same each time customers come into contact with Swisscom, whether this be
during communication, while using our products or when interacting with our customer service.
Uniform experiences offer a vital link between Swisscom and its customers, particularly in the age
of digitisation.
By the end of 2016, Swisscom had attracted 1.48 million customers to sign up for Swisscom TV. It is
continuously expanding the TV offering, including the addition of a new UHD box and the launch of
services that make TV accessible for everyone, especially people with a visual or hearing impairment.
Quick mobile phone repair services have emerged as a major need. In response to this, we set up
our own Repair Centers in some of the Swisscom Shops. And in keeping with our promise to
customers, they are different than what consumers have come to know and expect elsewhere. Our
Repair Centers guarantee repairs within 24 hours using original spare parts and even offer a coffee
bar atmosphere for anybody waiting.
The new Natel infinity 2.0 subscriptions introduced in 2016 are proving extremely popular. Since
the offer’s spring launch, over a million customers have opted in favour of more roaming, quicker
surfing speeds and other included services like a device-independent cloud.
Seizing the best opportunities for growth – long-term competitiveness
Long-term competitiveness calls for companies to evolve and embrace the courage to change.
Swisscom has been doing this for years. We share this experience with our business customers and
offer our support as a trusted partner during their digital transformation. Swisscom has a broad
portfolio of machine-to-machine applications, digitisation of business processes, use of the cloud,
security solutions, use of artificial intelligence and much more. These solutions give Swisscom’s
customers a chance to leverage opportunities for growth and guarantee their competitiveness.
Swisscom avails itself of the best opportunities for growth as well. It plans to continue expanding
both in growth areas in the TIME market (telecommunications, IT, media and entertainment) and
by developing its Internet business.
The information services local.ch and search.ch were merged under the “localsearch” brand in 2016.
We also collaborated with Coop to launch siroop, an online marketplace that unites merchants
both large and small, nationwide and local. Our cooperation with the start-up Mila will continue as
well: Around 22,000 interventions by Swisscom Friends, namely customers who help other
customers locally, have been registered on the platform.
Fastweb
Swisscom is continuing to develop its subsidiary Fastweb. By expanding the ultrafast broadband
network and mobile communications market, building partnerships, and improving service quality,
Fastweb aims to further strengthen its strong market position in Italy and generate growth. The
expansion of Italy’s broadband network is continuing at full speed: Fastweb and Telecom Italia
intend to cooperate on the rollout of Fibre to the Home (FTTH). The aim is for 13 million or half of
homes and businesses in Italy to be connected to the ultrafast broadband network by 2020.
Swisscom values
At Swisscom, people and their relationships are at the heart of everything we do: We want to shape
the future (sustainability), achieve great things (passion), be open to new ideas (curiosity), keep our
promises (reliability) and be close to customers (customer focus). Swisscom’s centre of excellence
for Human Centred Design develops methods and approaches with a focus on people and their
relationships. Our values and beliefs are then incorporated into the development of new products
and services.
Multi-generational thinking as an integral component of the corporate strategy
Swisscom thinks and acts with a focus on sustainability. This responsibility towards the environ-
ment, society and the economy forms an integral part of our corporate strategy. Our vision is of a
modern, forward-looking Switzerland.
In terms of Corporate Responsibility, our activities focus on the main priorities of climate protection,
work and life, media skills, attractive employer, fair supply chain and a networked Switzerland. In
2016, we strengthened efforts to compile evidence related to our activities in the areas of energy
efficiency, media skills and fair supply chain even further. Nationwide, we have connected over
6,020 schools to the Internet through Schools on the Net, a programme that has been in place for
over 15 years. This initiative benefits around 50,000 school classes, 120,000 teachers and more
than 900,000 pupils. At the same time, our media skills courses have introduced more than
300,000 elderly people (since 2005) and 100,000 pupils, parents and teachers (since 2008) to the
networked world and all of the opportunities and risks it entails. As one of Switzerland’s most
attractive employers, it goes without saying that Swisscom fosters a corporate culture geared
toward sustainability. This includes personal and professional development for each and every
individual, active specialist training with more than 900 trainees at present (including 450 in
ICT jobs) and a fair social partnership.
With regard to climate protection, we have cut our own CO2 emissions by more than half since 1990.
Nowadays, customers using our services for mobile working, for instance, are reducing CO2 emissions
by around 450,000 tonnes per year, which is equivalent to the emissions of around 110,000 cars.
Newsweek magazine named Swisscom as the fourth most sustainable company in the world
in 2016. And something of which we are very proud.
Challenging regulatory environment
A clear majority of voters and the all States rejected the “Pro Service Public” initiative in June 2016.
In December 2016, ComCom decided to renew Swisscom’s licence for the Swiss universal service
for another five-year period, beginning in 2018. The revised ordinance increases the minimum
bandwidth from 2 to 3 Mbps, now includes IP technology and abolishes Swisscom’s obligation to
operate one public payphone in each municipality. Several different topics are on the agenda in
2017: the complete revision of the Swiss Data Protection Act, revision of the Telecommunications
Act, implementation of the Federal Law on the Monitoring of Postal and Telecommunications
Traffic (BÜPF) and the Intelligence Service Act. With a view to the rollout of 5G, the telecommunica-
tions industry will continue to advocate for concessions for antenna construction.
Simplification and a focus on costs
Swisscom plans to reduce its cost base by over CHF 300 million between 2015 and 2020. We will
achieve this through the organisational changes implemented in 2016, adjustments to our job
vacancies, optimised processes and the transformation to All IP technology. These measures will
free up funds, enabling Swisscom to continue investing in infrastructure and new business areas
and to remain competitive over the long term.
Financial outlook for 2017
Swisscom will propose payment of a dividend of CHF 22 per share for the 2016 financial year at the
2017 Annual General Meeting. For 2017, Swisscom expects net revenue of around CHF 11.6 billion,
EBITDA of around CHF 4.2 billion and capital expenditure of some CHF 2.4 billion. For Swisscom
(excluding Fastweb), a slight decline in revenue is expected due to high competition and price pres-
sure. A slight increase in revenue is expected for Fastweb. EBITDA for Swisscom, excluding Fastweb,
is expected to be around CHF 100 million lower year-on-year. The reduction in EBITDA is attribut-
able to price pressure and declines in the number of fixed-line telephony connections. In addition,
the costs for roaming are expected to increase. EBITDA will be positively affected by cost savings.
Fastweb’s EBITDA is expected to be slightly higher. Capital expenditure in Switzerland and at
Fastweb is expected to be on a par with the prior year. Subject to achieving its targets, Swisscom
will propose payment of an unchanged, attractive dividend of CHF 22 per share for the 2017 finan-
cial year at the 2018 Annual General Meeting.
A big thank you
2016 was a successful year, something that is not a given in light of today’s market environment. We
owe this success to the trust placed in us by our customers. We owe it to the loyalty of our shareholders.
And we owe it to our employees’ enthusiasm and eagerness to do their very best, every single day of
the year. They deserve our most heartfelt gratitude. After all, they are the ones contributing their
ideas, visions and innovations today in order to create the Swisscom of tomorrow and beyond. Their
passion for Swisscom and the interest they show in our products fill us with confidence and pride
as we look to the future.
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
14–21
24–95
98–145
148–237
240–250
Swisscom already has a high-level security culture. By conducting
targeted attacks, the Red Team is able to identify weaknesses
that were either previously unknown or not given a suffi ciently
high priority by Swisscom’s security concepts.
Michel Grädel
Security expert
Stephan Rickauer
Head, Red Team
Optimum security
An average of five specific security
measures can be recommended for
each cyber attack.
Simulating cyber attacks
A realistic cyber attack by
the Red Team lasts three weeks
on average.
“We put ourselves in the minds
of real cyber criminals and
attack Swisscom several times
a year. We’re the good hackers.”
Introduction
The best in
today’s net-
worked world –
everywhere
and anytime.
16 KPIs of Swisscom Group
KPIs of Swisscom Group
1616 KPIs of Swisscom Group
18 Key events 2016
Key events 2016
1818 Key events 2016
20 Business overview
Business overview
2020 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
[
%
CHF
%
2016
2015
Change
11,643
t o b e u p d a t e d ]
11,678
4,098
–0.3%
35.1
4.8%
36.9
4,293
2,148
2,012
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Capital expenditure in property, plant and equipment
and other intangible assets
Net debt at end of period
Operational data at end of period
Fixed telephony 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
Ratio of CO2 reduction to CO2 emissions 2
Employees
Full-time equivalent employees at end of year
Full-time equivalent employees in Switzerland at end of year
in thousand
in thousand
in thousand
in thousand
in thousand
in thousand
in thousand
in thousand
in thousand
CHF
CHF
GWh
%
tonnes
number
number
1,604
30.97
6,522
30.4
1,791
2,416
7,846
2,367
1,992
1,476
6,612
1,362
26.27
5,242
24.8
1,844
2,409
8,042
2,629
1,958
1,331
6,625
12,447
12,543
128
364
2,355
51,802
456.10
23,627
22.00 1
536
35.9
19,837
0.99
21,127
18,372
128
315
2,201
51,802
503.00
26,056
22.00
521
29.6
20,116
0.81
21,637
18,965
6.8%
17.8%
17.9%
24.4%
–2.9%
0.3%
–2.4%
–10.0%
1.7%
10.9%
–0.2%
–0.8%
0.0%
15.6%
7.0%
0.0%
–9.3%
–9.3%
0.0%
2.9%
–1.4%
–2.4%
–3.1%
1 In accordance with the proposal of the Board of Directors to the Annual General Meeting.
2 Together with its customers Swisscom is aiming to save twice as much CO2 as it emits through its operations including the supply chain by 2020.
11,703
14,000
Net revenue in CHF million
t o b e u p d a t e d ]
11,678
1,914
11,643
1,978
10,500
7,000
9,665
9,586
2,117
9,764
[
3,500
0
Other countries
Switzerland
EBITDA in CHF million
4,413
625
3,788
4,098
637
3,461
4,293
721
3,572
6,000
4,500
3,000
1,500
0
2014
2015
2016
2014
2015
2016
Net income in CHF million
Capital expenditure in CHF million
3,000
2,250
1,500
1,706
1,362
1,604
750
0
2,436
685
1,751
2,409
587
1,822
2,416
642
1,774
3,000
2,250
1,500
750
0
2014
2015
2016
2014
2015
2016
Number of employees in full-time equivalent (FTE)
21,125
2,853
18,272
21,637
2,672
18,965
21,127
2,755
18,372
30,000
22,500
15,000
7,500
0
Ratio of CO2 reductions to CO2 emissions
1.2
0.99
0.77
0.81
0.9
0.6
0.3
0
Other countries
Switzerland
2014
2015
2016
2014
2015
2016
Other countries
Switzerland
Other countries
Switzerland
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Key events 2016
Swisscom TV
1 Gbps
Thanks to a new TV-Box, customers can now for the
first time watch programmes in ultra-high definition
(UHD). The built-in voice-activated search function
that supports Swiss dialects ensures that content is
even easier to find. Swisscom is also making it easier
to access barrier-free TV content.
Swisscom, together with its partner Ericsson, is the
first provider in Europe to successfully transfer data
at 1 Gbps over the mobile broadband network.
In doing so, it is taking another major step towards
the introduction of even higher mobile Internet speeds.
G.fast
Swisscom is the first telecommunications service
provider in Europe to start using the new G.fast
transmission standard throughout Switzerland.
The technology will allow Swisscom to quickly and
cost-effectively provide high transmission speeds
of up to 500 Mbps.
The Internet
of Things
Swisscom is the first provider in Switzerland to set up
an additional network dedicated to the Internet
of Things: the Low Power Network. This network is
designed for the transmission of small amounts
of data independently of the electrical network.
Smart cities
Swisscom, in cooperation with the private IMD business
school, published a study aimed at supporting
authorities with digitisation. This study is one way
in which Swisscom strives to help cities employ digital
technology in smarter, more innovative ways.
Internet-Box 2
Thanks to its optimised technology, the new
“Internet-Box 2” router offers faster WLAN speeds
and a large transmission range at home.
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Blocking
advertising calls
FinTech
start-ups
Swisscom customers can activate a filter to block
advertising calls with a few clicks in the Customer
Centre or by calling the hotline. An IP-based fixed-
network connection is required to use this filter.
In its capacity as an IT service provider, Swisscom
currently provides support to more than half of all Swiss
banks in matters relating to digitisation, and is now
intensifying its collaboration with FinTech start-ups.
Repair Centre
There are nine Repair Centres in Swisscom Shops
throughout German-speaking and French-speaking
Switzerland. Defective mobile phones are, where
possible, repaired on site within 24 hours.
Voice
recognition
Swisscom is introducing new voice recognition
software for its Voiceprint hotline. The so-called
customer voiceprint ensures an even faster and more
reliable identity verification process than ever before.
New sub-
scription benefits
Households made up of five people or more can now
take advantage of the new Tutto benefit. The new
Natel infinity 2.0 subscriptions also offer higher surfing
speeds, more roaming options and unlimited online
storage.
New
business park
More than 500 employees are moving into the new
business park in Sion. The building, which complies
with the Minergie-P-Eco standard, meets Swisscom’s
high standards with respect to sustainable development
and modern working methods.
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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 (Sales & Services
and Products & Marketing divisions), Enterprise Customers and Wholesale, as well as the IT,
Network & Infrastructure division.
Residential Customers
Sales & Services
Sales & Services combines all sales channels and services for residential and SME customers under
one roof and is responsible for all call centres, online & cross channels, shops and field services
within Swisscom Switzerland. Sales & Services, together with the Customer Interaction Experience
team, also oversees all customer, sales and service processes along the full customer experience
chain and designs these processes.
Products & Marketing
The Products & Marketing segment houses the product and marketing expertise for residential
and SME customers. The division ensures that these two segments provide a uniform customer
experience. Products & Marketing plans, conceives and designs standardised B2B and B2C products.
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 infra-
structure, including the provision of cost-efficient solutions and reliable services. Enterprise Customers
ranks as one of the leading providers for the integration and operation of complex IT systems. It also
has core competencies in the fields of integrated communication solutions, IT infrastructure and
cloud services, workplace solutions and the digitisation of business process (including SAP services) and
provides a comprehensive range of outsourcing services for the financial sector.
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 services with foreign providers.
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IT, Network & Infrastructure
The IT, Network & Infrastructure (INI) segment builds, operates and maintains Swisscom’s nation-
wide fixed network and mobile communications infrastructure in Switzerland. It is also responsible
for the development and production of Switzerland-wide standardised IT and network services
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 as well as Swisscom Real Estate Ltd and Business Fleet Management Ltd.
Fastweb
Fastweb is a leading, alternative service provider in the Italian fixed-network market for both resi-
dential and business customers. Fastweb supplies its services both directly via its own fibre-optic
network and also via the unbundled fixed-access lines and wholesale products offered by Telecom
Italia. In addition to fixed-network services, its portfolio also includes mobile services for residential
customers on networks operated by other service providers. Fastweb provides its services in all
large towns and cities in Italy.
Other Operating Segments
The Other Operating Segments includes the Digital Business unit as well as Participations and
Subsidiaries in the areas of payment solutions, network construction and maintenance, radio trans-
mitters, energy management and event solutions, which complement the Swisscom core business
in related areas. Digital Business is focused on growth areas in the areas of Internet services and
digital business models. It also includes the online directories and phone book business.
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Group Headquarters
Group Headquarters chiefly comprises the Group divisions Group Business Steering, Group Strategy &
Board Services, Group Communications & Responsibility, Group Security and Group Human
Resources as well as employment company Worklink AG.
Thomas Birchmeier
Product manager
Denis Schlauss
IT architect
The Swisscom TV team plans and coordinates the devel-
opment of Swisscom TV from both a technical and a visual
perspective. Its primary aim is to produce a consistent TV
experience across all screens and for all target groups. This
has also led to the introduction of the fi rst functions for
barrier-free TV.
“We are proud to commit ourselves to investing in ‘Switzer-
land’s most popular television’. It is what drives us every
single day. Agile and rapid development enables us to react
to customer needs in a targeted manner. It’s important to
us that our services are simple and intuitive to use so that
even people with sensory impairments have easy access.”
Isabella Kosch
Strategic product developer
Alexander Schradt
Interface designer
375 music CDs
36 kWh
This is the volume of data
that Swisscom TV delivers
to our customers at peak
times – per second.
of electricity is consumed annually
by a Swisscom TV box, which
equates to the cost of one or two
cups of coffee at a restaurant.
Management Commentary
Inspiring our
customers
with the best
experiences.
Strategy, organisation
and environment
Business model
and customer relations
Employees
Innovation and
development
Financial review
26 Group structure and organisation
29 Corporate strategy and objectives
33 Value-oriented business management
34 General conditions
46 Business activities
53 Products, services, sales channels
55 Customer satisfaction
56 Headcount
57 Employment law in Switzerland
59 Staff development
60 Staff recruitment
60 Employee satisfaction
61 Employment law in Italy
62 Environment, objectives and management approach
62 Open innovation: a success factor
64 Focused innovation
66 Key fi nancial fi gures
67 Summary
68 Results of operations
71 Segment revenue and results
77 Quarterly review 2015 and 2016
80 Cash fl ows
81 Capital expenditure
82 Net asset position
84 Net debt
85 Statement of added value
86 Energy effi ciency and CO2 emissions in Switzerland
87 Financial outlook
Capital market
Risks
88 Swisscom share
90 Payout policy
90 Indebtedness
92 Risk management system
93 General statement on the risk situation
93 Risk factors
Strategy, organisation
and environment
Swisscom’s corporate strategy is aimed at maintaining its leading
position in the ICT market and offering customers the best.
Trusted, simple, inspiring.
Group structure and organisation
Management structure
From 1 January 2016 onwards, Swisscom further increased the level of digitisation within its organi-
sational structure in order to strengthen areas with close customer proximity and boost the compa-
ny’s effectiveness in the highly competitive ICT market. In doing so, the company has combined dis-
tribution and service for Residential Customers and Small and Medium-Sized Enterprises of Swisscom
Switzerland in the Sales & Services unit as well as the digital business in the Digital Business unit. To
exploit synergies and accommodate the increasing level of convergence, Swisscom is also combining
product development and product provision for Residential Customers and SME into one. The focus
placed on corporate business will remain of central importance, and the organisational structure of
Enterprise Customers will be further simplified. Through these adjustments Swisscom wants to
improve the customer experience from a single source, simplify processes and increase efficiency in
order to create greater scope for innovation. The restructuring has resulted in changes in the Group
Executive Board.
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 financial principles. It delegates day-to-day business management to the CEO of
Swisscom Ltd. Together with the CEO, the heads of the Group divisions Group Business Steering
(CFO) and Group Human Resources (CPO) as well as the heads of the Sales & Services, Products &
Marketing, Enterprise Customers and IT, Network & Infrastructure of Swisscom Switzerland form
the Group Executive Board. The Board of Directors of Italian subsidiary Fastweb is presided over by
the CEO of Swisscom Ltd. The management of Fastweb has been transferred to the Delegate of the
Board of Directors of Fastweb.
Board of
Directors
CEO
Swisscom Ltd
Internal Audit
Group
Communications
& Responsibility
Group Strategy
& Board Services
Group Security
Sales & Services
Products &
Marketing
Enterprise
Customers
IT, Network &
Infrastructure
Group Business
Steering
Group Human
Resources
Digital Business
Group Executive Board
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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 Group. By law, the Swiss Confederation must hold the majority
of shares in Swisscom Ltd. As at 31 December 2016, the Confederation held 51.0% of the shares in
Swisscom Ltd, which remains unchanged from the previous year.
27 Swiss subsidiaries (prior year: 33) and 14 foreign subsidiaries (prior year: 15) were fully consolidated
in Swisscom’s financial statements as at 31 December 2016, while 15 associated companies (prior
year: 15) were included according to the equity method. Swisscom also holds various non- controlling
interests in growth companies.
Swisscom Ltd mainly holds direct majority interests in Swisscom (Switzerland) Ltd, Swisscom
Broadcast Ltd and Swisscom Directories Ltd. Fastweb S.p.A. (Fastweb) is held indirectly via Swisscom
(Switzerland) Ltd and an intermediate company in Italy. Swisscom Re Ltd in Liechtenstein is the
Group’s own reinsurance company.
The main associates of Swisscom are Belgacom International Carrier Services Ltd (international data
traffic), siroop Ltd (online marketplace), Admeira Ltd (marketing of media offerings and advertise-
ment platforms) as well as Flash Fiber S.r.l. (optical fibre expansion in Italy).
Key changes to the Group structure in the year under review
At the start of 2016, Swisscom acquired a 50% stake in Geneva-based Open Web Technology SA,
which was renamed Swisscom Digital Technology SA after the takeover. The acquired company is a
specialist in the digital transformation of companies. The acquisition allows Swisscom to further
expand its digitisation expertise with corporate customers.
As a result of organisational changes and in order to simplify processes, a number of companies in the
Swiss core business were merged with Swisscom (Switzerland) Ltd in 2016, namely Swisscom Banking
Provider Ltd, Wingo Ltd as well as all Veltigroup companies.
In Italy, Swisscom sold its 10.6% minority shareholding in Metroweb S.p.A. at the end of 2016. Its
Italian subsidiary Fastweb and Telecom Italia (TIM) intend to cooperate on the rollout of Fibre to the
Home (FTTH), and for this purpose have founded Flash Fiber S.r.l., in which Fastweb holds a 20%
stake.
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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 for 2016 has
not been changed in comparison with the previous year. Segment reporting in 2016 thus continues
to comprise the following: Swisscom Switzerland, Fastweb and Other Operating Segments.
Swisscom Switzerland covers the segments Residential Customers, Small and Medium-Sized Enter-
prises, Enterprise Customers, Wholesale and IT, Network & Innovation.
Starting in 2017, segment reporting will be adapted to the management structure. The main
change concerns segmental reporting for the Swisscom Directories unit (localsearch), which was
previously reported as part of the Small and Medium-Sized Enterprises segment. The unit is now
reported in the Digital Business unit under “Other Operating Segments”. The new segment
reporting is shown below and is broken down as follows: Swisscom Switzerland, Fastweb and Other
Operating Segments. Swisscom Switzerland covers the segments Residential Customers, Enterprise
Customers, Wholesale and IT, Network & Infrastructure. Group Headquarters, which primarily
includes the Group divisions Group Business Steering, Group Human Resources, Group Communi-
cations & Responsibility, Group Strategy & Board Services and Group Security, continues to be
reported separately:
Swisscom Switzerland1
Fastweb
Other Operating Segments2
Group Headquarters
> Swisscom (Switzerland) Ltd3
> BFM Business Fleet Management Ltd
> CT Cinetrade AG4
> Datasport Ltd
> Mila AG
> Swisscom Digital Technology SA
> Swisscom Health AG
> Fastweb S.p.A.
> Billag Ltd
> cablex Ltd
> Improve Digital B.V.
> Mona Lisa Capital AG5
> Swisscom Broadcast Ltd
> Swisscom Directories Ltd
> Swisscom Energy Solutions Ltd
> Swisscom ITS Finance Custom Solutions Ltd
> Swisscom Event & Media Solutions Ltd
> Swisscom Ltd
> Swisscom Italia S.r.l.
> Swisscom Re Ltd
> Worklink AG
> Swisscom Real Estate Ltd
> Swisscom Services Ltd
> Belgacom International Carrier Ltd
> Flash Fiber S.r.l.
> Admeira Ltd
> finnova ltd bankware
> Medgate Ltd
> Medgate Technologies Ltd
> siroop Ltd
> Venturing Participations
> Zanox AG
1 Swisscom Switzerland comprises the operating segments Residential Customers, Enterprise Customers, Wholesale and IT, Network & Infrastructure.
2 Other Operating Segments comprises the operating segments Digital Business and Participations.
3 Swisscom (Switzerland) Ltd has operating subsidiaries in Austria, France, Germany, the Netherlands, Singapore, Sweden, Switzerland and the USA.
4 CT Cinetrade AG has subsidiaries in Switzerland: kitag kino-theater Ltd, PlazaVista Entertainment AG and Teleclub AG.
5 Mona Lisa Capital AG is a venturing participation.
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Corporate strategy and objectives
Corporate strategy
Swisscom is the Swiss market leader in the fi eld of telecommunications (mobile telecommunications
and fi xed telephone network) and digital television. It is also one of the leading providers in a wide
range of IT business segments. Fastweb is the leading alternative provider for both retail and
business customers in the Italian fi xed-line market.
Society and the economy currently fi nd themselves in a constant state of change. Megatrends such
as digitisation and connectivity, customisation and demographic change are reshaping our society
and the economy and have a more indirect and long-term impact on Swisscom’s business. In this
context, Swisscom recognises a series of short to medium-term trends that constitute direct,
strategic infl uencing factors, such as the increasing proliferation of the Internet of Things, data-
centric business models and progress in the fi eld of artifi cial intelligence.
The market environment in which Swisscom operates has already changed radically in recent years.
Connectivity is ever-present and will increase further. In the future, countless people, applications
and devices will be in permanent communication with each other and the exponential data growth
will continue at the same pace. Technological change is likewise proceeding at a rapid pace and
customer requirements are changing in equal measure. The competition on the saturated core
market is becoming increasingly fi erce. New providers from around the world are forcing themselves
into other ICT markets – often with disruptive business models – and are thus stepping up
competition. These developments have exerted pressure on the revenues generated in the
traditional Swisscom core business. The resulting lower revenue and income need to be off set in
order to ensure that suffi cient fi nancial resources are available for major investments in new
technologies.
The best in the networked world – everywhere and all the time.
Pioneer
Mentor
Designer
Building the best
infrastructure
Creating the best
experiences
Realising the best
growth opportunities
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The vision of Swisscom: the best in the networked world – always and everywhere
In an increasingly networked and digitised world, Swisscom always offers its customers the best –
regardless of their location. Thus, Swisscom is a pioneer and resolutely drives digitisation forward.
Swisscom is focusing on internal digitisation in order to ensure that it can operate on the market as
a leading, exemplary company. As an optimal companion in the networked world, Swisscom strives
to ensure simplicity and is a trusted, inspiring partner for its customers. Swisscom helps business
customers to create flexible ICT infrastructures, adjust their business processes to meet the new
challenges of the digital world and optimise communication and teamwork among their employ-
ees. In this formative role, Swisscom is helping to shape this new world and make Switzerland into
a leading European ICT centre. To always offer the best in the networked world, Swisscom must
meet the highest expectations in terms of infrastructure, customer experience and growth.
Building the best infrastructure
A high-quality infrastructure allows Swisscom to deliver its products and services, provide a consis-
tently positive customer experience and differentiate itself from its competitors. Swisscom wants
to offer its customers in Switzerland and Italy the leading IT and communications infrastructure.
Reliance on high-performance networks that are always available will continue to increase in
future. Swisscom is fulfilling 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, cost-efficient expansion of the ultrafast
broadband network through various fibre-optic technologies – both in Switzerland and in Italy.
Swisscom is continuing to drive forward the technological transition from traditional to IP-based
solutions. It is constantly expanding its mobile network infrastructure and thus providing custom-
ers with the best experiences when using the network-based offerings. Swisscom aims to better
meet customer needs through a scalable infrastructure, increasingly virtualised services and infra-
structure, and continual improvement processes. The Swisscom Cloud infrastructure offers a high
level of quality and security and is the basis for new scalable offerings that are produced in Switzer-
land. The transfer of internal platforms to the Swisscom Cloud increases scalability, flexibility and
cost efficiency.
Offering the best experiences
To clearly distinguish itself in its core business, Swisscom is committed to delivering first-class ser-
vice to its customers and inspiring them with unique experiences across the board. Swisscom cus-
tomers can count on us as a competent, reliable partner and enjoy service that is individual, flexible
and personal at all points of contact. From the customer’s perspective, contact with Swisscom
should always be simple and convenient. Swisscom is thus reducing complexity and is focused on
providing relevant offerings. It is also standardising and simplifying procedures and processes.
When optimising processes and creating new digital services and experiences, Swisscom always
takes a customer-centric approach and aims to improve customer perception. In doing so, Swisscom
aims to further boost customer loyalty, strengthen its brand and improve its efficiency and agility.
Realising the best growth opportunities
Swisscom anticipates that the relevant markets in Switzerland and Italy will continue to grow
steadily on the whole. The main drivers of growth are modest increases in population and the num-
ber of households, the rising number of connected devices (as a result of the “Internet of Things”)
and the ever-growing use of ICT in a wide variety of industries. In addition to this, there is still pent-up
demand and growth potential for convergent offerings in Italy due to the relatively low level of
broadband penetration.
Swisscom wants to realise growth opportunities by further developing its core business – for
example by means of growth in entertainment services (such as TV) and fibre-optic connections.
There are further opportunities for growth in other sectors, too, such as healthcare – in which
Swisscom provides vertical ICT services – the cloud, digital solutions for business customers, and
digital security offerings. Swisscom is aiming to launch new digital services in selected areas. These
services will be offered via the Internet and will in some cases rely on new business models. Exam-
ples include the offerings provided by Admeira (advertising), siroop (e-commerce) and localsearch
(digital services for SMEs). Another focal point is the further development of Fastweb in Italy, where
Swisscom intends to further improve the market position of its Italian subsidiary in order to gener-
ate an increasing value proposition.
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In response to the far-reaching developments in the market environment, Swisscom periodically
re-evaluates its strategy and focuses its implementation on counteracting the dynamic market
conditions. It has defined five priorities in connection with this:
> Maximising the core business: Swisscom will ensure its position as market leader in the long
term, differentiate itself by means of high-quality products, infrastructure and customer ser-
vice, and tap new sources of income in the core business. Swisscom is confronting the erosion of
its core business through active customer relationship management (e.g. with bundles and cus-
tomer loyalty) and an attractive multi-brand portfolio.
> Further development of Fastweb: Swisscom is improving Fastweb’s market position and achiev-
ing growth in Italy thanks to the further development of the ultrafast broadband network, the
utilisation of partnerships, the expansion of the mobile communications business as well as
high service quality.
> Focus on growth: In order to offset the decline in revenue in the core business and continue to
offer customers relevant services, Swisscom is selectively tapping new growth areas in TIME
markets and further developing its Internet business.
> Operational excellence: Over the next few years, Swisscom will continuously optimise its cost
base in order to remain financially successful in the long term and to absorb the effects of price
competition and margin erosion (e.g. through simplicity, reducing the complexity of processes
and adjusting the product portfolio).
> Transformation: Swisscom will continue to work on developing the corporate culture, agile and
customer-oriented methods, management and technology in order to prepare for the chal-
lenges it will face in the future (e.g. through the development of relevant key skills, the techno-
logical transformation (All IP) and clear innovation fields).
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 in the area of corporate responsibility. For each of
these, it has formulated a long-term target.
Energy efficiency and climate protection
Together with its customers, Swisscom is aiming to save twice as much CO2 as it emits through its
operations and supply chain by 2020. Green ICT enables companies to massively reduce energy
consumption and CO2 emissions. Video conferencing and home office solutions generate savings in
travel time and costs, and ICT services from the cloud allow business customers to operate their IT
operations more efficiently than if they were to use a server of their own. Buildings, vehicles and
networks can be managed in an energy-efficient manner thanks to ICT solutions. Swisscom also
offers residential customers numerous ways to reduce their carbon footprint, from online billing to
a recycling service for mobile phones. Swisscom is committed to reducing its own CO2 emissions
from its operations and supply chain and also requires its suppliers to reduce their carbon footprint.
Work and life
By 2020, Swisscom aims to be supporting one million people with its offerings in the healthcare
sector, such as the Swisscom health platform and corresponding fitness sensors, electronic patient
dossiers and offerings from its subsidiary Datasport. Swisscom also wants to offer one million peo-
ple the opportunity to use mobile working models by 2020. To this end, it has included Work Smart
services in its portfolio and supports mobile working methods through activities such as the Home
Office Day.
Media skills and security
Swisscom aims to be the market leader in data security by 2020, helping one million people to use
the media safely and responsibly. Swisscom has for many years now provided free Internet access
to schools and introduced first-time users to the digital world through media training courses. In
doing so, Swisscom aims to protect young people in the use of online media by means of technical
solutions and offerings that promote media skills.
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Attractive employer
Swisscom wants to be one of the most attractive employers in Switzerland by 2020. It offers
employees opportunities for personal development and promotes 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. Swisscom employees also have the chance to
get involved in social and community projects, for example, by participating in the Corporate Vol-
unteering Programme.
Fair supply chain
In the interests of a fair supply chain, Swisscom is committed to improving employment conditions
for more than two million people by 2020. To this end, Swisscom has forged international partner-
ships that will ensure the implementation of relevant measures in close collaboration with suppli-
ers. The company also ensures that working conditions at its suppliers are reviewed for improve-
ments every year as part of the audit process.
Networked Switzerland
By the end of 2021, some 90% of all homes and businesses will have a minimum bandwidth of
80 Mbps by the end of 2021 – with around 85% of those achieving speeds of 100 Mbps or higher.
Furthermore, 99% of the population was able to benefit from the fourth-generation mobile net-
work incorporating 4G/LTE technology by the end of 2016. According to calculations performed by
the Boston Consulting Group (BCG), Swisscom is thus indirectly contributing around CHF 30 billion
to the country’s GDP and helping to create and maintain some 100,000 jobs.
Swisscom’s targets
Based on its strategy, Swisscom has set itself various short- and long-term targets that take eco-
nomic, ecological and social factors into consideration.
Objectives
Effective 2016
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Financial targets 1
Net revenue
Operating income before depreciation
and amortisation (EBITDA)
Capital expenditure in property, plant
and equipment and other intangible assets
Other targets
Ultrafast broadband in Switzerland 2
Ultrafast broadband in Italy
Mobile network in Switzerland
Energy efficiency in Switzerland
Ratio CO2 reduction to CO2 emmissions 3
Group net revenue for 2016
of more than CHF 11.6 billion
EBITDA for 2016
of around CHF 4.2 billion
Capital expenditure for 2016
of more than CHF 2.3 billion
Coverage of 90%
by the end of 2021
Coverage of 30%
by the end of 2016
Coverage of 99% with 4G/LTE
by the end of 2016
+35% by the end of 2020
compared to 1 January 2016
Ratio 2:1 by the end of 2020
CHF 11,643 million
CHF 4,293 million
CHF 2,416 million
more than 3.5 million
in excess of 50 Mbps
30% or 7.5 million
99%
+8.9%
0.99
1 As already communicated in 2016, the financial targets for 2016 were adjusted as a result of compensation received
by Fastweb from legal proceedings and increased capital expenditure in the broadband networks in Switzerland:
EBITDA of around CHF 4.25 billion and capital expenditure of around CHF 2.4 billion.
2 Basis: 4.3 million homes and 0.7 million businesses (Swiss Federal Statistical Office – SFSO).
3 Swisscom would like to save twice as much CO2 jointly with its customers, as she caused by the operation and the supply chain
by the end of 2020.
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’s enterprise value derived from the share price with that of comparable telecoms compa-
nies. 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 performance-re-
lated 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 performance-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 Man-
agement Incentive Plan ensure that the interests of management are kept aligned with those of
the shareholders.
Enterprise value
In CHF million, except where indicated
31.12.2016
31.12.2015
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
23,627
7,846
8
31,481
4,293
7.3
26,056
8,042
5
34,103
4,098
8.3
The sum of market capitalisation, net debt and non-controlling interests in subsidiaries is the enter-
prise value (EV). 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 decreased
year-on-year by CHF 2.6 billion or 7.7% to CHF 31.5 billion, mainly as a result of lower market capi-
talisation. The ratio of enterprise value to EBITDA dropped to 7.3 (prior year: 8.3). The decline reflects
the fact that EBITDA rose more sharply than the enterprise value compared with the previous year.
EBITDA for 2015 was very adversely affected by provisions of CHF 186 million for legal proceedings.
Excluding this one-off item in EBITDA, the ratio for the previous year was 8.0.
With a ratio of 7.3, Swisscom’s relative market valuation 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 a high level of investment and an attractive dividend policy, as
well as the general business conditions in Switzerland such as lower interest rates and lower corpo-
rate income tax rates as compared to other European countries.
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General conditions
Macroeconomic environment
Swisscom’s financial position, net assets and results of operations are primarily influenced by mac-
roeconomic factors, notably economic trends, interest rates, exchange rates and the capital mar-
kets.
Economy
Economic growth in 2016 was slightly better than in the previous year, with an increase in net
exports being one of the main contributors towards this growth. The performance of the economy
continued to be influenced by the monetary policy of the Swiss National Bank and the European
Central Bank, while inflation, as measured by the national consumer price index, increased slightly.
Viewed over the long term, inflation rates remain at a very low level.
The bulk of Swisscom’s revenue from telephony and broadband services comes from fixed monthly
fees and is subject to low cyclical fluctuations in demand. Project business with corporate customers,
on the other hand, is more sensitive to cyclical factors.
Interest rates
The general level of interest rates in Switzerland has historically been lower than in most other indus-
trialised countries. In the reporting year, the level of and movements in interest rates were deter-
mined to a large extent by the monetary policy of the SNB and the European and US central banks.
The SNB lifted the cap of CHF 1.20 against the euro on 15 January 2015 and at the same time intro-
duced negative interest rates for sight deposits. As a result, the yields on ten-year Confederation
bonds also fell into negative territory. At the end of 2016 they stood at minus 0.14%.
Development of interest rates in Switzerland Yield on government bonds for 10 years in %
3.00
2.00
1.00
0.00
–1.00
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1.25
0.36
0.56
–0.05
–0.14
2012
2013
2014
2015
2016
The level of interest rates has a direct impact on funding costs and also affects in the consolidated
financial statement the valuation of various items in the balance sheet such as assets, long-term
provisions and pension liabilities. Swisscom again took advantage of the ongoing period of nega-
tive interest rates in 2016 for various financing transactions. It issued three bonds with a total value
of CHF 700 million with maturities of between 11 and 16 years, all at favourable terms of interest.
In addition, a private placement for CHF 150 million that fell due was extended by 15 years. The
proportion of variable interest-bearing financial liabilities stands at 21%. The interest expense on all
financial liabilities averaged 1.9% in 2016 (prior year: 2.3%). In addition, Swisscom has in the past
concluded interest rate swaps with long terms to maturity which are not designated for hedge
accounting. Changes in market interest rates can result in high fluctuations in fair values recognised
in income statement.
Exchange rates
On 15 January 2015, the Swiss National Bank (SNB) announced it would no longer defend the min-
imum CHF/EUR exchange rate of 1.20. As a consequence, the Swiss franc appreciated substantially,
particularly against the euro. At the end of 2016, the exchange rate of the Swiss franc to the euro
was 1.07.
Development of exchange rate at the end of period CHF/EUR
1.75
1.50
1.25
1.00
0.75
1.21
1.23
1.08
1.07
1.20
2012
2013
2014
2015
2016
These exchange rate movements have not had a particularly large net impact on Swisscom’s oper-
ational activities in Switzerland. Only a small share of Swisscom’s revenue in Switzerland is gener-
ated in foreign currencies. Handset and technical equipment procurement as well as roaming
charges incurred for the use of fixed and mobile networks abroad by Swisscom customers give rise
to transaction risks in foreign currencies (notably EUR and USD). These risks are partly hedged by
foreign currency forward contracts.
Swisscom mostly funds itself in Swiss francs, although the proportion of financial liabilities in EUR
has gradually increased in the last three years, particularly as a result of bond issuance activity. This
has led to a better diversification of funding sources. At the end of 2016, financial liabilities
amounted to CHF 8.5 billion, of which 73% was in CHF, 25% in EUR and 2% in USD. Currency trans-
lations in respect of foreign Group companies, in particular Fastweb in Italy, affect the presentation
of the net assets and results of operations in the consolidated financial statements. Cumulative
currency translation adjustments in respect of foreign subsidiaries recognised in consolidated
equity before deduction of tax effects amounted to CHF 2.2 billion in 2016, which was unchanged
from the previous year. A portion of the liabilities in EUR has been designated as a currency hedge
of the net investment in Fastweb.
Capital market
In 2016, international equity markets fell and the Swiss Market Index (SMI) suffered a decline of
6.8%. Swisscom holds surplus liquidity in the form of cash and cash equivalents and short-term
money-market investments. There are only insignificant direct financial investments in equities or
other non-current financial assets. comPlan, Swisscom’s legally independent pension fund in Swit-
zerland, has total assets of around CHF 10 billion invested in equities, bonds and other investment
categories. These assets are thus exposed to capital market risks. This indirectly affects the finan-
cial position presented in Swisscom’s consolidated financial statements.
See
www.swisscom.ch/
investor
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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 objectives of the Swiss 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.
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The Federal Council also expects Swisscom to enter into partnerships (participations, alliances, foun-
dation of companies and other forms of cooperation) only if they promote a sustained increase in
enterprise value, can be managed well and take sufficient account of potential risks. No interests
may be held in foreign telecoms companies with a universal service obligation. Other interests in
foreign companies may be acquired if they support the core business in Switzerland or are other-
wise 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 2 Mbps. The universal service provision licence granted to
Swisscom in 2007 by the Federal Communications Commission (ComCom) 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
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
Regulatory developments in Switzerland in 2016
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. The Competition Commission (Weko) sanctioned Swisscom for
abuse of a market-dominant position in proceedings regarding the case of ADSL services in the
period up to the end of 2007. Swisscom challenged the ruling in the Federal Administrative Court.
In October 2015, the Federal Administrative Court confirmed in principle the Competition
Commission’s decision and imposed a penalty of CHF 186 million against Swisscom. Swisscom has
filed a complaint against the ruling with the Federal Supreme Court. In other proceedings related
to live sport broadcasts on pay television, the Competition Commission imposed a CHF 72 million
sanction against Swisscom for unlawful behaviour in the marketing of sports content. Swisscom
has challenged the ruling in the Federal Administrative Court. In a third set of proceedings, Weko
imposed a sanction of CHF 8 million against Swisscom in connection with allegations of unlawful
terms and conditions related to the broadband connections of post office locations. Swisscom has
also filed a complaint against this Weko ruling with the Federal Administrative Court. Further
information on ongoing proceedings is contained in Notes 28 and 29 to the consolidated financial
statements.
Basic service provision from 2018 to 2023
On 2 December 2016, the Federal Council approved an amendment to the Ordinance on Telecom-
munication Services (OST) which defines the content of basic service provision for telecommunica-
tions services as of 2018. From that year on, traditional analogue and digital connections will be
replaced by a multi-functional connection. The minimum data transfer rate for Internet access will
also be increased to 3000/300 kbps and services for people with disabilities will be expanded. The
Federal Communications Commission (ComCom) has granted Swisscom a basic service licence for
2018 to 2023.
Revision of the Telecommunications Act (TCA)
The Federal Council conducted a consultation on the revision of the Telecommunications Act (TCA).
Based on the results of the consultation, the Federal Department of Environment, Transport,
Energy and Communications (UVEK) was commissioned to draw up a dispatch on the amendment
of the TCA by September 2017. The intent of the bill is to strengthen consumer protection and the
protection of minors, in part by combating unsolicited advertising calls and child pornography, but
also by taking steps to control roaming prices. Concrete proposals will also be drawn up with regard
to transparency requirements pertaining to net neutrality and on ways for the Federal Council to
regulate access to new technologies in the event of a market dominant position. Other proposals
will address a reduction in the administrative burden of telecommunication service providers,
greater flexibility in the use of frequencies and improved access to building installations and direc-
tory data. Finally, standards are also required to govern Internet domain names, emergency calls,
and communication in exceptional circumstances.
Regulatory differences between Switzerland and the European Union
In the European Union (EU), the regulatory authorities have extensive powers to analyse markets
and impose obligations on market-dominant companies relating to non-discrimination, trans-
parency and forms of access (“ex-ante regulation”). The Swiss government has rejected such all-
encompassing regulation, as the market conditions in Switzerland are different to those in most
EU member states. The Swiss market is characterised by virtually nationwide competition between
Swisscom and the cable network operators. Moreover, municipal and regional electrical utilities
have also entered the market. The market situation prevailing in Switzerland therefore necessitates
a different form of regulation than in countries such as France and Italy, where there is largely
a single network provider and no platform competition has evolved.
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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 of imposing regulatory requirements on companies, based on
an analysis of the markets defined by the European Commission. 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 2016
AGCOM carried out public consultations in 2016 related to the approval of the reference offerings
provided by Telecom Italia (TIM) for unbundling, bitstream, NGA (next-generation access) and WLR
(wholesale line rental) services for the period from 2015 to 2016; the definitive resolutions are
expected until the first half of 2017.
In 2016, AGCOM concluded its market analysis on fixed network and mobile network termination
fees and set the maximum fee for termination of mobile services for the period from 2015 to 2017
and the fee for fixed network services for 2017 to 2019. The obligation regarding cost orientation
and equal treatment was retained in both cases; however, the operators were given the opportu-
nity to assert varying termination fees for calls made from outside EU member states based on the
principle of reciprocity. Full-service MVNOs will in future also be subject to regulated termination
fees.
Swisscom stakeholder groups
Dialogue takes place with stakeholder groups depending on how close the relationship is and on
the individual stakeholder group’s interests. However, the size of the respective stakeholder group is
the decisive factor in the kind of dialogue that is possible.
Customers
Swisscom systematically consults residential customers on their needs and their level of satisfac-
tion. Customer relationship managers, for example, gather information on customer needs in the
course of direct contact with customers. Representative customer satisfaction surveys are also reg-
ularly conducted, among other things to determine the extent to which customers perceive
Swisscom as an environmentally responsible, socially aware company.
Quarterly surveys are conducted among business customers, which include questions on sustain-
ability. 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 customers expect good service, attractive pricing, market transparency, responsible
marketing, comprehensive network coverage, network stability, low-radiation communication
technologies and sustainable products and services.
Shareholders and external investors
Besides the Annual General Meeting, Swisscom regularly fosters dialogue with shareholders at ana-
lysts’ presentations, road shows and in regular teleconferences. It engages in a regular exchange of
information with representatives of the Swiss Confederation (Confederation) as majority share-
holder. Over the years, it has also built up contacts with numerous external investors and rating
agencies. Shareholders and external investors expect above all stability, profitability and innova-
tion from Swisscom.
Authorities / residents
Swisscom maintains close contact with federal, cantonal and municipal authorities. A key issue in its
dealings with this stakeholder group concerns the expansion of the network infrastructure. Mobile data
applications are becoming increasingly popular with customers. But while mobile communications are
clearly appreciated and widely used, the expansion of the infrastructure required to provide these ser-
vices does not always meet with the same level of support.
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Network expansion gives rise to tension because of the different interests at stake. Swisscom has
been engaged in dialogue with municipal authorities and residents on network planning for many
years. In the case of construction projects, it 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 the 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 recognises its responsibility towards the
public at large and towards young people in particular.
Legislators
Swisscom is required to deal with political and regulatory issues, maintaining a regular dialogue
with authorities, parties and associations. Swisscom makes constructive contributions to relevant
legislative processes.
Suppliers
Swisscom’s procurement organisations regularly deal with suppliers and manage supplier relation-
ships, analysing the results of evaluations, formulating target agreements and reviewing perfor-
mance. 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 based on professional journalistic principles. In addition to the Media Office, representa-
tives of management maintain a regular dialogue with journalists and make themselves available
for interviews and more in-depth background discussions.
Employees and employee representation
Using a wide range of communication platforms and activities, Swisscom promotes a corporate
culture that encourages dialogue and cross-collaboration between employees. In 2016, Swisscom
developed a new employee survey which is better suited to the organisation’s requirements. The
new survey will be held three times a year and allows every employee, team and the entire organi-
sation to respond to feedback and make improvements.
Helping to shape Swisscom’s future is one of the most important tasks of the Employee Representa-
tion Committee. Twice a year, Swisscom organises a round-table meeting with the employee repre-
sentatives. Employee concerns mainly relate to social partnership, training and development, diver-
sity, 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 work in the area of sustainability and encourages 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 within the
framework of projects; for example, with WWF, myclimate, the Swiss Child Protection Foundation,
Brot für alle/Fastenopfer and organisations that address the specific needs of affected groups.
