Swisscom AG Annual Report 2018

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FY2018 Annual Report · Swisscom AG

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Annual Report

2018

Annual Report
publications

Annual Report

2018

Sustainability Report

2018

at a glance 2018

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The Annual Report, Sustainability Report and 2018 at a glance together make up Swisscom’s reporting
on 2018. The three publications are available online at: swisscom.ch/report2018

“Inspiring people” concept
The networked world offers countless opportunities that we can begin to shape today.
Top quality, groundbreaking innovation, deep-rooted commitment – we feel lucky to be able
to inspire people and to lead them to embrace the opportunities that a networked future offers.

The images used in our reporting show how and where we inspired people in 2018:
from high in the Alps to people’s homes, in business and in our Swisscom Shops.

A big thank-you to all who took the time to pose for these photographs: Pius and Jeanette Jöhl
with their kids at the Oberchäseren alp, a houseshare with friends in Zurich (Seraina Cadonau,
Anna Spiess, Linard Baer and Johannes Schutz), Ypsomed AG in Burgdorf, Stefan Mauron,
our customer Jeannette Furter, and the entire crew at House of Swisscom in Basel.

Table of contents

Introduction

Management Commentary

1–11

12–61

Corporate Governance and Remuneration Report

62–101

Financial Statements

Glossary

102–175

176–180

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2018 in review

Net revenue

EBITDA

Net income

11.7

billion CHF

4.2

1.5

billion CHF

Capital
expenditure

2.4

Employees (full-
time equivalents)

Net debt to
EBITDA ratio

19,845

1.8

Equity ratio

36.3

Dividend
per share

CHF

Patrouille des Glaciers

Watch it live

For the first time, Patrouille des
Glaciers will be broadcast live
across Switzerland via Swisscom
TV. The patrols will also be
tracked in real time through the
low power network.

inOne

Included in the
package

Expanded inOne offering: de-
vices with their own SIM card
plus extra roaming, services
and speed can be added easily
and at little cost.

Prepaid

Simple

“SimplyMobile” (“Coop Mobile”
as of 9 January 2019) is now
available in a prepaid version.
Unused data and call minutes
can simply be rolled over to
the next month.

Swisscom TV

Data packages

Internet

Exclusive

Swisscom TV is the exclusive
broadcaster of all 2018/2019
UEFA Champions League and
UEFA Europa League matches
via Teleclub.

Roaming

Swisscom has consistently
reduced roaming charges for
nearly all data packets abroad
by between 20% and 50%.

Guard

Internet Guard, which is free
of charge, offers Swisscom
customers even better protec-
tion online.

Awards

No. 1

Swisscom took the top spot in several tests and
rankings in 2018:
· Service test of industry magazine PCtipp,

for the fifth time running.

· Hotline test of industry magazine connect,

for the third time running.

· Overall winner in the CHIP mobile network test.
· Speed test of Ookla for the fastest mobile

network.

· Our mobile network was declared the best in

Switzerland in the mobile network test carried
out by connect.

Swisscom share

Fastweb

House of Swisscom

20 years

Swisscom was first listed
on the stock exchange on
5 October 1998. The Swisscom
share offers an average annual
return of 5%.

Network expansion

Ultra-fast
broadband

Half-way point reached in the
Swiss-wide expansion effort
– the 1,111th municipality
was added to the ultra-fast
broadband network.

Italy

Fastweb acquires 5G spectrum
and fixed wireless business of
Tiscali.

Future

Opening of the House of
Swisscom in Basel: next-
generation advice, service and
shopping.

Business customers

Cloud

The cloud is flying higher as
ten new customers join the
cloud and new public cloud
services are offered.

Mobile telephony

At the end of 2018, pilot 5G
networks were in operation in
seven Swiss cities.

Digitisation

240

Swisscom is digitising
240 alpine cabins and helping
alpine associations finance
the necessary power supply
solutions.

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KPIs of Swisscom Group

In CHF million, except where indicated

Net revenue and results

Net revenue 1

Operating income before depreciation and amortisation (EBITDA) 1,2

EBITDA as % of net revenue

Operating income (EBIT) 3

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 4

Capital expenditure in property, plant and equipment
and intangible assets

Net debt at end of period 5

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 6

Unbundled fixed access lines in Switzerland

Broadband access lines wholesale in Switzerland

Broadband access lines in Italy

Mobile access lines in Italy

Swisscom share

Number of issued shares

Market capitalisation at end of year

Closing price at end of period

Closing price highest

Closing price lowest

Dividend per share

Employees

Full-time equivalent employees at end of year

Average number of full-time equivalent employees

2018

2017

Change

11,714

11,662

4,213

36.0

2,069

1,521

29.48

8,208

36.3

1,745

2,404

7,393

1,788

2,033

1,519

6,551

4,295

36.8

2,131

1,568

30.31

7,645

34.7

2,159

2,378

7,447

2,047

2,014

1,467

6,637

11,891

12,165

481

2,547

1,432

51,802

24,331

469.70

530.60

427.00

22.00

19,845

20,083

107

435

2,451

1,065

51,802

26,859

518.50

527.00

429.80

22.00

20,506

20,836

0.4%

–1.9%

–2.9%

–3.0%

–2.7%

7.4%

–19.2%

1.1%

–0.7%

–12.7%

0.9%

3.5%

–1.3%

–2.3%

–18.7%

10.6%

3.9%

34.5%

–

–9.4%

–

–3.2%

–3.6%

CHF

in thousand

CHF

number

1 Swisscom has applied IFRS 15 “Revenue from Contracts with Customers” since

4 Definition operating free cash flow: operating income before depreciation and

1 January 2018. The prior year’s figures have not been adjusted. If IFRS 15
had not been applied, net revenue in 2018 would be CHF 5 million lower and
EBITDA CHF 43 million higher.

amortisation (EBITDA), change in operating assets and liabilities
(excluding cash and cash equivalents) less net capital expenditure in tangible
and intangible assets and dividends paid to non-controlling interests.

2 Definition operating income before depreciation and amortization (EBITDA):

5 Definition net debt: financial liabilities less cash and cash equivalents, current

operating income before depreciation and amortization, gain on sale of
subsidiaries, net
financial result, result of equity-accounted investees and income tax expense.

3 Definition operating income (EBIT): operating income before gain on sale of

subsidiaries, net financial result, result of equity-accounted investees
and income tax expense.

financial assets as well as non-current fixed interest-bearing certificates
of deposit and derivative financial instruments for financing received.

6 Definition revenue generating units (RGU) in Switzerland: fixed telephony
access lines, broadband access lines retail, Swisscom TV access lines and
mobile access lines.

Business overview

Other Operating
Segments

With subsidiaries in the areas of
network construction and
maintenance (cablex), broadcast-
ing services (Swisscom Broadcast)
and collection (Billag, until end of
2018), Swisscom complements
its core business in related areas.
The new Digital Business unit is
focused on growth areas in the
fields of Internet services and
digital business models and also
encompasses business with
online directories and telephone
directories (localsearch).

Swisscom
Switzerland

Fastweb

Fastweb is one of the largest
providers of broadband services
in Italy. Its product portfolio
comprises voice, data, broadband
and TV services as well as
video-on-demand for residential
and business 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 customised solutions
for corporate customers.

Residential Customers
The Residential Customers
division offers mobile and
fixed-line services.
These include telephony,
broadband, TV and mobile
offerings as well as ICT solutions
for SMEs.

Enterprise Customers
Whether voice or data, mobile or
fixed-line, individual products or
integrated solutions: Enterprise
Customers designs, implements
and operates entire ICT infra-
structures for corporate
customers.

IT, Network & Infrastructure
The division plans, operates and
maintains the network and IT
infrastructures in Switzerland.

Wholesale
The Wholesale segment provides
other telecommunication service
providers with access to the
Swisscom fixed and mobile
networks.

Revenue

CHF 8.8 bn

CHF 2.4 bn

CHF 0.9 bn

EBITDA

CHF 3.4 bn

CHF 0.8 bn

CHF 0.2 bn

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Shareholders’ letter
Good performance –
solid results

Dear Shareholders

20 years of Swisscom – 20 years of pioneering work and
investment in reliable infrastructure to support the Swiss
business community. In 2018, we celebrated our 20-year
anniversary as a public limited and listed company. During
this anniversary year, Swisscom continued to hold its ground
in an extremely challenging environment and achieved its
financial targets. An impressive market performance permitted
Swisscom to generate revenue that was practically on a par
with the previous year. Fastweb posted another pleasing
performance, growing its revenue and expanding its customer
base.

Visiting the historic cable tunnel on Bollwerk
street in Berne, where the latest fibre-optic

and copper cables provide parts of the city

with Internet.

Targets achieved thanks to innovation and capital expenditure
An increasingly saturated market, pressure on prices and costs and fierce competition in
its core business are all having an impact on Swisscom’s operations and activities.
Despite this, Swisscom generated revenue and earnings in 2018 that were in line with
the previous year. Net revenue was stable at CHF 11,714 million, while consolidated
operating income before depreciation and amortisation (EBITDA) declined by 1.9% to
CHF 4,213 million. Net income also virtually remained on par with the previous year at
CHF 1,521 million.

Revenue in the Swiss core business fell by 2.7% to CHF 8,817 million, mainly due to
discounts on bundled offerings and price pressure in the corporate business segment. In
addition, more and more customers are opting out of a separate fixed line for telephony,
with the number of connections falling by 259,000 year-on-year to 1.79 million. There
are also signs of market saturation in mobile telephony, as the number of mobile lines
fell year-on-year by 1.3% to 6.55 million. Despite the fiercely contested market, Swisscom
managed to keep its market share in mobile telephony stable at 60% and even increased
its market share in television to 35% (prior year: 33%). The number of TV connections
rose by 3.5% to 1.52 million, helping Swisscom TV remain by far Switzerland’s most
popular digital TV offering.

In 2018, we again updated the range of channels and apps available on Swisscom TV
while simplifying the user interface. In the summer of 2018, Swisscom TV customers
were the only viewers in the country able to watch the FIFA World Cup in UHD (ultra-
high definition). For the 2018/2019 football season onwards, Swisscom subsidiary
Teleclub acquired the transmission rights to the UEFA Champions League and the UEFA
Europa League, becoming the only Swiss broadcaster to broadcast all matches live.
Thanks in part to Swisscom TV, broadband connections were up by 19,000 (+0.9%) to
2.03 million year-on-year.

In the business customers segment, we have a strong position as a full-service provider,
our offerings fill customers’ needs and customer satisfaction is high. This is reflected in
the successful business transactions concluded with corporate customers. The demand
for cloud services, IT outsourcing and security solutions also continued to develop
positively.

inOne: over 2.3 million customers
We are also extremely successful in the market with our new combined package inOne,
which was launched in 2017: More than half of our residential customers rely on this
offering. inOne enables a flexible combination of mobile, broadband, TV and fixed-line
telephony products. In the year under review it was expanded further. Our customers
benefit from faster surfing and can add devices such as tablets, laptops, smart watches
and GPS trackers to their existing contract cheaply, quickly and easily. Over 2.3 million
customers with around 4.6 million connections have already opted for inOne.

Fastweb: strong growth in mobile telephony
Fastweb is performing well. Net revenue increased by 8.2% year-on-year to EUR 2,104
million. In spite of difficult market conditions, Fastweb’s broadband customer base grew
by 3.9% to 2.55 million in 2018. It also made strides in mobile telephony, with connections
up by 34.5% to 1.43 million customers in a stagnating market. In the fiercely competitive
market for corporate customers, Fastweb consolidated its market share at 31%.

Capital expenditure: Switzerland is world class
According to the OECD, no other country in the world invests as much per capita in its
telecommunications infrastructure than Switzerland, – and within Switzerland, no other
company in the sector invests in infrastructure as much as Swisscom does. In 2018,
Group-wide capital expenditure rose slightly (+1.1%) to CHF 2,404 million. Swisscom
invested 20.5% of net revenue (previous year: 20.4%) in infrastructure, with Switzerland
accounting for 68.4% of capital expenditure (CHF 1,645 million). These investments are

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paying off: the trade magazines CHIP and connect have both named Swisscom as having
the best network in Switzerland. We won the connect mobile network test for the ninth
time and can continue to use the “outstanding” rating in 2019.

Half-way point reached in expansion of ultra-fast broadband
By the end of 2018, Swisscom had connected about 4.2 million homes and businesses to
its ultra-fast broadband service (speeds in excess of 50 Mbps). Some 2.9 million homes
and offices benefit from connections with bandwidths of more than 100 Mbps. The
1,111th municipality was added to the ultra-fast broadband network, meaning the
half-way point has been reached in the expansion effort. Swisscom intends to make
fibre-optic technology available in every Swiss municipality by the end of 2021 and thus
give even remote locations access to ultra-fast broadband.

“More than half of our residential
subscribers put their trust in
inOne.”

Regulatory environment remains challenging
The rollout of 5G will be more difficult following the close decision by the Council of
States against relaxing ONIR limits (Ordinance on Non-Ionising Radiation). Swiss
businesses and the entire sector are thus pushing for a moderate liberalisation of the
ONIR. A working group will now analyse the requirements and risks relating to the
expansion of the 5G network and present a report with its recommendations by mid-
2019. The communication on the revision of the Telecommunications Act by the Federal
Council included a request for technology-neutral regulation of access. The Swiss
parliament rejected this increased regulation of access. Swisscom welcomes this outcome:
any such regulation would jeopardise capital expenditure, especially in rural areas.

A simple way to make use of opportunities
We are undergoing a rapid transformation. For a long time now, we’ve connected
people, machines, industries and entire ecosystems. We no longer just surf through
data, but use it to better design our towns and cities, to identify new needs, and to use
energy and resources more efficiently. Rather than simply protecting our customers and
ourselves from adverse interruptions, we guarantee smooth operations, day in day out.
At the same time, we are continuing to focus on our three strategic ambitions on which
we also worked hard in the past year:

Best customer experience
Swisscom has broken new ground in retail business. The latest and biggest Swisscom
Shop is more than just a store, it’s the “House of Swisscom” in Basel. It combines
shopping, advice, training and a repair centre. Visitors are welcomed at the coffee bar,
where (potential) residential and business customers can also discuss topics face to face
with Swisscom staff.

Operational excellence
We are continuing to build on the plan we announced in 2016 to ensure profitability and
develop new business areas. In 2018, we exceeded our goal of reducing our cost base by
CHF 100 million annually. At the same time, we are focusing on agile and more stream-
lined working models and organisational structures and on tapping into new areas of
business.

New growth
In selected areas, Swisscom has launched new digital services, which in part are based
on novel web-based business models. For example, Swisscom supports SwissSign Group
AG, the company behind SwissID – Switzerland’s digital identity card. Swisscom
co-founded autoSense AG, which also connects older car models to the Internet.

Shareholder return
Swisscom pursues a return policy with a stable dividend and paid out an ordinary
dividend of CHF 22 per share in 2018. The Swiss Market Index (SMI) fell by 10.2%
compared with the previous year. The Swisscom share price declined by 9.4%. Swisscom
shares have been traded on the stock exchange for 20 years, offering average annual
returns of 5%. Since Swisscom’s initial public offering, a total of CHF 32 billion has been
paid out to shareholders via dividends, capital reductions and share buyback pro-
grammes.

Outlook
For 2019, Swisscom expects net revenue of around CHF 11.4 billion, EBITDA of over
CHF 4.3 billion and capital expenditure of around CHF 2.3 billion. Subject to achieving its
targets, Swisscom will propose payment of an unchanged attractive dividend of CHF 22
per share for the 2019 financial year at the 2020 Annual General Meeting.

Sincerest thanks
On 1 January 2018, Swisscom celebrated its 20th anniversary. Swisscom has constantly
reinvented itself and continues to do so. Cyclical transformation has become a perma-
nent condition. And as a large corporation, we understand the need to constantly break
new ground. We are extremely proud that our employees are inspired to help us in this
endeavour. What’s more, every day they impress us as they continuously come up with
new ideas, concepts and proposals, which we can now implement more quickly and
easily thanks to our agile structure. For this, we would like to thank our employees.
Swisscom has around 20,000 people working for it, and each and every one of them
deserves a great big “thank you!”. Their curiosity and commitment ensure that you –
as investors and customers – can continue to rely on Swisscom as a partner, no matter
what the future brings. We would also like to thank you, our valued shareholders, for the
trust and confidence you have in our company.

Yours sincerely

Hansueli Loosli
Chairman of the Board of Directors
Swisscom Ltd

Urs Schaeppi
CEO Swisscom Ltd

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Connecting
people

In towns, in valleys and in the
farthest corners of Switzerland –
access to the digital world should
be available wherever you are.

Swisscom is digitising 240 alpine cabins. The partnership with alpine associations
underlines Swisscom’s commitment to the alpine economy and community – a little
piece of Switzerland that must be protected and supported. This is Swisscom’s way of
demonstrating its deep-rooted commitment to Switzerland.

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Strategy and
environment

Corporate strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Objectives and achievement of targets . . . . . . . . . . . . . . . . . . . . . . . .17
General conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Data protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21

Infrastructure

Infrastructure in Switzerland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
Infrastructure in Italy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26

Employees

Employees in Switzerland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Employees in Italy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29

Brands, products and
services

Swisscom brands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
Products and services in Switzerland . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Products and services in Italy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
Customer satisfaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35

Innovation and
development

Financial review

Innovation as an important driver . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
Innovation focused on specific topics . . . . . . . . . . . . . . . . . . . . . . . . . .38

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
Segment results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
Depreciation and amortisation, non-operating results . . . . . . . . .49
Cash flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
Capital expenditure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51
Net asset position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52
Value-oriented business management . . . . . . . . . . . . . . . . . . . . . . . . .54
Statement of added value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55
Financial outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56

Capital market

Swisscom share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
Dividend policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
Credit ratings and financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58

Risks

Risk situation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
Risk factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59

Swisscom Group
five-year review

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61

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Strategy and
environment

The market environment is influenced by increasing connectivity, changing
customer requirements, the growing significance of security and data
protection, and technological progress. As a market, technology and
innovation leader, Swisscom seeks to hold its own in its competitive core
business. In order to make its vision a reality, Swisscom has set out three
strategic aspirations in its corporate strategy. In doing this, it intends to secure
its market position and make it easy for its customers to seize the opportu-
nities presented by the networked world.

Corporate strategy

Swisscom is the Swiss market leader for mobile
telecommunications, fixed-line telephony and
television . It also occupies a leading market position
in a wide range of IT business segments . Fastweb is a
leading alternative provider for both retail and
business customers in the Italian fixed-line market .

Megatrends such as digitisation and connectivity,
customisation and demographic change are shaping
and altering our society and the economy in the long
run and have a long-term impact on the activities of
Swisscom . The increasing proliferation of the Internet
of Things, the 5G mobile telephony standard being
ready for market and the advancements made in the

field of artificial intelligence are short to medi-
um-term trends that impact Swisscom’s business .

The market environment in which Swisscom operates
has changed in recent years . Characteristic examples
of this include increasing connectivity, changing
customer needs, the growing importance of security
and data protection, and technological progress . The
pace of change has accelerated . Global Internet
companies are using their economies of scale and
pushing their way into local ICT markets . The core
market is saturated, with competition becoming
increasing fierce and prices under considerable
pressure, which is further squeezing Swisscom’s
revenue . Swisscom is looking for ways to compensate
for the resulting decrease in revenue and income .

As number 1, we are shaping the future.
Together we inspire people in the networked world.

Best customer experience

Operational excellence

New growth

Swisscom is a market, technology and innovation
leader in Switzerland with high quality standards,
connecting both residential and corporate customers .
It is at the heart of digitisation and enables its
customers to seize the opportunities presented by the
networked world without difficulty . In everything it

does, Swisscom focuses on people’s needs . Its
employees work in concert to provide inspirational
experiences . Swisscom is committed and trustworthy
in its actions and consistently seeks to learn new
things and develop itself further, without ever losing
sight of what is important when pursuing its goals .

What matters most to Swisscom is its customers’
trust in it . That trust is strengthened by Swisscom’s
high reliability and sustainability in everything it
undertakes . To make its vision of being a leader in
shaping the future and inspiring people in a net-
worked world a reality, Swisscom has set out three
strategic aspirations that give tangible expression to
its strategy .

Best customer experience
Swisscom wants to inspire its customers by providing
them with the best service at all times, regardless of
their location . The customer experience is based on a
high-performance infrastructure: Swisscom aims to
offer its customers the latest IT and communications
infrastructure and therefore assert its position as a
technological leader . Customer requirements for
networks are constantly growing . As a result,
Swisscom is setting up and operating networks that
are second to none in terms of security, availability
and performance . Swisscom is expanding its fixed
telephone and mobile network infrastructure,
enabling its customers to enjoy the best experiences
when utilising its offerings . With this in mind,
Swisscom is steadily driving forward the growth of 5G
in Switzerland despite the adverse impact of regula-
tions; for example, it has built Switzerland’s first fully
standardised 5G network in Burgdorf . The Swisscom
Cloud is the key platform for the internal and external
provision of services and forms the basis for new,
scalable offerings produced in Switzerland . Swisscom
complements its own cloud with global solutions
(such as Amazon Web Services), thereby operating as
a service provider that integrates solutions into
hybrid environments, i .e . combinations of local
infrastructure (private cloud) with the cloud resources
of a cloud provider (public cloud) .

The key to the success enjoyed by Swisscom is its
relationships with its customers . The company’s main
guiding principles are to provide the best service and
inspirational experiences across the board . Swisscom
customers can count on us as a competent, reliable
partner and enjoy service that is individual, flexible
and personal at all points of contact . For example,
they can have their damaged mobile phones repaired
in no time at all in the nine Repair Centres, which
meets a key customer need . Swisscom is reducing
complexity and providing relevant, innovative
offerings . For example, it is enabling its mobile
customers to take out “multi-device” subscriptions by
simply adding more devices – tablets or smart
watches, for instance – to the one they already have .
This means that individual customers do not have to
take out a separate subscription for devices newly
added to the range that connect them to the net-
work . In the business customer market, Swisscom
offers modern IT workstations from the cloud

supplemented by artificial intelligence . At their core is
the Digital Assistant, which enables users to set up
their devices quickly and easily themselves, to trigger
support queries and to access knowledge databases .
When creating new digital services and experiences,
Swisscom always focuses on meeting the needs of its
customers . In this way, Swisscom is restoring the trust
its customers have in the company, reinforcing
customers’ loyalty to the brand and increasing agility
and efficiency .

Operational excellence
Due to fierce competition, revenues in the core
business are still under pressure, in turn bringing even
greater pressure to bear on costs . It is essential that
Swisscom lower its cost base over the coming years to
secure its long-term future as a business . This will
allow Swisscom to free up funds for the exploration
of new business opportunities and make the invest-
ments necessary to ensure success . One of the main
focuses in optimising costs is the creation of more
efficient operating procedures, for example by
simplifying and adjusting the product portfolio,
reducing the number of interfaces, using agile
development methods, modernising and consolidat-
ing the IT platforms, increasing the efficiency of staff
deployments, and optimising processes being driven
by initiatives such as All IP migration . Swisscom also
regards internal digital transformation, and hence a
higher level of digitisation, as crucial . This includes the
virtualisation of network functions, improvement of
the online channel, greater process automation and
the increased use of artificial intelligence and
analytics . In addition to this, Swisscom is increasing
the efficiency of its investment activities, for example
by utilising an intelligent mix of technologies and by
reducing the number of partners involved in the
expansion of the network .

New growth
In spite of increased saturation, Swisscom is expect-
ing continued moderate volume growth in certain
relevant markets (among them postpaid mobile
telephony, broadband and IT services) in Switzerland
and Italy . The main driving forces behind this are
modest population growth, the increase in use of ICT
in a wide variety of industries and the relatively low
broadband penetration in Italy . Nevertheless, price
pressure remains at a high level, to the extent that
Swisscom expects a slight drop in market revenue on
the whole, particularly in the telecommunications
market .

Through the further development of its core business,
Swisscom intends to realise growth opportunities
through, for example, the further expansion of its TV/
entertainment offering, growth in the wholesale
sector, the expansion of its digital portfolio and, in

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the SME sector, through the successful marketing of ICT
products . The solutions business for digital security,
business applications and the cloud in the business
customer market offer further growth opportunities .
Swisscom is launching new digital services in selected
areas . Some of these, such as digital services for SMEs
(e .g . localsearch), Swisscom’s FinTech operations and its
use of blockchain as a supporting technology, are based
on new business models . When selecting growth areas,
Swisscom is guided by future customer requirements,
focuses on future-oriented business models with
substantial growth and is making increased use of
partnerships . In addition to the activities mentioned
above, Italian subsidiary Fastweb is playing a key role in
the realisation of growth opportunities . Swisscom is
improving Fastweb’s market position . Thanks to the
acquisition of Spektrum and the rollout of 5G, Fastweb
can strengthen its convergence offering by expanding
its current ultra-fast broadband network (with fixed
wireless access and its own 5G infrastructure in
selected urban hotspots) . Growth has also resulted
from the existence of a convergent product portfolio
based on transparency, fairness and simplicity, the
further development of the mobile communications
market, the expansion of the business customer
portfolio by means of horizontal solutions in relation to
the cloud and digital security, high-quality service and
the utilisation of partnerships .

Transformation
In order to deal with constant change and successfully
implement the strategy, employees at Swisscom are
continuously learning and developing, be it in their
mindset, in their working methods or in forms of
cooperation and structures . To this end, Swisscom
relies on agile and customer-centric working models
and organisational structures, ongoing improvement
and simplification, the development of relevant key
skills and technological transformation, for example .
The desired change in behaviour within the organisa-
tion is supported by targeted communication and
training measures .

Corporate responsibility (CR)
Digitisation presents many opportunities, but also
certain risks . Swisscom is well aware of its particular
responsibility as Switzerland’s leading ICT company .
Swisscom endeavours to make technological
advances accessible to everyone, based on a founda-
tion characterised by ethical thinking and acting with
integrity . Smart data, artificial intelligence, Industry
4 .0, smart cities, smart homes and esports are
examples of areas that present Swisscom with new
challenges, which it addresses by adapting and
building on its CR strategy . Swisscom’s CR strategy for
2025 is founded on the three fundamental challenges
presented by the digital information society, to which
Swisscom seeks to make its own contribution:

● Swisscom wants to hone the digital skills of people
living in a networked world . While technologies
advance at great speeds, people’s skills do not
change without help from others . The ability to
relate competently to a digital “other” is vital in
almost every area of life – for schoolchildren,
parents, politicians and senior citizens alike .
Anyone embedded in a value creation chain has no
option but to keep pace with the demands of a
networked world .

● Swisscom wants to make a tangible contribution

to climate protection worldwide . Climate change is
turning out to be a global problem of the first
order, affecting Switzerland’s natural resources no
less than those of all other countries . All countries
must contribute to climate protection . Digitisation
harbours promising possibilities for this effort .
● Swisscom seeks to put in place and develop the
most reliable and most secure ICT infrastructure
everywhere . That, after all, is fundamental to
Switzerland’s competitiveness, prosperity and
quality of life .

Accordingly, Swisscom pursues three objectives as its
own contribution to the well-being of people, the
environment and Switzerland as a nation:
● Doing more for people: Swisscom enables people
in Switzerland to make use of the opportunities
presented by a networked world . It is helping two
million people a year to develop their digital skills
and is improving working conditions in its supply
chain, and will maintain this focus until at least
2025 . Swisscom is also training around 960 appren-
tices .

● Doing more for the environment: Swisscom cares
about the environment . It is working with its
customers to reduce its CO2 emissions by 450,000
tonnes . This corresponds to 1% of Switzerland’s
greenhouse gas emissions .

● Doing more for Switzerland: Swisscom uses the

best networks and progressive solutions to create
added value for its customers, employees,
shareholders and suppliers, and for Switzerland . It
provides everyone and all businesses in Switzer-
land with reliable ultra-fast broadband . By doing
this it makes Switzerland a more competitive
country and a better place to live .

These three objectives comply with the company’s
overall goals and the 17 Sustainable Development
Goals of the United Nations . The new strategy retains
the earlier objectives in relation to media skills,
climate protection, being a responsible employer,
maintaining a fair supply chain and a networked
Switzerland . The Work Smart initiative is being
further promoted in the context of the new environ-
mental objective . Further information can be found in
the separate Sustainability Report .

Objectives and achievement of targets

Based on its strategy, Swisscom has set itself various short- and long-term targets that take economic,
ecological and social factors into consideration .

Financial targets

Net revenue

Operating income before depreciation
and amortisation (EBITDA)

Capital expenditure in property, plant
and equipment and intangible assets

Operational Excellence

Other targets

Ultrafast broadband in Switzerland 1

Objectives

Target achievement 2018

Group revenue for 2018
of around CHF 11.6 bn

EBITDA for 2018
of around CHF 4.2 bn

Capital expenditure for 2018
of less than CHF 2.4 bn

Reduction of CHF 100 million in cost base
in the Swiss business in 2018

Coverage of 90% by the end of 2021
in excess of 80 Mbps

Coverage of 75% by the end of 2021
in excess of 200 Mbps

CHF 11,714 mn

CHF 4,213 mn

CHF 2,404 mn

CHF 121 mn

64%

35%

1 Basis: 4 .3 million homes and 0 .7 million businesses (Swiss Federal Statistical

Office – SFSO) .

General conditions

Market environment
The three macroeconomic factors of the economy (Switzerland and Italy), interest rates and exchange rates
(EUR and USD) have a considerable influence on Swisscom’s financial position, results of operations and cash
flows and therefore on financial reporting .

Change GDP Switzerland

Change GDP Italy

Yield on government bonds (10 years)

Closing rate CHF/EUR

Closing rate CHF/USD

1 Forecast SECO

Unit

in %

in CHF

2014

2.4

0.1

0.38

1.20

0.99

2015

1.2

0.8

(0.04)

1.08

1.00

2 Forecast Istat

2016

1.4

0.9

(0.14)

1.07

1.02

2017

1.0

1.5

(0.07)

1.17

0.98

2018

2.6

0.1

(0.24)

1.13

0.99

Economy
Economic growth in Switzerland was higher in 2018
than in preceding years, with GDP forecast to increase
by 2 .6% in real terms . While there was also a rise in
inflation, it remained very low . Economic develop-
ments are having a wide range of impacts on
customer segments . A high share of the revenues
generated in the Residential Customers segment can
be attributed to products with fixed monthly charges,
meaning economic fluctuations are low . In contrast,
revenue from roaming services is subject to increased
volatility due to being reliant on trips made outside of
Switzerland (inbound and outbound) . Nevertheless, a
large and ever-increasing proportion of the roaming
services in terms of outbound traffic are included in
the fixed monthly charges . Project business in the
Enterprise Customers segment is more sensitive to
cyclical factors . Economic fluctuations tend to have a

greater impact on the sales and revenue generated by
Italian subsidiary Fastweb for both residential and
business customers .

Interest rates
The interest rate level has an impact on funding costs
and also affects the valuation of long-term provisions
and pension liabilities in the consolidated financial
statements . In addition, interest rates are a key
assumption for the impairment assessment of
recognised goodwill and other items in the financial
statements . The returns on ten-year Swiss govern-
ment bonds fell in 2018, and they remain at a
historically very low level . Swisscom exploited this in
2018 and reduced the average interest expense to
1 .0% (prior year: 1 .7%) by issuing bonds totalling CHF
885 million . 74% of financial liabilities were charged a
fixed interest rate . The average maturity of 5 .4 years

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offers considerable protection against a potential rise
in interest rates .

Currencies
The exchange rate trends for foreign currencies have
very little impact on the Swisscom results of opera-
tions . Transaction risks exist primarily in the purchase
of end devices and technical equipment as well as in
the acquisition of services from network operators
outside of Switzerland . In the core business in
Switzerland, the amount of money paid out in foreign
currencies is higher than income . The net cash flows
in foreign currency are partly hedged by foreign
currency forward contracts . Swisscom funds itself for
the most part in Swiss francs and to a lesser extent in
EUR . Over the last three years, the share of the
funding denominated in EUR has gradually increased
to around 40% . In addition to the transaction risks on
the operational cash flows in foreign currencies, there
is a currency translation risk in the balance sheet .
Fastweb’s net assets, which totalled EUR 2 .9 billion at
the end of 2018, and those of the other foreign
subsidiaries are translated into Swiss francs in the
consolidated financial statements at the exchange
rate applicable on the balance sheet date . Any
differences from the foreign currency translation are
recognised in equity and have no impact on the
results . Cumulative currency translation adjustments
in respect of foreign subsidiaries amounted to CHF 1 .7
billion at the end of 2018 . A portion of the financial
liabilities in EUR has been classified as a currency
hedge of the Fastweb net carrying amount .

Legal environment

Swisscom’s legal framework
Swisscom is a public limited company with special
status under Swiss law . Corporate governance is
governed by company law and the Telecommunica-
tions Enterprise Act (TEA) . In its capacity as a listed
company, Swisscom also observes capital market law
and the provisions concerning management remuner-
ation . The legal framework for Swisscom’s business
activities is primarily the Federal Telecommunications
Act (TCA), the Federal Cartel Act (CartA) and the
Federal Copyright Act (CopA) .

Telecommunications Enterprise Act (TEA) and
relationship with the Swiss Confederation
The TEA requires the Swiss Confederation to hold a
majority of the capital and voting rights in Swisscom .
Were the government to dispose of the majority
holding, this would require a change in the corre-
sponding law, which would be subject to a facultative
referendum . Every four years, the Federal 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 partnerships and investments . In
2017, the Federal Council approved the goals for the
period from 2018 to 2021 .
N See www.swisscom.ch/targets_2018-2021

Telecommunications Act (TCA)
The TCA and the associated legislation primarily
govern network access, basic service provision, the
use of radio frequencies and net neutrality . During
the reporting period, the Swiss parliament deliber-
ated on revising the TCA .
N See www.admin.ch

Network access
The intention of the legislators is that network access
regulation should not be expanded to include newly
built fibre-optic-based and hybrid fixed networks
(technology-neutral network access) . This means that
Swisscom is required to allow other providers physical
network access only to copper lines and at cost-based
prices . Access to fibre-optic lines continues to be on
the basis of commercial agreements .

Basic service provision
The aim of the basic service is to provide reliable and
affordable 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 . The current licence (2018 to 2022)
comprises a multifunctional telephone line, Internet
access with a minimum data transfer rate of 3 Mbps
(download) and various services for disabled people .
In 2017, the Swiss Parliament decided to increase the
minimum bandwidth for the basic service to 10 Mbps
(download) . This change will take effect the next time
the Ordinance on Telecommunications Services is
revised .

Mobile phone licence
Mobile phone licences are awarded by the Federal
Communications Commission (ComCom), usually by
means of public tenders . In February 2012, all of the
frequencies available for mobile communications
were sold in an auction . Swisscom acquired 44% of
the frequencies for which bids were submitted . The
licences run until the end of 2028 and can be used
with all technologies . Starting with the second
quarter of 2019, more mobile frequencies (in the
700 MHz, 1,400 MHz, 2,600 MHz and 3,600 MHz
frequency bands) are expected to become usable . The
frequencies required for this purpose are to be
awarded by auction in 2019 . The concession for the
frequency spectrum acquired through this auction
lasts 15 years, with the exception of the frequencies
in the 2,600 MHz band, which may not be used after
the end of 2028 .

Federal Cartel Act (CartA)
As a result of Swisscom’s market position, competi-
tion law (Federal Cartel Act) is highly relevant for
several of its products and services . The Federal Cartel
Act allows for direct sanctions to be imposed for
unlawful conduct by market-dominant companies .
The Swiss competition authorities have classified
Swisscom as being market-dominant in a wide range
of submarkets . There are currently proceedings open
for three issues, within the context of which the
Competition Commission (COMCO) has classified
Swisscom as being market-dominant and its conduct
as being unlawful, and has thus imposed direct
financial sanctions . The proceedings refer to the
provision of ADSL wholesale services, the broadcast of
live sporting events on pay TV and the broadband
connections of post office locations . The statuses of
the proceedings and the potential financial effects are
set out in the notes to the consolidated financial
statements (Note 3 .5) .

The Federal Copyright Act (CopA)
Swiss copyright law protects the rights of creators of
works while also facilitating the fair use of works
subject to copyright, which may generally be used
only with the copyright holder’s consent and in return
for consideration . An exception to this rule is made
for private use and for copying for private use . The
compensation payable to the copyright holder for
certain types of use protected by copyright law
(collective management of rights) is determined by
reference to collectively negotiated copyright tariffs .
These apply to distribution of television programmes
and to the use of time-delayed television viewing
(Replay TV) . The operators of TV channels take the
view that Replay TV loses them advertising revenue .
Through the ongoing revision of the CopA that is
currently being debated in Parliament, they are
therefore attempting to exclude it from the collective
management regime . Time-delayed television
viewing (Replay TV) meets a real need on the part of
customers and is essential if the TV programming
offered is to be attractive and forward-looking . It is
for that reason that Swisscom is expressing its firm
opposition to any restriction on the present custom-
er-friendly arrangements .

The Federal Radio and Television Act (FRTA)
Switzerland’s Radio and Television Act governs the
production, presentation, transmission and reception
of radio and television programmes . It is primarily on
account of Swisscom TV that Swisscom is affected by
the rules on the transmission and broadcasting of
media offerings . The various privileges (known as the
“must carry” provisions) applicable to certain
broadcasters are also relevant to Swisscom .

Federal Act on Data Protection (FADP)
The draft of the revised Data Protection Act (FADP)
was published on 15 September 2017 and is currently
progressing through Parliament on its way to
becoming law . It is not yet known when the revised
FADP will enter into force . Swisscom is working on the
assumption that the new FADP will resemble more
closely the European Union’s General Data Protection
Regulation (GDPR), although it remains to be seen
what its detailed provisions will be . Swisscom is
actively monitoring developments in order to be able
to take preventive measures in good time .

The European Union’s General Data Protection
Regulation (GDPR)
The GDPR governs the processing of personal data
and has been in force since 25 May 2018 . The GDPR is
relevant to Swisscom especially as regards its
provision of services to residential customers within
the European Economic Area (EEA) and of IT services
to business customers directly subject to the GDPR .
The actions required to comply with the GDPR’s
requirements, in so far as it impacts Swisscom’s
operations, were taken within the specified time
period . Swisscom is actively monitoring develop-
ments in data protection law in the EU in order to
keep its practices up to date .

Legal and regulatory environment in Italy
The legal framework for Fastweb’s business activities
is laid down primarily by both Italian and EU telecom-
munications legislation . Before taking effect, any new
regulations must, in the course of the ordinary
regulatory process, be submitted to the European
Commission and to the Italian competition and cartel
authorities for their opinion .

As the national regulatory authority, the Autorità per
le Garanzie nelle Comunicazioni (AGCOM) regularly
conducts market analyses in order to review regula-
tory obligations . AGCOM’s main concern in 2018 was
with reviewing the wholesale prices for 2017 . As a
result of this review, prices for bitstream access were
reduced . AGCOM also directed that monthly billing
should be resumed . Fastweb, like its competitors, had
billed its residential customers every four weeks .
AGCOM also granted Fastweb an exception to the
“roam like at home” (RLAH) rule, which specifies that
no additional charges should be incurred when
roaming within the EU . This exception permits
Fastweb to continue to demand roaming charges
until July 2019 . AGCOM also launched an analysis of
the wholesale fixed-line services market in 2018 . In
the second half of 2018, an auction of mobile
frequencies was held in which Fastweb acquired
frequencies in the 26 GHz range for a period of 19
years, for which it paid EUR 33 million .

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Swiss market trends in telecoms and IT
services
The Swiss telecommunications market is one of the
more highly developed by international standards . It
is characterised by innovation and a wide range of
voice and data products and services . The constant
advancement of digitisation and connectivity is a key
trend . In addition to the established regional and
national telecommunications companies, internation-
ally active companies are entering the Swiss telecom-
munications 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 relocating to an
increasing degree to the Internet . These develop-
ments are generating constant growth in demand for
high bandwidths that enable fast, high-quality access
to data and applications . The uninterrupted availabil-
ity of data and services, as well as the security
involved in ensuring this availability, play a key role .
Modern, highly effective network infrastructures
provide the ideal foundations for this . Swisscom is
therefore setting up the networks of the future for
both fixed-line and mobile communications .

The Swiss telecoms market is broken down into the
submarkets of relevance to Swisscom – mobile and
fixed-line telephony . The total revenue it generates is
estimated at around CHF 11 billion; however, this is
being put under increasing pressure . Market satura-
tion is ramping up the fierce competition in all
submarkets . The individual submarkets are character-
ised by a high level of promotional activity on the
part of the individual market participants . This makes
bundled offerings more and more important, as they
tie these customers more effectively to the company .
At the heart of the portfolio of offerings are conver-
gent offerings which can also contain one or more
mobile lines in addition to a fixed broadband
connection with Internet, TV and fixed-line tele-
phony . Swisscom’s range likewise includes bundled
offerings combining different technologies, while it
also offers products and services from the core
business using secondary and third-party brands .

Market share Swisscom
Swiss telecommunication market

60%

67%

33%

35%

75%

50%

25%

2018

2017
Mobile

2018

2017
Broadband

2017
TV

2018

Mobile communications market
Switzerland has three separate, wide-area mobile
networks on which the operators of those networks
market their own products and services . Other
market players also offer their own mobile services as
MVNOs (mobile virtual network operators) on these
networks . Swisscom makes its mobile communica-
tions network available to third-party providers so
that they can offer proprietary products and services
to their customers via the Swisscom network . Due to
the high level of market penetration, the mobile
communications market in Switzerland is showing
signs of saturation . For this reason, the number of
mobile lines (SIM cards) in Switzerland has stagnated
at around 11 million . Mobile access line penetration
in Switzerland remains at about 130% . As in the
previous year, the number of postpaid subscriptions
taken out increased, while the number of prepaid
customers fell . The proportion of mobile users with
postpaid subscriptions now stands at 71% (prior year:
68%) . Swisscom’s market share remains unchanged
from the previous year at 60% (postpaid: 61%;
prepaid: 59%) .

Fixed-line market
Switzerland has almost 100% coverage of fixed broad-
band networks . Alongside the fixed-line networks of
telecoms companies, there are also networks
provided by cable network operators . Moreover,
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 . These network infrastructures are
largely also made available to other market partici-
pants so that they can supply their products and
services . This has increasingly made the fixed
broadband connection the key access point for
customers . It is the basis for a wide-ranging product
offering from both national and global competitors .
During 2018, competition in the fixed-line segment
gained momentum when another Swiss market
participant rolled out a new bundled offering
featuring fibre optics . This supplier had formerly been
active only on the mobile telephony market .

