Swisscom AG
Annual Report 2021

Plain-text annual report

w o r r o m o t r o f y d a e r 1 2 0 2 t r o p e R l a u n n A Annual Report publications w o r r o m o t r o f y d a e r 1 2 0 2 t r o p e R l a u n n A w o r r o m o t r o f y d a e r l e c n a g a t a 1 2 0 2 e2ecac1c6a354f03abf5f01ce37b2399.indd 1 08.02.2022 08:53:48 3a0f22ec57fb46959c7dca336ce71541.indd 1 07.02.2022 17:23:17 The Annual Report, Sustainability Report and ‘2021 at a glance’ together make up Swisscom’s reporting on 2021. The three publications are available online at: swisscom.ch/report2021 ‘Ready for tomorrow’ concept As part of its ‘ready for tomorrow’ concept, Swisscom is committed to preparing itself and its customers for the digital future and harnessing the corresponding opportunities. The images in the Annual Report show Swisscom services that simplify the everyday life of SMEs and improve their competitiveness. The cover pages of the Annual Report and ‘2021 at a glance’ show Swisscom SME consultant Kathrin Kölbl with Fabian Mauerhofer, manager of the Ziegelhüsi hotel and restaurant in Deisswil. The company procures services from Swisscom. The remaining images are mostly from the various Swisscom campaigns run throughout the 2021 reporting year. Sustainability Report 2021 ready for tomorrow71092c7abd1147d2b9a8400b3527cb29.indd 102.02.2022 12:07:34 Table of contents Introduction Management Commentary 1 – 11 12 – 63 Corporate Governance and Remuneration Report 64 – 105 Consolidated Financial Statements Further Information 106 – 175 176 – 184 1 2021 in review Net revenue billion CHF EBITDA billion CHF Capital expenditure billion CHF 11.2  0.7% 4.5  2.2% 2.3  2.6% Net income billion CHF Net debt to EBITDA after leases ratio Equity ratio % 1.8  20.0% 1.4  0.1 43.6  4.5 PP Employees (full-time equivalent) Dividend per share CHF 18,905  0.8% 22  Total shareholder return Swisscom share % 12.9  15.9 PP Ambitious for the climate Swisscom has set itself the target of net zero emissions by 2025 Very good Swisscom wins connect service shop test with best ever rating. Top rating ‘My Swisscom’ rated best customer app – in Switzerland and compared with neighbouring German- speaking countries. World champion Out of 4,400 entries, Swisscom wins Global IoT Award from Microsoft. On course Fastweb 2021 once again achieved more sales, more customers and more profit in Italy. Fastest Swisscom has fastest 10 Gbit/s fibre optic connection. Best Swisscom again winner of all mobile tests in Switzerland. In the connect test, it even received an ‘outstanding’ rating and the highest score ever awarded in Switzerland. KPIs In CHF million, except where indicated  Net revenue and results 1 Net revenue  Operating income before depreciation and amortisation (EBITDA)  EBITDA as % of net revenue  EBITDA after lease expense (EBITDA AL)  Operating income (EBIT)  Net income  Earnings per share  Balance sheet and cash flows 1 Equity  Equity ratio  Operating free cash flow proxy  Capital expenditure  Net debt  Operational data  Fixed telephony access lines in Switzerland  Broadband access lines retail in Switzerland  TV access lines in Switzerland  Mobile access lines in Switzerland  Revenue generating units (RGU) 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  Closing price at end of period  Closing price highest  Closing price lowest  Dividend per share  Employees  Full-time equivalent employees  Average number of full-time equivalent employees  2021 2020 Change 11,183 11,100 4,478 40.0 4,177 2,066 1,833 35.37 10,813 43.6 1,891 2,286 5,689 1,424 2,037 1,592 6,177 4,382 39.5 4,082 1,947 1,528 29.54 9,491 39.1 1,853 2,229 6,218 1,523 2,043 1,588 6,224 11,230 11,378 596 2,750 2,472 51,802 26,657 514.60 562.40 456.30 22.00 2 18,905 19,099 555 2,747 1,961 51,802 24,715 477.10 577.80 446.70 22.00 19,062 19,095 % CHF % in thousand in thousand in thousand in thousand in thousand in thousand in thousand in thousand in thousand CHF CHF CHF CHF number number 0.7% 2.2% 2.3% 6.1% 20.0% 19.7% 13.9% 2.1% 2.6% –8.5% –6.5% –0.3% 0.3% –0.8% –1.3% 7.4% 0.1% 26.1% – 7.9% 7.9% – –0.8% 0.0% 1  Swisscom uses various alternative performance measures. The definition and reconciliation of values in accordance with IFRS are set out in the chapter on financial review. 2  In accordance with the proposal of the Board of Directors to the Annual General Meeting. s I P K | n o i t c u d o r t n I 4                     Business overview Other Operating Segments With subsidiaries in the area of network construction and main- tenance (cablex Ltd) and broad- cast services (Swisscom Broadcast Ltd), Swisscom is supplementing the core business in related areas. The Digital Business division is fo- cused on growth areas in the field of Internet services and digital business models, and also includes business with online directories and telephone books (localsearch). Swisscom Switzerland Fastweb Fastweb provides broadband and mobile phone services to resi- dential, business and wholesale customers in Italy. The offering includes telephony, broadband and mobile services. Fastweb also offers comprehensive ICT solutions for business customers. Residential Customers The Residential Customers division provides mobile and fixed-line services in Switzerland, such as fixed-line telephony, broadband, TV and mobile communications. Business Customers Business Customers offers tele- com services and overall commu- nications solutions for large cor- porations and SME customers in Switzerland. The offering in the area of business ICT infrastructure covers the entire range from individual products to complete solutions. Wholesale The Wholesale segment enables other telecommunications pro- viders to use the Swisscom fixed and mobile network. Infrastructure & Support Functions The Infrastructure & Support Func- tions area plans, operates and maintains the network and IT infra structure in Switzerland. Revenues Revenues Revenues CHF 8.2 bn EUR 2.4 bn CHF 1.0 bn EBITDA EBITDA EBITDA CHF 3.5 bn EUR 0.8 bn CHF 0.2 bn 5 Shareholders’ letter Healthy financial results – ready for tomorrow From left: Michael Rechsteiner, Chairman of the Board of Directors Swisscom Ltd and Urs Schaeppi, CEO Swisscom Ltd. Dear Shareholders The future needs digitisation. Our ambition is to make the digital future possible for our customers in Switzerland and Italy. Some 19,000 Swisscom and Fastweb employees have been committed to this objective for years. By investing around CHF 2.3 billion annually in network expansion, we are creating the conditions for successful digitisation. We develop advanced products and services for and with our customers – ensuring that our customers are also ready for what tomorrow may bring. We also seize the possibilities of digitisation to make climate-friendly changes: for example, we are seeking to become climate-neutral along the entire value chain in Switzerland by 2025. As a market and technology leader, we are spurred on by curiosity to anticipate future developments at an early stage: for example, we work closely with universities, invest in innovative start-ups and host an annual StartUp Challenge, with the theme for 2021 being cyber security. Solid finances – the foundation for lasting success Our markets remain saturated, and promotional and price pressure is high. Swisscom successfully held its own in this environment in 2021: with net revenue of CHF 11,183 million (+0.7%) and operating income before depreciation and amortisation (EBITDA) of CHF 4,478 million (+2.2%), the results were above the previous year. We achieved these good results thanks to networks that once again received top ratings in the year under review, our multi-award-winning customer service, and innovative products and services. In addition to these outward-facing aspects, we are consistently improving our own internal efficiency by expanding process automation, strengthening our online channels and simplifying our IT and networks. These measures enabled us to reduce our cost base by around CHF 120 million in 2021, further boosting our competitiveness. r e t t e l ’ s r e d l o h e r a h S | n o i t c u d o r t n I 6 Fastweb records more customers, revenue and EBITDA Fastweb made an important contribution to Swisscom’s success again in 2021. With a market share of around 16% among residential customers, 34% among businesses and 46% in the public sector, Fastweb is the clear number two in Europe’s fourth-largest broadband market. It grew its customer base in all segments, with rises of 0.1% for broadband customers and 26.1% in mobile communications. As a result, Fastweb boosted its revenue by 3.8% to EUR 2,392 million and its operating income before depreciation and amortisation (EBITDA) by 5.4% to EUR 826 million. This was a tremendous result! Much invested, much gained At the end of 2021, Swisscom reached the expansion target