Active partnerships and Swisscom’s social and ecological commitment are especially relevant for
the partners and NGO stakeholder group. The Swisscom website provides an overview of the
respective stakeholder groups.
Public
Swisscom maintains contact with the public through trade fairs and events, over social media, as
well as directly via the Swisscom website, through surveys of the public and, as in 2016, through the
Energy Challenge. The Energy Challenge is a campaign launched by the Swiss Federal Office of
Energy in which Swisscom took part as the main partner.
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Market trends in telecoms and IT services
Swiss telecommunications market
The Swiss telecommunications market is highly developed by international standards. It is charac-
terised by innovation and a wide range of voice and data products and services. Total revenue
generated by the telecoms market in Switzerland is estimated at around CHF 12 billion. The con-
stant advancement of digitisation and connectivity is a key trend. In addition to the established
national telecommunications companies, more and more new global competitors are entering the
Swiss telecoms market, offering both free and paying Internet-based services around the world,
including telephony, SMS messaging and streaming services. Cloud solutions are also playing an
ever more important role, with storage capacity, processing power, software and services all relo-
cating to an increasing degree to the Internet. These developments are causing a rapid growth in
demand for high bandwidths that enable fast, high-quality access to data and applications. There
is an increasing focus being placed on the security and uninterrupted availability of data and ser-
vices, with modern, highly effective network infrastructures forming the basis for this. Swisscom is
therefore setting up the networks of the future for both fixed-line and mobile communications.
Swisscom’s bundled offerings combine different technologies such as fixed-line broadband access
with Internet, TV and telephony, 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, broadband,
TV and fixed-line telephony.
Swisscom Switzerland access lines in thousand
6,612
711
5,901
8,000
6,000
4,000
2,000
0
Fixed-line
2,367
1,212
1,155
2,356
364
1,672
320
1,476
1,392
84
Mobile
Telephony
Broadband
Swisscom TV
Wholesale
Bundle subscriptions
Single subscriptions
128
Unbundled
access lines
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Mobile communications market
Switzerland has three separate, wide-area mobile networks on which the operators of those net-
works market their own products and services. Other market players additionally offer their own
mobile services as MVNOs (mobile virtual network operators). Swisscom also makes its mobile
communications network available to third-party providers so that they can offer their customers
proprietary products and services over the Swisscom network.
Due to the high level of market penetration, the mobile communications market in Switzerland is
showing signs of saturation. The number of mobile lines (SIM cards) in Switzerland stagnated at a
total of around 11 million at the end of 2016. As in the previous year, the number of postpaid sub-
scriptions taken out increased, while the number of prepaid customers fell. The proportion of
mobile users with postpaid subscriptions now stands at 65% (prior year: approx. 62%). The penetra-
tion with mobile access lines in Switzerland continues to exceed 130%.
In order to provide its customers with the best communications experiences, Swisscom is con-
stantly expanding its mobile network using the latest technology. There continues to be dynamic
competition on the Swiss mobile communications market, as shown by the adjustments made to
the portfolio of offerings by market participants throughout 2016. Swisscom has launched new
mobile subscriptions, such as Natel infinity 2.0, which provide customers with a larger scope of
service. 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 offerings mainly differ in terms of mobile data speeds and the number of inclusive
days of usage and data volume when abroad. It is now also possible to take out a subscription with-
out purchasing a handset as well as pay for a new handset in interest-free instalments. Swisscom
offers occasional users of the mobile network prepaid services with no monthly subscription fee.
Market shares mobile subscribers in Switzerland* in %
Swisscom mobile access lines in thousand
8,000
6,000
6,540
2,163
6,625
2,124
6,612
2,060
60%
Swisscom
4,000
4,377
4,501
4,552
* Estimate Swisscom
2014
2015
2016
2,000
0
Prepaid
Postpaid
Swisscom’s market share in 2016 was 60% (postpaid: 63%; prepaid: 55%), which corresponds to
a one percentage point increase on the previous year. This is mainly attributable to the fact that the
number of prepaid Swisscom customers has declined less than those of other market participants.
As in previous years, prices for mobile services continued to be squeezed by competition in 2016.
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Fixed network
Switzerland has almost 100% coverage of fixed broadband networks. Alongside the fixed-line net-
works of telecoms companies, there are also cable networks of cable network operators. Moreover,
new market players such as utilities operating in particular cities and municipalities are building
and operating fibre-optic networks on their own initiative at a regional level. In order to meet the
rising demands on the networks, Swisscom is investing heavily in its existing fixed network to cre-
ate a high-performance ultrafast broadband network based on the latest fibre-optic and IP tech-
nology. The fixed broadband connection has therefore increasingly developed into the key access
point for customers. It is the basis for a wide-ranging product offering from both national and
global competitors. Alongside individual products, Swisscom offers various bundled products tai-
lored to customer needs in the fixed-line area with a choice of TV and/or fixed telephony on top of
the broadband connection.
Broadband market
The most widespread access technologies for fixed broadband connections in Switzerland are infra-
structures based on the networks of telecoms providers and cable network operators. At the end of
2016, the number of retail broadband access lines in Switzerland totalled around 3.7 million, corre-
sponding to around 85% of households and businesses.
Market shares broadband access lines in Switzerland* in %
Swisscom Broadband access lines in thousand
54%
Swisscom
3,000
2,250
1,500
750
0
2,152
262
1,209
2,273
315
1,416
681
542
2,356
364
1,672
320
Wholesale
Bundle subscriptions
Single subscriptions
* Estimate Swisscom
2014
2015
2016
The number of broadband access lines increased by around 3% in 2016 (prior year: 4%). In contrast
to the previous year, growth in broadband access lines provided by cable network operators lagged
behind that of the broadband access lines of telecom service providers. Telecom service providers
accounted for more than three-quarters of new broadband access lines in 2016, corresponding to a
market share of all broadband lines of 67% (prior year: 66%). Of these, 54% (prior year: 54%) were for
Swisscom end customers and 13% (prior year: 12%) for Swisscom wholesale offerings and fully
unbundled lines.
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TV market
In Switzerland, TV signals are transmitted via cable, broadband, satellite, antenna (terrestrial) and
mobile. The Swiss TV market is almost completely digitised, as the large-scale broadcast of analogue
TV signals has been discontinued and high-definition television (Full HD) has now become stan-
dard. Swisscom has also enabled Ultra-HD (UHD) TV signals to be received on its network since
spring 2016. UHD is the successor technology to Full HD and provides a picture quality that is
around four times better. The UHD programme offering is however still in the start-up phase.
The Swiss TV market features a wide range of offerings from national market participants, and is
now also playing host to offerings from other international companies. These international compa-
nies offer TV and streaming services that can be used over an existing broadband connection,
regardless of the Internet provider. 2016 saw the level of competition increase, particularly in terms
of TV content. This is highlighted by the reallocation of the broadcasting rights for domestic and
international football and ice hockey. On the one hand, pay-TV channel Teleclub – a Swisscom sub-
sidiary – has been awarded the broadcasting rights, as in previous years, to the Swiss football
leagues from the 2017/2018 season onwards. On the other hand, national cable providers have
acquired the broadcasting rights to the Swiss ice hockey leagues and will take over responsibility for
these from Teleclub from the 2017/2018 season onwards.
Market shares digital TV in Switzerland* in %
Swisscom TV subscribers in thousand
32%
Swisscom
2,000
1,500
1,000
500
0
1,331
1,183
1,476
1,392
1,165
947
218
148
84
2014
2015
2016
Bundle subscriptions
Single subscriptions
* Estimate Swisscom
Just under 90% of TV connections are provided via cable or broadband networks. Swisscom has
steadily increased the market share of its own digital TV offering, Swisscom TV, over the past few
years. Swisscom became market leader at the end of 2015 and further expanded on this position
throughout 2016, achieving a market share of 32% at the end of the year (prior year: 29%).
Fixed-line telephony market
Fixed-line telephony is mainly based on lines running over the fixed networks of the telecom ser-
vice providers and the cable networks. The number of Swisscom fixed lines is steadily declining.
This trend continued in 2016, with the number of Swisscom fixed-line connections falling by
around 7% to 2.3 million. The main reason for the decline was the substitution of mobile phones for
fixed-line connections.
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IT services market in Switzerland
In 2016, the IT services market generated a revenue volume of CHF 8.6 billion. Market volume is
expected to total CHF 9.3 billion by 2019. Swisscom expects the strongest growth in business pro-
cess outsourcing (BPO) and in application-based and infrastructure project-based services, most
notably in cloud and security services. This growth is a result of the increasing number of business-
driven ICT projects. Customers usually expect services customised to their individual sector and
business processes with related consultancy.
Market shares IT services in Switzerland* in %
Swisscom net revenue IT services in CHF million
9%
Swisscom
1,000
750
500
250
0
761
776
650
* Estimate Swisscom
2014
2015
2016
The shifts in the market and IT innovations are creating new opportunities for Swisscom. As one of
the few providers of integrated digitisation solutions, Swisscom helps companies to improve cus-
tomer experiences, simplify and automate processes and integrate existing solutions. Swisscom
also co-creates new IT services with its customers. As a result, Swisscom is seen as a driver of digi-
tisation in the Swiss economy. With a market share of around 9%, it remains one of the leading
providers of IT services on the Swiss 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 billion. In contrast to most other European countries, in Italy there are no significant cable
network operators who offer broadband services. Around 55% of households and businesses in
Italy have access to fixed-line broadband services; the penetration of broadband is thus well below
the European average. Nevertheless, acceptance is speeding up, driven mainly by the use of new
fibre-optic networks and by the increasing use of online services, such as streaming and gaming.
The Italian market continues to be dominated by bundled products which combine voice and
broadband services. Convergence offerings for the fixed network and mobile communications are
also becoming increasingly popular. Due to the intensely competitive environment, the market is
under considerable pricing pressure. Ultrafast broadband services have become more popular and
the coverage now extends to over half of the country. One of the market leaders for fibre-optic/
VDSL offerings is Fastweb. Enel, the largest electricity producer and supplier in Italy, has founded a
new company – Enel Open Fiber – with the aim of providing access to a fibre-optic network in
selected Italian cities and using its capacity as operator to sell this wholesale to telecommunica-
tions companies. The government issued a call for tender in 2016 for several contracts relating
to the installation of new public fibre-optic networks with the aim of providing coverage by 2020 to
those areas that do not currently have Internet access.
Market shares broadband access lines in Italy* in %
Fastweb broadband access lines in thousand
2,072
2,201
2,355
16%
Fastweb
3,000
2,250
1,500
750
0
* Estimate Swisscom
2014
2015
2016
Fastweb is one of the leading providers in Italy with a market share of 16%. A permanent nation-
wide presence is becoming increasingly important for service providers given the growing com-
plexity of products and services. The expansion of Italy’s broadband network is continuing at full
speed: Fastweb and Telecom Italia intend to cooperate on the rollout of Fibre to the Home (FTTH).
The aim is for 13 million or half of homes and businesses in Italy to be connected to the ultrafast
broadband network by 2020. 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 telecommunications company and
one of its leading IT companies. Subsidiary Fastweb has established
a strong position on the Italian broadband market. Swisscom 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 has over 21,000 full-time equivalent employees, of whom around 18,400 are employed
in Switzerland. Swisscom’s international activities are concentrated mainly in Italy, through its sub-
sidiary Fastweb. Fastweb is one of the largest broadband companies in Italy. Over 80% of net reve-
nue and operating income before depreciation and amortisation (EBITDA) is generated from busi-
ness operations in Switzerland. Swisscom offers a full portfolio of products and services for
fixed-line telephony, broadband, mobile communications and digital television throughout Swit-
zerland and is mandated by the federal government to provide basic telecoms services to all sec-
tions of the population throughout Switzerland. Swisscom offers corporate customers a comprehen-
sive range of communications solutions as well as individually tailored solutions. Swisscom is also a
leading provider specialising in the integration and operation of IT systems in the fields of outsourc-
ing, workplaces, SAP and banking. Customers can purchase their products and services via a wide
range of sales channels. They can check out products and services first hand and receive compre-
hensive 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.
Net revenue
Switzerland accounts for
Full-time equivalent employees (FTEs)
Switzerland accounts for
83% of Swisscom’s revenue
87% of Swisscom’s FTEs
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See
www.swisscom.ch
Swisscom brand
The Swisscom brand is managed strategically as an intangible asset and an important element of
the Group’s reputation management. It provides optimum support for Swisscom’s business activi-
ties, gives guidance to customers and partners, and also acts to attract and motivate current and
potential staff .
The brand is implemented across all units – in a consistent and high-quality manner. It also has to
be extremely fl exible at the same time, bridging the gap between known and new concepts, and
likewise standing for network and infrastructure, best experiences and entertainment, as well as
ICT and digitisation.
Swisscom off ers products and services from the core business under the Swisscom corporate
branding, as well as under the secondary brand Wingo and the third-party brand M-Budget. It also
has other brands in its portfolio which are associated with other themes and business areas.
Outside Switzerland, Swisscom’s main market is Italy, where it operates under the Fastweb brand.
The strategic management and development of the entire brand portfolio is an integral part of
corporate communications.
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Extract of the brand portfolio
Swisscom wants to be perceived as being trustworthy, simple and inspiring, and aims to be the best
companion for its customers in today’s networked world. This is embodied by the successful mobile
telephony and bundled offerings, as well as the ongoing success of the Swisscom TV business. The
Teleclub, Kitag and Cinetrade brands, also operated by Swisscom, make a further contribution to
positioning the Group in the entertainment market. Other progressive products with a market
presence like cloud services under the Swisscom brand or – for example in the e-commerce sector
– under the siroop brand improve the company’s position on the market and reflect its commit-
ment towards the continuous improvement of its services.
Trustworthiness and service remain important factors in confirming to existing customers that
they made the right decision in opting for Swisscom and in winning new customers, while also
helping to underscore the importance of Swisscom for Switzerland: Swisscom is part of a modern
Switzerland, is always recognisable as a Swiss company and positions itself clearly and credibly
through its stance on responsibility. All this rounds off the positive image of the Swisscom brand
and enriches the Group’s multi-faceted customer relationships. This is one reason why the reputa-
tion values achieved by Swisscom are exceptionally high for a company in the telecommunications
sector worldwide.
External rankings also confirm this image. According to the “Best Swiss Brands 2016” survey carried
out by Interbrand, Swisscom moved up two places in the reporting year and now sits in fourth
place. This makes it one of the most valuable brands in Switzerland, with a monetary brand value
of over CHF 5 billion.
Swisscom’s network and IT infrastructure
Network infrastructure in Switzerland
Bandwidth requirements in the Swiss fixed and mobile telephone network continue to grow. This
can be attributed to the fact that customers now use a wide range of devices for accessing the
Internet. At the heart of the Swisscom network is IP technology (Internet Protocol), which can be
used via copper and fibre-optic lines. Swisscom is planning to switch over all of its products and
services to IP technology by the end of 2017. The old telephony infrastructure will be gradually
taken out of operation from 2018 onwards. Today, 60,000 customers are switching to IP technology
every month, and 75% of Swisscom customers are taking advantage of the benefits of IP products.
All IP enables faster and more flexible processes and operations, and is boosting the competitive
strength of Swisscom, its customers and Switzerland as a business centre. The Swisscom All IP ini-
tiative offers the basis for the digitisation of the Swiss economy.
Switzerland boasts one of the best IT and telecoms infrastructures worldwide. According to OECD
findings (OECD Broadband Portal August 2016, values for Q4 2015), broadband penetration in Swit-
zerland stands at 51.9%, which means that Switzerland has the highest broadband penetration in
the world, ahead of Denmark and the Netherlands. This is also confirmed by the “State of the Inter-
net Report” published by the technology service company Akamai in October 2016. According to
this report, Switzerland ranks third in Europe and seventh globally in respect of the availability of
ultrafast broadband. In mobile communications, broadband LTE coverage now extends to 99% of
the population, making Swisscom the largest network operator in Switzerland by far, both in the
fixed and mobile network.
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To drive forward ultrafast broadband provision in Switzerland, Swisscom has opted for a broad,
innovative mix of technologies. Alongside Fibre to the Home (FTTH), technology such as Fibre to the
Curb (FTTC), Fibre to the Street (FTTS) and Fibre to the Building (FTTB) will play a key role here; in
other words, optical fibre is getting ever closer to the client.
Fibre to the Curb (FTTC)
> VDSL since 2006, vectoring since 2014
> Up to 100 Mbps (vectoring)
Fibre to the Street (FTTS)
> Since 2013
> Up to 500 Mbps (G.fast)
Fibre to the Building (FTTB)
> Since 2013, up to 100 Mbps
> From mid-2017: up to 500 Mbps (G.fast)
Fibre to the Home (and Business, FTTH)
> Since 2008
> 1 Gbps since 2013
Fibreglass
Copper
It is not only network expansion which is subject to constant change but also the way in which data
is transported across the remaining copper cables. Vectoring doubles the capacity of copper cables,
while G.fast, the successor to VDSL, will permit bandwidths of up to 500 Mbps on copper cables.
G.fast was launched for the first time in the Swisscom network in September 2016. Swisscom is the
first European telecommunications provider to implement this progressive technology. As at the
end of 2016, Swisscom had established more than 3.5 million connections to its ultrafast broad-
band service (speeds in excess of 50 Mbps) through its technology mix. Of this number, over 2.5 mil-
lion lines were equipped with the latest fibre-optic technology. This makes Swisscom a market
leader by international standards.
In 2016, Swisscom defined new strategic objectives for its expansion of the fixed broadband net-
work infrastructure: the majority of people living in any given Swiss municipality should have
access to higher bandwidths by the end of 2021. To this end, some 90% of all homes and businesses
will have a minimum bandwidth of 80 Mbps by the end of 2021 – with around 85% of those achiev-
ing speeds of 100 Mbps or higher. In remote regions of Switzerland, Swisscom will honour its uni-
versal service provision mandate. Thanks to the new DSL+LTE Bonding technology, it is also able to
noticeably improve broadband provision in certain regions. DSL+LTE Bonding combines the perfor-
mance of the fixed line network with that of the mobile network, thus ensuring a significantly
better customer experience.
Swisscom supplies 99% of the Swiss population with 4G/LTE coverage. In urban regions with par-
ticularly high traffic along streets and in busy public places, 4G/LTE microcells ensure the required
network capacity. In this context, Swisscom has developed its own antenna technology for instal-
lation in a manhole, which will be improving coverage from 2016. Swisscom is increasingly install-
ing dedicated antenna systems in large business premises and indoor public areas. 4G+ technology
(LTE advanced) already ensures mobile Internet bandwidths in excess of 300 Mbps in urban areas.
In April 2016, Swisscom successfully transmitted data over its mobile network at a speed of 1 Gbps
for the first time and mapped out the way forwards for other technological developments.
Swisscom’s offering is therefore leading the way, both in Switzerland and by international stan-
dards. Swisscom is likewise providing ultra-modern IP-based voice services in the form of VoLTE
(Voice over LTE; launched in June 2015) and WiFi Calling (launched in August 2015). To ensure that
it will still be able to satisfy the rising demand from customers for data volumes in future, Swisscom
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See
www.swisscom.ch/
networkcoverage
is continuously expanding its mobile network and investing in new technologies. As the 22-year-
old 2G mobile technology needs a significant share of the antenna capacity but can only handle
0.5% of data traffic, Swisscom has decided to only support 2G until the end of 2020.
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-ap-
propriate 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 nearly a quarter of its approximately 8,400 antenna
sites with other providers. At the end of 2016, Swisscom had around 5,800 exterior units and
2,600 mobile communication antennae in buildings. And with around 4,000 hotspots in Switzer-
land, Swisscom is also the country’s leading provider of public wireless local area networks.
The Internet of Things has long connected an immense number of objects and devices to one
another and to people. Swisscom is the first provider in Switzerland to set up an additional network
dedicated to the Internet of Things: the Low Power Network (LPN), which forms the basis for the
Internet of Things and thus for smart cities, energy-efficient buildings, machine-to-machine net-
working and new digital applications. The initial LPN rollout for 80% of the Swiss population as well
as coverage in cities was concluded at the end of 2016.
Network infrastructure in Italy
Fastweb’s network infrastructure consists of a fibre-optic network spanning a total distance of
around 44,000 kilometres, reaching over 50% of the Italian population. Part of this infrastructure is
made up by an ultrafast broadband network, which provides 7.5 million households and busi-
nesses, i.e. 30% of the population, with Fibre to the Home (FTTH) and Fibre to the Street (FTTS)
coverage. This improved technology enables speeds of up to 200 Mbps to be reached. Moreover,
Fastweb supplies its customers with broadband by means of wholesale services provided by
well-established Italian operators.
In 2016, Fastweb initiated its plan to increase ultrafast broadband coverage to 50% of the popula-
tion by the end of 2020, thus providing broadband to 13 million households and businesses. This
network expansion will be implemented using both FTTS and FTTH. The FTTH network expansion
will provide coverage to approximately 3 million households and businesses in 29 cities by the end of
2020 and will be carried out together with Telecom Italia. For this purpose, a joint venture has been
founded in which Fastweb holds a 20% share.
While Fastweb does not have its own mobile network, it offers mobile services based on an agree-
ment with another mobile operator (MVNO model). In view of the significance of convergence
offerings for the fixed network and the increase in quality of mobile services, Fastweb upgraded its
network to FULL MVNO in 2016 and is thus able to manage customer SIM cards directly and better
control the customer experience. This will be launched on the market in 2017.
Swiss IT infrastructure
It’s not only bandwidths in the networks that are constantly increasing, but also the usage of cloud
services that Swisscom offers its customers. Bundled subscriptions such as Natel infinity 2.0 include
memory capacity in the Swisscom Cloud. The two myCloud and Storebox storage offerings are
showing data volume growth of 200 terabytes per month or 2 petabytes by the end of the report-
ing year, which Swisscom stores for its customers securely in the cloud. This is boosting the annual
data growth in the volume of data being stored, with Swisscom now storing around 40 petabytes
of data in its data centres.
The switch to data transmission by means of Internet Protocol, which is ubiquitous in All IP services,
is increasing the requirements imposed on locations that previously provided traditional telephony
services. In 2016, Swisscom upgraded its Lausanne data centre by providing it with modern IT infra-
structure. This now meets the requirements incurred by the increase in power density in each rack
– whereby the heat generated can be dissipated. In the data centre in Lausanne, Swisscom has set
up part of its Telco Cloud, on which the network functions will be virtually mapped out in the
future. This is a huge step into the future for Swisscom and confirms its role as a leader on the
technology market.
Swisscom is becoming more experienced in using cloud technologies every year. The first cloud
platforms used by Swisscom are already being replaced by the next generation of platforms. The
constant state of change on the market backs up Swisscom’s efforts to use the latest technologies
both internally and externally for the benefit of its customers. The industrialisation of IT continues
to make good progress, accompanied by the development of modern applications that benefit
from the new opportunities offered by the platforms and help cut costs. Nevertheless, the old and
new technologies will continue to exist and function side-by-side over the coming years. By inte-
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grating different generations of technology to meet its needs, Swisscom is gaining the necessary
experience and expertise to provide support to its customers as they make their way in the digital
world.
Fastweb’s IT infrastructure
Fastweb operates four large data centres in Italy with a total surface area of 8,000 square metres.
The IT infrastructure consists of around 5,000 servers (virtual and physical servers in equal parts),
750 databases and 3 petabytes of storage capacity.
One data centre is managed by a technology partner who is responsible for setting up, designing
and adapting the centre as well as the operational aspects of Fastweb’s IT infrastructure. Two data
centres are mainly used for corporate business services, in other words for housing, hosting or
other cloud-based services. One of the Fastweb data centres in Milan was the first in Italy to be
awarded Tier IV certification, which certifies the highest level of reliability, security and perfor-
mance. It is fully operational and hosts services for business customers.
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Mobile data traffic is increasing every year.
Compared with the previous year, data volume
grew by
Investments in performance enhancement
and security in the Swiss infrastructure
and in ultrafast broadband expansion
totalled in 2016
78 %
1.8 billion Swiss francs
Data protection
The customer data that Swisscom works with is subject to the Swiss Data Protection Act, the Tele-
communications Act and various client-specific confidentiality laws. Compliance with data protec-
tion laws and the observance of confidentiality are key tasks and concerns for Swisscom. It collects,
stores and processes personal data on the basis of the applicable contract provisions, particularly
for the provision of services, the handling and maintenance of the customer relationship, for billing,
ensuring high service quality, the security of the business operations and its infrastructure, and for
marketing purposes. Where legally stipulated, personal data is only processed with the necessary
consent of the customer. Customers may at any time object to the processing of their respective
personal data and can withdraw their consent. Swisscom raises awareness among all employees
who have access to client data through data protection and confidentiality training and equips
them to implement the compliance measures dedicated to this rigorously.
Moreover, Swisscom has taken technical measures to further improve data protection and confi-
dentiality. It has reviewed and specified all access rights to critical customer data. It has also set up
a system to determine whether access to critical customer data is legitimate. As in the past,
Swisscom also aims in the future to continuously develop the technology used for data protection
and to optimise the organisational structure, processes and employee training required for this
purpose. In bringing in new technologies and in meeting new needs, Swisscom is aware of its
responsibility and will continue to exercise the required sensitivity and assume its social responsi-
bility as a companion in the networked world.
Swisscom intends to continue providing its customers with support in the ongoing digitisation of
society. Within this realm, it is carrying out smart data projects for third parties, as part of which
personal data is not sold; instead, only anonymised data is used to draw up interpretations and
analyses. The residential customers affected by this can visit the Customer Centre online or call the
hotline to prevent the data that they provided being used in smart data projects.
Swisscom has also established an Ethics Board. This board serves the company in an advisory role
and addresses issues relating to process sustainability and integrity as well as digitisation
applications.
Finally, Swisscom strives to provide information on issues relevant to data protection in non-
technical language and in befitting detail. Part of the Swisscom website will be dedicated to this.
See
www.swisscom.ch/
dataprotection
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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 person-
alised and value-adding manner. Approximately 6 million customer visits to Swisscom Shops,
3,500 customer advisors, 14 million calls from residential and SME customers and more than one
and a half million e-mails, letters and social media enquiries per year are the basis for Swisscom
staying in touch with its customers and providing personal service. For years now, excellence in
service has been a top priority for Swisscom.
Residential Customers
In 2016, Swisscom enhanced its Swisscom TV 2.0 offering with a new UHD TV-Box, new functions
and more content. The new ultra-high definition TV-box (UHD TV-Box) was launched in April 2016.
It is smaller, quicker, more economical and displays images in ultra-high definition. At the same
time, customers can now use the voice control function on the new remote control to search for
content. In addition to the seven-day Replay function, the Video on Demand offering has been
expanded and the latest TV series can be rented prior to their first broadcast on free TV. Swisscom
has also updated the Natel infinity mobile phone offering. The new Natel infinity 2.0 subscription
not only includes unlimited surfing, telephone calls and SMS/MMS in Switzerland, but also offers
data transmission speeds that are up to five times faster, a considerable increase in roaming
options, more included calls abroad, unlimited use of myCloud and one year’s free use of Swisscom
TV Air. The bundled offerings, ranging from Vivo XS to XL, combine TV, Internet and fixed-line access
and offer the right subscription for individual needs. Subscribers who combine Vivo and Natel infin-
ity (plus) also benefit from a bundle discount. In myCloud, Swisscom offers its customers a Swiss
solution for the secure management and sharing of their personal data, such as photos, videos and
documents. Swisscom Natel infinity customers enjoy unlimited storage capacity, while everyone
else is given 15 gigabytes. Customers can also securely save their important documents, passwords
and notes in Docsafe. The service offerings are also continually being upgraded. In addition to offer-
ings such as My Service – the personal technical support service available as a subscription or on a
one-off basis – Swisscom has now launched the Swisscom Repair Centre. Customers can now hand
their damaged mobile phones into one of several Repair Centres and have them repaired within
24 hours without the phone leaving the Swisscom Shop. Swisscom is the only provider of mobile
phone repair services across Switzerland that uses original replacement parts and thus caters to
changing customer needs. Thanks to Swisscom Friends, customers receive rapid on-site customer
support for technical issues from people in their neighbourhood. Experienced users can register for
the service and build up a network of Swisscom Friends. Swisscom customers can book a Swisscom
Friend to, for example, install a device in their home. Swisscom Friends are volunteers and are com-
pensated by customers directly.
Small and Medium-Sized Enterprises
My SME Office and Smart Business Connect are modern communications solutions based on the
future-oriented IP technology. The two packages include an Internet connection, telephony service
and additional services such as an Internet failover. In combination with IT services from the cloud
(Dynamic Computing Services and Business Network Solutions), SMEs are gaining a measure of
flexibility in their everyday work, as they can set-up, dismantle and modify their IT and communica-
tions infrastructure at any time. Swisscom also offers Natel business infinity for SME and software
from the cloud (Storebox, Microsoft Office 365 and HomepageTool) as well as full service solutions.
Thanks to the digital solutions on offer, Swisscom gives its SME customers the option to work on
any device or in any location, and sets them up to overcome the challenges of an increasingly inter-
connected world.
Enterprise Customers
Digitisation is substantially changing business processes, business models, the customer experi-
ence and the working world in companies, and relies on the presence of solid communication net-
works. As a telecommunications and IT company, Swisscom has many years’ experience in digitisa-
tion and innovative solutions. It is driving the digitisation of Switzerland and supporting companies
in their digital transformation. In this context, it has one of the largest ICT portfolios, comprising
cloud, outsourcing and workplace solutions, UCC solutions, mobile phone solutions, networking
solutions, location networking, business process optimisation, SAP solutions, security and authenti-
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cation solutions (mobile ID) and a full range of services tailored to the banking industry, ranging
from IT and business outsourcing to trend research. Swisscom also offers new solutions such as the
Low Power Network for the Internet of Things and machine-to-machine networks, digital consulting,
software development and solutions for digitised business processes.
Healthcare market
Swisscom provides a full range of services for the healthcare sector. Swisscom offers private indi-
viduals the Evita online health dossier, medical practices a cloud-based practice software and bill-
ing services, and health insurance companies the operation of their core IT systems. Swisscom is
pressing ahead with digitisation in the health sector by providing networking solutions for service
providers. This makes Swisscom a key provider of networked healthcare solutions on the Swiss
market.
Networked home
Swisscom Energy Solutions is the first provider in Europe to use the intelligent tiko storage network
for households. tiko power allows its 6,500 users to control and optimise the consumption of their
heat pumps, electric heating systems and boilers remotely via the Internet. This makes it the larg-
est electricity storage network in Switzerland with an overall capacity equal to a hydroelectric
power station.
Sustainability
Sustainable ICT technologies support companies in their efforts to save energy and cut costs in
intelligent ways while also offering their staff an attractive working environment. These techno-
logies include teleworking and virtual meetings, which save on travel costs and time, and telehousing
and hosting solutions, which reduce the amount of energy consumed by data centres. The Internet
of Things creates further opportunities to manage vehicles, buildings and machines more
intelligently and efficiently than in the past. Products that provide added value in terms of their
sustainability for the environment and/or people receive a label, as well as a note describing their
added value.
Fastweb in Italy
Fastweb provides its residential and corporate customers with voice and broadband services
through its own broadband and ultrafast broadband network as well as via unbundled access lines
and wholesale products of Telecom Italia. In 2016, Fastweb strengthened the successful partner-
ship with the pay-TV provider Sky Italia, offering an increasing number of bundled products which
combine voice, broadband and TV services. Under an agreement with a mobile operator, Fastweb
offers its mobile services primarily to residential customers. There is a full range of ICT, cloud and
security service offerings for corporate customers.
Fastweb has confirmed its leading position as an innovative service provider. In 2016, work was
started on upgrading the FTTS network to the improved VDSL technology, which doubled data
transmission rates to speeds of up to 200 Mbps. The WiFi sharing solution (WoW-Fi), which can
turn a customer’s home router into a potential Wi-Fi access point for the entire Fastweb community,
was also expanded on the entire infrastructure. This solution is based on Fastweb’s fibre-optic
network and a simple but secure registration process. Fastweb thus offers its customers the possi-
bility of using mobile Internet without any additional expense.
See
www.swisscom.ch/
together
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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 recommend
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 NPS is calcu-
lated 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 Enterprise Customers segment conducts surveys among customers to measure satisfac-
tion along the customer experience chain. Feedback instruments are also used at key customer
contact points in order to determine customer satisfaction. After each interaction with the ser-
vice desk or after placing orders, IT users can submit feedback or enter their comments in the
order system. Customers can also 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
At the end of 2016, Swisscom had 21,127 full-time equivalent
employees, of whom 18,372 or 87% were employed in Switzerland.
Swisscom is also training 940 apprentices in Switzerland.
Headcount
At the end of 2016, Swisscom had 21,127 full-time equivalent employees (FTEs), of whom 18,372 or
87% of the total workforce were employed in Switzerland (prior year: 86.5%). Swisscom is also train-
ing 940 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
Enterprise Customers
Wholesale
IT, Network & Innovation
Swisscom Switzerland
Fastweb
Other Operating Segments
Group Headquarters
Total Group
Thereof employees in Switzerland
31.12.2016
31.12.2015
Change
4,508
1,597
5,335
88
5,045
16,573
2,468
1,796
290
21,127
18,372
4,870
1,601
5,378
105
5,245
17,199
2,401
1,723
314
21,637
18,965
–7.4%
–0.2%
–0.8%
–16.2%
–3.8%
–3.6%
2.8%
4.2%
–7.6%
–2.4%
–3.1%
Headcount was reduced by 510 full-time equivalent positions or 2.4% to 21,127 FTEs. In Switzer-
land, the number of employees decreased by 593 FTEs or 3.1% to 18,372.
In the year under review, employees in Switzerland on open-ended contracts accounted for 99.6%
of the workforce (prior year: 99.7%). Part-time employees made up 19.6% (prior year: 18.8%). Termi-
nations of employment by employees in Switzerland amounted to 6.3% of the workforce (prior
year: 5.8%).
Development of headcount in full-time equivalent
28,000
21,000
14,000
7,000
0
19,514
339
2,906
16,269
20,108
371
2,375
17,362
21,125
441
2,412
18,272
21,637
271
2,401
18,965
21,127
287
2,468
18,372
2012
2013
2014
2015
2016
Other countries
Italy
Switzerland
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Employment law in Switzerland
Introduction
Swisscom has 18,372 full-time equivalent employees in Switzerland. It is therefore one of the coun-
try’s largest employers. The legal terms and conditions of employment in Switzerland are based on
the Swiss Code of Obligations. The current collective employment agreement (CEA), which entered
into force on 1 April 2015, 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. The CEA of cablex AG likewise entered into force on 1 April 2015. At the end of Decem-
ber 2016, 15,392 Swisscom employees or 83% of the Swisscom workforce were covered by the col-
lective 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 represen-
tatives). The collective employment agreement (CEA) and the social plan constitute fair and con-
sensual 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 working week for employees covered by the Swisscom CEA is 40 hours. Among the progressive
benefits defined by the CEA are five weeks’ annual leave, or 27 days from age 45 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 educa-
tion 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 ill-
ness 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.
In November 2015, Swisscom negotiated the necessary CEA with the social partners on the basis of
the revised Ordinance 1 to the Swiss Labour Law. This agreement provides for a waiver of time
registration and was implemented on 1 January 2016, the date on which the amended ordinance
took effect.
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Working-hour models
Swisscom encourages its full-time and part-time employees to adopt an appropriate life domain
balance by means of the following measures: Flexible working hours are the standard model used
by a majority of employees. Other flexible working-hour models include annual working hours, a
long-term working-time account and part-time work. In connection with this, Swisscom conducted
the “Teilzeitmann” (part-time man) pilot trial in 2016. The experiment offered male employees the
opportunity to work part-time on a trial basis and its aim was to dispel prejudice and increase the
acceptance of part-time work. The “holiday purchasing” model allows employees to purchase addi-
tional 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 solutions for mod-
ern communication and collaboration. Swisscom is a sponsor of the Work Smart initiative.
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. Two new flexible working-hour models named “Work & Care”
have been added to the existing models to promote work-life balance, particularly where an
employee is caring for a relative.
Social plan
Swisscom’s social plan sets out the benefits provided to employees covered by the CEA who are
affected by redundancy. It utilises funds to improve employees’ prospects in the labour market. It
also provides for retraining measures in the event of long-term job cuts. Responsibility for imple-
menting 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 92% of those affected finding a new
job in 2016 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 (such as phased partial retirement or tempo-
rary placements 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 based on function, individual performance
and the job market. The performance-related salary component is contingent on business perfor-
mance 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 respective business segment or division. The targets primarily relate to key financial indicators
and customer 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 131
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 current CEA provides for a min-
imum salary of CHF 52,000, or CHF 50,000 in the case of the cablex CEA. Swisscom’s operations are
spread throughout Switzerland, and when it comes to determining salaries there is very little differ-
ence between regions. A study of starting salaries for the youngest employees (up to age 21) found
that the average basic annual salary in the function levels used for most job starters in this cate-
gory was CHF 58,000 or CHF 56,500 at cablex; in other words, 12% and 13% respectively above the
minimum salary defined by the relevant CEA.
Pay round
In February 2016, Swisscom and its social partners signed a two-year pay round agreement for
2016 and 2017. During the reporting year, Swisscom increased salaries in Switzerland by 0.4% of the
total salary. Salary adjustments were made based on individual employee performance and specif-
ically for employees with salaries that needed to be increased in line with the market. Management
staff were only awarded salary increases in individual cases.
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, the individual functions are assigned to job levels according to their require-
ments. A salary band is assigned to each job depending on the market salary. The salary band stip-
ulates the remuneration range for equivalent duties and responsibility. Pay is determined within
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this range based on the individual employee’s performance. As part of its salary review, Swisscom
grants employees who have performed 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. Previ-
ous reviews have revealed only minor pay discrepancies, well under the tolerance threshold of 5%.
Staff development
Swisscom’s market environment is constantly changing. The company invests in targeted profes-
sional training for its employees and managers in order to maintain and improve their employabil-
ity and the company’s competitiveness in the long term. As a pioneer in the field of digitisation in
Switzerland, Swisscom is also dedicated to getting to grips with the working models of the future
so as to provide employees and management with a learning environment in which they can
develop and test new skills. All employees have a variety of e-learning modules at their disposal in
the Learning Centre, featuring different types of lessons ranging from management topics, ICT and
business economics all the way to security and governance issues. In dialogue and in agreement
with line managers, all employees also have the opportunity to attend internal and external train-
ing programmes. Swisscom supports this both financially and also in terms of providing time off
work. In doing so, Swisscom relies upon its employees’ sense of responsibility to shape their own
professional development so that it meets their respective strengths. This also applies to talent
management. Employees can reapply for the talent programme independently. In the year under
review, every Swisscom employee spent 2.9 days on learning, training and development in Switzer-
land.
Swisscom believes that providing employees with support in their development is an important
task in the remit of management staff. Regular dialogue and feedback between employees, peers
and line managers is used as an orientation tool to heighten the general awareness of professional
development and long-term employability in the networked world. To assess and promote
employee performance and development, Swisscom will continue to develop its Performance
Management System in line with requirements. Performance evaluations are held on the basis of
binding contribution agreements, which are now discussed openly within the respective teams.
The feedback provided by internal customers to the respective employees supplements the con-
stant dialogue between employees and management staff and supports the achievement of
agreed contribution throughout the course of the year.
The Leadership Academy offers managers in personnel, project and technical leadership roles the
opportunity to get to grips with the key skills of management in a rapidly changing environment.
Individual training offerings and platforms which deepen management capabilities in a particular
group or a specific context also help to build up the skills of Swisscom’s managers in a systematic
and sustained way.
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Staff recruitment
As a Swiss company, Swisscom is committed to the Swiss employment market. In order to meet
customer needs and remain competitive, Swisscom is prepared to work together with both domes-
tic and international partners, on the condition that they satisfy Swisscom’s requirements as
regards labour legislation and sustainability.
In the majority of cases, Swisscom first advertises available vacancies internally. When recruiting
new employees, Swisscom seeks out individuals who are motivated and passionate about helping
customers and who want to help shape the future of the networked world. At all company loca-
tions in Switzerland, Swisscom primarily endeavours to employ people who live in the area where
they work.
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 2016, 325 young people started their apprenticeship at Swisscom. Swisscom is thus Swit-
zerland’s largest trainer of ICT professionals. In 2016, Swisscom trained a total of 940 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 2016, Swisscom developed a new employee survey which is even better suited to the organisa-
tion’s requirements. Employees submit their evaluations three times a year with respect to seven
questions revolving around their personal work situation. The results are available for everyone to
access in real time and allow individual employees, individual teams and the entire organisation to
respond to feedback and make improvements. The new survey promotes a culture of feedback,
which creates the basis for the whole company to develop together. 66% of the workforce partici-
pated in the first survey in October 2016, a very satisfactory response rate given the new survey
mode. The findings revealed that Swisscom employees rate Swisscom very highly as an employer,
particularly compared to other companies in the sector.
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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 nazio-
nale 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.
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 the work-life balance of its staff. The company’s terms and conditions of employ-
ment 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. This is why Swisscom consistently
focuses on meeting changing customer needs, and identifies growth
areas in which it can sustainably defend and strengthen its position.
Environment, objectives and management approach
Innovation is an important driver in the bid to enter new markets and partake in up-and-coming
technologies. Due to the rapidly changing nature of Swisscom’s business environment, innovation
and development, in other words the commercially successful implementation of new ideas, are
becoming increasingly important. Innovation is an important lever in remaining relevant in the core
business, in generating growth in new markets and in digitising internal work processes. Swisscom
strives to anticipate the strategic 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, suppliers
and other partners, as this enables a continuous, 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, i.e. the user-oriented design of simple, inspiring experiences
that help customers find their way in the networked world.
Within the company, Swisscom practises 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 trendsetting ideas and familiarise themselves with
best practice examples. One example of this is the Innovation Week held twice a year, during which
teams of employees from different divisions implement a new idea that addresses a specific customer
need, is of business relevance and has potential on the market. Moreover, Swisscom supports internal
pioneers through the Kickbox programme, which provides interested employees with the tools
(including starting credit, a timeframe as well as the contact details of innovation experts) required
for developing an idea into a prototype.
Outside the company, Swisscom promotes innovation throughout the industry. In particular,
Swisscom is committed to supporting young companies that offer new, progressive solutions in the
fields of IT, communications and entertainment. Swisscom participates in start-ups as a project partner
and investor, supports them by providing tailored products and services, and offers them access to
infrastructures and markets. Since 2013, Swisscom has held the StartUp Challenge competition,
where winners are sent on a one-week mentoring programme in Silicon Valley. In June 2016, Swisscom
announced that it was stepping up its collaboration with FinTech start-ups: a FinTech cluster within
Swisscom institutionalises the cooperation with start-up companies in the financial industry.
Swisscom Ventures is also being expanded with a dedicated FinTech fund of over CHF 10 million.
Using this fund, Swisscom is making targeted investments in promising FinTech start-ups and is
pressing ahead with collaborations in innovative digital banking services. In autumn of this year,
Swisscom launched the “Call for Innovation”, as part of which it contracted out specific ICT questions
for the international start-up community to answer. Selected start-ups have the opportunity to
present their solutions to a panel of experts, and the winning project will work on a joint test
project with Swisscom.
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See
www.swisscom.ch/
innovation
Swisscom has been operating in Silicon Valley since 1998, with its branch offices running targeted
trend and technology scouting operations and helping to remain at the forefront of technological
development via collaborations with start-ups.
Innovation platforms
Swisscom plays an active role in shaping Switzerland’s future. Its commitment to fostering an
innovative and competitive Switzerland is reflected in the backing it gives to a whole variety of
projects. Swisscom supports Switzerland’s role as a research centre by making investments and
engaging in partnerships with universities and institutions. For example, it funds the chair of
Professor Adrian Perrig, head of the network security group at the Federal Institute of Technology
in Zurich, thereby making an important contribution to information security in Switzerland.
As a partner of the Federal Institute of Technology Lausanne (EPFL), Swisscom enables research
work to be performed in the areas of human activity and the smart home (“intelligent living”) as
well as “5G for Switzerland”. The partnership involves the provision of financial support for selected
projects, the establishment of the “Digital Lab” (a competence centre for digitisation at the EPFL
Innovation Park), and various other campus activities, such as events dealing with digitisation.
Swisscom is also a partner of the Swiss Innovation Park and is closely involved in guiding this long-
term project as a member of the Board of Trustees. Through its participation in the regional
innovAARE Park, Swisscom is supporting research in the field of energy.
Finally, Swisscom is a founding member of the Digital Switzerland initiative (previously known as
Digital Zurich 2025), the aim of which is to position Switzerland as an attractive location for start-ups.
Swisscom also supports initiatives such as Impact Hub Zurich as well as incubators such as Base-
Camp4HighTech, and in doing so cultivates a dynamic environment for start-ups.
Enabling services
Swisscom hopes to make its software technologies and infrastructure elements internally available
by means of a strongly service-oriented procedure. It is confident of pressing ahead with the
development of future software solutions through standardisation and a self-service approach. By
offering its developers all of the key working bases – from programming interfaces and hosting all
the way to technical support – “as a service”, Swisscom is making its internal processes considerably
more streamlined, faster and cost-effective.
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Focused innovation
Swisscom is focusing its innovation activities on the following seven areas of innovation, which in
turn directly help the Group achieve its goals:
Netz
Netz
Netz
Netz
Digital Business
Digital Business
Netz
Netz
Digital Business
Digital Business
Digital Business
Digital Business
Set-up of data driven
and software-based
Digital Business
Digital Business
platforms
Digital Swisscom
Digital Swisscom
Digital Swisscom
Digitising internal
processes for simplification
and automation
Digital Swisscom
Digital Swisscom
Digital Swisscom
Network
More efficient expansion and
Netz
differentiation through the best
network
Internet der Dinge
Internet der Dinge
Internet der Dinge
Internet of Things
Internet der Dinge
Added value beyond connectivity in
the platform and application business
Internet der Dinge
Internet der Dinge
Internet der Dinge
Analytics & Artificial Intelligence
Better customer service through
artificial intelligence
Analytics und künstliche Intelligenz
Analytics und künstliche Intelligenz
Digital Swisscom
Digital Swisscom
Entertainment
Increasing the relevance of the offer,
e.g. through new content
Unterhaltung
Unterhaltung
Analytics und künstliche Intelligenz
Analytics und künstliche Intelligenz
Analytics und künstliche Intelligenz
Security
Building security capabilities
for internal and external use
Analytics und künstliche Intelligenz
Sicherheit
Analytics und künstliche Intelligenz
Sicherheit
Unterhaltung
Unterhaltung
Sicherheit
Sicherheit
Unterhaltung
Swisscom continually invests in progressive solutions in these areas of innovation. The aim is to
provide the best ICT infrastructure for a digital Switzerland, tap new growth markets and offer its
customers the best services and products:
Unterhaltung
Unterhaltung
Sicherheit
Sicherheit
Sicherheit
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See
www.swisscom.ch/lpn
Network
> 5G for Switzerland: As part of the “5G for Switzerland” programme, Swisscom and Ericsson are
making preparations for the new generation of mobile technology. Working together with the
Federal Institute of Technology Lausanne (EPFL) as a research partner, their aim is to advance the
development of 5G. They are also planning to work together with industrial partners on devel-
oping and testing the potential applications in a wide range of different areas, such as smart
transportation and virtual reality. The research results will influence the definition of the global
5G standard.
> G.fast: At the end of 2016, Swisscom became the first telecommunications company in Europe to
integrate the innovative G.fast (pronounced “gee dot fast”) transmission standard into its fixed
network. G.fast is an important element of Swisscom’s fixed network strategy and accommodates
the continuous data growth within the network. Thanks to G.fast, customers can benefit from band-
widths of up to 500 Mbps.