Broadband market
The most widespread access technologies for fixed
broadband connections in Switzerland are infrastruc-
tures based on the networks of telecommunications
providers and cable network operators . At the end of
2018, the number of retail broadband access lines in
Switzerland totalled 3 .8 million, corresponding to
around 85% of households and businesses . The
number of broadband connections increased by 1% in
2018 (prior year: 3%) . This growth is due mainly to the
increase in the number of broadband access lines
provided by telecommunications providers, whose
market share, as measured by the number of broad-

band access lines, rose to 68% from the previous
year’s figure of 67% .

TV market
In Switzerland, TV signals are transmitted via cable,
broadband, satellite, antenna (terrestrial) and mobile .
This enables consumers to watch television pro-
grammes on a very wide variety of devices . The Swiss
TV market features a wide range of offerings from
established national market participants, and is now
also playing host to new offerings from other national
and international companies, including TV and
streaming services that can be used over an existing
broadband connection, regardless of the Internet
provider . Competition in the largely saturated TV
market remains highly dynamic – especially in the
area of TV content, something that can be attributed
to the increasingly widespread broadcasting rights of
popular sports such as football and ice hockey .
Approximately 90% of TV connections are provided
via cable or broadband networks . Swisscom has
steadily increased the market share of its own TV
offering, Swisscom TV, over the past few years . It is
the market leader and further expanded on this
leading position throughout 2018, achieving a market
share of 35% at the end of the year (prior year: 33%) .

Fixed-line telephony market
Fixed-line telephony is mainly based on lines running
over the fixed networks of the telecom service
providers and the cable networks . The number of
fixed-line telephony connections is steadily declining .
This trend continued in 2018, with the number of
Swisscom fixed-line connections falling by around
13% to 1 .8 million . The main reason for the decline
was the substitution of mobile phones for fixed-line
telephony .

IT services market in Switzerland
The market for IT services generated revenue of
around CHF 10 billion in 2018 and will continue to
grow on the whole in the coming years . The areas in
which Swisscom expects the most growth are the
cloud, security, the Internet of Things (IoT) and
business applications . This growth results from the
increasing number of business-driven ICT projects,
the growing willingness to purchase external services,
an increase in the threat situation in IT security and
new technological opportunities in the IoT area (e .g .
new sensors, improved connectivity) . Customers
usually expect services customised to their individual
sector and business processes with related consul-
tancy .

development is the difficult environment in the
banking sector (project volatility, changing customer
requirements), while the development is positive in
growth areas such as cloud, data centre and security
services, where market revenues have risen signifi-
cantly .

Italian market trends in telecoms services

Italian broadband market
Italy’s fixed-line broadband market is Europe’s fourth
largest, with a revenue volume of EUR 15 billion
including wholesale services . Broadband penetration
in households and businesses has increased to 60%,
but remains well below the European average . The
relatively low broadband penetration is due on the
one hand to the fact that in the past television
services were mainly broadcast terrestrially and by
satellite as a result of restrictive legislation on the
distribution of content and the lack of cable network
operators . On the other hand, the penetration of
mobile broadband services is much higher than the
European average thanks to the combination of
high-performance mobile networks and relatively
lower mobile prices . The fixed-network broadband
market comprises around 16 million lines . Competi-
tion has become much more intense over recent
years .

Fastweb is the second largest broadband provider
with a market share of around 15% in the residential
segment and around 31% in the business segment .

Italian mobile communications market
Four mobile network operators are active on the
Italian mobile communications market, with 83
million SIM cards having been issued to date . There is
considerable pressure on prices, driven by such
factors as aggressive promotions and also made more
acute by the arrival of virtual mobile network
operators on the market . Under these challenging
conditions, Fastweb has managed to successfully
offer its own mobile services .

Overall, the sales volume of the Italian mobile
communications market amounts to around EUR 16
billion . It can be assumed that the market volume,
despite the already low price level by international
standards, will decline as a result of price pressure
and intense competition .

Data protection

In the IT services sector, Swisscom was unable to
continue the growth trend of recent years as planned .
The decline in sales led to a slight loss of market share
in the year under review . A main driver for this

Almost all of Swisscom’s divisions process personal
data . This is particularly important in the provision of
services and the handling of business relationships .
The ongoing digitisation process offers a plethora of
possibilities for optimising and further developing

services for customers and for improving the effi-
ciency of operational processes . Swisscom stands for
responsible, transparent and legally compliant
handling of customers’ and employees’ personal data .

It works continuously to extend its data protection
measures . For example, new processes and methods
ensure that data protection interests are taken into
account at an even earlier stage when planning
projects . In addition, staff training was intensified in
order to further improve their knowledge of the
handling of personal data .

For some time, Swisscom has been giving its custom-
ers the opportunity to influence the processing of
their data . Customers can opt out of their data being
used for smart data applications in the online
customer centre and at the points of contact .

Data protection within Swisscom is controlled and
monitored by a central data governance unit . This has
been further expanded so all business areas are
actively supported with the necessary resources and
knowledge to ensure compliance with legal require-
ments and Swisscom’s pledge of trustworthiness .
N See www.swisscom.ch/dataprotection

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Infrastructure

The telecommunication networks form the backbone of the Swiss infor-
mation society. Swisscom continues to invest heavily in infrastructure to meet
the broadband needs of the Swiss fixed and mobile network. Most people
living in any given Swiss municipality should have access to increased
bandwidths by the end of 2021. By the end of 2018, Swisscom had selectively
upgraded seven cities in its mobile communications network with 5G, thereby
pursuing its strategy of providing Switzerland with the best network and a
solid foundation for the digital transformation.

in the world . Rural regions benefit in particular from
the high level of capital expenditure, almost two
thirds of which is financed by Swisscom . According to
a study carried out by IHS (Broadband Coverage in
Europe 2017), the availability of broadband in rural
regions of Switzerland is about twice as high as the
EU average .

In mobile communications, broadband LTE coverage
now extends to 99% of the population . 95% of the
population currently has 4G+ with speeds of up to
300 Mbps, 72% 4G+ with speeds of 500 Mbps, and
27% 4G+ with speeds of up to 700 Mbps . This makes
Swisscom the largest network operator in Switzerland
by far, both in the fixed and mobile network . In the
fixed-line segment, Swisscom continues to expand its
ultra-fast broadband coverage with minimum
bandwidths of 80 Mbps . In doing so, it is focusing on a
mix of fibre-optic technologies as well as convergent
approaches that harness both the mobile and
fixed-line networks in combination . Swisscom uses
the term “fibre-optic technologies” to mean Fibre to
the Home (FTTH) as well as network architectures in
which copper cables are used in the last few metres
of the connection, such as Fibre to the Curb (FTTC),
Fibre to the Street (FTTS) and Fibre to the Building
(FTTB) . Optical fibre is getting ever closer to the
customer .

Infrastructure in Switzerland

Network infrastructure
The telecommunication networks form the backbone
of the Swiss information society . Swisscom pursues
the same strategy both on the ground and in the air
– to provide Switzerland with the best network and
thus provide a solid foundation for the digital
transformation . Swisscom currently operates three
networks that help facilitate the achievement of this
aim: the fixed network, the mobile network and the
low power network .

A uniform basis for increasing demand
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 and its infrastruc-
ture is Internet Protocol (IP) technology, which can be
used via copper and fibre-optic lines . Swisscom had
already converted the services and products for
almost all residential customers and the majority of
corporate customers to All IP by the end of 2017 .
Around 2 million Swisscom customers now benefit
from the advantages offered by IP technology .
Swisscom started transferring all of its locations to IP
in 2018 . 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
initiative thus forms the basis for the digitisation of
the Swiss economy .

Leading international position thanks to
constant expansion
International studies carried out by the OECD, IHS
(Information Handling Services) and Akamai regularly
show that Switzerland possesses one of the best
information and telecommunications infrastructures

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Fibre to the Curb (FTTC)
● Up to 100 Mbps

Fibre to the Street (FTTS)
● Up to 500 Mbps

Fibre to the Building (FTTB)
● Up to 500 Mbps

Fibre to the Home (FTTH)
● Up to 1,000 Mbps

The Swisscom mobile network is one of the best by
international standards . Swisscom currently supplies
around 99% of the Swiss population with 4G, 3G and
2G coverage . Progress continues to be made on
expanding 4G+ . Swisscom also carried out localised
tests of 5G in seven Swiss cities in 2018 . The volume of
data transferred on the mobile network is constantly
on the rise . As a result and owing to the stringent
legal framework conditions, the mobile network has
to be expanded with new mobile telephony sites .
Microcells can enhance the mobile sites . Thanks to a
Swisscom innovation, they can even be installed in
the floor and also be used in business premises and
indoor public areas by means of antennas .
N See www.swisscom.ch/networkcoverage

Fibre

Copper

Swisscom has set itself high goals as regards network
expansion: Most people living in any given Swiss
municipality should have access to increased band-
widths 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 . In remote regions of Switzerland, Swisscom
will honour its universal service provision mandate .
Thanks to the new DSL+LTE Bonding technology, it is
also noticeably improving broadband provision in
certain regions . DSL+LTE Bonding combines the
performance of the fixed-line network with that of
the mobile network, thus ensuring a significantly
better customer experience . As at the end of 2018,
Swisscom had established around 4 .2 million
connections to its ultra-fast broadband service with
speeds in excess of 50 Mbps through continuous
expansion . Of this number, over 3 .6 million lines were
equipped with the latest fibre-optic technology .

Right at the cutting edge thanks to innovative
technologies
In terms of technology, Swisscom has maintained its
leading international position . For example, it became
the first European telecommunications provider to
introduce the G .fast technology anywhere in the
world . G .fast enables bandwidths of up to 500 Mbps
on short copper cables (up to 200 metres in length) .
To put this into figures, a speed of 500 Mbps will
ensure that customers can use cutting-edge services
for many years to come, such as digital TV in HD
quality which requires 10 Mbps or Netflix and
YouTube in HD quality which needs 6 Mbps .

Antenna in the
cable duct

DSL/LTE
bonding

Antennas for
in-house amplification

Macro
antenna

Micro
antenna

Mobile signal-
amplifier

2G | 3G | 4G

2G | 3G | 4G | 5G

2G | 3G | 4G

A comprehensive introduction of 5G is delayed due to
the strict legal limits (ONIR – Ordinance on Protection
against Non-Ionising Radiation) . 5G is the mobile
communication standard of digitisation and vitally
important to Switzerland as a business centre,
enabling speeds of up to 10 Gbps, real-time reaction
and much larger capacities than current standards . By
putting in place the first 5G infrastructure, Swisscom
is highlighting its leadership in technology and laying
the foundation for the further development of 5G
applications . Swisscom has been working together
with Ericsson, the EPFL and Ypsomed since 2016 on
research into the new standard as part of the “5G for
Switzerland” programme . Its expectation is that 5G
will drive forward networking in the form of the
Internet of Things .

Mobile frequencies
Transmission of mobile signals requires the availabil-
ity of suitable frequencies . In Switzerland, such
frequencies are allocated on a technology-neutral
basis, i .e . any mobile communications technology can
be transmitted on the available frequencies . In 2012,
the Federal Communications Commission (ComCom)
allocated the frequencies 800 MHz, 900 MHz,
1,800 MHz, 2,100 MHz and 2,600 MHz . Swisscom
currently uses these frequencies to offer its customers
services via the 4G, 3G and 2G mobile communica-
tions technologies . At the beginning of 2019, further
mobile radio frequencies – 700 MHz, 1,400 MHz,
2,600 MHz and 3,500 MHz – will be allocated in
Switzerland, primarily for transmission via 5G .
Licences are issued by way of an auction .

Swisscom is continually expanding its broadband
network, extending the product range and increasing
the number of antenna sites . It coordinates site
expansions with other mobile providers wherever
feasible and now shares nearly a quarter of its
approximately 8,400 antenna sites with other
providers . At the end of 2018, Swisscom had around
5,800 exterior units and 2,600 mobile communication
antennas in buildings . And with around 5,500
hotspots in Switzerland, it is also the country’s
leading provider of public wireless local area net-
works .

The Internet of Things (IoT) has long connected an
immense number of objects and devices to one
another and to users . Swisscom has further expanded
its IoT portfolio and, in addition to the LTE-M and
narrowband IoT access technologies, has added other
platforms to its connectivity platforms . The low
power network now serves over 96% of the popula-
tion . The use of many new applications by customers
is evidence of IoT’s increasing momentum . Swisscom’s
broad IoT portfolio offers all the components needed
to implement applications nationally and internation-
ally .

IT infrastructure and platforms
Not only are bandwidths in the networks constantly
increasing, but so is the usage of cloud services .
Swisscom is positioning itself as a trustworthy
provider of private, public and hybrid cloud services
and expanding its portfolio with the help of interna-
tionally renowned partners .

With its newly defined cloud strategy, Swisscom is
positioning itself as a reliable IT partner with a broad
range of services . On the one hand, newly developed
Swisscom solutions such as the Enterprise Service
Cloud are gaining greater acceptance on the Swiss
market . On the other, Swisscom is expanding its
services with public cloud services (such as Amazon
Web Services or Microsoft Azure) in order to address
customers’ individual needs .

The switch to data transmission only by means of
Internet Protocol (All IP), together with the expansion
of connectivity services, is increasing the require-
ments imposed on locations that previously provided
telephony services . The virtualisation of network
functions is bringing about the creation of new
geographically redundant IT platforms, in addition to
those in Zurich and Lausanne, that can process large
volumes of data with short reaction times .

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 6,000 servers
(4,500 virtual servers and 1,500 physical servers),
900 databases and 5 petabytes of storage capacity .
One data centre is managed by a technology partner
with responsibility for setting up, designing and
adapting the centre as well as for the operational
aspects of Fastweb’s IT infrastructure . Two data
centres are mainly used for corporate business
services, including housing, the cloud or other ICT
managed services .

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Swisscom consistently uses cloud platforms to
provide internal and external communication
services . It operates these cloud platforms in its own
geographically redundant data centres, enabling
efficient, automated use and targeted improvement
of the customer experience .

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 . Swisscom is continuing to make use of the
standardised systems created by its partners rather
than developing its own infrastructures . The focus on
the development of market-specific value-adding
services based on such infrastructure is beginning to
bear fruit . The industrialisation of IT continues to
make headway, as does the development of modern
applications that benefit from the opportunities
offered by the platforms, cut costs and ensure
maximum stability .

Nevertheless, the old and new technologies will
continue to exist and function side-by-side over the
coming years . Here Swisscom is establishing itself in
the digital transformation by using specific services
such as the “Journey to the Cloud” portfolio . By
combining different generations of technology to
meet its needs, Swisscom is building upon its
experience and expertise to provide the best possible
support to its customers as they make their way into
the digital world .

Infrastructure in Italy

Network infrastructure
In Italy, the introduction of broadband started
relatively late, but the gap in coverage by next-gener-
ation access networks is now almost closed . By the
end of 2018, 87% of homes and businesses had been
connected to the ultra-fast broadband network .
Fastweb has contributed to this development with
substantial investments in its network infrastructure .
Fastweb’s own network infrastructure consists of a
fibre-optic network . With ultra-fast broadband
connections (FTTH, FTTS and Fixed Wireless Access),
Fastweb reaches around 12 million homes and
businesses or 45% of the population . For another 10
million homes and businesses, Fastweb can provide
ultra-fast broadband services based on wholesale
services from TIM .

In mobile communications, Fastweb acquired a
3 .5 GHz mobile spectrum from Tiscali in 2018 as well
as the Fixed Wireless Access business area . In
addition, at an auction in 2018, Fastweb acquired
mobile radio frequencies in the 26 GHz spectrum . This
enables Fastweb to drive the development of 5G
services and converged offerings .

Employees

In an environment that is changing at headlong speed, Swisscom is getting to
grips with the working models of the future, making targeted investments in
professional training for its employees in order to maintain and improve their
employability and the company’s competitiveness in the long term. For
example, Swisscom now allows its employees five training days a year. It lives
up to its claim to be a family-friendly company by facilitating mobile working
and increasing maternity and paternity leave. At the end of 2018, Swisscom
had 19,845 full-time equivalent employees, of whom 17,147 or 86% were
employed in Switzerland. Swisscom is also training around 960 apprentices in
Switzerland.

Employees in Switzerland

Introduction
Swisscom, as Switzerland’s leading ICT company, is at
the centre of the action where digitisation is con-
cerned . It wants to seize the opportunity to take the
lead in the market both now and in the future . This
requires satisfied employees who use their skills,
experience and personalities to inspire customers in
the networked world on a daily basis . Swisscom
operates in an environment characterised by very
rapid change . Knowledge that was up to date
yesterday may be outdated tomorrow . One conse-
quence of this is that jobs will be lost in areas where
the core business is declining, while new jobs will be
created in growth areas . Most of these job losses
occur through natural fluctuation and (early) retire-
ment . Thanks to foresighted planning, prudent
vacancy management and retraining, redundancies
are being kept to a minimum . This is another reason
why Swisscom invests in the employability of its
employees by giving them five training days a year . A
wide range of opportunities for personal develop-
ment is available to employees both externally and
on-the-job, including project assignments in other
areas of the company or specialisms for which
employees apply via an online marketplace, work-
shops on new technologies and agile ways of
working, progress meetings, talent programmes and
numerous training courses . Swisscom positions itself
on the ICT job market as an attractive employer,
offering its employees the opportunity to assume
responsibility, utilise their potential and further
develop their abilities .

general terms and conditions of employment, while
all other employees are subject to Swisscom’s
collective employment agreement (CEA) . Both sets of
terms and conditions of employment govern, among
other things, working hours and working models,
salaries and salary payments, professional develop-
ment, holidays and absences, providing for more than
the minimum envisaged by the Code of Obligations .
In the year under review, 99 .7% of the employees in
Switzerland were on open-ended contracts (prior
year: 99 .6%) . Part-time employees made up 20 .2%
(prior year: 19 .6%) . The fluctuation rate, representing
departing employees in Switzerland, amounted to
6 .8% of the workforce (prior year: 6 .3%) . Further
information on HR matters can be found in the
Sustainability Report .

Collective employment agreement (CEA)
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 representatives in
the various divisions) . The collective employment
agreement (CEA) and the social plan, with their fair
and jointly drafted provisions, are negotiated by
Swisscom Ltd and its social partners and applicable to
Swisscom Ltd’s employees . Subsidiaries such as
Swisscom (Switzerland) Ltd adopt the CEA, either in
its original form or as adapted to specific sectors or
lines of business, by means of an affiliation agree-
ment . Cablex Ltd is concluding its own CEA with the
social partners . In May 2018, Cablex and the social
partners worked out a new CEA, which will enter into
force on 1 January 2019 .

Swisscom staff are employed under private law on
the basis of the Code of Obligations . Swisscom
management employees in Switzerland are subject to

Under the Telecommunications Enterprise Act (TEA),
Swisscom is obliged to draw up a collective employ-
ment agreement in consultation with the employee

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associations . In the event of any controversial issues,
an arbitration commission must be convened which
will support the social partners by providing sugges-
tions for solutions . The present CEA has been in force
since 1 July 2018 . At the end of December 2018, 82%
of the workforce in Switzerland were covered by the
CEA (prior year: 83%) .

When negotiating the Swisscom CEA 2018, the
parties put particular emphasis on employees’
professional development: Swisscom employees will
be entitled to five training days a year from 1 January
2019 onwards . The revised “mobile working” rules
give greater priority to employees’ work-life balance,
and maternity leave has been extended to 18 weeks,
with paternity leave increased to three weeks . Fathers
are also entitled to take an extra month of unpaid
leave in the child’s first year of life . By granting these
extensions, Swisscom is reiterating its commitment
to offering family-friendly working conditions . The
CEA also accords the social partners and employee
representations a greater or lesser degree of entitle-
ment to information, participation and co-decision
making in various areas .

Social plan
The objective of the social plan is to formulate socially
acceptable restructuring measures and avoid job cuts .
It sets out the benefits provided to employees
covered by the CEA who are affected by redundancy .
Furthermore, the social plan makes use of the
relevant means to increase the employability of
employees and provides for retraining measures in
the event of long-term job cuts . Responsibility for
implementing the social plan lies with Worklink AG,
a subsidiary of Swisscom . It provides employees with
advice and support in their search for new employ-
ment and arranges temporary external or internal
work placements . The services it offers include skill
assessments, career advice and coaching sessions to
enhance employability . Swisscom also supports
special employment schemes, such as phased partial
retirement or temporary 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 . In 2018, 88%
of those affected found a new job before the end of
the social plan programme (prior year: 77%) . For
employees with management contracts, there is a
regulation comparable to the social plan which
supports them in their professional reorientation,
taking into account their employment conditions .

Employee remuneration

Salary system
Competitive pay packages help to attract and retain
highly skilled and motivated specialists and manage-

rial 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 performance as well as
individual performance in the case of executive
functions . The company’s success is measured by the
achievement of overriding objectives such as financial
ratios, customer loyalty and the implementation of
the Swisscom Group’s strategy . Individual perfor-
mance is measured on the basis of the achievement of
results- and conduct-related contributions . Details on
remuneration paid to members of the Group Execu-
tive Board are provided in the Remuneration Report .
D See report page 90

Pay round and payroll development
In 2018, Swisscom and its social partners signed an
agreement on the pay round for the year under
review . With effect from April 2018, salaries for
employees subject to the CEA were increased by 1 .1%
of the total payroll, dependent on performance .
Employees with salaries in the entry-level or market
segment received a salary increase of at least 0 .5%
subject to their performance . The performance of
employees whose salaries are in the upper range of
the respective salary band was rewarded by a one-off
payment . Specific adjustments were made to salaries
that needed to be brought in line with the market .
The total payroll for managers increased by 1 .1% to
allow for individual salary adjustments . Compared to
the prior year, the total payroll in Switzerland fell by
3 .3% to CHF 2 .0 billion .

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 employability
and the company’s competitiveness in the long term .
Employees have the opportunity to attend internal
and external training programmes . As a pioneer in
the field of digitisation in Switzerland, Swisscom is
dedicated to getting to grips with the working models
of the future . By doing this, it provides employees and
management with a learning environment in which
they can develop new skills and shape their own
professional development . In 2018, every Swisscom
employee spent 3 .0 days (prior year: 3 .1 days) on
learning, training and development .

Employee satisfaction
The Pulse survey gives Swisscom employees an
opportunity to submit their feedback on a wide
variety of issues relating to their personal work
situation twice a year . The results and the comments
in which employees give their assessments are

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
salary for 180 days and half the salary for a further
185 days .

Working time model
The company’s terms and conditions of employment
enable employees to achieve a healthy balance
between their work requirements and private needs .
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 specialists
and managers . The company’s salary system com-
prises a basic salary, a collective variable profit-shar-
ing 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 prof-
it-sharing bonus is based on the Premio di risultato
agreed separately with the unions . Fastweb respects
the legal minimum salary defined by the CCNL .

available to all employees in real time . They enable
every employee, the teams and the organisation as a
whole to respond quickly to the feedback and start to
make improvements . A survey of this type fosters a
culture of feedback which creates a basis on which
Swisscom and its employees can grow together . The
rate of responses to the Pulse survey is constantly
rising: a total of 83% of employees (2017: 62%)
participated in the two 2018 surveys . Some 78%, i .e .
more than two thirds, of the employees participating
in the survey said they were highly likely to recom-
mend Swisscom as an employer . Swisscom’s ratings
are generally higher than the benchmarks in the
dimensions surveyed .

Diversity
The different points of view, experiences, ideas and
skills of every single employee, which are expressed in
everyday collaboration, are what make Swisscom a
successful and innovative company . To promote
diversity, Swisscom focuses in its activities on the
dimensions of gender, inclusion, generations and
language regions . In relation to gender, for example,
Swisscom endeavours to make work compatible with
family life . Flexible working models and the option of
reducing working hours on an experimental basis are
making part-time working more acceptable . They also
help to offer women attractive working conditions in
what is a largely technical work environment . For that
reason, Swisscom takes the promotion of talent very
seriously . Swisscom is also committed to making jobs
available to people with physical or psychological
impairments in order to (re)integrate them into the
workforce . The proportion of posts for such people
has increased from 0 .64% to 0 .93% since 2014 . The
aim is that at least 1% of posts at Swisscom should
be earmarked for the purpose of inclusion . Swisscom
also works towards integration where generation
management is concerned, with flexible working
models and many development measures in place to
help older employees keep working for as long as
possible .

Employees in Italy

Employment agreement for the telecoms
sector
Statutory terms and conditions of employment in
Italy are based on the Contratto collettivo nazionale
di lavoro (CCNL), a state collective employment
agreement . The CCNL defines the terms and condi-
tions of employment between Swisscom’s Italian
subsidiary Fastweb and its employees . It also contains
provisions governing relations between Fastweb and
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 .

Discover 5G
In Burgdorf, 5G data transmissions were
carried out for the first time via a fully
standardised 5G network.

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At Ypsomed, 5G and the “factory of the
future” are already a reality . Together with
Swisscom, the medical devices manufacturer
tested 5G in an industrial setting . The fully
automated, 5G digitised production line is
gradually bringing jobs back to Switzerland,
for example, and is strengthening Switzer-
land as a business location .

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Brands, products and
services

The Swisscom brand builds a bridge between the familiar and the new. It
brings together all products and services from the core business under a single
roof. After a gap of ten years, its corporate identity and corporate design have
been refreshed. Swisscom’s vision, values and promise have been reviewed,
refined and simplified. The range of services and products Swisscom offers is
also being constantly adapted to its customers’ needs. As a result, both
residential and business customers have seen changes and improvements to
their inOne, Swisscom TV and other services. In line with the current trend in
Italy, Fastweb is encouraging the convergence of its mobile and fixed-line
customer bases.

Swisscom brands

The Swisscom brand is managed strategically as an
intangible asset and an important element of the
Group’s reputation management . It provides opti-
mum support for Swisscom’s business activities, 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 . At the same
time, it has to be extremely flexible, 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 .

Core business products and services are offered under
the Swisscom brand, as well as under the secondary
brands Wingo and SimplyMobile (Coop Mobile from
9 January 2019) and the third-party brand M-Budget .
Its portfolio also includes other brands which are
associated with other themes and business areas . The
Teleclub, Kitag and Cinetrade brands, also operated by
Swisscom, help to position the Group in the entertain-
ment field . 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 .

Extract of the brand portfolio
Auszug aus dem Markenportfolio

Society, technology and the environment are
changing ever more rapidly . A brand must absorb
these changes and be ahead of them . For this reason,
Swisscom revamped its ten-year corporate identity
and corporate design in the year under review:
Swisscom’s vision, values and promise have been
reviewed in terms of their relevance to the customer,
refined and simplified . Swisscom expects its employ-
ees to demonstrate trustworthiness, commitment
and curiosity in everything they do . On this basis,
Swisscom will present itself as a reliable provider,
build on its position as market leader and open up
new business areas . Swisscom gives its customers the
opportunity to take advantage of the networked
future easily .

Specifically, Swisscom has made its corporate design
more flexible and increasingly geared it to digital
applications . The design is intended to highlight still
more the customers and their possibilities . The
Swisscom promise and design are visible in all offers
and products as well as in its communication
measures .

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 Switzer-
land: Swisscom is part of a modern Switzerland, is
always recognisable as a Swiss company and posi-
tions 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 reputation values achieved by
Swisscom are exceptionally high for a company in the
telecommunications sector by global standards .

External rankings also confirm this image . In the
“Switzerland 50” survey carried out by Brand Finance,
Swisscom ranks in eighth place . This makes it one of
the most valuable brands in Switzerland, worth over
CHF 6 billion according to Brand Finance .

Products and services in Switzerland

Residential Customers
In order to provide its customers with the best
communications experiences, Swisscom is constantly
adjusting its portfolio of offerings to meet customer
needs . It has further developed the inOne subscrip-
tions introduced in 2017 and made them even more
attractive . The modular structure of inOne subscrip-
tions enables customers to select the performance of
individual components according to their needs and
to easily deploy new mobile devices such as smart
watches, trackers or tablets .

Offerings for private individuals
Thanks to inOne, Swisscom is able to provide private
individuals with a bundled offering with a choice of
TV, mobile and fixed-line telephony on top of the
broadband connection . For all components, custom-
ers can choose from three separately priced profiles
with varying levels of service . As the profiles differ
mainly in terms of Internet speed, the number of TV
channels available, the recording and replay func-
tions, and the billing of call minutes/SMS, inOne can
be easily adapted to individuals’ needs .

In 2018, Swisscom further expanded the inOne
mobile subscription, so that customers benefit not
only from faster surfing, but can also add on devices
such as tablets, laptops, smart watches, GPS trackers
or a second smartphone easily and inexpensively, all
under the same contract they already have . Custom-
ers are increasingly keen to have devices of this kind
with a mobile connection .

This year, too, Swisscom TV has enhanced its appeal
to customers by making a wider range of TV channels
available and making the user interface even simpler
to enable customers to find the programmes of
interest to them from among the many others on
offer . Swisscom TV was also assigned “theme worlds”,
each bundling together different types of content on
particular subjects . In the summer of 2018, Swisscom
TV customers were the only viewers in the country
able to watch the FIFA World Cup in top TV quality
thanks to UHD . For the 2018/2019 football season,
Swisscom acquired the transmission rights to the
UEFA Champions League and the UEFA Europa League,
becoming the only Swiss broadcaster to broadcast all
matches live .

Swisscom targets its other brands – Wingo, Simply-
Mobile (Coop Mobile from 9 January 2019) and
M-Budget – at customers who do not want the
high-quality service and extensive range offered by
Swisscom products . M-Budget and Wingo offer
customers straightforward and attractive mobile,
Internet and fixed-line services . Simply Mobile offers

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a mobile subscription with a data allowance that does
not expire at the end of the month, to the exclusion
of anything else .

Customers can now hand their damaged mobile
phones into Swisscom Repair Centres and have them
repaired without the phone leaving the Swisscom
Shop, while myCloud offers Swisscom customers a
Swiss solution for the secure management and
sharing of their personal data, such as photos, videos
and documents . Customers can securely save their
important documents, passwords and notes in
Docsafe . Swisscom is also continually upgrading its
service offerings, thus catering to changing customer
needs .

Offerings for SMEs
Swisscom offers small businesses a bundled package
for Internet and telephony called “inOne SME” .
“Smart Business Connect” gives SMEs with more
complex needs an individual solution for Internet,
telephony, collaboration, security and networking .
inOne SME and Smart Business Connect both contain
integrated services such as Internet failure protection
and can be supplemented with Swisscom TV or
Swisscom TV Public . IT products such as the cloud and
managed services are becoming more popular among
SMEs . Since early 2018, “Smart ICT” has enabled
customers with an interest in IT outsourcing to
benefit from global solutions . Together with IT
partners in the regions, Swisscom handles the
operation of the customer’s ICT infrastructure and
takes care of data security in a professional manner .
The IT offering includes, for example, computing
services, cloud-based software and managed
workplace solutions . The SME portfolio is completed
by mobile subscriptions tailored to the needs of
business customers . With its modern offerings,
Swisscom prepares SMEs for the challenges of a
networked world and shows them the new opportu-
nities presented by a mobile, flexible working
environment . Swisscom also gives SMEs access to
information and directory services in the form of
localsearch, which makes it easy to find addresses,
telephone numbers and detailed information on
companies – on the Internet, via the mobile app and
in the printed telephone directory (Local Guide) .

Enterprise Customers
As digitisation is fundamentally changing business
processes, business models, the customer experience
and the working world in companies, solid communi-
cation networks are indispensable . Swisscom makes
use of its many years of experience as an integrated
telecommunications and IT company in supporting
customers through the digitisation process . It works
together with customers to develop future-oriented
solutions, supported by one of the most comprehen-

sive ICT portfolios in Switzerland, which comprises
cloud, outsourcing, workplace and UCC solutions, as
well as mobile phone solutions, networking solutions,
location networking, business process optimisation,
SAP solutions, security and authentication solutions
(mobile ID) and a full range of services tailored to the
banking industry, ranging from IT and business
outsourcing to trend research . In 2018, Swisscom’s
primary concern was to expand its cloud offering and
the IT security, digital consulting and software
development services it provides . Swisscom also
offers new solutions for the Internet of Things,
including additional access technologies, additional
management platforms and access to an interna-
tional ecosystem in which national and international
solutions can be developed . The company makes
hospitals more efficient by providing them with
support in the digitisation of their processes . It also
helps health insurance companies by assuming the
operation of their core IT systems . Swisscom is driving
digitisation in the healthcare sector by providing its
networking solutions for service providers and
implementing the electronic patient dossier system .

Wholesale
Swisscom provides a variety of copper- and fibre-op-
tic-based connectors as per customer requirements .
With its Carrier Ethernet and Carrier Line services and
lines leased under the TCA, Swisscom Wholesale
offers telecoms service providers high-quality,
transparent, point-to-point connections tailored to
their needs with a range of bandwidths and inter-
faces and/or a flexible Ethernet service that makes
tailored bandwidths and service level agreements
possible . Swisscom Wholesale also provides basic
offerings for the connection (interconnection) of
telecoms systems and services as well as infrastruc-
ture products such as the shared use of cable ducts .
Swisscom Wholesale is also opening up advanced
business areas in the over-the-top (OTT) content field .

Products and services in Italy

Fastweb provides its residential and corporate
customers with voice and broadband services through
its own ultra-fast broadband network as well as via
unbundled access lines and wholesale products of
TIM . In 2017, Fastweb enhanced its convergence
offerings by launching a mobile 4G service on the
market, making its coverage and performance the
best in Italy . Fastweb’s offerings are characterised by
simplicity (price plans), transparency (no promotions
or hidden costs) and convergence (fixed network and
mobile communications bundled together) . Fastweb
has also established a leading role in the corporate
business sector, most notably in the public adminis-
tration segment . Finally, Fastweb has upgraded its
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 . The cus-
tomer modem – known as FastGate – has one of the
best WiFi performances on the market, while a
mobile app further enhances the customer experi-
ence .

Customer satisfaction

Swisscom Switzerland conducts segment-specific
surveys and studies in order to measure customer
satisfaction . It measures customer satisfaction twice
a year, in the second and fourth quarters of the year .
The Wholesale segment measures customer satisfac-
tion 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 emo-
tional aspects of customer loyalty as well as revealing
customers’ attitudes towards Swisscom . It 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 surveys and studies:

● The Residential Customers segment conducts
representative surveys to determine customer
satisfaction and customers’ willingness 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 satisfaction
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 service 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
influence the variable performance-related compo-
nent of employees’ pay .

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The FIFA World Cup was the sporting event of the year, and
Swisscom TV customers were able to have an even better
experience of it by watching it in UHD (Ultra High Definition) .
And with Teleclub, fans can also follow every UEFA Champions
League and UEFA Europa League match live . Thanks to
Swisscom TV, fans can experience the excitement and
atmosphere of matches in their own homes, just as if they
were in the stadium .

Watch live
Whether you’re watching from the
stands or your sofa, there’s nothing like
the excitement of a football match.

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Innovation and
development

At Swisscom, innovation takes place in all areas of the company as well as
beyond. One of the main drivers of economic sustainability is innovation,
which is also an important lever that makes it possible to remain relevant in
the core business, to generate growth in new markets and digitise internal
work processes. Swisscom is focusing its innovation activities on seven areas
of innovation, which in turn directly help the Group achieve its goals.

Innovation as an important driver

Swisscom’s business environment is rapidly changing,
so innovation and development – i .e . the commer-
cially successful implementation of new ideas – are
becoming increasingly important . Innovation is a
fundamental driver of economic sustainability .
Swisscom now derives much of its revenue from
products that are only a few years old . Innovation is
also an important lever that makes it possible to
remain relevant in the core business, to generate
growth in new markets and digitise internal work

processes . Swisscom strives to anticipate strategic
challenges, new growth areas and future customer
needs at an early stage . Innovations are therefore
driven by various approaches such as “Open Innova-
tion”, “Cooperation”, “Ventures” and “Enabling
Services” . It follows that innovation takes place in all
areas of Swisscom and beyond, driven by partnerships
with, for example, universities, start-ups and
established technology companies . These are
important success factors for actively shaping the ICT
future in Switzerland .
N See www.swisscom.ch/innovation

Innovation focused on specific topics

Swisscom is focusing its innovation activities on the following seven areas of innovation, which in turn directly
help the Group achieve its goals:

Internet of Things
Best infrastructure provider for the
Internet of Things in Switzerland.
Additional positioning as an E2E solution
provider in selected areas

Analytics and artificial intelligence
Development of artificial intelligence
and analytics capabilities for internal
and external use

Security
Development of best-in-class
security services for internal
and external use

Network and infrastructure
Growth through better customer
experience and differentiation
as well as an increase in process
efficiency

Entertainment
The best offering in Switzerland
based on a networked
entertainment ecosystems

Digital business
Establishment of Internet
services in the form of data
driven software platforms

Digital Swisscom
Simplicity and efficiency through
standardised digital processes
and a clear product portfolio

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:

Network and infrastructure
Swisscom is focusing on a technology mix so that the
whole of Switzerland can benefit from the opportuni-
ties offered by the digital world, from cities to alpine
huts throughout Switzerland . By means of All IP
transformation, it is consistently pushing ahead with
the strict separation of access technologies and
services in its fixed network . Its innovative architec-
ture also enables it to renew all components from the
core network to the connection . Only a few suppliers
worldwide are able to match the consistency with
which it is pursuing this development . Swisscom is
thus laying the foundations for the rapid introduction
of new services in the future and is always ahead of
other providers in making new developments
available to its customers .

In the area of mobile communications, Swisscom has
strongly promoted 5G as the next generation of
mobile communications standards . In spring 2018,
Swisscom, together with the medical company
Ypsomed, presented the first 5G applications based
on fully digitised process chains, from the delivery of
raw materials and the manufacture of products
through to provision and delivery . For the first time,
all hardware and software components were added
directly via a 5G antenna . This was followed in the
second half of 2018 by the first 5G test networks, in
Burgdorf, Guttannen and Lucerne .

Swisscom has massively expanded its cloud offering
with a multicloud approach in 2018 . Customers have
the choice of global public clouds as well as
Swisscom’s own Enterprise Service Cloud, whose data
storage facility leads the field in Switzerland .
Swisscom helps companies migrate their IT to the
cloud and hence to benefit from even greater agility,
faster processes and lower costs . Swisscom also uses
its own clouds for services such as MyCloud . The 5G
mobile communications standard allows the network
and the cloud to grow even closer together and opens
up new possibilities for Swisscom and its customers .

Internet of Things
● Nationwide networks in Switzerland for the

Internet of Things (IoT): Swisscom has further
expanded its IoT portfolio . In addition to the LTE-M
and narrowband IoT access technologies, it has
added the Vodafone Global Data Service platforms
to its connectivity management platforms . LTE-M
and narrow band IoT are dedicated technologies
for IoT applications and are a variant within the

4G/LTE standard . The low power network now
serves over 96% of the population . In 2018,
Swisscom gained another cooperation partner in
the shape of the SBB, which, among other things,
offers locations for network densification . The use
of many new applications by customers is evidence
of IoT’s increasing momentum . Swisscom’s broad
IoT portfolio offers all the components needed to
implement applications within Switzerland and
abroad . Swisscom also supports companies and
start-ups through various formats, such as Techie
Tuesday (a technical consultation hour all about
IoT) or the LPN Bootcamps, in order to make it
possible for them to enter the IoT and develop it
further .

N See www.swisscom.ch/lpn

● Smart City: In 2018, Swisscom united the various

initiatives within the company around the concept
of smart cities to form a team and is expanding
this in line with the market . As part of the Carbo-
sense IoT project, Swisscom, together with Empa,
the Swiss Data Science Centre (SDSC) and Decent-
lab, has given an example of how the IoT helps
cities and regions in making fact-based decisions .
Swisscom has been actively involved in the
establishment of the Smart City Hub as a way of
channelling the smart city initiatives throughout
Switzerland .

Analytics and artificial intelligence
● Artificial intelligence (AI): Swisscom makes

targeted use of artificial intelligence to offer its
customers an even better service . For example, AI
is used in customer service, to detect network
faults or to enhance the efficiency of internal
processes . In addition, Swisscom uses AI and data
analytics to help its customers evaluate data in a
targeted manner .

Security
● Security thanks to artificial intelligence: Threats
from the Internet are constantly growing in
number and becoming increasingly intelligent .
Swisscom is already using artificial intelligence (AI)
to help repel attacks by automatically detecting
attacks and dangers and promptly initiating
appropriate countermeasures to protect the
company, its infrastructure and customers . As a
result, Swisscom improves and accelerates
everyday processes and makes the work of security
experts easier . The AI-based procedure takes
tangible form in the Swisscom 24/7 Security
Operations Centre, which is offered as a service to
business customers .

In addition, the Internet Guard service blocks an
average of eight million accesses to dangerous

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websites per month, actively protecting Swisscom
customers . Swisscom signed up to the Cybersecurity
Tech Accord in 2018 and is as such publicly committed
to providing its customers and users with the best
possible protection against cyber-attacks and to
raising awareness of network security and of
self-protection capabilities .

Entertainment
● esports: With the “Swisscom Hero League

powered by ESL”, Swisscom has founded its own
Swiss esports league in cooperation with ESL . This
is aimed at both professionals and the population
at large . Swisscom TV has also expanded its range
by adding the esports league, several game
channels and an own game theme world . The
theme world bundles the best gaming pro-
grammes, videos and apps from all sources on
Swisscom TV . Swisscom is also constantly optimis-
ing all network components to meet the needs of
gamers . In addition to high broadband coverage,
these improvements include fast response times
(ping) and high upload speeds . In order to fulfil its
social responsibility, Swisscom’s commitment to
esports also comprises offers in the media skills
programme . An edition of the digital guidebook
“enter” was dedicated to games and esports and
a new course module for parents and teachers was
developed . Swisscom sees games and develop-
ments in the gaming industry as not only a social
trend, but also as drivers for the introduction of
new technologies and an economic factor for
Switzerland that should not be underestimated .
● Swisscom TV: The FIFA World Cup was the most

important sporting event of 2018, and the quality
of the broadcasts in Switzerland was unprece-
dented, since Swisscom TV customers were able to
watch the matches on SRG channels (SRF, RTS and
RSI) in crystal-clear ultra-high definition (UHD) and
high dynamic range (HDR) for the first time . High
dynamic range (HDR), when combined with UHD,
enhances quality in a way viewers cannot fail to
notice at once . UHD quadruples the number of
pixels compared to HD, while HDR provides much
higher contrast and a much wider colour spectrum .
Televised images are not only sharper, but also
feature a noticeable visual depth for the first time
ever .

Digital Swisscom
To get ahead in a digital world, Swisscom must first
digitise itself and become a model digital company . In
2018 it therefore again took consistent steps to
digitise its network, its workplaces and its processes .
Agile collaboration models and cloud-based produc-
tion speed up innovation cycles, increasing the
number of points of contact and enhancing customer
proximity . One far-reaching consequence of digitisa-

tion – which can even be described as a paradigm
shift – can be seen in new cooperation models with
partners . Swisscom has entered into IoT-related
cooperation agreements with SBB, Swiss Post and
NeoVac in order to rapidly consolidate the network
via each partner’s locations . Swisscom also works
closely with selected partners on various network
issues .