that it promised six years ago: it is delivering speeds of at least 80 Mbps to 90% of all homes and offices in every Swiss municipality. To achieve this, Swisscom invested around CHF 1.6 billion per year in the expansion and maintenance of its IT and network infrastructure in Switzerland. This forward-thinking approach to infrastructure expansion is continued in its Network Strategy 2025: Swisscom intends to double its fibre-to-the-home (FTTH) coverage and provide 50–60% of homes and offices with bandwidths of 10 Gbps by 2025. Swisscom again came top in all Switzerland’s mobile network tests in 2021, and achieved the best rating ever awarded in Switzerland in the annual test conducted by the trade magazine ‘connect’. Today, the entire Swiss population has 4G coverage. A basic version of 5G (5G technology on 4G antennas) already covers 99% of the population. The full benefits of 5G (5G technology on 5G antennas) are so far only available in 888 locations. In order to create new capacity for modern 5G technology, Swisscom decom- missioned the obsolete 2G/GSM mobile generation during 2021. Best network – but more difficult expansion Switzerland’s mobile and fibre-optic network is one of the best in the world. However, we note with concern the increasing regulation, which threatens to slow down the urgently needed network expansion. On top of the already ten times stricter installation limit values in Switzerland, we face an extremely strict assessment of adaptive 5G antennas and high administrative hurdles for minor operational or technological adjustments. If data traffic increases by around 20% annually but capacity is only expanded by 5%, the Swiss mobile communications network is heading for an unnecessary crunch. In its ruling of 30 September 2021, the Federal Administrative Court confirmed COMCO’s precautionary measures, meaning that Swisscom may not continue to expand its network infrastructure in accordance with the standard international point-to-multipoint (P2MP) FTTH standard. Swisscom is in talks with the COMCO to reach a solution in the interest of our customers as quickly as possible. By engaging in close dialogue with the authorities and politicians, Swisscom is striving to ensure that the expansion of our fibre-optic and mobile communications infrastructure is neither made more expensive nor delayed, because it is only with the highest-performing infrastructure that Switzerland will be able to seize the opportunities that the digital future will bring. Target of net zero by 2025 – one small step for the climate, but one ambitious leap for Swisscom After being named the world’s most sustainable telecommunications company in 2020, Swisscom is embarking on the next step: to reduce its CO2 emissions in Switzerland along the entire value chain to net zero by 2025. In order to be completely climate-neutral four years from now, Swisscom aims to reduce CO2 emissions from its operations and supply chains to a total of 235,000 tonnes, which is in line with a reduc- tion path to well below 1.5°C. Measures to achieve this include switching to electric models for its 2,400-strong vehicle fleet: Swisscom brought the first 80 electric vehicles into service in 2021 and intends to electrify the entire fleet by 2030. We are also promoting innovations that drive climate-friendly changes via the Swisscom IoT Climate Award and direct investments in start-ups. Examples include our investment in ecoRobotix, whose weeding robots cut CO2 emissions and herbicide use by 90% through solar cells and 5G. 7 Ready for our residential customers The residential customers market in Switzerland is saturated and strongly promotion-driven. Despite that, Swisscom continuously developed its attractive inOne bundled offering during the year under review. Home networking for controlling lighting, music or alarm systems also grew strongly. Ready for the new TV experience: Swisscom launched ‘blue Play’, an extensive new media library offering series, feature films and children’s programming, in 2021. It also introduced a technical innovation for sports fans: when using the Replay mode, the key moments – such as goalmouth action or yellow and red cards – are visually indicated so that viewers can always move to the most exciting passages of play. Swisscom is also committed to the Swiss music scene, which it will be bringing live to blue TV users from 2022, 365 days a year. Just as important as good-quality products is quality of service – be that online or in store. The trade magazine ‘connect’ awarded the My Swisscom app the highest score of any service app from a tele- communications company in Europe. The quality of personal service in our shops also secured the best score ever achieved in Switzerland: in a nutshell, ‘we are ready’! We are supporting Switzerland on its journey into a digital future with appropriate media training for individuals, teachers, school pupils and parents. A total of 72,000 people took part in these training sessions in 2021. Swisscom also campaigned against hate speech and online bullying with the #mutethehate campaign. ‘ Swisscom was a pioneer when it became the world’s first environ­ mentally certified telecom­ munications company 20 years ago. Now it wants to lead the way again with its target of net zero emissions by 2025. ’ IT: the lifeline for companies IT infrastructure is increasingly an indispensable lifeline for companies. Unsurprisingly, the market for IT services recovered last year. Especially those SMEs that only really recognised the importance of digiti- sation during the pandemic have some catching up to do. That is why Swisscom launched a digital POS system in 2021 that allows SME managers to manage all major processes, from ordering and inventory management to invoicing, from their tablets without any specific IT knowledge. To enable SMEs to provide their services securely, Swisscom offers IT security assessments, cloud solutions that apply the highest security standards and e-learning for employees. r e t t e l ’ s r e d l o h e r a h S | n o i t c u d o r t n I 8 In 2021, Swisscom’s partnership with Rhomberg Sersa, an SME in the field of track construction, provided a powerful illustration of what digitisation can achieve: the combination of the Internet of Things, cloud solutions and 5G have not just improved Rhomberg Sersa’s competitiveness and the safety of its employees on sites, but have also helped cut its CO2 emissions. Little surprise, then, that this ground-breaking project was selected from 4,400 applications as the winner of Microsoft’s Global IoT Award. ‘ Swisscom once again offered the best mobile network in 2021 and also the best service in its shops throughout Switzerland. These independent test results are a joy to behold! ’ Shareholder return and outlook Swisscom’s share price rose 7.9% to CHF 514.60 in 2021. Swisscom expects net revenue of CHF 11.1 to 11.2 billion, EBITDA of around CHF 4.4 billion and capital expenditure of around CHF 2.3 billion (around CHF 1.7 billion of which will be in Switzerland) for 2022. Subject to achieving its targets, Swisscom will propose an unchanged dividend of CHF 22 per share for the 2022 financial year at the 2023 Annual General Meeting. Many thanks ‘Being ready for tomorrow’ is both an opportunity and a challenge for all of us. Our employees prove every day that they are ready for tomorrow and want to support our customers as they move into this digital future. We are very thankful to them for this. We would also like to thank you, our valued shareholders, for your trust and confidence. We hope that you, too, are ready and eager to join us on our journey to a successful tomorrow. Kind regards Michael Rechsteiner Chairman of the Board of Directors Swisscom Ltd Urs Schaeppi CEO Swisscom Ltd 9 ‘Ready for everyday digital business’ More time for your customers thanks to our modern POS system on your touchscreen. ‘Ready for everyday digital business’ ‘Ready for optimal data security’ Enhanced IT security for your company and your customers thanks to our security checks, cloud solutions and e-learning. y r a t n e m m o C t n e m e g a n a M Strategy and environment _______ Targets and achievement of targets in 2021 . . . . . . . . . . . . 14 General conditions and market environment . . . . . . . . . . 14 Swisscom Group Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Strategy for Switzerland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Strategy in Italy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Sustainability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Infrastructure ________________ Infrastructure in Switzerland . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Infrastructure in Italy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Employees ___________________ Employees in Switzerland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Employees in Italy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Brands, products and services ____ Swisscom brands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Products and services in Switzerland . . . . . . . . . . . . . . . . . . 37 Products and services in Italy . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Customer satisfaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Innovation and development _____ Innovation as a key driver of business performance . . . . 40 Innovation focused on specific topics . . . . . . . . . . . . . . . . . . 41 Financial review _______________ Alternative performance measures . . . . . . . . . . . . . . . . . . . . . 44 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Segment results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Depreciation and amortisation, non-operating results 51 Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Cash flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Capital expenditure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Net asset position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Financial outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Value-oriented business management . . . . . . . . . . . . . . . . . 58 Statement of added value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Capital market ________________ Swisscom share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 Dividend policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Credit ratings and financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Risks ________________________ Risk situation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 Risk factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 13 t n e m n o r i v n e d n a y g e t a r t S | y r a t n e m m o C t n e m e g a n a M 14 Strategy and environment Swisscom is Switzerland’s largest telecoms provider . Through its subsidiary Fastweb, it also has an alternative telecoms service provider in the Italian market . In order to ensure its long-term success in a dynamic environment, Swisscom has defined five Group goals . In Switzerland, Swisscom aims to consolidate its market leadership even further . Swisscom forms Switzerland’s digital backbone and sets itself apart by offering the best customer experience . In Italy, the subsidiary Fastweb is focusing on the further expansion of the ultra-broadband network and on convergence offerings . Other key Group goals are an extremely high level of financial stability, innovative offerings, resilient networks and sustainability . Targets and achievement of targets in 2021 Financial targets  Net revenue  Operating income before depreciation  and amortisation (EBITDA)  Capital expenditure  Operational Excellence  Targets 2021 Target achievement 2021 Net revenue for the year 2021 of around CHF 11 .1 billion EBITDA for the year 2021 of around CHF 4 .3 billion Capital expenditure for the year 2021 of around CHF 2 .3 billion Reduction of cost base 2021 in Swiss business by CHF 100 million CHF 11,183 million CHF 4,478 million CHF 2,286 million CHF 119 million Swisscom has set itself various targets that take eco- nomic, ecological and social factors into consideration. This annual report contains the targets and achieve- ment of targets for 2021 from a financial perspective. Those for sustainability are described in the separate sustainability report. N See www.swisscom.ch/cr-report2021 General conditions and market environment Swisscom operates in a very dynamic environment. Meg- atrends such as demographic change, a sharper focus on health-related topics and the growing importance of sus- tainability are indelibly shaping and altering Swiss soci- ety and the economy and have a long-term impact on the activities of Swisscom as a result. By the same token, the expansion of ultra-fast broadband, the increasing pene- tration of cloud computing and the advancements made in the field of artificial intelligence are short- to medi- um-term trends that impact Swisscom’s business. Digiti- sation is being accelerated even further by the global Covid-19 pandemic as it penetrates more and more into all spheres of life. Customer behaviour has also under- gone a lasting change, as indicated by, among other things, the increased use of online channels for shopping and making contact as well as the rise of contactless pay- ment. The pandemic has caused the importance of high-performance networks to grow and expectations regarding the stability and availability of the network infrastructure will continue to rise as a result. Digitisation is leading to new, rapidly developing business models. Swisscom’s core business is characterised by fierce competition with strong price pressure. The overall market for connectivity services continues to shrink in Switzerland and Italy. Global Internet companies are using their econo- mies of scale and forcing themselves into local ICT markets for both residential and business customers.           Market environment The three macroeconomic factors of the economy (in Switzerland and in Italy), interest rates and exchange rates (EUR and USD) can have a significant 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 Economy Economic developments in 2021 were once again dom- inated by the measures taken to contain the Covid-19 pandemic. After slumping sharply in the early stages of the pandemic in 2020, the economy recovered in the year under review, with GDP in Switzerland up 3.5% in 2021 compared with the previous year. Swisscom’s cus- tomer segments are affected differently by the eco- nomic trend. A high share of the revenues generated in the Residential Customers segment can be attributed to products with fixed monthly charges, meaning the impact of economic fluctuations on revenue remains low in the short term. However, an economic downturn may reinforce the trend towards switching to cheaper price plans. Project business with business customers is more sensitive to cyclical factors. Pandemic-related travel restrictions led to lower revenues and lower costs in the roaming business. Furthermore, the pan- demic resulted in a negative business trend in the cin- ema business. 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 constitute a key assumption for the impairment assessment of goodwill and other items in the financial statements. The yields on ten-year government bonds remain at a very low level. Swisscom issued one bond totalling CHF 100 mil- lion in 2021. The average interest expense on these financial liabilities (excl. lease liabilities) was 0.9% at the end of 2021. 88% of these financial liabilities were charged a fixed interest rate. The average maturity is 6.2  years. This financing structure offers considerable protection against a potential rise in interest rates. Unit in % in % in % in CHF in CHF 2017 2018 2019 1 .0 1 .5 (0 .07) 1 .17 0 .98 2 .8 0 .1 (0 .24) 1 .13 0 .99 0 .9 0 .2 (0 .46) 1 .09 0 .97 2020 (2 .5) (9 .6) (0 .53) 1 .08 0 .88 2021 3 .5 1 6 .3 2 (0 .13) 1 .03 0 .91 2 Forecast Istat Currencies Exchange rate fluctuations have very little impact on Swisscom’s income or financial position. Transaction risks for operational cash flows exist primarily in the pur- chase of end devices and technical equipment and ser- vices from network operators outside of Switzerland (e.g. for roaming). In the core business in Switzerland, the amount of money paid out in foreign currencies is higher than the income in the corresponding currencies. The largest currency exposure is in USD. The net cash flows in foreign currency are partly hedged by foreign currency forward contracts, and hedge accounting is applied in the consolidated financial statements. Swisscom funds itself for the most part in Swiss francs and to a lesser extent in EUR. The net assets of foreign subsidiaries, especially of Fastweb in Italy, are also sub- ject to a currency translation risk in the consolidated financial statements. The carrying amount of Fastweb’s net assets totalled EUR 3.4 billion at the end of 2021. The balance sheet items of the foreign subsidiaries were translated into Swiss francs at the exchange rate on the balance sheet date, and differences arising in translation were recognised directly in equity. A portion of the financial liabilities in EUR is classified as a currency hedge of the Fastweb net assets. 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, in particular, the Telecommunications Enterprise Act (TEA). In its capacity as a listed company, Swisscom also observes capital market law and the requirements of the Ordinance against Excessive Com- pensation in Listed Stock Companies (OaEC). The legal framework for Swisscom’s business activities is primar- ily derived from the Federal Telecommunications Act (TCA) and the Federal Cartel Act (CartA). 