Internet of Things
> Swisscom Low Power Network: This network is used for applications in combination with
“autonomous” devices that only transmit a small amount of data. The devices in the field require
less power and can therefore function without a power supply or large batteries. Manufacturing
and maintenance are relatively cost-effective. Swisscom is providing Switzerland’s first national
LPN for the Internet of Things.
> Smart City: In Pully, Canton of Vaud, and other pilot cities, anonymised, aggregated mobile phone
data is helping to improve traffic flows in the town and relieve the burden on the town centre by
displaying exact movement patterns. The project is intended to act as a pilot: Swisscom is helping
towns and cities to plan their infrastructure in a more systematic manner and find easier ways to
manage it.
Analytics & Artificial Intelligence
> Voiceprint: Customers who call the hotline can now be identified through their voice. The so-called
voiceprint makes the identity verification process faster and more reliable. Voiceprint thus helps
agents to serve customers even faster and with a more personal service.
Security
> Security with artificial intelligence: The number of threats from the Internet continues to grow
and the threats themselves are becoming increasingly intelligent. Swisscom plans to use algo-
rithms and artificial intelligence to automatically identify attacks and threats as well as to initiate
the corresponding countermeasures. This could make a considerable contribution towards
ensuring a safe and secure network.
Entertainment
> UHD TV-Box for a new era of picture quality and voice recognition: In April 2016, Swisscom
launched a new TV-Box. It is smaller, quicker, more economical and offers images in amazing ultra-
high definition quality (UHD). The new box comes equipped with a new remote control with a
built-in microphone to enable customers to perform voice-activated searches, thus eliminating
the need to type in search terms and making it much easier to find film or programme titles,
actors, sports clubs or other key words.
Digital Swisscom
> Swisscom Friends – neighbourly help: The aim of Swisscom Friends is to encourage customers
to discover the opportunities available in the digital world. As part of the neighbourly help
service, people provide support to other people from their neighbourhood with any technical
concerns they may have. The service comes with the benefit that support can also be provided
outside of office hours. Swisscom Friends are volunteers and are compensated by customers
directly.
Digital Business
> siroop: Through its participation in Eos Commerce AG – a start-up founded by Coop – and the
launch of the siroop online marketplace, Swisscom is driving digitisation, offering customers and
Swiss retailers a secure and attractive platform and leveraging the trend in favour of online
retailing, which is increasingly growing in importance for Swisscom as well. Coop and Swisscom
are contributing their expertise in digitisation, e-commerce, marketing and retailing to start-up
companies.
In addition to the activities it carries out in innovation fields, Swisscom is constantly investigating
the opportunities offered by new technologies. In 2016, it focused on the potential of blockchain
disruptive technology as well as virtual/augmented reality.
The aim is for Swisscom to provide the best infrastructure for a digital Switzerland, tap new growth
markets and offer its customers the best services and products.
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Financial review
Drop in net revenue (–0.3%). Increase in EBITDA (+4.8%) and
net income (+17.8%). On a like-for-like basis, decrease in net
revenue (–0.5%) and EBITDA (–1.2%). Customer base decline
in Switzerland (–0.8%) and growth in Italy (+7.0%). Payment of
an unchanged dividend of CHF 22 per share will be proposed
for the 2016 financial year.
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 year
2016
11,643
4,293
36.9
2,148
1,604
1,604
30.97
1,791
2,416
7,846
2015
11,678
4,098
35.1
2,012
1,362
1,361
26.27
1,844
2,409
8,042
Full-time equivalent employees at end of year
21,127
21,637
Change
–0.3%
4.8%
6.8%
17.8%
17.9%
17.9%
–2.9%
0.3%
–2.4%
–2.4%
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Development of net revenue in CHF million
Development of EBITDA in CHF million
11,703
2,043
9,660
11,678
1,862
9,816
11,643
1,948
9,695
16,000
12,000
8,000
4,000
0
6,000
4,500
3,000
1,500
0
Fastweb
Swisscom
w/o Fastweb
4,413
625
3,788
4,098
619
3,479
4,293
721
3,572
2014
2015
2016
2014
2015
2016
Fastweb
Swisscom
w/o Fastweb
Development of capital expenditure in CHF million
Development of net income in CHF million
2,436
682
1,754
2,409
581
1,828
2,416
633
1,783
3,000
2,250
1,500
750
0
2,000
1,500
1,000
500
0
Fastweb
Swisscom
w/o Fastweb
1,706
1,604
1,362
2014
2015
2016
2014
2015
2016
Summary
Swisscom’s net revenue declined by CHF 35 million or 0.3% year-on-year to CHF 11,643 million.
Revenue in the Swiss core business decreased by CHF 105 million or 1.1% to CHF 9,440 million.
While revenue from telecommunications services fell by CHF 124 million or 1.8% as a result of
increasing competitive pressure and falling roaming prices, revenue in the solutions business with
corporate customers reported an increase of CHF 31 million or 2.9%. The number of revenue gener-
ating units (RGU) in Swiss core business fell by 96,000 or 0.8% to 12.4 million as a result of market
saturation. Nevertheless, the company maintained or, as in the case of Swisscom TV, even increased
its market shares. As a result of customer growth, the revenue of Italian subsidiary Fastweb was
EUR 59 million or 3.4% higher at EUR 1,795 million. The number of subscribers to Fastweb’s broad-
band business grew by 154,000 or 7.0% year-on-year to 2.4 million.
Operating income before depreciation and amortisation (EBITDA) was CHF 195 million or 4.8% higher
at CHF 4,293 million. Excluding non-recurring items and on the basis of constant exchange rates,
EBITDA fell by CHF 54 million or 1.2%. On a like-for-like basis, EBITDA in the Swiss core business
decreased by CHF 125 million or 3.2%, and at Fastweb it rose by EUR 45 million or 8.0%. Net income
increased by CHF 242 million or 17.8% to CHF 1,604 million, largely due to non-recurring items. Pay-
ment of an unchanged dividend of CHF 22 per share for the 2016 financial year will be proposed to
the Annual General Meeting.
At CHF 2,416 million, capital expenditure was nearly on a par with the previous year (+0.3%). In Swit-
zerland, capital expenditure declined by CHF 48 million or 2.6% to CHF 1,774 million. At the end of
2016, more than 3.5 million homes and businesses had been connected to ultrafast broadband
(speeds in excess of 50 Mbps). At Fastweb, capital expenditure increased by EUR 40 million or 7.4% to
EUR 581 million due to the continuing expansion of the broadband network.
Operating free cash flow declined by CHF 53 million or 2.9% to CHF 1,791 million. This decline was
mainly due to the payment of the Competition Commission penalty of CHF 186 million imposed as
part of the ongoing proceedings regarding broadband services. Excluding this payment, operating
free cash flow would have risen by CHF 133 million or 7.2%. Net debt decreased by CHF 196 million
or 2.4% to CHF 7,846 million as compared to the end of 2015. The ratio of net debt to EBITDA
declined from 2.0 to 1.8.
Headcount at Swisscom was reduced by 510 full-time equivalent positions or 2.4% year-on-year to
21,127 FTEs. The workforce in Switzerland declined by 593 FTEs or 3.1% to 18,372 FTEs, with the
reduction attributable to efficiency measures more than offsetting the increase in the number of
positions in the solutions business with corporate customers as well as the recruitment of external
workforce. Fastweb increased its workforce by 2.8% to 2,468 FTEs.
For 2017, Swisscom expects net revenue of around CHF 11.6 billion, EBITDA of around CHF 4.2 bil-
lion and capital expenditure of some CHF 2.4 billion. For Swisscom (excluding Fastweb), a slight
decline in revenue is expected due to high competition and price pressure. A slight increase in reve-
nue is expected for Fastweb. EBITDA for Swisscom, excluding Fastweb, is expected to be around
CHF 100 million lower year-on-year. The reduction in EBITDA is attributable to price pressure and
declines in the number of fixed-line telephony connections. In addition, the costs for roaming are
expected to increase. EBITDA will be positively affected by cost savings. Fastweb’s EBITDA is expected
to be slightly higher. Capital expenditure in Switzerland and at Fastweb is expected to be on a par
with the prior year. Subject to achieving its targets, Swisscom will propose payment of an
unchanged dividend of CHF 22 per share for the 2017 financial year at the 2018 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
2016
9,374
1,948
320
1
11,643
3,686
721
94
(114)
(72)
(22)
2015
9,475
1,862
340
1
11,678
3,601
619
69
(117)
(60)
(14)
Operating income before depreciation and amortisation (EBITDA)
4,293
4,098
11,643
11,678
Net revenue
Goods and services purchased
Personnel expense
Other operating expense
Capitalised costs of 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
(2,323)
(2,947)
(2,548)
468
(7,350)
4,293
(2,145)
2,148
(155)
–
(3)
1,990
(386)
1,604
1,604
–
(2,342)
(3,019)
(2,697)
478
(7,580)
4,098
(2,086)
2,012
(189)
(83)
23
1,763
(401)
1,362
1,361
Change
–1.1%
4.6%
–5.9%
0.0%
–0.3%
2.4%
16.5%
36.2%
–2.6%
20.0%
57.1%
4.8%
–0.3%
–0.8%
–2.4%
–5.5%
–2.1%
–3.0%
4.8%
2.8%
6.8%
–18.0%
–100.0%
12.9%
–3.7%
17.8%
17.9%
1
–100.0%
Average number of shares outstanding (in millions of shares)
Earnings per share (in CHF)
51.800
30.97
51.802
26.27
0.0%
17.9%
1 Operating income of segments includes ordinary employer contributions as pension fund expense.
The difference to the pension cost according to IAS 19 is recognised as a reconciliation item.
Share in net revenue in %
Share in EBITDA in %
17%
Fastweb
17%
Fastweb
83%
Swisscom
w/o Fastweb
83%
Swisscom
w/o Fastweb
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Operating results
Net revenue
Swisscom’s net revenue declined by CHF 35 million or 0.3% year-on-year to CHF 11,643 million, of
which Swisscom Switzerland accounted for 81%, Fastweb for 17% and Other Operating Segments
for 2%. At constant exchange rates and excluding company acquisitions and disposals, Swisscom’s
net revenue decreased by CHF 55 million or 0.5%. Revenue from external customers at Swisscom
Switzerland contracted by CHF 101 million or 1.1%, due primarily to lower revenue from telecom-
munications services. By contrast, the revenue of Italian subsidiary Fastweb increased on the back
of customer growth by EUR 59 million or 3.4% to EUR 1,795 million (measured in local currency).
Adjusted for the sale of companies, the net revenue from external customers of Other Operating
Segments was CHF 9 million or 2.9% higher due to a rise in construction services performed by
cablex. At Swisscom Switzerland, the number of revenue generating units (RGU) dropped by 96,000
or 0.8% to 12.4 million as a result of market saturation. The increase in Swisscom TV and broadband
was offset by a decline in connections for fixed-line telephony. The number of mobile lines remained
on a par with the previous year. The number of Fastweb broadband customers rose by 154,000 or
7.0% to 2.4 million.
Operating expense
Operating expense of Swisscom fell by CHF 230 million or 3.0% year-on-year to CHF 7,350 million.
The prior year’s operating expense included the recognition of provisions for the ongoing Competi-
tion Commission proceedings on broadband services (CHF 186 million) and for headcount reduc-
tion (CHF 70 million). Adjusted for these provisions and other non-recurring items such as gains
from the sale of real estate, non-cash pension expenses in accordance with IAS 19, compensation
from legal proceedings, company acquisitions and disposals and the provisions created in 2016 for
termination benefits and regulatory risks, and on the basis of constant exchange rates, operating
expense remained stable. Higher costs at Swisscom Switzerland for subscriber acquisition and
retention activities and higher costs in the solutions business for corporate customers and in rela-
tion with the parallel operation of networks were offset by cost savings of CHF 50 million as a result
of efficiency gains.
Operating income before depreciation and amortisation (EBITDA)
Operating income before depreciation and amortisation (EBITDA) was CHF 195 million or 4.8%
higher at CHF 4,293 million. In the previous year in particular, one-off expenses significantly
impacted operating income. On a like-for-like basis, EBITDA fell by CHF 54 million or 1.2%. At
Swisscom Switzerland, the adjusted decline amounted to CHF 125 million or 3.2% and was attrib-
utable to a drop in revenue from telecommunications services and to higher costs for subscriber
acquisition and retention. At Fastweb, EBITDA rose by EUR 45 million or 8.0% on a like-for-like basis,
mainly due to higher revenue as a result of customer growth. On an adjusted basis, Swisscom’s
profit margin decreased 0.3 percentage points to 36.9%.
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Net revenue
declined by 0.3% year-on-year
Net revenue in 2016 amounted to
EBITDA
increased by 4.8% year-on-year
EBITDA in 2016 amounted to
11.6 billion Swiss francs
4.3 billion Swiss francs
Depreciation and amortisation, non-operating results
Depreciation, amortisation and impairment losses
Swisscom’s depreciation, amortisation and impairment losses increased by CHF 59 million or 2.8%
to CHF 2,145 million year-on-year, mainly reflecting an increase in depreciation and amortisation at
Swisscom Switzerland because of the high level of capital expenditure. Intangible assets resulting
from business combinations were capitalised for purchase price allocation purposes. Depreciation
and amortisation includes scheduled amortisation of intangible assets deriving from business combi-
nations (e.g. brands and customer relationships) totalling CHF 104 million (prior year: CHF 125 mil-
lion).
Net interest expense and other financial result
Net interest expense declined by CHF 34 million to CHF 155 million as a result of lower average
interest costs. The other financial result for 2016 was a break-even result after posting a net
expense of CHF 83 million in the previous year. In 2016, the other financial result included a gain of
CHF 41 million from the sale of associate Metroweb S.p.A. The prior-year other financial result
includes foreign exchange losses of CHF 40 million due to the Swiss National Bank’s lifting of the
minimum exchange rate.
Investments in associates
The share of results of associates primarily involves Belgacom International Carrier Services Ltd,
siroop Ltd, Zanox AG and Admeira Ltd. The result includes the initial costs for companies currently
being built up. Dividends of CHF 17 million (prior year: CHF 22 million) mainly resulted from dividend
payments made by Belgacom International Carrier Services Ltd.
Income tax expense
Income tax expense was CHF 386 million (prior year: CHF 401 million), corresponding to an effective
income tax rate of 19.4% (prior year: 22.7%). The above-average income tax rate in 2015 is mainly
attributable to the fact that no income tax effects were recognised on the provision created in
2015 for the ongoing Competition Commission proceedings regarding broadband services. Exclud-
ing non-recurring items, Swisscom expects the income tax rate to remain around 21% in the long
term.
Net income
Net income increased by CHF 242 million or 17.8% to CHF 1,604 million year-on-year, largely due to
non-recurring items. Earnings per share increased accordingly from CHF 26.27 to CHF 30.97.
EBIT
rose 6.8% year-on-year
EBIT in 2016 amounted to
Net income
grew 17.8% year-on-year
Net income in 2016 amounted to
2.15 billion Swiss francs
1.60 billion Swiss francs
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Segment revenue and results
Swisscom’s financial reporting focuses on the three operating divisions Swisscom Switzerland,
Fastweb and Other Operating Segments, and Group Headquarters. Swisscom Switzerland is the
Swiss market leader in the field of telecommunications. Fastweb is one of the largest broadband
telecom companies in Italy. Other Operating Segments mainly comprises Participations, Health and
Connected Living. Group Headquarters largely comprises the Group divisions. Swisscom Switzer-
land consists of the customer segments Residential Customers, Small & Medium-Sized Enterprises,
Enterprise Customers and Wholesale as well as IT, Network & Innovation.
Development of revenue from external customers
Swisscom Switzerland in CHF million
Development of revenue generating units (RGU)
Swisscom Switzerland in thousand
9,253
9,475
9,374
10,000
7,500
5,000
2,500
0
14,000
10,500
7,000
3,500
0
12,373
12,543
12,447
2014
2015
2016
2014
2015
2016
Revenue mobile
single subscriptions
Revenue fixed-line
single subscriptions
Revenue bundled
subscriptions
Revenue others
Total
2,776
2,729
2,614
1,967
1,731
1,466
1,921
2,589
9,253
2,234
2,781
9,475
2,502
2,792
9,374
Fixed telephony access lines 2,778
Broadband access lines retail 1,890
Swisscom TV access lines
1,165
Mobile access lines
6,540
2,629
1,958
1,331
6,625
2,367
1,992
1,476
6,612
Total revenue generating
units (RGU)
12,373
12,543
12,447
Development of revenue from external customers
Fastweb* in EUR million
Development of broadband access lines Fastweb in thousand
1,685
1,732
1,787
2,000
1,500
1,000
500
0
2,072
2,201
2,355
3,000
2,250
1,500
750
0
2014
2015
2016
2014
2015
2016
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Residential Customers
Corporate Business
Wholesale hubbing
Wholesale others
753
789
28
115
878
711
26
117
906
706
19
156
External revenue
1,685
1,732
1,787
*New revenue structure since 2015. Figures 2014 not restated.
Swisscom Switzerland
In CHF million, except where indicated
Net revenue and results
Residential Customers
Small and Medium-Sized Enterprises
Enterprise Customers
Wholesale
IT, Network & Innovation
Elimination
Net revenue
Residential Customers
Small and Medium-Sized Enterprises
Enterprise Customers
Wholesale
IT, Network & Innovation
Elimination
Segment result before depreciation and amortisation (EBITDA)
Margin as % of net revenue
Depreciation, amortisation and impairment losses
Segment result
Capital expenditure and headcount
2016
2015
Change
5,160
1,367
2,611
989
129
(816)
9,440
2,870
892
839
388
(1,304)
1
3,686
39.0
(1,489)
2,197
5,224
1,370
2,654
956
130
(789)
9,545
2,933
907
910
198
(1,347)
–
3,601
37.7
(1,383)
2,218
–1.2%
–0.2%
–1.6%
3.5%
–0.8%
3.4%
–1.1%
–2.1%
–1.7%
–7.8%
96.0%
–3.2%
100.0%
2.4%
7.7%
–0.9%
–3.1%
–3.6%
Capital expenditure in property, plant and equipment and other intangible assets
Full-time equivalent employees at end of year
1,743
16,573
1,799
17,199
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Net revenue of Swisscom Switzerland declined by CHF 105 million or 1.1% year-on-year to
CHF 9,440 million. While revenue from telecommunications services for end customers declined by
CHF 124 million or 1.8% as a result of greater competitive pressure and falling roaming prices,
revenue in the solutions business with business customers increased by CHF 31 million or 2.9%. The
number of revenue generating units (RGU) in Swiss core business fell by 96,000 or 0.8% to 12.4 mil-
lion as a result of market saturation. Nevertheless, the company maintained or, as in the case of
Swisscom TV, even increased its market shares. Swisscom TV is market leader, with a market share
of 32% (prior year: 29%). In the fixed-line business the number of RGUs fell by 83,000. The increase
in the TV and broadband business was more than offset by a drop in fixed-line telephony connections.
In the mobile communications business, the number of connections was down by 13,000.
Operating income before depreciation and amortisation (EBITDA) was CHF 85 million or 2.4%
higher at CHF 3,686 million. Operating income in 2015 was heavily impacted by one-off expenses,
such as an addition to provisions for the ongoing Competition Commission proceedings on broad-
band services. Adjusted for these provisions and other non-recurring items such as provisions for
headcount reduction and regulatory risks and gains from the sale of real estate, EBITDA decreased
by CHF 125 million or 3.2%. At CHF 1,743 million, capital expenditure was CHF 56 million or 3.1%
lower year-on-year. A rise in capital expenditure for the expansion of broadband networks was
offset in other areas. Headcount fell year-on-year by 626 FTEs or 3.6% to 16,573 FTEs. Excluding com-
pany acquisitions, the number of FTEs decreased by 687 or 4.0%.
Swisscom Switzerland / net revenue
In CHF million, except where indicated
2016
2015
Change
Revenue by services
Revenue mobile single subscriptions
Revenue fixed-line single subscriptions
Revenue bundles
Other net revenue
Revenue from external customers
Intersegment revenue
Net revenue
Operational data at end of period in thousand
Fixed telephony access lines
Broadband access lines retail
Swisscom TV access lines
Mobile access lines
Revenue generating units (RGU)
Bundles
Unbundled fixed access lines
Broadband access lines wholesale
2,614
1,466
2,502
2,792
9,374
66
9,440
2,367
1,992
1,476
6,612
12,447
1,672
128
364
2,729
1,731
2,234
2,781
9,475
70
9,545
2,629
1,958
1,331
6,625
12,543
1,416
128
315
–4.2%
–15.3%
12.0%
0.4%
–1.1%
–5.7%
–1.1%
–10.0%
1.7%
10.9%
–0.2%
–0.8%
18.1%
0.0%
15.6%
Revenue from external customers at Swisscom Switzerland contracted by CHF 101 million or 1.1%
to CHF 9,374 million. In the Residential Customers unit, revenue fell by CHF 64 million or 1.2% to
CHF 5,160 million, mainly as a result of lower roaming prices. In the Small and Medium-Sized
Enterprises unit, revenue remained fairly stable (–0.2%). The effect of lower roaming prices was
offset by additional revenue generated from the takeover of search.ch with effect from mid-2015.
Revenue in the Enterprise Customers unit decreased by CHF 43 million or 1.6% to CHF 2,611 million.
While revenue from telecommunications services fell due to price pressure, revenue in the solutions
business increased, albeit with a lower margin. Incoming orders in the Enterprise Customers unit
fell by 5.1% to CHF 2,515 million as a result of strong competition.
The huge demand for bundled offerings with flat-rate tariffs continues. By the end of 2016, the
number of customers using bundled packages had increased year-on-year by 256,000 or 18.1% to
1.67 million. Revenue from bundled contracts increased year-on-year by CHF 268 million or 12.0%
to CHF 2,502 million. The number of revenue generating units (RGU) fell by 96,000 or 0.8% to
12.4 million. Despite the tough competition, the number of Swisscom TV connections increased in
2016 by 145,000 or 10.9% to 1.48 million, with fixed-fee subscriptions accounting for 1.18 million.
Over 80% of customers use the cloud-based Swisscom TV 2.0 service. Broadband lines with end
customers grew by 34,000 or 1.7% to 1.99 million in 2016. The number of fixed-line telephony con-
nections fell by 262,000 or 10.0% to 2.37 million, mainly due to a shift to mobile telephony.
In the area of mobile telecommunications, the increasingly saturated market is impacting the
development of customer numbers. The number of mobile communications connections remained
stable year-on-year at 6.6 million (–0.2%). The number of postpaid lines including bundled offerings
rose by 51,000, while the number of prepaid access lines declined by 64,000. In the roaming business,
a drop in roaming fees and the inclusion of roaming in the Natel infinity 2.0 subscription packages
has driven roaming volumes up at an even faster pace. The associated price reduction in 2016 was
around CHF 100 million. Mobile data traffic increased by 78% year-on-year and voice traffic by 11%.
With the introduction of Natel infinity 2.0 in March 2016, customers benefit from much higher
speeds, more roaming options and unlimited online storage. By the end of 2016, 1.0 million
customers had opted for the new infinity subscriptions. The number of customers for all Natel
infinity subscriptions is 2.4 million, which equates to 70% of postpaid lines (excluding corporate
customers).
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Swisscom Switzerland / operating expenses and segment result
In CHF million, except where indicated
2016
2015
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 costs of 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
(459)
(504)
(1,074)
(2,037)
(2,413)
(1,601)
297
(3,717)
(5,754)
3,686
39.0
(1,489)
2,197
(440)
(459)
(1,114)
(2,013)
(2,502)
(1,744)
315
(3,931)
(5,944)
3,601
37.7
(1,383)
2,218
Capital expenditure in property, plant and equipment and other intangible assets
Full-time equivalent employees at end of year
1,743
16,573
1,799
17,199
4.3%
9.8%
–3.6%
1.2%
–3.6%
–8.2%
–5.7%
–5.4%
–3.2%
2.4%
7.7%
–0.9%
–3.1%
–3.6%
Segment expense fell by CHF 190 million or 3.2% to CHF 5,754 million. At CHF 2,037 million, direct
costs were CHF 24 million or 1.2% higher than a year earlier. The costs for subscriber acquisition and
retention rose by CHF 45 million or 9.8% to CHF 504 million, partly as a result of the TV box for
high-definition television being offered to customers at a preferential rate and thus no longer
remaining the property of Swisscom. Traffic fees increased due to higher roaming traffic volumes.
Indirect costs fell by CHF 214 million or 5.4% to CHF 3,717 million. Adjusted for the recognition of
provisions in the prior year for the ongoing Competition Commission proceedings on broadband
services and for other non-recurring items such as the recognition of provisions for headcount
reduction and regulatory risks, gains from the sale of properties and company acquisitions, indirect
costs fell by 0.7%. Higher costs in the solutions business for corporate customers and in relation to
the parallel operation of networks were more than offset by cost savings as a result of efficiency
gains. Swisscom Switzerland achieved cost savings totalling CHF 50 million in 2016. Personnel
expense declined by CHF 89 million or 3.6% to CHF 2,413 million, and by 2.1% on a like-for-like basis.
Headcount decreased year-on-year by 626 FTEs or 3.6% to 16,573 FTEs. Excluding company acquisi-
tions, the number of staff fell by 687 FTEs or 4.0% due to efficiency measures. The segment result
before depreciation and amortisation (EBITDA) rose by CHF 85 million or 2.4% to CHF 3,686 million.
On a like-for-like basis, EBITDA dropped by CHF 125 million or 3.2% due to lower roaming prices,
price pressure in the corporate customer business and higher costs for subscriber acquisition and
retention. Depreciation and amortisation increased year-on-year by CHF 106 million or 7.7% to
CHF 1,489 million. This increase is mainly due to higher investing activity. The segment result ended
the year CHF 21 million or 0.9% lower at CHF 2,197 million.
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Fastweb
In EUR million, except where indicated
Residential Customers
Corporate Business
Wholesale
Revenue from external customers
Intersegment revenue
Net revenue
Segment expenses
Segment result before depreciation and amortisation (EBITDA)
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
2016
906
706
175
1,787
8
1,795
(1,134)
661
36.8
581
2,468
2,355
2015
878
711
143
1,732
4
1,736
(1,160)
576
33.2
541
2,401
2,201
Change
3.2%
–0.7%
22.4%
3.2%
100.0%
3.4%
–2.2%
14.8%
7.4%
2.8%
7.0%
Development of revenue
from external customers in EUR million
Development of EBITDA in EUR million
1,685
1,732
1,787
2,000
1,500
1,000
500
0
1,000
750
500
250
0
515
576
661
2014
2015
2016
2014
2015
2016
Fastweb’s net revenue rose by EUR 59 million or 3.4% year-on-year to EUR 1,795 million. Despite
difficult market conditions, Fastweb’s broadband customer base grew by 154,000 or 7.0% to
2.36 million in 2016. Fierce competition reduced average revenue per residential broadband
customer by around 3% over the prior year. Nevertheless, this decline was outweighed by customer
growth. Revenue from residential customers rose accordingly by EUR 28 million or 3.2% to
EUR 906 million. Fastweb held its strong position in the market for business customers, with reve-
nue from business customers falling only slightly by EUR 5 million or 0.7% year-on-year to EUR 706 mil-
lion. Revenue from wholesale business increased by EUR 32 million or 22.4% to EUR 175 million.
The segment result before depreciation and amortisation (EBITDA) rose by EUR 85 million or 14.8%
to EUR 661 million. In 2016, Fastweb received compensation from Telecom Italia in the amount of
EUR 55 million as a result of an out-of-court settlement following a legal dispute. In the previous
year, compensation as a result of legal proceedings amounted to EUR 15 million. Excluding
compensation from legal proceedings, EBITDA rose by EUR 45 million or 8.0% and the profit margin
by 1.5 percentage points to 33.8%. The headcount at Fastweb rose by 67 FTEs or 2.8% to 2,468 FTEs,
driven primarily by the appointment of external workforce in the technical areas and the reinforce-
ment of resources in the mobile communications business. Fastweb continues to make progress on
network expansion. 810,000 customers were connected to the company’s own ultrafast broad-
band network at the end of 2016 (+25% year-on-year), which represents around one-third of all
Fastweb broadband customers. The Fastweb network now extends to around 100 towns and cities
in Italy, thus covering 30% of the population or 7.5 million households. Capital expenditure at
Fastweb increased by EUR 40 million or 7.4% to EUR 581 million due to accelerated broadband
expansion.
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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 (EBITDA)
Margin as % of net revenue
Capital expenditure in property, plant and equipment and other intangible assets
Full-time equivalent employees at end of year
2016
320
274
594
(500)
94
15.8
61
1,796
2015
340
263
603
(534)
69
11.4
48
1,723
Change
–5.9%
4.2%
–1.5%
–6.4%
36.2%
27.1%
4.2%
Development of revenue
from external customers in CHF million
Development of EBITDA in CHF million
406
340
320
500
375
250
125
0
200
150
100
50
0
103
94
69
2014
2015
2016
2014
2015
2016
The development of Other Operating Segments is mainly affected by the sale of companies in the
previous year. In the first half of 2015, Swisscom sold Alphapay Ltd and the Swisscom Hospitality
division. This is the main reason for the decline in revenue and segment expense.
The net revenue of the Other Operating Segments fell year-on-year by CHF 9 million or 1.5% to
CHF 594 million. Adjusted for the sale of companies, net revenue rose by CHF 20 million or 3.5%,
mainly as a result of higher revenue for construction services at cablex. The segment result before
depreciation and amortisation (EBITDA) increased by CHF 25 million or 36.2% to CHF 94 million,
mainly as a result of higher revenue as well as one-off charges at cablex in the prior year. The profit
margin improved by 4.4 percentage points to 15.8%. The headcount rose by 73 FTEs or 4.2% to
1,796 FTEs, driven primarily by the appointment of external workforce at cablex.
Group Headquarters and reconciliation of pension cost
Operating income before depreciation and amortisation improved by CHF 3 million or 2.6% year-
on-year to CHF –114 million. Headcount declined by 7.6% year-on-year to 290 FTEs.
An expense of CHF 72 million (prior year: CHF 60 million) was recognised as a pension cost
reconciliation item under IAS 19.
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Quarterly review 2015 and 2016
In CHF million, except where indicated
Income statement
Net revenue
1.
4.
quarter quarter quarter quarter
2.
3.
4.
2015 quarter quarter quarter quarter
1.
2.
3.
2016
2,893 2,865 2,893 3,027 11,678 2,885 2,884 2,874 3,000 11,643
Goods and services purchased
Personnel expense
Other operating expenses
Capitalised costs and other income
(568)
(756)
(609)
91
(553)
(757)
(577)
104
Operating income (EBITDA)
1,051 1,082
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
(688)
(2,342)
(544)
(533)
(703)
(785)
(803)
(3,019)
(726)
(2,697)
94
189
478
(558)
(743)
(600)
163
(580)
(695)
(613)
(641)
(2,323)
(744)
(2,947)
(738)
(2,548)
94
109
468
(765)
(597)
102
966
(517)
449
(51)
(6)
5
397
(123)
274
999 4,098 1,081 1,146 1,080
986 4,293
(541)
(2,086)
(546)
(546)
(524)
(529)
(2,145)
458 2,012
(42)
(36)
5
(189)
(83)
23
385 1,763
(81)
(401)
304 1,362
535
(39)
(40)
–
456
(92)
364
600
(42)
(24)
–
534
(110)
424
556
(31)
(5)
1
521
(112)
409
457 2,148
(43)
69
(4)
(155)
–
(3)
479 1,990
(72)
(386)
407 1,604
(507)
544
(47)
(57)
5
445
(94)
351
(521)
561
(49)
16
8
536
(103)
433
351
433
274
303 1,361
365
424
410
405 1,604
–
–
–
1
1
(1)
–
(1)
2
–
Earnings per share (in CHF)
6.78
8.35
5.29
5.85 26.27
7.05
8.20
7.90
7.82 30.97
Net revenue
Swisscom Switzerland
2,355 2,342 2,375 2,473 9,545 2,345 2,337 2,340 2,418 9,440
Fastweb
Other Operating Segments
Group Headquarters
Intersegment elimination
Total net revenue
468
144
–
(74)
453
156
1
(87)
457
149
–
(88)
489 1,867
154
603
1
2
(90)
(339)
482
129
–
(71)
483
146
1
(83)
476
149
–
516 1,957
170
594
1
2
(91)
(105)
(350)
2,893 2,865 2,893 3,027 11,678 2,885 2,884 2,874 3,000 11,643
Segment result before depreciation and amortisation (EBITDA)
Swisscom Switzerland
Fastweb
Other Operating Segments
Group Headquarters
Reconciliation pension cost
Intersegment elimination
955
130
16
(29)
(17)
(4)
969
148
19
(29)
(19)
(6)
833
156
24
(22)
(18)
(7)
844 3,601
185
10
(37)
(6)
3
619
69
(117)
(60)
(14)
966
144
22
(30)
(18)
(3)
946
223
27
(27)
(17)
(6)
936
169
27
(27)
(20)
(5)
838 3,686
185
18
(30)
(17)
(8)
721
94
(114)
(72)
(22)
Total segment result (EBITDA)
1,051 1,082
966
999 4,098 1,081 1,146 1,080
986 4,293
Capital expenditure in property, plant and equipment and other intangible assets
Swisscom Switzerland
Fastweb
Other Operating Segments
Intersegment elimination
Total capital expenditure
388
160
6
(5)
453
138
6
(4)
459
133
8
(5)
499 1,799
150
581
28
(5)
48
(19)
425
169
6
(4)
447
145
11
(6)
409
156
15
(5)
462
1,743
163
29
(6)
633
61
(21)
549
593
595
672 2,409
596
597
575
648 2,416
Full-time equivalent employees at end of year
Swisscom Switzerland
16,964 17,062 17,176 17,199 17,199 17,155 16,969 16,767 16,573 16,573
Fastweb
2,373 2,377 2,381 2,401 2,401 2,407 2,422 2,457 2,468 2,468
Other Operating Segments
1,940 1,722 1,725 1,723 1,723 1,769
1,743 1,771 1,796 1,796
Group Headquarters
Total headcount
322
325
321
314
314
314
309
297
290
290
21,599 21,486 21,603 21,637 21,637 21,645 21,443 21,292 21,127 21,127
Operating free cash flow
344
401
684
415 1,844
184
604
616
387 1,791
Net debt
7,895 8,760 8,320 8,042 8,042 8,108 8,856 8,310 7,846 7,846
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In CHF million, except where indicated
Swisscom Switzerland
Net revenue and results
Residential Customers
Small and Medium-Sized Enterprises
Enterprise Customers
Revenue mobile single subscriptions
Residential Customers
Small and Medium-Sized Enterprises
Enterprise Customers
Revenue fixed-line single subscriptions
Residential Customers
Small and Medium-Sized Enterprises
Enterprise Customers
Revenue bundles
Total revenue single subscriptions
and bundles
Solution business
Hardware sales
Wholesale
Revenue other
1.
4.
quarter quarter quarter quarter
2.
3.
4.
2015 quarter quarter quarter quarter
1.
2.
3.
2016
438
101
132
671
207
106
139
452
461
69
–
449
102
140
691
191
103
141
435
476
71
–
460
102
140
702
185
103
140
428
496
73
–
433 1,780
98
134
403
546
665 2,729
178
101
137
761
413
557
416 1,731
513 1,946
75
–
288
–
426
95
128
649
159
100
138
397
524
78
1
428
93
128
649
147
99
136
382
528
80
2
441
90
130
661
131
94
131
356
546
85
2
432 1,727
91
132
369
518
655 2,614
108
89
134
545
382
539
331 1,466
566 2,164
88
2
331
7
530
547
569
588 2,234
603
610
633
656 2,502
1,653 1,673 1,699 1,669 6,694 1,649 1,641 1,650 1,642 6,582
261
148
148
126
260
128
140
124
253
124
145
137
294 1,068
202
146
145
602
579
532
277
136
139
128
273
123
148
136
262
125
149
137
287 1,099
162
155
155
546
591
556
Total revenue from external customers 2,336 2,325 2,358 2,456 9,475 2,329 2,321 2,323 2,401 9,374
Residential Customers
1,252 1,247 1,267 1,309 5,075 1,252 1,236 1,254 1,278 5,020
Small and Medium-Sized Enterprises
Enterprise Customers
Wholesale
IT, Network & Innovation
320
607
148
9
332
598
140
8
344
594
145
8
343 1,339
650 2,449
146
8
579
33
328
605
139
5
334
597
148
6
334
574
149
12
338 1,334
624 2,400
155
6
591
29
Revenue from external customers
2,336 2,325 2,358 2,456 9,475 2,329 2,321 2,323 2,401 9,374
Segment result before depreciation and amortisation (EBITDA)
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Residential Customers
Small and Medium-Sized Enterprises
Enterprise Customers
Wholesale
IT, Network & Innovation
Intersegment elimination
Segment result (EBITDA)
Margin as % of net revenue
Fastweb, in EUR million
Residential Customers
Corporate Business
Wholesale hubbing
Wholesale other
Revenue from external customers
Segment result (EBITDA)
730
217
219
101
742
232
226
92
756
239
237
(86)
705 2,933
219
228
91
907
910
198
755
224
212
93
729
228
205
100
710
225
209
105
676 2,870
215
213
90
892
839
388
(312)
(323)
(312)
(400)
(1,347)
(318)
(316)
(313)
(357)
(1,304)
–
955
40.6
–
969
41.4
(1)
833
35.1
1
–
844 3,601
34.1
37.7
–
966
41.2
–
946
40.5
–
936
40.0
1
1
838 3,686
34.7
39.0
216
168
7
37
428
120
219
177
7
29
432
140
218
171
6
28
423
145
225
195
6
23
878
711
26
117
449 1,732
171
38.0
576
33.2
223
171
6
38
438
131
227
177
5
30
439
204
225
169
4
36
434
155
29.8
46.3
35.5
231
189
4
52
906
706
19
156
476 1,787
171
35.8
661
36.8
Margin as % of net revenue
28.0
32.4
34.2
Capital expenditure
147
132
124
138
541
154
132
144
151
581
Broadband access lines in thousand
2,124 2,157 2,172 2,201 2,201 2,241 2,257 2,295 2,355 2,355
In thousand, except where indicated
Swisscom Switzerland
Operational data
Access lines
Single subscriptions
Bundles
1.
4.
quarter quarter quarter quarter
2.
3.
4.
2015 quarter quarter quarter quarter
1.
2.
3.
2016
1,763 1,695 1,632 1,573 1,573 1,500 1,412 1,303 1,155 1,155
972 1,002 1,027 1,056 1,056 1,082 1,106 1,155 1,212 1,212
Fixed telephony access lines
2,735 2,697 2,659 2,629 2,629 2,582 2,518 2,458 2,367 2,367
Single subscriptions
Bundles
650
615
581
542
542
503
463
397
320
320
1,258 1,307 1,356 1,416 1,416 1,465 1,515 1,588 1,672 1,672
Broadband access lines retail
1,908 1,922 1,937 1,958 1,958 1,968 1,978 1,985 1,992 1,992
Single subscriptions
Bundles
200
182
165
148
148
127
111
98
84
84
1,001 1,056 1,110 1,183 1,183 1,240 1,289 1,342 1,392 1,392
Swisscom TV access lines
1,201 1,238 1,275 1,331 1,331 1,367 1,400 1,440 1,476 1,476
Prepaid single subscriptions
2,149 2,131 2,125 2,124 2,124 2,123 2,112 2,085 2,060 2,060
Postpaid single subscriptions
3,888 3,910 3,920 3,905 3,905 3,877 3,882 3,854 3,841 3,841
Mobile access lines single subscriptions 6,037 6,041 6,045 6,029 6,029 6,000 5,994 5,939 5,901 5,901
Bundles
Mobile access lines
531
551
573
596
596
615
629
674
711
711
6,568 6,592 6,618 6,625 6,625 6,615 6,623 6,613 6,612 6,612
Revenue generating units (RGU)
12,412 12,449 12,489 12,543 12,543 12,532 12,519 12,496 12,447 12,447
Broadband access lines wholesale
Unbundled fixed access lines
278
162
291
150
301
139
315
128
315
128
329
120
342
125
351
128
364
128
364
128
Bundles
2play bundles
3play bundles
4play bundles
nplay bundles
Total bundles
Swisscom Group
Information by geographical regions
302
680
266
10
301
712
278
16
301
741
291
23
287
790
304
35
287
790
304
35
280
826
313
46
281
856
319
59
279
889
349
71
281
930
375
86
281
930
375
86
1,258 1,307 1,356 1,416 1,416 1,465 1,515 1,588 1,672 1,672
Net revenue in Switzerland
2,407 2,395 2,431 2,531 9,764 2,398 2,396 2,393 2,478 9,665
Net revenue in other countries
486
470
462
496 1,914
487
488
481
522 1,978
Total net revenue
2,893 2,865 2,893 3,027 11,678 2,885 2,884 2,874 3,000 11,643
EBITDA Switzerland
EBITDA in other countries
Total EBITDA
Capital expenditure in Switzerland
Capital expenditure in other countries
Total capital expenditure
Full-time equivalent employees
in Switzerland
Full-time equivalent employees
in other countries
914
137
932
150
1,051 1,082
388
161
549
454
139
593
804
162
966
460
135
595
811 3,461
188
637
936
145
923
223
908
172
805 3,572
181
721
999 4,098 1,081 1,146 1,080
986 4,293
520 1,822
152
587
672 2,409
425
171
596
451
146
597
416
159
575
482 1,774
166
642
648 2,416
18,776 18,828 18,936 18,965 18,965 18,960 18,754 18,551 18,372 18,372
2,823 2,658 2,667 2,672 2,672 2,685 2,689
2,741 2,755 2,755
Total headcount
21,599 21,486 21,603 21,637 21,637 21,645 21,443 21,292 21,127 21,127
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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 expenditures for company acquisitions and disposals
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 increase in cash and cash equivalents
2016
4,293
(2,416)
(86)
1,791
(157)
(328)
1,306
47
(87)
(101)
(1,140)
(18)
7
2015
4,098
(2,409)
155
1,844
(188)
(350)
1,306
(64)
63
(132)
(1,140)
(5)
28
Change
195
(7)
(241)
(53)
31
22
–
111
(150)
31
–
(13)
(21)
Free cash flow in CHF million
4,293
–2,416
80
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27
68
–173
–8
1,791
–157
–328
1,306
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
At CHF 1,306 million, free cash flow remained at the previous-year level. Operating free cash flow
was down by CHF 53 million or 2.9% year-on-year to CHF 1,791 million. Operating income before
depreciation and amortisation (EBITDA) and the change in net working capital of the prior year
includes the recognition of a provision of CHF 186 million for the ongoing Competition Commission
proceedings on broadband services. Swisscom does not consider the sanction justified and has
lodged an appeal with the Federal Court. Swisscom paid the penalty of CHF 186 million, as no sus-
pensive effect was granted. Excluding this payment, operating free cash flow would have risen by
CHF 133 million or 7.2% versus the previous year. Capital expenditure increased year-on-year by
CHF 7 million or 0.3% to CHF 2,416 million. The high level of capital expenditure is attributable to
the ongoing expansion of broadband networks in Switzerland and Italy. In 2016 Swisscom issued
three debenture bonds with a total nominal amount of CHF 700 million with coupons of between
0.125% and 0.375% and maturities of 11 to 16 years. The funds raised were used to repay outstanding
debts. In addition, a private placement for CHF 150 million that fell due in 2016 was extended by a
further 15 years at a fixed interest rate of 0.56%. Swisscom paid a dividend of CHF 22 per share in
2016, which corresponds to an overall payout of CHF 1,140 million.
Capital expenditure
See report
pages 48—51
Swisscom remains committed to maintaining the high quality and availability of its network infra-
structures. In Switzerland this involves making targeted investments in ultrafast broadband
network expansion, migrating to an All-IP-based infrastructure, and ensuring a mobile network
with latest mobile network standards.
In Italy, Fastweb operates a network comprising a proprietary fibre-optic network and a copper-
based broadband access infrastructure. Fastweb is also systematically expanding this network
infrastructure.
In CHF million, except where indicated
Fixed access & infrastructure
Expansion of the fibre-optic network
Mobile access
Customer driven
Projects and others 1
Swisscom Switzerland
Fastweb
Other Operating Segments
Group Headquarters and elimination
Total capital expenditure
Thereof Switzerland
Thereof other countries
Total capital expenditure as % of net revenue
2016
500
476
231
189
347
2015
509
435
210
251
394
1,743
1,799
633
61
(21)
2,416
1,774
642
20.8
581
48
(19)
2,409 2
1,822
587
20.6
Change
–1.8%
9.4%
10.0%
–24.7%
–11.9%
–3.1%
9.0%
27.1%
10.5%
0.3%
–2.6%
9.4%
1 Including All IP migration.
2 Excluding capital expenditure of CHF 18 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 increased year-on-year by CHF 7 million or 0.3% to
CHF 2,416 million, corresponding to 20.8% of net revenue (prior year: 20.6%). Swisscom Switzerland
accounted for 72% of 2016 capital expenditure, while Fastweb accounted for 26% and Other
Operating Segments for 2%.
Capital expenditure incurred by Swisscom Switzerland declined year-on-year by CHF 56 million or
3.1% to CHF 1,743 million, corresponding to 18.5% of net revenue (prior year: 18.8%). The increase in
capital expenditure for the expansion of broadband networks with latest technologies was more
than offset by a drop in customer-driven investment and investment in the development of service
platforms. At the end of 2016, Swisscom had connected over 3.5 million households and businesses
to ultrafast broadband (speeds in excess of 50 Mbps). Of these, over 2.5 million were equipped with
latest technologies – from fibre to the home (FTTH) to the latest fibre-optic technologies such as
fibre to the street (FTTS), fibre to the building (FTTB) and vectoring technology. By the end of 2016,
Swisscom had extended state-of-the-art 4G/LTE coverage, which enables broadband access to the
Internet, to 99% of the Swiss population.
Fastweb increased its capital expenditure year-on-year by CHF 52 million or 9.0% to CHF 633 mil-
lion. In local currency the rise amounted to EUR 40 million or 7.4% to EUR 581 million. The main
reason for this rise was an increase in capital expenditure for broadband networks. In July 2016,
Fastweb and Telecom Italia announced plans to cooperate on the rollout of fibre to the home
(FTTH). The aim is for about half of all homes and businesses in Italy (i.e. 13 million), to be connected
to the ultrafast broadband network by 2020. The ratio of capital expenditure to revenue was 32.4%
(2015: 31.2%), with around 30% of total capital expenditure being directly related to customer
growth.
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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
31.12.2016
31.12.2015
Change
506
2,532
10,177
5,156
1,756
455
299
573
409
2,535
9,855
5,161
1,861
461
375
492
21,454
21,149
8,496
1,896
1,850
962
746
982
14,932
6,514
8
6,522
21,454
30.4%
8,593
1,768
2,919
1,139
436
1,052
15,907
5,237
5
5,242
21,149
24.8%
23.7%
–0.1%
3.3%
–0.1%
–5.6%
–1.3%
–20.3%
16.5%
1.4%
–1.1%
7.2%
–36.6%
–15.5%
71.1%
–6.7%
–6.1%
24.4%
60.0%
24.4%
1.4%
82
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Total liabilities and equity rose by CHF 0.3 billion or 1.4% to CHF 21.5 billion, which was primarily
due to higher capital expenditure.
In CHF million
Property, plant and equipment
Goodwill
Other intangible assets
Other operating assets
Provisions
Other operating liabilities
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
31.12.2016
31.12.2015
Change
10,177
5,156
1,756
3,105
(962)
(2,878)
16,354
506
(8,496)
(1,850)
(447)
193
262
6,522
9,855
5,161
1,861
3,027
(1,139)
(2,820)
15,945
409
(8,593)
(2,919)
(61)
223
238
5,242
322
(5)
(105)
78
177
(58)
409
97
97
1,069
(386)
(30)
24
1,280
Fastweb
As at 31 December 2016, the carrying amount of Fastweb in Swisscom’s consolidated financial state-
ments amounted to EUR 2.8 billion (CHF 3.0 billion; CHF/EUR year-end exchange rate of 1.074). This
includes goodwill with a net carrying amount of EUR 0.5 billion. Swisscom raised financing in EUR, of
which it designated EUR 1.24 billion as an instrument for hedging Fastweb’s net assets. Fastweb’s
cumulative currency translation losses of CHF 1.8 billion (after tax) at the end of 2016 are recognised in
equity in Swisscom’s consolidated financial statements.