Swisscom is also taking the next step on the road to
a smart cooperation culture by further developing its
own workplaces . The introduction of a hybrid
workplace environment – a combination of Microsoft
Office 365 Cloud services and Swisscom’s own data
centre – simplifies access to data from any mobile and
registered end device . In addition, the smart environ-
ment enhances usability and data security . Swisscom
is making progress towards the working world of the
future, playing an active part in the paradigm shift
and gaining valuable experience from which its
customers will ultimately benefit .

Swisscom has pressed further onward with the
introduction of agile models, which include SAFe
Frameworks and BizDevOps . They serve to promote
and implement developments in faster innovation
cycles both within Swisscom and in cooperation with
customers . These cooperation models also offer
employees interesting further training opportunities,
increase the attractiveness of the individual functions
in the company and enable them to take advantage of
all the opportunities offered by cloud-based develop-
ment . The basis for this is the digitisation of net-
works, for example with All IP .

In 2018, Swisscom made even greater use of artificial
intelligence (AI) in customer service . Customer
advisors rely on adaptive algorithms to analyse and
classify e-mails automatically . In network operations,
AI helps to analyse potential disruptive factors and to
rectify network problems automatically .

Digital business
In the field of digital business innovation, Swisscom
supported developments within and outside its own
company in 2018 by promoting intrapreneurship and
by setting up joint ventures with strategic partners .

● Kickbox: Expanding the in-house intrapreneurship

programme and making it a cross-company
innovation ecosystem providing employees with
resources (for example, time and budget) to realise
innovation projects .

● FinTech: Launching three FinTech joint ventures
together with partners . The Credit Exchange is a
platform for the granting of mortgages . It brings
together banks, insurers, pension funds and
others, and enables end customers to choose the

mortgage that represents the best value for them .
Daura enables unlisted companies to register or
issue equities via blockchain and to transfer them
securely worldwide . Digitised shares of this kind
make it possible for such companies to extend
their circle of potential investors . Book-entry
securities such as shares are becoming increasingly
digitised . Daura is the first step towards making
Swisscom a leading provider of digital property
registration, custody and transfer services . The
intended next step is that Custodigit AG should be
established as a platform for regulated financial
services, providing its end customers with a safe
place to store their digital assets .
IoT – foundation of autoSense with AMAG: The
company connects vehicles to the Internet . With
the autoSense app and a compact adapter, users
gain direct access to valuable information about
the journey and their vehicle . The service currently
includes a logbook, remote diagnostics and
warnings of engine problems . Additional digital
services for refuelling and parking as well as
tailor-made vehicle insurance are planned .

●

● Digital identity: In spring 2018, SwissSign Group AG

was founded as the sponsor of SwissID . The
company is widely supported by state-owned
enterprises as well as by finance and insurance
companies . The shareholders want SwissID to
become a means of establishing an open and
simple system for digital identification . Swisscom
has acquired a stake in the SwissSign Group .

In addition to its activities in innovation fields,
Swisscom is constantly investigating the opportuni-
ties presented by new technologies, such as the
disruptive blockchain technology, drones and
robotics . 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 .

Many Swiss SMEs have not generally benefited from
digitisation up to now . Swisscom’s subsidiary
Swisscom Directories Ltd (localsearch) helps SMEs in
the digital world achieve success, enabling them to be
found online, to acquire new customers and secure
their loyalty; in these ways, localsearch helps SMEs
use digital marketing to make their mark . Thanks to
localsearch’s MyPRESENCE, SMEs gain access to over
25 online services with just one central entry .
MyPRESENCE was launched in November 2017 and
has already amassed more than 5,000 customers . In
addition, the local .ch and search .ch directories
operated by localsearch have the most extensive
reach in Switzerland .
N See www.localsearch.ch
N See www.local.ch

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A new way of shopping
Advice, service and shopping all under
one roof.

The newly opened House of Swisscom in Basel
offers customers a truly novel shopping
experience . Retail and business customers can
obtain competent advice, have devices repaired,
discover the innovation zone or relax in the
Swisscom Lounge .

Financial review

Net revenue
in CHF million

EBITDA
in CHF million

12,000

8,000

4,000

11,643
1,948
9,695

11,662
2,155
9,507

11,714
2,418
9,296

4,500

3,000

1,500

Fastweb
Swisscom w/o
Fastweb

4,293
721
3,572

4,295
845
3,450

4,213
777
3,436

2016

2017

2018

2016

2017

2018

Capital expenditure
in CHF million

Headcount
in full-time equivalents

2,250

1,500

750

2,416
633
1,783

2,378
692
1,686

2,404
757
1,647

24,000

16,000

8,000

Fastweb
Swisscom w/o
Fastweb

21,127
2,468
18,659

20,506
2,504
18,002

19,845
2,484
17,361

2016

2017

2018

2016

2017

2018

Operating free cash flow
in CHF million

Net income
in CHF million

2,159

1,791

1,745

2,250

1,500

750

1,500

1,604

1,568

1,521

1,000

500

2016

2017

2018

2016

2017

2018

Fastweb
Swisscom w/o
Fastweb

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Summary

In CHF million, except where indicated

Net revenue 1

Operating income before depreciation and amortisation (EBITDA) 1

EBITDA as % of net revenue

Operating income (EBIT)

Net income

Earnings per share (in CHF)

Operating free cash flow

Capital expenditure in property, plant and equipment and intangible assets

Net debt at end of year

2018

11,714

4,213

36.0

2,069

1,521

29.48

1,745

2,404

7,393

2017

11,662

4,295

36.8

2,131

1,568

30.31

2,159

2,378

7,447

Full-time equivalent employees at end of year (number)

19,845

20,506

Change

0.4%

–1.9%

–2.9%

–3.0%

–2.7%

–19.2%

1.1%

–0.7%

–3.2%

1 Swisscom has applied IFRS 15 “Revenue from Contracts with Customers” since

1 January 2018 . The prior year’s figures have not been adjusted . If IFRS 15
had not been applied, net revenue in 2018 would be CHF 5 million lower and
EBITDA CHF 43 million higher .

Swisscom’s net revenue rose by 0 .4% to CHF 11,714
million . On the basis of constant exchange rates, it fell
by 0 .3% . Revenue in the Swiss core business declined
as a result of intense competition and market
saturation by CHF 241 million or 2 .7% to CHF 8,817
million . Revenue from telecommunications services
fell by CHF 242 million or 3 .7%, which can be
attributed to price pressure and declining revenue
from fixed-line telephony . The number of revenue
generating units (RGU) dropped by 2 .3% compared
with the previous year to 11 .9 million . The Italian
subsidiary Fastweb reported strong revenue and
customer growth . Revenue rose by EUR 160 million or
8 .2% to EUR 2,104 million, while the number of
broadband customers increased by 96,000 or 3 .9% to
2 .55 million and the number of mobile lines climbed by
367,000 or 34 .5% to 1 .43 million .

Operating income before depreciation and amortisa-
tion (EBITDA) declined by 1 .9% to CHF 4,213 million . In
the previous year, results were impacted by non-re-
curring items, including one-off income from legal
disputes at Fastweb amounting to CHF 102 million
and net expenses associated with headcount
reductions in the Swiss business of CHF 61 million .
Furthermore, in 2018, the year-on-year development
of EBITDA was impacted by new requirements
governing the revenue recognition of customer
contracts (IFRS 15) . In the Swiss core business, EBITDA
fell by CHF 137 million or 3 .9% on a like-for-like basis .
The drop in revenue was partially offset by savings in
indirect costs . At Fastweb, EBITDA rose in local
currency by 5 .6% on a like-for-like basis as a result of
the growth in revenue .

Consolidated operating income (EBIT) contracted by
CHF 62 million or 2 .9% to CHF 2,069 million, while net
income was down CHF 47 million or 3 .0% to
CHF 1,521 million . Payment of an unchanged dividend

of CHF 22 per share for the 2018 financial year will be
proposed to the Annual General Meeting .

Capital expenditure rose by CHF 26 million or 1 .1% to
CHF 2,404 million . Progress continues to be made on
expanding the broadband networks . In Switzerland,
capital expenditure for the expansion of the broad-
band networks remained at a high level . With other
investments declining, capital expenditure in
Switzerland fell overall by CHF 33 million or 2 .0% to
CHF 1,645 million . Capital expenditure at Fastweb
rose by EUR 35 million or 5 .6% to EUR 657 million . This
rise resulted from the acquisition of mobile radio
frequencies .

Operating free cash flow declined by CHF 414 million
or 19 .2% to CHF 1,745 million, mainly due to the
movement in net working capital, which, unlike the
previous year, was negative . At CHF 7,393 million, net
debt was CHF 54 million lower than at the end of
2017, while the ratio of net debt to EBITDA rose from
1 .7 to 1 .8 .

Headcount decreased year-on-year by 661 FTEs or
3 .2% to 19,845 FTEs . In Switzerland, headcount fell by
541 FTEs or 3 .1% to 17,147 FTEs as a result of the
declining core business . Over half of the reduction
was offset by natural fluctuation and vacancy
management .

For 2019, Swisscom expects net revenue of around
CHF 11 .4 billion, EBITDA of over CHF 4 .3 billion and
capital expenditure of around CHF 2 .3 billion . Subject
to achieving its targets, Swisscom will propose
payment of an unchanged attractive dividend of
CHF 22 per share for the 2019 financial year at the
2020 Annual General Meeting .

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Segment results

In CHF million, except where indicated

2018

2017

Change

Net revenue

Residential Customers

Enterprise Customers

Wholesale 1

IT, Network & Infrastructure

Intersegment elimination

Swisscom Switzerland

Fastweb

Other Operating Segments

Group Headquarters

Intersegment elimination

5,924

2,410

894

159

(570)

8,817

2,426

907

(438)

6,053

2,510

944

167

(616)

9,058

2,164

850

(411)

Revenue from external customers 2

11,714

11,662

Operating income before depreciation and amortisation (EBITDA)

Residential Customers

Enterprise Customers

Wholesale

IT, Network & Infrastructure

Swisscom Switzerland

Fastweb

Other Operating Segments

Group Headquarters

Reconciliation item pension cost 3

Intersegment elimination

3,373

755

446

(1,166)

3,408

777

186

(78)

(60)

(20)

3,482

822

446

(1,250)

3,500

845

180

(111)

(92)

(27)

Operating income before depreciation and amortisation (EBITDA) 2

4,213

4,295

–2.1%

–4.0%

–5.3%

–4.8%

–7.5%

–2.7%

12.1%

6.7%

100.0%

6.6%

0.4%

–3.1%

–8.2%

0.0%

–6.7%

–2.6%

–8.0%

3.3%

–29.7%

–34.8%

–25.9%

–1.9%

1 Including intersegment recharges of services performed by other network

3 Operating income of segments includes ordinary employer contributions as

providers .

2 Swisscom has applied IFRS 15 “Revenue from Contracts with Customers”
since 1 January 2018 . The prior year’s figures have not been adjusted . If
IFRS 15 had not been applied, net revenue in 2018 would be CHF 5 million
lower (Swisscom Switzerland CHF –9 million; Fastweb CHF +4 million)
and EBITDA CHF 43 million higher (Swisscom Switzerland CHF +12 million;
Fastweb CHF +31 million) .

Swisscom’s reporting focuses on the three operating
divisions Swisscom Switzerland, Fastweb and Other
Operating Segments . Group Headquarters, which
includes non-allocated costs, is reported separately .
Swisscom Switzerland comprises the customer
segments Residential Customers, Enterprise Customers
and Wholesale, as well as the IT, Network & Infra-
structure division . Fastweb is a telecommunications
provider for residential and business customers in
Italy . Other Operating Segments primarily comprises
the Digital Business division, Swisscom Broadcast Ltd
(radio transmitters) and cablex Ltd (network construc-
tion and maintenance) .

The IT, Network & Infrastructure segment does not
charge any network costs to other segments, nor does
Group Headquarters charge any management fees to
other segments . The remaining services between the
segments are recharged at market prices . Network
costs in Switzerland are budgeted, monitored and
controlled by the IT, Network & Infrastructure division,
which is managed as a cost centre . For this reason, no

pension fund expense . The difference to the pension cost according to IAS 19
is recognised as a reconciliation item .

revenue is credited to the IT, Network & Infrastructure
segment within the segment reporting, with the
exception of the rental and administration of buildings
and vehicles . The results of the segments “Residential
Customers”, “Enterprise Customers” and “Wholesale”
correspond to a contribution margin prior to network
costs .

Segment expense comprises direct costs, personnel
expenses and other operating costs less capitalised
costs of self-constructed assets and other income .
Segment expense includes ordinary employer
contributions as pension fund expense . The difference
between the ordinary employer contributions and the
past service cost under IAS 19 is reported as a
reconciliation item between the operating incomes of
the segments and Group operating income .

Swisscom Switzerland

In CHF million, except where indicated

Net revenue and results

Telecom services

Solution business

Merchandise

Wholesale

Revenue other

Revenue from external customers

Intersegment revenue

Net revenue 1

Direct costs

Indirect costs

Segment expenses

Segment result before depreciation and amortisation (EBITDA) 1

Margin as % of net revenue

Depreciation, amortisation and impairment losses

Segment result

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

Capital expenditure and headcount

Capital expenditure in property, plant and equipment and intangible assets

Full-time equivalent employees at end of year (number)

1 Swisscom has applied IFRS 15 “Revenue from Contracts with Customers” since

1 January 2018 . The prior year’s figures have not been adjusted . If IFRS 15
had not been applied, net revenue in 2018 would be CHF 9 million lower and
EBITDA CHF 12 million higher .

2018

2017

Change

6,222

1,042

705

566

202

8,737

8,817

(1,972)

(3,437)

(5,409)

3,408

38.7

(1,502)

1,906

1,788

2,033

1,519

6,551

11,891

1,970

481

1,620

14,478

6,464

1,084

648

578

203

8,977

9,058

(1,943)

(3,615)

(5,558)

3,500

38.6

(1,485)

2,015

2,047

2,014

1,467

6,637

12,165

1,898

107

435

1,654

15,157

–3.7%

–3.9%

8.8%

–2.1%

–0.5%

–2.7%

–1.2%

–2.7%

1.5%

–4.9%

–2.7%

–2.6%

1.1%

–5.4%

–12.7%

0.9%

3.5%

–1.3%

–2.3%

3.8%

–18.7%

10.6%

–2.1%

–4.5%

Net revenue for Swisscom Switzerland fell by
CHF 241 million or 2 .7% to CHF 8,817 million as a
result of fierce competition and the downward trend
in fixed-line telephony . Revenue from telecommuni-
cations services decreased by CHF 242 million or 3 .7%
to CHF 6,222 million . Of this decline, CHF 173 million
(–3 .2%) was attributable to the Residential Customers
segment and CHF 69 million (–6 .3%) to the Enterprise
Customers segment . In the Residential Customers
segment, the fall is due to price pressure and a
declining subscriber base in fixed-line telephony,
which contracted in this segment by 199,000 or
10 .8% to 1 .64 million . Competition led to price
pressure in the Enterprise Customers segment as well,
while customers were also able to optimise their
needs with the switch to All IP . In the solutions
business, net revenue decreased by CHF 42 million or
3 .9% to CHF 1,042 million due to strong competition
and lower volumes in the banking sector . The

Enterprise Customers segment recorded incoming
orders of around CHF 2 .5 billion (prior year:
CHF 2 .7 billion) . For Wholesale, the increased demand
for broadband connections largely offset the decline
in revenue from inbound roaming . The demand for
bundled offerings is still high .

The number of inOne customers is constantly
growing . As of the end of 2018, Swisscom Switzer-
land’s inOne customers numbered 2 .33 million, which
is 988,000 more than in the previous year . This means
that inOne covers 54% of all mobile subscriptions and
57% of fixed-line broadband connections of residen-
tial customers . The number of revenue generating
units decreased by 274,000 or 2 .3% to 11 .9 million,
chiefly as a result of the downward trend in fixed-line
telephony . Year-on-year, the number of fixed-line
telephony connections fell by 259,000 or 12 .7% to
1 .79 million . The number of mobile subscribers in this

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saturated market declined by 86,000 or 1 .3% to
6 .55 million . Swisscom increased the number of
subscribers to its postpaid lines by 34,000 or 0 .7% to
4 .68 million, whereas the number of prepaid lines
decreased by 120,000 or 6 .9% to 1 .87 million . The
markets for broadband and TV are also saturated, and
customer growth remains sluggish . The number of
broadband connections rose by 19,000 or 0 .9% to
2 .03 million, while TV connections increased by
52,000 or 3 .5% to 1 .52 million .

Segment expense fell by CHF 149 million or 2 .7% to
CHF 5,409 million . Excluding non-recurring items such
as provisions recognised for headcount reduction in
2017 and the first-time application of new IFRS
accounting standards in 2018, the decrease was 2 .0%
on a like-for-like basis . Direct costs increased by

CHF 29 million or 1 .5% to CHF 1,972 million . The costs
for purchasing goods rose, whereas those for
retaining and acquiring subscribers fell . Indirect costs
were CHF 178 million or 4 .9% lower at CHF 3,437 mil-
lion . On a like-for-like basis, the decline was
CHF 121 million or 3 .4% due to cost savings . Head-
count fell year-on-year by 679 FTEs or 4 .5% to 14,478 .
The costs saved were able to make up for around half
of the decline in revenue . The segment result before
depreciation and amortisation was CHF 92 million or
2 .6% lower at CHF 3,408 million, resulting in a decline
of 3 .9% on a like-for-like basis . Capital expenditure fell
by CHF 34 million or 2 .1% to CHF 1,620 million . Capital
expenditure for the expansion of the broadband
networks remained at a high level, while other
investments decreased .

Fastweb

In EUR million, except where indicated

Residential Customers

Corporate Business

Wholesale

Revenue from external customers

Intersegment revenue

Net revenue 1

Segment expenses

Segment result before depreciation and amortisation (EBITDA) 1

Margin as % of net revenue

Capital expenditure in property, plant and equipment and intangible assets

Full-time equivalent employees at end of year (number)

Broadband access lines at end of period in thousand

Mobile access lines at end of period in thousand

1 Swisscom has applied IFRS 15 “Revenue from Contracts with Customers” since
1 January 2018 . The prior year’s figures have not been adjusted . If IFRS 15 had
not been applied, net revenue in 2018 would be EUR 4 million higher and
EBITDA EUR 27 million higher .

2018

1,050

780

267

2,097

2,104

(1,430)

674

32.0

657

2,484

2,547

1,432

2017

986

710

240

1,936

1,944

(1,185)

759

39.0

622

2,504

2,451

1,065

Change

6.5%

9.9%

11.3%

8.3%

–12.5%

8.2%

20.7%

–11.2%

5.6%

–0.8%

3.9%

34.5%

In the previous year, one-off income from legal
disputes amounting to EUR 95 million had been
received . On a like-for-like basis, EBITDA rose by 5 .6%
as a result of the growth in revenue . Overall, capital
expenditure rose year-on-year by EUR 35 million or
5 .6% to EUR 657 million . This includes EUR 64 million
for investments in mobile radio frequencies . Fast-
web’s headcount was practically unchanged year-on-
year at 2,484 FTEs .

Fastweb’s net revenue rose by EUR 160 million or
8 .2% year-on-year to EUR 2,104 million thanks to
customer growth . Despite difficult market conditions,
Fastweb’s broadband customer base grew by 96,000
or 3 .9% to around 2 .55 million in 2018 . Fastweb is also
growing in the fiercely competitive mobile telephony
market . The number of mobile lines rose by 367,000
or 34 .5% to 1 .43 million within twelve months .
Residential customer revenue rose by EUR 64 million
or 6 .5% to EUR 1,050 million as a result of customer
growth . Despite the high level of competition,
Fastweb held its strong position in the market for
business customers . Revenue from corporate business
increased by EUR 70 million or 9 .9% to EUR 780 mil-
lion, while wholesale business revenue was up by
EUR 27 million or 11 .3% to EUR 267 million . The
segment result before depreciation and amortisation
was EUR 85 million or 11 .2% lower at EUR 674 million .

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 intangible assets

Full-time equivalent employees at end of year (number)

2018

558

349

907

(721)

186

20.5

2,649

2017

529

321

850

(670)

180

21.2

2,580

Change

5.5%

8.7%

6.7%

7.6%

3.3%

–20.7%

2.7%

The net revenue of the Other Operating Segments
rose year-on-year by CHF 57 million or 6 .7% to
CHF 907 million . The increase was mainly due to
higher revenue from construction services rendered
by cablex . The segment result before depreciation

and amortisation improved year-on-year by 3 .3% or
CHF 6 million to CHF 186 million . This corresponds to
a profit margin of 20 .5% . Headcount rose by 69 FTEs
or 2 .7% to 2,649 FTEs, driven primarily by the hiring of
new employees at cablex .

Group Headquarters and reconciliation

In CHF million, except where indicated

Group Headquarters

Reconciliation pension cost

Intersegment elimination

Operating income before depreciation and amortisation (EBITDA)

2018

(78)

(60)

(20)

(158)

2017

(111)

(92)

(27)

(230)

Change

–29.7%

–34.8%

–25.9%

–31.3%

The net costs not allocated to the operating seg-
ments, which comprise Group Headquarters, pension
cost reconciliation and inter-segment eliminations,
declined by CHF 72 million overall year-on-year .
Non-recurring items contributed to the reduction in
Group Headquarters net costs, which amounted to
CHF 33 million . These items included costs incurred in
2017 for the recognition of various provisions . Also, in
2018 revenue was generated from the reimburse-

ment of levies, and the measures to reduce the cost
base showed effects . The reconciliation item for
pension cost is the difference between the total of
employer contributions and the cost under IFRS . The
cost reduction here of CHF 32 million came about
mainly as a result of changes in assumptions (in
particular regarding the discount rate) . Inter-segment
eliminations pertain to unrealised profits on capital-
ised work of other Group companies .

Depreciation and amortisation, non-operating results

In CHF million, except where indicated

Operating income before depreciation and amortisation (EBITDA)

Depreciation, amortisation and impairment losses

Operating income (EBIT)

Net interest expense

Other financial result

Result of equity-accounted investees

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

Earnings per share (in CHF)

2018

4,213

(2,144)

2,069

(128)

(30)

1,916

(395)

1,521

1,527

(6)

29.48

2017

4,295

(2,164)

2,131

(149)

(11)

1,960

(392)

1,568

1,570

(2)

30.31

Change

–1.9%

–0.9%

–2.9%

–14.1%

172.7%

–2.2%

0.8%

–3.0%

–2.7%

200.0%

–2.7%

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Depreciation and amortisation fell by CHF 20 million
or 0 .9% year-on-year to CHF 2,144 million . The
amortisation of intangible assets related to business
combinations declined, amounting to CHF 37 million
(prior year: CHF 50 million) . Net interest expense
declined by CHF 21 million to CHF 128 million as a
result of lower average interest costs . Income tax
expense was CHF 395 million (prior year: CHF 392 mil-

lion), corresponding to an effective income tax rate of
20 .6% (prior year: 20 .0%) .

Net income fell by CHF 47 million or 3 .0% to CHF
1,521 million, primarily due to the non-recurring
items described in the summary . Earnings per share
fell accordingly from CHF 30 .31 to CHF 29 .48 .

Cash flows

In CHF million

Operating income before depreciation and amortisation (EBITDA)

Capital expenditure in property, plant and equipment and intangible assets

Change in defined benefit obligations

Change in net working capital and other cash flows from operating activities

Dividends paid to non-controlling interests

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 of financial liabilities

Repayment of financial liabilities

Dividends paid to equity holders of Swisscom Ltd

Other cash flows

(Net decrease) net increase in cash and cash equivalents

2018

4,213

(2,404)

(127)

(1)

1,745

(133)

(294)

1,318

(113)

1,451

(1,571)

(1,140)

(9)

(45)

2017

4,295

(2,378)

214

(8)

2,159

(155)

(289)

1,715

(106)

120

757

(1,158)

(1,140)

(9)

179

Change

(82)

(26)

(341)

(414)

(5)

(397)

(7)

(101)

694

(413)

–

(224)

up in order to repay a 3 .25% debenture bond for
CHF 1,385 million upon maturity .

Free cash flow declined year-on-year by CHF 397 mil-
lion to CHF 1,318 million, mainly due to lower
operating free cash flow . Operating free cash flow
decreased by CHF 414 million to CHF 1,745 million,
due chiefly to the movement in net working capital .
The positive movement in the previous year resulted
primarily from an increase in trade payables . In 2018,
the balances of liabilities moved in the opposite
direction, and this had a negative impact on the
change in net working capital . Also, in the previous
year, provisions were recognised that were used in
2018, resulting in a cash outflow .

Net expenditure for company acquisitions and
disposals amounted to CHF 113 million (prior year:
CHF 106 million) . This chiefly includes payments for
the acquisition of the Fixed Wireless division and
mobile radio frequencies of Tiscali by Fastweb and
investments in equity-accounted investee Flash Fiber
in connection with the network expansion in Italy
(prior year: purchase of a Tiscali business division by
Fastweb and acquisition of the remaining shares of
Cinetrade) . In 2018, Swisscom took up debenture
bonds in the amounts of CHF 300 million and EUR 500
million . In addition, short-term bank loans were taken

Development of free cash flow
in CHF million

4,213

1,745

–2,404

–127

EBITDA

Capital
expenditure

Change in
net working
capital

Change in
defined
benefit
obligations

–1

Other

–133

–294

1,318

Operating
free cash
flow

Net interest
paid

Taxes
paid

Free
cash flow

2018

496

490

307

250

2017

486

469

271

347

1,620

1,654

757

(19)

2,404

1,645

759

20.5

692

(26)

2,378

1,678

700

20.4

Change

2.1%

4.5%

13.3%

–4.9%

–28.0%

–2.1%

9.4%

–20.7%

–26.9%

1.1%

–2.0%

8.4%

capital expenditure to revenue was 31 .2% (prior year:
32 .0%) .

Capital expenditure

In CHF million, except where indicated

Fixed access and infrastructure

Expansion of the fibre-optic network

Mobile network

Customer driven

Projects and others 1

Swisscom Switzerland

Fastweb

Other Operating Segments

Group Headquarters and eliminations

Total capital expenditure

Thereof Switzerland

Thereof foreign countries

Total capital expenditure as % of net revenue

1 Including All IP migration .

Capital expenditure rose year-on-year by CHF 26 mil-
lion or 1 .1% to CHF 2,404 million, corresponding to
20 .5% of net revenue (prior year: 20 .4%) . Swisscom
Switzerland accounted for 67% of 2018 capital
expenditure, while Fastweb accounted for 32% and
Other Operating Segments for 1% .

Capital expenditure incurred by Swisscom Switzer-
land declined year-on-year by CHF 34 million or 2 .1%
to CHF 1,620 million, corresponding to 18 .4% of net
revenue (prior year: 18 .3%) . Capital expenditure for
the expansion of the broadband networks with the
latest technologies remained at a high level, while
other investments decreased .

Fastweb increased its capital expenditure by
CHF 65 million or 9 .4% to CHF 757 million . In local
currency, it remained at the same high level as the
previous year, totalling EUR 657 million . The increase
of EUR 35 million or 5 .6% in capital expenditure
resulted from the acquisition and extension of mobile
radio frequencies in the amount of EUR 64 million .
Fastweb is continuing the expansion of the ultra-fast
broadband networks in Italy as planned . The ratio of

Net asset position

In CHF million

Property, plant and equipment

Goodwill

Intangible assets

Trade receivables

Trade payables

Provisions

Other operating assets and liabilities, net

Net operating assets

Net debt

Defined benefit obligations

Income tax assets and liabilities, net

Equity-accounted investees and
other non-current financial assets

Equity

Equity ratio at end of year

Ratio net debt/EBITDA

31.12.2018

01.01.2018

Change

10,894

10,697

5,164

1,858

2,189

(1,658)

(1,032)

(18)

17,397

(7,393)

(1,196)

(895)

295

8,208

36.3

1.8

5,186

1,758

2,359

(1,753)

(1,077)

(183)

16,987

(7,447)

(1,048)

(804)

253

7,941

35.3

1.7

197

(22)

100

(170)

165

410

(148)

(91)

267

Operating assets
Net operating assets rose by CHF 0 .4 billion or 2 .4% to
CHF 17 .4 billion . The increase was mainly attributable
to increased capital expenditure in property, plant
and equipment and intangible assets as a result of
high levels of investment . The net carrying amount of
goodwill was CHF 5 .2 billion, the bulk of which relates
to Swisscom Switzerland (CHF 4 .3 billion) . 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 repur-
chase, 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 0 .5 billion (CHF 0 .6 billion) .
Fastweb’s carrying amount in the consolidated
financial statements totals EUR 2 .9 billion (CHF 3 .3
billion) .

Net debt
Swisscom aims to maintain a single-A credit rating .
Net debt comprises financial liabilities less cash and
cash equivalents, current financial assets, non-current
certificates of deposit and derivative financial
instruments for financing .

In CHF million

Debenture bonds

Bank loans

Private placements

Finance lease liabilities

Other financial liabilities

Total financial liabilities

Cash and cash equivalents

Non-current certificates of deposit

Non-current derivative financial instruments for financing

Other current financial assets

Net debt

Operating income before depreciation and amortisation (EBITDA)

Ratio net debt/EBITDA

31.12.2018

31.12.2017

5,554

1,233

426

384

570

6,137

760

493

461

435

8,167

8,286

(474)

(145)

(81)

(74)

7,393

4,213

1.8

(525)

(145)

(99)

(70)

7,447

4,295

1.7

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Development of net debt
in CHF million

7,447

–1,745

1,140

128

294

129

7,393

Net debt
31.12.2017

Operating
free cash flow

Dividends

Net interest
expense

Taxes paid

M&A and
other effects

Net debt
31.12.2018

The ratio of net debt to EBITDA was 1 .8 at the end of
2018 (prior year: 1 .7) . 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 obliga-
tions . The share of the Group’s variable interest-bear-
ing financial liabilities amounts to 26% .

As at 31 December 2018, Swisscom’s financial
liabilities amounted to CHF 8 .2 billion . Around 85% 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 .3
billion at 31 December 2018 . In 2018, the average
interest expense on all financial liabilities was 1 .0%
(prior year: 1 .7%), and the average residual term to
maturity was 5 .4 years . A large proportion of the
financial liabilities will fall due for repayment if a
shareholder other than the Swiss Confederation gains
majority control over Swisscom .

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

564

–

278

394

361

564

–

269

1,314

2,727

–

909

150

269

–

Total

1,194

5,514

428

384

516

Total interest-bearing financial liabilities

1,257

1,031

1,376

3,044

1,328

8,036

Post-employment benefits
Defined benefit obligations recognised in the
consolidated financial statements are measured in
accordance with IFRS provisions . Net defined benefit
obligations amounted to CHF 1 .2 billion, which
represents a CHF 0 .2 billion increase year-on-year .
This is mainly due to the negative return on plan
assets . In accordance with the Swiss accounting
standards applicable to the pension fund (Swiss GAAP
ARR), the funding surplus amounts to CHF 0 .3 billion,
corresponding to a coverage ratio of 103% on the
plan’s assets of CHF 10 .5 billion . The main reasons for
the difference of CHF 1 .5 billion compared with IFRS
are the application of differing actuarial assumptions,
for example with regard to the discount rate, life
expectancy or risk sharing (CHF 0 .9 billion), as well as
a different actuarial measurement method
(CHF 0 .6 billion) . Unlike Swiss GAAP, IFRS measure-
ment takes into account future salary, contribution
and pension increases and early retirements .

Equity
Equity of CHF 8 .2 billion (prior year: CHF 7 .6 billion)
and an equity ratio of 36 .3% (prior year: 34 .7%) were

reported in the 2018 consolidated financial state-
ments . The increase of CHF 0 .6 billion reported in
equity resulted in part because the net income was
not distributed in its entirety as dividends . In
addition, a change in accounting policies (IFRS 15) had
a positive net effect on equity . The foreign currency
differences arising from the translation of foreign
subsidiaries are recognised in equity . On 31 December
2018, cumulative currency translation losses
amounted to CHF 1 .7 billion (after tax) .

Distributable reserves are not determined on the basis
of the equity as reported in the consolidated financial
statements but rather on the basis of equity as
reported in the separate financial statements of
Swisscom Ltd . The equity totalled CHF 6 .5 billion in the
2018 separate financial statement of Swisscom Ltd .
The difference of CHF 1 .7 billion as compared to the
equity disclosed in the consolidated balance sheet is
largely due to earnings retained by subsidiaries and
different accounting policies . 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 December 2018, Swisscom Ltd held
distributable reserves of CHF 6 .4 billion .

Value-oriented business
management

Key performance indicators for planning and manag-
ing business operations are revenue, operating
income before depreciation and amortisation
(EBITDA) and capital expenditure . The enterprise
value/EBITDA ratio also permits comparisons of
Swisscom’s enterprise value derived from the share
price on the balance sheet date with that of similar

companies (European telecommunications compa-
nies) as well as with the prior year . The members of
the Board of Directors and Group Executive Board are
paid a portion of their remuneration in the form of
Swisscom shares, which are blocked for a period of
three years . They are also subject to a minimum
shareholding requirement . Variable remuneration
based on financial and non-financial targets, the
partial settlement of remuneration in shares and the
minimum shareholding requirement ensure that the
financial interests of management are aligned with
the interests of shareholders .

In CHF million, except where indicated

31.12.2018

31.12.2017

24,331

7,393

1,196

(295)

(15)

32,610

4,213

7.7

26,859

7,447

1,048

(253)

(11)

35,090

4,295

8.2

Enterprise value

Market capitalisation

Net debt

Defined benefit obligations

Equity-accounted investees and other non-current financial assets

Non-controlling interests

Enterprise value (EV)

Operating income before depreciation and amortisation (EBITDA)

Ratio enterprise value/EBITDA

Swisscom’s enterprise value decreased by 7 .1% or
CHF 2 .5 billion to CHF 32 .6 billion in 2018 . The reason
for this was a decline in market capitalisation of 9 .4%
or CHF 2,6 billion . The lower enterprise value caused
the ratio of enterprise value to EBITDA to drop to 7 .7
(prior year: 8 .2) . Swisscom’s relative market valuation
is therefore 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 lower interest rates and lower corporate
income tax rates in Switzerland as compared to other
European countries .

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Statement of added value

Thanks to a modern, high-performance network
infrastructure and a comprehensive, needs-driven
service offering, Swisscom makes an important
contribution to Switzerland’s competitiveness and
economic success and generates direct added value .

Operating added value is equivalent to net revenue
less goods and services purchased, other indirect
costs and depreciation and amortisation . Personnel
expense in the statement of added value is treated as
use of added value rather than as an intermediate
input .

In CHF million

Added value

Net revenue

Capitalised self-constructed assets and other income

Direct costs

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

2018

2017

Switzer-
land

Abroad

Total

Switzer-
land

Abroad

Total

9,274

2,440

11,714

9,476

2,186

11,662

347

(2,001)

(1,571)

(1,521)

114

(953)

(601)

(586)

461

325

(2,954)

(1,946)

(2,172)

(1,594)

(2,107)

(1,528)

183

(775)

(549)

(586)

508

(2,721)

(2,143)

(2,114)

(4,746)

(2,026)

(6,772)

(4,743)

(1,727)

(6,470)

4,528

414

4,942

4,733

459

5,192

2,531

335

224

(62)

4,880

2,755

2,666

376

360

1,141

128

496

4,880

244

(72)

5,120

2,910

394

1,148

149

519

5,120

1 Other operating expense: excluding taxes on capital and other taxes not

4 Employees: employer contributions are reported as pension cost, rather than

based on income .

as expenses according to IFRS .

2 Depreciation and amortisation: excluding amortisation of acquisition-related

5 Public sector: current income taxes, taxes on capital and other taxes not

intangible assets such as brands or customer relations .

based on income .

3 Other non-operating result: financial result excluding net interest expense,

6 Company: including changes in deferred income taxes and defined benefit

result of equity-accounted investees, and amortisation of acquisition-related
intangible assets .

obligations .

Of the consolidated operating added value of
CHF 4 .9 billion, 92% or CHF 4 .5 billion was generated
in Switzerland, which was 4 .3% less than in the
previous year . At the same time, added value per FTE
was 3 .8% lower at CHF 251,000 . In addition to direct
added value, purchases from suppliers provide
significant indirect added value for Switzerland’s

Swisscom development of value added per
employee in Switzerland
in CHF thousand

300

200

100

259

262

251

2016

2017

2018

economic development . Taking into account capital
expenditure instead of depreciation and amortisa-
tion, the purchasing volume in the Swiss business was
around CHF 4 .9 billion in 2018, with added value
contributed by suppliers in Switzerland of approxi-
mately 60% or CHF 2 .9 billion .

Allocation of added value
in %

● 3% Third-party lenders
● 7% Public sector

● 10% Company
● 23% Shareholders

● 57%
Employees

2018
Reported

Impact
IFRS 16

Change
w/o IFRS 16

2019
Outlook

11,714

4,213

2,404

–

~200

~180

~20

–

(300)

~ CHF 11.4 bn

(300)

~ CHF 9.0 bn

> 0

> EUR 2.1 bn

< 0

> 0

< 0

> CHF 4.3 bn

< CHF 3.6 bn

> EUR 0.7 bn

~ CHF 2.3 bn

~ CHF 1.6 bn

~ EUR 0.6 bn

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Financial outlook

In CHF million, except where indicated

Net revenue

Swisscom Group

Swisscom without Fastweb

Fastweb

Operating income before depreciation and amortisation (EBITDA)

Swisscom Group

Swisscom without Fastweb

Fastweb

Capital expenditure

Swisscom Group

Swisscom without Fastweb

Fastweb

For 2019, Swisscom expects net revenue of around
CHF 11 .4 billion, EBITDA of over CHF 4 .3 billion and
capital expenditure of around CHF 2 .3 billion . Due to
strong competition and price pressure and the
ongoing decline in the number of fixed-line telephone
connections, Swisscom expects revenue to be slightly
lower without Fastweb . Fastweb’s revenue is
expected to increase slightly from 2018 . The outlook
for EBITDA in 2019 reflects the effect of a new
accounting standard for leasing (IFRS 16) applicable
from 2019 onwards . Under this standard, the costs for
rental and leasing of property, plant and equipment
are no longer recognised as operating expenses, but
are instead capitalised as right-of-use assets and
recognised as lease liabilities . Rental and lease costs
are now recognised in the income statement below
EBITDA as amortisation of right-of-use assets and
interest on lease liabilities . This effect increases the
reported EBITDA by around CHF 200 million . On a
like-for-like basis and excluding the effects of IFRS 16,
Group EBITDA will be lower in 2019 than in 2018 . This
has little impact on net income . For Swisscom,
excluding Fastweb, the decline in revenue cannot be
fully compensated by cost savings . In contrast, an
increase in EBITDA is anticipated for Fastweb on a
like-for-like basis . Capital expenditure in Switzerland,
excluding costs for acquiring additional mobile radio
frequencies at auction, will be slightly less than in the
previous year . Fastweb’s capital expenditure is
expected to be lower, because the EUR 64 million
spent on mobile radio frequencies in 2018 will no
longer recur . Subject to achieving its targets,
Swisscom will propose payment of an unchanged,
attractive dividend of CHF 22 per share for the 2019
financial year at the 2020 Annual General Meeting .

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
2018 amounted to CHF 24 .3 billion (previous year:
CHF 26 .9 billion) . The number of shares issued
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 .

Share performance 2018
in CHF

500

450

400

350

Swisscom

SMI (indexed)

Stoxx Europe 600 Telcos (in CHF, indexed)

8
1
1
0
1
0

8
1
2
0
8
2

8
1
3
0
1
3

8
1
4
0
0
3

8
1
5
0
1
3

8
1
6
0
0
3

8
1
7
0
1
3

8
1
8
0
1
3

8
1
9
0
0
3

8
1
0
1
1
3

8
1
1
1
0
3

8
1
2
1
1
3

The Swiss Market Index (SMI) fell by 10 .2% compared
with the previous year . The Swisscom share price
decreased by 9 .4% to CHF 469 .70, outperforming the
Stoxx Europe 600 Telecommunications Index (–16 .4%
in CHF; –13 .2% in EUR) . Average daily trading volume
fell by 3% to 151,185 shares . The total trading volume
of Swisscom shares in 2018 amounted to CHF 17 .6
billion .
N See www.swisscom.ch/shareprice

Shareholder return
On 10 April 2018, Swisscom paid out an ordinary
dividend of CHF 22 per share . Based on the closing
price at the end of 2017, this equates to a return of
4 .2% . Taking into account the decline in the share
price, the Swisscom share achieved a total share-
holder return (TSR) of –5 .2% in 2018 . The TSR for the
SMI was –7 .1% and for the Stoxx Europe 600 Telecom-
munications Index –11 .8% in CHF and –8 .3% in EUR .

Stock exchanges
Swisscom shares are listed on the SIX Swiss Exchange
under the symbol SCMN (Securities No . 874251) . In
the United States (Over The Counter, Level 1), they are
traded in the form of American Depositary Receipts
(ADR) at a ratio of 1:10 under the symbol SCMWY
(Pink Sheet No . 69769) .

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Ownership structure

Confederation

Natural persons

Institutions

Total

Number of
shareholders

Number of
shares

26,394,000

70,206

4,995,716

2,904

20,412,227

31.12.2018

Share
in %

51.0%

9.6%

39.4%

Number of
shareholders

Number of
shares

26,394,000

69,837

5,042,232

2,938

20,365,711

31.12.2017

Share
in %

51.0%

9.7%

39.3%

73,111

51,801,943

100.0%

72,776

51,801,943

100.0%

currencies . Swisscom’s solid financial standing
enabled it unrestricted access to money and capital
markets again in 2018 .

The majority shareholder as at 31 December 2018
was the Swiss Confederation, which is obligated by
current law to hold the majority of the capital and
voting rights . As at 31 December 2018, some 20% of
the shares were held in unregistered shareholdings .

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 . Twenty-four
analysts regularly publish studies on Swisscom . At the
end of 2018, 16% of the analysts recommended a buy
rating for the Swisscom share, 42% a hold rating and
42% a sell rating . The average price target at
31 December 2018, according to the analysts’
estimates, was CHF 470 per share .

Dividend policy

Swisscom pursues a return policy with a stable
dividend . At the forthcoming Annual General Meeting
on 2 April 2019, the Board of Directors will propose an
unchanged ordinary dividend of CHF 22 per share for
the 2018 financial year . 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 31 .9 billion to its shareholders: CHF 19 .9
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 389 per share
since the initial public offering . Together with the
overall increase in share price of CHF 130 per share,
this amounts to an average annual total return of
5 .0% .