15   t n e m n o r i v n e d n a y g e t a r t S | y r a t n e m m o C t n e m e g a n a M 16 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 hold- ing, this would require a change in the corresponding law, which would be subject to a facultative referen- dum. Every four years, the Federal Council defines the goals which the Confederation as principal shareholder aims to achieve. The current target period covers the years 2018 to 2021. These goals include strategic, finan- cial and personnel policy objectives as well as targets relating to partnerships and investments. The Federal Council also expects Swisscom to pursue a corporate strategy that is, to the extent economically possible, both sustainable and committed to ethical principles. In November 2021, the Federal Council approved the goals for the period from 2022 to 2025. N See www.swisscom.ch/ziele_2018-2021 N See www.swisscom.ch/ziele_2022-2025 Telecommunications Act (TCA) The Telecommunications Act and the associated legisla- tion primarily govern network access, basic service pro- vision and the use of radio frequencies. The new provi- sions on network neutrality and roaming resulting from amendments to the law and ordinances entered into effect in 2021. The regulatory provisions regarding mobile network hardening are still being drafted. These provisions are designed to ensure that the population and the economy can continue to use important tele- communications services (emergency calls, data ser- vices, telephony, radio and TV programmes) in the event of a power shortage. N See www.admin.ch Network access The legislator has confirmed that it intends to continue to limit network access regulation to copper-based con- nections (no technology-neutral network access). This means that Swisscom is required to allow other provid- ers physical network access only to copper lines at cost- based prices. Access to fibre-optic lines continues to be on the basis of commercial agreements. Basic service provision The Federal Communications Commission (ComCom) has awarded the universal service licence for the period 2018 to 2022 to Swisscom. The aim of the basic service is to pro- vide reliable, affordable basic telecommunications to all sections of the population in all regions of the country. The Federal Council periodically determines the scope of ser- vices as well as the related quality and pricing require- ments. Swisscom fulfils its mandate and generally offers fixed network telephony (IP) as well as broadband Internet with a transmission rate of at least 10 Mbps (downloads) and 1 Mbps (uploads). In December 2021, the Federal Council opened a consultation on the revision of the Ordi- nance on Telecommunications Services (OTS), proposing to include an additional Internet service with a download speed of at least 80 Mbps in the universal service licence from 2024 onward. The amendment to the ordinance pro- vides for the subsidiarity principle. If the market already provides an alternative using mobile communications or satellite technology, for example, no basic service is required. Non-ionising radiation The Ordinance on Non-Ionising Radiation (ONIR) regu- lates immissions and thus the transmission power of mobile antennas. The Swiss limit values (installation limit value) are ten times stricter than the limit values recommended by the WHO or those in force in neigh- bouring countries. Additional antennas are required to cope with increasing volumes of data transmitted over the network and to guarantee the reliability of mobile connections. These meet with resistance from the popu- lation. In April 2020, the Federal Council refused to adjust the limits, which would have increased the capac- ity of existing antenna systems. Federal Cartel Act (CartA) Competition law (Federal Cartel Act) is highly relevant to various products and services from Swisscom, pri- marily due to Swisscom’s prominent market position. It allows for direct sanctions to be imposed for unlawful conduct by market-dominant companies. Companies upon which other companies are dependent (relative market power) will be subject to the Federal Cartel Act from 2022 onward. The Swiss competition authority (Competition Commission, COMCO) has classified Swisscom as being market-dominant in a wide range of submarkets. There are currently several proceedings open within the context of which COMCO has classi- fied Swisscom as being market-dominant and its con- duct as being unlawful, and has thus imposed or may impose direct financial sanctions. The proceedings relate to the rolling out of the fibre-optic network, the broadcast of live sporting events on pay TV, broadband connections of post office locations and the broadband connections of business customers. The statuses of the proceedings and the potential financial effects are set out in the notes to the consolidated financial state- ments (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 a considera-   tion. An exception to this rule is made for private use and for copying for private use. The compensation paya- ble to the copyright holder for certain types of use pro- tected by copyright law (collective management of rights) is determined by reference to collectively negoti- ated copyright tariffs. These apply to distribution of tel- evision programmes and to the use of time-delayed tel- evision viewing (Replay TV). The Federal Radio and Television Act (FRTA) Switzerland’s Radio and Television Act governs the pro- duction, presentation, transmission and reception of radio and television programmes. It is primarily on account of blue TV that Swisscom is affected by the rules on the transmission and broadcasting of media offer- ings. The various privileges (known as the ‘must carry’ provisions) applicable to certain broadcasters are rele- vant to Swisscom. Federal Act on Data Protection (FADP) The Swiss Federal Act on Data Protection regulates the treatment of personal data. After several years of preparatory work, Parliament adopted the revised version of the Federal Act on Data Protection in 2020. It is not yet known when the revised act will come into force. Swisscom expects this to happen in the second half of 2022. The European Union’s General Data Protection Regulation (GDPR) The General Data Protection Regulation has regulated the processing of personal data since May 2018. The GDPR is relevant to Swisscom both as regards its service offering to residential customers in the EU as well as within the Euro- pean Economic Area (EEA) and its provision 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 by Swisscom within the specified time period. Legal and regulatory environment in Italy The legal framework for Fastweb’s business activities is determined primarily by Italy’s telecommunications leg- islation and the EU. Following a market analysis, in August 2019 the national regulatory authority, AGCOM, issued a decision on Telecom Italia’s wholesale access services (TIM) for the years 2018 to 2021. Among other things, it approved a price reduction for virtual unbun- dled access (VULA) based on FTTS (Fibre to the Street) for the period from 2019 to 2021. In July 2021, Commission Delegated Regulation (EU) 2021/654 entered into force, setting limits on fixed and mobile termination rates for voice services at EU level. Data protection Swisscom attaches great importance to the legally com- pliant and responsible processing of personal data. Data protection within Swisscom is controlled and monitored by a central data governance unit, which works closely with all the relevant divisions and other staff units. Swisscom pushed ahead with the implementation of the new Federal Act on Data Protection (FADP) in the year under review. It has analysed the new legal require- ments and examined their impact on its own activities. It will now implement the corresponding measures in a cross-departmental programme involving all relevant functions. In addition, Swisscom issued new directives and information sheets in 2021 for specific types of data processing. One important aspect of data protection at Swisscom is the expansion of technical systems that support data governance. Swisscom also has clearly defined processes and responsibilities that apply in the event of data protection breaches. In the year under review, Swisscom worked hard to pro- mote the development of Privacy Icons. These graphical representations show data subjects quickly and easily which of his or her data is being processed and how. They are made available to the public through the Pri- vacy Icons association and can be used by data proces- sors at no charge. Swisscom is a member of the associa- tion and is represented on the board. At Swisscom, a data ethics framework for the entire company forms the basis for ethically correct data pro- cessing. The framework