Goodwill
The net carrying value of goodwill is CHF 5,156 million, the bulk of which relates to Swisscom Swit-
zerland (CHF 4,582 million). This goodwill arose primarily in 2007 in connection with the repurchase
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 529 million).
Goodwill in respect of Other Operating Segments amounts to CHF 45 million.
Post-employment benefits
Defined benefit obligations presented in the consolidated financial statements are measured in
accordance with International Financial Reporting Standards (IFRS). Net defined benefit obligations
amount to CHF 1,850 million, which represents a CHF 1,069 million decline year-on-year. This is
attributable primarily to the fact that IFRS now takes account of the division of funding gaps
between employer and employee (risk sharing). The positive effect of the first-time application of
risk sharing is CHF 0.9 billion. In accordance with the Swiss accounting standards applicable to the
pension fund (Swiss GAAP ARR), the surplus amounts to CHF 0.1 billion, corresponding to a cover-
age ratio of around 101%. The main reasons for the difference compared with IFRS of CHF 1.9 billion
are the application of differing actuarial assumptions with regard to the discount rate, life expec-
tancy or risk sharing (CHF 1.0 billion), as well as a different actuarial measurement method (CHF 0.9 bil-
lion). Unlike Swiss GAAP, IFRS measurement takes into account future salary, contribution and pen-
sion increases and early retirements.
Equity
Equity increased by CHF 1,280 million or 24.4% to CHF 6,522 million. The ratio of equity to total
assets rose from 24.8% to 30.4%. The CHF 1,604 million in net income and net gains of CHF 831 mil-
lion recognised directly in equity exceeded dividend payments of CHF 1,140 million to the share-
holders of Swisscom Ltd. Net gains recognised directly in equity include non-cash actuarial gains
from pension plans totalling CHF 1,162 million as well as unrealised losses of CHF 21 million result-
ing from currency translation of foreign Group companies. The CHF/EUR exchange rate fell from
1.084 at the end of 2015 to 1.074 at the end of 2016. On 31 December 2016, cumulative currency
translation losses recognised in equity amounted to CHF 1,834 million (after tax).
Distributable reserves are calculated on the basis of equity reported in the separate financial state-
ments of Swisscom Ltd in accordance with Swiss company-law financial-reporting standards,
rather than on the basis of equity as disclosed in the consolidated balance sheet prepared in accor-
dance with International Financial Reporting Standards (IFRS). On 31 December 2016, the equity of
Swisscom Ltd totalled CHF 6,255 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
different 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. On 31 Decem-
ber 2016, Swisscom Ltd held distributable reserves of CHF 6,193 million.
83
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Net debt
Swisscom targets a net debt / EBITDA ratio of around 1.9. Net debt comprises financial liabilities
less cash and cash equivalents, current financial assets and non-current, fixed-interest-bearing
financial assets.
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
31.12.2014
31.12.2015
31.12.2016
8,120
73.8%
1.5
1.8
8,042
75.2%
1.5
2.0
7,846
69.6%
1.2
1.8
8,042
–1,791
1,140
155
328
–28
7,846
Net debt
31.12.2015
Operating
free cash flow
Dividends
Net interest
expense
Taxes paid
Other
effects
Net debt
31.12.2016
The ratio of net debt to EBITDA was 1.8 at the end of 2016 (prior year: 2.0). 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
interest -bearing financial liabilities amounts to 21%.
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 table below
shows the maturity profile of interest-bearing financial liabilities at nominal value as at 31 Decem-
ber 2016:
In CHF million
Bank loans
Debenture bonds
Private placements
Finance lease liabilities
Other financial liabilities
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
198
600
250
16
1
64
345
–
101
1,425
1,074
1,987
1,010
6,096
72
16
23
278
24
1
–
36
9
150
416
–
750
508
34
Total
708
Total interest-bearing financial liabilities
1,065
1,600
1,722
2,032
1,677
8,096
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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 7% of the Group’s added value from operations in the year
under review (prior year: 6%).
In CHF million
Added value
Net revenue
Capitalised self-constructed assets and other income
Goods and services purchased
Other operating expenses 1
Depreciation and amortisation 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)
Third-party lenders (net interest expense)
Company (retained earnings) 6
Total added value
Switzerland
Abroad
Total Switzerland
Abroad
2016
2015
Total
9,665
1,978
11,643
9,764
1,914
11,678
325
(1,851)
(1,819)
(1,493)
143
(472)
(718)
(548)
468
(2,323)
(2,537)
339
(1,829)
(1,800)
(2,041)
(1,404)
139
(513)
(697)
(540)
478
(2,342)
(2,497)
(1,944)
(4,838)
(1,595)
(6,433)
(4,694)
(1,611)
(6,305)
4,827
383
5,210
5,070
303
5,373
2,651
308
224
13
(107)
5,103
2,875
2,748
513
321
1,148
155
604
5,103
216
5
(388)
4,985
2,964
518
1,147
189
167
4,985
1 Other operating expense: excluding taxes on capital and other taxes not based on income.
2 Depreciation and amortisation: excluding amortisation of acquisition-related intangible 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, as well as ComCo sanctions.
6 Company: including changes in deferred income taxes and defined benefit obligations.
In 2016, operating added value amounted to CHF 5,210 million, 3.0% more than in 2015. Some 93%
of operating added value was generated in Switzerland (prior year: 94%). Added value from inter-
national operations increased by CHF 80 million to CHF 383 million.
Operating added value in Switzerland fell 4.8% year-on-year to CHF 4,827 million, while added
value from operations per FTE was 4.8% lower at CHF 259,000 (prior year: 272,000).
Swisscom development of added
value per employee in Switzerland in CHF thousand
Allocation of added value in %
400
300
200
100
0
283
272
259
2014
2015
2016
12%
Company
3%
Third-party lenders
23%
Shareholders
6%
Public sector
56%
Employees
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Energy efficiency and CO2 emissions in Switzerland
In %, except where indicated
Energy consumption (in GWh)
Increase of the efficiency of energy to 1 January 2010
Increase of the efficiency of energy to 1 January 2016
Direct CO2 emissions (in tonnes)
Ratio CO2 reduction to CO2 emmissions
2016
536
35.9
8.9
19,837
0.99
2015
521
29.6
–
20,116
0.81
Change
2.9%
–1.4%
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 has set
itself the goal of increasing its energy efficiency by a further 35% by the end of 2020 compared with
1 January 2016. The increase will be achieved primarily by measures in the network infrastructure
area. Together with its customers, Swisscom is also aiming to save twice as much CO2 as it emits
throughout the entire company including the supply chain by 2020. Swisscom intends to achieve
this target on the one hand by reducing emissions, and on the other by promoting and marketing a
sustainable product portfolio.
In 2016, total energy consumption in Switzerland rose by 15 GWh or 2.9% to 536 GWh. The effi-
ciency measures introduced to improve cooling in telephone exchanges and cut energy consump-
tion in data centres partly offset the additional energy consumption attributable to network
expansion. Swisscom achieved an average PUE (power usage effectiveness) value of 1.47 across all
of its data centres in 2016 (prior year: 1.50). In 2016, as in previous years, Swisscom once again used
100% renewable energy. Energy efficiency improved versus 1 January 2010 to 35.9% (prior year:
29.6%), and versus 1 January 2016 by 8.9%. In 2016, direct CO2 emissions in Switzerland decreased
by 279 tonnes or 1.4% to 19,837, chiefly due to lower consumption of fossil fuels. The ratio of
savings among customers to emissions climbed from 0.81 to 0.99 in 2016.
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Outlook for net revenue
Expectation for 2017 of around
Outlook for EBITDA
Expectation for 2017 of around
11.6 billion Swiss francs
4.2 billion Swiss francs
Financial outlook
In CHF million
Net revenue
2016
reported
11,643
Adjustment
2016
pro forma
2017
Change
Swisscom
w/o Fastweb
2017
Change
Fastweb
2017
outlook
< 0
> 0
~ 11,600
Operating income before depreciation
and amortisation (EBITDA)
4,293
Capital expenditure
2,416
(20) 1
4,273
~ –100
0
> 0
0
~ 4,200
~ 2,400
1 Fastweb litigation of CHF –60 million and provisions (for restructuring and other risks) of CHF +40 million.
For 2017, Swisscom expects net revenue of around CHF 11.6 billion, EBITDA of around CHF 4.2 bil-
lion and capital expenditure of some CHF 2.4 billion. For Swisscom (excluding Fastweb), a slight
decline in revenue is expected due to high competition and price pressure. A slight increase in reve-
nue is expected for Fastweb. EBITDA for Swisscom, excluding Fastweb, is expected to be around
CHF 100 million lower year-on-year. The reduction in EBITDA is attributable to price pressure and
declines in the number of fixed-line telephony connections. In addition, the costs for roaming are
expected to increase. EBITDA will be positively affected by cost savings. Fastweb’s EBITDA is expected
to be slightly higher. Capital expenditure in Switzerland and at Fastweb is expected to be on a par
with the prior year. Subject to achieving its targets, Swisscom will propose payment of an
unchanged dividend of CHF 22 per share for the 2017 financial year at the 2018 Annual General
Meeting.
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Outlook for capital expenditure
Expectation for 2017 of around
Dividend per share
If 2017 targets are met
2.4 billion Swiss francs
22 Swiss francs
Capital market
Swisscom’s shares are listed on the SIX Swiss Exchange.
The creditworthiness of Swisscom is regularly assessed
by international rating agencies.
Swisscom share
Swisscom’s market capitalisation as at 31 December 2016 amounted to CHF 23.6 billion (previous
year: CHF 26.1 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 persons
Institutions
Total
Number of
Shareholders
Number of
Shares
1
26,394,000
74,224
5,497,806
3,205
19,910,137
31.12.2016
Share
in %
51.0%
10.6%
38.4%
Number of
Shareholders
Number of
Shares
1
26,394,000
69,929
4,929,030
3,094
20,478,913
31.12.2015
Share
in %
51.0%
9.5%
39.5%
77,430
51,801,943
100.0%
73,024
51,801,943
100.0%
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The majority shareholder as at 31 December 2016 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 2016, some 21% of the shares were held in unregistered
shareholdings.
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).
Share performance
Share performance 2016 in CHF
550
500
450
400
350
.
5
1
2
1
1
3
.
.
6
1
1
0
1
3
.
.
6
1
2
0
9
2
.
.
6
1
3
0
1
3
.
.
6
1
4
0
0
3
.
.
6
1
5
0
1
3
.
.
6
1
6
0
0
3
.
.
6
1
7
0
1
3
.
.
6
1
8
0
1
3
.
.
6
1
9
0
0
3
.
.
6
1
0
1
1
3
.
.
6
1
1
1
0
3
.
.
6
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) declined by 6.8% compared with the previous year. The Swisscom
share price fell by 9.3% to CHF 456.10, outperforming the Stoxx Europe 600 Telecommunications
Index (–16.9% in CHF; –15.8% in EUR). Average daily trading volume fell by 2.9% year-on-year to
133,566 shares. Total trading volume of Swisscom shares in 2016 amounted to CHF 16 billion.
Shareholder return
On 12 April 2016, Swisscom paid out an ordinary dividend of CHF 22 per share. Based on the closing
price at the end of 2015, this equates to a return of 4.4%. Taking into account the fall in share price,
the total shareholder return (TSR) of the Swisscom share was –5.4% in 2016. The TSR for the SMI
was –3.4% and for the Stoxx Europe 600 Telecommunications Index –12.8% in CHF and –11.7% in
EUR.
Swisscom share performance indicators
Par value per share at end of year
2012
1.00
2013
1.00
2014
1.00
2015
1.00
2016
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
20,400
24,394
27,067
26,056
23,627
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
%
CHF
393.80
470.90
522.50
503.00
456.10
400.00
474.00
587.50
580.50
528.50
334.40
390.20
467.50
471.10
426.80
34.90
22.00
63.04
32.53
22.00
67.63
32.70
22.00
67.27
26.27
22.00
83.75
30.97
22.00 1
71.04
79.77
115.30
105.29
101.10
125.75
1 In accordance with the proposal of the Board of Directors to the Annual General Meeting.
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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.
25 analysts regularly publish studies on Swisscom. At the end of 2016, 16% of the analysts recom-
mended a buy rating for the Swisscom share, 48% a hold rating and 36% a sell rating. The average
price target at 31 December 2016, according to the analysts’ estimates, was CHF 480 per share.
Payout policy
Swisscom pursues a stable dividend policy that is focused on cash flow generation and capital
allocation. At the forthcoming Annual General Meeting on 3 April 2017, the Board of Directors will
propose an ordinary dividend of CHF 22 per share for the financial year 2016 (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 29.5 billion to its shareholders:
CHF 17.5 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 345 per share since the initial public offering.
Together with the overall increase in share price of CHF 116 per share, this amounts to an average
annual total return of 5.2%.
Indebtedness
Level of indebtedness
Swisscom aims to have a net debt of around 1.9 times EBITDA (operating income before depreciation
and amortisation). Net debt comprises financial liabilities less cash and cash equivalents, current
financial assets and non-current, fixed-interest-bearing financial assets.
As at 31 December 2016, net debt amounted to CHF 7.8 billion (prior year: CHF 8.0 billion), corresponding
to a net debt/EBITDA ratio of 1.8 (prior year: 2.0).
Dividend per share
in the 2016 reporting year
Dividend yield of the Swisscom share
Based on share price as at end of 2016
22 CHF
4.8 %
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Credit ratings and financing
With a rating of A (stable) and A2 (stable) respectively, Swisscom enjoys good ratings from 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 portfolio. This involves paying particular attention to balancing maturities and a
diversification of financing instruments, markets and currencies. Swisscom’s solid financial standing
enabled unrestricted access to money and capital markets again in 2016.
As at 31 December 2016, Swisscom’s financial liabilities amounted to CHF 8.5 billion. Around 87%
of the financial liabilities have a residual term to maturity of more than one year. Financial liabilities
with a term of one year or less amounted to CHF 1.1 billion at 31 December 2016. In 2016, the aver-
age interest expense on all financial liabilities was 1.9% (prior year: 2.3%), and the average residual
term to maturity was 4.8 years. A large proportion of the financial liabilities will fall due for repay-
ment if a shareholder other than the Swiss Confederation gains majority 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
1,425
500
250
500
200
200
200
160
300
150
In EUR million
Par value
500
500
500
Coupon
Payment
Maturity
Security number
3.75%
3.25%
2.63%
0.25%
1.75%
1.50%
0.375%
0.375%
19.07.2007
22.10.2007 1
19.07.2017
3,225,473
14.09.2009
14.09.2018
10,469,162
31.08.2010
31.08.2022
11,469,537
17.04.2015
17.04.2023
26,898,817
10.07.2012
10.07.2024
188,335,365
14.07.2014
14.07.2026
24,777,613
15.12.2016
15.12.2027
34,458,378
31.03.2016
31.03.2028
31,792,166
1.50%
30.09.2014
28.09.2029
25,414,750
0.125%
15.09.2016
15.09.2032
33,635,277
1.00%
17.04.2015
17.04.2035
26,898,818
Coupon
Payment
Maturity
ISIN no.
2.00%
1.88%
1.75%
30.09.2013 1
30.09.2020 XS0972165848
08.04.2014 1
08.09.2021 XS1051076922
15.09.2015 1
15.09.2025 XS1288894691
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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 system 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 system 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, fit-for-purpose reporting at each level of management, suitable documen-
tation and a risk and opportunity-aware corporate culture.
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. It coordi-
nates all organisational units charged with risk management tasks and oversees these insofar as
this is required for reporting purposes. This ensures comprehensive, Group-wide coordinated risk
management 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
documents 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 organisational units monitor the legal compliance risks and financial reporting risks
(internal control system, ICS).
Process
The main risks and opportunities for Swisscom are identified in a comprehensive analysis. Each
topic is assigned an owner. To enable the early identification, assessment and management of risks
and opportunities and their inclusion in strategic planning, the central Risk Management unit
works closely with the Controlling and Strategy department and other relevant departments. Risk
management covers risks and opportunities in the areas of strategy (including market), operations
(including finance), compliance and financial reporting. The risks are assessed according to their
qualitative and quantitative effects in the event of occurrence, and managed on the basis of a risk
strategy. The risks are evaluated in terms of their impact on key performance indicators 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 significant risks,
their potential effects and the status of measures on a semi-annual basis, and the Board of Directors
on a semi-annual basis. The effectiveness of the risk strategies and measures taken is assessed
quarterly.
Information on the internal control system, compliance management and internal auditing is
provided in the Corporate Governance Report, Section 4.10, Controlling instruments of the Board
of Directors vis-à-vis the Group Executive Board.
See report
page 118
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General statement on the risk situation
Risks are driven by changes in markets, competition, customer behaviour, technology, the regulatory
environment and government policy. The importance of established telecoms services is continuing
to decline. New services in the areas of digitisation and IT services, such as cloud services, security
products and the communication between machines, should compensate for the loss of revenue
from the traditional core business. Over the long term, the trend in the ICT market will necessitate
fundamental changes in the approach to risks related to the business model, technology and human
capital. Forthcoming 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
Increasing competition driven by national infrastructure providers and service providers who do
not have their own telecoms infrastructure (e.g. OTTs) is exerting transformation pressure on the
business. During this transformation, the complexity resulting from the parallel operation of old
and new technologies has to be reduced so as to enable new, attractive services. Here there is a risk
that the revenue from the classic telecoms business will not be secured sustainably during the
transformation process, while at the same time technical complexity remains undiminished. More-
over, a trend can currently be observed towards national and international cooperation among
telecommunications providers, the purpose of which is to provide low-cost services internationally
and exploit major synergies and economies of scale. There is thus a risk that Swisscom will not be
able to align its cost structures with its current and future competitors, which would narrow the
scope for investment, innovation and price reductions.
If such risks materialise, this 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
The manner in which regulations are implemented (e.g. telecommunications and antitrust legislation)
entails risks for Swisscom which could have an adverse impact on the company’s financial position
and results of operations. The main risks concern the possibility of price regulation being extended
to mobile communications (mobile termination) and broadband (optical fibre) which would further
reduce Swisscom’s income and restrict the company’s room for manoeuvre, as well as sanctions by
the Competition Commission which could reduce Swisscom’s operating results and cause
reputational damage to the company. The forthcoming revision of the Telecommunications Act
also heightens regulatory risk. Finally, excessively high political demands (e.g. those imposed on
universal service provision) threaten to fundamentally undermine the current competitive system.
See report
page 36
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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 companies and other network operators as it strives to meet current and future customer
needs and defend its own market share. The network expansion that this necessitates calls for
major investments. To mitigate financial risks and ensure optimum network coverage, expansion is
determined by population density and customer demand. Substantial risks would arise if Swisscom
were forced to spend more on network expansion than planned, or if projected long-term earnings
were to fall. Swisscom minimises the risks by adapting the broadband expansion of the access net-
work to changing conditions as well as technical opportunities on an ongoing basis.
Employees
Constant changes in background conditions and markets mean that corporate culture needs to
adapt. The key challenges in this context lie in maintaining employee motivation and high staff
loyalty despite cost pressure, while managing growth and efficiency, increasing employees’ ability
to adapt and renew their skills and ensuring that Swisscom remains an attractive employer.
Competitive dynamics, regulation and the recoverability of Fastweb’s assets
The competitive dynamics carry risks which could have a detrimental impact on Fastweb’s strategy
and jeopardise projected revenue growth. The impairment test performed in 2016 confirmed the
recoverable value of Fastweb’s assets. The recoverability of Fastweb’s net assets recognised in the
consolidated financial statements is contingent above all on achieving the financial targets set out
in the business plan (revenue 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 legislation. 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 communications
networks and IT platforms. Any major disruption to business operations poses a high financial risk
as well as a substantial reputational risk. Force majeure, natural disasters, human error, hardware
or software failure, criminal acts by third parties (e.g. 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,
alter native 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.
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Information and security technologies
Swisscom is in the midst of a transformation from line-switched TDM technology to IP technology.
This transformation should enable Swisscom to produce 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 competitiveness. The
transformation is being monitored by the Group Executive Board.
The area of Internet security has developed and changed with immense speed with respect to
technology, economics and society and their interdependencies. These new innovations and
capabilities go hand in hand with new opportunities as well as new risks.
The wider the variety of opportunities for attack, the more difficult prevention becomes. This means
it is even more important for potential threats to be recognised at an early stage, systematically
understood and quickly averted.
Environment and health
Electromagnetic radiation (e.g. 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 Ordi-
nance on Non-Ionising Radiation (ONIR), Switzerland has adopted the precautionary principle and
introduced limits for base stations which are ten times stricter than the EU’s limits. The public’s
wary attitude to mobile antenna sites in particular is impeding Swisscom’s network expansion.
Even without stricter legislation, 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, higher
average or extreme temperatures as well as the loss of permafrost. These trends could impact the
operability of Swisscom’s telecoms infrastructure, particularly in view of the potential risk to base
stations, transmitter 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.
See
www.cdp.net
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Michelle Bösiger
First-year
commercial apprentice
Lias Hess
First-year mediamatics apprentice
In their role as sustainability ambassadors, apprentices
attend internal team meetings and report on how
Swisscom supports sustainability. The apprentices then
work together with their team on their contribution
towards sustainability.
43,236
pupils, parents and teachers
were trained in media skills
by Swisscom in 2016.
900 team meetings
in total are attended by apprentices.
Timon Wüthrich
First-year
mediamatics apprentice
“We can make a diff erence by passing on
our knowledge. Our commitment to
sustainability therefore certainly pays
off at Swisscom.”
Corporate Governance and
Remuneration Report
Taking advantage
of new
opportunities
to generate
sustainable growth.
Corporate Governance
Remuneration Report
100 1 Principles
101 2 Group structure and shareholders
103 3 Capital structure
106 4 Board of Directors
120 5 Group Executive Board
126 6 Remuneration, shareholdings and loans
126 7 Shareholders’ participation rights
128 8 Change of control and defensive measures
128 9 Auditor
130 10 Information policy
131 1 Principles
132 2 Decision-making powers
134 3 Remuneration paid to the Board of Directors
138 4 Remuneration paid to the Group Executive Board
144 5 Other remuneration
145 Report of the Statutory Auditor
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 effort 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.
1 Principles
1.1 General 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 business management. They incorporate in
their decisions the legitimate interests of Swisscom shareholders, customers, employees and other
interest groups. To this end, the Board of Directors practises 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 of 1 September 2014 issued by SIX Swiss Exchange, 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
> legal requirements pursuant to the Swiss Code of Obligations
The interaction of investors, proxy advisors and other stakeholder groups with 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 as and when necessary.
1.2
Internal governance framework
Swisscom’s principles and rules on corporate governance are set out primarily in the company’s
Articles of Incorporation, 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 declaration 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, comply 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”.
See
www.swisscom.ch/
basicprinciples
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2 Group structure and shareholders
2.1 Group structure
2.1.1. Operational group 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 Human Resources, Group Strategy &
Board Services, Group Communications & Responsibility and Group Security. The Board of Directors
delegates the day-to-day business management to the CEO of Swisscom Ltd. The CEO, together with
the heads of the Group divisions Group Business Steering (CFO) and Group Human Resources (CPO)
as well as the heads of the business divisions Sales & Services, Products & Marketing, Enterprise
Customers and IT, Network & Infrastructure, form the Group Executive Board. The Group further
operates a Digital Business division. Strategic and financial management of the Group companies
is assured through the rules governing 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 (Switzerland) Ltd and the Italian subsidiary Fastweb S.p.A. are
classified as strategic Group companies. The Board of Directors of Swisscom (Switzerland) Ltd
comprises the CEO of Swisscom Ltd as Chairman, the CFO of Swisscom Ltd and the Head of IT, Net-
work & Infrastructure. The operations of Swisscom (Switzerland) Ltd are managed by the CEO of
Swisscom Ltd. Seats on the Board of Directors of Fastweb S.p.A. are held by the CEO of Swisscom
Ltd as Chairman together with the CFO of Swisscom Ltd and other representatives of Swisscom.
The Board of Directors also includes an external member. The Board of Directors of Fastweb S.p.A.
has empowered the delegate of the Board of Directors with the executive management of the
company. 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 other persons appointed by the CEO. Other representatives
of Swisscom and, in some cases, external parties also serve as members of the Board of Directors.
Further information on the Group structure can be found in the Management Commentary in the
section on Group structure and organisation.
A list of Group companies, including company name, registered office, percentage of shares held and
share capital, is provided in Note 40 to the consolidated financial statements.
For financial reporting purposes, the business divisions of Swisscom are allocated to individual seg-
ments, which during the year under review were based on the management structure employed up
until the end of 2015. For practical reasons, the segment reporting for 2016 has not been changed
versus the previous year. The 2016 financial reporting is thus structured according to the areas
Swisscom Switzerland, Fastweb and Other Operating Segments. Swisscom Switzerland covers the
segments Residential Customers, Small and Medium-Sized Enterprises, Enterprise Customers,
Wholesale and IT, Network & Innovation. Other Operating Segments mainly comprises Participa-
tions, Health and Connected Living. Group Headquarters, which primarily includes the Group divi-
sions as well as the employment company Worklink, continues to be reported separately. Further
information on segment reporting can be found in the Management Commentary.
See report
page 26
See report
pages 218—219
See report
page 28
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2.1.2 Listed company
The Swisscom Group comprises only one listed company, Swisscom Ltd, a company governed by
Swiss law with its registered office in Ittigen (canton of Berne, Switzerland) and is listed in the Standard
for Equity Securities, Sub-Standard International Reporting, of SIX Swiss Exchange (Securities
No.: 874251; ISIN: CH0008742519; Ticker Symbol: SCMN).
Trading in the United States is conducted over-the-counter (OTC) as a Level 1 programme (Symbol:
SCMWY; ISIN: CH008742519; CUSIP for ADR: 871013108). Within the framework of the programme,
The Bank of New York Mellon Corporation issues the American Depository Shares (ADS). ADS are
American securities which represent Swisscom shares. Ten ADS correspond to one share. The ADS
are evidenced by American Depositary Receipts (ADR).
As at 31 December 2016, the stock market capitalisation of Swisscom Ltd was CHF 23,627 million.
2.2 Major shareholders
Pursuant to Article 120 of the Federal Act on Financial Market Infrastructures and Market Conduct
in Securities and Derivatives Trading (FMIA), there is a duty to disclose shareholdings whenever 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 February 2016, BlackRock, Inc., New York, reported a shareholding of 3% in Swisscom Ltd; a few
days later it reported a shareholding of 3.01%. The shareholding disclosures can be viewed on the
website of SIX Exchange Regulation at https://www.six-exchange-regulation.com/en/home/
publications/significant-shareholders.html.
On 31 December 2016, the Swiss Confederation (“the Confederation”), as majority shareholder,
continued to hold 50.95% of the issued share capital of Swisscom Ltd, which is unchanged from the
previous year. The Telecommunications Enterprises Act (TEA) provides that the Confederation shall
hold the majority of the share capital and voting rights of Swisscom Ltd.
2.3 Cross-participations
No cross-shareholdings exist between Swisscom Ltd and other public limited companies.
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3 Capital structure
3.1 Capital
At 31 December 2016 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.
3.2 Authorised and conditional capital
There is no authorised or conditional share capital.
3.3 Changes in capital
The share capital was unchanged in the years 2014 to 2016. During this period, changes in share-
holders’ equity of Swisscom Ltd in the individual financial statements drawn up under Swiss
commercial law were as follows:
In CHF million
Balance at 1 January 2014
Net income
Dividends paid
Balance at 31 December 2014
Net income
Dividends paid
Balance at 31 December 2015
Net income
Dividends paid
Purchase and sale of treasury shares
Balance at 31 December 2016
Share capital
Legal
capital reserves
Voluntary
retained earnings
Treasury
shares
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–
–
52
–
–
52
–
–
–
52
21
–
–
21
–
–
21
–
–
–
21
4,170
2,472
(1,140)
5,502
279
(1,140)
4,641
2,682
(1,140)
–
6,183
–
–
–
–
–
–
–
–
–
(1)
(1)
Total
equity
4,243
2,472
(1,140)
5,575
279
(1,140)
4,714
2,682
(1,140)
(1)
6,255
The Annual General Meetings held on 7 April 2014, 8 April 2015 and 6 April 2016 each approved an
ordinary dividend of CHF 22 per share.
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3.4 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 rights, 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.
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).
The holder of an ADR possesses the rights listed in the Deposit Agreement (e.g. the right to issue
instructions for the execution of voting rights and the right to dividends). The Bank of New York
Mellon Corporation, which acts as the ADR depository, is listed as the shareholder in the share register.
ADR holders are therefore unable to directly enforce and exercise shareholder rights. The Bank of
New York Mellon Corporation exercises the voting rights in accordance with the instructions it
receives from the ADR holders.
For further details on the shares, see section 7 “Shareholders’ participation rights” and the
Management Commentary.
Swisscom Ltd has issued no participation certificates.
3.5 Profit-sharing certificates
Swisscom Ltd has issued no profit-sharing certificates.
3.6 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.
In accordance with Article 3.5.1 of the Articles of Incorporation, the Board of Directors 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 registered in its
name, exceeds the limit of 5% of all registered shares entered in the commercial register. The
acquirer is entered in the register as a shareholder or beneficial holder without voting rights for the
remaining shares. The other statutory provisions on restricted transferability are described in sec-
tion 7.1 of this report, “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 in excess of the 5%
threshold, provided they disclose their trustee capacity. In addition, they must be subject to super-
vision by a banking or financial market supervisory authority or otherwise provide the necessary
assurance that they are 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. This provision of the Articles of Incorporation may be changed by resolution of the Annual
General Meeting; an absolute majority of valid votes cast is required. In accordance with this provi-
sion, the Board of Directors has issued regulations governing 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 under-
takes, within the limit of 5%, to request entry as a shareholder with voting rights for any given
individual beneficial owner for no more than 0.5% of the registered share capital of Swisscom Ltd
entered in the commercial register.
See report
page 126
See report
page 88
See
www.swisscom.ch/
basicprinciples
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3.7 Convertible bonds, debenture bonds and options
See report
page 194
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 equity-
share-based payments made by Swisscom Ltd are described in Note 11 to the consolidated financial
statements.
See report
page 180
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4 Board of Directors
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Frank
Esser
Barbara
Frei
Alain
Carrupt
Theophil
Schlatter
Hansueli
Loosli
Valérie
Berset Bircher
Catherine
Mühlemann
Hans
Werder
Roland
Abt
Frank
Esser
Barbara
Frei
Alain
Carrupt
Theophil
Schlatter
Hansueli
Loosli
Valérie
Berset Bircher
Catherine
Mühlemann
Hans
Werder
Roland
Abt
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4.1 Members of the Board of Directors
The Board of Directors consists of nine members. Hugo Gerber, Michel Gobet and Torsten Kreindl
stepped down from the Board of Directors at the Annual General Meeting held on 6 April 2016.
Roland Abt, Valérie Berset Bircher and Alain Carrupt were elected as new members of the Board of
Directors. The representative of the Swiss Confederation, Hans Werder, will step down from the
Board of Directors at the Annual General Meeting on 3 April 2017. The Swiss Confederation has
delegated Renzo Simoni as his successor. Renzo Simoni (born 1961), a Swiss national, has a doctorate
in civil engineering from the Swiss Federal Institute of Technology and has been Chairman of the
Management Board at AlpTransit Gotthard AG since 2007.
Members of the Board of Directors at 31 December 2016 are as follows:
Taking office at the
Annual General Meeting
Appointed until
Annual General Meeting
Name
Nationality
Year of birth
Function
Hansueli Loosli 1
Switzerland
1955
Chairman
Roland Abt
Switzerland
1957 Member
Valérie Berset Bircher
Switzerland
1976 Member, representative of the employees
Alain Carrupt
Switzerland
1955 Member, representative of the employees
Frank Esser
Barbara Frei
Germany
1958 Member
Switzerland
1970 Member
Catherine Mühlemann Switzerland
1966 Member
Theophil Schlatter
Switzerland
1951 Deputy Chairman
Hans Werder 2
Switzerland
1946 Member, representative of the Confederation
1 Since 1 September 2011 Chairman.
2 Designated by the Swiss Confederation.
2009
2016
2016
2016
2014
2012
2006
2011
2011
2017
2017
2017
2017
2017
2017
2017
2017
2017
4.2 Education, professional activities and affiliations
Details on the education and professional career of each member of the Board of Directors are
provided below. This section also discloses the mandates each Board member holds outside the
Group as well as other significant activities such as permanent functions in important interest
groups.
Pursuant to the Articles of Incorporation, Board members may perform no more than three addi-
tional mandates in listed companies and no more than ten additional mandates in non-listed com-
panies. In total, they may not perform more than ten such additional mandates. These restrictions
on the number of mandates do not apply to mandates performed by a Board member by order of
Swisscom or to mandates in interest groups, charitable associations, institutions and foundations
or employee retirement-benefit foundations. However, the total number of these mandates is also
limited to ten and seven respectively. 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 external mandates, in particular the definition of the term “mandate” and infor-
mation on other mandates that do not fall under the aforementioned numerical restrictions for
listed and non-listed companies, are set out in Article 8.3 of the Articles of Incorporation. No member
of the Board of Directors exceeds the limits set for mandates.
See
www.swisscom.ch/
basicprinciples
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Hansueli Loosli
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, most recently 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: Mandate of the Coop Group: Chairman of the Board of
Directors, Bell AG, Basel
Mandates in non-listed companies: Mandates of the Coop Group: Chairman of the
Board of Directors, Coop Group Association, Basel; Chairman of the Board of Directors,
Transgourmet Holding AG, Basel; Chairman of the Board of Directors, Coop Mineraloel AG,
Allschwil. Other mandates: Member of the Advisory Board Deichmann SE, Essen; member
of the Board of Directors, Heinrich Benz AG, Weiach, until December 2016
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,
and employee benefit foundations: –
Other significant activities: –
Roland Abt
Education: Doctorate in business administration (Dr. oec.)
Career history: 1985–1987 CFO of a group of companies with operations in the areas of
IT and real estate; 1987–1996 Eternit Group (currently Nueva Group): 1987–1991 Head of
Group Controlling, 1991–1993 CEO, Industrias Plycem, Venezuela, 1993–1996 Division
Manager, Fibre Cement Activities; 1996–2016 Georg Fischer Group: 1996–1997 Chief
Financial Officer (CFO), Georg Fischer Piping Systems, 1997–2004 CFO, Agie Charmilles
Group (currently Georg Fischer Machine Tools), 2004–December 2016 CFO, Georg Fischer
AG, and Member of the Group Executive Board
Mandates in listed companies: Member of the Board of Directors of Conzzeta AG in Zurich
Mandates in non-listed companies: Member of the Board of Directors, Raiffeisenbank,
Zufikon
Mandates by order of Swisscom: –
Mandates in interest groups, charitable associations, institutions and foundations,
and employee benefit foundations: –
Other significant activities: Member of the Regulatory Board and Issuers Committee of
SIX Swiss Exchange, Zurich
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Valérie Berset Bircher
Education: Doctorate in law (Dr. iur.)
Career history: 2005 Office of the International Labour Organization (ILO), specialist in
employment law in the Department of International Labour Standards; 2006–2007
International Organization for Standardization (ISO), Human Resources Department;
since 2007 Deputy Head of the International Labour Affairs section of the State Secretariat
for Economic Affairs (SECO) in which role she has served on committees of the United
Nations (UN) and the International Labour Organization (ILO) addressing economics,
finance and development issues and as a member of the Federal Advisory Committee for
the National Contact Points on OECD Guidelines for Multinational Companies and the
tripartite ILO Committee; 2011–2014 Member of the ILO Board of Directors.
Mandates in listed companies: –
Mandates in non-listed companies: –
Mandates by order of Swisscom: –
Mandates in interest groups, charitable associations, institutions and foundations,
and employee benefit foundations: –
Other significant activities: –
Alain Carrupt
Education: Swiss school-leaving certificate in economics
Career history: 1978–1994 PTT companies, most recently as Head of Administration at
the telecoms directorate in Sion; 1994–2000 PTT Union, Central Secretary of the Tele-
communications sector; 2000–2010 Communications Union: 2000–2002 Deputy General
Secretary and Head of Personnel, 2003–2008 Vice Chairman, 2008–2010 Chairman;
2011–2016 syndicom Trade Union: 2011–2013 Joint Chairman, 2013–February 2016
Chairman
Mandates in listed companies: –
Mandates in non-listed companies: Member of the SUVA Board of Directors until
June 2016
Mandates by order of Swisscom: –
Mandates in interest groups, charitable associations, institutions and foundations,
and employee benefit foundations: –
Other significant activities: –
Frank Esser
Education: PhD in business administration, Dr. rer. pol.
Career history: 1988–2000 Mannesmann Deutschland, most recently from 1996 as
a member of the Executive Board of Mannesmann Eurokom; 2000–2012 Société Française
Radiotéléphonie (SFR): 2000–2002 Chief Operating Officer (COO), 2002–2012 CEO, in this
function from 2005–2012 also a member of the Group Executive Board of the Vivendi
Group
Mandates in listed companies: Member of the Board of Directors, AVG Technologies N.V.,
Amsterdam, until September 2016; member of the Supervisory Board, Dalenys Group S.A
(formerly Rentabiliweb Group S.A.S.), Brussels; member of the Board of Directors, InterXion
Holding N.V., Amsterdam
Mandates in non-listed companies: –
Mandates by order of Swisscom: –
Mandates in interest groups, charitable associations, institutions and foundations,
and employee benefit foundations: –
Other significant activities: –
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Barbara Frei
Education: Degree in mechanical engineering, ETH; doctorate (Dr. sc. techn.), ETH; Master
of Business Administration, IMD Lausanne
Career history: 1998–November 2016 ABB Group in various managerial positions, including,
in particular, 2008–2010 ABB s.r.o., Prague, Country Manager; 2010–2013 ABB S.p.A.,
Sesto San Giovanni (Italy), Country Manager and Regional Manager Mediterranean;
November 2013–December 2015 Drives and Control Unit, Managing Director; 2016 Head
of Strategic Portfolio Reviews for the Power Grids division; since December 2016 Schneider
Electric, Paris: Zone President Germany and Chairman of the Executive Committee of
Schneider Electric GmbH, Germany
Mandates in listed companies: –
Mandates in non-listed companies: –
Mandates by order of Swisscom: –
Mandates in interest groups, charitable associations, institutions and foundations,
and employee benefit foundations: –
Other significant activities: –
Catherine Mühlemann
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: Member of the Supervisory Board, Tele Columbus AG,
Berlin
Mandates in non-listed companies: Vice-Chair of Switzerland Tourism
Mandates by order of Swisscom: –
Mandates in interest groups, charitable associations, institutions and foundations,
and employee benefit foundations: –
Other significant activities: –
Theophil Schlatter
Education: Degree in business administration (lic. oec. HSG); qualified 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; 1997–2011 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 until April 2016; 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,
and employee benefit foundations: –
Other significant activities: –
Hans Werder
Education: Doctorate in social science (Dr. rer. soc.); law degree (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,
and employee benefit foundations: –
Other significant activities: –
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4.3 Election and term of office
Under the terms of the Articles of Incorporation, the Board of Directors comprises between seven
and nine members and, if necessary, the number can be increased temporarily. It currently com-
prises nine members. 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 Swiss Confederation’s sole representative. Under the terms of the Telecommuni-
cations Enterprise Act (TEA), employees must also 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 have been Valérie Berset Bircher and
Alain Carrupt since the Annual General Meeting of April 2016. Valérie Berset Bircher was nomi-
nated by the transfair staff association and Alain Carrupt was nominated by the syndicom trade
union. With the exception of the representative of the Swiss Confederation, the Board of Directors
of Swisscom Ltd is elected by the shareholders at the Annual General Meeting. 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
conclusion of the following Annual General Meeting. Re-election is permitted. 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, as a rule, is a
total of twelve years. This flexible arrangement makes it possible for shareholders to extend the
maximum term of office in exceptional cases if special circumstances exist. Members who reach
the age of 70 retire from the Board as of the date of the next Annual General Meeting. The maxi-
mum term of office and age limit for the Federal representative are determined by the Federal
Council.
4.4
Independence
In order to determine independence, the Board of Directors applies the criteria set out in the Swiss
Code of Best Practice for Corporate Governance. Independent members shall thus mean non-
executive members of the Board of Directors who never were or were more than three years ago a
member of the executive management and who have no or comparatively minor business relations
with the company. The term of office of a member of the Board of Directors is not a criterion that
can be used to assess independence. No members of the Board of Directors hold an executive role
within the Swisscom Group or have held such a role in any of the three business years prior to the
reporting year. 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, holds the
majority of the capital and voting rights in Swisscom. Customer and supplier relationships exist
between the Swiss Confederation and Swisscom. Details of these are provided in Note 37 to the
consolidated financial statements.
See report
page 215
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4.5
Internal organisation and modus operandi
The Board of Directors is responsible for the strategic and financial management of Swisscom and
for supervising the company’s executive management. As the supreme governing body of the
Company, it has decision-making authority unless such authority is granted to the Annual General
Meeting by law. The Board of Directors has delegated individual tasks to committees. The Board of
Directors and the standing committees of the Board of Directors of Swisscom Ltd were organised
as follows as at 31 December 2016:
Board of Directors
Finance Committee
Audit Committee1
Compensation Committee
Frank Esser2
Alain Carrupt
Catherine Mühlemann
Hansueli Loosli
Theophil Schlatter2
Valérie Berset-Bircher
Hans Werder
Hansueli Loosli
Barbara Frei2
Frank Esser
Hans Werder
Theophil Schlatter
Hansueli Loosli
1 Roland Abt, participation as guest
2 Chairman of the Board of Directors’ committees
The Board of Directors is convened by the Chairman and meets as often as business requires. In the
event that the Chairman is unavailable, the meeting is convened by the Vice-Chairman. The CEO,
the CFO and the Head of Group Strategy & Board Services regularly attend 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 members receive documents prior to the meeting to allow
them to prepare for the items on the agenda. To further ensure appropriate reporting to the mem-
bers of the Board, the Board of Directors invites members of the Group Executive Board, senior
employees of Swisscom, auditors and other internal and external experts, as appropriate, to attend
its meetings on specific issues. 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 duties, responsibilities and modus operandi of the Board of Directors as well as its conduct
with respect to conflicts of interest are defined in the Organisational Rules and those of the stand-
ing committees are defined in the relevant committee regulations.
The Board of Directors attaches great importance to the ongoing development and continuing
education of the Board and its individual members. The Board of Directors and the committees
conduct self-assessments, usually once a year and most recently in January 2016. A one-day man-
datory training course was held at the beginning of 2016. Each quarter, the members of the Board
of Directors also have the opportunity to explore in-depth the upcoming challenges facing the
Group and business divisions as part of “company experience days”. The majority of members of
the Board of Directors regularly take advantage of these opportunities. In addition, individual
members of the Board of Directors attended selected presentations and seminars during the year.
New Board members are given a task-specific introduction to their new activity. At this one-day
introduction they are provided with an overview of Group management and the current opera-
tional challenges; they are also given an in-depth look at topics related to Fastweb and attend
task-related training sessions. Whenever possible, the Board of Directors attends the Swisscom
Group’s annual management meeting.
See
www.swisscom.ch/
basicprinciples
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The following table gives an overview of the Board of Directors’ meetings, conference calls and
circular resolutions in 2016.
Meetings 1
Conference calls
Circular resolutions
Total
Average duration (in hours)
Participation:
Hansueli Loosli, Chairman
Roland Abt 2
Valérie Berset Bircher 2
Alain Carrupt 2
Frank Esser
Barbara Frei
Hugo Gerber 3
Michel Gobet 3
Torsten Kreindl 3
Catherine Mühlemann
Theophli Schlatter, Deputy Chairman
Hans Werder
1 Two meetings were held over two days.
2 Elected to the Board of Directors as of 6 April 2016.
3 Resigned from the Board of Directors as of 6 April 2016.
4.6 Chairman of the Board of Directors
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5:30
11
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8
11
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3
3
3
11
11
11
3
1:15
3
3
3
3
3
2
–
–
–
3
3
3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
See
www.swisscom.ch/
basicprinciples
Hansueli Loosli has been a member of the Board of Directors since 2009 and its Chairman since
September 2011. The powers and responsibilities of the Chairman are defined in the Organisational
Rules. In the event that the Chairman of the Board of Directors is unavailable, the Vice-Chairman,
Theophil Schlatter, assumes his powers and responsibilities.
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4.7 Committees of the Board of Directors
The Board of Directors has three standing committees (Audit, Finance and Compensation) and one
ad-hoc committee (Nomination) tasked with carrying out detailed examinations of matters of
importance. The committees usually consist of three to six members. As a rule, every member
of the Board of Directors always also sits on at least one of the standing committees. Roland Abt,
in office since April 2016, did not sit on any committees during the year under review due to his
operational role as CFO of Georg Fischer AG until the end of 2016. He did, however, sit in as a guest
on individual meetings of the Audit Committee. Subject to being appointed to the Compensation
Committee (without voting rights), the Chairman of the Board of Directors is a member of all the
standing committees. The committees are chaired by other members, however, who must provide
the Board of Directors with an oral report on the activities of the previously held committee meet-
ings at the next meeting of the Board of Directors. All members of the Board of Directors also
receive copies of all Finance and Audit Committee meeting minutes. The minutes of the Compen-
sation Committee are provided to the other members of the Board of Directors upon request.
Finance Committee
On behalf of the Board of Directors, the Finance Committee prepares information on corporate
transactions, for example, in connection with setting up or dissolving important Group companies,
acquiring or disposing of significant shareholdings, and entering into or terminating strategic alli-
ances. The Committee 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 Venturing. Details of the Committee’s activities are set out in the Finance Committee
rules of procedure.
The Finance Committee is convened by the Chairman or at the request of a Committee member as
often as business requires. The CEO, the CFO and the Head of Group Strategy and 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 and project
managers are called upon, as appropriate, to also attend the meetings.
The following table gives an overview of the Finance Committee’s composition, meetings,
conference calls and circular resolutions in 2016.
Meetings
Conference calls
Circular resolutions
See
www.swisscom.ch/
basicprinciples
Total
Average duration (in hours)
Participation:
Frank Esser, Chairman
Alain Carrupt 1
Michel Gobet 2
Torsten Kreindl 3
Catherine Mühlemann
Hansueli Loosli
2
3:20
2
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–
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2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 Elected to the Board of Directors as of 6 April 2016.
2 Resigned from the Board of Directors as of 6 April 2016.
3 Chairman, resigned from the Board of Directors as of 6 April 2016.
Audit Committee
The Audit Committee handles all financial management business (for example, accounting, financial
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 (dividend policy, for example).
The Committee is the Board of Directors’ most important controlling instrument and is responsible
for monitoring the Group-wide assurance functions. It formulates positions 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.
See
www.swisscom.ch/
basicprinciples
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See report
page 215
The Chairman of the Audit Committee, Theophil Schlatter, is a financial expert. Since April of 2016,
half of the Committee’s members have possessed experience in finance and accounting. Roland
Abt, financial expert, sat in on two meetings as a guest in the year under review and has been
a member of the Committee since 2017.
The members of the Audit Committee neither work for Swisscom in an executive capacity at present
nor have they done so in the past, nor do they have 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 provided in Note 37 to the consolidated financial statements.
The Audit Committee is convened by the Chairman or at the request of a Committee member as
often as business requires, but at least four times a year. The CEO, CFO, Head of Group Strategy &
Board Services, Head of Accounting, Head of Internal Audit and the external auditors attend the
Audit Committee meetings. Depending on the agenda, other Swisscom management members
are called upon to attend. The Audit Committee can also involve independent third parties such as
lawyers, public accountants and tax experts as required.