Credit ratings and financing

Swisscom enjoys good ratings from the Standard &
Poor’s and Moody’s rating agencies, at A (stable) and
A2 (stable) respectively . Swisscom aims to maintain
the single-A credit rating . To avoid structural down-
grading, 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

Risks

Changes in markets, competition, customer behaviour, technology, the
regulatory environment and government policy are drivers of risk. Swisscom’s
risk management system is aimed at safeguarding the company’s enterprise
value. New offerings in the areas of digitisation and IT services should
compensate for sagging revenue from the traditional core business. Over the
long term, the trend in the ICT market will necessitate major changes in the
approach to risks related to the business model, technology and human
capital.

Risk situation

Risks are driven by changes in markets, competition,
customer behaviour, technology, the regulatory
environment and government policy . The importance
of established telecommunications services is
continuing to decline . New services in the areas of
digitisation and IT services, such as cloud services,
security products and 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
major changes in the approach to risks related to the
business model, technology and human capital, while
forthcoming regulatory decisions pose a latent risk
that could impact Swisscom’s financial development .
The key risk factors are addressed below . The main risk
factors in the supply chain are reported separately in
the Sustainability Report .

Risk factors

Telecommunications market
Competition driven by national infrastructure
providers and service providers who do not have their
own telecoms infrastructure is growing and exerting
pressure on the business . During this transformation,
the complexity resulting from the parallel operation
of old and new technologies has to be reduced 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 transfor-
mation process, while technical complexity remains
undiminished . Moreover, a trend can currently be
observed towards national and international coopera-
tion among telecommunications providers, the
purpose of which is to provide low-cost services
internationally and exploit major synergies and
economies of scale . There is a risk that Swisscom will
not be able to align its cost structures with its current

and future competitors, which would narrow its
scope for investment, innovation and price reduc-
tions . 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 . in telecommunications, antitrust and copyright
legislation) entails risks for Swisscom, which could
have an adverse impact on the company’s financial
position and results of operations . Sanctions by the
Competition Commission could also reduce
Swisscom’s operating results and cause reputational
damage to the company . Finally, excessively high
political demands (e .g . those imposed on universal
service provision) threaten to fundamentally under-
mine the current competitive system .

Increasing 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, IPTV, 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
this necessitates calls for major investments . To
mitigate financial risks and ensure optimum network
coverage, network expansion is geared towards
population density and customer demand . Substan-
tial 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 network to changing condi-
tions and technical opportunities on an ongoing basis .

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tation and operating phases . These risks have the
potential to delay the rollout of new services, increase
costs and impact competitiveness . The transforma-
tion is being closely monitored by the Group Execu-
tive Board . The area of Internet security has devel-
oped and changed with immense speed with respect
to technology, economics and society and their
interdependencies . 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,
making it even more important for potential threats
to be recognised at an early stage, systematically
understood and quickly averted .

Health and the environment
Electromagnetic radiation (e .g . from mobile antennas
or mobile handsets) has repeatedly been claimed to
be potentially harmful to the environment and
health . Under the terms of the Ordinance on Non-Ion-
ising Radiation (ONIR), Switzerland has adopted the
precautionary principle and introduced limits for base
stations that are ten times stricter than those
prescribed by the EU . The public’s wary attitude, in
particular towards mobile antenna sites, 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 . These risks
are driven by legal and regulatory changes, changes to
physical climatic parameters (increased levels of
precipitation, higher average temperatures and
temperature extremes, and melting permafrost) and
other economic and reputational factors . The
resulting developments 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
reports of the Federal Office for the Environment
(FOEN) on climate change (CH2014 Impacts and
CH2018 Climate Scenarios) . Swisscom also publishes
its own annual climate report .
N See www.cdp.net

Employees
Constant changes in background conditions and
markets mean that corporate culture also has to
continuously adapt . The key challenges in this context
lie in maintaining employee motivation and high staff
loyalty despite the pressure on costs, as well as
managing growth and efficiency, increasing employ-
ees’ ability to adapt and renew their skills and
ensuring that Swisscom remains an attractive
employer .

Competitive dynamics, regulation and
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 impair-
ment test performed in 2018 confirmed the recover-
able 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 European and Italian telecom-
munications legislation . Regulatory risks can jeop-
ardise 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 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,
hacking) and the ever-growing complexity and
interdependence of modern technologies can cause
damage or interruption to operations . Built-in
redundancy, contingency plans, deputising arrange-
ments, alternative locations, careful selection of
suppliers and other measures are designed to ensure
that Swisscom can deliver the level of service that
customers expect at all times .

Information and security technologies
Swisscom is switching analogue telephony to Internet
Protocol (IP) . This transformation should enable
Swisscom to produce more flexibly and efficiently
than before . The experience with IP technology to
date has been positive . Swisscom’s complex IT
architecture entails risks during both the implemen-

Swisscom Group
five-year review

In CHF million, except where indicated

2014

2015

2016

2017

2018

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

Cash flow from operating activities

Capital expenditure in property, plant and equipment
and intangible assets

Net debt at end of period

Employees

11,703

11,678

11,643

11,662

11,714

CHF

4,413

37.7

2,322

1,706

32.70

5,486

26.2

3,565

2,436

8,120

4,098

35.1

2,012

1,362

26.27

5,242

24.8

3,702

2,409

8,042

4,293

36.9

2,148

1,604

30.97

6,522

30.4

3,722

2,416

7,846

4,295

36.8

2,131

1,568

30.31

7,645

34.7

4,091

2,378

7,447

Full-time equivalent employees at end of year

number

21,125

21,637

21,127

20,506

Average number of full-time equivalent employees

number

20,433

21,546

21,543

20,836

Operational data at end of period

Fixed telephony access lines in Switzerland

Broadband access lines retail in Switzerland

Mobile access lines in Switzerland

Swisscom TV access lines in Switzerland

in thousand

2,778

1,890

6,540

1,165

2,629

1,958

6,625

1,331

2,367

1,992

6,612

1,418

2,047

2,014

6,637

1,467

Revenue generating units (RGU) Switzerland

in thousand

12,373

12,543

12,389

12,165

11,891

Unbundled fixed access lines in Switzerland

Broadband access lines wholesale in Switzerland

in thousand

180

262

128

315

128

364

107

435

481

Broadband access lines in Italy

in thousand

2,072

2,201

2,355

2,451

2,547

Swisscom share

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

Information Switzerland

Net revenue

Operating income before depreciation and amortisation (EBITDA)

Capital expenditure in property, plant and equipment
and intangible assets

27,067

26,056

23,627

26,859

522.50

503.00

456.10

518.50

587.50

580.50

528.50

527.00

467.50

471.10

426.80

429.80

22.00

67.27

22.00

83.75

22.00

71.04

22.00

72.59

CHF

9,586

3,788

9,764

3,461

9,665

3,572

9,476

3,451

9,274

3,419

1,751

1,822

1,774

1,678

1,645

4,213

36.0

2,069

1,521

29.48

8,208

36.3

3,720

2,404

7,393

19,845

20,083

1,788

2,033

6,551

1,519

51.802

24,331

469.70

530.60

427.00

22.00

74.63

Full-time equivalent employees at end of year

number

18,272

18,965

18,372

17,688

17,147

1 In accordance with the proposal of the Board of Directors to the Annual

General Meeting .

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Corporate Governance 1 Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64
2 Group structure and shareholders . . . . . . . . . . . . . . . . . . . . . . . . .64
3 Capital structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66
4 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68
5 Group Executive Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .80
6 Remuneration, shareholdings and loans . . . . . . . . . . . . . . . . . . .86
7 Shareholders’ participation rights . . . . . . . . . . . . . . . . . . . . . . . . . .86
8 Change of control and defensive measures . . . . . . . . . . . . . . . .87
9 Auditor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .87
10 Information policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .88
11 Financial calendar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .89

Remuneration Report

1 Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .90
2 Remuneration of the Board of Directors . . . . . . . . . . . . . . . . . . .92
3 Remuneration of the Group Executive Board . . . . . . . . . . . . . . .95
4 Other remuneration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .99

Statutory Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101

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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.

Principles

2 Group structure and shareholders

2 .1 Group structure

2.1.1 Operational Group structure
Swisscom Ltd is a holding company and is responsible
for the overall management of the Swisscom Group . It
comprises five Group divisions: Group Business
Steering, Group Human Resources, Group Strategy &
Board Services, Group Communications & Responsi-
bility and Group Security . The Board of Directors
delegates the day-to-day business management to
the CEO of Swisscom Ltd . The Group Executive Board
is comprised of the CEO, the heads of the Group
divisions Group Business Steering (CFO) and Group
Human Resources (CPO), plus the heads of the
business divisions Sales & Services, Products &
Marketing, Enterprise Customers, and IT, Network &
Infrastructure . The Group also operates a Digital
Business division and Group companies such as the
Italian subsidiary Fastweb S .p .A .

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 the legitimate
interests of Swisscom shareholders, customers,
employees and other interest groups into their
decisions . To this end, the Board of Directors practises
effective and transparent corporate governance,
which is characterised by clearly assigned responsibili-
ties and based on recognised standards . In this regard,
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, and the
requirements of the Ordinance against Excessive
Compensation in Listed Stock Companies (OaEC) .

The interaction of investors, proxy advisors and other
stakeholder groups with the respective specialist
divisions allows the Board of Directors to identify new
trends at an early stage and to adjust its corporate
governance activities to new requirements as and
when necessary .

Swisscom’s principles and rules on corporate gover-
nance 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 an
explicit 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 responsibility for
people, society and the environment, comply with
applicable rules, demonstrate integrity and report any
violations of the Code of Conduct .

The latest versions of these documents as well as
their earlier, unamended and superseded versions can
be viewed online on the Swisscom website under
“Basic principles” .
N See www.swisscom.ch/basicprinciples

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

The business activities are carried out by Swisscom
Group companies . Strategic and financial manage-
ment is assured through the rules governing the
assignment of powers and responsibilities set by the
Board of Directors of Swisscom Ltd . The Group
companies are divided into three categories: strategic,
important and other . Swisscom Ltd, Swisscom
(Switzerland) Ltd and the 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 one other member of the Group
Executive Board . The CEO of Swisscom Ltd is responsi-
ble for the executive management of Swisscom
(Switzerland) Ltd . Seats on the Board of Directors of
Fastweb S .p .A . are held by the CEO of Swisscom Ltd,
who acts 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 . All
other Group companies are assigned to a Group
division or business division . The members of the
Board of Directors are appointed by the CEO . In some
cases, external parties also serve as members of the
Board of Directors . A list of Group companies,
including company name, registered office, percent-
age of shares held and share capital, is provided in
Note 5 .4 to the consolidated financial statements .
D See report pages 153—154

For financial reporting purposes, the business
divisions of Swisscom are allocated to individual
segments . Further information on segment reporting
can be found in the Management Commentary .
D See report page 46

2.1.2 Listed company
Swisscom Ltd is a company governed by Swiss law and
has its registered office in Ittigen (Canton of Berne,

Switzerland) . It is listed in the Standard for Equity
Securities, Sub-Standard International Reporting, of
the 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 (ticker 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 that represent Swisscom shares . Ten ADS
correspond to one share . The ADS are evidenced by
American Depositary Receipts (ADR) .

As at 31 December 2018, the stock market capitalisa-
tion of Swisscom Ltd was CHF 24,331 million . The
Swisscom Group comprises no other listed compa-
nies .

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 to Swisscom Ltd and
SIX Swiss Exchange 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, irrespective
of whether or not the voting rights can be exercised .
The detailed disclosure requirements and the method
for calculating these limits are specified in the FINMA
Financial Market Infrastructure Ordinance (FMIO-
FINMA) . Under the FMIO-FINMA, nominee companies,
which are not able to independently decide how
voting rights are exercised, need not report when any
of their shareholdings reach, exceed or fall below
these limits . The shareholding notifications can be
viewed on the website of SIX Exchange Regulation at
https://www .six-exchange-regulation .com/en/
home/publications/significant-shareholders .html .

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In the 2018 reporting year, no shareholdings subject
to Article 120 FMIA were reported to Swisscom . In
August 2017, BlackRock, Inc ., New York, reported a
shareholding of 3 .44% of the voting rights in
Swisscom Ltd . According to the Swisscom share
register, Chase Nominees Ltd ., London, held 4 .6% of
the voting rights in Swisscom Ltd on 31 December
2018 .

which acts as the ADR depository, is listed as the
shareholder in the share register . ADR holders are
therefore unable to directly enforce or 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 . If it does not receive instructions, it does not
exercise the voting rights .

On 31 December 2018, the Swiss federal government
(Swiss 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 Swiss 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 .

3 Capital structure

3 .1 Capital
The share capital of Swisscom AG has remained
unchanged since 2009, totalling CHF 51,801,943,
The shares are fully paid up . There is no authorised or
conditional share capital . Information concerning
equity can be found in the financial statements of
Swisscom Ltd .
D See report page 167

3 .2 Shares, participation and profit-
sharing 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 Confedera-
tion . Shareholders may at any time request confirma-
tion 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) .

Further information on the shares is available in
Section 7 “Shareholders’ participation rights” as well
as in the Management Commentary .
D See report page 86

Swisscom Ltd has issued neither participation nor
profit-sharing certificates .
D See report page 57

3 .3 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 Incorpora-
tion are not subject to restrictions of any kind . 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 if the
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 . For the shares in excess of the
limit, the acquirer is entered in the share register as a
shareholder or beneficial holder without voting
rights . The other statutory provisions on restricted
transferability are described in section 7 .1 of this
report, “Voting right restrictions and proxies” .
N See www.swisscom.ch/basicprinciples

Swisscom has issued special regulations governing
the registration of trustees and nominees in the share
register . To facilitate the tradability of the company’s
shares on the stock exchange, the Articles of Incorpo-
ration (Article 3 .6) allow the Board of Directors, by
means of regulations or agreements, to permit the
fiduciary entry of registered shares with voting rights
for trustees and nominees in excess of the 5%
threshold, provided they disclose their trustee
capacity . In addition, they must be subject to supervi-
sion 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 Meet-
ing, for which an absolute majority of valid votes cast
is required . In accordance with this provision, the

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,

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 by
which the trustee or nominee acknowledges the
applicable entry restrictions and disclosure obliga-
tions as binding . Trustees and nominees related in
terms of capital or voting rights either contractually
or through common management or other means are
treated as a single shareholder (trustee or nominee) .

3 .4 Convertible bonds, debenture bonds
and options
Swisscom has no convertible bonds outstanding .
Details of the debenture bonds are given in Note 2 .2
to the consolidated financial statements .
D See report page 122

Swisscom does not issue options on registered shares
of Swisscom Ltd to its employees .

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4 Board of Directors

4 .1 Members of the Board of Directors

As of 31 December 2018, the Board of Directors comprised the following non-executive members:

Name

Hansueli Loosli 1

Roland Abt

Valérie Berset Bircher 2

Alain Carrupt

Frank Esser 3

Barbara Frei

Anna Mossberg

Catherine Mühlemann

Renzo Simoni 4

Nationality

Switzerland

Germany

Switzerland

Sweden

Switzerland

Year of birth

1955

1957

1976

1955

1958

1970

1972

1966

1961

Taking office at the
Annual General Meeting

Function

Chairman

Member

Member, representative of the employees

Deputy Chairman

Member

Member, representative of the Confederation

2009

2016

2014

2012

2018

2006

2017

1 Since 1 September 2011 Chairman .
2 Resignation from the Board of Directors as of 31 December 2018 .

3 Nominated to Deputy Chairman as of 4 April 2018 .
4 Designated by the Swiss Confederation .

Valérie Berset Bircher, the representative of the
employees, resigned from her position on the Board
of Directors on 31 December 2018 for professional
reasons . The Board of Directors will thus consist of
eight members from 1 January 2019 until the election
of a replacement, which will take place on 2 April
2019 . Theophil Schlatter, Vice-Chairman, stepped
down from the Board of Directors at the Annual

General Meeting on 4 April 2018 . Anna Mossberg was
elected as his replacement on the Board of Directors .

4 .2 Education, professional activities and
affiliations
Key details of the career and qualifications of each
member of the Board of Directors are provided in the
summary below, along with the mandates held
outside the Group and other significant activities .
Pursuant to the Articles of Incorporation, Board
members may perform no more than three additional
mandates in listed companies and no more than ten
additional mandates in non-listed companies . 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 . The number of mandates held by order
of Swisscom is limited to ten, while the number of
mandates in interest groups, charitable associations,
institutions and foundations, and employee benefit
foundations is limited to seven . Prior to accepting
new mandates outside the Swisscom Group, the
Board members are obligated to consult the Chair-
man of the Board of Directors . Details on the regula-
tion 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 Board of Directors
exceeds the limits set for mandates .
N See www.swisscom.ch/basicprinciples

Hansueli Loosli
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 mandate: Member of
the Advisory Board, Deichmann SE, Essen

Other significant activities
–

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Roland Abt
Doctorate in business administration (Dr. oec.)

Valérie Berset Bircher
Doctorate in law (Dr. iur.)

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 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 Machining
Solutions), 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,
Zurich

Mandates in non-listed companies
Member of the Board of Directors, Raiffeisenbank,
Zufikon; Chairman of the Board of Directors, Eisen-
bergwerk Gonzen AG, Sargans; member of the Board
of Directors of Aargau Verkehr AG (AVA), Aarau
(formerly BDWM Transport AG, Bremgarten)

Other significant activities
–

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; 2007–2018 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 Organiza-
tion (ILO) addressing economics, finance and develop-
ment 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 and since 2017
Member of the ILO Board of Directors; since 2019
Head of the International Labour Affairs section of the
State Secretariat for Economic Affairs (SECO)

Mandates in non-listed companies
Member of the Board of Directors, Worklink AG,
March–December 2018

Other significant activities
Member of the Committee on Freedom of Association,
ILO, Geneva

Alain Carrupt
Swiss school-leaving certificate in economics

Frank Esser
Graduate in business administration,
Doctorate in Economics (Dr. rer. pol.)

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
Telecommunications sector; 2000–2010 Communica-
tions 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
–

Other significant activities
–

Career history
1988–2000 Mannesmann Deutschland, most recently
from 1996 member of the Executive Board of
Mannesmann Eurokom; 2000–2012 Société Française
du Radiotéléphone (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 Supervisory Board, Dalenys Group S .A
(formerly Rentabiliweb Group S .A .S .), Brussels, up
until May 2018; member of the Board of Directors,
interXion Holding N .V ., Amsterdam

Other significant activities
–

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Barbara Frei
Degree in mechanical engineering, ETH;
Doctorate (Dr. sc. techn.), ETH; Master of
Business Administration, IMD Lausanne

Anna Mossberg
Executive MBA for Growing Companies,
Stanford Business School, Palo Alto; Master
of Science, Industrial Engineering and
Management, Technical University Lulea

Career history
1996–2010 Telia: in various functions, in particular
Vice President and Head of Business & Product
Management, Head of Internet, Consumer Segment,
Director Data Services, Product & Services; 2010
Bahnhof AB, CEO; 2011 Stanley Securities AB, Senior
Advisor; 2012–2014 Deutsche Telekom, Senior Vice
President Strategy; 2015–March 2018 Google Ltd .,
Sweden, member of the Management Team

Mandates in listed companies
Member of the Board of Directors of Swedbank AB,
Sweden

Other significant activities
–

Career history
1998–2016 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: Chairman of the Executive Committee
of Schneider Electric GmbH, Germany, in which
capacity she was also Zone President Germany until
June 2017; from July 2017–December 2018 Zone
President Germany, Austria and Switzerland for the
group Schneider Electric, Paris; since January 2019
Executive Vice President Europe Operations

Mandates in listed companies
Since March 2018, member of the Board of Directors,
Swiss Prime Site, Olten

Mandates in non-listed companies
Schneider Electric Group: CEO of ELSO GmbH, Merten
GmbH, Schneider Electric GmbH, Schneider Electric
Holding Germany GmbH, SE Real Estate GmbH and
Schneider Electric “Austria” Ges .m .b .H, and member
of the Supervisory Board of Schneider Electric
Sachsenwerk GmbH; since March 2018, Chairman of
the Board of Directors, Schneider Electric (Schweiz)
AG, Ittigen; since April 2018, Delegate of the Board of
Directors, Feller AG, Horgen

Other significant activities
–

Catherine Mühlemann
Lic. phil. I

Renzo Simoni
Doctorate in mechanical engineering
(Dr. sc. techn.), ETH

Career history
1994–1997 Swiss Television DRS, Head of Media
Research; 1997–1999 SF1 and SF2, Programme
Executive; 1999–2001 TV3, Programme Director;
2001–2003 MTV Central, CEO; 2003–2005 MTV
Central & Emerging Markets, CEO; 2005–2008 MTV
Central & Emerging Markets and Viva Media AG
(Viacom), CEO; 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

Career history
1985–1989 Gruner Group, technical assistant in Civil
Engineering and Building Construction; 1989–1995
Federal Institute of Technology in Zurich (ETH Zurich),
scientific assistant; 1995–1998 ETH Zurich, lecturer
(part-time); 1995–2002 Ernst Basler + Partner AG, Civil
Engineering Developer Consulting Services; 2002–
2006 Helbling Beratung + Bauplanung AG, member of
the Management Board, most recently as Co-CEO;
2007–2017 AlpTransit Gotthard AG, Chairman of the
Management Board

Mandates in non-listed companies
Vice-Chairwoman of Switzerland Tourism; member of
the Supervisory Board of Messe Berlin GmbH, Berlin

Mandates in non-listed companies
Member of the Board of Directors, Gruner AG, Basel;
since June 2018, member of the Board of Directors,
Rhätische Bahn AG

Other significant activities
–

Other significant activities
Member of the Advisory Committee of DB Stutt-
gart-Ulm GmbH (PSU) Project Company (“Stutt-
gart 21”) of the German State Railways; Chairman of
the Board of the Psychiatric Hospital of the University
of Zurich

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 . Under the Articles of Incorpo-
ration of Swisscom Ltd, the Swiss Confederation is
entitled to appoint two representatives to the Board
of Directors of Swisscom Ltd . Currently, Renzo Simoni
is the only representative appointed by the Federal
government . Under the terms of the Telecommunica-
tions Enterprise Act (TEA), employees must be
granted appropriate representation on the Board of
Directors of Swisscom Ltd . The Articles of Incorpora-
tion also stipulate that the Board of Directors is to
include two employee representatives . Employees are
entitled to make proposals for their employee

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representatives . Since the Annual General Meeting of
April 2016, the elected employee representatives
have been Valérie Berset Bircher and Alain Carrupt .
Valérie Berset Bircher was nominated by the transfair
staff association and Alain Carrupt was nominated by
the syndicom trade union . Valérie Berset Bircher
terminated her mandate with effect from 31 Decem-
ber 2018 for professional reasons . 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 as well as the
members of the Compensation Committee individu-
ally 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 circum-
stances exist . Members who reach the age of 70 retire
from the Board as of the date of the next Annual
General Meeting . The maximum term of office and
age limit for the representative of the Swiss Confeder-
ation are determined by the Federal Council .

Independence

4 .4
To determine independence, the Board of Directors
applies the criteria set out in the Swiss Code of Best
Practice for Corporate Governance . Independent
members are thus understood to mean non-execu-
tive members of the Board of Directors who were
never a member of the executive management or
who have not been a member of the executive
management for at least three years and who have no
or only 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 Renzo
Simoni, holds the majority of the capital and voting
rights in Swisscom in accordance with the TEA .
Customer and supplier relationships exist between
the Swiss Confederation and Swisscom . Details of
these are provided in Note 6 .2 to the consolidated
financial statements .
D See report page 157

Internal organisation and modus

4 .5
operandi
The Board of Directors is responsible for the strategic
and financial management of Swisscom and for
monitoring 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 virtue of
law . The Board of Directors has delegated individual
tasks to committees . The standing committees of the
Board of Directors of Swisscom Ltd were constituted
as follows as at 31 December 2018:

Board of Directors

Audit Committee
Roland Abt 1
Valérie Berset Bircher 2
Renzo Simoni
Hansueli Loosli

Compensation Committee
Barbara Frei 1
Roland Abt
Frank Esser
Renzo Simoni
Hansueli Loosli 3

Finance Committee
Frank Esser 1
Alain Carrupt
Anna Mossberg
Catherine Mühlemann
Hansueli Loosli

1 Chairman (-woman) of the Committee of the Board of Directors
2 Resigned from the Board of Directors as of 31 December 2018
3 Without voting rights

The Board of Directors is usually convened once per
month by the Chairman (except in November and
July) for a one-to-two-day meeting . Further meetings
are convened as business requires . In the event that
the Chairman is hindered, 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 members
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 and its conduct with respect to
conflicts of interest are defined in the Organisational
Rules and in the rules governing the standing
committees .
N See www.swisscom.ch/basicprinciples

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-assess-
ments, usually once a year and most recently in
January 2018 . A one-day mandatory training course
was held at the beginning of 2018 . Each quarter, the
members of the Board of Directors also have the
opportunity to explore the upcoming challenges
facing the Group and business divisions in-depth as
part of “company experience days” . The majority of
members of the Board of Directors regularly take
advantage of these opportunities . New Board
members are given a task-specific introduction to
their duties . At a one-day introduction, they are
provided with an overview of Group management
and the current operational challenges . They are also
introduced to topics related to the Italian subsidiary
Fastweb and attend task-related training sessions .
Whenever possible, the members of the Board of
Directors attend the Swisscom Group’s annual
management meeting .

The following table gives an overview of the Board of
Directors’ meetings, conference calls and circular
resolutions in 2018 .

Total

Average duration (in hours)

Participation:

Hansueli Loosli, Chairman

Roland Abt

Valérie Berset Bircher

Alain Carrupt

Frank Esser, Deputy Chairman

Barbara Frei

Anna Mossberg 1

Catherine Mühlemann

Theophil Schlatter, Deputy Chairman 2

Renzo Simoni

Meetings

Conference calls

Circular resolutions

6:29

0:46

–

1 Elected to the Board of Directors as of 4 April 2018 .

2 Resigned from the Board of Directors as of 4 April 2018 .

4 .6 Chairman of the Board of Directors
Hansueli Loosli has been a member of the Board of
Directors since 2009 and Chairman of the Board since
September 2011 . The tasks and responsibilities of the
Chairman are defined in the Organisational Rules . In
the event that the Chairman of the Board of Directors
is hindered, the Vice-Chairman, Frank Esser, takes over
his tasks and responsibilities .
N See www.swisscom.ch/basicprinciples

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, each member of the Board of Directors sits
on at least one of the standing committees . Subject
to being appointed to the Compensation Committee
(without voting rights), the Chairman of the Board of

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Directors is a member of all the standing committees .
The standing committees are chaired by other
members, however . The chairs of the committees
report verbally on the latest committee meetings 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 Compensation Committee are
provided to the other members of the Board of
Directors upon request .

Finance Committee
The Finance Committee prepares information for the
Board of Directors on corporate transactions, for
example, in connection with setting up or dissolving
significant Group companies, acquiring or disposing
of significant shareholdings, and entering into or
terminating strategic alliances . 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 issuing 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 .
N See www.swisscom.ch/basicprinciples

The Finance Committee is convened by the Chairman
or at the request of a Committee member as often as
business requires, but as a rule once per quarter . The
CEO, the CFO and the Head of Group Strategy and
Board Services attend meetings of the Finance
Committee . Depending on the agenda item, other
members of the Group Executive Board, the Manage-
ment Boards of the strategic Group companies and
project managers are called upon to also attend the
meetings .

The following table gives an overview of the Finance Committee’s composition, meetings, conference calls and
circular resolutions in 2018 .

Meetings

Conference calls

Circular resolutions

Total

Average duration (in hours)

Participation:

Frank Esser, Chairman

Alain Carrupt

Anna Mossberg 1

Catherine Mühlemann

Renzo Simoni 2

Hansueli Loosli

3:47

–

1 Elected to the Board of Directors as of 4 April 2018 .

2 Resigned from the Finance Committee as of 4 April 2018 .

Audit Committee
The Audit Committee handles all business relating to
financial management (for example, accounting,
financial controlling, financial planning and financ-
ing), 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 Commit-
tee is the Board of Directors’ most important
controlling instrument and is responsible for monitor-
ing 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 decision-making authority . Details of
the Committee’s activities are set out in the Audit
Committee rules of procedure .
N See www.swisscom.ch/basicprinciples

of the Committee is an expert in the financial field,
and the majority of the remaining Committee
members are experienced in finance and accounting .
The Audit Committee is convened by the Chairman or
at the request of a Committee member as often as
business requires, but at least once per quarter . 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 members
of Swisscom management are called upon to attend .
The Audit Committee can also involve independent
third parties such as lawyers, public accountants and
tax experts as required .

From 1 January 2019, the Audit Committee will
consist of three independent members . The Chairman

The following table gives an overview of the Audit Committee’s composition, meetings, conference calls and
circular resolutions in 2018 .

Total

Average duration (in hours)

Participation:

Roland Abt, Chairman 1

Theophil Schlatter, Chairman 1, 2

Valérie Berset Bircher

Renzo Simoni 3

Hansueli Loosli 1

Meetings

Conference calls

Circular resolutions

4:42

0:00

–

1 Financial expert .
2 Resigned from the Board of Directors as of 4 April 2018 .

3 Nominated to the Audit Committee as of 4 April 2018 .

Compensation Committee
For information on the Compensation Committee,
refer to the section “Remuneration Report” .
D See report page 90

sion of persons entrusted with managing the
company’s operations . It decides on the appointment
and removal of members of the Group Executive
Board .

Nomination Committee
The Nomination Committee is formed on an ad-hoc
basis for the purpose of preparing the groundwork 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 and
decides upon the motion to be submitted to the
Annual General Meeting for the election and approval
of members of the Board of Directors . The Nomina-
tion Committee is convened by the Chairman or at
the request of a Committee member as often as
business requires . A Nomination Committee compris-
ing the following members was formed in the 2018
financial year for the election of a member of the
Group Executive Board: Hansueli Loosli (Chair), Valérie
Berset Bircher and Frank Esser . The Committee held
one meeting, which lasted three hours and twen-
ty-five minutes . Another Nomination Committee was
formed to appoint the successor to the Board of
Directors; it comprised Hansueli Loosli (Chairman),
Frank Esser, Renzo Simoni and Barbara Frei . This
Committee held two meetings lasting an average of
two hours .

4 .8 Assignment of powers of authority
The Telecommunications Enterprise Act (TEA) refers
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 for the overall management and supervi-

The Board of Directors also sets the strategic,
organisational, financial planning and accounting
guidelines, including the tax strategy, taking into
account the goals that the Swiss Confederation, as
majority shareholder, aims to achieve . The Swiss
Federal Council formulates these goals for a four-year
period in accordance with the provisions of the TEA .
N See www.swisscom.ch/targets_2018-2021

The Board of Directors has delegated day-to-day
business management to the CEO in accordance with
the TEA and the Articles of Incorporation . In addition
to the duties reserved for it under law, the Board of
Directors decides on business transactions of major
importance to the Group, including, for example, the
acquisition or disposal of companies with a financial
exposure in excess of CHF 20 million and capital
investments or divestments thereof 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 detail in the Organisational Rules and in
Annex 2 to the Organisational Rules, “Rules of
Procedure and Accountability” (see function diagram) .
N See www.swisscom.ch/basicprinciples

Information and controlling

4 .9
instruments of the Board of Directors vis-
à-vis the Group Executive Board
The Board of Directors is briefed comprehensively so
it can fulfil its tasks and responsibilities . The Chair-
man 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 .

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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 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 financial statement reporting policies
as for external financial reporting . It also includes key
non-financial information that is important for
controlling and steering purposes . Every member of
the Board of Directors is entitled to request informa-
tion on all matters relating to the Group at any time,
provided this does not conflict with the provisions
regarding the reclusion 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 is responsible for establishing
and monitoring the Group-wide assurance functions
of risk management, internal control system,
compliance and internal audit and is briefed compre-
hensively on these matters .

4.9.1 Risk management
The Board of Directors has set the objective of
protecting the company’s enterprise value through
the implementation of Group-wide risk manage-
ment . A corporate culture that promotes the con-
scious handling of risks and opportunities facilitates
the achievement of this objective . Accordingly,
Swisscom has implemented a Group-wide, central risk
management system that takes account of both
external and internal events . It captures 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 the appropri-
ate documentation . Its objective is to identify, assess
and address significant risks and opportunities in
good time . To this end, the central Risk Management
unit, which reports to both the CFO and Controlling,
works closely with the Controlling and Strategy
departments and other assurance functions and line
functions . Swisscom assesses its risks in terms of the
probability that they will occur and their quantitative
and qualitative effects in the event that they do occur .
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
provided a report on risks every quarter, as well as
in-depth information on significant risks, their
potential effects and the status of remedial measures
in April and December . The Board of Directors is
informed on an annual basis . In urgent cases, the
Chairman of the Audit Committee is informed
without delay about any significant new risks .
Significant risk factors are described in the Risks
section of the Management Commentary .
D See report pages 59—60

4.9.2 Internal control system and financial
reporting
The internal control system (ICS) ensures the reliabil-
ity 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 compo-
nents: control environment, assessment of financial
statement accounting risks, control activities,
monitoring activities, information and communica-
tion . 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 twice a year and to the Board of Directors
on an annual basis . Should the ICS risk assessment
change significantly, the Chairman of the Audit
Committee is informed without delay . Corrective
measures to remedy the shortcomings are monitored
centrally . The Audit Committee assesses the perfor-
mance and effectiveness of the ICS on the basis of the
periodic reporting .

4.9.3 Compliance management
The Board of Directors has set the objective of
safeguarding the Swisscom Group and its executive
bodies and employees from legal sanctions, financial
losses and reputational damage by ensuring Group-
wide compliance . A corporate culture that 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 Compli-
ance, a specialist unit of the Group legal department,
applies a risk-based approach towards 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 corrective measures . The

findings, the reports submitted to the whistle-blow-
ing platform and the status of any corrective mea-
sures implemented .

employees affected are informed of the measures and
their implementation is monitored . The decentralised
Compliance organisational units independently
monitor compliance with the Group regulations that
affect them, and they report to Group Compliance .
Once every year, Group Compliance reviews the
appropriateness and effectiveness of the system . In
certain areas, an annual audit of the implemented
measures is also performed by external auditors
(financial intermediation in accordance with the
Money Laundering Act) . Group Compliance reports to
the Audit Committee and the Board of Directors once
per annum on its activities and its 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
without delay .

4.9.4 Internal auditing
Internal auditing is carried out by the Internal Audit
unit . Internal Audit supports the Swisscom Ltd Board
of Directors and its Audit Committee in fulfilling their
statutory and regulatory supervisory and controlling
obligations . Internal Audit also supports management
by highlighting areas of potential for improving
business processes and the assurance functions . 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 and
possesses maximum independence . It is under the
direct control of the Chairman of the Board of
Directors and provides reports to the Audit Commit-
tee . At an administrative level, Internal Audit provides
reports to the Head of Group Strategy & Board
Services .

Internal Audit liaises closely and exchanges informa-
tion with the external auditors . The external auditors
have unrestricted access to the audit reports and
audit files 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 . Notwithstanding the above, 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
that objections raised relating to external reporting,
financial reporting and assurance functions can be
submitted anonymously and handled confidentially .
At its meetings, which are held at least on a quarterly
basis, the Audit Committee is briefed on audit

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5 Group Executive Board

5 .1 Members of the Group Executive
Board
In accordance with the Articles of Incorporation, the
Executive Board shall comprise one or more members,
who may not be members of the Board of Directors of
Swisscom Ltd at the same time . Temporary excep-
tions are only permitted in exceptional cases . The
Board of Directors has delegated responsibility for the

overall executive management of Swisscom Ltd to the
CEO . The CEO is entitled to delegate his powers to
subordinates, mainly to other members of the Group
Executive Board . The members of the Group Execu-
tive Board are appointed by the Board of Directors .
D See report pages 64—65

An overview of the composition of the Group
Executive Board as at 31 December 2018 is given in
the table below .

Name

Urs Schaeppi 1

Mario Rossi

Hans C. Werner

Marc Werner

Urs Lehner

Heinz Herren 2

Nationality

Switzerland

Switzerland and France

Switzerland

Dirk Wierzbitzki

Germany

Year of birth

Function

Appointed to the
Group Executive Board as of

1960

1967

1968

1962

1965

CEO Swisscom Ltd

CFO Swisscom Ltd

CPO Swisscom Ltd

Head of Sales & Services

Head of Enterprise Customers

Head of IT, Network & Infrastructure

Head of Products & Marketing

March 2006

January 2013

September 2011

January 2014

June 2017

January 2014

January 2016

1 Since November 2013 CEO .

2 Resigned from the Group Executive Board as of 31 January 2019 .

Heinz Herren left the Group Executive Board on
31 January 2019 . Christoph Aeschlimann (born in
1977) was named as the new member of the Group
Executive Board on 1 February 2019 and will assume
the role of Head of IT, Network & Infrastructure .

5 .2 Education, professional activities and
affiliations
Key details of the careers and qualifications of the
members of the Group Executive Board are provided
below along with a summary of the mandates they
hold outside the Group and other significant activi-
ties . Pursuant to the Articles of Incorporation, the
Group Executive Board members may perform no
more than one additional mandate in listed compa-
nies 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 . The number of mandates held by order
of Swisscom is limited to ten, while the number of
mandates in interest groups, charitable associations,
institutions and foundations, and employee benefit
foundations is limited to seven . 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 .

None of the members of the Group Executive Board
exceed the set limits for mandates .
N See www.swisscom.ch/basicprinciples

Urs Schaeppi
Degree in engineering (Dipl. Ing. ETH) and
business administration (lic. oec. HSG)

Career history
1994–1998 plant manager, Biberist paper factory;
1998–2006 Head of Commercial Business, Swisscom
Mobile; 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 and since March 2006 member of the
Swisscom Group Executive Board

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 Board of Directors,
Admeira AG, Berne; member of the Board of Trustees
of the Swiss Entrepreneurs Foundation

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
the Department of Economics of the University of
Zurich; member of the Steering Committee of
digitalswitzerland, Zurich (formerly Digital Zurich
2025); member of the Advisory Board on Digital
Transformation for the Federal Department of the
Environment, Transport, Energy and Communications
(DETEC) and the Federal Department of Economic
Affairs, Education and Research (EAER)

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Mario Rossi
Commercial apprenticeship; Swiss Certified
Public Accountant

Hans C. Werner
Graduate in business management,
PhD in business administration (Dr. oec.)

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 and again
member of the Swisscom Group Executive Board

Mandates by order of Swisscom
Vice-President of the Board of Trustees, comPlan,
Berne; since February 2018, member of the Board of
Directors, Belgacom International Carrier Services S .A .,
Brussels

Mandates in interest groups, charitable
associations, institutions and foundations,
and employee benefit foundations
Member of the Foundation Board of the Hasler
Foundation, Berne

Other significant activities
Member of the Sanctions Committee of SIX Swiss
Exchange AG, Zurich; since July 2018, member of the
Board of Directors of SwissHoldings, Berne

Career history
1997–1999 Kantonsschule Büelrain, Winterthur,
Rector; 1999–2007 Swiss Re: 1999–2000 Head of
Technical Training and Business Training, 2001
Divisional Operation Officer, Reinsurance & Risk
Division, 2002–2003 Head of Human Resources (HR)
Corporate Centre and HR Shared Services, 2003–2007
Head of Global HR; 2007–2009 Schindler Aufzüge AG,
Head of HR and Training; 2010–2011 Europe North
and East Schindler, HR Vice President; since Septem-
ber 2011 Swisscom Ltd, Chief Personnel Officer (CPO)
and member of the Swisscom Group Executive Board

Mandates by order of Swisscom
Member of the Board, Swiss Employer’s Association,
Zurich; member of the Board of Trustees, comPlan,
Berne

Other significant activities
President of the Institute Council of the International
Institute of Management in Technology (iimt) of the
University of Fribourg

Urs Lehner
Degree in IT Engineering (UAS, University of
Applied Sciences), Executive MBA in Business
Engineering, University of St. Gallen (HSG)

Career history
1997–2013 Trivadis Group, most recently: 2004–2008
Solution Portfolio Manager, member of the Executive
Board of Trivadis Group, 2008–2011 Chief Operating
Officer (COO) of Trivadis Group, 2011–2013 member
of the Board of Directors of Trivadis Holding AG; July
2011–June 2017 Swisscom (Switzerland) Ltd: July
2011–December 2013 Head of Marketing & Sales
Corporate Business, 2014–2015 Head of Marketing &
Sales Enterprise Customers, 2016–June 2017 Head of
Sales & Services Enterprise Customers; since June
2017 Swisscom, Head of Enterprise Customers and
member of the Swisscom Group Executive Board

Mandates
–

Other significant activities
–

Marc Werner
Technical apprenticeship with specialised
secondary school diploma, Swiss Certified
Marketing Executive; Senior Management
Programme (University of St. Gallen); Senior
Executive Programme, London Business School;
Leading Change and Organizational Renewal
(LCOR) Programme, Harvard 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; 2008–2013 Swisscom
(Switzerland) Ltd: 2008–2011 Head of Marketing &
Sales Residential Customers and Deputy Head of
Residential Customers, 2012–2013 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 Head of Sales & Services
and since January 2014 member of the Swisscom
Group Executive Board

Mandates by order of Swisscom
Chairman of the Board of Directors, siroop AG, Zurich,
until April 2018; member of the Board of Directors,
Digital Festival AG; since October 2018, member of
the Board of Trustees, “Stiftung für Marketing in der
Unternehmensführung”

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, until March 2018; member
of the Executive Board of the SVC Swiss Venture Club

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Heinz Herren
Degree in electrical engineering (HTL)

Dirk Wierzbitzki
Degree in electrical engineering (Dipl. Ing.)