is used by the Data Ethics Board, which is made up of members from various divisions of Swisscom, to assess sensitive cases and ensure that they comply with the principles of corporate ethics. The Data Ethics Board reviewed several use cases in 2021 to check for compliance with data ethics principles. The approach set out in the framework for data ethics has proven suc- cessful and will be continued. N See www.swisscom.ch/dataprotection Swiss market trends in telecoms and IT services The Swiss telecommunications market is characterised by a wide range of voice and data products and services as well as the continuing advance of digitisation and con- nectivity. In addition to the established regional and national telecommunications companies, internationally active companies are entering the Swiss telecommunica- tions market, offering both free and paid-for Inter- net-based services around the world, including telephony, SMS messaging and streaming services. Overall, this is generating constant growth in demand for high band- widths that enable fast, quality access to data and appli- 17 t n e m n o r i v n e d n a y g e t a r t S | y r a t n e m m o C t n e m e g a n a M 18 cations. The uninterrupted availability of data and ser- vices as well as the security involved in ensuring this availability are becoming increasingly important, with modern, highly effective network infrastructures provid- ing the foundations. Swisscom is therefore employing the latest technologies to continuously expand both its fixed and mobile networks. The 2020 acquisition of Sunrise by Liberty Global (parent company of UPC Switzerland) and the subsequent merger of UPC Switzerland and Sunrise have consolidated the market even further in the year under review. Competitive pressure in the market remains high as a result. The Swiss telecoms market is broken down into the sub- markets of relevance to Swisscom – mobile communica- tions and fixed network – and generates total revenue estimated at CHF  11 billion. Price pressure will remain high in all markets, and Swisscom therefore expects rev- enue to decline slightly in the telecommunications mar- ket in the medium term. Saturation in all markets is intensifying the existing cut-throat competition. The individual submarkets are characterised by a high level of promotional activity on the part of the individual market participants and corresponding price pressure. At the heart of the portfolio of offerings are convergence offerings which can contain one or more mobile lines, in addition to a fixed broadband connection with Internet, TV and fixed-line telephony. Swisscom – as well as some competitors – offers products and services from the core business using secondary and third-party brands. Market share Swisscom  Swiss telecommunication market  57%  56%  51%  50%  37%  37%  2020  2021  2020  2021  2020  2021  Mobile  Broadband retail  TV        Mobile communications market Switzerland has three separate, wide-area mobile net- works 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 communications network available to selected third-party providers so that they can offer pro- prietary products and services to their customers via the Swisscom network. The Swiss mobile communications market is saturated due to the high level of market pen- etration and the number of mobile lines (SIM cards) has stagnated at around 11 million. Mobile access line pene- tration in Switzerland remains at around 125%. As in the previous year, the number of postpaid subscriptions taken out increased, while the number of prepaid cus- tomers fell. The proportion of mobile users with post- paid subscriptions stands at approximately 81% (prior year: 77%). Swisscom decommissioned the obsolete sec- ond-generation mobile network (2G/GSM) in the first half of 2021. Swisscom is using the freed-up capacity for the newer 4G and 5G generations. Swisscom’s postpaid market share is 56%. This represents a decrease of one percentage point compared to the previous year, which is due to the continuing competitive pressure. Fixed-line market Close to 100% of Switzerland is covered by fixed broad- band networks. Alongside the fixed-line networks of tel- ecoms companies, there are also networks provided by cable network operators. Moreover, market players such as utilities operating in particular cities and municipali- ties are building and operating fibre-optic networks on their own initiative at a regional level. For the most part, their network infrastructures are available to other mar- ket participants for product offerings and the provision of services. Swisscom is building state-of-the-art fibre-optic networks, partly in cooperation with other companies, based on the principle of open networks. In 2021, Swisscom entered into a partnership for fibre-op- tic expansion with its competitor Salt. Within the frame- work of the partnership, Salt is investing in long-term usage rights for Swisscom’s fibre-optic connections. This will enable Salt to offer its own products and services on a large scale in the future, thereby increasing the diver- sity of its offerings on the market even further. Fixed broadband connections lay the basis for a wide-ranging product offering from both national and global compet- itors. There is currently a great deal of uncertainty shrouding the continued rolling out of the fibre-optic network to homes and businesses (FTTH), which Swisscom is implementing for the whole of Switzerland. In 2021, the Federal Administrative Court confirmed the precautionary measures taken by the Competition Com- mission in December 2020, which partly call into ques-   tion Swisscom’s network architecture and may there- fore also have an impact on its partnership with Salt. Until the situation is clarified, Swisscom is only building network elements relating to the P2P (point-to-point) network element (e.g. feeder to the home) or that are being built under cooperations. 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. The broadband market grew by around 2% in the 2021 reporting year. There were 4 million retail broadband access lines in Switzerland at the end of 2021. Swisscom’s market share declined by one percentage point year-on-year to 50% as a result of persistently high competitive pressure. TV market In Switzerland, TV signals are transmitted via cable, broadband, satellite and mobile. The large majority of TV connections is provided via cable or broadband networks. The Swiss TV market features a diverse range of offerings from established national market participants. Offerings from other national and international companies are also available on the market, including TV and streaming ser- vices that can be used over an existing broadband con- nection, regardless of the Internet provider. The competi- tive dynamics in the saturated TV market remain high, driven by the large number of different offerings. At the end of 2020, Swisscom acquired the broadcasting rights for all matches in the top Swiss football leagues from 2021 to 2025 in order to further strengthen its strong position in the TV market. It defended its market share against the competition in 2021 and remains the market leader with a market share of 37%. Fixed-line telephony market Fixed-line telephony is mainly based on lines running over the fixed networks of the telecoms service providers and the cable networks. As the use of fixed-line telephony is steadily declining it continues to be replaced by mobile communications. This trend continued in 2021, with the number of Swisscom fixed-line connections falling by around 7% to 1.4 million. IT services market in Switzerland In 2021, the IT services market (IT services and software) generated revenue of around CHF 19 billion. The market recovered in the 2021 reporting year following a slight decline in the previous year due to the Covid-19 pan- demic. For the coming years, Swisscom assumes that the market will grow by 4 to 5% per year due to increasing digitisation. The areas in which it expects the most growth are the cloud, workspace & collaboration, secu- rity, the Internet of Things (IoT) and business applica- tions. This growth is a result of the increasing number of business-driven ICT projects as well as the rising demand for digital business models and new working models. Swisscom has noticed companies’ growing willingness to procure more external services in order to cope with elevated complexity and the accelerating transforma- tion into a hybrid cloud. Further growth drivers are also the increasing threats in the area of IT security as well as system solutions in the area of IoT. Customers generally expect services customised to their individual sector and business processes with appropriate advice. In a difficult market environment, Swisscom increased its revenue slightly year-on-year