The following table gives an overview of the Audit Committee’s composition, meetings, conference
calls and circular resolutions in 2016.
Meetings
Conference calls
Circular resolutions
Total
Average duration (in hours)
Participation: 1
Theophil Schlatter, Chairman 2
Valérie Berset Bircher 3
Hugo Gerber 4
Hans Werder
Hansueli Loosli
5
5:25
5
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5
5
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–
–
–
–
–
–
–
–
–
–
–
–
–
1 Roland Abt, financial expert has attended two meetings as guest.
2 Financial expert.
3 Elected to the Board of Directors as of 6 April 2016.
4 Resigned from the Board of Directors as of 6 April 2016.
See report
page 131
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 when
needed. The Committee is presided over by the Chairman and its 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 Directors appoints the members of the Group Executive Board or decides upon the motion
to be submitted to the Annual General Meeting for the election and approval of members of the
Board of Directors. No Nomination Committee was formed in the 2016 financial year. In 2015 and
in January 2016, the Chairman and one or two other members of the Board of Directors examined
and interviewed suitable candidates for Board of Director elections which took place in April 2016.
They provided periodic reports on these activities to the Board of Directors. The candidates
evaluated were also introduced in person to the other members of the Board of Directors at Board
meetings.
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See
www.swisscom.ch/
targets_2014-2017
See
www.swisscom.ch/
basicprinciples
4.8 Assignment of powers of authority
The Telecommunications Enterprise Act (TEA) makes reference to the Swiss Code of Obligations
regarding 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 Rules. In addition to those duties
which are incumbent on it by virtue of law, 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 and capital expenditures 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 Rules (see function table in Rules of Procedure
and Accountability).
4.9
Information instruments of the Board of Directors vis-à-vis the Group Executive Board
The Board of Directors is briefed comprehensively in order to enable it to fulfil its powers and
responsibilities. The Chairman of the Board of Directors and the CEO meet at least once a month to
discuss fundamental issues concerning Swisscom Ltd and its Group companies. The Chairman also
meets in person with each member of the Group Executive Board as well as the heads of other
Group and business divisions once a year for an in-depth discussion of topical issues.
At every ordinary meeting of the Board of Directors, the CEO also provides the Board of Directors
with detailed information on the course of business, major projects and events, and any measures
adopted. Every month, the Board of Directors receives a report containing all key performance
indicators relating to the Group and the segments. In addition, the Board of Directors receives a
quarterly report on the course of business, financial position, results of operations, cash flows and
risk position of the Group and the segments. It also receives projections for operational and financial
developments for the current financial year. The management reporting is carried out in accordance
with the same accounting principles and standards as external financial reporting. It also includes
key non-financial information that is important for controlling and steering purposes. Every mem-
ber of the Board of Directors is entitled to request information on all matters relating to the Group
at any time, provided this does not conflict with the provisions regarding the exclusion of a member
from Board deliberations or confidentiality obligations. The Board of Directors is informed
immediately of any events of an exceptional nature.
The Board of Directors addresses the verbal 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 estimated 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 are
currently being investigated.
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4.10 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, internal control system, compliance and internal audit.
Risk management
4.10.1
The Board of Directors has set the objective of protecting the company’s enterprise value through
the implementation of Group-wide risk management. A corporate culture that is conscious of risks
and opportunities facilitates the achievement of this objective. Swisscom has thus implemented a
Group-wide, central risk management system. This takes account of external and internal events
and is based on the established standards COSO II and ISO 31000. It covers risks in the areas of
strategy (including market risks), operations (including finance risks), compliance and financial
reporting. Swisscom engages in level-appropriate, comprehensive reporting and maintains appro-
priate documentation. The objective is to identify, assess and address significant risks and oppor-
tunities in good time. To this end, the central Risk Management unit, which reports to both the CFO
and the Controlling department, collaborates closely with the Controlling department, the Strategy
department, other assurance functions and line functions. Swisscom assesses its risks and their
quantitative effects in the event of occurrence. The risks are managed on the basis of a risk strategy.
The risks are evaluated in terms of their impact on key performance indicators. 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 a semi-annual basis. Significant risk
factors are described in the Risks section of the Management Commentary.
Financial reporting internal control system
4.10.2
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. The Accounting unit, which is attached to Group Business Steering,
and Internal Audit periodically monitor the functioning and effectiveness of the ICS. Significant
shortcomings in the ICS identified during the monitoring activities are reported together with the
corrective measures 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 the shortcomings are monitored
centrally. The Audit Committee assesses the performance and reliability of the ICS on the basis of
the periodic reporting.
Compliance management
4.10.3
The Board of Directors has set the objective of protecting the Swisscom Group and its executive
bodies and employees against legal sanctions, financial losses and reputational damage by ensuring
Group-wide compliance. A corporate culture which promotes willingness to behave in a way that
complies with the relevant regulations facilitates the achievement of this objective. Swisscom has
therefore implemented a Group-wide, central compliance system. Within the framework of this
system, every year Group Compliance, a specialist unit of the Group legal department, applies a
risk-based approach to identifying areas of legal compliance that require monitoring by the central
system. Within these areas of legal compliance, the business activities of the Group companies are
reviewed periodically in a proactive manner in order to identify risks in good time and determine
the required measures. The employees affected are informed of these measures and the measures’
implementation is monitored. Group Compliance reviews the suitability and effectiveness of the
system annually. Within the Swisscom Health AG business division and in the area of billing for
added-value services of Swisscom Switzerland Ltd, an annual audit of the implemented measures
is also performed by external auditors (financial intermediation) in accordance with the Money
Laundering Act. Group Compliance informs the Risk Management unit on a quarterly basis of any
significant risks that are identified and reports to the Audit Committee and the Board of Directors
once per 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.
See report
pages 92—95
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Internal audit
4.10.4
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 supervisory
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. It is under the direct control of the Chairman of
the Board of Directors and reports to the Audit Committee. At its meetings, which are held 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 informs the Audit
Committee of any irregularities which come to its attention. At the administrative level, Internal
Audit provides reports to the Head of Group Strategy & Board Services.
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. Internal
Audit closely coordinates audit planning with the external auditors. The integrated strategic audit
plan, which includes the coordinated annual plan of both the internal and external auditors, is
prepared 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 information
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 on a quarterly basis for the Audit Committee.
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5 Group Executive Board
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Visiting the innovation centre «La Werkstadt» in Biel
Christian
Petit
Dirk
Wierzbitzki
Marc
Werner
Mario
Rossi
Urs
Schaeppi
Heinz
Herren
Hans C.
Werner
Visiting the innovation centre «La Werkstadt» in Biel
Christian
Petit
Dirk
Wierzbitzki
Marc
Werner
Mario
Rossi
Urs
Schaeppi
Heinz
Herren
Hans C.
Werner
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5.1 Members of the Group Executive Board
In accordance with the Articles of Incorporation, the Group Executive Board shall 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.
As at 31 December 2016, the Group Executive Board was composed of the CEO of Swisscom Ltd,
the heads of the Group divisions Group Business Steering and Group Human Resources, and the
heads of the business divisions Sales & Services, Products & Marketing, Enterprise Customers and IT,
Network & Infrastructure.
An overview of the composition of the Group Executive Board as at 31 December 2016 is given in the
table below.
See report
pages 26—28
Name
Urs Schaeppi 1
Mario Rossi
Hans C. Werner
Marc Werner
Christian Petit
Heinz Herren
Nationality
Switzerland
Switzerland
Switzerland
Year of birth
Function
1960
CEO Swisscom Ltd
1960
CFO Swisscom Ltd
1960
CPO Swisscom Ltd
Switzerland and France
1967 Head of Sales & Services
France
Switzerland
1963 Head of Enterprise Customers
1962 Head of IT, Network & Infrastructure
Appointed to the
Group Executive Board as of
March 2006
January 2013
September 2011
January 2014
April 2014
January 2014
January 2016
Dirk Wierzbitzki
Germany
1965 Head of Products & Marketing
1 Since November 2013 CEO.
5.2 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 interest
groups. Pursuant to the Articles of Incorporation, the Group Executive Board members may per-
form no more than one additional mandate in listed companies and no more than two additional
mandates in non-listed companies. In total, they may not perform more than two such additional
mandates. These restrictions on the number of mandates do not apply to mandates performed by
an Executive Board member by order of Swisscom or to mandates in interest groups, charitable
associations, institutions and foundations or employee retirement-benefit foundations. However,
the total number of these mandates is limited to ten and 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 external
mandates, in particular the definition of the term “mandate” and information on other mandates
that do not fall under the aforementioned numerical restrictions for listed and non-listed companies,
are set out in Article 8.3 of the Articles of Incorporation.
No member of the Group Executive Board exceeds the set limits for mandates.
See
www.swisscom.ch/
basicprinciples
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Urs Schaeppi
Education: Degree in engineering (Dipl. Ing. ETH) and business administration (lic. oec. HSG)
Career history: 1994–1998 plant manager at Biberist paper factory; 1998–2006 Head of
Commercial Business, Swisscom Mobile Ltd; 2006–2007 CEO, Swisscom Solutions Ltd;
2007–August 2013 Head of Enterprise Customers, Swisscom (Switzerland) Ltd; since
January 2013 Head of Swisscom (Switzerland) Ltd; 23 July–6 November 2013 acting CEO,
Swisscom Ltd, 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 Foundation Board, IMD International
Institute for Management Development, Lausanne; member of the Foundation Council,
Swiss Innovation Park Foundation, Berne; member of the Steering Committee, digital-
switzerland, Zurich (formerly Digital Zurich 2025); member of the Board of Directors,
Admeira Ltd, Berne
Mandates in interest groups, charitable associations, institutions and foundations,
and employee benefit foundations: –
Other significant activities: Member of the Board of Directors, Swiss-American Chamber
of Commerce, Zurich; member of the Executive Board, Glasfasernetz Schweiz, Berne;
member of the Advisory Board of the Department of Economics of the University of
Zurich, since May 2016
Mario Rossi
Education: Commercial apprenticeship; Swiss 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 again
Mandates in listed companies: –
Mandates in non-listed companies: –
Mandates by order of Swisscom: President of the Board of Trustees, comPlan, Baden
Mandates in interest groups, charitable associations, institutions and foundations,
and employee benefit foundations: Member of the Hasler Foundation, Berne, since
December 2016
Other significant activities: Member of the Sanctions Committee, SIX Swiss Exchange Ltd,
Zurich
Hans C. Werner
Education: Graduate in business management, 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, Divisional
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,
and employee benefit foundations: –
Other significant activities: President of the Institute Council and member of the Advisory
Board of the International Institute of Management in Technology (iimt)
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Marc Werner
Education: Technical apprenticeship with Maturity Certificate, Swiss Certified Marketing
Executive; Senior Management Programme (Graduate School of St. Gallen); Senior Executive
Programme at London Business School
Career history: 1997–2000 Minolta (Schweiz) AG, Head of Marketing and Sales and
member of the Executive Management; 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 Marketing &
Sales Residential Customers and Deputy Head of Residential Customers; 2012–2013
Swisscom (Switzerland) Ltd, Head of Customer Service Residential Customers and Deputy
Head of Residential Customers; September 2013–December 2015 Swisscom, Head of
Residential Customers division; since January 2016 Swisscom, Head of Sales & Services
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 of Net-Metrix AG,
Zurich
Mandates by order of Swisscom: Chairman of the Board of Directors of siroop Ltd, Zurich
Mandates in interest groups, charitable associations, institutions and foundations,
and employee benefit foundations: Member of the Board of Directors of simsa –
Swiss Internet Industry Association, Zurich
Other significant activities: Member of the Communications Council of KS/CS –
Communication Switzerland (formerly the Verband SW Schweizer Werbung), Zurich;
member of the Executive Board of the SWA-ASA – Association of Swiss Advertisers,
Zurich, since March 2016; member of the Executive Board of the SVC Swiss Venture Club
since September 2016
Christian Petit
Education: MBA ESSEC, Cergy-Pontoise
Career history: 1993–1999 debitel France; 2000–2003 Head of Operations, Swisscom
Mobile AG; 2003–2006 Head of Product Marketing, Swisscom Mobile AG; 2006–June 2007
CEO, Hospitality Services Plus SA; August 2007–December 2012 member of the Group
Executive Board, Swisscom; August 2007–August 2013 Head of Residential Customers,
Swisscom (Switzerland) Ltd; September 2013–December 2013 Head of Corporate Business,
Swisscom (Switzerland) Ltd; January–March 2014 Head of Enterprise Solution Center,
Swisscom (Switzerland) Ltd; since April 2014 Head of Enterprise Customers (formerly
Corporate Business), Swisscom
Since April 2014 member of the Swisscom Group Executive Board again
Mandates in listed companies: –
Mandates in non-listed companies: –
Mandates by order of Swisscom: Member of the Board of Trustees, Stiftung IT Berufs-
bildung Schweiz, Berne
Mandates in interest groups, charitable associations, institutions and foundations,
and employee benefit foundations: –
Other significant activities: –
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Heinz Herren
Education: Degree in electronic engineering (HTL)
Career history: 1994–2000 3Com Corporation; 2000 Inalp Networks Inc.; 2001–2005
Head of Marketing Wholesale, Swisscom Fixnet Ltd; 2005–2007 Head of Small and
Medium- Sized Enterprises, Swisscom Fixnet Ltd; 2007–2010 Head of Small and Medium-
Sized Enterprises, Swisscom (Switzerland) Ltd; 2011–2013 Head of Network & IT, Swisscom
(Switzerland) Ltd; August 2007–December 2012 Member of the Group Executive Board,
Swisscom; since January 2014 Head of IT, Network & Infrastructure (formerly IT, Network &
Innovation), Swisscom
Since January 2014 member of the Swisscom Group Executive Board again
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 Ltd, Brussels
Mandates in interest groups, charitable associations, institutions and foundations,
and employee benefit foundations: –
Other significant activities: –
Dirk Wierzbitzki
Education: Degree in electrical engineering (Dipl. Ing.)
Career history: 1994–2001 Mannesmann (now Vodafone Germany): various management
roles in the area of product management; 2001–2010 Vodafone Group: 2001–2003
Director for Innovation Management, Vodafone Global Products and Services, 2003–2006
Director for Commercial Terminals, 2006–2008 Director for Consumer Internet Services
and Platforms, 2008–2010 Director for Communications Services; 2010–2012 Head of
Customer Experience Design for Residential Customers, Swisscom (Switzerland) Ltd;
2013–2015 Head of Fixed-network Business & TV for Residential Customers, Swisscom
(Switzerland) Ltd; 2010–2015 member of Management Residential Customers, Swisscom
(Switzerland) Ltd; since January 2016 Head of Products & Marketing, Swisscom
Since January 2016 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, SoftAtHome, Paris
Mandates in interest groups, charitable associations, institutions and foundations,
and employee benefit foundations: –
Other significant activities: –
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5.3 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.
6 Remuneration, shareholdings and loans
See report
page 131
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.
7 Shareholders’ participation rights
7.1 Voting 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 Directors
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, exceeds the limit of 5% of all registered shares entered in the commercial regis-
ter. 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 registered
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 cementing 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.
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.
This provision of the Articles of Incorporation may be changed 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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7.2 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
7.3 Convocation of the Annual General Meeting
The Board of Directors must convene the Annual General Meeting at least 20 calendar 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.
One or more shareholders who together represent at least 10% of the share capital can demand in
writing that an extraordinary general meeting be convened, stating the agenda item and the
proposal and, in the case of elections, the names of the proposed candidates.
7.4 Agenda items
The Board of Directors is responsible for defining the agenda. 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.
7.5 Representation at the Annual General Meeting
Shareholders may be represented at the Annual General Meeting by another shareholder with voting
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 repre-
sented by their legal representative even if the latter is not a shareholder. Authorisation may be
granted in writing or via the Sherpany Internet platform once a shareholder has opened a share-
holder account on this platform. Shareholders who are represented by a proxy may issue instruc-
tions for each agenda item and also for all unannounced agenda items and motions, stating whether
they wish to vote for or against the 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 Incorpo-
ration).
The Articles of Incorporation do not include any regulations that differ from the provisions of the
Ordinance against Excessive Compensation in Stock Exchange Listed Companies (OaEC) regarding
the appointment of the independent proxy or any statutory regulations on the issuing of instruc-
tions to the independent proxy or on electronic participation in the Annual General Meeting.
7.6 Entries in the share register
Shareholders entered in the share register with voting rights are entitled to vote at the Annual
General Meeting. To ensure due procedure, the Board of Directors defines a cut-off date for deter-
mining voting entitlements, which is a few business days before the respective Annual General
Meeting. Entries into and deletions from the share register are possible at any time regardless of
the cut-off date. The cut-off date is announced with the invitation to the Annual General Meeting
and also published in the financial calendar on the Swisscom website. Shareholders entered in the
share register with voting rights as of 4 p.m. on 1 April 2016 were entitled to vote at the Annual
General Meeting of 6 April 2016.
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8 Change of control and defensive measures
8.1 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.
8.2 Clause on change of control
See report
page 131
Details on clauses on change of control are given in the section “Remuneration Report”.
9 Auditor
9.1 Selection process, duration of mandate and term of office of the Auditor-in-charge
The statutory auditor is appointed annually by the Annual General Meeting following a proposal
submitted by the Board of Directors. Re-election is permitted.
The principles for appointing the statutory auditor have been set forth in a policy by the Board of
Directors. A new tender is issued for the statutory auditor’s mandate at least every 10 to 14 years.
The statutory auditor’s tenure is limited to 20 years. The Audit Committee steers the selection
process, defines transparent selection criteria and submits two proposals accompanied by a
substantiated recommendation in favour of one audit firm to the Board of Directors. The last
tendering process was launched in 2007 with effect from the 2008 financial year. The next tendering
process will be launched by 2021 at the latest with effect from the 2022 financial year.
KPMG AG, Muri bei Bern, has acted as the statutory auditor of Swisscom Ltd and its Group companies
(with the exception of Fastweb S.p.A, which is audited by PriceWaterhouseCoopers S.p.A.) since
1 January 2004. Hanspeter Stocker of KPMG AG has been responsible for the mandate as Auditor-
in-charge since 2015.
9.2 Audit fees
Fees for auditing services provided by KPMG AG in 2016 amounted to CHF 3,239 thousand (prior
year: CHF 3,413 thousand). PricewaterhouseCoopers S.p.A. as auditors for Fastweb received
remuneration of CHF 768 thousand in 2016 (prior year: CHF 678 thousand).
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9.3 Supplementary fees
Fees of KPMG AG for additional audit-related services amounted to CHF 283 thousand (prior year:
CHF 201 thousand) and the fees for other services came to CHF 127 thousand (prior year: CHF 1,533 thou-
sand). The supplementary fees primarily comprise tax advisory services. Fees of Pricewaterhouse-
Coopers S.p.A. for additional audit-related services for Fastweb amounted to CHF 112 thousand
(prior year: CHF 155 thousand).
9.4 Supervision and controlling instruments vis-à-vis the auditors
The Audit Committee verifies the qualifications and independence of the statutory auditors as a
licensed, state-supervised auditing firm as well as the quality of the audit services performed on
behalf of the Board of Directors. It is also responsible for observing the statutory rotation principle
for the Auditor-in-charge and for reviewing and issuing the new tender for the audit mandate. 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 defined guidelines for additional service
mandates (including a list of prohibited services). It has also set a threshold for fees charged for addi-
tional services, which is defined as a percentage of the audit fees. In order to ensure the indepen-
dence of the auditors, additional assignments must be approved by the CFO of the local Group
company or by the Audit Committee (where the fee exceeds CHF 300,000). The Audit Committee
is reported to quarterly by the CFO and annually by the auditors on current mandates being per-
formed by the auditors, broken down according to 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 to the Committee in detail on the performance
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 beyond the meetings of the Committee and regularly reports to the Board of
Directors.
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10 Information policy
Swisscom pursues an open, active information policy vis-à-vis the general public and the capital
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.
The interim reports and annual report are available on the Swisscom website under Investor Relations
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/
financialreports
See
www.swisscom.ch/adhoc
See
www.swisscom.ch/
generalmeeting
See report
page 251
The minutes of the Annual General Meeting of 6 April 2016 and minutes from past meetings are
available on the Swisscom website.
Those responsible 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.
10.1 Publication of results for the 2017 financial year
> Interim report: 3 May 2017
> Interim report: 17 August 2017
> Interim report: 2 November 2017
> Annual report: February 2018
10.2 Annual General Meeting for the 2016 financial year
> On 3 April 2017 in the Hallenstadion in Zurich-Oerlikon
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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,
thereby creating an incentive to achieve long-term corporate success
as well as added value for shareholders.
1 Principles
1.1 General principles
This Remuneration Report outlines the principles underlying, 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, as well as the decision-making powers. It discloses
information as to 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. Swisscom also complies with the recommenda-
tions of the Swiss Code of Best Practice for Corporate Governance 2014 issued by economiesuisse,
the umbrella organisation representing Swiss business.
As in previous years, the Remuneration Report will be put to a consultative vote at the Annual
General Meeting on 3 April 2017.
1.2
Internal principles for remuneration
See
www.swisscom.ch/
basicprinciples
Swisscom’s internal principles for determining the level of remuneration are primarily set out in the
Articles of Incorporation, the Organisational Rules 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”.
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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 Board for the following financial year upon the motion
proposed by 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 Articles 5.7.7 and 5.7.8 of the Articles
of Incorporation. Article 7.2.2 of the Articles of Incorporation also defines 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 remuneration.
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 Exec-
utive Board. It sets the remuneration of the Board of Directors and decides on the remuneration of
the CEO as well as the total remuneration for the Group Executive Board. In doing so, it takes into
account the maximum amounts approved by the Annual General Meeting for the remuneration to
be paid to the Board of Directors and the Group Executive Board for the financial year in question.
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 conduct of the members of the Board of Directors
with respect to conflicts of interest is defined in section 2.6 of the Organisational Rules.
The decision-making powers are governed by the Articles of Incorporation, the Organisational
Rules of the Board of Directors and the Regulations of the Compensation Committee. The Articles
of Incorporation and the relevant rules and regulations can be accessed 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.
Remuneration
Committee
Board
of Directors
Annual
General Meeting
See
www.swisscom.ch/
basicprinciples
Subject
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-share and performance-based participation plans of the Group
General terms of employment 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
–
–
–
–
–
–
–
–
–
–
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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. The Chairman of the Board of Direc-
tors does not participate in meetings in which discussions take place or decisions are made with
regard to his own remuneration. The CEO, CPO, Head of Group Strategy & Board Services and Head
of Rewards & HR Analytics attend the meetings in an advisory capacity, unless agenda items exclu-
sively 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 be called
upon to attend the meetings in an advisory capacity. Minutes are kept of the meetings, which are
provided to the members of the Committee and to other members of the Board of Directors on
request. The meetings of the Compensation Committee are generally held in February, June and
December. Further meetings can be convened as and when required. The Chairman reports verbally
on the activities of the Compensation Committee at the next meeting of the Board of Directors.
The details are governed by Article 6.5 of the Articles of Incorporation, as well as by the Organi sational
Rules of the Board of Directors and the Regulations of the Compensation Committee.
The members of the Compensation 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 provided in Note 37 to the consolidated financial statements.
The following table gives an overview of the composition of the Committee, the Committee meetings,
conference calls and circular resolutions held or taken in 2016.
Meetings
Conference calls
Circular resolutions
See
www.swisscom.ch/
basicprinciples
See report
page 215
Total
Average duration (in hours)
Participation:
Barbara Frei, Chairwoman
Frank Esser 1
Torsten Kreindl 2
Theophil Schlatter
Hans Werder 3
Hansueli Loosli 4
3
1:20
3
2
1
3
3
3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 Elected to the Compensation Committee as of 6 April 2016.
2 Resigned from the Board of Directors as of 6 April 2016.
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 individuals 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
is proportionate to 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 Articles 6.4 and 8.1 of the Articles of Incorporation.
The remuneration is made up of a Director’s fee which varies in relation to the member’s function,
meeting attendance fees as well as pension fund and any fringe benefits. No variable perfor-
mance-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 mini-
mum shareholdings, thus ensuring 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 2015, the Board of Directors assessed the appropriateness of the
remuneration as part of a discretionary decision basing itself on the study published in 2015 by
ethos, the Swiss Foundation for Sustainable Development. This study provides information for the
2014 financial year on the remuneration of the management of Switzerland’s 100 largest listed
companies. No external consultants were called on with regard to the structuring of remuneration.
In view of the efficiency improvement measures adopted by the Group in the year under review, the
Board of Directors decided to set an example and reduced its remuneration from 1 January 2016.
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. As of 1 January 2016, the basic emolument for all members of the Board
of Directors excluding employee social insurance contributions is CHF 110,000 (net) per year (previously
CHF 120,000).
The functional allowances amount to CHF 255,000 net per year for the Chairman (previously
CHF 265,000), 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. Annual remuneration of
CHF 10,000 net is awarded for membership in a standing committee. No functional allowance,
however, 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 remuneration (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. This restriction on disposal also applies if members leave
the company during the blocking period. The shares, which are allocated in April of each reporting
year in respect of the reporting year, are recorded at market value on the date of allocation. The
share-based remuneration is augmented by a factor of 1.19 in order to take account of the differ-
ence between the tax value and the market value. Further information on the Management Incen-
tive Plan can be found in Note 11 to the consolidated financial statements. In April 2016, 1,308 shares
were allocated to the members of the Board of Directors (prior year: 1,302 shares) with a tax value
of CHF 439 per share (prior year: CHF 473). Their market value was CHF 522.50 (prior year: CHF 563)
per share.
Meeting attendance fees
For meetings, attendance fees of CHF 1,100 net (previously CHF 1,250) are paid for each full day and
CHF 650 net (previously CHF 750) for each half-day.
See
www.swisscom.ch/
basicprinciples
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See report
page 180
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 remuner-
ation paid 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 and is also included in
the total remuneration.
With regards to the disclosure of services rendered, non-cash benefits and expenses, a tax-based
point of view is taken. 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 out-of-pocket 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
2015 and 2016 is presented in the tables below, broken down into individual components. The
lower amount of total remuneration for 2016 is attributable to the reduction in remuneration rates
and meeting attendance fees and to the fact that fewer meeting days were held.
2016, in CHF thousand
Hansueli Loosli
Roland Abt 1
Valérie Berset Bircher 1
Alain Carrupt 1
Frank Esser
Barbara Frei
Hugo Gerber 2, 3
Michel Gobet 3
Torsten Kreindl 3
Catherine Mühlemann
Theophil Schlatter
Hans Werder
Total remuneration to members
of the Board of Directors
Base salary
and functional allowances
Cash
remuneration
Share-based
payment
Meeting
attendance fees
Employer
contributions
to social security
Total 2016
315
59
64
64
105
112
34
32
38
96
158
134
186
49
53
53
66
66
4
4
5
57
93
80
27
11
16
14
18
17
6
5
5
16
21
23
29
7
8
8
–
11
3
2
–
10
12
11
557
126
141
139
189
206
47
43
48
179
284
248
1,211
716
179
101
2,207
1 Elected to the Board of Directors as of 6 April 2016.
2 The cash remuneration (including meeting attendance fees) till 6 April 2016 for the mandate as member of the Board of Directors
of Worklink AG of CHF 2,500 is included.
3 Resigned from the Board of Directors as of 6 April 2016.
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2015, in CHF thousand
Hansueli Loosli
Frank Esser
Barbara Frei
Hugo Gerber 1
Michel Gobet
Torsten Kreindl
Catherine Mühlemann
Theophil Schlatter
Hans Werder
Total remuneration to members
of the Board of Directors
Base salary
and functional allowances
Cash
remuneration
Share-based
payment
Meeting
attendance fees
Employer
contributions
to social security
Total 2015
330
104
120
111
104
127
104
167
142
196
62
71
62
62
75
62
99
84
34
23
23
28
22
24
23
28
28
31
11
12
12
11
13
11
17
12
591
200
226
213
199
239
200
311
266
1,309
773
233
130
2,445
1 The cash remuneration (including meeting attendance fees) of CHF 8,500 for the mandate as member of the Board of Directors
of Worklink AG is included.
3.4 Comparison with the total amount approved by the Annual General Meeting
Total remuneration paid to the members of the Board of Directors is within the maximum total
amount approved by the 2015 Annual General Meeting (AGM) for 2016 of CHF 2.6 million.
Remuneration to members of the Board of Directors 2016 in CHF million
2.6
2.2
3
2
1
0
Total amount
approved by the AGM
Effective
Remuneration
3.5 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.
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3.6 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 2015 and 2016 are listed in the table below:
Number
Hansueli Loosli
Roland Abt 1
Valérie Berset Bircher 1
Alain Carrupt 1
Frank Esser
Barbara Frei
Hugo Gerber 2
Michel Gobet 2
Torsten Kreindl 2
Catherine Mühlemann
Theophil Schlatter
Hans Werder
Total shares held by the members of the Board of Directors
1 Elected to the Board of Directors as of 6 April 2016.
2 Resigned from the Board of Directors as of 6 April 2016.
31.12.2016
31.12.2015
2,350
2,012
88
96
96
332
648
–
–
–
1,326
1,225
1,128
7,289
–
–
–
205
528
1,233
1,600
1,322
1,223
1,054
982
10,159
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, the
use of a company car) and pension benefits. The variable remuneration includes a performance-re-
lated component settled in cash and shares.
The members of the Group Executive Board are required to hold a minimum shareholding, 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 compliance with the
minimum shareholding requirement, Group Executive Board members have the possibility 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 participa-
tion plans of the Group Executive Board are set out in Article 8.1 of the Articles of Incorporation.
Remuneration
Assets
See
www.swisscom.ch/
basicprinciples
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Instruments
Fixed remuneration
Base salary
Pension benefits
Fringe benefits
Variable remuneration
Performance-related
component in cash
and shares
Minimum 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,
employee retention
and risk protection
Focus on annual
objectives and long-
term business success
Alignment with
shareholders interests
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 relies on cross-sector market comparisons
with Swiss companies as well as international sector comparisons. These two comparative per-
spectives allow Swisscom to form an optimal overview of the relevant employment market for
managerial positions. In the year under review, Swisscom referred to two comparative studies con-
ducted by Towers Watson, a recognised consultancy firm. The comparison with the Swiss market
covers major companies domiciled in Switzerland from various sectors, with the exception of the
financial and pharmaceutical sectors. On average, these companies generate revenue of CHF 4.7 bil-
lion and employ 13,000 people. The sector comparison covers telecommunications companies
from eleven western European countries with an average revenue of CHF 8.9 billion and an average
workforce of 18,800 employees. The evaluation of these studies takes into account the extent of
responsibility in terms of revenue, number of employees and international scope.
As a rule, the Compensation Committee reviews individual remuneration paid to members of the
Group Executive Board every three years of employment. In view of the newly adopted efficiency
improvement measures, the Board of Directors decided to defer the periodic remuneration review
of the individual members of the Group Executive Board, which was due to take place in the year
under review, and leave the remuneration unchanged. In connection with this, the Group Executive
Board also opted to forego 10% of the variable performance-related salary component due to it as
a result of having achieved its targets.
4.2 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 represents 70% of the base salary if objectives are achieved (target bonus). The
amount of the performance-related component paid out depends on the extent to which the tar-
gets are achieved, as 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 performance-related salary component is thus limited to 91% of the base salary. 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.
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 targets relevant to the reporting year remained largely unchanged
in line with the Group’s continuing corporate strategy. The targets are based on the Swisscom
Group’s budget figures for 2016.
All members of the Group Executive Board are measured against targets at the levels “Group”,
“Customers” and “Segments”. Group targets consist of financial targets. 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 mem-
ber is responsible. Further information on customer satisfaction can be found in the Management
Commentary.
Segment targets are tailored to the relevant function of each Group Executive Board member and
consist of financial and non-financial targets. As in the previous year, these also include financial
targets for the Italian subsidiary Fastweb S.p.A., on which the Group Board members delegated by
Swisscom to Fastweb’s Board of Directors are measured. The target structure is thus aligned to
Swisscom’s strategic priorities: strengthening the core business in Switzerland by offering the best
infrastructure and customer experiences as well as through the realisation of new growth oppor-
tunities and further developing Fastweb in Italy.
See report
page 55
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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
Objectives
Group
Net revenue
EBITDA margin
Operating free cash flow
Customers
Net promoter score
Segments
Segment targets
Total
Weighting of targets level
CEO
Weighting of targets level
of other members of the
Group Executive Board
18%
18%
24%
20%
20%
100%
15–18%
15–18%
20–24%
20%
20–30%
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. The achievement of an individual target can vary from 0%
(if the lower limit is not achieved) to 200% (if the upper limit is exceeded).
Achievement scale for each target
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200%
130%
100%
0%
Payment limited if 130%
of overall targets are met
Below
limit
At
limit
Above
limit
Measured
performance
Payment of the performance-related salary component is based on individual target achievement and
is limited if 130% of overall targets are met (weighted target achievement across all individual targets).
The overall achievement of targets governing the payment of the performance-related component
is calculated according to the weighting of the individual targets. The payment is limited to a
maximum of 130% of the target bonus. In determining the level of target achievement, the
Compensation Committee 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 overall achievement of targets, 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.
In the year under review, some of the financial Group targets were exceeded and others not quite
met in full. The customer targets were not fully met. Depending on the unit, the other targets of
the segments were not fully achieved, were achieved in part or were exceeded in part.
In view of the efficiency improvement measures adopted in the year under review, the Group
Executive Board opted for a 10-percentage-point reduction of the payment of the variable perfor-
mance-related salary component to which it was entitled based on the achievement of its targets.
Allowing for this reduction, the payment of the performance-related component is 92% of the
target bonus for the CEO and between 85% and 95% of the target bonus for the other members of
the Group Executive Board.
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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 opt to increase this share by up to a maximum of 50%. The remaining
portion of the performance-related component is settled in cash. In the event of a departure during
the course of the year, the payment of the performance-related component for the current year is
generally made in full 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 the publication of the third-quarter
results. In the year under review, two members of the Group Executive Board opted for a higher
share component. The shares are allocated on the basis of their tax value, rounded up to whole
numbers of shares, and are subject to a three-year blocking period. This restriction on disposal also
applies if the employment relationship is terminated during the 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 2017.
Further information on the Management Incentive Plan can be found in Note 11 to the consoli-
dated financial statements.
In April 2016, a total of 1,841 shares (2015: 1,268 shares) with a tax value of CHF 439 (prior year:
CHF 473) per share and a market value of CHF 522.50 (prior year: CHF 563) per share were allocated
for the 2015 financial year to the members of the Group Executive Board.
Restricted share plan
The restricted share plan serves to support the recruitment and retention of employees in key posi-
tions. It can also be utilised as a remuneration component for members of the Group Executive
Board. Under this plan, the Board of Directors can, where necessary, pay part of the remuneration
in the form of restricted share units. These shares must be earned over a three-year vesting period.
Swisscom has so far not allocated any restricted share units to members of the Group Executive
Board.
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. They also include 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. Also included is the share of the
special contribution to comPlan determined by the Board of Directors in the year under review and
attributable to the members of the Group Executive Board. Swisscom is paying the special non-
recurring contribution designed to mitigate the impact of pension reductions suffered by employees
born in or before 1969 as a result of the lowering of the conversion rate on 1 July 2017. Further
information about this is provided in Note 10 to the consolidated financial statements.
With regard 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.
See report
page 180
See report
page 174
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4.3 Total remuneration
The following table shows total remuneration paid to the members of the Group Executive Board
for the 2015 and 2016 financial years, broken down into individual components and including the
highest amount paid to one member. In the year under review, the variable performance-related
salary component (CHF 2,579 thousand in total) was 68.2% of the base salary (CHF 3,782 thousand
in total) The total remuneration paid to the highest-earning member of the Group Executive Board
(CEO, Urs Schaeppi) increased by 0.1% compared to the prior year The increase in total remuneration
paid to the Group Executive Board is attributable to the one-time special contribution made to the
pension plan to offset the impact of the reduction in the conversion rate for employees born in
1969 or earlier. The increase this caused in retirement provision contributions was largely compen-
sated by the lower variable remuneration.
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 3
Total remuneration to members of the Group Executive Board
Total
Group
Executive Board
2016
Total
Group
Executive Board
2015
Thereof
Urs Schaeppi
2016
Thereof
Urs Schaeppi
2015
3,782
1,604
975
84
541
1,064
8,050
3,775
1,792
1,018
85
538
816
882
284
338
14
126
189
882
336
327
17
126
144
8,024
1,833
1,832
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 Includes the share of the exceptional contribution to the pension fund attribuable to the members of the Group Executive Board.
Swisscom makes a non-recurring contribution to mitigate the impact of the pension reductions resulting from the lowering
of the conversation rate as of 1 July 2017.
4.4 Comparison with the total amount approved by the Annual General Meeting
Total remuneration paid to the members of the Group Executive Board is within the maximum
total amount approved by the 2015 Annual General Meeting (AGM) for 2016 of CHF 9.7 million.
Remuneration to members of the Group Executive Board 2016 in CHF million
12
8
4
0
9.7
8.1
Total amount
approved by the AGM
Effective
Remuneration
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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 equivalent
to two years’ basic salary. The remaining members shall maintain a shareholding equivalent to one
year’s basic 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 applicable, 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 at his discretion.
4.6 Shareholdings of the members of the Group Executive Board
Blocked and non-blocked shares held by members of the Group Executive Board or related parties
as at 31 December 2015 and 2016 are listed in the table below:
Number
Urs Schaeppi (CEO)
Mario Rossi
Hans C. Werner
Marc Werner
Christian Petit
Roger Wüthrich-Hasenböhler 1
Heinz Herren
Dirk Wierzbitzki 2
Total shares held by the members of the Group Executive Board
1 Resigned from the Group Executive Board as of 31 December 2015.
2 Joined the Group Executive Board as of 1 January 2016.
31.12.2016
31.12.2015
3,229
1,027
897
382
1,337
–
1,333
64
8,269
2,602
821
571
211
1,525
1,032
1,098
–
7,860
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 apply beyond the salary payable for a maximum of
twelve months. The employment contracts stipulate that Swisscom may allow wrongfully awarded
or paid remuneration to lapse or reclaim such remuneration. They do not contain a non-competition
clause or a clause on change of control.
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5 Other remuneration
5.1 Remuneration for additional services
Swisscom may pay remuneration to members of the Board of Directors for assignments in Group
companies and for those performed by order of Swisscom (Article 6.4 of the Articles of Incorporation).
In the year under review, Hugo Gerber, who stepped down from the Board of Directors at the
Annual General Meeting of 6 April 2016, was the only member to receive remuneration for an addi-
tional mandate as 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. The remuneration is paid fully
in cash. Out-of-pocket expenses are reimbursed on the basis of actual costs incurred. The remuneration
takes into account the activities and level of responsibility. It is determined by the Board of Directors
of Worklink AG based on a discretionary decision and reviewed every two years for ongoing
appropriateness. The remuneration paid to Hugo Gerber is customary on the market and is not
connected to his mandate as an officer of Swisscom Ltd.
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 former or current member of the Board of Directors or the
Group Executive Board which are not at arm’s length.
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 2016 financial year, Swisscom has granted 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
To the General Meeting of Shareholders of Swisscom Ltd., Ittigen (Berne)
We have audited the accompanying remuneration report of Swisscom Ltd. for the year ended 31 December 2016.
The audit was limited to the information according to articles 14 - 16 of the Ordinance against Excessive
compensation in Stock Exchange Listed Companies contained in the sections 3.3, 4.3 and 5.1 to 5.3 on pages
131 to 144 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 remuneration 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 components 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 2016 of Swisscom Ltd. complies with
Swiss law and articles 14 – 16 of the Ordinance.
KPMG AG
Hanspeter Stocker
Licensed Audit Expert
Auditor in Charge
Gümligen-Berne, 7 February 2017
Daniel Haas
Licensed Audit Expert
KPMG AG, Hofgut, PO Box 112, CH-3073 Gümligen-Berne
KPMG AG is a subsidiary of KPMG Holding AG, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss legal entity. All rights reserved.
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15,400 devices
were taken to
Repair Center in 2016.
Huge demand
Nine Repair Center have
been opened in German-
speaking and French-speaking
Switzerland to date.
The Repair Center are located directly
inside Swisscom Shops. Where
possible, defective smartphones are
repaired within 24 hours, while
express repairs can be carried out
in just three hours.
Matthias Dobmann
Repair Center
training coordinator
Alban Sabani
Repair Center service technician
“As technicians, we are usually in the background
and have no direct contact with the customer.
At the Repair Center, we can see customers’
reactions and enjoy how happy they are to get
their working smartphone back.”
Financial statements
Building the
infrastructure
of the future
through targeted
investments.
Consolidated
fi nancial statements
150 Consolidated income statement
151 Consolidated statement of comprehensive income
152 Consolidated balance sheet
153 Consolidated statement of cash fl ows
154 Consolidated statement of changes in equity
155 Notes to the consolidated fi nancial statements
1 General information
2 Basis of preparation
3 Summary of signifi cant accounting policies
4 Signifi cant accounting judgments, estimates and assumptions
in applying accounting policies
5 Business combinations and disposal of subsidiaries
6 Segment information
7 Net revenue
8 Goods and services purchased
9 Personnel expense
10 Post-employment benefi ts
11 Share-based payments
12 Other operating expense
13 Capitalised costs of self-constructed assets and other income
14 Financial income and fi nancial expense
15 Income taxes
16 Earnings per share
17 Cash and cash equivalents
18 Trade and other receivables
19 Other fi nancial assets
20 Inventories
21 Other non-fi nancial 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 and contingent assets
30 Other non-fi nancial liabilities
31 Additional information concerning equity
32 Dividend distributions
33 Financial risk management and supplementary disclosures regarding
fi nancial instruments
34 Supplementary information on the statement of cash fl ows
35 Future commitments
36 Research and development
37 Related parties
38 Service concession agreements
39 Events after the balance sheet date
40 List of Group companies
220 Statutory Auditor’s Report
Financial statements
of Swisscom Ltd
227 Income statement
228 Balance sheet
229 Notes to the fi nancial statements
1 General information
2 Summary of signifi cant accounting policies
3 Disclosures on balance sheet and income statement positions
235 Proposed appropriation of retained earnings
236 Statutory Auditor’s Report
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 cost of self-constructed assets and other income
Operating income before depreciation, amortisation and impairment losses
Note
6, 7
8
9, 10, 11
12
13
Depreciation, amortisation and impairment losses on tangible and intangible assets
23, 24
Operating income
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
2016
2015
11,643
11,678
(2,323)
(2,947)
(2,548)
468
4,293
(2,145)
2,148
80
(235)
(3)
1,990
(386)
1,604
1,604
–
30.97
(2,342)
(3,019)
(2,697)
478
4,098
(2,086)
2,012
43
(315)
23
1,763
(401)
1,362
1,361
1
26.27
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Consolidated statement
of comprehensive income
In CHF million
Net income
Note
2016
Other comprehensive income
Actuarial gains and losses from defined benefit pension plans
Associates
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 foreign subsidiaries transferred to income statement
Change in fair value of available-for-sale financial assets
Gains and losses from available-for-sale financial assets transferred to income statement
Change in fair value of cash flow hedges
Gains and losses from cash flow hedges transferred to income statement
Associates
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
10, 31
25, 31
15, 31
31
31
31
31
31
25, 31
15, 31
1,604
1,162
(5)
(238)
919
(21)
5
7
(3)
8
2
(2)
(84)
(88)
831
2,435
2,435
–
2015
1,362
(393)
–
80
(313)
(194)
–
4
(6)
(12)
11
–
53
(144)
(457)
905
904
1
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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
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
Treasury shares
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
31.12.2016
31.12.2015
17
18
19
20
15
21
23
24
24
25
19
15
21
26
27
15
28
30
26
10
28
15
30
31
31
31
329
2,532
177
154
18
325
3,535
10,177
5,156
1,756
193
262
281
94
17,919
21,454
1,125
1,896
125
182
650
3,978
7,371
1,850
780
621
332
10,954
14,932
52
136
8,149
(1)
(1,822)
6,514
8
6,522
21,454
324
2,535
85
174
21
238
3,377
9,855
5,161
1,861
223
238
354
80
17,772
21,149
1,195
1,768
146
351
693
4,153
7,398
2,919
788
290
359
11,754
15,907
52
136
6,783
–
(1,734)
5,237
5
5,242
21,149
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 operating assets and liabilities
Income taxes paid
Cash flow from 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
Proceeds from sale subsidiaries, net of cash and cash equivalents sold
Investments in associates
Proceeds from sale of 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 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
5
25
25
26
26
32
31
11, 31
34
2016
1,604
3
386
2,145
3
(20)
9
(80)
235
(95)
(328)
3,862
(2,416)
27
–
(38)
–
(3)
88
(196)
92
27
17
(2,402)
898
(999)
(184)
(1,140)
(8)
–
(4)
(16)
2015
1,362
(23)
401
2,086
2
(27)
10
(43)
315
134
(350)
3,867
(2,427)
61
109
(64)
33
(43)
–
(93)
34
12
23
(2,355)
1,287
(1,419)
(200)
(1,140)
(7)
(5)
(2)
2
(1,453)
(1,484)
7
324
(2)
329
28
302
(6)
324
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Consolidated statement
of changes in equity
Equity
attributable
to equity
Non-
Other holders of controlling
interests
Swisscom
reserves
(1,590)
5,483
–
1,361
(144)
(144)
(457)
904
3
1
–
1
Total
equity
5,486
1,362
(457)
905
–
(1,140)
(7)
(1,147)
–
–
–
(1,734)
–
(88)
(88)
(2)
2
(10)
5,237
1,604
831
2,435
–
–
8
5
–
–
–
(2)
2
(2)
5,242
1,604
831
2,435
–
(1,140)
(8)
(1,148)
–
–
–
(4)
3
(17)
(1,822)
6,514
–
–
11
8
(4)
3
(6)
6,522
In CHF million
Note
Share
capital
Capital
reserves
Retained
earnings
Treasury
shares
Balance at 31 December 2014
52
136
6,885
Net income
Other comprehensive income
Comprehensive income
Dividends paid
Purchase of treasury shares
for share-based payments
Allocation of treasury shares
for share-based payments
Transactions with
non-controlling interests
Balance at 31 December 2015
Net income
Other comprehensive income
Comprehensive income
Dividends paid
Purchase of treasury shares
for share-based payments
Allocation of treasury shares
for share-based payments
Transactions with
non-controlling interests
Balance at 31 December 2016
32
31
11, 31
31
32
31
11, 31
–
–
–
–
–
–
–
52
–
–
–
–
–
–
–
52
–
–
–
–
–
–
–
136
–
–
–
–
–
–
–
1,361
(313)
1,048
(1,140)
–
–
(10)
6,783
1,604
919
2,523
(1,140)
–
–
(17)
136
8,149
–
–
–
–
–
(2)
2
–
–
–
–
–
–
(4)
3
–
(1)
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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 2016 comprise Swisscom Ltd, the parent company, and its subsidiaries.
A table of the Group subsidiaries is set out in Note 40. 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 is listed on the
SIX Swiss Exchange. As of 31 December 2016, the Swiss Confederation (“Confederation”), as majority
shareholder, held 51.0% of the voting rights and issued capital of Swisscom Ltd. The Confederation
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 7 Febru-
ary 2017. The consolidated financial statements are subject to approval by the Annual General
Meeting of Shareholders of Swisscom Ltd to be held on 3 April 2017.
2 Basis of preparation
The consolidated financial statements of Swisscom have been prepared in accordance with Inter-
national Financial Reporting Standards (IFRS) and in compliance with the provisions of Swiss law.