Career history
1994–2000 3Com Corporation; 2000 Inalp Networks
Inc .; 2001–2007 Swisscom Fixnet AG: 2001–2005
Head of Marketing Wholesale, 2005–2007 Head of
Small and Medium-Sized Enterprises; 2007–Decem-
ber 2012 Swisscom, member of the Group Executive
Board; 2007–2013 Swisscom (Switzerland) Ltd:
2007–2010 Head of Small and Medium-Sized
Enterprises, 2011–2013 Head of Network & IT;
2014–January 2019 Swisscom, Head of IT, Network &
Infrastructure (formerly IT, Network & Innovation)
and again member of the Group Executive Board

Mandates in non-listed companies
Member of the Board of Directors, Schweizerische
Mobiliar Genossenschaft, Berne

Mandates by order of Swisscom
Member of the Board of Directors, Belgacom Inter-
national Carrier Services S .A ., Brussels; member of the
Board of Directors and Board Committee of econo-
miesuisse, Zurich

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 of
Commercial Terminals, 2006–2008 Director of
Consumer Internet Services and Platforms, 2008–
2010 Director of Communications Services; 2010–
2015 Swisscom (Switzerland) Ltd: member of
Management Residential Customers, 2010–2012
Head of Customer Experience Design for Residential
Customers, 2013–2015 Head of Fixed-network
Business & TV for Residential Customers; since
January 2016, Swisscom, Head of Products & Market-
ing and member of the Swisscom Group Executive
Board

Mandates by order of Swisscom
Member of the Board of Directors, SoftAtHome, Paris;
since April 2018, member of the Board of Directors,
Admeira AG, Berne and member of the Board of
Directors, Adtelier AG, Berne

Other significant activities
–

Christoph Aeschlimann (from 1 February 2019)
Degree in computer science (Dipl. Ing.),
École polytechnique fédérale de Lausanne (EPFL);
MBA, McGill University (Canada)

Career history
2001–2004 Odyssey Asset Management Systems,
Software Development Manager; 2006–2007 Zühlke
Group, Business Unit Manager; 2007–2011 Odyssey
Financial Technologies: 2007–2008 Area Services
Manager, 2008–2011 Senior Account Manager EMEA;
2011–2012 BSB, Head of Switzerland and General
Manager D-A-CH & CIS; 2012–2018 ERNI Group:
2012–2014 Business Area Manager, 2014–2017
Managing Director Switzerland, 2017–2018 CEO; since
February 2019, Swisscom, Head of IT, Network &
Infrastructure and member of the Swisscom Group
Executive Board

Mandates
–

Other significant activities
–

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5 .3 Management agreements
Neither Swisscom Ltd nor any of the Group compa-
nies included in the scope of consolidation have
entered into management agreements with third
parties .

6 Remuneration, shareholdings
and loans

All information on the remuneration of the Board of
Directors and the Group Executive Board of
Swisscom Ltd is provided in the separate Remunera-
tion Report .
D See report page 90

Shareholders’ participation

7
rights

7 .1 Voting right restrictions and proxies
Each registered share entitles the holder to one vote .
Voting rights can only be exercised if the shareholder
is entered in the share register of Swisscom Ltd with
voting rights . The Board of 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 . For the shares in excess of the
limit, the acquirer is entered in the share register as a
shareholder or beneficial holder without voting
rights . 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
majority of the capital and voting rights in 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 excep-
tional 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 cement-
ing 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 they have
acquired the shares in their own name and for their
own account or as beneficial holder . Should an
acquirer of shares refuse to make such a declaration,
they 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 .

The restrictions on voting rights provided for in the
Articles of Incorporation may be changed by resolu-
tion of the Annual General Meeting, for which an
absolute majority of valid votes cast is 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 .

7 .2 Statutory quorum requirements
The Annual General Meeting of Shareholders of
Swisscom Ltd adopts its resolutions and decides its
elections by the absolute majority of valid votes cast .
Abstentions are not deemed to be votes cast . In
addition to the special quorum requirements under
the Swiss Code of Obligations, a two-thirds majority
of the voting shares represented is required in the
following cases:

Introduction of restrictions on voting rights

●
● Change in the Articles of Incorporation concerning

special quorums for resolutions

7 .3 Convocation of the Annual General
Meeting and agenda items
The Board of Directors convenes 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 or, in the case of elections, by
stating the names of the proposed candidates .

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 (Article 5 .4 .3 of the
Articles of Association) .
N See www.swisscom.ch/basicprinciples

7 .4 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 . The law firm Reber
Rechtsanwälte, Zurich, was appointed as independent
proxy for the period up until the conclusion of the
General Annual Meeting in April 2019 . Partnerships
and legal entities may be represented by authorised
signatories, while minors and wards may be repre-
sented by their legal representative, even if the
representative is not a shareholder .

A power of attorney may be granted in writing or
electronically via the shareholders’ platform operated
by Computershare Switzerland Ltd . Shareholders who
are represented by a proxy may issue instructions for
each agenda item and also for all unannounced
agenda items and motions, stating whether they wish
to vote for or against the motion or abstain . The
independent proxy must cast the votes entrusted to
him by shareholders according to their instructions . If
the independent proxy receives no instructions, he
shall abstain . Abstentions are not deemed to be votes
cast (Article 5 .7 .4 of the Articles of Incorporation) .

7 .5 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 at its own discretion
for determining voting entitlements, which is a few
business days before the respective Annual General
Meeting . Entries in and deletions from the share
register can be made 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 31 March 2018 were
entitled to vote at the Annual General Meeting of
4 April 2018 . Shareholders entered in the share
register with voting rights as of 5 p .m . on 28 March
2019 are entitled to vote at the Annual General
Meeting of 2 April 2019 .

8 Change of control and defensive
measures

Under the terms of the Telecommunications Enter-
prise 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 .

Details on clauses on change of control are given in
the section “Remuneration Report” .
D See report page 90

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 policies for appointing the statutory
auditor have been set forth in a policy by the Board of
Directors . A new invitation to 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 substanti-
ated recommendation in favour of one audit firm to
the Board of Directors .

KPMG AG, Muri bei Bern, has acted as the statutory
auditor of Swisscom Ltd and its Group companies
(with the exception of the Italian subsidiary Fast-
web S .p .A, which is audited by PriceWaterhouseCoo-
pers S .p .A .) since 1 January 2004 . As regulated by the
Swiss Code of Obligations, the person who leads the
audit may only perform the mandate for a maximum
of seven years . Hanspeter Stocker of KPMG AG has
been responsible for the audit mandate as Auditor-in-
charge since 2015 .

In 2018, the Board of Directors issued a new call for
tenders for the audit mandate for Swisscom Ltd and
its Group companies – with the exception of Fastweb
S .p .A . The Board of Directors proposes to the Annual
General Meeting of Shareholders to be held on 2 April
2019 that PricewaterhouseCoopers AG (PwC) be
elected as the new auditor . The function of Auditor-
in-charge is to be assumed by Peter Kartscher .

9 .2 Audit fees
Remuneration for the auditing services provided by
KPMG AG in 2018 amounted to CHF 2,869 thousand

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(prior year: CHF 2,843 thousand) . Pricewaterhouse-
Coopers S .p .A . as auditors for Fastweb received an
audit fee of CHF 770 thousand in 2018 (prior year:
CHF 671 thousand) .

9 .3 Supplementary fees
The fees charged by KPMG AG for additional audit-
related services amounted to CHF 278 thousand
(prior year: CHF 388 thousand), and the fees for other
services were CHF 63 thousand (prior year: CHF 121
thousand) . The audit-related services comprise
certifications of electronic signatures . The other
services comprise tax advisory services .

The fees charged by PricewaterhouseCoopers S .p .A .
for additional audit-related and other services for
Fastweb amounted to CHF 201 thousand (prior year:
CHF 319 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
invitations to 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 . It has defined guidelines for
additional service mandates (including a list of
prohibited services) . In a regulation, it has also set a
threshold for fees charged for additional services,
which is defined as a percentage of the audit fees . In
order to ensure the independence of the auditors,
additional service mandates must be approved by the
Audit Committee where the fee exceeds CHF 300
thousand . The Audit Committee requires that the CFO
reports to it quarterly and the auditors annually on
current mandates being performed by the auditors,
broken down according to audit services, audit-re-
lated services and non-audit services .

The statutory auditors, represented by the Auditor-in-
charge and his deputy, usually attend all Audit
Committee meetings . They inform 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 . Finally,
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 . The auditor attended the five ordinary
meetings of the Audit Committee held in 2018 .
Internal Audit was represented at all seven meetings
held in 2018 . Neither the auditor nor Internal Audit
participated in the meetings of the full Board of
Directors .

Information policy

Swisscom pursues an open, active information policy
vis-à-vis shareholders, the general public and the capi-
tal markets . Shareholders are provided with notifica-
tions and announcements in accordance with
Article 12 of the Articles of Incorporation, which are
published in the Swiss Commercial Gazette . Swisscom
publishes comprehensive, consistent and transparent
financial information on a quarterly basis . Further-
more, it publishes an annual sustainability report in
accordance with the Global Reporting Initiative (GRI)
and an annual report including a management
commentary, corporate governance report, remuner-
ation report and the financial statements . The interim
reports and annual report are available on the
Swisscom website under “Investors” or may be
ordered directly from Swisscom . The Sustainability
Report is available on the Swisscom website under
“Company” .
N See www.swisscom.ch/financialreports
N See www.swisscom.ch/cr-report2018

Swisscom meets investors regularly throughout the
year, presents its financial results at analysts’
meetings and road shows, attends selected confer-
ences for financial analysts and investors, and keeps
its shareholders and other interested parties continu-
ously informed about its business through press
releases .

Related presentations and the ad-hoc press releases
published by Swisscom are available on the Swisscom
website under “Investors” . It is possible to subscribe
online to the ad-hoc press releases published by
Swisscom .
N See https://www.swisscom.ch/adhoc

The comprehensive minutes of the Annual General
Meeting of 4 April 2018 and minutes from past
meetings are available on the Swisscom website .
N See www.swisscom.ch/generalmeeting

Those responsible for investor relations can be
contacted via the website or by e-mail, telephone or
post . The contact details and address of the head
office may be found in the website publishing details .
D See report page 181

11 Financial calendar

● Annual General Meeting for the 2018 financial

year: 2 April 2019, St . Jakobshalle, Basel
● 1st Quarter Interim Report: 2 May 2019
● Half-year Interim Report: 15 August 2019
● 3rd Quarter Interim Report: 31 October 2019
● Annual Report 2019: February 2020

The detailed financial calendar is published on the
Swisscom website under “Investors” and is updated
on a regular basis .
N See www.swisscom.ch/financialcalendar

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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 and therefore creates an
incentive to achieve long-term corporate success as well as added value for
shareholders.

The Board of Directors approves, inter alia, the
personnel and remuneration policy for the entire
Group, as well as the general terms and conditions of
employment for members of the Group Executive
Board . It 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 remu-
neration, submits proposals to the Board of Directors
in this context, and, within the framework of the
approved total remuneration, is empowered to decide
upon the remuneration of the individual Group
Executive Board members (with the exception of the
CEO) . Neither the CEO nor the other members of the
Group Executive Board are entitled to participate in
meetings at which their remuneration is discussed or
decided .

The decision-making powers are governed by the
Articles of Incorporation, the Organisational Rules of
the Board of Directors and the Regulations of the
Compensation Committee .
N See www.swisscom.ch/basicprinciples

1 Governance

1 .1 General principles
The Remuneration Report is based on sections 3 .5 and
5 of the annex to the Corporate Governance Directive
issued by the SIX Swiss Exchange and Articles 13 to 16
of the Ordinance against Excessive Compensation in
Listed Stock Companies (OaEC) . Swisscom implements
the requirements of the OaEC and complies with the
recommendations of the Swiss Code of Best Practice
for Corporate Governance 2014 issued by economie-
suisse, the umbrella organisation representing Swiss
business .

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” .
N See www.swisscom.ch/basicprinciples

As in previous years, the Remuneration Report will be
put to a consultative vote at the Annual General
Meeting on 2 April 2019 .

1 .2 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 remunera-
tion .

The table below shows the division of responsibilities between the Annual General Meeting, the Board of
Directors and the Compensation Committee .

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 equity-participation schemes
for the Board of Directors and the Group Executive Board

Personnel and remuneration policy

Principles underlying retirement-benefit plans and social security payments

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

Remuneration
Committee

Board
of Directors

Annual
General Meeting

–

Remuneration of the members of the Group Executive Board (excl. CEO)

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 .

the 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 Organisational
Rules of the Board of Directors and the Regulations of
the Compensation Committee .
N See www.swisscom.ch/basicprinciples

The members of the Compensation Committee
neither work nor have worked for Swisscom in an
executive capacity, nor do they maintain any signifi-
cant 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 6 .2 to
the consolidated financial statements .
D See report page 157

1 .3 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 Directors to the Compensation Commit-
tee, he has no voting rights . The Chairman of the
Board of Directors recuses himself when discussions
take place or decisions are made with regard to
changes in his own remuneration . The CEO, CPO,
Head of Group Strategy & Board Services and the
Head of Rewards & HR Analytics attend the meetings
in an advisory capacity . In the case of agenda items
that concern the Board of Directors exclusively or
concern changes in the remuneration of the CEO and
CPO, the CEO and CPO may not be 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 meet-
ings, which are provided to the members of the
Committee and to other members of the Board of
Directors on request . The meetings of the Compensa-
tion Committee are generally held in February, June
and December . Further meetings can be convened as
and when required . The Chairman of the Compensa-
tion Committee reports verbally on the activities of

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The following table gives an overview of the composition of the Committee, the Committee meetings,
conference calls and circular resolutions held or taken in 2018 .

Total

Average duration (in hours)

Participation:

Barbara Frei, Chairwoman

Roland Abt 1

Frank Esser

Theophil Schlatter 2

Renzo Simoni 3

Hansueli Loosli 4

Meetings

Conference calls Circular resolutions

1:18

–

1 Elected to the Compensation Committee as of 4 April 2018 .
2 Resigned from the Board of Directors as of 4 April 2018 .

3 Representative of the Confederation .
4 Participation without voting rights .

2 Remuneration of the Board of
Directors

2 .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
with the normal market remuneration for comparable
functions . The basic principles regarding the remuner-
ation 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 .
N See www.swisscom.ch/basicprinciples

with the requirements on minimum shareholdings,
thus ensuring they directly participate financially in
the performance of Swisscom’s shares . The remunera-
tion is normally reviewed every December for the
following year for ongoing appropriateness . In
December 2017, the Board of Directors assessed the
appropriateness of the remuneration as part of a
discretionary decision based on the study published in
2017 by ethos, the Swiss Foundation for Sustainable
Development . This study provides information on the
remuneration of management committees in
Switzerland’s 200 largest listed companies that are
constituents of the Swiss Performance Index . No
external consultants were called on with regard to
the structuring of remuneration . The Board of
Directors opted not to adjust remuneration for the
2018 financial year .

2 .2 Remuneration components

The remuneration is made up of a Director’s fee that
varies in relation to the member’s function, meeting
attendance fees, social insurance contributions and
any applicable 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

Director’s fee
The Director’s fee is made up of a basic emolument
and functional allowances as compensation for the
individual functions . The following net amounts
(excluding employee social insurance contributions)
are paid per year:

in CHF/net

Base salary per member

Functional allowances 1

Presidium

Vice presidium

Representative of the Confederation

Finance Committee

Audit Committee

Remuneration Committee

1 No functional allowance is paid for participation in ad-hoc committees

appointed on a case-by-case basis .

110,000

255,000

20,000

40,000

Chairmanship

Member

20,000

50,000

20,000

10,000

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 to be
invested in shares . In this manner, the remuneration
(excluding meeting attendance fees 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 or 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 the year following the
reporting year in question, 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 difference between the
tax value and the market value . In April 2018, a total
of 1,486 shares were allocated to the members of the
Board of Directors (prior year: 1,493 shares) with a tax
value of CHF 390 per share (prior year: CHF 387) . Their
market value was CHF 464 (prior year: CHF 461) per
share .

Meeting attendance fees
For meetings, attendance fees of CHF 1,100 net are
paid for each full day and CHF 650 net for each
half-day .

Social insurance contributions and fringe
benefits
Swisscom pays the contributions to social insurance,
in particular old-age and survivors’ insurance and
unemployment insurance, for the members of the
Board of Directors . The disclosed remuneration paid
to the members of the Board of Directors includes the
share of social insurance contributions payable by the
employee . The share of contributions payable by
Swisscom in its role as employer is disclosed sepa-
rately and is also included in the total remuneration .

The disclosure of service-related and non-cash
benefits and expenses relies on a tax-based point of
view . No significant service-related or non-cash
benefits are rendered . Expenses are reimbursed on
the basis of actual costs incurred . Accordingly, neither
service-related and non-cash benefits nor out-of-
pocket expenses are included in the reported
remuneration .

2 .3 Total remuneration
The total remuneration paid to the individual
members of the Board of Directors for the 2018 and
2017 financial years is presented in the tables below,
broken down into individual components . The higher
amount of total remuneration for 2018 is attributable
to the fact that a greater number of meetings and
conference calls were held and the employer contri-
butions to social security were higher .

2018, in CHF thousand

Hansueli Loosli

Roland Abt

Valérie Berset Bircher 1

Alain Carrupt

Frank Esser

Barbara Frei

Anna Mossberg 2,3

Catherine Mühlemann

Theophil Schlatter 4

Renzo Simoni

Base salary
and functional allowances

Cash
remuneration

Share-based
payment

Meeting
attendance fees

Employer
contributions
to social security

Total 2018

314

127

102

130

112

136

186

563

252

194

182

245

207

149

182

252

Total remuneration to members
of the Board of Directors

1,225

724

203

139

2,291

1 The cash remuneration (including meeting attendence fees) for the mandate
as member of the Board of Directors of Worklink AG of CHF 6,500 is included .

3 Anna Mossberg is liable to social insurance contributions in Sweden . No

employee contributions were included .

2 Elected to the Board of Directors as of 4 April 2018 .

4 Resigned from the Board of Directors as of 4 April 2018 .

2017, in CHF thousand

Hansueli Loosli

Roland Abt

Valérie Berset Bircher

Alain Carrupt

Frank Esser

Barbara Frei

Catherine Mühlemann

Theophil Schlatter

Renzo Simoni 1

Hans Werder 2

Base salary
and functional allowances

Cash
remuneration

Share-based
payment

Meeting
attendance fees

Employer
contributions
to social security

Total 2017

315

120

112

158

186

558

184

185

181

224

205

181

284

193

Total remuneration to members
of the Board of Directors

1,224

725

185

116

2,250

1 Elected to the Board of Directors as of 3 April 2017 .

2 Resigned from the Board of Directors as of 3 April 2017 .

The total remuneration paid to the members of the
Board of Directors for the 2018 financial year is within
the maximum total amount approved by the 2017
Annual General Meeting (AGM) for 2018 of CHF 2 .5
million .

2 .4 Minimum shareholding requirement
The members of the Board of Directors are required
to maintain a minimum shareholding equivalent to
one annual emolument (basic emolument plus
functional allowances) . They have four years to
acquire the shareholding, in the form of the blocked
shares paid as part of remuneration and, as 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 Chairman of the
Board of Directors can approve individual exceptions
at his discretion .

2 .5 Shareholdings of the members of the
Board of Directors
As at 31 December 2017 and 2018, the members of
the Board of Directors and/or related parties held
blocked and non-blocked shares as shown in the table
below . None of the individuals required to make
notification holds voting shares exceeding 0 .1% of the
share capital .

Number

Hansueli Loosli

Roland Abt

Valérie Berset Bircher

Alain Carrupt

Frank Esser

Barbara Frei

Anna Mossberg 1

Catherine Mühlemann

Theophil Schlatter 2

Renzo Simoni

Total shares held by the members of the Board of Directors

31.12.2018

31.12.2017

3,113

2,733

379

329

642

919

112

1,559

–

324

7,706

205

213

478

784

–

1,443

1,419

160

7,648

1 Elected to the Board of Directors as of 4 April 2018 .

2 Resigned from the Board of Directors as of 4 April 2018 .

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3 Remuneration of the Group
Executive Board

3 .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 enter-
prise value . It is systematic, transparent 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 in the area for which
the member of the Group Executive Board is
responsible .

● Through direct financial participation in the

performance of the Swisscom share, 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 (mainly the use of a
company car) and pension fund benefits . The variable
remuneration includes a performance-related
component settled partly in cash and partly in 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 the Swisscom share
and thus aligns their interests with those of share-
holders . To facilitate compliance with the minimum
shareholding requirement, Group Executive Board
members have the possibility of drawing up to 50% of
the variable performance-related component of their
salary in shares .

The basic principles regarding the performance-re-
lated remuneration and the profit and equity
participation plans of the Group Executive Board are
set out in Article 8 .1 of the Articles of Incorporation .
N See www.swisscom.ch/basicprinciples

Remuneration

Assets

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

Influencing factors

Function, experience
and qualifications,
market

Achievement of
annual performance
targets

Long-term growth
of enterprise value

Purpose

Employee recruitment,
employee retention
and protection

Focus on annual
targets and sustain-
able corporate results

Alignment with
shareholders
interests

The Compensation Committee decides at its discre-
tion 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 compari-
sons . These two comparative perspectives allow

Swisscom to form an optimal overview of the
relevant employment market for managerial posi-
tions . No new comparative studies were taken into
consideration in the year under review . The studies by
Willis Towers Watson were referred to for this
purpose, as in the previous reporting year . 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

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the reporting year were revised slightly by the
Compensation Committee in line with the Group’s
continuing corporate strategy . The targets are based
on the Swisscom Group’s budget figures for 2018 .

The targets for the members of the Group Executive
Board consist of financial as well as business transfor-
mation targets . The financial targets include revenue,
earnings before interest, taxes, depreciation and
amortisation as a percentage of revenue (EBITDA
margin), and a free cash flow proxy . The business
transformation targets are summarised under the
Business Transformation Multiplier (BTM) and include
the Net Promoter Score for residential and business
customers, which is a recognised indicator of
customer loyalty, an availability coefficient, growth
targets and net cost savings targets . Further informa-
tion on customer satisfaction can be found in the
Management Commentary .
D See report page 35

Segment targets are tailored to the function of each
Group Executive Board member . As in the previous
year, these include financial targets for the Italian
subsidiary Fastweb S .p .A . (Fastweb), based on which
the Group Executive Board members delegated by
Swisscom to Fastweb’s Board of Directors are
measured . The target structure thus takes account of
the following two strategic priorities of Swisscom:
strengthening the core business by offering the best
infrastructure, whereby the results achieved are
rewarded, and focusing on future success, whereby
realisation of new growth opportunities and the best
customer experiences is incentivised in particular .

A lower and an upper limit apply to the weighting of
the two priorities, with the maximum possible target
achievement being 130% .

generate revenue of CHF 4 .7 billion 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 the two comparative
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 the
individual remuneration paid to members of the
Group Executive Board every three years of employ-
ment . Taking into account the benchmarks, the Board
of Directors adjusted the salary of one member of the
Group Executive Board during the course of the
reporting year in order to reflect the performance of
this member and to bring the salary into line with
standard market remuneration levels .

3 .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 (performance-related bonus) .
The amount of the performance-related component
paid out depends on the extent to which the targets
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
performance-related 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
salary component
The targets underlying the variable performance-re-
lated salary 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 following table illustrates the target structure for all Group Executive Board members in the year under
review and shows the individual targets and their respective weighting .

Target levels

Objectives

Financial performance factor

Net revenue

EBITDA margin

Free cash flow proxy

Segment targets

Total finance target factor

Business transformations targets

Net promoter score

Availability key indicator

Growth

Net cost savings

Total business transformation multiplicator

Weighting of Weighting of targets level
of other members of the
targets level
Group Executive Board
CEO

24%

32%

20%

100%

40%

20%

100%

24–30%

32–40%

0–20%

40%

20%

Achievement of targets
The Compensation Committee determines the level
of target achievement in the subsequent year once
the consolidated financial statements become
available . Its decision is based on an 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

Lower
limit

At
target

Upper
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 individ-
ual targets . These targets consist of financial and
business transformation targets, which are multiplied
by one another as factors . The amount paid out is
limited to a maximum of 130% of the perfor-
mance-related bonus . In determining the level of
target achievement, the Compensation Committee
has a degree of discretion in assessing the effective
management performance, 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 compo-
nent to be paid to the Group Executive Board and the
CEO .

In the year under review, the financial targets of the
Group were on the whole exceeded . The business
transformation targets were not fully met .

The resulting payment of the performance-related
component is 99% of the performance-related bonus
for the CEO and between 99% and 104% of the
performance-related bonus for the other members of
the Group Executive Board .

Payment of the variable performance-related
salary component
The variable performance-related salary component
for a given financial year is paid in April of the
following year, with 25% being paid in the form of
Swisscom shares, in accordance with the Manage-
ment Incentive Plan . Group Executive Board members
may opt to increase the share component up to a
maximum of 50% of the total variable perfor-
mance-related compensation . The remaining portion

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of the performance-related component is settled in
cash . In the event of a departure from the Group
Executive Board during the course of the year, the
payment of the performance-related component for
the current year is generally made in cash only . The
decision of what percentage of the variable perfor-
mance-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, three
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 remuner-
ation 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 determined as of the date
of allocation . The allocation of shares for the 2018
reporting year will be made in April 2019 .

In April 2018, a total of 1,974 shares (prior year: 2,121
shares) with a tax value of CHF 390 (prior year:
CHF 387) per share and a market value of CHF 464
(prior year: CHF 461) per share were allocated for the
2017 financial year to the 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 (for pension fund regulations,
see www .pk-complan .ch) . The disclosed pension
benefits (“pension benefits” here meaning amounts
paid that give rise to or increase pension entitle-
ments) 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 term life
insurance concluded for Swisscom management staff
in Switzerland . Further information about this is
provided in Note 4 .3 to the consolidated financial
statements .
D See report pages 144—149

With regards to the disclosure of service-related and
non-cash benefits and expenses, a tax-based point of
view is taken . The members of the Group Executive
Board are entitled to the use of a company car . The
disclosed service-related and non-cash benefits
rendered 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 .

3 .3 Total remuneration
The following table shows the total remuneration
paid to the members of the Group Executive Board for
the 2017 and 2018 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 for members of the Group Executive
Board (CHF 2,760 thousand in total) was around 75%
of the base salary (CHF 3,694 thousand in total) . The
total remuneration paid to the highest-earning
member of the Group Executive Board (CEO, Urs
Schaeppi) decreased by 2 .1% compared to the prior
year . The decrease in total remuneration paid to the
Group Executive Board and the CEO is primarily
attributable to the lower variable remuneration as
compared to the prior year .

In CHF thousand

Fixed base salary paid in cash

Variable performance-related remuneration paid in cash

Variable performance-related remuneration paid in shares 1

Service-related and non-cash benefits

Employer contributions to social security 2

Retirement benefits

Total remuneration to members of the Group Executive Board

Benefits paid following retirement from Group Executive Board 3

Total remuneration paid to Group Executive Board,
incl. benefits paid following retirement from Board

Total Group
Executive Board
2018

Total Group
Executive Board
2017

Thereof
Urs Schaeppi
2018

Thereof
Urs Schaeppi
2017

3,694

1,874

886

575

892

8,016

605

3,736

1,966

901

591

847

8,133

629

882

459

182

137

147

1,829

–

882

486

193

145

141

1,868

–

8,621

8,762

1,829

1,868

1 The shares are reported at market value and are blocked from sale for three

3 Contractual compensation payments made during the notice period to a

years .

2 Employer contributions to social security (AHV, IV, EO and FAK, incl . adminis-

tration costs, and daily sickness benefits and accident insurance) are included
in the total remuneration .

Group Executive Board member who resigned from Board during the financial
year .

Total remuneration paid to the members of the Group
Executive Board for the 2018 financial year is within
the maximum total amount approved by the 2017
Annual General Meeting (AGM) for 2018 of CHF 9 .7
million .

3 .4 Minimum shareholding requirement
The members of the Group Executive Board are
required to hold a minimum amount of Swisscom
shares . The minimum shareholding to be held by the
CEO is equivalent to two years’ base salary and the
other Group Executive Board members are required to
maintain a shareholding equivalent to one year’s base
salary . The members of the Group Executive Board
have four years to build up the required minimum
shareholding in the form of the blocked shares paid as
part of remuneration and, if necessary, through share
purchases on the open market . Compliance with the

shareholding requirement is reviewed annually by the
Compensation Committee . If a member’s sharehold-
ing 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 .

3 .5 Shareholdings of the members of the
Group Executive Board
Blocked and non-blocked shares held by members of
the Group Executive Board and/or related parties as
at 31 December 2017 and 2018 are indicated in the
table below . None of the individuals required to make
notification holds voting shares exceeding 0 .1% of the
share capital .

Number

Urs Schaeppi (CEO)

Mario Rossi

Hans C. Werner

Marc Werner

Urs Lehner

Heinz Herren

Dirk Wierzbitzki

Total shares held by the members of the Group Executive Board

31.12.2018

31.12.2017

4,380

1,483

1,259

1,158

290

1,856

604

11,030

3,964

1,236

1,068

750

115

1,586

234

8,953

3 .6 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 any wrongfully awarded remuneration to
lapse or may reclaim any remuneration that is wrong-
fully paid . The contracts do not contain a non-compe-
tition clause or a clause on change of control .

4 Other remuneration

the assignment and level of responsibility . It is
determined by the Board of Directors of Worklink AG
by discretionary decision and assessed every two
years for appropriateness . Valérie Berset Bircher
stepped down from her position on the Board of
Directors of Worklink AG on 31 December 2018 for
professional reasons .

The members of the Group Executive Board are not
entitled to separate remuneration for any director-
ships they hold either within or outside the Swisscom
Group .

4 .1 Remuneration for additional services
Swisscom may pay remuneration to members of the
Board of Directors for assignments in Group compa-
nies and assignments performed by order of
Swisscom (Article 6 .4 of the Articles of Incorporation) .
Only Valérie Berset Bircher, who was elected to the
Board of Directors of Worklink AG on 19 March 2018,
received remuneration for additional activities in the
2018 reporting year, amounting to CHF 7,500 gross
per year . For attending meetings, fees of CHF 1,000
gross are paid for each full day and CHF 500 gross for
each half-day . The remuneration is paid all in cash .
Expenses are reimbursed on the basis of actual costs
incurred . The remuneration is commensurate with

4 .2 Remuneration for former members
of the Board of Directors or Group
Executive Board and related parties
In the year under review, no remuneration was paid
to former members of the Board of Directors 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 . With the exception of the
remuneration paid to the member of the Group
Executive Board who stepped down in 2017 in
fulfilment of contractual commitments during the
notice period, no such remuneration was paid to
former members of the Group Executive Board . 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 .

4 .3 Loans and credits granted
Swisscom Ltd has no statutory basis for the granting
of loans, credit facilities or pension benefits apart
from the retirement benefits paid to the members of
the Board of Directors and Group Executive Board .

In the 2018 financial year, Swisscom granted no collat-
eral, 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 . There are therefore no corresponding
receivables outstanding .

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100

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 2018.
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 2.3, 2.5, 3.3, 3.5 and 4.1 to 4.3 on
pages 90 to 100 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 2018 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, 6 February 2019

Toni Wattenhofer
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.

101

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Consolidated financial
statements

Consolidated statement of comprehensive income . . . . . 104
Consolidated balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Consolidated statement of cash flows . . . . . . . . . . . . . . . . . 106
Consolidated statement of changes in equity . . . . . . . . . . 107

Notes to the
consolidated
financial statements

Operating performance
1
1 .1
Segment information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
1 .2 Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117

Capital and financial risk management

2
2 .1 Capital management and equity . . . . . . . . . . . . . . . . . . . . . . . . 119
2 .2
Financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
2 .3 Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
Financial result . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
2 .4
2 .5
Financial risk management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125

Operating assets and liabilities

3
3 .1 Operating net current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
3 .2 Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . 135
3 .3 Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
3 .4
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
3 .5 Provisions, contingent liabilities and contingent assets . . 140

4
Employees
4 .1
Employee headcount and personnel expense . . . . . . . . . . . . 143
4 .2 Key management compensation . . . . . . . . . . . . . . . . . . . . . . . . 144
4 .3 Post-employment benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144

Scope of consolidation

5
5 .1 Group structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
Significant changes in scope of consolidation . . . . . . . . . . . . 150
5 .2
5 .3
Equity-accounted investees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
5 .4 Group companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153

6
Other disclosures
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155
6 .1
6 .2 Related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
6 .3 Other accounting policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158

Statutory Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160

Financial statements
of Swisscom Ltd

Income statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
Balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168
Notes to the financial statements . . . . . . . . . . . . . . . . . . . . . 169
Proposed appropriation of retained earnings . . . . . . . . . . . 173

Statutory Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174

Consolidated Financial Statements
Consolidated statement
of comprehensive
income

In CHF million, except for per share amounts

Note

2018

2017

Income statement

Net revenue

Direct costs

Personnel expense

Other operating expense

Capitalised self-constructed assets and other income

Operating income before depreciation, amortisation and impairment losses

Depreciation, amortisation and impairment losses

Operating income

Financial income

Financial expense

Result of equity-accounted investees

Income before income taxes

Income tax expense

Net income

Other comprehensive income

Actuarial gains and losses from defined benefit pension plans

Change in fair value of equity instruments

Items that will not be reclassified to income statement

Foreign currency translation adjustments of foreign subsidiaries

Change in available-for-sale financial assets

Change in cash flow hedges

Other comprehensive income from equity-accounted investees

Items that are or may be reclassified subsequently to income statement

Other comprehensive income

Comprehensive income

Net income

Other comprehensive income

Comprehensive income

Share of net income and comprehensive income

Equity holders of Swisscom Ltd

Non-controlling interests

Net income

Equity holders of Swisscom Ltd

Non-controlling interests

Comprehensive income

Earnings per share

1.1

1.2

1.2, 4.1

1.2

3.2–3.4

2.4

5.3

6.1

2.1

11,714

11,662

(2,954)

(2,815)

(2,193)

461

4,213

(2,144)

2,069

(186)

1,916

(395)

1,521

(62)

(53)

(40)

–

(33)

(86)

1,521

(86)

1,435

1,527

(6)

1,521

1,441

(6)

1,435

(2,721)

(3,002)

(2,152)

508

4,295

(2,164)

2,131

(204)

(11)

1,960

(392)

1,568

679

–

679

143

(5)

135

814

1,568

814

2,382

1,570

(2)

1,568

2,384

(2)

2,382

Basic and diluted earnings per share (in CHF)

2.1

29.48

30.31

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Consolidated
balance sheet

In CHF million

Assets

Cash and cash equivalents

Trade receivables

Other operating assets

Other financial assets

Current income tax assets

Total current assets

Property, plant and equipment

Goodwill

Intangible assets

Equity-accounted investees

Other financial assets

Deferred tax assets

Total non-current assets

Total assets

Liabilities and equity

Financial liabilities

Trade payables

Provisions

Other operating liabilities

Current income tax liabilities

Total current liabilities

Financial liabilities

Defined benefit obligations

Provisions

Deferred gain on sale and leaseback of real estate

Deferred tax liabilities

Total non-current liabilities

Total liabilities

Share capital

Capital reserves

Retained earnings

Foreign currency translation adjustments

Other reserves

Equity attributable to equity-holders of Swisscom Ltd

Non-controlling interests

Total equity

Total liabilities and equity

Note

31.12.2018

31.12.2017

3.1

6.1

3.2

3.3

3.4

5.3

6.1

2.2

3.1

3.5

3.1

6.1

2.2

4.3

3.5

2.2

6.1

2.1

474

2,189

1,243

3,990

10,894

5,164

1,858

174

339

167

18,596

22,586

1,361

1,658

131

1,127

250

4,527

6,806

1,196

901

134

814

9,851

14,378

136

9,759

(1,728)

8,223

(15)

8,208

22,586

525

2,389

729

3,731

10,697

5,186

1,758

152

337

197

18,327

22,058

1,834

1,753

177

1,165

213

5,142

6,452

1,048

900

146

725

9,271

14,413

136

9,155

(1,689)

7,656

(11)

7,645

22,058

105

Consolidated statement
of cash flows

In CHF million

Net income

Income tax expense

Result of equity-accounted investees

Financial income

Financial expense

Depreciation, amortisation and impairment losses

Gain on sale of property, plant and equipment

Loss on disposal of property, plant and equipment

Expense for share-based payments

Change in provisions

Change in defined benefit obligations

Change in operating assets and liabilities

Change in deferred gain from the sale and leaseback of real estate

Interest received

Dividends received

Interest paid

Income taxes paid

Cash flow from operating activities

Note

6.1

5.3

2.4

3.2–3.4

1.2

3.5

4.3

3.1

2.2

5.3

2.2

6.1

Purchase of property, plant and equipment and intangible assets

3.2, 3.4

Sale of property, plant and equipment and intangible assets

Acquisition of subsidiaries, net of cash and cash equivalents acquired

Purchase of equity-accounted investees

Proceeds from sale of equity-accounted investees

Purchase of other financial assets

Proceeds from other financial assets

Cash flow used in investing activities

Issuance of financial liabilities

Repayment of financial liabilities

Dividends paid to equity holders of Swisscom Ltd

Dividends paid to non-controlling interests

Acquisition of non-controlling interests

Other cash flows from financing activities

Cash flow used in financing activities

(Net decrease) net increase in cash and cash equivalents

Cash and cash equivalents at 1 January

Foreign currency translation adjustments in respect of cash and cash equivalents

Cash and cash equivalents at 31 December

5.2

2.2

2.1

5.2

2018

1,521

395

(5)

(28)

186

2,144

(17)

(57)

(70)

(12)

(157)

(294)

3,720

(2,404)

(78)

(35)

–

(31)

(2,495)

1,451

(1,571)

(1,140)

(1)

–

(9)

2017

1,568

392

(44)

204

2,164

(24)

165

(12)

(181)

(289)

4,091

(2,378)

(63)

(20)

(58)

158

(2,255)

757

(1,158)

(1,140)

(8)

(99)

(9)

(1,270)

(1,657)

(45)

525

(6)

474

179

329

525

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Consolidated statement
of changes in equity

In CHF million

Share
capital

Capital
reserves

Foreign
currency
Retained translation
earnings adjustments

Balance at 31 December 2016

136

8,148

(1,834)

Net income

Other comprehensive income

Comprehensive income

Dividends paid

Other changes

Balance at 31 December 2017

Change in accounting policies 1

Balance at 1 January 2018

Net income

Other comprehensive income

Comprehensive income

Dividends paid

Other changes

–

1,570

679

2,249

(1,140)

(102)

–

145

–

136

9,155

(1,689)

–

300

–

136

9,455

(1,689)

–

1,527

(53)

1,474

(1,140)

(30)

–

(39)

–

Balance at 31 December 2018

136

9,759

(1,728)

1 See «General informations and amendements of financial statement report-

ing policies» in the Notes to the consolidated financial statements .

Equity
attributable
to equity

Non-
Other holders of controlling
interests

Swisscom

reserves

6,514

1,570

814

2,384

(1,140)

(102)

7,656

296

7,952

1,527

(86)

1,441

(1,140)

(30)

(2)

–

(2)

(8)

(9)

(11)

–

(11)

(6)

–

(6)

(1)

–

(10)

–

(4)

(2)

–

Total
equity

6,522

1,568

814

2,382

(1,148)

(111)

7,645

296

7,941

1,521

(86)

1,435

(1,141)

(27)

8,223

(15)

8,208

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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 .

General information and changes in accounting policies

General information
The Swisscom Group (hereinafter referred to as “Swisscom”) provides telecommunication services and is active
primarily in Switzerland and Italy . The consolidated financial statements as of and for the year ended
31 December 2018 comprise Swisscom Ltd, as parent company, and its subsidiaries . Swisscom Ltd is a limited -
liability company incorporated in accordance with Swiss law 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 . The number of issued shares is unchanged from the prior year and aggregates
51,801,943 . The shares have a nominal value of CHF 1 and are fully paid-up . Each share entitles the holder to
one vote . The majority shareholder of Swisscom Ltd remains, as in the prior year, the Swiss Confederation
(“Confederation”) . 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 state-
ments on 6 February 2019 . As of this date, no material events after the reporting date have occurred . The
consolidated financial statements will be submitted for approval to the Annual General Meeting of Share-
holders of Swisscom Ltd to be held on 2 April 2019 .

Basis of preparation
The consolidated financial statements of Swisscom have been prepared in accordance with International
Financial Reporting Standards (IFRS) and in compliance with the provisions of Swiss law . The reporting period
covers twelve months . The consolidated financial statements are presented in Swiss francs (CHF) which
corresponds to the functional currency of Swisscom Ltd . Unless otherwise noted, all amounts are stated in
millions of Swiss francs . The consolidated financial statements are drawn up on the historical cost basis, unless
a standard or interpretation prescribes another measurement basis for a particular caption in which case this is
explicitly stated in the accounting policies . Material accounting policies of relevance for an understanding of
the consolidated financial statements are set out in the specific notes to the financial statements .

Significant judgements, estimates and assumptions in applying the accounting policies
The preparation of consolidated financial statements is dependent upon assumptions and estimates being
made in applying the accounting policies for which management can exercise a certain degree of judgment .
This concerns the following positions:

Description

Useful lives of property, plant and equipment and intangible assets

Recoverability of Goodwill

Provisions for dismantlement and restoration costs

Provision for regulatory and competition law procedures

Defined benefit obligations

Further information

Note 3.2 and 3.4

Note 3.3

Note 3.5

Note 4.3

Amendments to International Financial Reporting Standards and Interpretations which
are to be applied for the first time in the financial year
As from 1 January 2018 onwards, Swisscom adopted various amendments to existing International Financial
Reporting Standards (IFRS) and Interpretations, which, with the exception of the amendments below, have no
material impact on the results or financial position of the Group .

Standard

IFRIC 22

Name

Foreign currency transactions and advance consideration

Amendements to IFRS 2

Classification and measurement of share-based payment transactions

IFRS 9

IFRS 15

Various

Financial instruments

Revenue from contracts with customers and related clarifications to IFRS 15

Amendments to IFRS 2014–2016

Further information as to the changes in IFRS which must be applied in 2019 or later are set out in Note 6 .3 . The
new IFRS Standards adopted have the following impact on shareholders’ equity as of 1 January 2018:

In CHF million

Trade receivables

Other operating assets

Deferred tax assets

Other financial assets

Other assets

Total assets

Other operating liabilities

Deferred tax liabilities

Other liabilities

Total liabilities

Total equity

Total liabilities and equity

31.12.2017

2,389

729

197

415

18,328

22,058

1,165

725

12,523

14,413

7,645

22,058

Application
IFRS 9

Application
IFRS 15

01.01.2018

(30)

(2)

–

(14)

–

(15)

(14)

–

435

(3)

–

432

–

121

311

432

2,359

1,162

201

426

18,328

22,476

1,210

802

12,523

14,535

7,941

22,476

IFRS 9 “Financial Instruments”
The Standard encompasses new rules to classify and measure financial assets and liabilities, the recognition of
impairments and the recording of hedging relationships . The new provisions have resulted in changes to the
classification of other financial assets . In addition, equity instruments which until now were measured at cost
must now be measured at fair value . The classification and carrying amounts of other financial assets in the
accordance with the previous and new provisions are as follows:

Classification
according to IAS 39

Classification
according to IFRS 9

Carrying amount
according to IAS 39

Carrying amount
according to IFRS 9

In CHF million

Term deposits

Loans and receivables

At amortised cost

Certificates of deposit

Loans and receivables

At amortised cost

Loans

Loans and receivables

At amortised cost

Equity instruments

Quoted debt instruments

Derivative financial instruments

Total other financial assets

Available-for-sale

Fair value through
profit or loss

At fair value through other
comprehensive income

At amortised cost

Fair value through
profit or loss

145

100

415

145

100

426

Under the new provisions relating to impairments, impairment losses on financial assets are to be recognised
earlier . Impairment losses on financial assets as of 1 January 2018 increased by CHF 32 million before income
taxes as a result of the initial adoption of IFRS 9 . No changes for Swisscom will ensue from the recording of
hedging relationships . Equity as of 1 January 2018 declined by CHF 15 million as a result of the initial adoption
of IFRS 9 . The prior year’s comparative figures were not restated .