and held on to its market position. This was mainly due to positive trends in the growth areas of security, cloud and business applications. Market revenues increased in each of those areas, although certain revenues shifted to the big global cloud providers (hyperscalers) and were lost in Switzerland as a result. In addition, Swisscom strengthened its position in the IT ser- vices market in the year under review through the acquisi- tions of the MTF Group (IT services for SMEs), Webtiser AG (SAP e-commerce) and JLS Digital AG (digital communica- tions, customer-specific applications and digital signage), all of which operate in German-speaking Switzerland and the Principality of Liechtenstein. Italian market trends in telecoms services Italian broadband market Thanks to revenue of around EUR 15 billion including wholesale, Italy is the fourth largest fixed-line market in Europe. The volume of the broadband market for homes and businesses has increased steadily in past years. The broadband market comprises around 17 million access lines for four major competitors and other smaller pro- viders. Fastweb is one of the largest fixed-network broadband providers with a market share of 16% in the residential customer segment and 34.5% in the business customer segment. Italian mobile communications market The Italian mobile communications market has a volume of around 78 million active SIM cards and a total revenue of around EUR 13 billion. Competition and price pressure are substantial. Despite the difficult environment, Fast- web’s customer base in mobile communications grew by 26% year over year to around 2.5 million customers. Fast- web’s market share in terms of SIM cards is 3%. 19  Swisscom Group Goals In order to ensure its long-term success in a dynamic environment, Swisscom has defined five Group targets (‘Swisscom Group Goals 2025’). It has enshrined one common denominator in these Group targets, which apply to all Group companies: the new purpose of ‘Empowering the Digital Future’. Swisscom Group Goals 2025 No. 1 in Switzerland Leading Challenger in Italy Rock-solid Financials Committed to Corporate Responsibility Outstanding in Innovation & Reliability Swisscom has set itself the goal of consolidating its posi- tion even further, both as a market leader in Switzerland and as a key provider in the market for IT services (‘No. 1 in Switzerland’). It forms Switzerland’s digital backbone and sets itself apart by offering the best customer expe- rience. Swisscom’s Fastweb subsidiary is a leading alternative provider for residential and business customers in Italy (‘Leading challenger in Italy’). Fastweb continues to expand its own convergent ultra-broadband network through ongoing investments. The best customer experi- ence is based on impressive quality of service and on offers that are characterised by transparency, fairness and simplicity. Fastweb contributes significantly to Swisscom’s growth and aims to make further gains in market share. Swisscom is characterised by enormous stability (‘Rock- solid financials’). Safeguarding profitability and cash flow is pivotal to its ability to continue distributing attractive dividend. Swisscom is committed to fulfilling its corporate respon- sibility towards society. This responsibility is becoming increasingly important in the eyes of shareholders, the capital market and customers (‘Committed to corporate responsibility’). As a trustworthy company, Swisscom focuses on sustainability, which it expresses through net zero emissions and a positive carbon footprint in the Swiss business by 2025, among other things. Swisscom also promotes diversity and inclusion within its own company. Diversity stands for a balanced mix of genera- tions, gender equality and variety in terms of language and origin. Inclusion refers to the targeted integration of employees with physical or psychological impairments as well as the integration of refugees. N See www.swisscom.ch/cr-report2021 As a leading digital company, Swisscom launches innova- tive products and services based on resilient and secure networks (‘Outstanding in innovation & reliability’). It develops growth areas in its Digital Business division, such as FinTech or Trust Services, in a targeted manner. t n e m n o r i v n e d n a y g e t a r t S | y r a t n e m m o C t n e m e g a n a M 20    Strategy for Switzerland 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 con- cert to provide inspirational experiences. Swisscom is committed and trustworthy in its actions, consistently seeks to learn new things and develop and systemati- cally pursues its goals. What matters most to Swisscom is its customers’ trust in it. That trust is strengthened by Swisscom’s reliability and sustainability in everything it undertakes. To realise its vision of being a market leader in shaping the future and inspiring people in a net- worked world, Swisscom has set out three strategic aspi- rations. Best infrastructure Digital leader Best service Highly simplified IT & network Best customer experience Operational excellence Best products Smart investments Growth Maximisation of core business Focused growth in new areas of business Growth in IT market Strategic aspirations of Swisscom Best customer experience Swisscom wants to inspire its customers by providing them with the best service at all times, regardless of their location. Since the customer experience is based on a high-performance infrastructure, Swisscom offers its customers the latest IT and communications infrastruc- ture and develops these on an ongoing basis. Customer requirements for networks are constantly growing. As a result, Swisscom sets up and operates high-perfor- mance networks that are top-notch in terms of security, availability and coverage. In the year under review, the Swisscom network once again earned top rankings in numerous tests conducted by leading technical journals. Swisscom sets itself ambitious goals for the expansion of its fibre-optic network. By the end of 2025, fibre-optic coverage in homes and businesses (FTTH – Fibre to the Home) is expected to increase to between 50 and 60%. After launching the first 5G network in Europe with commercial offerings and end devices in spring 2019, Swisscom is continuing to push ahead with the expan- sion of 5G. Some portions of the population still have concerns about and are resistant to the expansion of 5G. Additionally, Switzerland’s strict legal limits mean that networks’ full capacity cannot be exploited and that, in turn, hinders efforts to create urgently needed capacity on the mobile network. Cloud services produced in Switzerland form the central cornerstone of the cloud offering and are supplemented by global public cloud solutions (including Amazon Web Services or Microsoft Azure, for example). Swisscom acts as an independent service provider that offers hybrid and multicloud solutions to provide customers the sup- port they need for their digital transformation. 21 t n e m n o r i v n e d n a y g e t a r t S | y r a t n e m m o C t n e m e g a n a M 22 The relationship with customers is at the heart of Swisscom’s success. Swisscom’s top priorities are providing the best service and inspirational experiences across the board. Swisscom provides customers with expert guidance and they get flexible, personalised on-site service and enjoy a simple user experience across all online offerings. Swisscom is also streamlining its offering and provides rel- evant, advanced products. At the forefront of its conver- gence offering is the flexible, modular inOne subscription, which is being improved on an ongoing basis and remains very popular among residential customers. In addition to its main brand, Swisscom offers second- and third-party brands to address more digitally savvy or price-sensitive target groups. Swisscom continues to develop its blue TV, blue News, blue+ and blue Cinema entertainment services within the ‘Swisscom blue’ product family. Swisscom provides small and medium-sized enterprises (SMEs) with in-depth, personal, local support thanks to a nationwide network of SME specialists and certified part- ners. Swisscom provides SMEs with complete Smart ICT solutions for outsourcing IT. Most recently, it added new security solutions and more to its offering for Swiss SMEs. As a trusted partner, Swisscom helps SME customers to defend themselves against the growing threat of cyber attacks. Both standardised products and customised cus- tomer solutions are in demand in the business customer segment. Swisscom offers business customers an inte- grated customer experience from a single source. Operational excellence Due to fierce competition, revenues in the core business are still under strong pressure. Swisscom wants to offset these revenue losses as much as possible through growth in new areas and strict