The reporting period covers twelve months. The consolidated financial statements 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, or
consumed or realised within a normal business cycle, are classified as current. The income state-
ment is classified by 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 of the reported financial instruments correspond approximately to the carrying amounts
reported in the balance sheet at the time of preparing 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. Companies
acquired and sold are included in consolidation from the date on which they are acquired and
deconsolidated from the date they are disposed of, respectively. Intercompany balances and trans-
actions, 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 impairment 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 statement as a component of the consolidated net income or loss. Move-
ments in shareholdings of subsidiary companies are reported as transactions within equity insofar
as control existed previously and continues to exist. Written put options to owners of non-con-
trolling 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 attribut-
able 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 translated
into the functional currency using the exchange rates prevailing at the dates of the transactions.
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 translated 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 arising from
the translation of net assets and income statements are recorded in 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
31.12.2016
31.12.2015
31.12.2014
1.074
1.019
1.084
0.995
1.202
0.990
2016
1.090
0.990
2015
1.075
0.966
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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
institutions 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 amor-
tised 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 into the following categories: “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 classifica-
tion of financial 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.
Upon acquisition, financial assets are recognised at their fair values, including directly related trans-
action costs. Transaction costs relating to financial assets at fair value through profit or loss are not
capitalised on acquisition 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 re-measurement are taken to income.
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, in addition to trade receivables, term deposits with original matur-
ities exceeding three months which Swisscom places directly, or through an agent, with the bor-
rower.
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 other comprehen-
sive income. Foreign exchange gains and losses on debt instruments are recognised in the income
statement. When available-for-sale financial assets are sold, value-impaired or otherwise disposed
of, the cumulative gains and losses since acquisition that had been recognised in other comprehen-
sive income 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 acquisition or manufacturing 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 acquisition or manufacturing cost of inventories is determined using the
weighted average cost method. Valuation allowances are recognised for inventories that are diffi-
cult to sell. Unsaleable inventories are fully written off.
3.7 Property, plant and equipment
Property, plant and equipment is recorded at acquisition or manufacturing cost less accumulated
depreciation/amortisation and impairment losses. In addition to the purchase cost and the costs
directly attributable to bringing the asset to the location and condition necessary for it to be capa-
ble of operating in the manner intended by management, purchase or manufacturing cost also
includes the estimated costs for dismantling and restoration of the site. The manufacturing costs
of self- constructed assets include directly attributable costs as well as indirect costs of material,
manufacture 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/amortisation 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
158
Other installations
1 Technical installations.
Years
10 to 40
30
40
4 to 15
3 to 15
3 to 15
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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 pro-
cess for determining useful estimated lives takes into account the anticipated use by the company,
the expected wear and tear, technological developments as well as empirical values with compara-
ble assets. The estimated useful lives and residual values are reviewed at least annually as of the
balance sheet date and, where necessary, adjusted. Leasehold improvements and installations in
leased premises are amortised on a straight-line basis over the shorter of their estimated useful
lives and the remaining minimum 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 calcu-
lated 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
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 the 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
In determining useful estimated lives, the anticipated use by the company, the expected wear and
tear, technological developments as well as empirical values with comparable assets are taken into
account. Systematic amortisation is computed using the straight-line method based on the follow-
ing 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 continuing 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
disposal 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 and disposal groups classified as being held for sale are no longer depreciated or amortised.
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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 indications of
impairment in value. An impairment loss is recognised where there is objective evidence of impair-
ment, such as where the borrower is in bankruptcy, in default or other significant financial difficul-
ties. 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 flows, tak-
ing into consideration 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 in value. 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. With regards to 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 anticipated 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 of disposal 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
costs to sell and the value in use, is less than its carrying amount, the carrying amount is written
down 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.
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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.
3.15 Provisions
Provisions are raised whenever a legal or de facto liability exists as a result of an occurrence in the
past, the 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.
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
associations 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 installa-
tions 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 re-measured, 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 net carrying amount. Any excess is taken directly to the
income statement.
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, revenues
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 and TV ser-
vices, fixed-network and mobile phone subscriptions as well as national and international tele-
phone and data traffic for residential customers. The segment also includes value-added services
and the sale of terminal equipment.
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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. Furthermore, the segment
includes the business with on-line directories and telephone directories.
Enterprise Customers
The segment Enterprise Customers focuses on complete communication solutions for large busi-
ness 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 telecommu-
nication service providers and the use of third-party networks by Swisscom. It also includes roam-
ing with foreign operators whose customers use Swisscom’s mobile networks, as well as broad-
band services and regulated products as a result of the unbundling of the “last mile” for other
telecommunication service providers.
IT, Network & Innovation
IT, Network & Innovation is responsible primarily for the planning, operation and maintenance of
Swisscom’s network infrastructure and all IT systems. It is responsible for the development and
production of standardised IT and network services for the entire Group. In addition, IT, Network &
Innovation also includes the support functions Finances, Human Resources and Strategy for
Swisscom Switzerland as well as the management of real estate in Switzerland.
Fastweb
Fastweb is one of the largest providers of broadband services in Italy. Its product portfolio com-
prises voice, data, broadband and 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 comprise the business area Participations. In addition, the seg-
ment includes the areas of Health and Connected Living. Participations consist principally of the
subsidiaries Billag Ltd, cablex Ltd, and Swisscom Broadcast Ltd. Billag Ltd collects radio and TV
license fees on behalf of the Swiss Confederation. cablex Ltd operates in the field of construction
and maintenance of wired and wireless networks in Switzerland, primarily in the field of telecom-
munication. 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
Combined offerings
Swisscom provides bundled service offerings which include internet and TV as well as an optional
fixed-line connection with telephony services. They are all offered on the basis of fixed monthly sub-
scription charges (flat rate). Revenue is recognised on a straight-line basis over the contractual term.
Mobile
Mobile phone services encompass basic subscription charges and in addition, domestic and inter-
national mobile phone traffic generated by Swisscom customers in Switzerland or abroad as well
as roaming by foreign operators whose customers use Swisscom’s networks. Mobile services also
include value-added services, data traffic as well as the sale of mobile handsets. Revenue from
mobile telephony is recorded on the basis of the actual minutes used. Swisscom offers subscrip-
tions with a fixed monthly flat-rate fee, 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 revenue at the time the service is provided.
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If a mobile handset is sold as a part of a bundled offering with a subscription, it is treated as a
multi-component transaction. The price of the entire multi-component transaction is spread on a
pro-rata basis over the various component parts on the basis of the respective individual sales
prices thereof. In this respect, the revenue to be recognised for each individual component is lim-
ited by that part of the total consideration for the multi-component transaction whose payment is
not dependent on the provision of additional services.
Fixed networks
Fixed-network services encompass primarily connection fees as well as 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 services, operator services as
well as the business with prepaid calling cards and the sale of terminal equipment. Installation 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 terminal
equipment is recorded at the time of delivery.
Broadband
Broadband services include the range of broadband access lines offered to residential and corpo-
rate 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 con-
tract term on a straight-line basis. If no minimum contract term has been agreed, the revenue is
recognised on the date of installation or connection.
TV
In the TV sector, revenue is generated from the range of digital TV services and video-on-demand.
Revenue from TV services contains non-recurring installation and connection charges and recur-
ring subscription fees. Installation and connection fees related to installations are deferred and
released to income over the minimum contract term on a straight-line basis. If no minimum con-
tract 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, maintenance and operation of communication infrastructures. Fur-
thermore, they include applications and services as well as the integration, operation and mainte-
nance of data networks and outsourcing services. Revenues from customer-specific construction
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
relating to and the 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
Actuarial computations of expense and of defined-benefit obligations are undertaken by qualified
experts using the projected unit credit method. The latest actuarial valuation was undertaken as at
31 December 2016. Current service costs, past service costs arising from pension-plan amend-
ments and plan settlements as well as administrative costs are reported under personnel expense
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and interest accruing on net obligations as finance expense. Actuarial gains and losses and the
return on plan assets (with the exception of amounts reflected in net interest income) are reported
under other comprehensive income.
The assumptions regarding net future benefits are set out in the formal set of regulations govern-
ing the pension plan in compliance with legal provisions. As regards the Swiss pension plans, the
relevant formal regulations comprise the rules of the pension fund as well as the relevant laws,
ordinances and directives concerning occupational benefit plans, in particular the provisions con-
tained therein concerning funding and measures to be taken to eliminate pension-fund deficits.
From 2016 onwards, risk-sharing features were taken into account in defining financial assump-
tions in the formal regulations. These limit the employer share of future benefit costs as well as
imposing obligations on employees, where applicable, to make additional contributions for the pur-
pose of eliminating funding deficits.
Should the level of committed long-term disability benefits (disability pensions), irrespective of the
number of service years, be the same for all insured employees, the costs for the benefits are rec-
ognised on the date on which the event causing the disability occurs.
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 encompass 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
taxes are recognised in principle on all temporary differences. Temporary differences arise from dif-
ferences between the carrying amount of a balance sheet position in the consolidated financial
statements and its value as reported for tax purposes and which will reverse in future periods. The
tax rate used to determine the amount of deferred taxes is that which is expected to apply when the
temporary difference reverses based on the tax rate which is 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 recognised 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 re-measured
at fair value. The method of recording the fluctuations in fair value varies according to the underly-
ing transaction and the intention with regards thereto upon purchase or issuance of this underly-
ing transaction. On the date a derivative contract is entered into, management designates the pur-
pose 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 dealt with in other compre-
hensive income and 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 transaction 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 results.
Otherwise, the amounts recorded in equity are recognised in the income statement as income or
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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 2016 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
Amendements to IFRS 11
Accounting for acquisitions of interests in a joint operation
Amendements to IAS 1
Disclosure initiative
Amendements to IAS 16
and IAS 38
Clarification of acceptable methods of depreciation and amortisation
Various
Improvements to IFRS 2012–2014
Amended International Financial Reporting Standards and Interpretations,
whose application is not yet mandatory
The following Standards and Interpretations published up to the end of 2016 are mandatory for
accounting periods beginning on or after 1 January 2017:
Standard
Name
Amendements to IAS 7
Disclosure initiative
Amendements to IAS 12
Recognition of deferred tax assets for unrealised losses
IFRIC 22
Foreign currency transactions and advance consideration
Amendements to IFRS 2
Classification and measurement of share-based payment transactions
IFRS 9
IFRS 15
IFRS 16
Various
Financial instruments
Revenue from contracts with customers and related clarifications to IFRS 15
Leases
Amendements to IFRS 2014–2016
Effective from
1 January 2017
1 January 2017
1 January 2018
1 January 2018
1 January 2018
1 January 2018
1 January 2019
1 January 2017 resp.
1 January 2018
Swisscom will review its financial reporting for the impact of the new and amended standards
which take effect on or after 1 January 2017 and for which Swisscom did not make voluntary early
application. At present, Swisscom anticipates no material impact on consolidated financial report-
ing with the exception of the amendments described in the following paragraphs.
IFRS 15 “Revenue from Contracts with Customers”: in contrast to the revenue recognition stan-
dards 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 to the customer 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. With regards to 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 winning a contract as well as guidelines as to the ques-
tion when such costs are to be capitalised. In addition, the new standard requires new, more
detailed note disclosure information. Swisscom anticipates that the wide-ranging amendments, in
particular in the area of accounting for multi-component contracts and the prescribed capitalisa-
tion of customer acquisition costs, will impact consolidated financial reporting. IFRS 15 will have
the following material impact on the consolidated financial statements of Swisscom:
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> In the case of multi-component contracts (mobile-phone contract with a subsidised mobile
handset), the revenue will be allocated over the pre-delivered components (mobile handset)
with the result that the revenue will be recognised earlier. The total revenue remains unchanged
over the duration of the contract.
> Commissions paid to dealers (customer acquisition costs) as well as costs of routers and set-top
boxes (contract performance costs) are capitalised and recognised as expense over the term of
the contract.
> Swisscom will in all probability apply IFRS 15 through an adjustment to equity in the amount of
the cumulative effect as from 1 January 2018 (cumulative method).
The impact will be evaluated as part of a Group-wide project regarding the implementation of the
new standard. A reliable estimate of the quantitative impact, however, is not possible prior to the
completion of the project.
IFRS 16 “Leases”: For the lessee, IFRS 16 provides for a comprehensive model for dealing with lease
arrangements in financial statements. The differentiation between finance and operating lease
arrangements which was required until now under IAS 17 is thus dropped in future for the lessee.
The lessee shall recognise leasing obligations in its balance sheet for all future lease payments to be
made as well as recognising a right to use the underlying asset. For financial-reporting purposes,
the lessor shall continue to differentiate between finance and operating lease arrangements. In
this respect, the accounting model foreseen under IFRS 16 do not materially differ from the previ-
ous provisions under IAS 17. Swisscom expects that the comprehensive modifications will have a
material impact on the consolidated financial statements. However, a reliable estimate of the
impact of applying IFRS 16 can only be made once a detailed analysis is completed. IFRS 9 “Financial
Instruments”: The Standard includes new rules to classify and value financial assets and liabilities,
the recognition of value impairments and the recording of hedging relationships. In certain cases,
changes in classification will result from the new provisions and also in certain cases, the new pro-
visions regarding value impairment will lead to the earlier recording of losses impacting income.
Swisscom has not completed the detailed analysis but does not, however, anticipate material
changes to financial-statement reporting.
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 certain
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 note disclosure information. The estimates used in preparing the consolidated financial
statements and valuations are based on empirical values and other factors which are deemed
appropriate in the given circumstances.
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The following estimates used and assumptions made in applying the accounting policies have a
critical influence on the consolidated financial statements.
Description
Judgemental decisions and estimation insecurity
Further information
Recoverability of Goodwill Key assumptions such as projected cash flows, the discount rate (WACC)
and long-term growth rate for determination of recoverable amount
Defined benefit obligations Key assumptions such as discount rate, future salary and pension increases,
Provisions for
dismantlement and
restoration costs
Provision for regulatory
and competition
law procedures
Allowances for
doubtful receivables
Recognition of
deferred tax assets
Useful lives of property,
plant and equipment
interest on pension plan savings. Employee contributions for funding shortfall,
future pension rights of insured employees as well as life expectancy for
valuing the defined benefit obligations
Future costs for dismantlement and restoration
as well as the date of the dismantlement
Probability of occurrence and amount of the expected cash outflow
Measurement of allowances taking into account historical experience
with receivable losses
Possibility of achieving future taxable profits which can be offset
against the available tax loss-carry forwards
Estimate of useful lives taking into account the expected use,
expected physical wear, technology developments as well as
past experience with comparable assets
Note 24
Note 10
Note 28
Note 28
Note 18
Note 15
Notes 3.7 and 23
5 Business combinations and disposal of subsidiaries
Business combinations in 2015 and 2016
In 2016, Swisscom made payments, net of cash and cash equivalents acquired, totalling CHF 38 mil-
lion (prior year: CHF 64 million) for the acquisition of subsidiaries. Of this amount, CHF 32 million
(prior year: CHF 8 million) relates to deferred consideration arising on business combinations in prior
years and CHF 6 million (prior year: CHF 56 million) for subsidiaries acquired during the accounting
period.
Business combination search.ch Ltd
In May 2014, Swisscom and Tamedia agreed to contribute their companies Swisscom Directories
Ltd (local.ch) and search.ch Ltd to a jointly-held subsidiary company. Swisscom holds 69% of the
capital of the joint company, with Tamedia holding the remaining 31%. With the on-line directory
platform local.ch and the Local Guide telephone directories, Swisscom Directories Ltd is a leading
company in Switzerland in the field of advertising and the operation of directories. Search.ch Ltd
(search.ch) is a leading Swiss search and information service. With the merger of Swisscom
Directories Ltd (local.ch) and search.ch Ltd, there was born a comprehensive Swiss directory and
information platform for private individuals, companies and public administrations as well as an
important advertising partner for small and medium-size companies.
The transaction was consummated at the beginning of July 2015 following consent to the transac-
tion given by the Federal Competition Commission (Weko). Swisscom granted Tamedia a put option
and Tamedia granted Swisscom a call option for the 31% share of Tamedia which both can be exer-
cised as from the third year following the consummation of the transaction. The fair value of the
put option at the time of consummation of the transaction amounted to CHF 222 million. This
amount was recognised as a financial liability in the third quarter of 2015. The fair value of the put
option corresponds to the purchase cost for the acquisition of search.ch Ltd.
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The allocation of the acquisition costs over the net assets of search.ch may be analysed as follows:
In CHF million
Purchase price allocation of search.ch AG
Cash and cash equivalents
Other intangible assets
Other current and non-current assets
Defined benefit obligations
Deferred tax liabilities
Other current and non-current liabilities
Identifiable assets and liabilities
Goodwill
Purchase costs
Cash and cash equivalents acquired
Issuance of equity instruments
Total cash inflow
2015
12
42
10
(5)
(4)
(20)
35
187
222
(12)
(222)
(12)
The gross amount of the trade receivables acquired amounts to CHF 7 million. At the time of the
acquisition, it was anticipated that of this amount, CHF 1 million was non-collectible. No transac-
tion costs arose in connection with the acquisition of search.ch Ltd. The principal reasons for the
recognition of goodwill are the anticipated synergies from distribution as well as additional market
share. In 2015, there resulted additional net revenues of CHF 18 million and a profit of CHF 4 million
from this business combination. On the assumption that the subsidiary acquired in 2015 had been
included in the consolidated financial statements as from the date of 1 January 2015, there would
have resulted consolidated pro-forma net revenues of CHF 11,693 million and a consolidated pro-
forma net income of CHF 1,363 million.
Other business combinations in 2015
In 2015, Swisscom acquired the entire share capital of two companies, the Veltigroup group and
H-Net Ltd. Furthermore, Swisscom acquired in 2015 51% of the share capital of Mila Ltd. With the
acquisition of Veltigroup, Swisscom consolidates its ICT portfolio for business clients and its pres-
ence in Western Switzerland. Veltigroup is a leading ICT service provider and offers companies a
complete ICT service offering from infrastructure through to end-customer services and solutions.
Through the purchase of H-Net Ltd, Swisscom strengthens its portfolio in the field of healthcare.
H-Net Ltd is one of the leading companies in the fields of administrative and medical data exchange
in healthcare. H-Net Ltd was merged with Swisscom Health Ltd following acquisition. The purchase
of Mila Ltd is designed to make a contribution to all three strategic market thrusts of Swisscom
(client orientation, innovation, operational excellence).
In addition, Swisscom acquired the Avanti business from HP Switzerland. Avanti is an operations
control system and back-office for emergency response organisations. Furthermore, Swisscom
acquired the Swiss business of World Television (Switzerland) Limited. Through this, Swisscom
Event & Media Solutions could further expand its existing offering in the field of video and stream-
ing services thereby becoming the Swiss market leader in the field of online video communications
and live-streaming for corporate customers.
The other subsidiaries and business areas acquired in 2015 are regarded as immaterial business
combinations and are thus presented on an aggregate basis. The aggregate allocation of acquisi-
tion costs over the net assets acquired may be analysed as follows:
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In CHF million
Purchase price allocation of other business combinations
Cash and cash equivalents
Other intangible assets
Other current and non-current assets
Defined benefit obligations
Deferred tax liabilities
Other current and non-current liabilities
Identifiable assets and liabilities
Share of identifiable net assets attributable to non-controlling interests
Goodwill
Acquisition costs
Cash and cash equivalents acquired
Issuance of equity instruments
Total cash outflow
2015
21
60
52
(25)
(7)
(58)
43
(8)
68
103
(21)
(14)
68
The gross amount of trade receivables acquired totals CHF 34 million. At the time of the acquisition,
it was anticipated that all of these receivables were considered collectible. No transaction costs
arose in connection with the acquisition of the remaining subsidiaries acquired in 2015. The princi-
pal reasons for the recognition of goodwill are the anticipated synergies, the additional market
shares and the qualified workforce. In 2015, there resulted additional net revenues of CHF 139 mil-
lion and a net income of CHF 3 million from these business combinations. On the assumption that
the subsidiaries acquired in 2015 had been included in the consolidated financial statements as
from the date of 1 January 2015, there would have resulted consolidated pro-forma net revenues of
CHF 11,679 million and a consolidated pro-forma net income of CHF 1,361 million.
Disposal of subsidiaries in 2015
In 2015, Swisscom disposed of Alphapay Ltd and its entire shareholdings in the Swisscom Hospital-
ity Services Group. Alphapay Ltd is active as a debt-collection service provider and is specialised in
the receivables management of third parties. Swisscom Hospitality Services offers broadband services
to guests and clients in the fields of hotel and conference services in Europe and North America. In
addition, iWare SA and Spree7 GmbH, both active in the media sector, were sold in 2015, The sale
of these subsidiaries gave rise to a profit of CHF 19 million which was recognised as other financial
income.
The aggregate carrying amounts of the net assets disposed of as well as the aggregate cash inflows
from the sales of subsidiaries in 2015 may be analysed as follows:
In CHF million
Cash and cash equivalents
Trade and other receivables
Property, plant and equipment
Goodwill
Deferred tax assets
Other current and non-current liabilities
Trade and other payables
Other current and non-current liabilities
Total net assets sold
Purchase consideration
Cash and cash equivalents sold
Deferred payment of purchase price
Total cash inflow from sale of subsidiaries
2015
11
21
2
13
3
11
(14)
(21)
26
45
(11)
(1)
33
169
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a
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a
d
i
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o
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n
o
c
e
h
t
o
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s
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t
o
N
6 Segment information
General disclosures
Operating segments requiring to be reported are determined on the basis of the management
approach. Accordingly, external segment reporting reflects the internal financial reporting to the
Chief Operating Decision Maker. The segment information disclosed is in line with that reported in
the internal reporting system. Reporting is divided into the segments “Residential Customers”,
“Small and Medium-Sized Enterprises”, “Enterprise Customers”, “Wholesale” and “IT, Network &
Innovation” which are regrouped under Swisscom Switzerland, as well as “Fastweb” and “Other
Operating Segments”. In addition, “Group Headquarters”, which includes unallocated costs, are
reported separately in segment reporting. Further segment disclosures are set out in Note 3.16.
Group Headquarters charges no management fees for its financial management and the segment
IT, Network & Innovation charges no network costs to other segments. Other services between the
segments are recharged between the segments at market prices. The results of the segments Res-
idential Customers, Small and Medium-Sized Enterprises, Enterprise Customers and Wholesale
equate to a contribution margin prior to network costs. The segment results of IT, Network & Inno-
vation reports, as its segment result, operating expenses and depreciation and amortisation, less
revenues from the rental and management of real estate, the capitalised costs of self-constructed
assets and other income. The segment results of Swisscom Switzerland correspond in aggregate to
the operating results (EBIT) of Swisscom Switzerland. The services offered by the individual operat-
ing segments are described in Note 3.16. The segment results of Fastweb and Other Operating
Segments correspond to the operating results (EBIT) of these units. This latter encompasses net
revenues from external customers and other segments, less segment expenses, depreciation and
amortisation and impairment losses on property, plant & equipment and intangible assets.
Segment expenses comprise the costs of materials and services, personnel expenses and other
operating costs less capitalised costs of self-constructed assets and other income.
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 2016, an amount of CHF 72 mil-
lion is included in the column “Eliminations” as a reconciling item to retirement-benefit expense in
accordance with IAS 19 (prior year: CHF 60 million).
Services provided to or sales of assets recharged between the individual segments may include
unrealised gains or losses. These are eliminated and are reported in the segment information in the
column “Eliminations”.
170
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N
Segment information 2015 and 2016
Segment information for 2016 of Swisscom may be analysed as follows:
2016, in CHF million
Net revenue from external customers
Net revenue from 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
Swisscom
Switzerland
Fastweb
9,374
1,948
66
9,440
2,197
9
1,957
124
Other
Operating
Segments
Group
Head-
quarters
320
274
594
27
1
1
2
(114)
Elimi-
nation
Total
–
11,643
(350)
(350)
(86)
–
11,643
2,148
(155)
(3)
1,990
(386)
1,604
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
112
4
1,743
1,489
11
(9)
633
597
–
–
77
60
67
–
6
–
–
–
–
–
–
193
(20)
(8)
–
–
2,416
2,145
11
(3)
Segment information 2016 of Swisscom Switzerland may be analysed as follows:
2016, in CHF million
Small and
Medium-
Sized
Enterprises
Residential
Customers
Enterprise
Customers
IT,
Whole- Network &
Innovation
sale
Elimi-
nation
Total
Swisscom
Switzer-
land
Net revenue from external customers
5,020
1,334
2,400
Net revenue from other segments
Net revenue
Segment result
Associates
140
5,160
2,748
33
211
1,367
2,611
847
722
39
1
15
Capital expenditure in property, plant and
equipment and other intangible assets
137
Depreciation, amortisation and impairment losses
122
Gain (loss) on disposal of property,
plant and equipment, net
Share of results of associates
1
(25)
40
45
(1)
(1)
159
117
(4)
1
591
398
989
388
56
–
–
–
16
29
100
129
(2,508)
1
1,407
1,204
15
–
–
9,374
(816)
(816)
–
–
–
1
–
–
66
9,440
2,197
112
1,743
1,489
11
(9)
171
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a
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fi
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a
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o
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o
C
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m
e
t
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a
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a
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fi
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a
d
i
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o
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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
Segment information 2015 of Swisscom is to be analysed as follows:
2015, in CHF million
Net revenue from external customers
Net revenue from 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
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
Swisscom
Switzerland
Fastweb
9,475
1,862
70
9,545
2,218
5
1,867
(16)
Other
Operating
Segments
Group
Head-
quarters
340
263
603
(5)
1
1
2
(117)
Elimi-
nation
Total
–
11,678
(339)
(339)
(68)
–
11,678
2,012
(272)
23
1,763
(401)
1,362
105
42
1,817
1,383
20
16
581
635
–
–
76
48
74
(3)
7
–
–
–
–
–
–
223
(19)
(6)
–
–
2,427
2,086
17
23
Segment information 2015 of Swisscom Switzerland is to be analysed as follows:
2015, in CHF million
Small and
Medium-
Sized
Enterprises
Residential
Customers
Enterprise
Customers
IT,
Whole- Network &
Innovation
sale
Elimi-
nation
Total
Swisscom
Switzer-
land
Net revenue from external customers
5,075
1,339
2,449
Net revenue from other segments
Net revenue
Segment result
Associates
149
5,224
2,797
31
205
1,370
2,654
859
818
31
2
15
Capital expenditure in property, plant and equipment
and other intangible assets
180
Depreciation, amortisation and impairment losses
136
Gain (loss) on disposal of property,
plant and equipment, net
Share of results of associates
–
(3)
50
48
–
–
171
92
(5)
–
579
377
956
198
56
–
–
–
19
33
97
130
(2,454)
1
1,416
1,107
25
–
–
9,475
(789)
(789)
–
–
–
–
–
–
70
9,545
2,218
105
1,817
1,383
20
16
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 which
primarily provides fixed-network and IP-based products in Italy. Net revenue and assets are
allocated to regions. Net revenue and assets are allocated according to the registered office of the
related Group company.
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o
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t
a
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a
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a
d
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o
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o
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o
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s
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t
o
N
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
Bundled contracts
Other
Total net revenue
2016
Non-current
assets
14,368
2,876
132
–
543
2015
Non-current
assets
14,151
2,904
125
–
592
Net revenue
9,764
1,864
43
7
–
Net revenue
9,665
1,948
30
–
–
11,643
17,919
11,678
17,772
2016
2,695
3,272
2,499
3,177
2015
2,804
3,439
2,248
3,187
11,643
11,678
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 customer accounted for more than 10%
of segment revenue in 2015 and 2016.
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
2016
10,914
722
7
2015
10,887
788
3
11,643
11,678
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
2016
6
471
1,135
169
282
260
2015
19
484
1,124
174
263
278
2,323
2,342
173
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a
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a
d
i
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o
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n
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o
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s
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t
o
N
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
2016
2,268
253
338
9
3
3
20
53
2015
2,295
257
320
9
2
4
67
65
2,947
3,019
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 AG. The employment company Worklink AG
hires out participating employees to third parties on a temporary basis. For further information, see
Note 28.
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 363 million in 2016 (prior year: CHF 346 million). Of this amount,
CHF 338 million (prior year: CHF 320 million) was recorded as personnel expense and CHF 25 million
(prior year: CHF 26 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 comPlan pension plan has the legal form
of a foundation. The organisation, benefits and the system of funding are set forth in Pension Fund
Rules. The supreme governing body of comPlan is the Foundation Council. The overall management
of the pension plan and responsibility for its financial stability is incumbent on the Foundation
Council. The Council is constituted by an equal number of representatives of the employees and
the employer. The Pension Fund Rules, together with the relevant laws, ordinances and directives
of the Federal Council concerning occupational pension plans, in particular the provisions con-
tained therein concerning funding and measures to eliminate funding deficits, form the formal
regulatory framework of the pension plan which is binding for financial-statement reporting and
the actuarial assumptions.
The level of benefits payable by comPlan exceed the legally prescribed minimum. 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 retirees. For individuals retiring at the age of 65, the
rate of conversion is currently 6.11%. The accumulated savings result from employee and employer
contributions which are paid into the individual savings account of each insured person as well as
the interest accruing on the accumulated savings. The interest rate to be applied to the accumu-
lated pension savings is set annually by the Foundation Council. The plan is funded through
employer and employee contributions which vary with the salary level as well as the return on the
plan assets. The level of recurring contributions provided for under the pension-fund rules is grad-
174
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a
d
i
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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
uated according to age groups and for the employer amount to 8.35% to 16.35% and those of the
employees to 5.5% to 9.5% of the ensured salary. In case of retirement before the ordinary retire-
ment age, the employer finances additionally a bridging pension up until the ordinary retirement
age with an overall maximum cost of CHF 80,100 per employee. The amount of disability pensions
in relation to the salary is the same for all insured employees, irrespective of the number of service
years.
In the event of a foreseeable funding deficit, computed in accordance with local financial-state-
ment accounting principles, the Foundation Council lays down appropriate measures to eliminate
the funding deficit which will lead to the restoration of a financial equilibrium within a reasonable
time-frame. The measures may consist of the levying of restructuring contributions, a lower level
of interest accruing or zero interest, the curtailment of insured benefits or in a combination of such
measures. As a general rule, the measures must lead to the elimination of the funding deficit within
a timeframe of 5 to 7 years. Should the current funding be insufficient from an actuarial perspec-
tive and there exists, as a result, a structural financing shortfall, the top priority is to eliminate this
shortfall by adjusting the benefits or recurring contributions. Insofar as other measures do not
achieve the goal, comPlan can levy contributions to eliminate a funding deficit from the employer
and employees (restructuring contributions) so long as a funding deficit persists. The employer’s
restructuring contributions must, at a minimum, be equal to the sum of employee contributions.
Under the formal regulatory framework of the pension plan, the employer has no legal obligation
to pay additional contributions to eliminate more than 50% of a funding deficit or of a structural
funding shortfall. In the case of Swisscom, a de-facto obligation over and above the legal minimum
obligation exists deriving from customary company-specific practice. In the case of the actuarial
valuation, the legal and de-facto obligations are regarded as the upper limit of the employer’s share
of the costs of future benefits within the meaning of IAS 19.87(c).
As a consequence of the low interest-rate level and increasing life expectancy, the Foundation
Council of comPlan decided upon various measures to ensure the financial equilibrium between
the pension-fund liabilities and the funding of benefits and communicated this decision in October
2016. The core elements of the measures comprise a lowering of the conversion rate from 6.11% to
5.34% in monthly steps beginning in July 2017 through to September 2020 and an increase in recur-
ring savings contributions of the employees and employer. The recurring contributions provided
under the pension-fund rules are raised from 10.05% to 16.65% for the employer and for the
employees, from 6.6% to 10.6% of the insured salaries. Moreover, and in order to cushion the impact
of future pension reductions, special contributions will be credited to the individual savings
accounts of insured employees born in 1969 and later during a maximum period of 5 years.
Swisscom bears a share totalling CHF 50 million of the costs of the special contributions through an
extraordinary payment in 2017. The remaining costs of an anticipated amount of approx.
CHF 250 million will be financed by using freely available funds of comPlan. As a result of the special
contributions, the extent of pension reductions for the beneficiaries will be limited to 6%. The var-
ious measures give rise to a past-service cost of CHF 3 million which was recognised in the fourth
quarter of 2016 as part of pension-fund expense in the income statement. This is based on a reval-
uation of the net pension-fund obligations using the market values of the plan assets which were
valid as of the date of the pension-fund amendment and the current actuarial assumptions which
take into account the risk-sharing features. The past service cost equates to the difference resulting
from the valuation based upon the previous pension-fund benefits and contributions and the val-
uation based upon the benefits and contributions provided for under the amended pension-fund
rules. Ignoring the risk-sharing features, a negative past-service cost of CHF 546 million would have
resulted from the plan amendment.
In accordance with the Swiss accounting standards applicable to the pension fund (Swiss GAAP
ARR), the surplus amounts to CHF 0.1 billion, corresponding to a coverage ratio of around 101%
(prior year: 108%). The main reasons for the difference compared with IFRS are the application of
differing actuarial assumptions with regard to the discount rate, life expectancy or risk sharing, as well
as a different actuarial measurement method. The Investment Commission is the central manage-
ment, coordination and monitoring body for the management of the pension plan assets. The pen-
sion plan assets are administered using mandated, independent financial service providers. Moni-
toring is supported by an external investment controller. The Foundation Council determines the
investment strategy and tactical bandwidths within the framework of the legal provisions. Within
its terms of reference, the Investment Commission may undertake the asset allocation.
175
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a
d
i
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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 pension plans
In addition to the plans of various subsidiary companies in Switzerland which did not join comPlan,
other pension plans include the pension plan for Fastweb employees. Employees of the Italian sub-
sidiary 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.
Pension cost
Defined-benefit pension plans
In CHF million
Current service cost
Plan amendments
Administration expense
Total recognised in personnel expense
Interest expense on net defined benefit obligations
Total recognised in financial expense
Total expense of defined benefit plans
recognised in income statement
comPlan
322
3
4
329
25
25
354
Other
plans
8
–
1
9
–
–
9
2016
comPlan
330
305
3
5
338
25
25
–
4
309
25
25
Other
plans
13
(3)
1
11
1
1
2015
318
(3)
5
320
26
26
363
334
12
346
In addition, other comprehensive income includes an actuarial gain of CHF 1,162 million (prior year:
loss of CHF 393 million) which may be analysed as follows:
In CHF million
Actuarial gains and losses from:
Change of the demographical assumptions
Change of the financial assumptions
Experience adjustments to defined benefit obligations
Return on plan assets excluding the part
recognised in financial result
Expense (income) of defined benefit plans
recognised in other comprehensive income
comPlan
Other
plans
2016
comPlan
Other
plans
102
(991)
36
–
2
(3)
102
(989)
33
(3)
171
85
(308)
–
(308)
146
(1,161)
(1)
(1,162)
399
–
2
(8)
–
(6)
2015
(3)
173
77
146
393
Gains aggregating CHF 991 million arising from the amendment to the financial assumptions of
comPlan comprise the impact of the recognition of risk-sharing features for the first time in the
financial assumptions totalling CHF 856 million.
Defined-contribution pension plans
Expenses in 2016 for defined-contribution plans aggregated CHF 9 million (prior year: CHF 9 million).
176
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a
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fi
d
e
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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
Status of pension plans
In CHF million
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 business combinations
Disposals from sales of subsidiaries
Plan amendments
Foreign currency translation adjustments
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 (expense) on plan assets excluding the part
recognised in financial result
Additions from business combinations
Disposals from sales of subsidiaries
Plan amendments
Administration expense
Transfer of pension plans to comPlan
Balance at 31 December
Net defined benefit obligations
comPlan
Other
plans
2016
comPlan
Other
plans
2015
12,183
117
12,300
11,406
294
11,700
322
113
178
(325)
(853)
–
–
3
–
8
1
2
(9)
(1)
1
–
–
–
14
11,635
(14)
105
330
114
180
(334)
(854)
1
–
3
–
–
305
127
169
(288)
253
–
(37)
–
–
13
3
6
(19)
(6)
89
(1)
(12)
(2)
248
(248)
318
130
175
(307)
247
89
(38)
(12)
(2)
–
11,740
12,183
117
12,300
9,307
74
9,381
9,026
242
9,268
88
268
178
(325)
308
–
–
–
(4)
6
9,826
1
3
2
(9)
–
–
–
–
(1)
(6)
64
89
271
180
(334)
102
256
169
(288)
308
(146)
–
(23)
–
(4)
–
–
–
(5)
–
2
9
6
104
265
175
(19)
(307)
–
59
–
(9)
(1)
(146)
59
(23)
(9)
(5)
–
215
(215)
9,890
9,307
74
9,381
Net defined benefit obligations recognised at 31 December
1,809
41
1,850
2,876
43
2,919
Movements in recognised defined-benefit obligations are to be analysed as follows:
Other
plans
2016
comPlan
Other
plans
In CHF million
Balance at 1 January
Pension cost, net
Employer contributions and benefits paid
Disposals from sales of subsidiaries
Additions from business combinations
Expense (income) of defined benefit plans
recognised in other comprehensive income
Foreign currency translation adjustments
Transfer of pension plans to comPlan
comPlan
2,876
354
(268)
–
–
(1,161)
–
8
43
2,919
2,380
9
(3)
–
1
(1)
–
(8)
363
(271)
–
1
(1,162)
–
–
334
(256)
(14)
–
399
–
33
Balance at 31 December
1,809
41
1,850
2,876
2015
2,432
346
(265)
(15)
30
393
(2)
–
2,919
52
12
(9)
(1)
30
(6)
(2)
(33)
43
The weighted average duration of the net present value of the recorded pension obligations is
18 years, which is unchanged from that of the prior period.
177
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t
o
t
s
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t
o
N
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:
Category
Government bonds Switzerland
Corporate bonds Switzerland
Government bonds developed markets, World
10.0%
Corporate bonds developed markets, World
Government bonds emerging markets, World
Private debt
9.0%
7.0%
6.0%
Investment
strategy
Quoted
8.0%
6.0%
31.12.2016
31.12.2015
Not
quoted
4.5%
0.0%
0.0%
0.0%
0.0%
6.2%
Total
Quoted
6.8%
6.0%
8.4%
9.2%
7.2%
6.2%
2.2%
7.8%
10.1%
9.0%
6.5%
0.0%
Not
quoted
7.4%
0.0%
0.0%
0.0%
0.0%
4.9%
Total
9.6%
7.8%
10.1%
9.0%
6.5%
4.9%
2.3%
6.0%
8.4%
9.2%
7.2%
0.0%
Third-party debt instruments
46.0%
33.1%
10.7%
43.8%
35.6%
12.3%
47.9%
Equity shares Switzerland
5.0%
5.2%
Equity shares developed markets, World
12.0%
13.3%
Equity shares emerging markets, World
Equity instruments
Real estate Switzerland
Real estate World
Real estate
Commodities
Private markets
8.0%
25.0%
11.0%
6.0%
8.4%
26.9%
7.5%
3.7%
17.0%
11.2%
4.0%
7.0%
1.9%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
4.6%
1.2%
5.8%
2.0%
7.0%
1.4%
5.2%
4.9%
13.3%
11.0%
8.4%
7.4%
26.9%
23.3%
12.1%
4.9%
8.2%
3.7%
17.0%
11.9%
3.9%
7.0%
1.4%
1.7%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
3.6%
0.0%
3.6%
1.9%
6.1%
3.6%
4.9%
11.0%
7.4%
23.3%
11.8%
3.7%
15.5%
3.6%
6.1%
3.6%
Cash and cash equivalents and other investments
1.0%
178
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h
t
o
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t
o
N
Cash and cash equivalents and
alternative investments
12.0%
1.9%
10.4%
12.3%
1.7%
11.6%
13.3%
Total plan assets
100.0%
73.1%
26.9%
100.0%
72.5%
27.5%
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 various
investment categories, markets, currencies and industry segments in both developed and emerg-
ing markets. The interest rate duration of interest-bearing assets is 5.52 years (prior year: 5.77 years)
and the average rating of these assets is A–. Within the overall portfolio, all foreign currency posi-
tions are hedged against the Swiss franc following a currency strategy to the extent necessary to
meet a pre-determined ratio of 94% (CHF or CHF-hedged). The unquoted and therefore rather illiq-
uid investments make up 26.8% of total plan assets. Following this investment strategy, comPlan
anticipates a target value for the value fluctuation reserve of 17.3% (basis: 2017 financial year).
Other pension plans
The other plans pursue the goal of achieving the highest possible return on assets within the frame-
work 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 invest-
ment categories, markets, currencies and industry segments.
Additional information on plan assets
As of 31 December 2016, plan assets include Swisscom Ltd shares and bonds with a fair value of
CHF 5 million (prior year: CHF 5 million). The effective return on plan assets in 2016 amounted to
CHF 397 million (prior year: CHF –42 million).
In 2017, Swisscom expects to make payments to the pension funds for ordinary employee contribu-
tions totalling CHF 262 million (excluding payments for early retirements and changes to the pen-
sion 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
Share of employee contribution to funding shortfall
Life expectancy at age of 65 – men (number of years)
Life expectancy at age of 65 – women (number of years)
2016
2015
comPlan
Other plans
comPlan
Other plans
0.64%
1.08%
–
0.64%
40%
22.26
24.32
0.91%
0.74%
–
1.03%
–
22.26
24.32
0.94%
1.75%
–
0.94%
–
21.49
23.96
1.46%
1.64%
–
1.34%
–
21.49
23.96
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. The level of
growth in pensions reflects comPlan’s lack of potential. Interest accruing on the retirement savings
equates to the discount rate. As regards the life-expectancy assumptions, Swisscom applies the
BVG 2010 generation tables until the end of 2015 and for 2016 onwards, the BVG 2015 generation
tables.
For the actuarial computations as of 31 December 2016 and the effects of the pension-fund
amendments decided upon in the fourth quarter of 2016, the risk-sharing effects contained in the
formal regulatory framework were taken into account in the financial assumptions in two steps.
With the implicit assumption of a future return on plan assets equal to the discount rate, the recur-
rent contributions provided for under the pension-fund rules are insufficient for the correct current
funding of the benefits provided for under the pension-fund rules of comPlan. There results a struc-
tural funding shortfall. For the actuarial computations, it is assumed, as a first step, that the Foun-
dation Council will decide upon measures to eliminate the funding gap in accordance with the
formal regulatory framework. As a measure, it is assumed that future pensions will be lowered
gradually over a period of 10 years by 5.6%. This assumption considers that for the determination
of the conversion rate in the extra-mandatory portion, the discount rate of 0.64% used for the
actuarial computation will be applied and that the legal conversion rate of 6.8% will be applied in
the mandatory area. Even after assuming a curtailment of future benefits, there remains a struc-
tural funding shortfall which is arithmetically divided over the employer and employees in a second
step. The assumption is that the obligation of the employer legally and de-facto is limited to 60% of
the funding shortfall. These assumptions are based upon the legal provisions regarding the elimi-
nation of funding deficits as well as the specific behavioural patterns and measures taken both by
the employer and the Foundation Council. As a result of the assumption of a curtailment in bene-
fits and a limitation of the share of the funding shortfall, there results a reduction in defined-ben-
efit obligations of CHF 856 million, which was recognised in other comprehensive income as a
change in accounting estimate. Of this amount, CHF 145 million relates to the curtailment of ben-
efits assumed in the first step. The effect of limiting the employer’s obligations in the second step
amounts to CHF 711 million. No risk-sharing features were taken into account for the actuarial
computation as of 31 December 2015. The estimation process to determine the financial assump-
tions taking into account the risk-sharing features contained in the formal regulatory framework
was amended in 2016 in order to present a more realistic view of the effective pension-plan
expense which will arise for the company. With the current low level of interest rates, failure to take
the risk-sharing features into consideration leads to a distorted presentation of the recognised net
pension-fund liability and to unrealistically high negative past-service costs in the case of plan
amendments.
179
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a
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N
Sensitivity analysis comPlan
In CHF million
Discount rate (change +/–0.5%)
Expected rate of salary increases (change +/–0.5%)
Expected rate of pension increases (change +0.5%; –0.0%)
Interest on old age savings accounts (change +/–0.5%)
Share of employee contribution to funding shortfall (change +/–10%)
Life expectancy at age of 65 (change +/–0.5 year)
Defined benefit obligations
Current service cost 1
Increase
Assumption
Decrease
Assumption
Increase
Assumption
Decrease
Assumption
(574)
47
547
25
178
128
670
(45)
–
(23)
(178)
(129)
(40)
7
30
8
–
5
48
(7)
–
(8)
–
(5)
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 half
a year, respectively. In the process, only one of the assumptions is adjusted each time, the other
parameters remain unchanged. In the sensitivity analysis, in view of a negative movement in pen-
sion increases, no change was made as the reduction in pension benefits is not possible.
11 Share-based payments
Management Incentive Plan
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 their emoluments in the form of Swisscom shares. Members of the
Group Executive Board receive 25% of their variable performance-related salary component in the
form of Swisscom shares. Group Executive Board members may increase this share up to a maxi-
mum of 50% at their discretion. 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 subse-
quent business year once the financial statements are finalised. The shares allocated to the mem-
bers of the Group Executive Board are based on the variable earnings-related compensation of the
prior year. The tax value per share amounts to CHF 439 (prior year: CHF 473). The shares are subject
to a retention period of three years from the grant date. The shares are vested immediately upon
allocation.
In 2016, 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 2016
Members of the Board of Directors
Members of the Group Executive Board 1
Other Management members
Total 2016
1 Allocation for the financial year 2015.
Number of
allocated shares
Market price
in CHF
Expense in
CHF million
1,308
1,841
3,337
6,486
523
523
515
523
0.7
1.0
1.7
3.4
180
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a
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a
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i
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o
N
In 2015, 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 2015
Members of the Board of Directors
Members of the Group Executive Board 1
Other Management members
Total 2015
1 Allocation for the financial year 2014.
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 workforce
Allowances for receivables
Administration expense
Miscellaneous operating expenses
Total other operating expense
Number of
allocated shares
Market price
in CHF
Expense in
CHF million
1,302
1,268
1,309
3,879
563
563
563
563
2016
361
256
9
114
271
216
304
191
94
122
610
0.7
0.7
0.7
2.1
2015
345
285
10
104
261
227
300
200
81
143
741
2,548
2,697
Other operating expense includes provisions established and released relating to regulatory and
competition-law-related proceedings. See Note 28.
13 Capitalised costs of self-constructed assets and other income
In CHF million
Capitalised costs of self-constructed assets
Gain on sale of property, plant and equipment
Income from employment company Worklink (personnel hire)
Miscellaneous income
Total capitalised costs of self-constructed assets and other income
2016
347
20
6
95
468
2015
337
27
5
109
478
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.
181
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a
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i
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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
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n
a
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fi
d
e
t
a
d
i
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o
s
n
o
c
e
h
t
o
t
s
e
t
o
N
14 Financial income and financial expense
In CHF million
Interest income on financial assets
Capitalised borrowing costs
Gain on sale of subsidiaries. See Note 5.
Gain on sale of associates. See Note 25.
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.
Foreign exchange losses
Present-value adjustments on provisions
Other financial expense
Total financial expense
Financial income and financial expense, net
2016
13
6
–
42
7
12
80
(168)
(10)
(25)
–
(11)
(21)
(235)
(155)
2015
10
8
19
–
–
6
43
(199)
(13)
(26)
(40)
(13)
(24)
(315)
(272)
The net interest expense on financial assets and financial liabilities is to be analysed as follows:
In CHF million
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 net interest expense on financial assets and financial liabilities
2016
13
13
(134)
(29)
(5)
(168)
(155)
2015
10
10
(162)
(32)
(5)
(199)
(189)
182
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a
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fi
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a
d
i
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o
s
n
o
C
s
t
n
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m
e
t
a
t
s
l
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
s
n
o
c
e
h
t
o
t
s
e
t
o
N
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
2016
305
–
81
386
339
47
2015
296
(1)
106
401
387
14
In addition, the other comprehensive income includes negative current and deferred income taxes
of CHF 322 million (prior year: CHF 133 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
2016
(83)
(238)
(1)
–
(322)
2015
51
80
(1)
3
133
In the past, income taxes on foreign-currency related impairment losses on Group subsidiaries
were recognised under other comprehensive income. As a result of restructuring in 2016, these
impairment losses can no longer be asserted for tax purposes. The resultant effect on income taxes
in other comprehensive income in 2016 amounts to CHF 79 million.