109

IFRS 15 “Revenue from Contracts with Customers”
In contrast to the provisions in force until now, 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 point of time or over-time criteria, it is no
longer a question of the transfer of risks and rewards but of the transfer of control over the goods and services
to the customer . With regards to multi-element contracts, IFRS 15 explicitly rules that the transaction price is
to be allocated to each identified performance obligation in proportion to the relative stand-alone selling
prices . Furthermore, the new standard contains new rules regarding the costs to fulfill and to obtain a contract
as well as guidelines as to the question when such costs are to be capitalised . In addition, the new standard
requires new, more detailed presentation and disclosure information . IFRS 15 will have the following material
impact on the consolidated financial statements of Swisscom:

Revenues
●

If a mobile handset is sold as part of a bundled offering with a mobile-phone contract, it is considered as a
multi-element contract . Previously in such multi-element contracts, the subsidy granted on the mobile
handset was allocated in full to the mobile handset and recognised accordingly in full upon conclusion of
the contract . Under the new rules, the revenue is to be reallocated over the pre-delivered components
(mobile handset) with the result that the revenue will be recognised earlier . The total revenue remains
unchanged over the whole duration of the contract .

● Swisscom makes bundled offerings which include broadband and TV as well as an optional fixed-line

connection with telephony services . Service fees are fixed . Routers and set-top boxes are sold in conjunction
with such bundled offerings which previously were recognised as revenue in full at the time of sale . Because
of their technical requirements, the routers and set-top boxes can be used exclusively for Swisscom services .
Conversely, Swisscom services can only be used with Swisscom routers and set-top boxes . For this reason,
the routers and set-top boxes do not constitute separate performance obligations . Revenues from the sale
of routers and set-top boxes are thus distributed over the term of the underlying service contract .

● Previously, connection fees were deferred and recognised as revenue over the minimum contract period .
Should no minimum contract period exist, the revenue was recognised at the time of activation . Non -
refundable connection fees which do not constitute a separate performance obligation in future are
considered as part of the total transaction price and allocated to the separate performance obligations
arising under the customer contract on a pro-rata basis .

Contract costs
● Handset subsidies and commissions paid to dealers (costs to obtain a contract) were previously expensed

immediately . In future, directly attributable costs to obtain a contract are capitalised and expensed over the
life of the contract .

● The costs of routers and set-top boxes were previously expensed at the time of sale in accordance the
revenue recognition policy . In future, they will also be capitalised as directly attributable costs to fulfill
a contract and expensed over the term of the underlying service contract .

Swisscom has elected to apply the modified retrospective approach for the initial adoption of IFRS 15 . In
accordance with this transitional method, Swisscom must apply IFRS 15 retrospectively only for those contracts
which had not been fulfilled as of 1 January 2018 . The cumulative effect in applying the standard was rec-
ognised in equity as of 1 January 2018, with no effect on the income statement . The prior year’s comparative
figures were not restated . Equity as of 1 January 2018 increased by CHF 311 million as a result of the adoption
of the new standard . The impact is the result of the initial recognition of contract assets and liabilities as well
as deferred costs to obtain a contract and costs to fulfill a contract . How IFRS 15 will impact future results will
depend on future business models and products, the mix of distribution channels as well as future movements
in volumes, prices and costs .

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Presented below are the relevant financial-statement positions measured in accordance with the previous and
new accounting policies:

In CHF million

Income statement

Net revenue

Direct costs

Personnel expense

Other operating expense

Capitalised self-constructed assets and other income

Operating income before depreciation, amortisation and impairment losses

Depreciation, amortisation and impairment losses

Operating income

Financial income

Financial expense

Result of equity-accounted investees

Income before income taxes

Income tax expense

Net income

In CHF million

Balance sheet

Other operating assets

Other assets

Total assets

Other operating liabilities

Deferred tax liabilities

Miscellaneous liabilities

Total liabilities

Total equity

Total liabilities and equity

IFRS 15
2018

IAS 18/IAS 11
2018

Adjustment

11,714

11,709

(2,954)

(2,815)

(2,193)

461

4,213

(2,144)

2,069

(186)

1,916

(395)

1,521

(2,859)

(2,815)

(2,193)

414

4,256

(2,144)

2,112

(186)

1,959

(404)

1,555

(95)

–

(43)

–

(43)

–

(43)

(34)

IFRS 15
31.12.2018

IAS 18/IAS 11
31.12.2018

Adjustment

1,243

21,343

22,586

1,127

814

12,437

14,378

8,208

22,586

823

21,343

22,166

1,054

744

12,437

14,235

7,931

22,166

420

–

420

–

143

277

420

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1 Operating performance

This chapter sets outs information on the operating performance of Swisscom
in the current financial year. The classification according to operating segments
corresponds to the reporting system used internally to evaluate performance
and allocate resources, as well as to Swisscom’s management structure.

1 .1 Segment information

General disclosures

Swisscom Group

Swisscom Switzerland

Residential
Customers

Enterprise
Customers

Wholesale

IT, Network
& Infrastructure

Fastweb

Other Operating
segments

Segment

Activity

Residential Customers

Enterprise Customers

Wholesale

IT, Network & Infrastructure

Fastweb

Other Operating Segments

The segment Residential Customers comprises connection fees for broadband and TV services, fixed-network and
mobilephone subscriptions as well as national and international telephone and data traffic for residential custom-
ers and customers from small- and medium size enterprises. Furthermore, the segment includes the sale of mer-
chandise.

Enterprise Customers focuses on complete communication solutions for large business customers. Its product
offering in the field of business ICT infrastructure covers the whole range of services from individual products to
complete business solutions.

This segment comprises the use of Swisscom fixed and mobile networks by other telecommunication service pro-
viders and the use of third-party networks by Swisscom. It also includes roaming with foreign operators whose
customers use Swisscom’s mobile networks, as well as broadband services and regulated products as a result of the
unbundling of the “last mile” for other telecommunication service providers.

The segment IT, Network & Infrastructure is responsible 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 in Switzerland. In addition, IT, Network & Infrastructure also includes the support functions
Finances, Human Resources and Strategy for Swisscom Switzerland as well as the management of real estate and
the vehicle fleet in Switzerland.

Fastweb is one of the largest providers of broadband services in Italy. Its product portfolio covers voice, data, broad-
band and TV services as well as video-on-demand for residential and corporate 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 customised solutions.

Other Operating Segments mainly comprises Digital Business and Participations. Digital Business mainly comprises
Swisscom Directories Ltd (localsearch), which operates in the field of online directories and telephone directories.
Participations mainly comprises the subsidiaries Billag Ltd, cablex Ltd and Swisscom Broadcast Ltd. Billag Ltd col-
lected radio and television license fees on behalf of the Swiss Confederation until the end of 2018. The operations
of cablex Ltd are in the building and maintenance of wired and wireless networks in Switzerland, primarily in the
field of telecommunications. Swisscom Broadcast Ltd is the leading provider in Switzerland of broadcast services, of
cross-platform retail media services and of security communications.

Reporting is made on the basis of the segments “Residential Customers”, “Enterprise Customers”, “Wholesale”,
and “IT, Network & Infrastructure”, which are regrouped under Swisscom Switzerland, as well as “Fastweb” and
“Other Operating Segments” . In addition, “Group Headquarters”, which includes non-allocated costs, is
disclosed separately in segment reporting .
Group Headquarters does not charge any management fees to other segments for its financial management
services, nor does the IT, Network & Infrastructure segment charge any network costs to other segments . The
remaining services between the segments are recharged at market prices . Segment expense encompasses the
direct and indirect costs which include personnel expense, other operating costs less capitalised costs of
self-constructed assets and other income . Retirement-benefit expense includes ordinary employer contribu-
tions . The difference between the ordinary employer contributions and the pension cost as provided for under
IAS 19 is reported in the column “Eliminations” . In 2018, an expense of CHF 60 million is disclosed under
“Eliminations” as a pension cost reconciliation item in accordance with IAS 19 (prior year: CHF 92 million) . The
results of the segments “Residential Customers”, “Enterprise Customers” and “Wholesale” correspond to a

contribution margin prior to network costs . The segment result of IT, Network & Infrastructure consists of
operating expenses and depreciation and amortisation less revenues from the rental and administration of
buildings and vehicles as well as the capitalised costs of property, plant and equipment and other income . The
segment results of Swisscom Switzerland and of the other operating segments do not include the retire-
ment-benefit reconciliation item in accordance with IAS 19 . The segment results of Fastweb correspond to the
operating results . Several business areas were transferred between the various segments of Swisscom
Switzerland . The prior year’s comparatives were restated accordingly .

Segment information 2018

2018, in CHF million

Residential customers

Corporate customers

Wholesale customers

Net revenue from external customers

Net revenue from other segments

Net revenue

Direct costs

Indirect costs 1

Segment result before depreciation and amortisation

Depreciation, amortisation and impairment losses

Segment result

Financial income and financial expense, net

Result of equity-accounted investees

Income before income taxes

Income tax expense

Net income

Swisscom
Switzerland

5,843

2,328

566

Fastweb

1,210

900

308

8,737

2,418

8,817

2,426

(1,972)

(3,437)

3,408

(1,502)

1,906

(950)

(699)

777

(587)

190

Other
Operating
Segments

Group
Head-
quarters

Elimi-
nation

–

558

–

558

349

907

(59)

(662)

186

(59)

127

–

(80)

(78)

–

(78)

Segment result before depreciation and amortisation

3,408

777

186

(78)

(80)

4,213

Capital expenditure in property, plant and equipment
and intangible assets

(1,620)

(757)

(46)

Change in provisions

Change in defined benefit obligations

Change in operating net working capital

Other 2

Operating free cash flow

(61)

(97)

(3)

1,633

–

(1)

–

(1)

–

(1)

–

138

(67)

1 Including capitalised costs of self-constructed assets and other income .

2 Proceeds from the sale of property, plant and equipment, non-cash change in
net working capital from operating activities, change in deferred gain from
the sale and leaseback of real estate, and dividend payments to owners of
non-controlling interests .

113

Total

7,053

3,787

874

11,714

–

11,714

(2,954)

(4,547)

4,213

–

(438)

331

(80)

(2,144)

(76)

2,069

(158)

1,916

(395)

1,521

–

(9)

(2,404)

(57)

(70)

(1)

1,745

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Segment information Swisscom Switzerland 2018

2018, in CHF million

Fixed access

Mobile subscribers

Telecom services

Solution business

Merchandise

Wholesale

Revenue other

Net revenue from external customers

Net revenue from other segments

Net revenue

Direct costs

Indirect costs 1

Segment result before depreciation and amortisation

Depreciation, amortisation and impairment losses

Segment result

Capital expenditure in property, plant and equipment
and intangible assets

1 Including capitalised costs of self-constructed assets and other income .

Segment information 2017

2017, in CHF million, restated

Residential customers

Corporate customers

Wholesale customers

Net revenue from external customers

Net revenue from other segments

Net revenue

Direct costs

Indirect costs 1

Segment result before depreciation and amortisation

Depreciation, amortisation and impairment losses

Segment result

Financial income and financial expense, net

Result of equity-accounted investees

Income before income taxes

Income tax expense

Net income

Residential
Customers

Enterprise
Customers

IT,
Whole- Network &
sale Infrastructure

Elimi-
nation

Total
Swisscom
Switzerland

2,573

2,618

5,191

–

494

–

158

580

451

1,031

1,042

211

–

5,843

2,308

102

5,924

2,410

(1,411)

(1,140)

3,373

(138)

3,235

(755)

(900)

755

(69)

686

–

566

–

566

328

894

(430)

(18)

446

–

139

159

(10)

(1,315)

(1,166)

–

(1,296)

446

(2,462)

–

(570)

634

(64)

–

3,153

3,069

6,222

1,042

705

566

202

8,737

8,817

(1,972)

(3,437)

3,408

(1,502)

1,906

(170)

(54)

–

(1,396)

–

(1,620)

Other
Operating
Segments

Group
Head-
quarters

Elimi-
nation

Swisscom
Switzerland

5,971

2,428

578

Fastweb

1,097

791

267

8,977

2,155

9,058

2,164

(1,943)

(3,615)

3,500

(1,485)

2,015

(771)

(548)

845

(589)

256

–

529

–

529

321

850

(31)

(639)

180

(96)

–

(112)

(111)

–

Total

7,068

3,749

845

11,662

–

11,662

(2,721)

(4,646)

4,295

–

(411)

268

(119)

(2,164)

(111)

(113)

2,131

(160)

(11)

1,960

(392)

1,568

Segment result before depreciation and amortisation

3,500

845

180

(111)

(119)

4,295

Capital expenditure in property, plant and equipment
and intangible assets

Change in provisions

Change in defined benefit obligations

Change in operating net working capital

Other 2

Operating free cash flow

1 Including capitalised costs of self-constructed assets and other income .

(1,654)

(692)

(58)

(56)

184

(11)

(4)

(1)

–

2,002

186

–

(50)

–

(96)

–

(14)

(2,378)

165

(10)

2,159

Segment information Swisscom Switzerland 2017

2017, in CHF million, restated

Fixed access

Mobile subscribers

Telecom services

Solution business

Merchandise

Wholesale

Revenue other

Net revenue from external customers

Net revenue from other segments

Net revenue

Direct costs

Indirect costs 1

Segment result before depreciation and amortisation

Depreciation, amortisation and impairment losses

Segment result

Capital expenditure in property, plant and equipment
and intangible assets

1 Including capitalised costs of self-constructed assets and other income .

Disclosure by geographical regions

In CHF million

Switzerland

Italy

Other countries

Not allocated

Total

Disclosure by products and services

In CHF million

Telecom services

Solution business

Merchandise

Wholesale

Revenue other

Total net revenue

Residential
Customers

Enterprise
Customers

IT,
Whole- Network &
sale Infrastructure

Total
Elimi-
Swisscom
nation Switzerland

2,662

2,702

5,364

–

451

–

156

615

485

1,100

1,084

197

–

5,971

2,402

108

6,053

2,510

(1,398)

(1,173)

3,482

(126)

3,356

(741)

(947)

822

(80)

742

–

578

–

578

366

944

(478)

(20)

446

–

141

167

(12)

(1,405)

(1,250)

–

(1,279)

446

(2,529)

–

(616)

686

(70)

–

3,277

3,187

6,464

1,084

648

578

203

8,977

9,058

(1,943)

(3,615)

3,500

(1,485)

2,015

(192)

(69)

–

(1,393)

–

(1,654)

2018

Non-current
assets

14,440

3,581

506

2017

Non-current
assets

14,400

3,359

534

Net revenue

9,476

2,155

–

Net revenue

9,274

2,418

–

11,714

18,596

11,662

18,327

2018

8,227

1,042

775

873

797

2017

8,269

1,084

699

845

765

11,714

11,662

115

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Accounting policies

In the following paragraphs are described the accounting policies which are valid as from 1 January 2018 .
The amendments to the previous accounting policies are described in the note “Amendments to International
Financial Reporting Standards and Interpretations which are to be applied for the first time in the financial
year” .

Telecommunication services
Telecommunication services encompass mobile and fixed-network services in domestic and foreign locations .
Mobile-phone services comprise the basic charges; in addition, they include the domestic and international
cellular traffic relating to calls made by Swisscom customers within Switzerland and abroad . Swisscom offers
subscriptions with a monthly flat-rate fee, the revenue for which is recognised on a straight-line basis over the
minimum term of the contract . Depending on the type of subscription, revenue is recognised on the basis of
the minutes used . The minimum contract term, as a rule, is 12 or 24 months . If a mobile handset is sold as part
of a bundled offering with a mobile-phone contract, it is considered as a multi-element contract . Multi-ele-
ment transactions are grouped into portfolios for revenue accounting . The transaction price for multi-element
contracts is allocated to each identified performance obligation on the basis of relative stand-alone selling
prices . In this process, the stand-alone selling prices of each component is considered in relation to the sum of
the stand-alone selling price of each performance obligation under the contract . The stand-alone selling prices
of mobile handsets and subscriptions correspond to Swisscom’s list price and the minimum contract term .
Non-refundable connection fees not representing separate performance obligations are taken into account in
the transaction price and allocated on a relative stand-alone selling prices basis to the individual performance
obligations under the customer contract . In the event that there is no minimum contract term, the revenue is
recognised at the time of connection .
Fixed-network services comprise principally the basic charges for fixed telephony, broadband and TV connec-
tions as well as the domestic and international telephony traffic of individuals and corporate customers . In
addition, Swisscom makes bundled offerings comprising broadband and TV connections with an optional fixed-
line telephony connection . These subscription fees are flat-rate . The minimum contract term is twelve months .
Revenues are recognised on a straight-line basis over the term of the contract . Revenue for telephone calls is
recognised at the time when the calls are made .

Solutions
The service area of communications and IT solutions comprise principally advisory services and the implemen-
tation, maintenance and operation of communication infrastructures . Furthermore, the area includes applica-
tions and services, as well as the integration, operation and maintenance of data networks and outsourcing
services . Revenue from customer-specific orders is recognised using a measure of progress method which is
measured on the basis of the relationship of the costs incurred to total anticipated costs . Revenue arising on
long-term outsourcing contracts is recognised as a function of performance to date provided to the customer .
The duration of these contracts, as a rule, is between 3 and 7 years . Transition projects in connection with an
outsourcing contract are not recorded as separate performance obligations . Maintenance revenues are
recognised on a straight-line basis over the term of the maintenance contracts .

Sales of merchandise
Mobile handsets, fixed-line devices and miscellaneous supplies are recognised as revenue at the time of
delivery or provision of the service . Swisscom sells routers und TV-boxes to be used for services provided by
Swisscom . As these are only compatible with the Swisscom network and cannot be used for networks of other
telecommunication service providers, they are not recorded as separate performance obligations . Revenue is
deferred and recognised over the minimum contract term of the related broadband or TV subscription .

Wholesale
The services comprise principally leased lines and the use of the Swisscom fixed network by other telecommu-
nication service providers (roaming) . Leased-line charges are recognised as revenue on a straight-line basis over
the terms of the contract . Roaming services are recognised as revenue on the basis of the call minutes or at
contractually agreed charges as of the time of providing the service . Roaming fees charged to other telecom-
munication service providers are reported on a gross basis .

1 .2 Operating expenses

Direct costs

In CHF million

Customer premises equipment and merchandise

Services purchased

Costs of obtaining a contract

Costs to fulfill a contract

Traffic fees of foreign subsidiaries

International traffic fees

National traffic fees

Total direct costs

Indirect costs

In CHF million

Salary and social security expenses

Other personnel expense

Total personnel expense 1

Information technology cost

Maintenance expense

Rental expense

Energy costs

Advertising and selling expenses

Consultancy expenses and freelance workforce

Administration expense

Allowances for receivables and contract assets

Miscellaneous operating expenses

Total other operating expense

Capitalised self-constructed assets

Income from litigations

Gain on sale of property, plant and equipment

Miscellaneous income

Total capitalised self-constructed assets and other income

Total indirect costs

1 See Note 4 .1 .

2018

1,175

607

345

428

269

2017

1,128

486

296

–

400

302

109

2,954

2,721

2018

2,751

2,815

284

334

207

118

230

176

100

670

2017

2,856

146

3,002

306

284

206

105

249

176

108

627

2,193

2,152

(331)

–

(17)

(113)

(461)

(327)

(102)

(24)

(55)

(508)

4,547

4,646

Capitalised costs of self-constructed assets include personnel costs for the manufacture of technical installa-
tions, the construction of network infrastructures and the development of software for internal use .

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Accounting policies

Costs to obtain a contract
Swisscom pays commissions to dealers for the acquisition and retention of mobile-phone customers . The
commission payable is dependent on the type of subscription . Costs to obtain a contract are deferred and
amortised over the related revenue-recognition period . In addition, the handset subsidies granted to the
customer at the same time a Swisscom mobile-phone subscription is entered into, are reimbursed to the
dealer . These costs are deferred and amortised on a straight-line basis over the contract term as costs to obtain
a contract . The amortisation period corresponds to the related revenue-recognition period . See note 1 .1 .

Costs to fulfill a contract
In connection with a broadband or TV subscription, the customer must purchase a router or TV box in order
that the customer can use the services of Swisscom . Routers and TV boxes may be used exclusively for services
provided by Swisscom . The cost of routers and TV boxes are reported as costs to fulfill a contract and amor-
tised over the minimum term of the contract . The start-up costs incurred to transfer and integrate outsourcing
transactions with corporate customers are deferred and amortised against income on a straight-line basis over
the duration of the operating contract . The amortisation period corresponds to the related revenue-recogni-
tion period . See note 1 .1 .

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2 Capital and financial risk management

Set out below are the procedures and guidelines governing the active
management of equity resources and of the financial risks to which Swisscom
is exposed. Swisscom strives to achieve a robust capital equity basis thus
enabling it to guarantee its ability to continue as a going concern and to offer
investors an appropriate return based on the risks assumed.

2 .1 Capital management and equity

Net debt to EBITDA ratio
Swisscom aims to maintain a single-A credit rating . In addition, Swisscom targets a net debt of approximately
1 .9 x EBITDA (operating income before depreciation, amortisation and impairment losses), excluding consider-
ation of IFRS 16 . Net debt consists of total financial liabilities less cash and cash equivalents, current financial
assets as well as non-current fixed interest-bearing certificates of deposit and derivative financial instruments
for financing received . The net debt to EBITDA ratio is as follows:

In CHF million

Net debt

Operating income before depreciation, amortisation and impairment losses (EBITDA)

Ratio net debt/EBITDA

31.12.2018

31.12.2017

7,393

4,213

1.8

7,447

4,295

1.7

Equity ratio
Swisscom strives to achieve an equity ratio of 30%, at a minimum . The equity ratio is computed as follows:

In CHF million

Equity

Total assets

Equity ratio in %

31.12.2018

31.12.2017

8,208

22,586

36.3

7,645

22,058

34.7

Dividend policy
Swisscom pursues a return policy with a stable dividend . Distributable reserves are not determined on the
basis of the equity as reported in the consolidated financial statements but rather on the basis of equity as
reported in the statutory financial statements of the parent company, Swisscom Ltd . At 31 December 2018,
Swisscom Ltd’s distributable reserves amounted to CHF 6,435 million . The dividend is proposed by the Board of
Directors and must be approved by the Annual General Meeting of Shareholders . Treasury shares are not
entitled to a dividend . Swisscom Ltd paid the following dividends in 2017 and 2018:

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

2018

51.801

22.00

1,140

2017

51.801

22.00

1,140

The Board of Directors proposes to the Annual Shareholders’ Meeting of Swisscom Ltd to be held on 2 April
2019 the payment of an ordinary dividend of CHF 22 per share in respect of the 2018 financial year . This
equates to an aggregate dividend distribution of CHF 1,140 million . The dividend distribution is scheduled to be
made on 8 April 2019 .

Earnings per share

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)

2018

1,527

2017

1,570

51,801,182

51,800,771

29.48

30.31

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Supplementary information on equity
Development of retained earnings and other reserves as well as comprehensive income 2018

Fair value
reserve

Hedging
reserve

Equity
holders of
Swisscom

Non-
controlling
interests

In CHF million

Balance at 31 December 2017

Change in accounting policies

Balance at 1 January 2018

Net income

Actuarial gains and losses from defined
benefit pension plans

Change in fair value of equity instruments

Income tax expense

Items that will not be reclassified
to income statement

Foreign currency translation adjustments
of foreign subsidiaries

Fair value losses of cash flow hedges transferred
to income statement

Equity-accounted investees

Income tax expense

Items that are or may be reclassified
subsequently to income statement

Other comprehensive income

Comprehensive income

Dividends paid

Other changes

Foreign
currency
Retained
translation
earnings adjustments

9,155

(1,689)

300

9,455

1,527

(78)

(53)

–

(53)

1,474

(1,140)

(30)

–

(1,689)

–

(41)

–

(39)

–

Balance at 31 December 2018

9,759

(1,728)

In CHF million

Balance at 31 December 2016

Net income

Actuarial gains and losses from defined
benefit pension plans

Equity-accounted investees

Income tax expense

Items that will not be reclassified
to income statement

Foreign currency translation adjustments
of foreign subsidiaries

Change in fair value of cash flow hedges

Gains and losses transferred to income statement

Equity-accounted investees

Income tax expense

Items that are or may be reclassified
subsequently to income statement

Other comprehensive income

Comprehensive income

Dividends paid

Other changes

8,148

1,570

850

–

(171)

679

–

679

2,249

(1,140)

(102)

(1,834)

–

166

–

(4)

(19)

145

–

(4)

–

(2)

–

(2)

–

7,468

296

7,764

1,527

(78)

(53)

(41)

(33)

(86)

1,441

(1,140)

(30)

8,035

–

(11)

–

(5)

–

(6)

–

(5)

–

(2)

6,326

1,570

850

–

(171)

679

166

(11)

(5)

(17)

135

814

2,384

(1,140)

(102)

7,468

(15)

8,020

Total

7,457

296

7,753

1,521

(78)

(53)

(41)

(33)

(86)

1,435

(1,141)

(27)

Total

6,334

1,568

850

–

(171)

679

166

(11)

(5)

(17)

135

814

2,382

(1,148)

(111)

(11)

–

(11)

(6)

–

(6)

(1)

(2)

–

(2)

(8)

(9)

Development of retained earnings and other reserves as well as comprehensive income 2017

Foreign
currency
Retained
translation
earnings adjustments

Fair value
reserve

Hedging
reserve

Equity
holders of
Swisscom

Non-
controlling
interests

Balance at 31 December 2017

9,155

(1,689)

(11)

7,457

2 .2 Financial liabilities

In CHF million

Balance at 1 January

Issuance of bank loans

Issuance of debenture bonds

Issuance of other financial liabilities

Issuance of financial liabilities

Repayment of bank loans

Repayment of debenture bonds

Repayment of private placements

Repayment of finance lease liabilities

Repayment of other financial liabilities

Repayment of financial liabilities

Interest expense

Interest payments

Foreign currency translation adjustments

Change in finance lease liabilities

Change in fair value

Accrual of purchase price margins from business combinations

Other changes

Balance at 31 December

Bank loans

Debenture bonds

Private placements

Finance lease liabilities

Derivative financial instruments 1

Other financial liabilities 2

Total financial liabilities

Thereof current financial liabilities

Thereof non-current financial liabilities

2018

8,286

564

885

1,451

(69)

(1,385)

(72)

(27)

(18)

2017

8,496

177

500

757

(247)

(640)

(250)

(19)

(2)

(1,571)

(1,158)

138

(157)

(117)

(51)

(7)

158

160

(181)

224

(26)

(3)

(2)

8,167

8,286

1,233

5,554

426

384

516

8,167

1,361

6,806

760

6,137

493

461

375

8,286

1,834

6,452

1 See Note 2 .5 .

2 See Note 5 .2 .

Credit lines
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 2018, none of these lines of credit had been drawn down, as in the
prior year .

Bank loans

In CHF million

Bank loans in EUR 1, 3

Maturity years

2018–2019

Bank loans in EUR 1, 3

Bank loans in EUR 2

Bank loans in EUR 2, 3

Bank loans in USD 2

Total bank loans

1 Variable interest-bearing .
2 Fixed interest-bearing .

2013–2020

2015–2020

2017–2024

2009–2028

Par value
in currency

Nominal
interest rate

500

120

200

150

0.01%

Euribor
+0.386%

0.76%

0.67%

8.30%

7.65%

Effective
interest rate

–0.66%

0.12%

–0.52%

0.67%

4.62%

4.63%

Carrying amount

31.12.2018

31.12.2017

563

135

229

169

1,233

–

211

238

175

760

3 Designated for hedge accounting of net investments in foreign operations .

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As of 31 December 2018, Swisscom had short-term bank loans on a weekly and monthly basis in the amount
of EUR 500 million (CHF 563 million) . In 2017, Swisscom took up a bank loan of a nominal amount of EUR 150
million maturing in 2024 . The funds so received were applied to repay existing debts . The bank loans may
become due for immediate repayment if the shareholding of the Swiss Confederation in the capital of
Swisscom falls below one third or if another shareholder can exercise control over Swisscom .

Debenture bonds

In CHF million

Maturity years

Par value
in currency

Nominal
interest rate

Effective
interest rate

31.12.2018

31.12.2017

Carrying amount

Debenture bond in CHF
(ISIN: CH0104691628)

Debenture bond in EUR
(ISIN: XS0972165848)

Debenture bond in EUR
(ISIN: XS1051076922) 1

Debenture bond in CHF
(ISIN: CH0114695379)

Debenture bond in CHF
(ISIN: CH0268988174)

Debenture bond in CHF
(ISIN: CH0188335365)

Debenture bond in EUR
(ISIN: XS1288894691) 1

Debenture bond in CHF
(ISIN: CH0247776138)

Debenture bond in EUR
(ISIN: XS1803247557)

Debenture bond in CHF
(ISIN: CH0344583783)

Debenture bond in CHF
(ISIN: CH0362748359)

Debenture bond in CHF
(ISIN: CH0317921663)

Debenture bond in CHF
(ISIN: CH0437180935)

Debenture bond in CHF
(ISIN: CH0254147504)

Debenture bond in CHF
(ISIN: CH0336352775)

Debenture bond in CHF
(ISIN: CH0373476164)

Debenture bond in CHF
(ISIN: CH0268988182)

Total debenture bonds

2009–2018

1,385

3.25%

3.44%

–

1,396

2013–2020

2014–2021

2010–2022

2015–2023

2012–2024

2015–2025

2014–2026

2018–2026

2016–2027

2017–2027

2016–2028

2018–2028

2014–2029

2016–2032

2017–2033

2015/
2018–2035

500

250

500

200

500

200

350

200

150

160

300

150

300

2.00%

2.22%

1.88%

2.06%

2.63%

2.81%

0.25%

–0.37%

1.75%

1.77%

1.75%

–0.06%

1.50%

1.47%

1.13%

1.25%

0.38%

–0.39%

0.38%

0.30%

0.75%

0.72%

1.50%

1.47%

0.13%

0.14%

0.75%

0.71%

1.00%

0.25%

564

501

255

504

584

202

560

199

351

202

151

161

299

151

585

500

253

504

599

202

–

197

351

202

–

161

299

151

306

5,554

152

6,137

1 Designated for hedge accounting of net investments in foreign operations .

In the first quarter of 2018, Swisscom took up a debenture bond of a nominal amount of CHF 150 million with
a coupon rate of 1 .0% and maturing in 2035 . Furthermore, a debenture bond of a nominal amount of EUR 500
million (CHF 585 million) with a coupon rate of 1 .125% and maturing in 2026 was issued in April 2018 . On
12 October 2018, Swisscom took up a debenture bond of a nominal amount of CHF 150 million with a coupon
rate of 0 .75% and maturing in 2028 . The funds so received were applied to repay existing debts . In the third
quarter of 2018, Swisscom repaid a debenture bond of a nominal amount of CHF 1 .4 billion upon maturity . In
2017, Swisscom issued two debenture bonds of an aggregate nominal amount of CHF 500 million . The
financing so received was applied to repay existing loans . In the third quarter of 2017, Swisscom repaid a
debenture bond of a nominal amount of CHF 600 million upon maturity .

Private placements

In CHF million

Maturity years

Private placements in CHF

2007–2018

Private placements in CHF

2007–2019

Private placements in CHF

2016–2031

Total private placements

Par value
in currency

Nominal
interest rate

Effective
interest rate

31.12.2018

31.12.2017

Carrying amount

278

150

Variable

0.56%

1.31%

1.25%

0.56%

–

276

150

426

272

150

493

In the fourth quarter of 2018, Swisscom repaid a private placement of CHF 72 million upon maturity . The
Swiss-franc-denominated private placements with a nominal value of CHF 278 million maturing in 2019 may
become due for immediate repayment 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 Confedera-
tion permanently give up its majority shareholding in Swisscom .

Finance lease liabilities
Swisscom concluded two agreements in 2001 for the sale of real estate . At the same time, it 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 2018, the carrying
amount of the deferred gains was CHF 134 million (prior year: CHF 146 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 .05% . The minimum lease payments, financial liabilities and the future payment thereof, expressed in
terms of their net present value, relating to these leaseback agreements are set out in the following table:

In CHF million

Within 1 year

Between 1 and 5 years

After 5 years

Total minimum lease payments/carrying amount

Thereof current finance lease liabilities

Thereof non-current finance lease liabilities

Net carrying amount of buildings acquired under finance lease

Accounting policies

Minimum lease payments

Carrying amount

31.12.2018

31.12.2017

31.12.2018

31.12.2017

137

593

775

144

793

985

317

384

363

252

390

461

438

328

Financial liabilities
Financial liabilities are initially recognised at fair value less direct transaction costs . In subsequent accounting
periods, they are re-measured at amortised cost using the effective interest method .

Finance leases
A lease is recorded as a finance lease whenever substantially all of the risks and rewards incidental to owner-
ship of an asset are passed on . The asset is initially recognised at the lower of its fair value and the present
value of the minimum lease payments and is amortised over the asset’s estimated useful life or the lower
contract term . The interest component of the lease payments is recognised as interest expense over the lease
term computed on the basis of the effective interest method . Lease contracts 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 over the lease term to other income on a straight-line basis . Losses on sale-and-lease-
back transactions are expensed immediately .

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2 .3 Operating leases
Operating leases relate primarily to the rental of real estate held for business purposes . In 2018, payments for
operating leases amounted to CHF 207 million (prior year: CHF 201 million) . Future minimum lease payments in
respect of non-cancellable operating lease contracts are as follows:

In CHF million

Within 1 year

Between 1 and 2 years

Between 2 and 3 years

Between 3 and 4 years

Between 4 and 5 years

After 5 years

Total minimum lease payments from operating lease

Accounting policies

31.12.2018

31.12.2017

182

170

149

122

102

573

1,298

178

157

138

112

317

987

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 term . Gains and losses on sale-and-leaseback transactions are recorded directly in the income statement .

2 .4 Financial result

In CHF million

Interest income on financial assets

Foreign exchange gains

Change in fair value of interest rate swaps 1

Capitalised borrowing costs

Other financial income

Total financial income

Interest expense on financial liabilities

Interest expense on defined benefit obligations 2

Foreign exchange losses

Present-value adjustments on provisions 3

Other financial expense

Total financial expense

Financial income and financial expense, net

Net interest expense

1 See Note 2 .5 .
2 See Note 4 .3 .

3 See Note 3 .5 .

2018

–

(138)

(6)

(8)

(28)

(186)

(158)

(128)

2017

(160)

(11)

–

(6)

(27)

(204)

(160)

(149)

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2 .5 Financial risk management
Swisscom is exposed to various financial risks arising from its operating and financing activities . Financial risk
management is conducted in accordance with established guidelines with the objective of containing the
potential adverse effects thereof on the financial situation of Swisscom . The identified risks and measures to
minimise them are presented below:

Risk

Source

Risk mitigation

Currency risks

Swisscom is exposed to foreign exchange changes
which can impact the Group’s cash flows,
financial result and equity.

● Reduction in cash flow volatility by use of forward
currency contracts/swaps and currency swaps and
designation for hedge accounting (transaction risk)
● Ruduction in translation risk by foreign currency
financing and designation for hedge accounting
● Hedging of curreny risk of foreign currency financing
by use of currency swaps

Interest rate risk

Credit risks
from operating
business activities
and financial
transactions

Liquidity risk

Interest-rate risks result from changes in interest rates
which can negatively impact cash flows and the financial
situation of Swisscom. Interest rate fluctuations can impact
the market value of certain financial assets, liabilities and
hedging instruments.

● Deployment of interest rate swaps to reduce

the volatility of planned cash flows

Through its operating business activities and derivative
financial instruments and financial investments,
Swisscom is exposed to the risk of default
of a counterparty.

● Guideline establishing minimum requirements

for counterparties

● Designated counterparty limits
● Employment of netting agreements foreseen under

ISDA (International Swaps and Derivatives Association)

Prudent liquidity management involves the holding
of adequate reserves of cash and cash equivalents,
negotiable securities as well as the possibility
of obtaining confirmed lines of credit.

● Use of collateral agreements

● Procedures and principles

to ensure adequate liquidity

● Two guaranteed bank credit lines
each of CHF 1,000 million

Foreign exchange risks
As regards financial instruments, the following currency risks and hedging contracts for foreign currencies as of
31 December 2017 and 2018 existed:

In CHF million

Cash and cash equivalents

Trade receivables

Other financial assets

Financial liabilities

Trade 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

(3,443)

(34)

(3,360)

(64)

(3,424)

–

635

789

1,424

(2,000)

31.12.2018

31.12.2017

USD

227

(144)

(47)

(423)

(371)

430

(62)

–

368

(3)

EUR

103

(2,377)

(71)

(2,249)

(2,248)

–

819

902

(1,346)

USD

230

(144)

(80)

(405)

(393)

–

189

–

189

(204)

In addition, Swisscom has financial liabilities outstanding as of 31 December 2018 with an aggregate nominal
value of EUR 1,770 million (CHF 1,995 million) (prior year: EUR 1,330 million; CHF 1,555 million) which were
designated as net investments in foreign shareholdings for hedge accounting purposes . In 2018, an income of
CHF 85 million (prior year: expense of CHF 114 million) arising from the revaluation of financial liabilities was
recognised in other comprehensive income in the position foreign currency translation of foreign Group
companies . As of 31 December 2018, the cumulative positive amount of foreign currency translation differ-
ences in equity totals CHF 162 million .

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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

31.12.2018

EUR volatility 6.28%

USD volatility of 7.68%

31.12.2017

EUR volatility 6.25%

USD volatility of 7.78%

Income impact
on balance sheet
items

Hedges for
balance sheet
items

Planned
cash flows

Hedges for
planned
cash flows

211

(4)

140

(1)

(89)

(56)

–

(33)

–

(20)

The volatility of the balance-sheet positions and scheduled cash flows is partially offset by the volatility of the
related hedging contracts .

Interest rate risks
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

Variable through interest rate swaps

Variable interest-bearing, net

Fixed interest-bearing

Variable through interest rate swaps

Fixed interest-bearing, net

Total interest-bearing financial assets and liabilities, net

31.12.2018

31.12.2017

6,562

1,053

7,615

(139)

(556)

(695)

6,920

497

1,364

1,861

6,423

(1,364)

5,059

6,920

7,220

655

7,875

(127)

(603)

(730)

7,145

1,244

1,296

7,093

(1,244)

5,849

7,145

Interest rate sensitivity analysis
A shift in interest rates by 100 basis points has no material impact on the income statement and equity as of
31 December 2017 and 2018 .

Credit risks
Credit risks from financial transactions
The carrying amounts of cash and cash equivalents and other financial assets exposed to credit risk (excluding
trade debtors) may be analysed as follows:

In CHF million

Cash and cash equivalents

Financial assets at amortised cost

Loans and receivables

Derivative financial instruments

Other assets valued at fair value

Total carrying amount of financial assets

31.12.2018

31.12.2017

474

259

–

817

525

–

201

100

887

The carrying amounts analysed by the Standard & Poor’s rating of the counterparties may be summarised as
follows:

In CHF million

AAA

AA– to AA+

A– to A+

BBB– to BBB+

Without rating

Total

31.12.2018

31.12.2017

453

212

817

433

342

887

Financial risks from operating activities
Credit risks on trade receivables, contract assets and other receivables arise from the Group’s operating
activities . Credit risks from other receivables are insignificant . As an initial step, Swisscom splits up the credit
risks from operating activities over Swisscom Switzerland and Fastweb . Default risks are principally impacted
the individual attributes of the customers . The default risk is further influenced by the default risk of customer
groups and industry sectors . Swisscom possesses a receivables-management system as an aid to minimise
default losses . New customers are reviewed for their credit-worthiness and maximum payment targets are set
for customer groups . As regards their credit-worthiness, customers are divided into groups for the purposes of
monitoring default risk . In this process, a differentiation between individual and corporate customers, inter
alia, is made . In addition, the ageing structure of the receivables as well as the industry segment in which a
customer is active are taken into account . The split of trade receivables and contract assets by operating
segment may be analysed as follows:

In CHF million

Notional amount

Residential Customers

Enterprise Customers

Wholesale

IT, Network & Infrastructure

Swisscom Switzerland

Fastweb

Other Operating Segments

Total notional amount

Allowances for doubtful debts

Residential Customers

Enterprise Customers

Wholesale

IT, Network & Infrastructure

Swisscom Switzerland

Fastweb

Other Operating Segments

Total allowances for doubtful debts

31.12.2018

31.12.2017

1,140

481

149

1,795

696

176

2,667

(51)

(3)

(1)

(2)

(57)

(87)

(13)

(157)

956

531

102

1,632

814

136

2,582

(47)

(3)

–

(2)

(52)

(131)

(10)

(193)

Notional amount less allowances for doubtful debts

Total notional amount less allowances for doubtful debts

2,510

2,389

127

As of 31 December 2018, the due dates of trade receivables and contract assets as well as any applicable
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

Rate

0.51%

6.15%

24.36%

35.48%

81.93%

5.89%

Par value

1,972

439

31.12.2018

Allowance

(10)

(27)

(19)

(33)

(68)

2,665

(157)

As of 31 December 2017, the due dates of trade receivables as well as any applicable related valuation allow-
ances are to be analysed as follows :

31.12.2017

Allowance

(4)

(18)

(17)

(24)

(130)

(193)

2017

183

–

(90)

(3)

193

In CHF million

Not overdue

Past due up to 3 months

Past due 4 to 6 months

Past due 7 to 12 months

Past due over 1 year

Total

Par value

1,824

377

124

167

2,582

Movements in valuation allowances for trade receivables and contract assets may be analysed as follows:

In CHF million

Balance at 1 January

Change in accounting policies

Additions to allowances

Write-off of irrecoverable receivables subject to allowance

Release of unused allowances

Foreign currency translation adjustments

Balance at 31 December

Liquidity risk
Contractual maturities including estimated interest payable

2018

193

(138)

(7)

(4)

157

In CHF million

31.12.2018

Bank loans

Debenture bonds

Private placements

Finance lease liabilities

Other financial liabilities

Trade payables

Derivative financial instruments

Total

Carrying Contractual Due within Due within Due within
1 year 1 to 2 years 3 to 5 years
amount

payments

Due after
5 years

1,233

5,554

426

384

516

1,295

5,960

438

775

516

641

278

394

1,658

1,610

302

638

1,470

330

3,777

157

593

–

9,825

10,700

3,052

1,094

1,663

4,891

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128

In CHF million

31.12.2017

Bank loans

Debenture bonds

Private placements

Finance lease liabilities

Other financial liabilities

Trade payables

Derivative financial instruments

Total

Derivative financial instruments

In CHF million

Interest rate swaps in CHF

Currency swaps in EUR

Total fair value hedges

Forward currency contracts in USD

Total cash flow hedges

Interest rate swaps in CHF

Currency swaps in USD

Currency swaps in EUR

Forward currency contracts in USD

Total other derivative financial instruments

Total derivative financial instruments

Thereof current derivative financial instruments

Thereof non-current derivative financial instruments

Carrying Contractual Due within Due within Due within
1 year 1 to 2 years 3 to 5 years
amount

payments

Due after
5 years

760

830

6,137

6,575

1,497

493

461

375

514

985

375

235

1,753

1,718

108

280

109

328

1,836

342

3,175

102

158

793

–

10,039

11,140

3,659

605

2,319

4,557

Contract value

Positive fair value

Negative fair value

31.12.2018

31.12.2017

31.12.2018

31.12.2017

31.12.2018

31.12.2017

575

789

425

819

1,364

1,244

202

200

635

221

1,118

2,684

149

200

210

101

–

511

1,904

–

100

(1)

–

(1)

(2)

(48)

–

(1)

(2)

(51)

(54)

(5)

(49)

(3)

–

(3)

(2)

(54)

(1)

–

(55)

(60)

(4)

(56)

Swisscom has entered into interest rate and foreign currency swaps, designated as fair value hedges, in order
to hedge interest rate and foreign currency risks of fixed interest-bearing finance denominated in CHF and EUR .
Derivative financial instruments contain currency swaps, designated as cash-flow hedges, in order to hedge
future purchases of merchandise and services in USD . Furthermore, derivative financial instruments include
interest rate swaps which are not designated for hedge accounting purposes . In addition, derivative financial
instruments comprise exclusively forward foreign currency transactions and foreign currency swaps in EUR and
USD which serve to hedge future transactions in connection with financing or the operating business activities
of Swisscom and which were not designated for hedge accounting purposes . Swisscom does not enter into
derivative financial instruments for speculative 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 invest-
ment-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 2018, the financial liabilities and assets, including accrued interest, arising from cross-border
lease agreements amounted to USD 79 million or CHF 78 million, respectively, which, in compliance with SIC 27,
were not recognised in the balance sheet (prior year: USD 75 million or CHF 73 million) .