cost management. In its core business, Swisscom wants to optimise its cost base further over the coming years in order to secure long- term profitability. This should allow Swisscom to free up funds for the exploration of new business opportunities and make the investments necessary to ensure future success. As a leading digital company, Swisscom’s inter- nal digital transformation and accompanying increase in its own level of digitisation are also crucial. To drive this transformation, Swisscom is expanding process auto- mation, strengthening its online channel for sales and consulting and using artificial intelligence and analytics capabilities, among other things. Simplifying the com- pany’s own IT and network is also essential. To this end, Swisscom is modernising and consolidating its IT plat- forms, phasing out old technologies, reducing inter- faces, using agile development methods and standardis- ing and streamlining its product portfolio. What’s more, Swisscom is making its investment activities even more efficient, for example through an intelligent mix of tech- nologies and value-oriented network expansion. New growth The market for telecommunications in Switzerland is saturated. Swisscom anticipates moderate volume growth, both as a continuation of the previous trend in the postpaid segment of mobile communications as well as in the broadband segment, where it expects the rising number of homes and businesses in Switzerland, among other factors, to result in an increase in the num- ber of subscribers. Price pressure will remain high in all markets, and Swisscom therefore expects revenue to decline slightly in the telecommunications market as a whole. Following the slight dip in the market in 2020 due to the Covid-19 pandemic, the IT services market recov- ered in the year under review. Market experts believe that it will continue to enjoy moderate growth over the next few years, driven by increasing digitisation and the related increase in the use of ICT in numerous industries. Swisscom is targeting growth in the following three areas in particular: in its core business, in the IT market and in new business areas. By developing its core busi- ness further, it intends to exploit growth opportunities, e.g. in the Internet of Things (for both residential and business customers), with advanced value-added ser- vices and in respect of secondary and third-party brands. In the IT sector, the focus is on security and cloud ser- vices, vertical IT offerings (e.g. banking) and applications. It aims to generate growth in new business areas through its activities in the fintech sector, digital ser- vices for SMEs provided by localsearch (Swisscom Direc- tories Ltd) and trust services. It manages growth areas using clearly defined success criteria. When selecting growth areas, it is guided by future customer require- ments, focuses on future-oriented business models offering strong growth and makes increased use of part- nerships. ‘Level up’ transformation In order to achieve the Group goals (‘Swisscom Group Goals 2025’) in a rapidly changing environment and to help shape the future, Swisscom must break new ground. To do so, it focuses on the following three basic principles of management and employee behaviour: ‘Performing together’, ‘Thinking digital first’, and ‘Acting lean-agile’. These three basic principles are crucial to achieving the Group’s goals. With clear targets regarding ‘Performing together’, ‘Thinking digital first’ and ‘Acting lean-agile’, Swisscom intends to develop its corporate culture and employees’ skills and take them up to the next level (‘Level up’). To that end, Swisscom is commit- ted to Group-wide goals and also relies on the continu- ous development of all employees and teams who take on responsibility and deliver a correspondingly impres- sive performance. Decisions at Swisscom are always made based on data. In this context, digitisation plays a   central role, which is why Swisscom is systematically digitising its internal business processes. Likewise, all employees need digital skills to provide Swisscom cus- tomers with the best experience and to offer significant added value through lean, iteratively developed solu- tions. To that end, Swisscom promotes the continuous development of its employees. In order to improve its brand positioning, Fastweb has additionally enshrined its purpose of ‘Tu sei futuro’ in its articles of association. In doing so, it intends to expand its positioning, which had been heavily based on speed and performance in the past, to include future topics such as digitisation and sustainability. Swisscom expects Fastweb to further expand its market position in the future and to make a rising value contribution. Strategy in Italy Fastweb is an infrastructure-based, alternative telecom- munications provider for residential and business cus- tomers in Italy. It has its own ultra-broadband infra- structure and offers mobile communications services in addition to fixed-network services for residential cus- tomers and smaller business customers. It positions itself as a high-quality provider and pursues a strategy of becoming an infrastructure-based OTT provider. Its own network infrastructure (mobile communications and fixed network) offers customers gigabit connectiv- ity. At the same time, Fastweb is developing new ser- vices that – much like conventional OTT providers – are characterised by simplicity, strong customer orientation and effectiveness. Fastweb continues to expand its own convergent ultra-broadband network through ongoing investments. In the broadband market, Fastweb’s good market position is based on its own optical fibre-based infrastructure (FTTH and FTTS). Fastweb has held a 4.5% stake in FibreCop S.p.A, a network company founded in 2020 and majority owned by TIM (58%), since 2021. By acquiring a stake in FibreCop, Fastweb will benefit from the planned further FTTH roll-out in Italy. Fastweb addi- tionally relies on the use of fixed wireless access (FWA). FWA allows surfing speeds similar to those offered by fibre to achieve a better customer experience at lower costs and with less time required for network expan- sion. The planned roll-out of the nationwide 5G mobile network will be enabled by the acquisition of Spektrum and the partnership with WindTre. In the residential customer segment, Fastweb relies on a convergent product portfolio that is transparent, fair and simple. It intends to offer the best customer experi- ence by providing an impressively high level of service quality. For business customers, it is making strategic expansions to its portfolio, primarily by employing hori- zontal solutions focused on cloud and digital security. Another focus of Fastweb’s activities is the expansion of its wholesale offerings – whether in the area of ultra- fast broadband or with the connection of mobile com- munications sites to the fibre-optic network. Sustainability Sustainability strategy Swisscom assumes responsibility towards society and the environment. As Switzerland’s leading ICT company, it wants to seize the opportunities of the digital trans- formation for the prosperity of Switzerland, get involved and help shape the future. Swisscom does this by pro- moting the digital skills of people, protecting the cli- mate, supporting fair and climate-friendly supply chains, and building and maintaining a reliable, high-perfor- mance ICT infrastructure. These measures are part of its Sustainability Strategy and are aligned with the UN’s 17 Global Sustainable Development Goals. Swisscom has formulated three strategic priorities with corresponding objectives to address these fields of activity: ‘ready for peo- ple’, ‘ready for the environment’ and ‘ready for Switzerland’. Further information can be found in the separate Sustaina- bility Report. N See www.swisscom.ch/cr-report2021 Ready for people Swisscom wants to enable people in Switzerland to make use of the opportunities presented by a networked world. By no later than 2025, Swisscom will help 2 mil- lion people annually to improve their skills in the digital world. New educational opportunities for schools, the people, SMEs and their employees are bringing it closer to this goal. Its teams in the call centres and shops are available to answer its customers’ questions. Swisscom ensures safe and fair working conditions in the supply chain. It is also committed to barrier-free access to all its services. Ready for the environment As a pioneer in climate protection, Swisscom makes a contribution to help limit the global temperature increase to 1.5 degrees. In its Swiss business, Swisscom will be cli- mate-neutral across the entire value chain by 2025. It is also working with its customers to reduce net CO2 emis- sions by 1 million tonnes per year by 2025. This corre- sponds to around 2% of Switzerland’s greenhouse gas emissions. Furthermore, Swisscom wants to reduce its energy consumption by 20% by 2030 compared to today. 