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’s operating
subsidiaries in Switzerland. The applicable income tax rate remains unchanged from the prior year
at 20.9%.
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 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
2016
1,817
173
1,990
20.9%
416
1
(2)
(8)
5
6
(12)
(26)
6
–
386
2015
1,692
71
1,763
20.9%
368
(5)
19
2
(7)
7
–
(23)
36
4
401
19.4%
22.7%
183
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m
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a
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a
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a
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fi
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a
d
i
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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
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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
Income tax assets and liabilities
Current income 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 business combinations
Current income tax liabilities at 31 December, net
Thereof current income tax assets
Thereof current income tax liabilities
Thereof Switzerland
Thereof foreign countries
2016
125
305
5
(324)
(4)
–
107
(18)
125
105
2
2015
155
295
23
(345)
(5)
2
125
(21)
146
129
(4)
Deferred tax assets and liabilities
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
36
–
78
359
118
138
729
(568)
(326)
(76)
–
–
(99)
(1,069)
31.12.2016
Net
amount
Assets
Liabilities
31.12.2015
Net
amount
41
–
86
582
171
192
(523)
(335)
(59)
–
–
(91)
1,072
(1,008)
(532)
(326)
2
359
118
39
(340)
281
(621)
(435)
95
(482)
(335)
27
582
171
101
64
354
(290)
(121)
185
In 2016, 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
31.12.2015
Recognised
in income
statement
Recognised
in other
compre-
hensive
income
Change
in scope
of consoli-
Foreign
currency
translation
Balance at
dation adjustments 31.12.2016
(482)
(335)
27
582
171
101
64
(50)
13
(25)
15
(52)
18
(81)
–
–
–
(238)
–
(79)
(317)
–
(5)
–
–
–
–
(5)
–
1
–
–
(1)
(1)
(1)
(532)
(326)
2
359
118
39
(340)
184
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a
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a
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n
a
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fi
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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 2015, 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
31.12.2014
Recognised
in income
statement
Recognised
in other
compre-
hensive
income
Change
in scope
of consoli-
Foreign
currency
translation
Balance at
dation adjustments 31.12.2015
(420)
(341)
75
508
218
6
46
(59)
17
(45)
(9)
(31)
21
–
–
–
80
–
76
–
(20)
(2)
4
3
1
(106)
156
(14)
(3)
9
(1)
(1)
(19)
(3)
(18)
(482)
(335)
27
582
171
101
64
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 2016, various subsidiaries recognised deferred tax
assets on tax loss carry-forwards and other temporary differences totalling CHF 729 million (prior
year: CHF 1,072 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 10 million (prior year: CHF 202 million) were recognised by subsidiaries reporting a loss in 2015
or 2016. On the basis of the approved business plans of these subsidiaries, Swisscom considers it
probable that the tax loss carry-forwards and temporary differences can be offset against future
taxable profits.
Tax loss carry-forwards for which no deferred tax assets were recognised, 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
31.12.2016
31.12.2015
–
–
4
13
13
27
29
27
113
72
41
–
1
8
12
15
22
26
32
116
84
32
No deferred tax liabilities (prior year: CHF 6 million) were recognised on the undistributed earnings
of subsidiaries as of 31 December 2016. Temporary differences of subsidiaries and associates, on
which no deferred income taxes were recognised as of 31 December 2016, amounted to
CHF 1,390 million (prior year: CHF 931 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.
185
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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
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)
2016
1,604
2015
1,361
51,800,352
51,801,558
30.97
26.27
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 deposits
Total cash and cash equivalents
31.12.2016
31.12.2015
329
329
324
324
As in the prior year, Swisscom had no current term deposits outstanding in 2016.
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
186
Receivables from construction contracts
Other receivables
Allowances
Total other receivables, net
Total trade and other receivables
31.12.2016
31.12.2015
2,401
207
(183)
2,425
45
9
29
31
(7)
107
2,532
2,334
246
(184)
2,396
89
9
25
21
(5)
139
2,535
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 minimised due to the large number of customers. Risks are moni-
tored by country. The adequacy of valuation allowances is assessed on the basis of numerous
factors. Amongst these are ageing analyses of receivables, the current solvency of customers and
experience from the past.
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
Total allowance for receivables
Total trade receivables, net
31.12.2016
31.12.2015
1,833
744
31
2,608
(65)
(116)
(2)
(183)
2,425
1,836
715
29
2,580
(58)
(125)
(1)
(184)
2,396
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 valuation allowances are to be analysed as
follows:
In CHF million
Not due
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
31.12.2016
Allowance
Gross amount
31.12.2015
Allowance
1,881
366
92
101
168
2,608
(7)
(3)
(7)
(25)
(141)
(183)
1,855
364
73
94
194
2,580
(7)
(5)
(5)
(28)
(139)
(184)
The table below presents the changes in valuation allowances for trade and other receivables.
In CHF million
Balance at 31 December 2014
Additions to allowances
Write-off of irrecoverable receivables subject to allowance
Release of unused allowances
Additions from business combinations
Disposals from sales of subsidiaries
Foreign currency translation adjustments
Balance at 31 December 2015
Additions to allowances
Write-off of irrecoverable receivables subject to allowance
Release of unused allowances
Balance at 31 December 2016
Construction contracts
Trade
receivables
Other
receivables
195
84
(78)
(1)
1
(3)
(14)
184
95
(92)
(4)
183
15
1
–
(1)
–
(10)
–
5
3
(1)
–
7
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
2016
2015
79
(17)
62
(47)
15
29
(14)
36
88
(10)
78
(62)
16
25
(9)
52
In 2016, construction contracts generated net revenues of CHF 252 million (prior year: CHF 262 million).
187
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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
19 Other financial assets
In CHF million
Balance at 31 December 2014
Additions
Disposals
Additions from business combinations
Change in fair value
Foreign currency translation adjustments
Balance at 31 December 2015
Additions
Disposals
Change in fair value
Impairment losses
Foreign currency translation adjustments
Balance at 31 December 2016
Thereof other current financial assets
Thereof other non-current financial assets
Loans and receivables
Loans and
receivables
Available-
for-sale
Valued
at fair value
205
21
(33)
4
–
(1)
196
127
(24)
–
(29)
4
274
103
171
50
17
(19)
–
4
–
52
10
(8)
7
–
–
61
2
59
11
61
–
–
3
–
75
61
(61)
27
–
2
104
72
32
Total
266
99
(52)
4
7
(1)
323
198
(93)
34
(29)
6
439
177
262
As of 31 December 2016, term deposits totalled CHF 93 million (prior year: CHF 8 million). Financial
assets as of 31 December 2016 in an amount of CHF 152 million (prior year: CHF 149 million) were
not freely available. These assets serve as security for bank loans. As of 31 December 2016, loans to
associates of CHF 6 million (prior year: CHF 4 million) were recorded which are regarded as net
investments in associates. In 2016, impairment losses in an amount of CHF 29 million were
recognised on these loans. See Note 25.
Available-for-sale financial assets
Available-for-sale financial assets primarily include financial investments in equity instruments.
Shares not quoted on stock exchanges are recorded at cost if their fair value cannot be reliably
determined. As of 31 December 2016, the carrying amount of investments in shares recorded at
cost totalled CHF 41 million (prior year: CHF 37 million).
Financial assets measured at fair value
Financial assets measured at fair value through profit and loss include quoted debt securities with
a carrying amount of CHF 63 million (prior year: CHF 61 million) and a remaining term of less than
one year. These financial assets were not freely available since the assets serve as collateral to
secure off-balance liabilities arising from cross-border lease agreements. See Note 33. As at
31 December 2016, derivative financial instruments with a positive market value of CHF 41 million
were also recognised (prior year: CHF 14 million). Derivative financial instruments include forward
foreign currency transactions, foreign currency swaps and interest rate swaps. See Note 33.
188
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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
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
31.12.2016
31.12.2015
10
148
2
–
160
(6)
154
5
170
3
–
178
(4)
174
In 2016, inventory-related costs amounting to CHF 1,141 million (prior year: CHF 1,143 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
Contract fulfillment costs
Total other non-current non-financial assets
31.12.2016
31.12.2015
236
4
51
34
325
27
67
94
159
6
47
26
238
10
70
80
22 Non-current assets held for sale
On 31 December 2015 and 2016, there were no non-current assets held for sale. As of 31 December
2014, real-estate properties and investments in associates with a carrying amount of CHF 109 mil-
lion were recognised which were sold in 2015 at carrying value.
189
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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
23 Property, plant and equipment
Land, buildings
and leasehold
improvements
Technical
installations
Advances made
Other
and assets
assets under construction
In CHF million
Acquisition costs
Balance at 31 December 2014
Additions
Disposals
Additions from business combinations
Disposals from sales of subsidiaries
Adjustment to dismantlement and restoration costs
Other reclassifications
Foreign currency translation adjustments
Balance at 31 December 2015
Additions
Disposals
Adjustment to dismantlement and restoration costs
Other reclassifications
Foreign currency translation adjustments
2,785
4
(110)
–
–
–
92
(9)
2,762
7
(30)
–
5
(1)
26,248
1,495
(1,266)
–
(35)
(51)
124
(386)
26,129
1,423
(550)
(47)
108
(40)
3,621
252
(144)
1
(4)
(4)
116
–
3,838
242
(141)
(2)
82
–
Balance at 31 December 2016
2,743
27,023
4,019
Accumulated depreciation and impairment losses
Balance at 31 December 2014
Depreciation
Disposals
Disposals from sales of subsidiaries
Other reclassifications
Foreign currency translation adjustments
Balance at 31 December 2015
Depreciation
Disposals
Other reclassifications
Foreign currency translation adjustments
2,019
38
(59)
–
–
(2)
1,996
37
(13)
(1)
–
19,153
1,061
(1,266)
(34)
(7)
(191)
18,716
1,103
(550)
(1)
(21)
2,352
310
(136)
(3)
–
1
2,524
308
(136)
–
–
Balance at 31 December 2016
2,019
19,247
2,696
590
146
–
–
–
–
(372)
(2)
362
197
(1)
–
(204)
–
354
–
–
–
–
–
–
–
–
–
–
–
–
Total
33,244
1,897
(1,520)
1
(39)
(55)
(40)
(397)
33,091
1,869
(722)
(49)
(9)
(41)
34,139
23,524
1,409
(1,461)
(37)
(7)
(192)
23,236
1,448
(699)
(2)
(21)
23,962
10,177
9,855
9,720
Net carrying amount
Net carrying amount at 31 December 2016
Net carrying amount at 31 December 2015
Net carrying amount at 31 December 2014
724
766
766
7,776
7,413
7,095
1,323
1,314
1,269
354
362
590
In 2016, borrowing costs amounting to CHF 6 million were capitalised (prior year: CHF 8 million).
The average interest rate used for the capitalisation of borrowing costs was 1.7% (prior year: 1.9%).
As of 31 December 2016, the net carrying amount of buildings acquired under finance leases
amounted to CHF 382 million (prior year: CHF 406 million). See Note 28 for further information on
the adjustments to dismantling and restoration costs.
190
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
24 Goodwill and other intangible assets
In CHF million
Acquisition costs
Internally
generated
software
Goodwill
Purchased
Customer
software relationships
Brands
Other
intangible
assets
Balance at 31 December 2014
6,540
1,307
1,980
1,133
272
Additions
Disposals
Reclassifications
Additions from business combinations
Disposals from sales of subsidiaries
Foreign currency translation adjustments
–
–
–
255
(13)
(217)
176
(75)
95
–
(18)
(14)
166
(53)
21
32
(2)
–
–
–
50
(1)
(109)
(100)
Balance at 31 December 2015
6,565
1,471
2,035
1,082
Additions
Disposals
Reclassifications
Additions from business combinations
–
–
–
–
Foreign currency translation adjustments
(18)
138
(202)
71
–
(1)
187
(75)
31
–
(12)
–
(12)
–
22
(8)
Balance at 31 December 2016
6,547
1,477
2,166
1,084
Accumulated amortisation and impairment losses
Balance at 31 December 2014
1,557
Amortisation
Impairment losses
Disposals
Disposals from sales of subsidiaries
Reclassifications
Foreign currency translation adjustments
Balance at 31 December 2015
Amortisation
Impairment losses
Disposals
Reclassifications
–
–
–
–
–
(153)
1,404
–
–
–
–
Foreign currency translation adjustments
(13)
838
217
2
(75)
(18)
16
(10)
970
246
–
(200)
(2)
(1)
1,499
228
–
(47)
(2)
(9)
(83)
1,586
234
2
(75)
1
(10)
905
93
–
–
(1)
–
(85)
912
69
–
(12)
–
(8)
–
–
–
4
–
(26)
250
–
–
–
–
(2)
248
203
25
–
–
–
–
(20)
208
25
–
–
–
(2)
Total
12,218
547
(163)
40
357
(49)
(481)
986
205
(35)
(76)
16
(15)
(15)
1,066
12,469
247
(54)
(93)
–
(1)
572
(343)
9
22
(42)
1,165
12,687
312
111
1
(34)
(14)
–
(9)
367
115
6
(48)
3
(2)
5,314
674
3
(156)
(35)
7
(360)
5,447
689
8
(335)
2
(36)
Balance at 31 December 2016
1,391
1,013
1,738
961
231
441
5,775
Net carrying amount
Net carrying amount at 31 December 2016
Net carrying amount at 31 December 2015
Net carrying amount at 31 December 2014
5,156
5,161
4,983
464
501
469
428
449
481
123
170
228
17
42
69
724
699
674
6,912
7,022
6,904
As of 31 December 2016, other intangible assets included advance payments made and uncom-
pleted development projects of CHF 215 million (prior year: CHF 154 million). Apart from goodwill,
there are no intangible assets with indefinite useful lives. As of 31 December 2016, accumulated
impairment losses on goodwill of CHF 1,391 million were recognised. Goodwill arising from invest-
ments in associates is included as part of the investments in associates.
191
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fi
d
e
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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 activities.
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
Enterprise Customers Swisscom Switzerland
Fastweb
Other cash-generating units
Total goodwill
31.12.2016
31.12.2015
2,620
2,620
662
907
529
438
662
907
533
439
5,156
5,161
Goodwill was tested for impairment in the fourth quarter of 2016 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
estimated 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 an assumed long-term constant growth rate. The
growth rates applied are those customarily assumed for the country or market. The key assumptions
underlying the calculations are as follows:
Cash-generating unit
Residential Customers Swisscom Switzerland
WACC
pre-tax
6.66%
Small and Medium-Sized Enterprises Swisscom Switzerland
6.66%
Enterprise Customers Swisscom Switzerland
Fastweb
6.64%
9.63%
5.25%
5.25%
5.25%
7.38%
WACC
pre-tax
6.57%
6.61%
6.61%
0%
0%
0%
1.0%
10.30%
2016
WACC
Long-term
post-tax growth rate
2015
WACC
Long-term
post-tax growth rate
5.20%
5.20%
5.20%
7.50%
0%
0%
0%
1.0%
Other cash-generating units
7.3–12.2% 6.3–9.5%
0–1.0% 7.1–12.1% 6.3–9.5%
0–1.0%
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.
Residential Customers, Small- and Medium-Sized Enterprises and Enterprise Customers –
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. As of the measurement 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.
192
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d
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a
d
i
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o
s
n
o
C
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
e
h
t
o
t
s
e
t
o
N
Fastweb
The impairment test of Fastweb was undertaken in the fourth quarter of 2016. 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 2017 to 2021. 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 detailed planning period up to 2021. In the prior year, an average annual growth in revenue
In the business plan, an average annual growth in revenue of 6.25% is expected for the
Projected EBITDA margin
(EBITDA as % of net revenue)
of 4.2% had been expected for the detailed planning period 2016–2020.
Normalised EBITDA margin in the terminal value amounted to 34% (prior year: 40%).
Projected capital expenditure rate
(capex as % of net revenue)
Normalised capital expenditure as a percentage of net revenue in the terminal value
came to 20% (prior year: 23%).
Post-tax discount rate
Long-term growth rate
The post-tax discount rate is 7.38% (prior year: 7.50%) and the related pre-tax discount rate
is 9.63% (prior year: 10.30%). 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, however, a floor interest rate of 3%
is applied. A premium for the country risk of Italy is then added.
The normalised free cash flows in the terminal value were capitalised with a perpetual 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 recoverable amount
exceeded the net carrying amount by EUR 710 million (CHF 768 million).
The following changes in material assumptions lead to a situation where the value in use equates
to the net carrying amount:
Average annual growth rate through 2021 with
the same EBITDA margin as in the business plan
Normalised EBITDA margin
Normalised capital expenditure rate
Post-tax discount rate
Long-term growth rate
25 Investments in associates
In CHF million
Balance at 1 January
Additions
Disposals
Dividends
Share of net results
Share of other comprehensive income
Foreign currency translation adjustments
Balance at 31 December
193
s
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n
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c
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h
t
o
t
s
e
t
o
N
Assumptions
Sensitivity
6.3%
34%
20%
7.38%
1.0%
4.3%
31%
23%
8.84%
–0.8%
2016
223
11
(41)
(17)
26
(7)
(2)
193
2015
182
50
–
(22)
23
–
(10)
223
The participations which are reflected in the consolidated financial statements of Swisscom using
the equity method of accounting are set out in Note 40. Dividend income of CHF 17 million (prior
year: CHF 22 million) is attributable mainly to the dividends distributed by Belgacom International
Carrier Services. In 2016, an aggregate negative amount of CHF 3 million was recognised as part of
the attributable share of results in associates. Included in this amount are impairment losses of
CHF 29 million on loans to associates which are regarded as a net investment in associates. See
Note 19.
In December 2016, Swisscom disposed of its share in Metroweb S.p.A. for a purchase price of
EUR 80 million (CHF 86 million) thus giving rise to a gain on disposal of CHF 41 million which was
recognised as other finance income.
Additions in 2015 comprise investments by Swisscom in finnova ltd bankware (banking software),
siroop Ltd (online marketplace), Admeira Ltd (previously known as Ringier Publishing AG, advertising
marketing) and Managed Mobility AG (fleet management and fleet optimisation).
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
194
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m
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l
a
i
c
n
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fi
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t
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e
t
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t
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d
i
l
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s
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o
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e
h
t
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t
s
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t
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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
2016
2015
2,453
(2,371)
82
34
1,178
202
(899)
(113)
368
2,575
(2,418)
157
104
1,073
933
(964)
(429)
613
31.12.2016
31.12.2015
208
645
251
16
1
1
3
1,125
545
5,495
487
492
33
62
257
7,371
8,496
746
45
350
16
2
6
30
1,195
610
5,385
581
510
13
55
244
7,398
8,593
Bank loans and credit limit
In CHF million
Bank loans in CHF variable interest-bearing
Bank loans in EUR 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 EUR fixed interest-bearing
Bank loans in USD fixed interest-bearing
Total bank loans
Due within
Par value
in CHF
31.12.2016
31.12.2015
Carrying amount
2016
2016
2017
2017
2020
2020
2028
130
542
70
64
258
215
101
–
–
70
64
258
219
142
753
130
542
–
–
326
219
139
1,356
During 2015 and 2016, Swisscom took up short-term bank loans in CHF and EUR on a weekly and
monthly basis. As of 31 December 2016, there were, as a result, short-term bank loans totalling
CHF 70 million and EUR 60 million outstanding (prior year: CHF 130 million and EUR 500 million).
In the prior year, Swisscom had taken up a bank loan of EUR 200 million with a term of until 2020.
This interest-bearing EUR-denominated bank loan was transformed into variable-rate CHF inter-
est-bearing financing through a foreign-currency swap and was designated as a fair value hedge for
hedge accounting purposes. As of 31 December 2016, no transaction costs were recognised in con-
nection with the bank loans, as in the prior year. The effective interest rate of the CHF denominated
bank loans was –0.20%, in EUR –0.16% and in USD 4.62%. A bank loan of EUR 240 million
(CHF 258 million) was designated for hedge accounting for net investments in foreign sharehold-
ings. 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 exer-
cise control over Swisscom.
Swisscom has two confirmed lines of credit from banks each amounting to CHF 1,000 million
maturing in 2020 and 2022, respectively. As of 31 December 2016, none of these lines of credit had
been drawn down, as in the prior year.
Debenture bonds
In CHF million
Debenture bond in CHF
Debenture bond in CHF
Debenture bond in EUR
Debenture bond in EUR
Debenture bond in CHF
Debenture bond in CHF
Debenture bond in CHF
Debenture bond in EUR
Debenture bond in CHF
Debenture bond in CHF
Debenture bond in CHF
Debenture bond in CHF
Debenture bond in CHF
Debenture bond in CHF
Total debenture bonds
Maturity years
2007–2017
2009–2018
2013–2020
2014–2021
2010–2022
2015–2023
2012–2024
2015–2025
2014–2026
2016–2027
2016–2028
2014–2029
2016–2032
2015–2035
Par value
in CHF
600
1,425
537
537
500
250
500
537
200
200
200
160
300
150
Nominal
interest rate
3.75%
3.25%
2.00%
1.88%
2.63%
0.25%
1.75%
1.75%
1.50%
0.38%
0.38%
1.50%
0.13%
1.00%
Carrying amount
31.12.2016
31.12.2015
610
1,434
610
1,432
535
536
500
253
504
554
202
198
202
161
299
152
539
540
499
251
504
540
202
–
–
161
–
152
6,140
5,430
195
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o
N
In 2016, Swisscom issued three debenture bonds with an aggregate nominal value of CHF 700 mil-
lion: of this amount, CHF 200 million bears a coupon rate of 0.375% maturing in 2028, CHF 300 mil-
lion bearing interest of 0.125% maturing in 2032 as well as an issue of CHF 200 with coupon rate of
0.375% maturing in 2027. These debenture bonds issues were taken up to repay outstanding debts.
In the prior year, Swisscom took up debenture bonds totalling CHF 400 million. Related to this,
interest rate swaps were entered into for a nominal amount of CHF 425 million in order to hedge
the interest rate risk on financing received and were designated as fair value hedges for hedge-ac-
counting purposes.
In 2015, Swisscom had taken up a debenture bond totalling EUR 500 million (CHF 542 million)
through the intermediary of Lunar Funding V. This interest-bearing financing of EUR 500 million
was swapped into variable-rate financing in CHF by means of a foreign-currency swap and desig-
nated as a fair value hedge for hedge-accounting purposes. Furthermore, Swisscom repaid a deben-
ture bond amounting to CHF 500 million upon maturity in the prior year.
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 CHF domestic
Total private placements
Due within
Par value
in CHF
31.12.2016
31.12.2015
Carrying amount
2016
2017
2018
2019
2031
200
250
72
278
150
–
249
70
269
150
738
200
247
69
265
150
931
In the first quarter of 2016, a maturing private placement totalling CHF 150 million was extended
by a further 15 years at a fixed interest rate of 0.56%. As in the prior year, no transaction costs were
recorded as of 31 December 2016 in connection with the private placements. The effective interest
rate on the private placements is 1.2%. The Swiss-franc-denominated private placements with a
carrying value of CHF 588 million maturing in 2017 to 2019 may become due for immediate repay-
ment if the shareholding of the Swiss Confederation in the capital 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 2016, the deferred gains totalled CHF 158 million (prior year: CHF 163 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 6.0%.
196
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o
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o
C
s
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e
t
a
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a
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fi
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a
d
i
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o
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n
o
c
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o
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s
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N
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
31.12.2016
31.12.2015
45
44
38
34
33
984
1,178
(670)
508
16
492
46
40
39
36
35
1,060
1,256
(730)
526
16
510
The future payments of the liabilities arising under finance leases, expressed in terms of their
present value, as of 31 December 2015 and 2016 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
31.12.2016
31.12.2015
16
16
11
7
6
452
508
16
11
10
7
6
476
526
In addition, operating lease arrangements exist for miscellaneous real estate with terms of 1 to
25 years. See Note 35. In 2016, conditional rental payments of CHF 2 million were recorded as rental
expense (prior year: CHF 3 million).
Other non-interest-bearing financial liabilities
On 31 December 2016, the carrying value of other non-interest-bearing financial liabilities amounts
to CHF 260 million (prior year: CHF 274 million). Included therein is the carrying value of a financial
liability in the amount of CHF 233 million (prior year: CHF 230 million) arising from the acquisition
of search.ch AG in 2015. See note 5.
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 payables
Total other payables
Total trade and other payables
31.12.2016
31.12.2015
1,192
405
1,597
32
18
14
235
299
1,058
428
1,486
23
23
9
227
282
1,896
1,768
197
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o
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C
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a
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a
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a
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a
d
i
l
o
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n
o
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e
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t
o
N
28 Provisions
In CHF million
Balance at 31 December 2014
Additions to provisions
Present-value adjustments
Release of unused provisions
Use of provisions
Additions from business combinations
Disposals from sales of subsidiaries
Foreign currency translation adjustments
Balance at 31 December 2015
Additions to provisions
Present-value adjustments
Release of unused provisions
Use of provisions
Balance at 31 December 2016
Thereof current provisions
Thereof non-current provisions
Termination
benefits
Dismantlement
and restoration
costs
Regulatory
and competition
law proceedings
29
70
–
(3)
(8)
–
–
–
88
50
–
(30)
(29)
79
74
5
646
–
35
(86)
(2)
–
–
–
593
5
56
(105)
(7)
542
–
542
106
208
–
–
(4)
–
–
–
310
26
–
–
(186)
150
10
140
Other
146
23
2
(7)
(14)
2
(2)
(2)
148
68
2
(11)
(16)
191
98
93
Total
927
301
37
(96)
(28)
2
(2)
(2)
1,139
149
58
(146)
(238)
962
182
780
Provisions for employee reduction programme
In the fourth quarter of 2016, Swisscom recognised a provision for personnel reduction costs of
CHF 50 million. Swisscom operates in a highly competitive market characterised by radical transfor-
mations, fierce rivalry and pricing pressures. Swisscom has set itself the goal of reducing its cost
basis from 2015 through to 2020 by over CHF 300 million. This is to be achieved through organisa-
tional changes, job reductions, optimisation of processes and the migration to All-IP technology.
Resources will thus be freed up in order to continue to invest in infrastructure, new fields of activity
and to exploit opportunities resulting from digitalisation. The measures planned will result in the
elimination of positions in Switzerland and in employees participating in the social plan.
Provisions for dismantling and restoration costs
The provisions for dismantling and restoration costs relate to the dismantling of telecommunica-
tion 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
estimates of future anticipated dismantling costs and are discounted using an average interest rate
of 1.18% (prior year: 1.48%). The effect of using different interest rates amounted to CHF 47 million
(prior year: CHF 24 million). In 2016, the cost index used for computing the dismantling costs was
lowered, the impact of which aggregated CHF 103 million. In 2016, as a result of reassessments,
adjustments totalling CHF 49 million (prior year: CHF 55 million) were recorded under property,
plant and equipment and CHF 4 million (prior year: CHF 7 million) which was recognised in the
income statement. The non-current portion of the provisions is expected to be settled after 2020.
The level of provisions is determined to a substantial degree by the level of estimated future dis-
mantling and restoration costs as well as the timing of the dismantling. An increase of estimated
costs by 10% would result in an increase of CHF 51 million in the amount of the provision. A shift in
the timing of dismantling by a further ten years would lead to a reduction in the provision by
CHF 74 million.
198
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C
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e
t
a
t
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a
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fi
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a
d
i
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o
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n
o
c
e
h
t
o
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s
e
t
o
N
Provisions for regulatory and competition-law 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.
The determination of the prices for access services during 2013 to 2016 is still pending. In addition,
the Federal Competition Commission (Weko) is conducting various proceedings against Swisscom.
In accordance with the Federal Anti-Trust Law, Weko may impose penalties against Swisscom in the
event that the competition law is found to have been violated. The level of the penalty is depen-
dent on the duration and severity as well as the nature of the violation. It may be as much as 10%
of the revenues which have been generated by the company in question in the last three business
years on the relevant markets in Switzerland. Claims under civil law against Swisscom were asserted
which might prevail in the event that a legally enforceable finding as to market abuse is reached.
Any applicable payments will depend upon the date on which legally-binding decrees and decisions
are issued.
In 2009, Weko levied a penalty totalling CHF 220 million on Swisscom for abuse of a market-domi-
nant position in the case of ADSL services during the period through to the end of 2007. Swisscom
has appealed against the ruling to the Federal Administrative Court. In September 2015, the Fed-
eral Administrative Court in principle upheld the Weko decision and reduced the penalty imposed
on Swisscom by Weko from CHF 220 million to CHF 186 million. As a result of the decision, Swisscom
recognised a provision of CHF 186 million in the third quarter of 2015. Swisscom does not consider
the penalty to be justified and has lodged an appeal to the Federal Court. At the beginning of 2016,
Swisscom paid the penalty of CHF 186 million as no suspensive effect was granted.
On the basis of legal opinions, provisions for regulatory and competition-law proceedings were
raised and then released in the third and fourth quarters of 2015 which are presented on a net basis
for procedural reasons.
Other provisions
Other provisions include provisions for environmental, contractual and tax risks. The non-current
portion of the provisions will most likely be settled in 2017 and 2018.
29 Contingent liabilities and contingent assets
Regulatory and competition-law 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.
The determination of the prices for access services during 2013 to 2016 is still pending. In addition,
the Federal Competition Commission (Weko) is conducting various proceedings against Swisscom.
In accordance with the Federal Anti-Trust Law, Weko may impose penalties against Swisscom in the
event that the competition law is found to have been violated. The amount of the penalty is depen-
dent on the duration and severity as well as the nature of the violation. It may be as much as 10%
of the revenues which have been generated by the company in question in the last three business
years on the relevant markets in Switzerland. In the event of a legally enforceable finding as to
market abuse, claims under civil law may be asserted against Swisscom.
In April 2013, Weko initiated an investigation against Swisscom pursuant to the Anti-Trust Law in the
area of broadcasting live-sport events on pay TV. In May 2016, Weko decreed a penalty of CHF 72 mil-
lion on Swisscom as part of these proceedings. Swisscom rejects the accusations and is of the opinion
that it has conducted itself in a lawful manner in the marketing of sports contents. In addition,
claims under civil law against Swisscom were asserted which might prevail in the event that a
legally enforceable finding as to market abuse is reached. Swisscom has challenged the penalty
imposed in the Federal Administrative Court and from a current perspective, considers the levying of
199
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a
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n
a
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fi
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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
sanctions in the court of last appeal as not probable. For this reason, it has established no provision
in the consolidated financial statements as of and for the year ended 31 December 2016, as in the
prior year.
In November 2015, in its investigation as to the invitation to tender for the corporate network of the
Swiss Post in 2008, Weko reached the conclusion that Swisscom has a market-dominant position on
the market for broadband access for large corporate clients. In this tender, Swisscom is accused of
having set the wholesale prices charged to competitors at such a high level that the latter could not
compete with the end-customer offer made by Swisscom. As a result of this unlawful conduct,
Weko ruled a direct penalty of CHF 8 million. Swisscom has challenged the ruling in the Federal
Administrative Court. From a current perspective, Swisscom considers the levying of sanctions in
the court of last appeal as not probable and thus has established no provision in the consolidated
financial statements as of and for the year ended 31 December 2016.
Contingent assets from litigation
In 2015, the Italian competition authorities (AGCM) found Telecom Italia guilty of unlawful conduct
as a market-dominant company and imposed a penalty of EUR 104 million. Related to the same
matter, Fastweb has claimed damages from Telecom Italia and initiated legal action in connection
therewith. In the fourth quarter of 2015, Fastweb and Telecom Italia reached an out-of-court settle-
ment which encompassed the contested receivables of both parties due from each other. In the
second quarter of 2016, Telecom Italia made a payment of EUR 55 million (CHF 60 million). As at
31 December 2016, there continued to exist for Fastweb, as a result of the settlement, an uncertain
receivable to which conditions are attached. Disclosure of the amount of the receivable is waived for
contractual and procedural reasons.
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
31.12.2016
31.12.2015
440
94
30
86
650
158
174
332
436
97
32
128
693
163
196
359
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 over the lease term to
the income statement under other income. See Notes 13 and 26.
200
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
31 Additional information concerning equity
Share capital and treasury shares
As of 31 December 2016, 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 3 million (prior year:
CHF 2 million) were allocated for share-based compensation plans. See Note 11.
The holdings of treasury shares have changed as follows:
Balance at 31 December 2014
Purchases on the market
Allocated for share-based compensation
Balance at 31 December 2015
Purchases on the market
Allocated for share-based compensation
Balance at 31 December 2016
Number
149
3,730
(3,879)
–
8,000
(6,486)
1,514
Average price
in CHF
In CHF million
525
567
563
–
520
520
–
–
2
(2)
–
4
(3)
1
As of 31 December 2016, Swisscom had 1,514 treasury shares in its portfolio (prior year: none). As a
result, the balance of shares outstanding as at 31 December 2016 totalled 51,800,429 (prior year:
51,801,943 shares).
Other reserves
In CHF million
Balance at 31 December 2014
Foreign currency translation adjustments of foreign subsidiaries
Change in fair value
Gains and losses transferred to income statement
Income tax expense
Balance at 31 December 2015
Foreign currency translation adjustments of foreign subsidiaries
Change in fair value
Gains and losses transferred to income statement
Associates
Income tax expense
Balance at 31 December 2016
Hedging
reserve
Fair value
reserve
(7)
–
(12)
11
2
(6)
–
8
2
–
(1)
3
7
–
4
(6)
–
5
–
7
(3)
–
–
9
Foreign
currency
translation
adjustments
(1,590)
(194)
–
–
51
(1,733)
(21)
–
5
(2)
(83)
Total
other
reserves
(1,590)
(194)
(8)
5
53
(1,734)
(21)
15
4
(2)
(84)
(1,834)
(1,822)
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 include the differences from the foreign currency translation of the financial statements of
subsidiaries and associates from the functional currency into Swiss francs. On 31 December 2016,
cumulative foreign currency translation losses before taxes of Fastweb amounted to CHF 2,162 mil-
lion (prior year: CHF 2,143 million).
201
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
Other comprehensive income in 2016 may be analysed as follows:
Retained
earnings
Hedging
reserve
Foreign
currency
translation
reserve adjustments
Fair value
Equity
holders of
Swisscom
Non-
controlling
interests
2016, in CHF million
Actuarial gains and losses from
defined benefit pension plans
Associates
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
Gains and losses transferred to income statement
Associates
Income tax expense
Items that are or may be reclassified subsequently
to income statement, net of tax
Total other comprehensive income
919
–
–
–
–
–
8
2
–
(1)
9
9
–
–
–
–
–
7
(3)
–
–
4
4
–
–
–
–
(21)
–
5
(2)
(83)
(101)
(101)
1,162
(5)
(238)
919
(21)
15
4
(2)
(84)
(88)
831
–
–
–
–
–
–
–
–
–
–
Total
other
compre-
hensive
income
1,162
(5)
(238)
919
(21)
15
4
(2)
(84)
(88)
831
Other comprehensive income in 2015 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
2015, 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
Gains and losses 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
(313)
–
–
–
–
(12)
11
2
1
1
–
–
–
–
4
(6)
–
(2)
(2)
–
–
–
(393)
80
(313)
(194)
(194)
–
–
51
(8)
5
53
(143)
(143)
(144)
(457)
–
–
–
–
–
–
–
–
–
(393)
80
(313)
(194)
(8)
5
53
(144)
(457)
1,162
(5)
(238)
919
–
–
–
–
–
–
(393)
80
(313)
–
–
–
–
–
202
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
32 Dividend distributions
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 consol-
idated financial statements. At 31 December 2016, Swisscom Ltd’s distributable reserves amounted
to CHF 6,193 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 2016 financial year is
not recorded as a liability in these consolidated financial statements. Treasury shares are not
entitled to a dividend.
Swisscom paid the following dividends in 2015 and 2016:
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
2016
51.800
22.00
1,140
2015
51.802
22.00
1,140
The dividend payments for the 2014 and 2015 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 3 April 2017 the payment of an ordinary dividend of CHF 22 per share in respect of the
2016 financial year. This equates to a total dividend distribution of CHF 1,140 million. The dividend
payment is foreseen on 7 April 2017.
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 movements in foreign exchange rates, interest rates
as well as the creditworthiness and ability of counterparties to meet their payment obligations.
A further risk arises from the ability to ensure adequate liquidity. Financial risk management is
conducted in accordance with established guidelines with the aim of limiting potentially adverse
effects on the financial situation of Swisscom. These guidelines contain, in particular, 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
cooperation 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 which can impact the Group’s financial results and
consolidated equity. Foreign exchange risks impacting cash flows (transaction risks) are partially
hedged by financial instruments and designated for hedge accounting. In addition, foreign
exchange risks with an impact on equity (translation risks) are partially hedged through financial
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 1,240 million (CHF 1,332 million) which were designated for hedge
accounting for net investments in foreign shareholdings.
203
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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 currency risks and hedging contracts for foreign currencies of financial instruments as of
31 December 2016 are to be analysed as follows:
In CHF million
31.12.2016
Cash and cash equivalents
Trade and other receivables
Other financial assets
Financial liabilities
Trade and other payables
Net exposure at carrying amounts
Net exposure to forecasted cash flows in the next 12 months
Net exposure before hedges
Forward currency contracts
Foreign currency swaps
Currency swaps
Hedges
Net exposure
EUR
USD
Other
55
8
93
(2,161)
(66)
(2,071)
89
(1,982)
–
97
752
849
(1,133)
3
10
244
(148)
(68)
41
(470)
(429)
(4)
406
–
402
(27)
–
12
2
–
(12)
2
–
2
–
–
–
–
2
The currency risks and hedging contracts for foreign currencies of financial instruments as of
31 December 2015 are to be analysed as follows:
In CHF million
31.12.2015
Cash and cash equivalents
Trade and other receivables
Other financial assets
Financial liabilities
Trade and other payables
Net exposure at carrying amounts
Net exposure to forecasted cash flows in the next 12 months
Net exposure before hedges
Forward currency contracts
Foreign currency swaps
Currency swaps
Hedges
Net exposure
EUR
USD
Other
50
9
17
(2,706)
(48)
(2,678)
50
(2,628)
–
567
759
1,326
(1,302)
3
3
229
(143)
(59)
33
(412)
(379)
(3)
351
–
348
(31)
1
4
1
–
(26)
(20)
–
(20)
–
–
–
–
(20)
204
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
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
31.12.2016
31.12.2015
Income impact on balance sheet items
EUR volatility of 7.47% (previous year: 7.67%)
USD volatility of 10.35% (previous year: 10.41%)
Hedges for balance sheet items
EUR volatility of 7.47% (previous year: 7.67%)
USD volatility of 10.35% (previous year: 10.41%)
Planned cash flows
EUR volatility of 7.47% (previous year: 7.67%)
USD volatility of 10.35% (previous year: 10.41%)
Hedges for planned cash flows
EUR volatility of 7.47% (previous year: 7.67%)
USD volatility of 10.35% (previous year: 10.41%)
155
(4)
(63)
7
(7)
49
–
(49)
205
(3)
(101)
6
(4)
43
–
(43)
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 deploys swaps to hedge its interest rate risk.
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
31.12.2016
31.12.2015
7,331
765
8,096
(117)
(489)
(606)
7,490
276
–
1,177
1,453
7,214
–
(1,177)
6,037
7,490
6,509
1,705
8,214
(138)
(412)
(550)
7,664
1,293
(350)
984
1,927
6,371
350
(984)
5,737
7,664
205
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
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
31.12.2016
Variable financing
Interest rate swaps
Cash flow sensitivity, net
31.12.2015
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
(3)
(12)
(15)
(13)
(6)
(19)
3
12
15
13
6
19
–
–
–
–
2
2
–
–
–
–
(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 value-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.
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. In order to further limit credit risks in the case of derivative trades, Swisscom
has concluded collateral agreements with several counterparties. The carrying amount of financial
assets exposed to credit risk is to be analysed as follows:
In CHF million
Cash and cash equivalents
Trade and other receivables
Loans and receivables
Derivative financial instruments
Other assets valued at fair value
Note
31.12.2016
31.12.2015
17
18
19
19
19
329
2,532
274
41
63
324
2,535
196
14
61
Total carrying amount of financial assets
3,239
3,130
206
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
The carrying amounts of cash and cash equivalents and other financial assets subject to credit risk
(excluding trade and other receivables) and the related Standard & Poor’s ratings of the counter-
parties are to be summarised as follows:
In CHF million
31.12.2016
31.12.2015
AAA
AA+
AA
AA–
A+
A
A–
BBB+
BBB
BBB–
Without rating
Total
14
193
6
152
121
116
6
42
3
12
42
707
12
163
7
149
11
148
1
43
2
9
50
595
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 two confirmed lines of credit from banks each of CHF 1,000 million
maturing in 2020 and 2022, respectively. As of 31 December 2016, none of these lines of credit had
been drawn down, as in the prior year.
The contractual maturities of financial liabilities including estimated interest payments as of
31 December 2016 are as follows:
In CHF million
31.12.2016
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
753
826
6,140
6,658
738
508
34
260
765
1,178
34
260
207
731
253
45
1
3
1,896
1,896
1,875
73
367
1,533
1,248
73
44
23
238
10
281
105
1
2
11
63
108
4
4
11
179
3,146
158
984
9
17
–
89
10,392
11,725
3,119
1,998
2,026
4,582
207
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
The contractual maturities of financial liabilities including estimated interest payments as of
31 December 2015 are as follows:
In CHF million
31.12.2015
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
1,356
5,430
931
526
15
274
1,439
6,080
954
1,256
15
319
747
129
352
46
2
30
1,768
1,768
1,742
74
729
252
40
7
24
10
437
2,194
350
110
–
248
16
181
3,028
–
1,060
6
17
–
61
240
22
16
47
155
10,361
12,071
3,070
1,152
3,402
4,447
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 com-
puted 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
maturing future payments discounted at market interest rates. The fair value of publicly traded
interest-bearing financial assets and 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
investments held for sale is based on quoted stock exchange prices as of the balance sheet date.
Interest rate swaps and currency swaps are discounted at market 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.
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.
208
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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
Asset/liability valuation categories and fair value of financial instruments
The carrying amounts and fair values of financial assets and financial liabilities with their corres-
ponding valuation categories are summarised in the following table. Not included therein are cash
and cash equivalents, trade receivables and payables as well as miscellaneous receivables and
payables whose carrying amount corresponds to a reasonable estimation of their fair value.
In CHF million
31.12.2016
Derivative financial instruments
Other assets valued at fair value
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
In CHF million
31.12.2015
Derivative financial instruments
Other assets valued at fair value
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
–
–
–
–
274
274
–
–
–
–
–
–
–
–
–
–
–
20
20
–
–
–
–
–
–
–
–
–
–
–
41
63
–
104
–
–
63
63
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
753
–
63
15
78
–
–
–
–
–
6,140
6,517
738
508
34
260
–
–
–
–
41
–
–
41
290
290
63
63
782
–
758
1,049
34
260
8,433
6,517
2,883
–
–
5
5
–
–
–
–
–
–
–
–
–
–
–
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
–
–
–
–
196
196
–
–
–
–
–
–
–
–
–
–
–
15
15
–
–
–
–
–
–
–
–
–
–
–
14
61
–
75
–
–
61
61
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,356
5,430
931
526
15
274
–
61
–
61
–
–
–
–
–
5,867
–
–
–
–
14
–
–
14
239
239
61
61
1,391
–
957
1,037
15
274
8,532
5,867
3,674
–
–
15
15
–
–
–
–
–
–
–
–
–
–
–
In addition, as of 31 December 2016, there were available-for-sale financial assets with a carrying
amount of CHF 41 million (prior year: CHF 37 million) which are valued at acquisition cost.
209
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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
Level 3 financial instruments developed as follows in 2015 and 2016:
In CHF million
Balance at 31 December 2014
Disposals
Balance at 31 December 2015
Disposals
Balance at 31 December 2016
Available-for-sale financial assets
18
(3)
15
(10)
5
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 2015 and 2016, there were no reclassifi-
cations between the various levels.
Asset/liability valuation categories and results of financial instruments
The results for each asset/liability valuation category are to be analysed as follows:
In CHF million
31.12.2016
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
In CHF million
31.12.2015
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
210
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
Loans and
receivables
Available-
At fair value
through
for-sale profit or loss
Financial
Hedging
liabilities transactions
13
–
–
–
13
–
–
–
13
–
–
–
–
–
7
(3)
4
4
(4)
(11)
(11)
–
(26)
–
–
–
(163)
–
10
–
(153)
–
–
–
(26)
(153)
(1)
–
–
(1)
(2)
8
2
10
8
Loans and
receivables
Available-
At fair value
through
for-sale profit or loss
Hedging
Financial
liabilities transactions
10
–
(20)
–
(10)
–
–
–
(10)
–
–
–
–
–
4
(6)
(2)
(2)
(4)
(13)
(39)
–
(56)
–
–
–
(194)
–
19
–
(175)
–
–
–
(56)
(175)
(1)
–
–
(10)
(11)
(12)
11
(1)
(12)
In addition, in 2016, valuation allowances for trade and other receivables amounting to CHF 94 mil-
lion (prior year: CHF 81 million) were recorded under other operating expenses. Furthermore,
impairment losses of CHF 29 million on loans to associates were reflected in the attributable share
of results of associates. These loans are recognised as net investments in associates.
Derivative financial instruments
At 31 December 2015 and 2016, 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
31.12.2016 31.12.2015 31.12.2016 31.12.2015 31.12.2016 31.12.2015
1,177
235
636
984
617
996
2,048
2,597
32
4
5
41
9
32
12
1
1
14
2
12
(2)
–
(61)
(63)
(1)
(62)
(3)
(5)
(53)
(61)
(6)
(55)
Fair value hedges
In CHF million
Interest rate swaps in CHF
Currency swaps in EUR
Total fair value hedges
Contract value
Positive fair value
Negative fair value
31.12.2016 31.12.2015 31.12.2016 31.12.2015 31.12.2016 31.12.2015
425
752
1,177
225
759
984
3
29
32
1
11
12
(2)
–
(2)
–
(3)
(3)
In 2016, Swisscom entered into interest rate swaps to hedge the interest-rate risk of CHF-denomi-
nated interest-bearing financing totalling CHF 200 million. In the prior year, Swisscom had entered
into interest rate swaps to hedge the interest rate risk of CHF-denominated interest-bearing financ-
ing amounting to CHF 225 million. At 31 December 2016, these interest rate swaps had positive fair
values of CHF 3 million and negative fair values of CHF 2 million (prior year: positive fair values of
CHF 1 million). Furthermore, in 2015, Swisscom had concluded currency swaps totalling EUR 700 mil-
lion to hedge the foreign currency and interest rate risks of interest-bearing financing in EUR. As at
31 December 2016, these currency swaps had positive fair values of CHF 29 million (prior year:
positive fair values of CHF 11 million and negative fair values of CHF 3 million).
Cash flow hedges
In CHF million
Currency swaps in USD
Interest rate swaps in CHF
Total cash flow hedges
Contract value
Positive fair value
Negative fair value
31.12.2016 31.12.2015 31.12.2016 31.12.2015 31.12.2016 31.12.2015
235
–
235
267
350
617
4
–
4
1
–
1
–
–
–
–
(5)
(5)
As of 31 December 2016, derivative financial instruments included currency swaps of USD 230 mil-
lion (CHF 235 million) which serve to hedge future purchases of goods and services in the respec-
tive currencies. In the prior year, currency swaps of USD 268 were recorded for this purpose. These
hedging transactions were designated for hedge-accounting purposes. The hedges disclose a posi-
tive fair value of CHF 4 million (prior year: positive market value of CHF 1 million). For these desig-
nated hedging instruments, an amount of CHF 4 million was recognised in the hedging reserve as
part of consolidated equity (prior year: CHF zero).