129

Accounting policies

Derivative financial instruments
Derivative financial instruments are initially recognised at fair value and subsequently re-measured at fair
value . The method of recording the fluctuations in fair value depends on the underlying transaction and the
objective pursued by purchasing or entering into this underlying transaction . On the date a derivative contract
is concluded, management designates the purpose of the hedging relationship: hedge of the fair value of an
asset or liability (“fair value hedge”) or a hedge of future cash flows in the case of future transactions (“cash
flow hedge”) . Changes in the fair value of derivative financial instruments that were designated as hedging
instruments for “fair value hedges” are recognised in the income statement . Changes in the fair value of
derivative financial instruments that were designated as “cash flow hedges” are dealt with in other compre-
hensive income and recognised in the hedging reserve as part of equity . If a hedge of an anticipated transac-
tion subsequently results in the recording of a financial asset or financial liability, the amount included in
equity is recognised in 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 state-
ment as income or expense in the same period the cash flows of the intended or agreed future transaction
occur . Changes in the fair value of derivative financial instruments that are not designated as hedging instru-
ments are taken immediately to income .

Valuation category and fair value of financial instruments
Estimation of fair values
Fair values are allocated to one of the following three hierarchical levels:

● Level 1: 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 .

The fair value of publicly traded equity and debt instruments of Level 1 is based upon their stock-exchange
quotations as of the balance-sheet date . The fair value of Level 2 financial assets and liabilities which are not
quoted on exchanges are computed on the basis of future maturing payments discounted at market interest
rates . Level 3 assets consist of investments in various investment funds and individual companies . The fair
value is determined on the basis of a computational model . Interest rate and currency swaps are discounted at
market rates . Foreign currency forward transactions and foreign currency swaps are valued by reference to
forward foreign exchange rates as of the balance-sheet date .

Valuation categories and fair value of financial instruments
The fair values of financial assets and financial liabilities are summarised in the following table . Not included
therein are cash and cash equivalents, trade receivables and trade payables as well as miscellaneous receiv-
ables and liabilities whose carrying amount corresponds to a reasonable estimation of their fair value .

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130

In CHF million

Other financial assets

Term deposits

Certificates of deposit

Listed debt instruments

Loans

At amortised cost

Equity instruments valued at fair value

Fair value through other comprehensive income

Loans

Derivative financial instruments

Fair value through profit or loss

Total other financial assets

Financial liabilities

Bank loans

Debenture bonds

Private placements

Finance lease liabilities

Derivative financial instruments

Other financial liabilities

Total financial liabilities

In CHF million

Other financial assets

Term deposits

Certificates of deposit

Loans

Loans and receivables

Equity instruments valued at fair value

Equity instruments valued at cost

Available-for-sale

Debt instruments held for trading

Derivative financial instruments

Fair value through profit or loss

Total other financial assets

Financial liabilities

Bank loans

Debenture bonds

Private placements

Finance lease liabilities

Derivative financial instruments

Other financial liabilities

Total financial liabilities

Carrying amount

Fair Value

31.12.2018

Level

145

259

157

271

421

433

1,233

5,554

426

384

516

1,250

5,719

426

665

516

8,167

8,630

Carrying amount

Fair Value

31.12.2017

Level

145

201

100

161

415

760

6,137

493

461

375

162

218

100

161

432

788

6,439

504

879

375

8,286

9,045

–

131

Financial assets amounting to CHF 208 million (prior year: CHF 145 million) are not freely available, as they
serve as security for liabilities .

3 Operating assets and liabilities

The following section discloses information on the movement in net current
assets as well as in significant non-current tangible and intangible assets.
In addition, it provides information as to the allocation of goodwill to the
individual cash-generating units and on the results of any applicable
impairment tests. Furthermore, movements in provisions, contingent liabilities
and contingent assets are presented in this section.

3 .1 Operating net current assets

Movements in operating assets and liabilities

In CHF million

Financial year 2018

Trade receivables

Other operating assets

Trade payables

Other operating liabilities

Total operating assets and liabilities, net

31.12.2017

Application
IFRS 9 & 15

Operational
changes

Other
changes

31.12.2018

2,389

729

(1,753)

(1,165)

200

(30)

433

–

(45)

358

(139)

(31)

(3)

2,189

1,243

(1,658)

(1,127)

647

1 Foreign currency translation and adjustments from acquisition and sale of

subsidiaries .

In CHF million

Financial year 2017

Trade receivables

Other operating assets

Trade payables

Other operating liabilities

Total operating assets and liabilities, net

1 Foreign currency translation and adjustments from acquisition and sale of

subsidiaries .

31.12.2016

Operational
changes

Other
1
changes

31.12.2017

2,425

680

(1,597)

(1,123)

385

(98)

(85)

(11)

(165)

(71)

(31)

(20)

2,389

729

(1,753)

(1,165)

200

As of 31 December 2018, the share of other operating assets which will be consumed twelve months after the
balance-sheet date amounts to CHF 281 million (prior year: CHF 85 million) and that of other operating
liabilities CHF 121 million (prior year: CHF 145 million) .

Trade receivables

In CHF million

Billed revenue

Accrued revenue

Allowances

Total trade receivables 1

1 Credit risks . See Note 2 .5 .

31.12.2018

31.12.2017

2,231

113

(155)

2,189

2,389

193

(193)

2,389

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132

Other operating assets and liabilities

In CHF million

Other operating assets

Contract assets

Contract costs

Other receivables

Inventories

Prepaid expenses

Advance payments made

Value-added taxes receivable

Other non-financial assets

Total other operating assets

Other operating liabilities

Contract liabilities

Accruals for variable performance-related bonus

Value-added taxes payable

Accruals for annual holiday, overtime

Liabilities from collection activities

Advance payments received

Miscellaneous liabilities

Total other operating liabilities

1 Including cumulative effect of initially applying IFRS 15 .

Contract assets and liabilities

In CHF million

Contract assets

Swisscom Switzerland

Fastweb

Other

Total contract assets

Contract liabilities

Swisscom Switzerland

Fastweb

Other

Total contract liabilities

31.12.2018

01.01.2018

321

274

154

316

282

279

168

282

1,243

1,162

620

163

173

1,127

694

157

174

1,210

31.12.2018

01.01.2018

258

321

427

113

620

234

282

437

179

694

Contract assets of Swisscom Switzerland include primarily deferrals arising in connection with the sale of
bundled offerings in the mobile-phone area . In part, mobile handsets are sold, together with a mobile-phone
contract, on a subsidised basis in the bundled offering . As a result of the allocation of revenue over the
pre-delivered components (mobile handset), revenues are recognised earlier than the invoicing thereof . This
results in contract assets deriving from this business being recognised . Contract liabilities comprise primarily
deferrals arising on the payment of prepaid cards and prepaid subscription fees of Swisscom Switzerland . In
2018, an amount of CHF 307 million was recorded as revenue which had been recognised as a contract liability
as of 1 January 2018 . Swisscom avails itself of the rules of IFRS 15 .121 regarding the disclosure of the transac-
tion price allocated to the performance obligation that are unsatisfied . The exemption is not applied in the case
of mobile-phone contracts with the sale of a subsidised mobile handset and a minimum contract term .
Revenues of CHF 961 million will be recognised from such contracts (2019: CHF 715 million .; 2020: CHF 246 mil-
lion) .

133

Contract costs
Contract costs include deferred costs to obtain a contract as well as costs to fulfill a contract which may be
analysed as follows:

In CHF million

Costs to obtain a contract

Commissions to dealers for customer acquisition and retention

Commissions to dealers for handset subsidies

Swisscom Switzerland

Fastweb

Other

Total costs to obtain a contract

Costs to fulfill a contract

Router and TV boxes

Initial costs from outsourcing contracts

Total costs to fulfill a contract

Total contract costs

Accounting policies

31.12.2018

01.01.2018

101

173

101

274

107

164

115

279

Operating assets and liabilities
Total operating assets and liabilities used in the normal course of business are disclosed as current items in the
balance sheet .

Trade receivables
Trade and other receivables are measured at amortised cost less impairment losses . Impairment losses on
trade receivables are recognised, depending on the nature of the underlying transaction, in the form of
individual valuation allowances or portfolio-based general valuation allowances which cover the anticipated
default risk . As regards portfolio-based general valuation allowances, financial assets are grouped together
based on heterogeneous credit-risk attributes, reviewed collectively for impairment and whenever required,
impairment losses are recognised . In addition to contractually foreseen payment conditions, historical default
rates and current information and expectations are taken into consideration in determining the expected
future cash flows from the portfolio . Impairment losses for trade receivables are recognised as other operating
expense .

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134

Technical
installations

Land, buildings
and leasehold
1
improvements

Advances made
and assets
Other assets under construction

3 .2 Property, plant and equipment

In CHF million

At cost

Balance at 31 December 2016

Additions

Disposals

Adjustment to dismantlement and restoration costs

Reclassifications

Foreign currency translation adjustments

Balance at 31 December 2017

Additions

Disposals

Adjustment to dismantlement and restoration costs

Reclassifications

Business combinations

Foreign currency translation adjustments

Balance at 31 December 2018

Accumulated depreciation and impairment losses

Balance at 31 December 2016

Depreciation

Disposals

Reclassifications

Foreign currency translation adjustments

Balance at 31 December 2017

Depreciation

Disposals

Reclassifications

Foreign currency translation adjustments

27,023

1,298

(663)

386

28,175

1,366

(1,586)

(1)

(192)

27,878

(19,247)

(1,114)

668

(208)

(19,880)

(1,165)

1,584

107

2,743

4,019

(63)

–

270

(137)

107

2,696

4,273

(99)

–

(3)

–

(4)

242

(167)

160

–

2,592

4,512

(2,019)

(2,696)

(35)

–

(3)

(315)

132

(12)

–

(2,040)

(2,891)

(35)

(319)

163

(66)

–

354

234

–

(226)

364

196

–

(202)

–

(1)

357

–

Total

34,139

1,806

(863)

(20)

397

35,508

1,806

(1,852)

(197)

35,339

(23,962)

(1,464)

817

(211)

(24,811)

(1,519)

1,778

(1)

108

(24,445)

10,894

10,697

10,177

Balance at 31 December 2018

(19,298)

(2,034)

(3,113)

Net carrying amount

Net carrying amount at 31 December 2018

Net carrying amount at 31 December 2017

Net carrying amount at 31 December 2016

1 Buildings acquired under finance lease . See Note 2 .2 .

8,580

8,295

7,776

558

656

724

1,399

1,382

1,323

357

364

354

Commitments for future capital expenditures
Firm contractual commitments for future capital investments in property, plant and equipment as of
31 December 2018 aggregated CHF 914 million (prior year: CHF 857 million) .

Non-cash investing and financing transactions
Additions to property, plant and equipment include additions from finance leases amounting to CHF 14 million
(prior year: CHF 20 million) . As a result of changes in the assumptions made in estimating the provisions for
dismantlement and restoration costs, an increase therein of CHF 3 million (prior year: increase of CHF 49 mil-
lion) was recognised in property, plant and equipment with no impact on the income statement . See Note 3 .5 .

Significant judgements or estimates
Management estimates the useful economic lives and residual values of technical facilities, real estate and
other installations and equipment on the basis of the anticipated period over which economic benefits will
accrue to the company from the use of the assets . Useful economic lives are reviewed annually on the basis of
historical and forecast expectations concerning future technological developments, economic and legal
changes as well as further external factors .

135

Accounting policies

Property, plant and equipment is recognised at historical cost less depreciation and impairment losses . In
addition to historical cost and the costs directly attributable to bringing the asset to the location and condition
necessary for it to be capable of operating in the manner intended by management, purchase or manufactur-
ing cost also includes the estimated costs for dismantling and restoration of the site . Borrowing costs are
capitalised insofar as they are directly attributable 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 costs can be measured reliably . The
carrying amount of the parts replaced is de-recognised . Depreciation is calculated using the straight-line
method except for land, which is not depreciated . The estimated useful lives for the main categories of
property, plant and equipment are:

Category

Government bonds Switzerland

Corporate bonds Switzerland

Government bonds developed markets, World

Investment
strategy

5.0%

6.0%

7.0%

Quoted

1.7%

6.1%

7.2%

Corporate bonds developed markets, World

10.0%

10.3%

Government bonds emerging markets, World

Private debt

Third-party debt instruments

Equity shares Switzerland

8.0%

6.0%

8.1%

0.0%

42.0%

33.4%

6.0%

5.4%

Equity shares developed markets, World

12.0%

11.2%

Equity shares emerging markets, World

7.0%

Equity instruments

Real estate Switzerland

Real estate World

Real estate

Commodities

Private markets

Cash and cash equivalents and other investments

Cash and cash equivalents and
alternative investments

25.0%

23.6%

13.0%

7.0%

20.0%

4.0%

8.0%

1.0%

7.0%

1.4%

8.4%

1.9%

0.0%

31.12.2018

31.12.2017

Total

Quoted

Not
quoted

3.6%

0.0%

6.3%

9.9%

0.0%

6.0%

4.8%

5.3%

6.1%

7.2%

1.8%

5.7%

7.4%

10.3%

10.0%

8.1%

6.3%

7.4%

0.0%

43.3%

32.3%

5.4%

5.5%

11.2%

13.2%

7.0%

8.4%

23.6%

27.1%

13.0%

6.2%

7.1%

3.6%

10.8%

19.2%

10.7%

2.0%

9.6%

0.4%

3.9%

9.6%

0.4%

2.1%

0.0%

Total

5.3%

5.7%

7.4%

10.0%

7.4%

6.2%

42.0%

5.5%

13.2%

8.4%

27.1%

11.8%

6.1%

17.9%

4.1%

8.3%

0.6%

3.5%

0.0%

6.2%

9.7%

0.0%

4.7%

2.5%

7.2%

2.0%

8.3%

0.6%

13.0%

1.9%

12.0%

13.9%

2.1%

10.9%

13.0%

Total plan assets

100.0%

67.3%

32.7%

100.0%

72.2%

27.8%

100.0%

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 undertakes the asset allocation
and is the central steering, coordination and monitoring body for the management of the pension-plan assets .
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 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 emerging markets . The interest rate
duration of interest-bearing assets is 5 .98 years (prior year: 6 .56 years) and the average rating of these assets is
A– . Within the overall portfolio, all foreign currency positions are hedged against the Swiss franc following a
currency strategy to the extent necessary to meet a pre-determined ratio of 85% (CHF or CHF-hedged) . The
unquoted and therefore lesser liquid investments make up 32 .7% of total plan assets . Following this invest-
ment strategy, comPlan anticipates a target value for the value fluctuation reserve of 17 .5% (basis: 2019
financial year) .

Additional information on plan assets
As of 31 December 2018, plan assets include Swisscom Ltd shares and bonds with a fair value of CHF 6 million
(prior year: CHF 6 million) . The effective return on plan assets in 2018 amounted to CHF –299 million (prior year:
CHF +943 million) . In 2019, Swisscom expects to make payments to the pension funds for statutory employee
contributions totalling CHF 283 million .

147

Assumptions underlying actuarial computations

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)

comPlan

0.86%

1.08%

–

0.86%

40%

22.20

24.00

2018

2017

Other plans

comPlan

Other plans

1.57%

–

22.20

24.00

0.69%

1.08%

–

0.69%

40%

22.10

23.90

1.30%

–

22.10

23.90

The discount rate is based upon CHF-denominated corporate bonds with an AA rating of domestic and foreign
issuers and listed on the Swiss Exchange SIX . The development of salaries corresponds to the historical average
of recent years . No future growth in pensions is anticipated as comPlan has insufficient fluctuation reserves
available . The interest rate used to compute interest accruing on the individual retirement savings is assumed
to be the discount rate . Life-expectancy assumptions are arrived at through a projection of future mortality
improvements in accordance with the Continuous Mortality Investigation Model (CMI), based on the mortality
improvements actually observed in Switzerland in the past . The computations are made with a future long-
term mortality improvement rate of 1 .75% . A reduction of net defined benefit pension obligations by CHF 100
million resulted from the initial application of the CMI model which was recognised as a change in accounting
estimate in 2017 in other comprehensive income .
The risk-sharing attributes contained in the formal regulatory framework relating to the handling of funding
shortfalls were taken into account in the financial assumptions in two steps . As a first step, it is assumed that
the Foundation Council will decide on a gradual lowering of future pensions by 4 .31% (prior year: 5 .4%) over a
period of ten years in order to close the interest-induced structural funding gap . This is based upon a projection
of the future conversion rate using a mixed rate for the mandatory and extra-mandatory portions . The
conversion rate in the mandatory portion applies the current legal conversion rate . In the extra-mandatory
portion, the conversion rate is computed with a discount rate of 0 .86% . As a second step, the present value of
the remaining funding gap between the regulatory contributions and the benefits adjusted in the first step is
shared between the employer and the employees . The legal and de-facto obligation of the employer to pay
additional contributions is unchanged and assumed to be limited to 60% of the funding gap . This is based on
the legal and regulatory provisions concerning the elimination of funding shortfalls as well as the measures
actually decided upon by the Foundation Council and the employer in the past . Assuming the limitation of the
employer’s share of the funding shortfall, this results in a reduction in defined benefit obligations of CHF 482
million (prior year: CHF 465 million), which corresponds to the assumed employee contribution . The change of
the employee share is recognised in other comprehensive income .

Sensitivity analysis comPlan
Sensitivity analysis 2018

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)

1 The sensitivity refers to the current service cost recorded in personnel ex-

pense .

Defined benefit obligations

Current service cost

Increase
assumption

Decrease
assumption

Increase
assumption

Decrease
assumption

(516)

501

(120)

119

601

(36)

–

(17)

120

(120)

(33)

–

(5)

–

(6)

–

(4)

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148

Sensitivity analysis 2017

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)

1 The sensitivity refers to the current service cost recorded

in personnel expense .

Defined benefit obligations

Current service cost

Increase
assumption

Decrase
assumption

Increase
assumption

Decrase
assumption

(556)

536

(116)

126

650

(41)

–

(19)

116

(127)

(39)

–

(7)

–

(7)

–

(5)

The sensitivity analysis takes into consideration the movement in defined benefit obligations as well as
current-service costs in adjusting the actuarial assumptions by half a percentage point and half a year, respec-
tively . In the process, only one of the assumptions is adjusted each time, the other parameters remaining
unchanged . In the sensitivity analysis, in view of a negative movement in pension increases, no change was
made as the reduction in pension benefits is not possible .

Significant judgements or estimates
The determination of post-employment retirement benefit obligations requires an estimation of the future
service periods, the development of future salaries and pensions as well as interest accruing on the employee
savings accounts, the timing of contractual pension benefit payments and the employees’ share of the funding
shortfall . This evaluation is made on the basis of prior experience and anticipated future trends . Anticipated
future payments are discounted with the yields of Swiss-franc-denominated corporate bonds of domestic and
foreign issuers quoted on the Swiss Exchange with a AA rating . The discount rates match the anticipated
payment maturities of the liabilities .

Accounting policies

Actuarial computations of pension expense and the related defined benefit obligations are undertaken using
the projected unit credit method . Current service costs, past service costs arising from pension-plan amend-
ments and plan settlements as well as administrative costs are reported in the income statement under
personnel expense and interest accruing on net obligations as finance expense . Actuarial gains and losses and
the return on plan assets, except for amounts reflected in net interest income, are reported under other
comprehensive income . The assumptions regarding net future benefits are made in compliance with the
formal set of regulations governing the pension plan . 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 contained therein concerning funding and
measures to be taken to eliminate funding shortfalls . Risk-sharing features in the formal regulatory framework
are taken into account in arriving at financial assumptions; these limit the employer’s share of the costs of
future benefits as well as involving employees in the payment of additional contributions, where applicable, to
order to eliminate 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
these benefits are recognised on the date on which the event causing the disability occurs .

149

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5 Scope of consolidation

The following section sets out details of the Group structure of Swisscom as
well as disclosures concerning subsidiaries, joint ventures and associates. In
addition, material changes in Group structure are discussed, together with
their impact on the consolidated financial statements.

5 .1 Group structure
Swisscom Ltd is the parent company of the Group and holds principally direct majority shareholdings in
Swisscom (Switzerland) Ltd, Swisscom Broadcast Ltd and Swisscom Directories Ltd . Fastweb S .p .A . (Fastweb) is
held indirectly via Swisscom (Switzerland) Ltd as well as an intermediate company in Italy . Swisscom Re Ltd in
Liechtenstein is the Group’s in-house reinsurance company .

5 .2 Significant changes in scope of consolidation
Net cash flows from the acquisition and disposal of participations may be analysed as follows:

In CHF million

Expenses for business combinations net of cash and cash equivalents acquired

Expenses for deferred consideration arising on business combinations

Expenses for shareholdings accounted for using the equity method

Proceeds from sale of equity-accounted investees

Acquisition of non-controlling interests

Total cash flow from the purchase and sale of shareholdings, net

2018

(60)

(18)

(35)

–

(113)

2017

(44)

(19)

(20)

(99)

(106)

Exercise of call option to acquire remaining shares in Swisscom Directories AG
Until now, Swisscom has held a 69% share in the share capital of Swisscom Directories AG, the remaining
shares being held by Tamedia . Swisscom had granted Tamedia a put option, and Tamedia had granted
Swisscom a call option for Tamedia’s 31% shareholding . The put and call options could be exercised as from
mid-2018, respectively . In December 2018, Swisscom exercised its call option to acquire the outstanding 31%
share in Swisscom Directories AG for a purchase price of CHF 240 million . Settlement thereof was made in
January 2019 . As a result of exercising the call option, the other financial liabilities previously recorded by
Swisscom in the consolidated financial statements as of 31 December 2018 were increased by CHF 14 million
with no income effect . See Note 2 .2 .

Acquisition of fixed-wireless division as well as mobile frequencies from Tiscali
At the end of July 2018, the Italian subsidiary Fastweb signed an agreement to purchase the fixed-wireless
division and a 3 .5 GHz frequency spectrum from Tiscali in order to enhance its mobile communication and
convergence business on a long-term and sustainable basis . The value of the transaction amounts to
EUR 185 million (CHF 208 million) . The transaction was consummated on 16 November 2018 . The transaction
qualifies as a business combination in accordance with IFRS 3 . The business combination was recognised on a
provisional basis in the consolidated financial statements as of and for the year ended 31 December 2018, as at
the date of preparation of the consolidated financial statements, not all necessary information for the pur-
chase price allocation was available . The provisional allocation of the acquisition cost over the net assets can be
summarised as follows:

In CHF million

Property, plant and equipment

Intangible assets

Other current liabilities

Identified assets and liabilities/acquisition costs

Deferred payment of purchase price

Total cash outflow

2018

206

(15)

208

(152)

It is anticipated that no goodwill will be recognised from the business combination . No transaction costs arose
in connection with the acquisition . The deferred residual acquisition price will be settled through a cash
payment in 2019 of EUR 80 million (CHF 90 million) and the rendering of services for an amount of EUR 55 mil-

150

lion (CHF 62 million) . The impact of the business combination on net revenue and net income 2018 of
Swisscom is not material .

Accounting policies

Consolidation
Subsidiaries are all companies over which Swisscom Ltd has the effective ability to control their financial and
business policies . Control is generally assumed where Swisscom Ltd directly or indirectly 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 . Intergroup balances and transactions, income and expenses, shareholdings and dividends as well
as unrealised gains and losses are fully eliminated . Non-controlling interests in subsidiary companies are
reported in the consolidated balance sheet within equity separately, however, from that attributable to the
shareholders of Swisscom Ltd . The non-controlling interests in net income or loss are shown in the consoli-
dated income statement as a component of the consolidated net income or loss . Changes in shareholdings of
subsidiary companies are reported as transactions within equity insofar as control existed previously and
continues to exist . Put options granted to owners of non-controlling interests are disclosed as financial
liabilities . The balance-sheet date for all consolidated subsidiaries is 31 December . There are no material
restrictions on the transfer of funds from the subsidiaries to the parent company .
Shareholdings 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 .

Business combinations
Business combinations are accounted for using the acquisition method . As of the date of the business combina-
tion, 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 instru-
ments 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 difference between the cost of acquisition and the fair value of the identifi-
able assets and liabilities acquired or assumed is accounted for as goodwill after taking into account any
non-controlling interests .

5 .3 Equity-accounted investees

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

2018

152

(4)

(18)

(3)

174

2017

193

(76)

(20)

152

In 2018, an aggregate amount of CHF 5 million (prior year: CHF –11 million) was recognised as the attributable
share of net results in equity-accounted investees . Included therein are impairment losses of CHF 6 million
(prior year: CHF 28 million) on loans which are considered as net investments in equity-accounted investees .

151

Selected key performance indicators for equity-accounted investees

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

2018

2017

1,814

(1,756)

1,089

1,084

(1,021)

(549)

603

2,120

(2,065)

942

860

(926)

(485)

391

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152

5 .4 Group companies

Group companies in Switzerland

Registered name

Switzerland

Admeira Ltd 1,3

Ad Unit Ltd. 2

autoSense Ltd 2,3

Billag Ltd 1

cablex Ltd 2

Credit Exchange Ltd 2,3

CT Cinetrade AG 1

Custodigit Ltd 2

Datasport Ltd 2

daura Ltd 2,3

finnova ltd bankware 2,3

Global IP Action Ltd 2

itnetX (Switzerland) AG 2

kitag kino-theater Ltd 2

Medgate Ltd 2,3

Medgate Technologies Ltd 2,3

Mila AG 2

Mona Lisa Capital AG 2

MyStrom Ltd 2

PlazaVista Entertainment AG 2

SEC consult (Switzerland) Ltd 2,3

SmartLife Care Ltd 2

Swisscom Blockchain Ltd 2

Swisscom Broadcast Ltd 1

Swisscom Digital Technology SA 1

Swisscom Directories Ltd 1

Swisscom eHealth Invest GmbH 2

Swisscom Event & Media Solutions Ltd 2

Swisscom Health AG 2

Swisscom Real Estate Ltd 1

Swisscom IT Services Finance Custom Solutions Ltd 2

Olten

Swisscom (Switzerland) Ltd 1

Swisscom Services Ltd 2

Swisscom Ventures Ltd 2

SwissSign Group Ltd 2,3

Teleclub AG 2

Teleclub Programm AG 2,3

tiko Energy Solutions SA 2

Worklink AG 1

Ittigen

Opfikon

Zurich

Ittigen

Berne

Registered
office

Share of capital
and voting right
in %

Currency

Share capital
in million

Segment

Berne

Zurich

Fribourg

Berne

Zurich

Gerlafingen

Zurich

Lenzburg

Pfäffikon

Rümlang

Zurich

Basel

Zurich

Ittigen

Zurich

Wangen

Zurich

Berne

Geneva

Zurich

Ittigen

100

CHF

0.3

0.1

0.2

0.1

5.0

0.1

0.5

1.0

0.2

0.1

0.5

0.2

0.1

1.0

0.7

0.1

0.4

5.0

0.1

0.2

0.1

25.0

0.1

2.2

1.4

0.1

100.0

0.1

1,000.0

0.1

2.0

12.5

1.2

0.6

13.3

0.5

OTH

SCS

OTH

SCS

OTH

SCS

OTH

SCS

OTH

SCS

OTH

SCS

OTH

SCS

OTH

GHQ

OTH

SCS

GHQ

OTH

SCS

OTH

GHQ

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 represen-
tation on the Board of Directors of the company, Swisscom can exercise a
significant influence .

4 SCS = Swisscom Switzerland, FWB = Fastweb, OTH = Other, GHQ = Group

Headquarters (unallocated costs) .

153

Group companies in other countries

Registered name

Belgium

Registered
office

Share of capital
and voting right
in %

Currency

Share capital
in million

Segment

Belgacom International Carrier Services Ltd 2,3

Brussels

EUR

1.5

SCS

Germany

Abavent GmbH 2

Mila Europe GmbH 2

Swisscom Telco GmbH 2

France

local.fr SA 2

SoftAtHome SA 2,3

Italy

Fastweb S.p.A. 2

Fastweb Air S.r.l. 2

Flash Fiber S.r.l. 2,3

Swisscom Italia S.r.l. 2

Liechtenstein

Swisscom Re Ltd 1

Luxembourg

DTF GP S.A.R.L 2

Digital Transformation Fund
Initial Limited Partner SCSp 2

Netherlands

NGT International B.V. 2

Austria

Kempten

Berlin

Leipzig

100

Bourg-en-Bresse

Colombes

Milan

100

EUR

0.3

–

1.0

6.5

41.3

10.0

–

505.8

SCS

GHQ

OTH

SCS

FWB

GHQ

Vaduz

100

CHF

5.0

GHQ

Luxembourg

100

Luxembourg

100

EUR

Capelle a/d IJssel

100

EUR

–

OTH

SCS

Swisscom IT Servics Finance SE 2

Vienna

100

EUR

3.3

Singapore

Swisscom IT Services Finance Pte Ltd 2

Singapore

100

SGD

0.1

USA

Swisscom Cloud Lab Ltd 2

Delaware

100

USD

–

4 SCS = Swisscom Switzerland, FWB = Fastweb, OTH = Other, GHQ = Group

Headquarters (unallocated costs) .

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154

6 Other disclosures

This section details information which is not already disclosed in the other
parts of the report. It includes, for instance, disclosures regarding income
taxes and related corporate entities and individuals.

6 .1 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

2018

337

395

335

2017

349

392

338

In addition, other comprehensive income includes current and deferred income taxes 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 to the fair value of equity instruments

Gains and losses from cash flow hedges transferred to income statement

Total income tax expense recognised in other comprehensive income

2018

(1)

(16)

–

(16)

2017

171

(1)

188

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 remained unchanged from the prior year at 20 .4% .

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 from result of shareholdings accounted for using the equity method

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 income tax of prior periods

Total income tax expense

Effective income tax rate

2018

1,732

184

1,916

20.4%

391

(1)

(11)

(3)

(16)

395

2017

1,724

236

1,960

20.4%

400

(12)

(14)

(37)

392

20.6%

20.0%

155

Current income tax assets and liabilities

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

Current income tax liabilities at 31 December, net

Thereof current income tax assets

Thereof current income tax liabilities

Thereof Switzerland

Thereof foreign countries

Deferred income tax assets and liabilities

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

2018

203

338

(277)

(17)

248

(2)

250

240

Assets

Liabilities

–

103

216

135

542

(669)

(303)

(69)

–

(148)

(1,189)

31.12.2018

Net
amount

(632)

(303)

216

(13)

(647)

167

(814)

(673)

Assets

Liabilities

–

102

186

153

565

(623)

(309)

(51)

–

(110)

(1,093)

2017

107

369

(279)

(10)

203

(10)

213

198

31.12.2017

Net
amount

(589)

(309)

186

(528)

197

(725)

(588)

Tax loss carry-forwards for which no deferred tax assets were recognised, expire as follows:

In CHF million

Expiring within 1 year

Expiring within 2 to 7 years

No expiration

Total unrecognised tax loss carry-forwards

Thereof Switzerland

Thereof foreign countries

31.12.2018

31.12.2017

136

153

137

–

125

164

114

No deferred tax liabilities were recognised on the undistributed earnings of subsidiaries as of 31 December
2018 (prior year: CHF 6 million) . Temporary differences of subsidiaries and equity-accounted investees, on
which no deferred income taxes are recognised as of 31 December 2018, amounted to CHF 1,829 million (prior
year: CHF 1,117 million) .

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Accounting policies

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 differences 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 . 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 whenever they relate to the same
taxing authority and taxable entity .

6 .2 Related parties

Majority shareholder and equity-accounted investees
Majority shareholder
Pursuant to the Swiss Federal Telecommunication Enterprises Act (TEA), the Swiss Confederation (“the
Confederation”) is obligated to hold a majority of the share capital and voting rights of Swisscom . On
31 December 2018, the Confederation, as majority shareholder, continued to hold 51 .0% of the issued shares of
Swisscom Ltd . Any reduction of the Confederation’s holding below a majority shareholding would require a
change in law which would need to be voted upon by the Swiss Parliament and would also be subject to a
facultative referendum by Swiss voters . As the majority shareholder, the Confederation has the power to
control the decisions of the annual general meetings of shareholders which are taken by the absolute majority
of validly cast votes . This relates primarily to resolutions concerning dividend distributions and the election of
the members of the Board of Directors . Swisscom supplies telecommunication services to and in addition,
procures services from the Confederation . The Confederation comprises the various ministries and administra-
tive bodies of the Confederation and the other companies controlled by the Confederation (primarily the Swiss
Post, Swiss Federal Railways, RUAG as well as Skyguide) . All transactions are conducted on the basis of normal
customer/supplier relationships and on conditions applicable to unrelated third parties . In addition, financing
transactions are entered into with the Swiss Post on market conditions .

Equity-accounted investees
Services provided to/by equity-accounted investees are based upon market prices . Such participations are
listed in Note 5 .3 .

Transactions and balances

In CHF million

Financial year 2018

Confederation

Equity-accounted investees

Total 2018/Balance at 31 December 2018

In CHF million

Financial year 2017

Confederation

Equity-accounted investees

Total 2017/Balance at 31 December 2017

Income

Expense

Receivables

Liabilities

241

133

374

114

204

281

324

166

173

Income

Expense

Receivables

Liabilities

247

324

127

215

269

289

163

166

Occupational pension schemes and compensation payable to individuals in key positions
Transactions between Swisscom and the various pension funds are detailed in Note 4 .3 . Compensation paid to
individuals in key positions are disclosed in Note 4 .2 .

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6 .3 Other accounting policies

Foreign currency translation
Foreign currency transactions which are not denominated in the functional currency are translated into the
functional currency using the exchange rate 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 . Assets and liabilities of subsidiar-
ies and equity-accounted investees 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 .

Significant foreign currency translation rates

Currency

1 EUR

1 USD

Closing rate

Average rate

31.12.2018

31.12.2017

31.12.2016

1.127

0.984

1.170

0.976

1.074

1.019

2018

1.153

0.977

2017

1.113

0.985

Amended International Financial Reporting Standards and Interpretations, whose application is
not yet mandatory
The following Standards and Interpretations published up to the end of 2018 are mandatory for annual periods
beginning on or after 1 January 2019:

Effective from

1 January 2019

1 January 2020

1 January 2019

1 January 2020

1 January 2019

Standard

IFRIC 23

Name

Uncertainty over income tax treatments

Amendements to IAS 1 and IAS 8

Definition of material

Amendements to IAS 19

Plan amendments, curtailments and settlements

Amendements to IAS 28

Long-term shareholdings in associated companies and joint ventures

Amendements to IFRS 3

Definition of a business

Amendements to IFRS 9

Early repayment arrangements with negative compensation payment

IFRS 16

Various

–

Leases

Amendements to IFRS 2015–2017

Amendments to references to the Framework Concept in the IFRS Standards

1 January 2020

Amendements to IFRS 10 and IAS 28

Sale or deposit of assets between an investor and an associated company
or joint venture

still open

Swisscom will review its financial reporting for the impact of those new and amended standards which take
effect on or after 1 January 2019 and for which Swisscom did not make voluntary early adoption . At present,
Swisscom anticipates no material impact on consolidated financial reporting except for the amendment
described below .

IFRS 16 Leases
IFRS 16 (in force as from 1 January 2019) replaces IAS 17, IFRIC 4 and SIC 27 and lays down the principles
governing the recognition, measurement and disclosure of lease arrangements . For the lessee, IFRS 16 provides
for a single model for accounting for lease arrangements in financial statements . The differentiation between
finance and operating lease arrangements required until now under IAS 17 is thus dropped in future for the
lessee . The lessee shall recognise leasing liabilities in its balance sheet for all future lease payments to be made
as well as recognising a right-of-use for the underlying asset . In future, depreciation and amortisation and
interest will be recognised in the income statement instead of rental expense . This will lead to a material
increase in operating income before depreciation, amortisation and impairment losses . In the statement of
cash flows, the share of the lease payments representing amortisation under the lease arrangements to be
accounted for under the new rules will reduce cash flows from financing activities and no longer cash flows
from operating activities, as previously . Interest payments will continue to be reported as cash flows from
operating activities . As regards lessors, they will continue to differentiate between finance and operating lease

arrangements for financial reporting purposes . In this regard, the accounting model foreseen under IFRS 16
does not materially differ from the previous provisions under IAS 17 .
Swisscom has elected to apply the modified retrospective approach for the initial adoption of IFRS 16 . For
reasons of simplicity, a reassessment as to whether a contract as of 1 January 2019 constitutes or includes a
leasing arrangement will be dispensed with . The payment obligations arising under the operating-lease
arrangements disclosed in note 2 .3 for the most part comprise leasing payments from the rental of operation
and office buildings as well as of antenna sites . The net present value of the payment obligations arising from
previous operating-lease arrangements will be accounted for as leasing liabilities . The corresponding right-of-
use assets will be recognised in the amount of the leasing liabilities . As of 1 January 2019, right-of-use assets
and leasing liabilities aggregating some CHF 1 .3 billion will be recognised from the initial adoption of IFRS 16 .
The comparative prior-year’s figures will not be restated . The adoption of IFRS 16 has no impact on equity as of
1 January 2019 . With regard to the 2018 financial year, the application of IFRS 16 would have led to an increase
in operating income before depreciation, amortisation and impairment losses (EBITDA) of some CHF 0 .2 billion
and to higher depreciation and amortisation as well as interest expense of a combined aggregate amount of
some CHF 0 .2 billion . In addition, as a result of the discontinuation of SIC 27, other financial assets and financial
liabilities totalling USD 79 million (CHF 78 million) which were previously not recorded will be recognised . The
Italian subsidiary, Fastweb, procures various access services from other fixed-network operators for the use of
connection cables to the end customer . A part of these access services is now classified as leases in accordance
with IFRS 16 . The value of the individual connection cable fulfils the criteria as an asset of low value . Swisscom
will apply the low value exemption of IFRS 16 for these lease arrangements . Accordingly, no right-of-use assets
and lease liabilities will be recognised for these access services, the costs of which will continue to be reported
as operating expense .

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Statutory Auditor’s Report
(cid:37)(cid:72)(cid:85)(cid:428)(cid:70)(cid:75)(cid:87)(cid:3)(cid:71)(cid:72)(cid:85)(cid:3)(cid:53)(cid:72)(cid:89)(cid:428)(cid:86)(cid:428)(cid:82)(cid:81)(cid:86)(cid:86)(cid:87)(cid:72)(cid:79)(cid:79)(cid:72)(cid:3)

To the General Meeting of Swisscom Ltd., Ittigen (Berne)
An die Generalversammlung der Swisscom AG, Ittigen (Bern)

Report on the Audit of the Consolidated Financial Statements
Bericht zur Prüfung der Konzernrechnung

Opinion
Prüfungsurteil
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 2018, the consolidated statement of comprehensive
Wir haben die Konzernrechnung der Swisscom AG und ihrer Tochtergesellschaften (der Konzern) – bestehend
income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then
aus der konsolidierten Bilanz zum 31. Dezember 2018, der konsolidierten Gesamtergebnisrechnung, der
ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.
konsolidierten Eigenkapitalveränderungsrechnung und der konsolidierten Geldflussrechnung für das dann
endende Jahr sowie dem Anhang der Konzernrechnung einschliesslich einer Zusammenfassung bedeutsamer
In our opinion the consolidated financial statements (pages 104 to 159) give a true and fair view of the
Rechnungslegungsgrundsätze – geprüft.
consolidated financial position of the Group as at 31 December 2018, and its consolidated financial performance
and its consolidated cash flows for the year then ended in accordance with International Financial Reporting
Nach unserer Beurteilung vermittelt die Konzernrechnung (Seiten 106 bis 161) ein den tatsächlichen Verhältnis-
Standards (IFRS) and comply with Swiss law.
sen entsprechendes Bild der Vermögens- und Finanzlage des Konzerns zum 31. Dezember 2018 sowie dessen
Ertragslage und Cashflows für das dann endende Jahr in Übereinstimmung mit den International Financial
Reporting Standards (IFRS) und entspricht dem schweizerischen Gesetz.
Basis for Opinion

We conducted our audit in accordance with Swiss law, International Standards on Auditing (ISAs) and Swiss
Grundlage für das Prüfungsurteil
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
Wir haben unsere Prüfung in Übereinstimmung mit dem schweizerischen Gesetz, den International Standards on
independent of the Group in accordance with the provisions of Swiss law and the requirements of the Swiss audit
Auditing (ISA) sowie den Schweizer Prüfungsstandards (PS) durchgeführt. Unsere Verantwortlichkeiten nach
profession, as well as the IESBA Code of Ethics for Professional Accountants, and we have fulfilled our other
diesen Vorschriften und Standards sind im Abschnitt "Verantwortlichkeiten der Revisionsstelle für die Prüfung der
ethical responsibilities in accordance with these requirements.
Konzernrechnung" unseres Berichts weitergehend beschrieben. Wir sind von dem Konzern unabhängig in Über-
einstimmung mit den schweizerischen gesetzlichen Vorschriften und den Anforderungen des Berufsstands sowie
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
dem Code of Ethics for Professional Accountants des International Ethics Standards Board for Accountants
opinion.
(IESBA Code), und wir haben unsere sonstigen beruflichen Verhaltenspflichten in Übereinstimmung mit diesen
Anforderungen erfüllt.

Key Audit Matters
Wir sind der Auffassung, dass die von uns erlangten Prüfungsnachweise ausreichend und geeignet sind, um als
Grundlage für unser Prüfungsurteil zu dienen.

Revenue recognition

Besonders wichtige Prüfungssachverhalte
Capitalization of technical facilities and software

Umsatzerfassung

Fastweb goodwill

Aktivierung von technischen Anlagen und Software

Provisions and contingent liabilities for regulatory and competition-law proceedings

Goodwill Fastweb

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.

Rückstellungen und Eventualverbindlichkeiten für regulatorische und wettbewerbsrechtliche Verfahren

Besonders wichtige Prüfungssachverhalte sind solche Sachverhalte, die nach unserem pflichtgemässen Ermes-
sen am bedeutsamsten für unsere Prüfung der Konzernrechnung des aktuellen Zeitraums waren. Diese Sach-
verhalte wurden im Zusammenhang mit unserer Prüfung der Konzernrechnung als Ganzes und bei der Bildung
unseres Prüfungsurteils hierzu berücksichtigt, und wir geben kein gesondertes Prüfungsurteil zu diesen Sach-
verhalten ab.

Revenue recognition

Bericht der Revisionsstelle

Key Audit Matter

An die Generalversammlung der Swisscom AG, Ittigen (Bern)

Our response

Prüfungsurteil

Swisscom’s telecommunication business is
Bericht zur Prüfung der Konzernrechnung
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
Wir haben die Konzernrechnung der Swisscom AG und ihrer Tochtergesellschaften (der Konzern) – bestehend
the operating effectiveness of IT controls of accounting-
aus der konsolidierten Bilanz zum 31. Dezember 2017, der konsolidierten Gesamtergebnisrechnung, der
relevant systems, with the assistance of our IT
konsolidierten Eigenkapitalveränderungsrechnung und der konsolidierten Geldflussrechnung für das dann
specialists, to reflect the high degree of integration of
endende Jahr sowie dem Anhang der Konzernrechnung einschliesslich einer Zusammenfassung bedeutsamer
service performance and recording by various IT
Rechnungslegungsgrundsätze – geprüft.
systems.

Additionally, Swisscom implemented the newly
applicable revenue recognition standard IFRS 15
and recognized the impact in equity as at 1 January
2018 for contracts which had not yet been executed
as at this date. The effect of the first time application
of IFRS 15 is driven mainly by bundle contracts in
the Swiss wireless business.

Nach unserer Beurteilung vermittelt die Konzernrechnung (Seiten 96 bis 147) ein den tatsächlichen Verhältnissen
entsprechendes Bild der Vermögens- und Finanzlage des Konzerns zum 31. Dezember 2017 sowie dessen
Ertragslage und Cashflows für das dann endende Jahr in Übereinstimmung mit den International Financial
Reporting Standards (IFRS) und entspricht dem schweizerischen Gesetz.

In addition, we performed analytical procedures. Based
on internal reports, we analyzed trends related to the
most important key performance indicators per revenue
segment and product category, and we critically
assessed deviations from our expectations.

Grundlage für das Prüfungsurteil

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.

Wir haben unsere Prüfung in Übereinstimmung mit dem schweizerischen Gesetz, den International Standards on
Auditing (ISA) sowie den Schweizer Prüfungsstandards (PS) durchgeführt. Unsere Verantwortlichkeiten nach
We evaluated Swisscom’s process of analysing the
diesen Vorschriften und Standards sind im Abschnitt "Verantwortlichkeiten der Revisionsstelle für die Prüfung der
impact of IFRS 15 and assessed whether the resulting
Konzernrechnung" unseres Berichts weitergehend beschrieben. Wir sind von dem Konzern unabhängig in Über-
changes of accounting policies and the financial impact
einstimmung mit den schweizerischen gesetzlichen Vorschriften und den Anforderungen des Berufsstands sowie
– in particular on the equity as at 1 January 2018 - are
dem Code of Ethics for Professional Accountants des International Ethics Standards Board for Accountants
complete and accurate.
(IESBA Code), und wir haben unsere sonstigen beruflichen Verhaltenspflichten in Übereinstimmung mit diesen
Anforderungen erfüllt.

Wir sind der Auffassung, dass die von uns erlangten Prüfungsnachweise ausreichend und geeignet sind, um als
Grundlage für unser Prüfungsurteil zu dienen.

We took a sample of significant revenue-driving
transactions from inception to the recognition in the
accounting system and assessed whether they were
accurately recorded in accordance with IFRS 15.
Furthermore we assessed the changes in the relevant
revenue processes whether they are suitable to analyze
and classify new contracts adequately to ensure the
correct revenue recognition.

In addition, we tested the appropriateness and
functionality of Swisscom's newly implemented IT
systems for the correct revenue recognition.

Besonders wichtige Prüfungssachverhalte

Umsatzerfassung

Aktivierung von technischen Anlagen und Software

For further information on revenue recognition refer to the following:

— Notes to the consolidated financial statements, No. 1.1 – Segment information

Goodwill Fastweb

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Capitalization of technical facilities and software

Bericht der Revisionsstelle

Key Audit Matter
An die Generalversammlung der Swisscom AG, Ittigen (Bern)

Our response

Given the technological change in the
Bericht zur Prüfung der Konzernrechnung
telecommunication sector, investment in new technical
facilities and software plays a strategic role in the
development of Swisscom’s business. In this regard, it
Prüfungsurteil
is important that the costs capitalized in relation to
Among others, using a statistical sampling procedure
acquired and self-developed technical facilities and
we assessed whether the capitalization of costs
Wir haben die Konzernrechnung der Swisscom AG und ihrer Tochtergesellschaften (der Konzern) – bestehend
software fulfil the IFRS criteria.
relating to a sample of technical facilities and software
aus der konsolidierten Bilanz zum 31. Dezember 2017, der konsolidierten Gesamtergebnisrechnung, der
met the criteria and took place at the appropriate point
konsolidierten Eigenkapitalveränderungsrechnung und der konsolidierten Geldflussrechnung für das dann
in time.
endende Jahr sowie dem Anhang der Konzernrechnung einschliesslich einer Zusammenfassung bedeutsamer
Rechnungslegungsgrundsätze – geprüft.

We tested whether Swisscom’s capitalization
guidelines comply with IFRS and whether the key
controls over the compliance with these guidelines
operated effectively.

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 those to be expensed with the actual
amounts and critically assessed any deviations.

Grundlage für das Prüfungsurteil

Wir haben unsere Prüfung in Übereinstimmung mit dem schweizerischen Gesetz, den International Standards on
Auditing (ISA) sowie den Schweizer Prüfungsstandards (PS) durchgeführt. Unsere Verantwortlichkeiten nach
For further information on capitalization of technical facilities and software refer to the following:
diesen Vorschriften und Standards sind im Abschnitt "Verantwortlichkeiten der Revisionsstelle für die Prüfung der
Konzernrechnung" unseres Berichts weitergehend beschrieben. Wir sind von dem Konzern unabhängig in Über-
— Notes to the consolidated financial statements, No. 3.2 – Property, plant and equipment
einstimmung mit den schweizerischen gesetzlichen Vorschriften und den Anforderungen des Berufsstands sowie
dem Code of Ethics for Professional Accountants des International Ethics Standards Board for Accountants
— Notes to the consolidated financial statements, No. 3.4 – Intangible assets
(IESBA Code), und wir haben unsere sonstigen beruflichen Verhaltenspflichten in Übereinstimmung mit diesen
Anforderungen erfüllt.

Wir sind der Auffassung, dass die von uns erlangten Prüfungsnachweise ausreichend und geeignet sind, um als
Grundlage für unser Prüfungsurteil zu dienen.
Fastweb goodwill

Key Audit Matter

Our response

Besonders wichtige Prüfungssachverhalte

At 31 December 2018 the goodwill related to the
operating segment Fastweb amounted to CHF 556
Umsatzerfassung
million (2017: CHF 578 million).

Aktivierung von technischen Anlagen und Software

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.

Goodwill Fastweb

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 as well as Group management.
In addition, we retrospectively assessed the accuracy
of past business plans by a multi-year comparison of
forecasted and actual amounts.

We analyzed the individual parameters underlying the
discount rate, with assistance from our valuation
specialists, and compared them with the peer group.

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3

Bericht der Revisionsstelle

We evaluated the model used for the impairment test
with respect to mathematical accuracy and
methodological adequacy.

An die Generalversammlung der Swisscom AG, Ittigen (Bern)

We also considered the appropriateness of
disclosures in relation to the impairment test and
assessed whether the disclosed sensitivity analyses
adequately reflect the risks embedded in the
impairment test.

Bericht zur Prüfung der Konzernrechnung

For further information on the Fastweb goodwill refer to the following:

Prüfungsurteil

— Notes to the consolidated financial statements, No. 3.3 –Goodwill

Wir haben die Konzernrechnung der Swisscom AG und ihrer Tochtergesellschaften (der Konzern) – bestehend
aus der konsolidierten Bilanz zum 31. Dezember 2017, der konsolidierten Gesamtergebnisrechnung, der
konsolidierten Eigenkapitalveränderungsrechnung und der konsolidierten Geldflussrechnung für das dann
endende Jahr sowie dem Anhang der Konzernrechnung einschliesslich einer Zusammenfassung bedeutsamer
Rechnungslegungsgrundsätze – geprüft.

Grundlage für das Prüfungsurteil

Wir haben unsere Prüfung in Übereinstimmung mit dem schweizerischen Gesetz, den International Standards on
Auditing (ISA) sowie den Schweizer Prüfungsstandards (PS) durchgeführt. Unsere Verantwortlichkeiten nach
diesen Vorschriften und Standards sind im Abschnitt "Verantwortlichkeiten der Revisionsstelle für die Prüfung der
Konzernrechnung" unseres Berichts weitergehend beschrieben. Wir sind von dem Konzern unabhängig in Über-
einstimmung mit den schweizerischen gesetzlichen Vorschriften und den Anforderungen des Berufsstands sowie
dem Code of Ethics for Professional Accountants des International Ethics Standards Board for Accountants
(IESBA Code), und wir haben unsere sonstigen beruflichen Verhaltenspflichten in Übereinstimmung mit diesen
Anforderungen erfüllt.

Wir sind der Auffassung, dass die von uns erlangten Prüfungsnachweise ausreichend und geeignet sind, um als
Grundlage für unser Prüfungsurteil zu dienen.

Besonders wichtige Prüfungssachverhalte

Umsatzerfassung

Aktivierung von technischen Anlagen und Software

Goodwill Fastweb

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164

Provisions and contingent liabilities for regulatory and competition-law proceedings

Bericht der Revisionsstelle

Key Audit Matter
An die Generalversammlung der Swisscom AG, Ittigen (Bern)

Our response

We tested the operating effectiveness of the controls
implemented to identify, assess and recognize legal
proceedings related to the regulatory and competition-
law environment.

Swisscom provides regulated access services to
Bericht zur Prüfung der Konzernrechnung
other telecommunication service providers. The
pricing of such services is the outcome of regulatory
proceedings.
Prüfungsurteil
Specifically, we participated in the quarterly meetings
In addition, the Federal Competition Commission
where legal proceedings were addressed with the
(WEKO) is conducting various proceedings against
Wir haben die Konzernrechnung der Swisscom AG und ihrer Tochtergesellschaften (der Konzern) – bestehend
relevant departments, and we discussed and
Swisscom.
aus der konsolidierten Bilanz zum 31. Dezember 2017, der konsolidierten Gesamtergebnisrechnung, der
challenged the summaries of the legal proceedings
konsolidierten Eigenkapitalveränderungsrechnung und der konsolidierten Geldflussrechnung für das dann
In case of a final verdict establishing market abuse,
prepared by Swisscom Group.
endende Jahr sowie dem Anhang der Konzernrechnung einschliesslich einer Zusammenfassung bedeutsamer
civil law claims may also be brought against Swisscom.
Rechnungslegungsgrundsätze – geprüft.
With the assistance of our legal specialists, we
The recognition of provisions or disclosure of
assessed the probability of cash outflows resulting from
contingent liabilities related to such proceedings
Nach unserer Beurteilung vermittelt die Konzernrechnung (Seiten 96 bis 147) ein den tatsächlichen Verhältnissen
legal proceedings, the point in time for recognizing
requires management to apply significant judgment.
entsprechendes Bild der Vermögens- und Finanzlage des Konzerns zum 31. Dezember 2017 sowie dessen
related provisions and the corresponding amount of
Ertragslage und Cashflows für das dann endende Jahr in Übereinstimmung mit den International Financial
such provisions or the disclosure of contingent liabilities.
Reporting Standards (IFRS) und entspricht dem schweizerischen Gesetz.
We additionally obtained and critically assessed written
statements of Swisscom’s external legal counsel for
significant proceedings.

Grundlage für das Prüfungsurteil

Wir haben unsere Prüfung in Übereinstimmung mit dem schweizerischen Gesetz, den International Standards on
Auditing (ISA) sowie den Schweizer Prüfungsstandards (PS) durchgeführt. Unsere Verantwortlichkeiten nach
diesen Vorschriften und Standards sind im Abschnitt "Verantwortlichkeiten der Revisionsstelle für die Prüfung der
Konzernrechnung" unseres Berichts weitergehend beschrieben. Wir sind von dem Konzern unabhängig in Über-
einstimmung mit den schweizerischen gesetzlichen Vorschriften und den Anforderungen des Berufsstands sowie
We assessed whether the disclosures on contingent
dem Code of Ethics for Professional Accountants des International Ethics Standards Board for Accountants
liabilities in the notes to the consolidated financial
(IESBA Code), und wir haben unsere sonstigen beruflichen Verhaltenspflichten in Übereinstimmung mit diesen
statements appropriately reflect the risks involved.
Anforderungen erfüllt.

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.

For further information on provisions and contingent liabilities for regulatory and competition-law proceedings
Wir sind der Auffassung, dass die von uns erlangten Prüfungsnachweise ausreichend und geeignet sind, um als
refer to the following:
Grundlage für unser Prüfungsurteil zu dienen.

— Notes to the consolidated financial statements, No. 3.5 – Provisions, contingent liabilities and contingent

assets

Besonders wichtige Prüfungssachverhalte

Umsatzerfassung

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Rückstellungen und Eventualverbindlichkeiten für regulatorische und wettbewerbsrechtliche Verfahren

Personalvorsorgeverpflichtung comPlan

1
5

Bericht der Revisionsstelle

Other Information in the Annual Report

The Board of Directors is responsible for the other information in the annual report. The other information
An die Generalversammlung der Swisscom AG, Ittigen (Bern)
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.
Bericht zur Prüfung der Konzernrechnung
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.
Prüfungsurteil
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
Wir haben die Konzernrechnung der Swisscom AG und ihrer Tochtergesellschaften (der Konzern) – bestehend
information in the annual report and, in doing so, consider whether the other information is materially inconsistent
aus der konsolidierten Bilanz zum 31. Dezember 2017, der konsolidierten Gesamtergebnisrechnung, der
with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be
konsolidierten Eigenkapitalveränderungsrechnung und der konsolidierten Geldflussrechnung für das dann
materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement
endende Jahr sowie dem Anhang der Konzernrechnung einschliesslich einer Zusammenfassung bedeutsamer
of this other information, we are required to report that fact. We have nothing to report in this regard.
Rechnungslegungsgrundsätze – geprüft.

Nach unserer Beurteilung vermittelt die Konzernrechnung (Seiten 96 bis 147) ein den tatsächlichen Verhältnissen
Responsibility of the Board of Directors for the Consolidated Financial Statements
entsprechendes Bild der Vermögens- und Finanzlage des Konzerns zum 31. Dezember 2017 sowie dessen
Ertragslage und Cashflows für das dann endende Jahr in Übereinstimmung mit den International Financial
The Board of Directors is responsible for the preparation of the consolidated financial statements that give a true
Reporting Standards (IFRS) und entspricht dem schweizerischen Gesetz.
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.
Grundlage für das Prüfungsurteil
In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the Group’s
Wir haben unsere Prüfung in Übereinstimmung mit dem schweizerischen Gesetz, den International Standards on
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the
Auditing (ISA) sowie den Schweizer Prüfungsstandards (PS) durchgeführt. Unsere Verantwortlichkeiten nach
going concern basis of accounting unless the Board of Directors either intends to liquidate the Group or to cease
diesen Vorschriften und Standards sind im Abschnitt "Verantwortlichkeiten der Revisionsstelle für die Prüfung der
operations, or has no realistic alternative but to do so.
Konzernrechnung" unseres Berichts weitergehend beschrieben. Wir sind von dem Konzern unabhängig in Über-
einstimmung mit den schweizerischen gesetzlichen Vorschriften und den Anforderungen des Berufsstands sowie
dem Code of Ethics for Professional Accountants des International Ethics Standards Board for Accountants
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
(IESBA Code), und wir haben unsere sonstigen beruflichen Verhaltenspflichten in Übereinstimmung mit diesen
Anforderungen erfüllt.
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
Wir sind der Auffassung, dass die von uns erlangten Prüfungsnachweise ausreichend und geeignet sind, um als
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
Grundlage für unser Prüfungsurteil zu dienen.
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.

Besonders wichtige Prüfungssachverhalte

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:

Umsatzerfassung

— 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
Aktivierung von technischen Anlagen und Software
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

Goodwill Fastweb
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Group’s internal control.
Rückstellungen und Eventualverbindlichkeiten für regulatorische und wettbewerbsrechtliche Verfahren

— 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,
Personalvorsorgeverpflichtung comPlan
based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions
Besonders wichtige Prüfungssachverhalte sind solche Sachverhalte, die nach unserem pflichtgemässen Ermes-
that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a
sen am bedeutsamsten für unsere Prüfung der Konzernrechnung des aktuellen Zeitraums waren. Diese Sach-
material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures
verhalte wurden im Zusammenhang mit unserer Prüfung der Konzernrechnung als Ganzes und bei der Bildung
in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our
unseres Prüfungsurteils hierzu berücksichtigt, und wir geben kein gesondertes Prüfungsurteil zu diesen Sach-
verhalten ab.

165

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166

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.

Bericht der Revisionsstelle

— 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.

An die Generalversammlung der Swisscom AG, Ittigen (Bern)

— Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business

Bericht zur Prüfung der Konzernrechnung

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.

Prüfungsurteil

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
Wir haben die Konzernrechnung der Swisscom AG und ihrer Tochtergesellschaften (der Konzern) – bestehend
internal control that we identify during our audit.
aus der konsolidierten Bilanz zum 31. Dezember 2017, der konsolidierten Gesamtergebnisrechnung, der
konsolidierten Eigenkapitalveränderungsrechnung und der konsolidierten Geldflussrechnung für das dann
We also provide the Board of Directors or its relevant committee with a statement that we have complied with
endende Jahr sowie dem Anhang der Konzernrechnung einschliesslich einer Zusammenfassung bedeutsamer
relevant ethical requirements regarding independence, and to communicate with them all relationships and other
Rechnungslegungsgrundsätze – geprüft.
matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

Nach unserer Beurteilung vermittelt die Konzernrechnung (Seiten 96 bis 147) ein den tatsächlichen Verhältnissen
From the matters communicated with the Board of Directors or its relevant committee, we determine those
entsprechendes Bild der Vermögens- und Finanzlage des Konzerns zum 31. Dezember 2017 sowie dessen
matters that were of most significance in the audit of the consolidated financial statements of the current period
Ertragslage und Cashflows für das dann endende Jahr in Übereinstimmung mit den International Financial
and are therefore the key audit matters. We describe these matters in our auditor’s report, unless law or
Reporting Standards (IFRS) und entspricht dem schweizerischen Gesetz.
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.

Grundlage für das Prüfungsurteil

Wir haben unsere Prüfung in Übereinstimmung mit dem schweizerischen Gesetz, den International Standards on
Report on Other Legal and Regulatory Requirements
Auditing (ISA) sowie den Schweizer Prüfungsstandards (PS) durchgeführt. Unsere Verantwortlichkeiten nach
diesen Vorschriften und Standards sind im Abschnitt "Verantwortlichkeiten der Revisionsstelle für die Prüfung der
In accordance with article 728a para. 1 item 3 CO and the Swiss Auditing Standard 890, we confirm that an
Konzernrechnung" unseres Berichts weitergehend beschrieben. Wir sind von dem Konzern unabhängig in Über-
internal control system exists, which has been designed for the preparation of consolidated financial statements
einstimmung mit den schweizerischen gesetzlichen Vorschriften und den Anforderungen des Berufsstands sowie
according to the instructions of the Board of Directors.
dem Code of Ethics for Professional Accountants des International Ethics Standards Board for Accountants
(IESBA Code), und wir haben unsere sonstigen beruflichen Verhaltenspflichten in Übereinstimmung mit diesen
Anforderungen erfüllt.

We recommend that the consolidated financial statements submitted to you be approved.

KPMG AG

Wir sind der Auffassung, dass die von uns erlangten Prüfungsnachweise ausreichend und geeignet sind, um als
Grundlage für unser Prüfungsurteil zu dienen.

Besonders wichtige Prüfungssachverhalte

Hanspeter Stocker
Licensed Audit Expert
Auditor in Charge

Umsatzerfassung

Toni Wattenhofer
Licensed Audit Expert

Gümligen-Berne, 6 February 2019

Aktivierung von technischen Anlagen und Software

Goodwill Fastweb

Rückstellungen und Eventualverbindlichkeiten für regulatorische und wettbewerbsrechtliche Verfahren

Personalvorsorgeverpflichtung comPlan

KPMG AG, Hofgut, PO Box 112, CH-3073 Gümligen-Berne

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

2018

218

251

(71)

(82)

(153)

(112)

121

2,230

2,337

(13)

2,324

2017

231

260

(79)

(92)

(171)

(129)

140

105

205

(8)

197

167

Balance sheet

In CHF million

Assets

Cash and cash equivalents

Derivative financial instruments

Trade receivables

Other current receivables

Accrued dividends receivable from subsidiaries

Accrued income and deferred expense

Total current assets

Financial assets

Derivative financial instruments

Participations

Total non-current assets

Total assets

Liabilities and equity

Current interest-bearing liabilities

Derivative financial instruments

Trade payables

Other current liabilities

Accrued expense and deferred income

Provisions

Total current liabilities

Non-current interest-bearing liabilities

Derivative financial instruments

Other non-current liabilities

Provisions

Total non-current liabilities

Total liabilities

Share capital

Legal capital reserves/capital surplus reserves

Voluntary retained earnings

Total equity

Total liabilities and equity

Note

31.12.2018

31.12.2017

3.1

2.2

3.2

306

132

2,100

2,632

5,026

8,214

13,280

15,912

290

–

110

413

6,045

7,973

14,091

14,504

1,763

2,211

301

2,142

7,215

7,273

9,415

6,424

6,497

15,912

2,344

6,782

6,847

9,191

5,240

5,313

14,504

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168

Notes to the financial
statements

1 General information

1 .1 Name, legal form and registered office
● 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 Telecommu-
nication Enterprises Act (TEA) of 30 April 1997 .

● Company identification number (UID) CHF-102 .753 .938

1 .2 Share capital
As of 31 December 2018, the share capital comprised 51,801,943 registered shares of a par value of CHF 1
per share, unchanged from the previous year .

1 .3 Significant shareholders
As at 31 December 2018, the Swiss Confederation (Confederation), as majority shareholder, continued to hold
51% of the issued shares of Swisscom Ltd as in the prior year . The Telecommunications Enterprises Act (TEA)
provides that the Confederation shall hold the majority of the share capital and voting rights of Swisscom Ltd .

1 .4 Number of full-time employees
The average number of employees of Swisscom Ltd during the financial year, expressed as full-time equiva-
lents, exceeded 250, as in the prior year .

1 .5 Approval and release of Annual Financial Statements
The Board of Directors of Swisscom Ltd approved the present Annual Financial Statements on 6 February 2019 for
release . No material post-balance-sheet events occurred up to this date . The Annual Financial Statements are
subject to approval by the shareholders of Swisscom Ltd in its Annual General Meeting to be held on 2 April 2019 .

2 Summary of significant accounting policies

2 .1 General
Significant financial statement reporting policies which are not prescribed by law are described below . The
possibility 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 .

2 .2 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 its Board of Directors .

A list of participations held directly or indirectly by Swisscom Ltd is included in Note 5 .4 to the Consolidated
Financial Statements .

2 .3 Derivative financial instruments and hedging transactions (hedge accounting)
Derivative financial instruments which are deployed to hedge foreign currencies and interest rates, are mea-
sured at market price . Movements in market values are recorded in the income statement . Derivatives which
meet the conditions for recognition as 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 (collective valuation approach with regard to valuation units) .

169

2 .4 Treasury shares
At the time of acquisition, treasury shares are recorded at purchase cost as a deduction from shareholders’
equity .

3 Disclosures on balance sheet and income statement positions

3 .1 Receivables and financial assets

In CHF million

Trade receivables

Other current receivables

Financial assets

3 .2 Liabilities

Trade payables and other liabilities

In CHF million

Trade payables

Other current liabilities

Other non-current liabilities

31.12.2018

132

5,026

Thereof from
participations

31.12.2017

Thereof from
participations

131

4,911

6,045

5,934

31.12.2018

Thereof to
participations

31.12.2017

Thereof to
participations

301

–

Other current liabilities as at 31 December 2018 include liabilities to pension funds of CHF 1 million (prior year:
none) .

Interest-bearing liabilities

In CHF million

Bank loans

Debenture bonds

Private placements

Interest-bearing liabilities to participations

Other interest-bearing liabilities to third parties

Total interest-bearing liabilities

Thereof current interest-bearing liabilities

Thereof non-current interest-bearing liabilities

31.12.2018

31.12.2017

1,212

5,520

428

1,741

8,978

1,763

7,215

736

6,106

500

1,556

8,993

2,211

6,782

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170

Debenture bonds

In CHF million or EUR million

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 EUR 2018–2026

Debenture bond in CHF 2016–2027

Debenture bond in CHF 2017–2027

Debenture bond in CHF 2016–2028

Debenture bond in CHF 2018–2028

Debenture bond in CHF 2014–2029

Debenture bond in CHF 2016–2032

Debenture bond in CHF 2017–2033

Debenture bond in CHF 2015–2035

Debenture bond in CHF 2018–2035

4 Further information

4 .1 Treasury shares

Balance at 31 December 2016

Purchases on the market

Allocated for share-based compensation

Balance at 31 December 2017

Purchases on the market

Allocated for share-based compensation

Balance at 31 December 2018

Par value
in currency

31.12.2018

Nominal
interest rate

–

500

250

500

200

500

200

350

200

150

160

300

150

–

2.00

1.88

2.63

0.25

1.75

1.50

1.13

0.38

0.75

1.50

0.13

0.75

1.00

Par value
in currency

1,385

500

250

500

200

–

200

350

200

–

160

300

150

–

31.12.2017

Nominal
interest rate

3.25

2.00

1.88

2.63

0.25

1.75

1.50

–

0.38

–

1.50

0.13

0.75

1.00

–

Number

1,514

7,200

(8,090)

624

8,300

(8,581)

343

Average price
in CHF

In CHF million

520

468

(4)

–

(4)

–

4 .2 Collateral given to secure third-party liabilities
As of 31 December 2018, guarantee obligations exist for Group companies in favour of third parties totalling
CHF 253 million (prior year: CHF 290 million) .

4 .3 Assets used to secure own commitments as well as assets subject to retention of title
As of 31 December 2018, financial assets totalling CHF 108 million (prior year: CHF 105 million) were not freely
available . These assets serve to secure commitments arising from bank loans .

171

4 .4 Participation rights 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 2017 and
2018:

Number

Hansueli Loosli

Roland Abt

Valérie Berset Bircher

Alain Carrupt

Frank Esser

Barbara Frei

Anna Mossberg 1

Catherine Mühlemann

Theophil Schlatter 2

Renzo Simoni

Total shares held by the members of the Board of Directors

31.12.2018

31.12.2017

3,113

2,733

379

329

642

919

112

1,559

–

324

7,706

205

213

478

784

–

1,443

1,419

160

7,648

1 Elected to the Board of Directors as of 4 April 2018 .

2 Resigned from the Board of Directors as of 4 April 2018 .

Number

Urs Schaeppi (CEO)

Mario Rossi

Hans C. Werner

Marc Werner

Urs Lehner

Heinz Herren

Dirk Wierzbitzki

Total shares held by the members of the Group Executive Board

31.12.2018

31.12.2017

4,380

1,483

1,259

1,158

290

1,856

604

11,030

3,964

1,236

1,068

750

115

1,586

234

8,953

In 2018, 1,486 shares (CHF 0 .7 million) were issued to the members of the Board of Directors and 1,974 shares
(CHF 0 .9 million) to the members of the Group Executive Board . None of the individuals required to make notifi-
cation holds voting shares exceeding 0 .1% of the share capital .

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172

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 2 April 2019 that
the available retained earnings of CHF 6,424 million for the financial year ending on 31 December 2018, be
appropriated as follows:

In CHF million

Appropriation of retained earnings

Retained earnings from previous year

Ordinary dividend 1

Balance carried forward from prior year

Net income for the year

Retained earnings available to the Annual General Meeting

Ordinary dividend of CHF 22.00 per share on 51,801,600 shares 1

Balance to be carried forward

1 Excluding treasury shares .

31.12.2018

5,240

(1,140)

4,100

2,324

6,424

(1,140)

5,284

In the event that the proposal is approved, a dividend per share will be paid to shareholders on 8 April 2019 as
follows:

Per registered share

Ordinary dividend, gross

Less 35% withholding tax

Net dividend payable

CHF

22.00

(7.70)

14.30

173

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174

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 2018, 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 167 to 172) for the year ended 31 December 2018 comply with
Swiss law and the company’s articles of incorporation.

Basis for Opinions

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

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of
the financial statements of the current period. We have determined that there are no key audit matters to
communicate in our report.

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.

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 suffi-
cient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement re-
sulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, inten-
tional 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 ma-
terial 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 condi-
tions may cause the entity to cease to continue as a going concern.

We also provide the Board of Directors or its relevant committee with a statement that we have complied with rel-
evant 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 mat-
ters 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 inter-
nal 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 com-
pany’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

Toni Wattenhofer
Licensed Audit Expert

Gümligen-Berne, 6 February 2019

KPMG AG, Hofgut, PO Box 112, CH-3073 Gümligen-Berne

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Glossary

Technical terms

4G/LTE (Long-Term Evolution): 4G/LTE 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+ enables theoretical
broadband data speeds of up to 700 Mbps via the
mobile network. To do so, it bundles 4G/LTE frequen-
cies to achieve the required capacity.

5G: 5G is the next generation in mobile network
technology. The frequencies for 5G will be auctioned
off in Switzerland this spring and it is to be expected
that the 5G technology will be commercially availa-
ble in Switzerland before the end of 2019. 5G will
bring with it even more capacity, very short response
times and higher bandwidths, thereby supporting the
digitisation of Swiss business and industry.

ADSL (Asymmetric Digital Subscriber Line): A
broadband data transmission technology that uses
the existing copper telephone cable for broadband
access to the data network.

All IP: All IP means that all services such as television,
the Internet and fixed-line phone run over the same
IT network. Swisscom is switching all existing
communication networks to Internet Protocol (IP).
The IP services within Switzerland will thus operate
on Swisscom’s own network, thereby enhancing
security and availability in comparison with other
voice services on the World Wide Web.

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.

Bitstream Access: Bitstream access refers to a
wholesale product for third-party providers in the
telecoms sector. Through bitstream access, a
telecoms provider makes a data stream to a certain
end customer available to a third-party provider. This
enables the third-party provider to offer its services
to a given customer to whom it is not physically
connected through its own network.

Cloud: Cloud computing makes it possible for IT
infrastructure such as computing capacity, data
storage, ready-to-use software and platforms to be
accessed via the Internet as needed. The data
centres, along with the resources and databases, are
distributed via the cloud. The term “cloud” refers to
such hardware which is not precisely locatable.

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.

Convergence: In the telecommunications sector,
“convergence” normally refers to an interaction of
mobile communication and fixed-network technolo-
gies or to products that encompass both mobile
communication and fixed-network services.

DSL (Digital Subscriber Line): DSL is the generic term
for transmission technologies using subscriber lines
that are made partly or completely of 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. It enables data transmission speeds of up
to 256 kbps. EDGE is currently available to over 99%
of the Swiss population. Swisscom plans to decom-
mission second-generation mobile communications
at the end of 2020 and use the frequencies for new,
more efficient technologies.

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 Build-
ing)/FTTC (Fibre to the Curb): FTTS, FTTB and FTTC in
conjunction with vectoring refer to innovative, hybrid
broadband connection technologies (optical fibre and
copper). With these technologies, optical fibre is
brought as near as possible to buildings and in the
case of FTTB right to the building’s basement; the
existing copper cables are used for the remaining
stretch. The future technological evolution from
VDSL2 to G.fast will significantly increase the
bandwidths for FTTS and FTTB.

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BPO (Business Process Outsourcing): BPO is a special
form of outsourcing and refers to the outsourcing of
entire business processes.

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 a
second-generation mobile technology that increases
the transmission speeds in GSM mobile communica-
tions networks. GPRS enables speeds of 30 to
40 kbps. Swisscom plans to decommission second-
generation mobile communications at the end of
2020 and use the frequencies for new, more efficient
technologies.

GSM (Global System for Mobile communications)
network: GSM is a global digital mobile communica-
tion standard of the second mobile generation. In
addition to voice and data transmission, it enables
services such as SMS messages and phone calls to
other countries and from abroad (international
roaming). Swisscom plans to decommission sec-
ond-generation mobile communications at the end
of 2020 and use the frequencies for new, more
efficient technologies.

Housing: Housing refers to the accommodation of
server infrastructure, including network connections,
in a data centre.

HSPA (High Speed Packet Access): HSPA is a further
development of third-generation mobile technology
of the UMTS mobile communication standard.
Compared to UMTS, HSPA enables large volumes of
data to be transmitted at faster speeds. Currently, the
highest transmission rate of HSPA in use is 21 Mbps.

ICT (Information and Communication Technology):
The terms “information technology” and “communi-
cation technology” were first combined in the 1980s
to denote the convergence of information technology
(information and data processing and the related
hardware) and communication technology (techni-
cally aided communications).

Inbound/Outbound (see Roaming)

IoT (Internet of Things): The connecting of things,
devices and machines to enable recording of status
and environmental data. These data provide the
basis for optimising processes, such as early recogni-
tion of failing machine components. It facilitates the
development of new business models based on these
data and opens up new opportunities for interacting
with customers.

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
an Internet Service Provider or 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.

LTE M: A connection technology for the Internet of
Things that foregoes some features of LTE in order to
reduce complexity and costs while still enabling all
conventional IoT applications. In contrast to NB IoT, it
also enables voice transmission, e.g. in lift tele-
phones. NB IoT is a technology often used for
mission-critical IoT applications.

MVNO (Mobile Virtual Network Operator): MVNO
denotes a business model for mobile communica-
tions. In this case, the corresponding business (the
MVNO) has either a limited network infrastructure or
no network infrastructure at all. It therefore accesses
the infrastructure of other mobile communication
providers.

NB IoT (Narrowband IoT): NB IoT is a connection
technology for the Internet of Things. Its focus is on
maximum coverage and minimum power consump-
tion, and it therefore forgoes some features of LTE
that are not needed for low-end applications, like
meter networking or simple objects. NB IoT is a
technology often used for massive IoT applications.

Net Promoter Score (NPS): The NPS is an indicator
that directly measures the likelihood of customer
referrals and indirectly measures customer satisfac-
tion. It is used as an analysis instrument when
determining customer satisfaction levels.

Network convergence: Network convergence refers
to the dissolution and reconstitution of previously
separate networks to one large convergent network,
such as in the case of the fixed and mobile networks
of Swisscom.

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).

Optical fibre: Optical fibre is a transport medium for
optical data transmission – in contrast to copper
cables, which transmit data through electrical signals.

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OTT (Over the Top): OTT refers to content distributed
by service providers over an existing network infra-
structure that they do not themselves operate. 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 mega-
bytes.

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
between 5 and 10 Mbps.

Roaming: Roaming enables mobile network subscrib-
ers 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 immediately 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 the
vicinity of which the mobile phone is located. The
base station then forwards the signal to the mobile
phone and the call can be taken. Roaming works only
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 separat-
ing 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 types,
ranging from large machines in a network to the
small devices used by residential customers.

Smart data: Primarily refers to the processing and
understanding of large, complex and rapidly
changing data volumes with the aim of creating
added value.

TDM (Time Division Multiplexing): Multiplexing is a
method that allows the simultaneous transmission 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 demultiplexed 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 grow together in the course of
digitisation.

Ultra-fast broadband: Ultra-fast broadband denotes
broadband speeds of more than 50 Mbps – on both
the fixed-line and mobile networks.

UMTS (Universal Mobile Telecommunications
System): UMTS is an international third-generation
mobile communications standard that combines
mobile multimedia and telematic services. UMTS is a
further development of GSM and is supplied as a
complement to GSM and public wireless LAN in
Switzerland. Today the UMTS network covers around
99% of the Swiss population.

Unified Communications: An endeavour to integrate
the wide variety of modern communication technolo-
gies. Under unified communications, different
telecommunication services such as e-mail, unified
messaging, telephony, mobile phone, PDAs, instant
messaging and presence functions are coordinated to
enhance the reachability of dispersed communication
partners, thereby speeding up business processes.

Vectoring: Vectoring is a technology used in conjunc-
tion with VDSL2. It eliminates interference between
copper wire pairs, technically allowing bandwidths to
be increased by up to 100%.

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.

VoIP (Voice over Internet Protocol): VoIP is used to
set up telephone connections via the Internet.

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Streaming: Streaming is the transmission of audio and
video signals over a network or the Internet without
the data having to be stored on a local device.

VoLTE (Voice over LTE): LTE is, in effect, a pure data
network. VoLTE enables phone connections over the
LTE network.

WiFi Calling: WiFi calling makes it possible to make
calls on a mobile phone via WLAN/WiFi, thereby
greatly improving mobile phone calls in buildings.

points on which the parties have been unable to
agree (objection principle).

WLAN (Wireless Local Area Network): A wireless local
area network (WLAN connects several computers
wirelessly and links them to a central information
system, printer or scanner.

Other terms

Bitstream 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. 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 such as
fast Internet access.

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 competi-
tion 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 and also provides
opinions 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, interconnection,
leased lines, etc.), approves national numbering plans
and regulates the conditions governing number
portability and freedom of choice of service provider.

Ex-ante: In an ex-ante approach to regulation, the
particulars of the regulated offerings (commercial,
technical and operating conditions) must be
approved by a government authority (authorisation
obligation). Then, when a regulated service is used,
the parties have to adhere to the conditions
approved by the government authority (e.g. pricing).
The suppliers affected have legal remedies at their
disposal by which the correctness of the govern-
ment-authorised pricing can be reviewed.

Ex-post: In an ex-post approach to regulation, the
parties must agree on all possible aspects of the
contractual content (primacy of negotiation). In the
event of a dispute, the authorities decide only on the

Federal Office of Communications (OFCOM): OFCOM
deals with issues related to telecommunications and
broadcasting (radio and television) and performs
official and regulatory tasks in these areas. It
prepares the decisions of the Swiss Federal Council,
the Federal Department of the 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 telecommunications
service providers with access to subscriber lines for
the purpose of using the entire frequency spectrum
of metallic pair cables.

Hubbing: Hubbing denotes the trading of telephone
traffic with other telecommunication operators.

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-domi-
nant telecommunications service providers are
required to allow their competitors interconnection
at cost-based prices (see also LRIC).

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: Unbundling of the last mile (Unbundling
of the Local Loop, ULL) enables fixed-line-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 forms of unbundling: unbundling at
the level of the telephone exchange (unbundling of
the local loop ULL or LLU, known as TAL in Switzer-
land) with currently around 600 unbundled locations;
and unbundling at distribution box level (sub-loop
unbundling, known as T-TAL in Switzerland), for
which no competitor has yet shown any interest.

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Forward-looking statements

This Annual Report contains forward-looking statements. In this Annual Report, such forward-looking
statements include, without limitation, statements relating to our financial condition, results of operations
and business and certain of our strategic plans and objectives.

Because these forward-looking statements are subject to risks and uncertainties, actual future results may
differ materially from those expressed in or implied by the statements. Many of these risks and uncertainties
relate to factors which are beyond Swisscom’s ability to control or estimate precisely, such as future market
conditions, currency fluctuations, the behaviour of other market participants, the actions of governmental
regulators and other risk factors detailed in Swisscom’s and Fastweb’s past and future filings and reports,
including those filed with the U.S. Securities and Exchange Commission and in past and future filings, press
releases, reports and other information posted on Swisscom Group Companies’ websites.

Readers are cautioned not to put undue reliance on forward-looking statements, which speak only of the date
of this communication.

Swisscom disclaims any intention or obligation to update and revise any forward-looking statements,
whether as a result of new information, future events or otherwise.

180

Publishing details

Key dates

● 7 February 2019

Publication of 2018 Annual Results and
Annual Report

● 2 April 2019

Annual General Meeting in Basel

The Annual Report is published in English,
French and German.

Online versions of the Annual Report
German: www.swisscom.ch/bericht2018
English: www.swisscom.ch/report2018
French: www.swisscom.ch/rapport2018

● 4 April 2019

Ex dividend date

● 8 April 2019

Dividend payment

● 2 May 2019

2019 First-Quarter Results

● 15 August 2019

2019 Second-Quarter Results

● 31 October 2019

2019 Third-Quarter Results

● February 2020

Publication of 2019 Annual Results and
Annual Report

Published and produced by

Swisscom Ltd, Berne

Translation
Lionbridge Switzerland AG, Basel

A Swisscom company brochure is also available
in English, French, German and Italian at
www.swisscom.ch/ataglance2018.

The Sustainability Report 2018 is published online at
www.swisscom.ch/cr-report2018.

General information
Swisscom Ltd
Head office
CH-3050 Berne
Phone: + 41 58 221 99 11

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

Production
MDD Management Digital Data AG, Lenzburg

For the latest information,
visit our website
www.swisscom.ch

Printing
Stämpfli AG, Berne

Photographers
Gerry Amstutz, Zurich
Michel Jaussi, Linn
Franz Rindlisbacher, Zurich

P E R F O R M A N C E

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