In the prior year, interest rate swaps totalling CHF 350 million hedging the interest-rate risk of CHF-
denominated variable-interest private placements were designated as cash flow hedges for hedge -
accounting purposes. As of 31 December 2015, these interest rate swaps were recognised with negative
fair values of CHF 5 million. An amount of CHF 6 million was recognised for these hedging instruments
in the hedging reserve as part of consolidated equity as at 31 December 2015.
211
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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
Other derivative financial instruments
In CHF million
Interest rate swaps in CHF
Currency swaps in USD
Currency swaps in EUR
Currency forward contracts in USD
Total other derivative financial instruments
Contract value
Positive fair value
Negative fair value
31.12.2016 31.12.2015 31.12.2016 31.12.2015 31.12.2016 31.12.2015
200
335
97
4
636
200
226
567
3
996
–
5
–
–
5
–
1
–
–
1
(60)
(1)
(53)
–
–
–
(61)
(53)
Furthermore, derivative financial instruments as at 31 December 2016 include interest rate swaps
covering CHF 200 million with maturities ending in 2040 and with a negative market value of
CHF 60 million (prior year: negative market value of CHF 53 million) which were not designated for
hedge accounting. In addition, derivative financial instruments include foreign currency forward
contracts and currency swaps for EUR and USD which serve to hedge future transactions in con-
nection with Swisscom’s operating activities and which were not designated for hedge-accounting
purposes.
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 2016, the financial
liabilities and assets, including accrued interest, arising from cross-border lease agreements
amounted to USD 72 million or CHF 74 million, respectively, which, in compliance with SIC 27, were
not recognised in the balance sheet (prior year: USD 69 million or CHF 69 million).
Netting of financial instruments
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 or the other. The ISDA agreements do
not meet the criteria for balance-sheet netting as Swisscom has presently no legally enforceable
right to offset the recognised amounts and such a right may only be applied to future occurrences
such as a credit default or other credit events. In 2016, Swisscom recorded an amount of CHF 7 mil-
lion for which such netting agreements existed. In the event of netting, derivative assets of
CHF 41 million and derivative liabilities of CHF 63 million would be reduced to CHF 34 million and
CHF 56 million, respectively. In the prior year, Swisscom recognised an amount of CHF 3 million for
which such netting agreements existed. In the event of netting, the derivative assets in the prior
year of CHF 14 million would be reduced to CHF 11 million and the derivative liabilities would be
reduced from CHF 61 million to CHF 58 million. In addition, Swisscom entered into collateral agree-
ments for interest-rate and foreign-currency swaps with various counterparties under which a net-
ting of market values takes place on a daily basis between the contracting parties. When including
these collateral agreements, derivative assets and derivative liabilities would be reduced by a fur-
ther CHF 25 million and CHF 2 million, respectively.
212
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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
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.
In CHF million
31.12.2016
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
31.12.2015
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
Netted in the
balance sheet
Net amount
30
49
79
28
36
64
22
149
171
42
83
125
(17)
(4)
(21)
(17)
(4)
(21)
(16)
(60)
(76)
(16)
(60)
(76)
13
45
58
11
32
43
6
89
95
26
23
49
Management of equity resources
Managed capital is defined as equity including non-controlling interests. Swisscom seeks to main-
tain a robust equity basis which enables it to assure the continuing existence of the company as a
going concern and to offer investors an appropriate return in relation to the risks entered into.
Furthermore, Swisscom maintains funds to enable capital 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 %
31.12.2016
31.12.2015
6,514
8
6,522
21,454
30.4
5,237
5
5,242
21,149
24.8
213
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m
e
t
a
t
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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 its strategic targets, the Federal Council has ruled that Swisscom’s net indebtedness shall not
exceed a multiple of approximately 2.1 of the operating result before taxes, interest and deprecia-
tion 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
31.12.2016
31.12.2015
6,140
753
738
508
357
8,496
(329)
(177)
(144)
7,846
4,293
1.8
5,430
1,356
931
526
350
8,593
(324)
(85)
(142)
8,042
4,098
2.0
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.
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
2016
(2)
20
(104)
134
(141)
(70)
68
(95)
2015
(3)
(30)
(9)
(77)
248
(51)
56
134
In 2016, other cash outflows from financing activities amount to CHF 16 million (prior year: cash
inflows of CHF 2 million). 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 19 million (prior year: CHF 9 million). As a result of changes in the assumptions made in esti-
mating the provisions for dismantling and restoration costs, a decrease of CHF 49 million net was
recognised in property, plant and equipment (prior year: decrease of CHF 55 million). See Note 23.
214
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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
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 2016 aggregated CHF 845 million (prior year: CHF 886 million).
Operating leases
Operating leases relate primarily to the rental of real estate for business purposes. See Note 26. In
2016, payments for operating leases amounted to CHF 331 million (prior year: CHF 314 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
31.12.2016
31.12.2015
162
142
126
113
88
305
936
150
140
117
101
89
372
969
36 Research and development
Costs aggregating CHF 14 million for research and development were expensed in 2016 (prior year:
CHF 18 million). This figure does not include direct development costs for new products and ser-
vices, nor does it includes amortisation of capitalised development costs.
37 Related parties
Majority shareholder, associates and non-controlling interests
Transactions and balances outstanding at year end with related entities and individuals for 2016
are as follows:
In CHF million
Confederation
Associates
Non-controlling interests
Total 2016/Balance at 31 December 2016
Income
Expense
Receivables
Liabilities
233
36
–
269
131
146
2
279
164
11
–
175
233
6
10
249
Transactions and balances outstanding at year end with related entities and individuals for 2015
are as follows:
In CHF million
Confederation
Associates
Non-controlling interests
Total 2015/Balance at 31 December 2015
Income
Expense
Receivables
Liabilities
280
23
–
303
139
109
2
250
147
9
–
156
375
7
6
388
215
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a
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a
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fi
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a
d
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o
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o
C
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a
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a
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fi
d
e
t
a
d
i
l
o
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n
o
c
e
h
t
o
t
s
e
t
o
N
Majority shareholder
Pursuant to the Swiss Federal Telecommunication Enterprises Act (“Telekommunikations unter-
nehmungsgesetz”, TEA), the Swiss Confederation (“the Confederation”) is obligated to hold a major-
ity of the share capital and voting rights of Swisscom. On 31 December 2016, the Confederation, as
majority shareholder, held 51% of the issued shares of Swisscom Ltd. Any reduction of the Confeder-
ation’s holding below a majority shareholding would require a change in law which would need to
be voted upon by the Swiss Parliament, 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 val-
idly 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 addi-
tion, procures services from the Confederation. The Confederation comprises the various ministries
and administrative bodies of the Confederation and the other companies controlled by the Confed-
eration (primarily the Swiss 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/by associates and non-controlling interests are based upon market prices. The
associates are listed in Note 40.
Post-employment benefits funds
Transactions between Swisscom and the various pension funds are detailed in Note 10.
216
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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
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
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
Pension contributions
Social security contributions
Total compensation to members of the Group Executive Board
2016
2015
1.4
0.7
0.1
2.2
5.5
1.0
1.1
0.5
8.1
1.5
0.8
0.1
2.4
5.7
1.0
0.8
0.5
8.0
Total compensation to members of the Board of Directors and of the Group Executive Board
10.3
10.4
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 the
form of equity shares. Compensation paid to the members of the Group Executive Board consists
of a fixed basic salary 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), the
Federal Communications Committee (ComCom) granted Swisscom a basic-service license for 2008
to 2017. As licensee, Swisscom is required to offer the entire range of the basic service to all sections
of the Swiss population 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 guarantees
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
municipality (Publifon). The Federal Council periodically sets price ceilings for basic services.
On 2 December 2016, the Federal Council adopted the revision of the Ordinance on Telecommuni-
cation Services (TSO) which defines the content of the basic service in the area of telecommunica-
tions from 2018 onwards. From this date on, the traditional analog and digital connections are
replaced by a multifunctional connection. Furthermore, the minimum data transmission rate for
the access to the internet is increased to 3000/300kbits/s and the services for disabled individuals
upgraded. The Federal Communication Committee (ComCom) has granted Swisscom a universal
service license for the years 2018-2023.
39 Events after the balance sheet date
Approval of the consolidated financial statements
No material post-balance sheet events have occurred during the period up to 7 February 2017, the
date on which the consolidated financial statements of Swisscom were approved by the Board of
Directors for release,
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40 List of Group companies
Registered office
Share of capital
and voting right in %
Currency
Share capital
in millions
Registered name
Switzerland
Admeira Ltd 1,3
Admeira Broadcast AG 2,3
Akenes Ltd 2,3
BFM Business Fleet Management Ltd 1
Billag Ltd 1
cablex Ltd 2
CT Cinetrade AG 1
Datasport Ltd 2
finnova ltd bankware 2,3
Global IP Action Ltd 2
kitag kino-theater Ltd 2
Medgate Ltd 2,3
Medgate Technologies Ltd 2,3
Mila AG 2
Mona Lisa Capital AG 2
myKompass Ltd 2, 3
MyStrom Ltd 2
PlazaVista Entertainment AG 2
SEC consult (Switzerland) Ltd 2,3
siroop Ltd 2,3
Swisscom Advertising Ltd 2,3
Swisscom Broadcast Ltd 1
Swisscom Digital Technology SA 1
Swisscom Directories Ltd 1
Swisscom eHealth Invest GmbH 2
Swisscom Energy Solutions Ltd 2
218
Swisscom Event & Media Solutions Ltd 2
Swisscom Health AG 2
Swisscom Real Estate Ltd 1
Berne
Berne
Lausanne
Ittigen
Fribourg
Berne
Zurich
Gerlafingen
Lenzburg
Pfäffikon
Zurich
Basel
Zug
Zurich
Ittigen
Lucerne
Ittigen
Zurich
Zurich
Zurich
Ittigen
Berne
Geneva
Zurich
Ittigen
Ittigen
Ittigen
Zurich
Ittigen
Swisscom IT Services Finance Custom Solutions Ltd 2 Olten
Swisscom (Switzerland) Ltd 1
Swisscom Services Ltd 2
Swisscom Ventures Ltd 2
Teleclub AG 2
Teleclub Programm AG 2,3
VirtualAds AG 2
Worklink AG 1
Ittigen
Ittigen
Berne
Zurich
Zurich
Basel
Berne
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33.3
33.3
27.3
100
100
100
75
100
9
75
75
40
40
51
99.5
13.8
100
75
46.5
50
33.3
100
50
69
100
54
100
100
100
100
100
100
100
75
25
83
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
CHF
CHF
CHF
CHF
0.3
0.1
0.1
1.0
0.1
5.0
0.5
0.2
0.5
0.2
1.0
0.7
0.1
0.4
5.0
0.1
0.1
0.1
0.1
0.1
0.1
25.0
0.1
2.2
1.4
13.3
0.1
0.1
100.0
0.1
1,000.0
1.2
2.0
1.2
0.6
1.1
0.5
1 Participation directly held by Swisscom Ltd.
2 Participation indirectly held by Swisscom Ltd.
3 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.
Registered name
Belgium
Belgacom International
Carrier Services Ltd 2,3
Germany
Abavent GmbH 2
Mila Europe GmbH 2
Swisscom Telco GmbH 2
VirtualAds Services GmbH 2
Zanox AG 2,3
Finland
Vilant Systems Oy 2,3
France
local.fr SA 2
Italy
Fastweb S.p.A. 2
Flash Fiber S.r.l. 2,3
Qualified eXchange network 2,3
Swisscom Italia S.r.l. 2
Liechtenstein
Swisscom Re Ltd 1
Netherlands
Improve Digital B.V. 2
NGT International B.V. 2
Austria
Registered office
Share of capital
and voting right in %
Currency
Share capital
in millions
Brussels
Kempten
Berlin
Leipzig
Leipzig
Berlin
Espoo
22.4
EUR
100
51
100
83
47.5
EUR
EUR
EUR
EUR
EUR
20
EUR
Bourg-en-Bresse
67
EUR
Milan
Milan
Milan
Milan
Vaduz
Amsterdam
Capelle a/d IJssel
100
20
60
100
EUR
EUR
EUR
EUR
100
CHF
100
100
EUR
EUR
Swisscom IT Servics Finance SE 2
Vienna
100
EUR
Sweden
Sellbranch AB 2
Singapore
Stockholm
50.1
SEK
Swisscom IT Services Finance Pte Ltd 2
Singapore
100
SGD
USA
Swisscom Cloud Lab Ltd 2
Delaware
100
USD
1 Participation directly held by Swisscom Ltd.
2 Participation indirectly held by Swisscom Ltd.
3 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.
1.5
0.3
–
–
–
0.2
–
0.5
41.3
–
–
505.8
5.0
–
–
0.1
0.1
0.1
–
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Statutory Auditor’s Report
To the General Meeting of Swisscom Ltd., Ittigen (Berne)
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the consolidated financial statements of Swisscom Ltd. and its subsidiaries (the Group), which
comprise the consolidated balance sheet as at 31 December 2016, the consolidated income statement,
consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated
statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a
summary of significant accounting policies.
In our opinion the consolidated financial statements (pages 150 to 219) give a true and fair view of the
consolidated financial position of the Group as at 31 December 2016, and its consolidated financial performance
and its consolidated cash flows for the year then ended in accordance with International Financial Reporting
Standards (IFRS) and comply with Swiss law.
Basis for Opinion
We conducted our audit in accordance with Swiss law, International Standards on Auditing (ISAs) and Swiss
Auditing Standards. Our responsibilities under those provisions and standards are further described in the
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are
independent of the Group in accordance with the provisions of Swiss law and the requirements of the Swiss audit
profession, as well as the IESBA Code of Ethics for Professional Accountants, and we have fulfilled our other
ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Key Audit Matters
Revenue recognition
Capitalization of technical facilities and software
Fastweb goodwill
Provisions and contingent liabilities for regulatory and competition-law proceedings
Pension fund obligations comPlan
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of
the consolidated financial statements of the current period. These matters were addressed in the context of our
audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
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Revenue recognition
Key Audit Matter
Our response
Swisscom’s telecommunication business is
characterized by a high volume of IT-based
transactions. The contracts underlying these
transactions often contain various elements that are
recorded separately. The correct recognition of the
identified contractual elements in the appropriate
period and the accuracy of invoicing are highly
dependent on IT systems.
We analyzed the process from the conclusion of a
contract to the receipt of payment and assessed
whether transactions are completely and accurately
recorded in the general ledger. We identified key
controls relating to revenue recognition and tested, on a
sample basis, their operating effectiveness. We tested
the operating effectiveness of IT controls of accounting-
relevant systems, with the assistance of our IT
specialists, to reflect the high degree of integration of
service performance and recording by various IT
systems.
In addition, we performed analytical procedures. Based
on internal reports, we analyzed trends in the most
important key performance indicators per revenue
segment and product category, and we critically
assessed deviations from our expectations.
With respect to significant newly introduced products,
we assessed whether the Group appropriately
determined the point in time and amount of revenue to
be recognized for the individual components.
For further information on revenue recognition refer to the following:
— Notes to the consolidated financial statements No. 3.16 – Segmentation and revenue recognition
— Notes to the consolidated financial statements No. 7 – Net revenue
Capitalization of technical facilities and software
Key Audit Matter
Our response
Given the technological change in the
telecommunication sector, investment in new technical
facilities and software plays a strategic role in the
development of Swisscom’s business. In this regard, it
is important that the costs capitalized in relation to
acquired and self-developed technical facilities and
software fulfil the IFRS criteria.
We tested whether Swisscom’s capitalization
guidelines comply with IFRS and whether the key
controls over the compliance with these guidelines
operated effectively.
Among others, using a statistical sampling procedure
we assessed whether the capitalization of costs in
2016 relating to a sample of technical facilities and
software met the criteria and took place at the
appropriate point in time.
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Furthermore, in relation to the development of material
new projects, we analyzed the amount and proper
identification of hours of work rendered by Swisscom
employees. We recalculated, on a sample basis, the
hourly rates used by Swisscom based on actual
personnel expenses and analyzed any variances. On
the basis of monthly budgets we also compared for
significant projects the expected costs to be
capitalized and expensed with the actual amounts and
critically assessed deviations.
For further information on capitalization of technical facilities and software refer to the following:
— Notes to the consolidated financial statements No. 23 – Property, plant and equipment
— Notes to the consolidated financial statements No. 24 – Goodwill and other intangible assets
Fastweb goodwill
Key Audit Matter
Our response
At 31 December 2016 the goodwill for the operating
segment Fastweb amounted to CHF 529 million (2015:
CHF 533 million).
The annual impairment test on the Fastweb goodwill is
significantly affected by management’s judgements
regarding the expected future cash flows, the discount
rate (WACC) used and the expected growth.
In the course of our audit, we assessed whether an
appropriate valuation method was used for the
Fastweb goodwill impairment test, the calculation was
coherent and management’s assumptions were
appropriate.
In particular, we challenged the input data and
assumptions related to the underlying cash flows and
the expected growth rates, as based on written
statements from local and Group management. In
addition, we retrospectively assessed the accuracy of
past business plans by a multi-year comparison of
forecasts and actual values.
We analyzed the individual parameters underlying the
discount rate, with assistance from our valuation
specialists, and compared them with the peer group.
We evaluated the model used for the impairment test
with respect to mathematical accuracy and
methodological adequacy.
We also considered the appropriateness of
disclosures in relation to the impairment test and
assessed whether the disclosed sensitivity analyses
adequately reflect the risks of the impairment test.
For further information on the Fastweb goodwill refer to the following:
— Notes to the consolidated financial statements No. 4 – Significant accounting judgments, estimates and
assumptions in applying accounting policies
— Notes to the consolidated financial statements No. 24 – Goodwill and other intangible assets
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Provisions and contingent liabilities for regulatory and competition-law proceedings
Key Audit Matter
Our response
Swisscom provides regulated access services to
other telecommunication service providers. The
pricing of such services is the outcome of regulatory
proceedings.
We tested the operating effectiveness of the controls
implemented to identify, assess and recognize legal
proceedings related to the regulatory and competition-
law environment.
In addition, the Federal Competition Commission
(WEKO) is conducting various proceedings against
Swisscom.
In case of a final verdict establishing market abuse,
civil law claims are also made against Swisscom.
The recognition of provisions or disclosure of
contingent liabilities related to such proceedings
requires management to apply significant judgment.
Specifically, we participated in the quarterly meetings
where legal proceedings were addressed with the
relevant departments, and we discussed and
challenged the summaries of the legal proceedings
prepared by Swisscom Group.
With the assistance of our legal specialists, we
assessed the probability of cash outflows resulting from
legal proceedings, the point in time for recognizing a
provision and the corresponding amount of any
provisions or the disclosure of contingent liabilities. We
additionally obtained and critically assessed written
statements of Swisscom’s external legal counsel for
significant proceedings.
We furthermore tested the amount of the provisions and
contingent liabilities by assessing whether the internal
and external data was correctly fed into the calculations
and whether the underlying assumptions were
adequate.
We assessed whether the disclosures on contingent
liabilities in the notes to the consolidated financial
statements appropriately reflect the risks.
For further information on provisions and contingent liabilities for regulatory and competition-law proceedings
refer to the following:
— Notes to the consolidated financial statements No. 4 – Significant accounting judgments, estimates and
assumptions in applying accounting policies
— Notes to the consolidated financial statements No. 28 – Provisions
— Notes to the consolidated financial statements No. 29 – Contingent liabilities and contingent assets
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Pension fund obligations comPlan
Key Audit Matter
Our response
Swisscom maintains several pension plans for its
employees in Switzerland and Italy. The majority of
Swisscom’s employees in Switzerland are insured
against the risks of old age, death and disability by
the independent pension plan ‘comPlan’. The defined
benefit obligation resulting from this plan is calculated
based on a number of financial and demographic
assumptions. The most significant assumptions are
the discount rate, expected rates of salary and
pension increases, the interest rates on old age
savings accounts, longevity and, as of the current
period the expected development of the conversion
rate. In accordance with Swiss regulations,
Swisscom’s assumptions also for the first time include
the principle of risk sharing of the remaining IAS 19
deficit between employer and employee. The
calculation of the employer’s share of the deficit is
based on, among other things, experience relating to
measures implemented in the past to improve the
pension plan’s financial situation.
Management determines these assumptions, which
involve judgement that has a significant impact on the
amount of pension obligations and expenses
recorded.
We assessed the completeness and accuracy of
personnel data underlying the actuary’s expert report by
testing the operating effectiveness of internal controls
and reconciled the data on a sample basis. We used
our own specialists to challenge the actuarial
calculation. In addition, we assessed the competence
and independence of the actuary engaged by
Swisscom.
Supported by our specialists, we analysed in detail the
conformity with IAS 19 of the expected development of
the conversion rate and the allocation of the remaining
deficit between employer and employee. We critically
assessed the expected development of the conversion
rate and the allocation of the deficit to employer and
employee based on Swisscom specific empirical
information and estimation.
Furthermore, we challenged Management’s other
assumptions used in the calculation of the actuary
mandated by Swisscom. In doing so, we examined the
methodology used to define the parameters and the
consistency with prior year and compared these
parameters with the range of observable market
information.
We further assessed whether the first-time recognition
of the risk sharing as a change in estimate was
appropriate and whether the disclosures in the notes to
the financial statements were adequate.
For further information on pension fund obligations comPlan refer to the following:
— Notes to the consolidated financial statements No. 4 – Significant accounting judgments, estimates and
assumptions in applying accounting policies
— Notes to the consolidated financial statements No. 10 – Post-employment benefits
Other Information in the Annual Report
The Board of Directors is responsible for the other information in the annual report. The other information
comprises all information included in the annual report, but does not include the consolidated financial
statements, the stand-alone financial statements of the Company, the remuneration report and our auditor’s
reports thereon.
Our opinion on the consolidated financial statements does not cover the other information in the annual report and
we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information in the annual report and, in doing so, consider whether the other information is materially inconsistent
with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be
materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We have nothing to report in this regard.
5
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Responsibility of the Board of Directors for the Consolidated Financial Statements
The Board of Directors is responsible for the preparation of the consolidated financial statements that give a true
and fair view in accordance with IFRS and the provisions of Swiss law, and for such internal control as the Board
of Directors determines is necessary to enable the preparation of consolidated financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the Group’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the Board of Directors either intends to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with Swiss law, ISAs and Swiss Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Swiss law, ISAs and Swiss Auditing Standards, we exercise professional
judgment and maintain professional skepticism throughout the audit. We also:
— Identify and assess the risks of material misstatement of the consolidated financial statements, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or the override of internal control.
— Obtain an understanding of internal control relevant to the audit 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
Group’s internal control.
— Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made.
— Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions
that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures
in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group to cease to continue as a going concern.
— Evaluate the overall presentation, structure and content of the consolidated financial statements, including
the disclosures, and whether the consolidated financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
— Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the consolidated financial statements. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely responsible
for our audit opinion.
We communicate with the Board of Directors or its relevant committee regarding, among other matters, the
planned scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide the Board of Directors or its relevant committee with a statement that we have complied with
relevant ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
6
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From the matters communicated with the Board of Directors or its relevant committee, we determine those
matters that were of most significance in the audit of the consolidated financial statements of the current period
and are therefore the key audit matters. We describe these matters in our auditor’s report, unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine
that a matter should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
In accordance with article 728a para. 1 item 3 CO and the Swiss Auditing Standard 890, we confirm that an
internal control system exists, which has been designed for the preparation of consolidated 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
Hanspeter Stocker
Licensed Audit Expert
Auditor in Charge
Gümligen-Berne, 7 February 2017
Daniel Haas
Licensed Audit Expert
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KPMG AG, Hofgut, PO Box 112, CH-3073 Gümligen-Berne
KPMG AG is a subsidiary of KPMG Holding AG, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss legal entity. All rights reserved.
7
Financial statements of Swisscom Ltd
Income statement
In CHF million
Net revenue from the sale of goods and services
Other income
Total operating income
Personnel expense
Other operating expense
Total operating expenses
Operating income
Financial expense
Financial income
Income from participations
Income before taxes
Income tax expense
Net income
2016
229
66
295
(78)
(92)
(170)
125
(135)
140
2,567
2,697
(15)
2,682
2015
237
32
269
(82)
(110)
(192)
77
(181)
201
189
286
(7)
279
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Balance sheet
In CHF million
Assets
Cash and cash equivalents
Current financial assets
Trade receivables
Other current receivables
Accrued dividends receivable from subsidiaries
Accrued income and deferred expense
Total current assets
Financial assets
Participations
Total non-current assets
Total assets
Liabilities and equity
Current interest-bearing liabilities
Trade payables
Other current liabilities
Accrued expense and deferred income
Provisions
Total current liabilities
Non-current interest-bearing liabilities
Other non-current liabilities
Provisions
Total non-current liabilities
Total liabilities
Share capital
Legal capital reserves/capital surplus reserves
Voluntary retained earnings
Treasury shares
Total equity
Total liabilities and equity
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Note
31.12.2016
31.12.2015
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.6
3.8
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86
17
16
2,500
100
2,899
4,996
7,884
12,880
15,779
176
–
21
10
73
89
369
5,911
7,872
13,783
14,152
1,868
1,718
5
54
84
10
2,021
7,403
88
12
7,503
9,524
52
21
6,183
(1)
6,255
15,779
8
52
81
8
1,867
7,449
66
56
7,571
9,438
52
21
4,641
–
4,714
14,152
Notes to the financial statements
1 General information
Name, legal form and domicile
> Swisscom Ltd, Ittigen (canton of Berne)
> Parent company of the Swisscom Group
>
Swisscom Ltd is a limited-liability company established under a special statute pursuant to the
Telecommunication Enterprises Act (TEA) (German: “Telekommunikationsunternehmungs-
gesetz”) of 30 April 1997.
> Company identification number (UID) CHF-102.753.938
Share capital
As of 31 December 2016, the share capital comprised 51,801,943 registered shares of a par value of
CHF 1 per share. This remains unchanged from the previous year.
Significant shareholders
As at 31 December 2016, the Swiss Confederation (Confederation), as majority shareholder, held
51% of the issued shares of Swisscom Ltd which is unchanged from the prior year. The Telecommu-
nications Enterprises Act (TEA) provides that the Confederation shall hold the majority of the share
capital and voting rights of Swisscom Ltd.
Number of full-time employees
The average number of employees of Swisscom Ltd during the financial year, expressed as full-time
equivalents, exceeded 250, as in the prior year.
Approval of Annual Financial Statements
The Board of Directors of Swisscom Ltd approved the present Annual Financial Statements on
7 February 2017 for release. The Annual Financial Statements are subject to approval by the share-
holders of Swisscom Ltd in its Annual General Meeting to be held on 3 April 2017.
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2 Summary of significant accounting policies
General
Significant financial statement reporting policies which are not prescribed by law are described
below. The ability to create and release hidden reserves for the purpose of ensuring the sustainable
development of the company should be taken into account in this respect.
Participations and recording of dividend distributions by subsidiary companies
Participations are accounted for at acquisition cost less valuation allowances, as required. Dividend
distributions from subsidiary companies are accrued in the financial statements of Swisscom Ltd
provided that the annual general meetings of the subsidiary companies approve the payment of
the dividend prior to the approval of the Annual Financial Statements of Swisscom Ltd by the Board
of Directors.
Treasury shares
At the time of acquisition, treasury shares are recorded at purchase cost as a reduction of share-
holders’ equity. In the event of a subsequent disposal, the resultant gain or loss is taken to income
as financial income or financial loss, respectively. The balance of and transactions in treasury shares
are disclosed in Note 31 to the Consolidated Financial Statements.
Share-based payments
Should treasury shares be used for share-based payments to members of the Board of Directors
and employees, the difference between the acquisition cost and any respective payment to the
employees represents personnel expense as at the time the shares are allocated. Share-based
payments of Swisscom Ltd are detailed in Note 11 to the Consolidated Financial Statements.
Derivative financial instruments and hedge accounting
Derivative financial instruments which are deployed to hedge foreign currencies and interest rates,
are measured at market price. Movements in market prices are recorded in the income statement.
Derivatives which meet the conditions of a hedging transaction, are measured using the same
valuation principles as those which apply to the underlying transaction. Gains and losses arising
from the underlying and hedging transactions are dealt with on a joint basis (combined valuation
perspective with regard to valuation units).
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3 Disclosures on balance sheet and income statement positions
3.1 Short-term financial assets
Short-term financial assets relate to fixed-term deposits denominated in EUR with a carrying value
of EUR 80 million (CHF 86 million) and a term exceeding 90 days.
3.2 Trade accounts receivables
Trade accounts receivables consist exclusively of receivables from participations.
3.3 Other current receivables
In CHF million
Receivables from third parties
Receivables from participations
Derivative financial instruments
Total other current receivables
3.4 Financial assets
In CHF million
Loans and receivables from third parties
Loans and receivables from participations
Derivative financial instruments
Disagio debenture bonds
Total financial assets
3.5 Participations
31.12.2016
31.12.2015
2
5
9
16
1
6
3
10
31.12.2016
31.12.2015
110
4,855
28
3
105
5,793
10
3
4,996
5,911
A list of directly and indirectly held participations of Swisscom Ltd is set out in Note 40 to the
Consolidated Financial Statements.
3.6
Interest-bearing liabilities
In CHF million
Payables to third parties
Payables to participations
Total current interest-bearing liabilities
In CHF million
Bank loans
Debenture bonds
Private placements
Loans to participations
Other interest-bearing liabilities to third parties
Total non-current interest-bearing liabilities
31.12.2016
31.12.2015
1,049
819
1,868
1,087
631
1,718
31.12.2016
31.12.2015
522
5,501
500
857
23
7,403
590
5,413
600
840
6
7,449
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The amounts, interest rates and maturities of the debenture bonds issued by Swisscom Ltd are as
follows:
In CHF million or EUR
Debenture bond in CHF 2007–2017
Debenture bond in CHF 2009–2018
Debenture bond in EUR 2013–2020
Debenture bond in EUR 2014–2021
Debenture bond in CHF 2010–2022
Debenture bond in CHF 2015–2023
Debenture bond in CHF 2012–2024
Debenture bond in EUR 2015–2025
Debenture bond in CHF 2014–2026
Debenture bond in CHF 2016–2027
Debenture bond in CHF 2016–2028
Debenture bond in CHF 2014–2029
Debenture bond in CHF 2016–2032
Debenture bond in CHF 2015–2035
3.7 Trade payables
In CHF million
Payables to third parties
Payables to participations
Total trade payables
3.8 Other liabilities
In CHF million
Payables to third parties
Payables to participations
Derivative financial instruments
Total other current liabilities
In CHF million
Payables to third parties
Derivative financial instruments
Total other non-current liabilities
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Par value
in CHF
600
1,425
537
537
500
250
500
537
200
200
200
160
300
150
31.12.2016
Nominal
interest rate
3.75
3.25
2.00
1.88
2.63
0.25
1.75
1.75
1.50
0.38
0.38
1.50
0.13
1.00
Par value
in CHF
600
1,425
542
542
500
250
500
542
200
–
–
160
–
150
31.12.2015
Nominal
interest rate
3.75
3.25
2.00
1.88
2.63
0.25
1.75
1.75
1.50
–
–
1.50
–
1.00
31.12.2016
31.12.2015
4
1
5
6
2
8
31.12.2016
31.12.2015
38
10
6
54
38
6
8
52
31.12.2016
31.12.2015
4
84
88
7
59
66
3.9 Residual leasing commitments
Leasing commitments present the following maturity structure:
In CHF million
Within 1 year
1 to 5 years
Total remaining amount of lease obligation
31.12.2016
31.12.2015
2
–
2
2
1
3
The amounts encompass the payments arising under rental and leasing contracts which are to be
settled up to the end of the contract or the end of the notice period for cancellation.
3.10 Shareholdings of the members of the Board of Directors and Group Executive Board
The following table discloses the number of unrestricted and restricted shares held by the members
of the Board of Directors and Group Executive Board as well as parties related to them, as of
31 December 2015 and 2016:
Number
Hansueli Loosli
Roland Abt 1
Valérie Berset Bircher 1
Alain Carrupt 1
Frank Esser
Barbara Frei
Hugo Gerber 2
Michel Gobet 2
Torsten Kreindl 2
Catherine Mühlemann
Theophil Schlatter
Hans Werder
Total shares held by the members of the Board of Directors
1 Elected to the Board of Directors as of 6 April 2016.
2 Resigned from the Board of Directors as of 6 April 2016.
Number
Urs Schaeppi (CEO)
Mario Rossi
Hans C. Werner
Marc Werner
Christian Petit
Roger Wüthrich-Hasenböhler 1
Heinz Herren
Dirk Wierzbitzki 2
Total shares held by the members of the Group Executive Board
1 Resigned from the Group Executive Board as of 31 December 2015.
2 Joined the Group Executive Board as of 1 January 2016.
31.12.2016
31.12.2015
2,350
2,012
88
96
96
332
648
–
–
–
1,326
1,225
1,128
7,289
–
–
–
205
528
1,233
1,600
1,322
1,223
1,054
982
10,159
31.12.2016
31.12.2015
3,229
1,027
897
382
1,337
–
1,333
64
8,269
2,602
821
571
211
1,525
1,032
1,098
–
7,860
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In 2016, 1,308 shares (CHF 0.7 million) were issued to members of the Board of Directors, 1,841 shares
(CHF 1.0 million) were issued to members of the Group Executive Board and 3,337 shares (CHF 1.7 mil-
lion) were issued to other Swisscom employees. See Note 11 to the Consolidated Financial Statements.
None of the individuals/entities required to make notification holds voting shares exceeding 0.1% of
the share capital.
3.11 Collateral given to secure third-party liabilities
As of 31 December 2016, guarantee obligations exist for Group companies in favour of third parties
totalling CHF 228 million (prior year: CHF 111 million).
3.12 Assets used to secure own commitments as well as assets subject to retention of title
As of 31 December 2016, financial assets totalling CHF 109 million (prior year: CHF 105 million) were
not freely available. These assets serve to secure commitments arising from bank loans.
3.13 Material events after the balance sheet date
No material events subsequent to the balance sheet date occurred in the period ending 7 February 2017,
the date on which the Board of Directors of Swisscom Ltd approved the release of the Annual
Financial Statements.
234
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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
3 April 2017 that the available retained earnings of CHF 6,183 million as of 31 December 2016 be
appropriated as follows:
In CHF million
Appropriation of retained earnings
Balance carried forward from prior year
Net income for the year
Treasury shares
Total retained earnings
Ordinary dividend of CHF 22.00 per share on 51,800,429 shares 1
Balance to be carried forward
1 Excluding treasury shares.
31.12.2016
3,501
2,682
(1)
6,182
(1,140)
5,042
In the event that the proposal is approved, a dividend per share will be paid to shareholders on
7 April 2017 as follows:
Per registered share
Ordinary dividend, gross
Less 35% withholding tax
Net dividend payable
CHF
22.00
(7.70)
14.30
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Statutory Auditor’s Report
To the General Meeting of Swisscom Ltd., Ittigen (Berne)
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of Swisscom Ltd., which comprise the balance sheet as at 31
December 2016, and the income statement for the year then ended, and notes to the financial statements,
including a summary of significant accounting policies.
In our opinion the financial statements (pages 227 to 234) for the year ended 31 December 2016 comply with
Swiss law and the company’s articles of incorporation.
Basis for Opinion
We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Our responsibilities under
those provisions and standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Statements section of our report. We are independent of the entity in accordance with the provisions of Swiss law
and the requirements of the Swiss audit profession and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Report on Key Audit Matters based on the circular 1/2015 of the Federal Audit Oversight Authority
236
We have determined that there are no key audit matters to communicate in our report.
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Responsibility of the Board of Directors for the Financial Statements
The Board of Directors is responsible for the preparation of the financial statements in accordance with the
provisions of Swiss law and the company’s articles of incorporation, and for such internal control as the Board of
Directors determines is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Board of Directors is responsible for assessing the entity’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the Board of Directors either intends to liquidate the entity or to cease
operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Swiss law and Swiss Auditing Standards will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
1
As part of an audit in accordance with Swiss law and Swiss Auditing Standards, we exercise professional
judgment and maintain professional skepticism throughout the audit. We also:
—
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.
— Obtain an understanding of internal control relevant to the audit 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
internal control.
— Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made.
— Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions
that may cast significant doubt on the entity’s ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures
in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future events or
conditions may cause the entity to cease to continue as a going concern.
We communicate with the Board of Directors or its relevant committee regarding, among other matters, the
planned scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide the Board of Directors or its relevant committee with a statement that we have complied with
relevant ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Board of Directors or its relevant committee, we determine those
matters that were of most significance in the audit of the financial statements of the current period and are
therefore the key audit matters. We describe these matters in our auditor’s report, unless law or regulation
precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a
matter should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
In accordance with article 728a para. 1 item 3 CO and the Swiss Auditing Standard 890, we confirm 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
Hanspeter Stocker
Licensed Audit Expert
Auditor in Charge
Gümligen-Berne, 7 February 2017
Daniel Haas
Licensed Audit Expert
KPMG AG, Hofgut, PO Box 112, CH-3073 Gümligen-Berne
KPMG AG is a subsidiary of KPMG Holding AG, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss legal entity. All rights reserved.
2
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800 technicians
1,526,909 interventions
on average are working for
our customers seven days
a week.
are carried out annually
at customer premises and
exchanges.
Marco Burri
Service technician
Swisscom is building the network of the
future. Customer Field Service provides on-site
support for SMEs, residential customers and
corporate customers. It assists customers in
migrating to IP (Internet Protocol) and ensures
the switch goes smoothly.
Markus Zahler
Service technician
“We have our fi nger on our customers’ pulse and
can respond individually to their personal needs.
The trust they place in us motivates us every day,
whatever the weather, day and night.”
Further information
Focusing on
our customers
with a great deal
of passion and
reliability.
Glossary
242242 Technical terms
246 Networks
247 Other terms
Index of keywords
249
Swisscom Group
fi ve-year review
250
Glossary
Technical terms
4G/LTE (Long Term Evolution): 4G/LTE is the successor technology to HSPA and is the fourth
generation 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. To do 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.
5G: 5G is the next generation of mobile network technology. While no international definition of a
5G standard exists to date, testing is taking place around the world. Swisscom expects to launch 5G
in Switzerland in 2020.
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 tele-
phony 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 (copper and optical
fibre) based on the Internet Protocol (IP). All-IP means that all services such as television, the Inter-
net or fixed-line telephony run over the same IT network. Phone calls are no longer transmitted
using analogue signals but instead take the form of data packets, as is the case for existing Internet
services. 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 switch all
existing communications networks to IP to enable all telecommunications services (telephony,
data traffic, TV, mobile communications, etc.) to be offered over IP. This would mean that all IP services
within Switzerland are provided via Swisscom’s own network, ensuring a higher level of security
and better availability than other online voice service providers.
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 dynamically according to
need 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
subscriber 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 avail-
able to over 99% of the Swiss population.
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FTTH (Fibre to the Home): FTTH refers to the end-to-end connection of homes and businesses
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. VDSL2’s upcoming evolution to G.fast will significantly increase bandwidths for FTTS
and FTTB.
G.fast (pronounced “gee dot fast”): G.fast, the latest technology for copper lines, is capable of
providing 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.
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 and from other countries (international roaming).
Housing: Housing is defined as the placement and network connection of server infrastructure in
a data centre.
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
simultaneously and at a consistently high speed than would be possible with UMTS. At locations
where mobile Internet use is particularly concentrated, HSPA was 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
technology (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 applications
(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.
MVNO (Mobile Virtual Network Operator): MVNO denotes a business model for mobile commu-
nications. In this case, the corresponding business (the MVNO) has either a limited network infra-
structure or no network infrastructure at all. 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. NPS is thus a tool used to
determine customer satisfaction.
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Network convergence: The dismantling and reorganisation of previously separated networks to
form a large, convergent network – for example, the Swisscom fixed-line and mobile network.
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.
Petabyte: Unit of measurement for data size. 1 petabyte is equivalent to approximately 1,000 tera-
bytes, 1,000,000 gigabytes or 1,000,000,000 megabytes.
PWLAN (Public Wireless Local Area Network): PWLAN denotes a wireless, local public network
based on the IEEE 802.11 WiFi standard family. A PWLAN typically offers data transmission speeds
of 5–10 Mbps.
Roaming: Roaming enables mobile network subscribers to use their mobile phones when travelling
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 networks (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.
Smart data: Primarily refers to the processing and understanding of large, complex and rapidly
changing data volumes in the aim of creating added value.
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.
Terabyte: Unit of measurement for data size. 1 terabyte is equivalent to approximately 1,000 giga-
bytes or 1,000,000 megabytes.
TIME: Acronym for Telecommunication, Information, Multimedia and Entertainment. It refers to
the way in which these areas have grown together within the scope of digitisation.
Ultra-fast broadband: Ultra-fast broadband denotes 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.
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Unified Communications: An attempt used to integrate the wide variety of modern communication
technologies. Different telecommunication services such as e-mail, unified messaging, telephony,
mobile telephony, PDAs, instant messaging and presence functions are coordinated to improve the
reachability of communication partners working on distributed projects, thereby speeding up
business processes.
Vectoring: Vectoring is a technology used in conjunction with VDSL2. It eliminates interference
(disruptions) between pairs of copper lines to achieve up to a twofold increase in bandwidth.
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.
Video on Demand: A service that allows subscribers to choose from a selection of (video) 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.
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).
WiFi Calling: WiFi Calling enables users to make calls via their mobile phone and the WLAN/WiFi
network. This technology significantly improves mobile phone reception in houses.
WLAN (Wireless Local Area Network): WLAN stands for wireless local area network. A WLAN
connects several computers wirelessly to a central information system, printer or scanner.
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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
redundancy 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 customers
(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 expansion
of fibre-to-the-home (FTTH) in 2008. It started rolling out broadband technology in 2000, first
based on ADSL. ADSL was followed in 2006 by VDSL2 and from 2013 onwards by FTTS/B (fibre-to-
the-street or basement) and vectoring. In addition, in September 2016 Swisscom became the first
European telecommunications provider to introduce G.fast in the live network. This new transmission
standard enables bandwidths of up to 500 Mbps in FTTS/B networks. To fulfil its mandate for basic
broadband provision, Swisscom also uses wireless technologies such as UMTS and satellite. At present,
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. 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 4G, 3G and 2G, the dominant digital standards across
Europe and much of the world. Swisscom has implemented different technologies that enable
transmission 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. Swisscom launched UMTS back 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. 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. At present, LTE enables bandwidths of up to
150 Mbps. However, it is continuously being developed, and since end-2015, customers can now
enjoy 4G+/LTE Advanced in 28 Swiss cities. Swisscom thus possesses the most efficient mobile
network in Switzerland and will continue to expand its technological lead. Bandwidths of up to
450 Mbps are already being tested in laboratory conditions.
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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 (Ver-
ordnung 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
market-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, inter-
connection, leased lines, etc.), approves national numbering plans and regulates the conditions
governing 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 Enterprise 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 regime, 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
contractual 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).
Federal Office of Communications (OFCOM): OFCOM deals with issues related to telecommuni-
cations 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).
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 telecommuni-
cations 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 communicate
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).
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 (unbundling).
LRIC (Long-Run Incremental Costs): LRIC is the method defined by the Ordinance on Telecommuni-
cations Services (Verordnung über Fernmeldedienste, FDV) for calculating regulated prices. It is
future-oriented and therefore creates economically efficient investment incentives.
Termination charges: Termination charges are levied by a network operator for forwarding calls to
another third-party network.
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- discriminatory
conditions based on original cost. The prerequisite for ULL is the presence of a market- dominant
provider. There are two types 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 unbundled
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
106–119
81
131–144
90
56–61; 174–180
83, 154
48–51; 246
191–193
120–126
26–28
183–185
36–38
34–35
40–45
84, 214
87
83, 174–180
198–199
92, 118, 203–214
92–95
66–79
88–90
29–31
48–51
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Swisscom Group
five-year review
In CHF million, except where indicated
2012
2013
2014
2015
2016
Net revenue and results
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
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
%
11,384
11,434
11,703
11,678
11,643
4,477
39.3
2,527
1,815
1,808
34.90
4,717
23.8
4,245
2,529 1
8,071
4,302
37.6
2,258
1,695
1,685
32.53
6,002
29.3
4,131
2,396
7,812
4,413
37.7
2,322
1,706
1,694
32.70
5,486
26.2
3,770
2,436
8,120
4,098
35.1
2,012
1,362
1,361
26.27
5,242
24.8
3,867
2,409
8,042
4,293
36.9
2,148
1,604
1,604
30.97
6,522
30.4
3,862
2,416
7,846
Full-time equivalent employees at end of year
Average number of full-time equivalent employees
number
number
19,514
19,771
20,108
21,125
21,637
19,746
20,433
21,546
21,127
21,453
Operational data at end of period
Fixed telephony access lines in Switzerland
Broadband access lines retail in Switzerland
250
Mobile access lines in Switzerland
Swisscom TV access lines in Switzerland
in thousand
in thousand
in thousand
in thousand
3,013
1,727
6,217
791
2,879
1,811
6,407
1,000
2,778
1,890
6,540
1,165
2,629
1,958
6,625
1,331
2,367
1,992
6,612
1,476
Revenue generating units (RGU) Switzerland
in thousand
11,748
12,097
12,373
12,543
12,447
Unbundled fixed access lines in Switzerland
Broadband access lines wholesale in Switzerland
Broadband access lines in Italy
in thousand
in thousand
in thousand
300
186
256
215
180
262
128
315
128
364
1,767
1,942
2,072
2,201
2,355
Swisscom share
Par value per share at end of year
CHF
1.00
Number of issued shares at end of period
in million of shares
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
CHF
CHF
CHF
CHF
%
1.00
51.802
24,394
470.90
474.00
20,400
393.80
400.00
334.40
390.20
22.00
63.04
22.00
67.63
1.00
51.802
27,067
522.50
587.50
467.50
22.00
67.27
1.00
51.802
26,056
503.00
580.50
471.10
22.00
83.75
1.00
51.802
23,627
456.10
528.50
426.80
22.00 2
71.04
9,268
3,864
9,358
3,685
9,586
3,788
9,764
3,461
9,665
3,572
1,994 1
1,686
1,751
1,822
1,774
Full-time equivalent employees at end of year
number
16,269
17,362
18,272
18,965
18,372
1 Including expenses of CHF 360 million for mobile frequencies.
2 In accordance with the proposal of the Board of Directors to the Annual General Meeting.
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Publishing details
Key dates
> 8 February 2017
Publication of 2016 Annual Results
and Annual Report
> 3 April 2017
Annual General Meeting in Zurich
> 5 April 2017
Ex dividend date
> 7 April 2017
Dividend payment
> 3 May 2017
2017 First-Quarter Results
> 17 August 2017
2017 Second-Quarter Results
> 2 November 2017
2017 Third-Quarter Results
> February 2018
Publication of 2017 Annual Results
and Annual Report
Publication and production
Swisscom Ltd, Berne
Translation
CLS Communication AG, Basel
Production
MDD Management Digital Data AG, Lenzburg
Printing
Stämpfli Publikationen AG, Berne
Photographer
Stefan Walter, Zurich
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 from
E-mail: annual.report@swisscom.com
A Swisscom company brochure is also available in English,
French, German and Italian.
www.swisscom.ch/ataglance2016
The Sustainability Report 2016 is published as an online
version at www.swisscom.ch/cr-report2016.
General information
Swisscom Ltd
Head office
CH-3050 Berne
Phone: +41 58 221 99 11
E-mail:
swisscom@swisscom.com
Financial information
Swisscom Ltd
Investor Relations
CH-3050 Berne
Phone: +41 58 221 99 11
E-mail:
Internet: www.swisscom.ch/investor
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
German: www.swisscom.ch/bericht2016
English: www.swisscom.ch/report2016
French: www.swisscom.ch/rapport2016
P E R F O R M A N C E
neutral
Printed Matter
No. 01-17-701378 – www.myclimate.org
© myclimate – The Climate Protection Partnership
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