23 t n e m n o r i v n e d n a y g e t a r t S | y r a t n e m m o C t n e m e g a n a M 24 Ready for Switzerland Swisscom provides individuals and businesses nation- wide with reliable ultra-fast broadband. Swisscom uses the best networks and progressive solutions to create added value for its customers, employees, shareholders and suppliers, and for all of Switzerland. By doing this, Swisscom makes the country more competitive and a better place to live. Climate protection and energy efficiency In a rapidly changing environment, Swisscom is continu- ing along its path towards greater energy efficiency and climate protection, strengthening its sustainability tar- gets and reducing its greenhouse gas emissions. The transition to a zero-emission company has implications for Swisscom’s organisation and processes. In return, it offers new sources of revenue through Swisscom’s port- folio of sustainable products and services. The regulatory environment has become more challeng- ing. In Switzerland, as in Europe, there is a noticeable trend towards more stringent requirements. Regulatory efforts are aimed at accelerating the transition to a zero-emissions economy by 2050 (net zero emissions) or, in other words, an economy that produces no more CO2 emissions than it is able to offset. This target is in line with the latest recommendations of the International Plant Protection Convention (IPPC) to keep the average temperature increase below 1.5 degrees. Swisscom revised its CO2 reduction targets in the 2021 reporting year and plans to meet the goal of net zero emissions in its Swiss business by 2025. In order to achieve its goals, Swisscom is working mainly on efforts to boost its own energy efficiency. Maximum energy efficiency is essential for an ener- gy-intensive company like Swisscom. As part of that, Swisscom aims to increase the efficiency of its network, real estate and mobility infrastructure while refraining from using environmentally harmful energy carriers. Accordingly, it acts and invests in a targeted manner. The company’s individual activities and impact of those activities are described in detail in the sustaina- bility and climate reports. The goal of net zero emissions not only requires that emissions be reduced to an enormous degree, but CO2 also needs to be sequestered in carbon sinks in the long term to remove it from the atmosphere. Swisscom is examining various options for this, including reforesta- tion or capturing CO2 directly from the air and storing it underground. Swisscom offers a range of services that help custom- ers reduce their CO2 footprint. These include teleser- vices such as Microsoft Teams or Zoom, which signifi- cantly reduce travel and therefore greenhouse gas emissions, as well. These services have proven very useful during the Covid-19 pandemic since they were able to preserve and even increase the economy’s pro- ductivity and competitiveness. One prerequisite for using teleservices like these is comprehensive coverage with high-speed connectivity. By 2025, Swisscom aims to provide 50 to 60% of Swiss homes and businesses with network speeds of up to 10 Gbps. An estimate of the emissions prevented by Swisscom customers through the use of sustainable services can be found in Swisscom’s annual climate report. N See www.swisscom.ch/climatereport2021 A transformation of this magnitude and speed comes with various risks and opportunities. Swiss and Euro- pean regulations will strongly shape the field of sustain- able finance going forward. They will demand a much higher degree of transparency about investments and their long-term impacts, as well as a more detailed materiality analysis. This kind of analysis must look at the matter from two perspectives: in terms of both the company’s impact on its environment and the environ- ment’s impact on the company. From 1 January 2022, companies with subsidiaries in the EU or whose securi- ties are traded on financial markets in the EU will have to report their activities according to the categories of the European taxonomy to make these more easily compa- rable. Swisscom has arranged its business activities in accordance with this classification. In addition to the transition risks associated with regula- tory and legal uncertainties, Swisscom must assess the physical risks arising from climate change. To that end, it has begun to implement the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). Swisscom has surveyed the potential impact that arises through climate change and the transition to a net-zero emissions company on its reputation, financing and portfolio. Swisscom was the first listed company in Swit- zerland to issue a green bond in euros in 2020, the pro- ceeds of which will be used within the scope of the Green Bond Framework. A green bond in CHF followed in 2021 and Swisscom has also had credit facilities with costs that are linked to environmental social governance (ESG) objectives since 2021. The portfolio of sustainable services makes a relevant contribution to sales and is expected to grow further. Information on this can be found in the sustainability report. N See www.swisscom.ch/cr-report2021   Infrastructure Telecommunications networks form the foundations for digital Switzerland . This was evident during the pandemic, when the networks seamlessly maintained economic life and social life . Swisscom continues to invest heavily in infrastructure to meet the growing broadband needs of the Swiss fixed and mobile network . It aims to directly connect up to 60% of homes and businesses with optical fibre by the end of 2025 and Swisscom had already provided 99% of the Swiss population with basic 5G coverage by the end of 2021 . This is commensurate with its strategy of building the best networks and laying a solid foundation for the digital transfor- mation for Switzerland . Infrastructure in Switzerland Network infrastructure The telecommunications networks form the backbone of the Swiss information society. This makes Swisscom the largest network operator in Switzerland by far, in both fixed and mobile networks. It aims to provide Swiss cus- tomers with the best network for both the fixed and mobile networks. It relies on a smart combination of dif- ferent network technologies so that the whole of Swit- zerland can benefit from the opportunities offered by the digital world. A network fault occurred in July 2021 that impacted emergency numbers, among others. The meas- ures taken in 2020 to implement a dynamic routing sys- tem for emergency service organisations proved funda- incident. Swisscom mentally successful during the continues to work on reducing disruptions. The number of residential customers affected by interruptions and downtime has decreased in recent years. Accordingly, customer satisfaction is showing a positive trend. A new age of communication has begun Swisscom has replaced conventional fixed-line teleph- ony with the Internet protocol (IP), and thus geared its network towards the future. All Swiss municipalities have already switched to IP telephony. Private custom- ers benefit from significantly improved voice quality, automatic name display and the ability to block annoy- ing advertising calls. Leading international position thanks to constant expansion Switzerland boasts one of the best IT and telecoms infra- structures worldwide, International studies carried out by the OECD or the data and information service provider IHS Markit regularly confirm this. Rural regions benefit in particular from the high level of capital expenditure, almost two thirds of which is financed by Swisscom. According to the Broadband Coverage in Europe 2020 study carried out by Omdia/IHS Markit, commissioned by the EU Commission and published in the year under review with the support of Glasfasernetz Schweiz, the availability of broadband in rural regions of Switzerland is significantly higher than the EU average. At the end of 2021, around 4.8 million or 90% of homes and businesses were connected with speeds in excess of 80 Mbps. This has enabled Swisscom to make ultra-fast broadband available even in remote locations. Meanwhile, more than 3.9 million (or 72%) of homes and businesses enjoy connections with speeds of more than 200 Mbps. Cover- age is at around 33% for speeds of 10 Gbps. In the Broad- band Network Test Switzerland 2021 conducted by the trade magazine connect, Swisscom’s fixed network takes first place in the 10 Gbit/s speed class. At the same time, Swisscom received a ‘very good’ rating for its fixed net- work. Swisscom’s mobile network is also one of the best networks in the world, as confirmed by independent net- 25 work tests such as those conducted by the trade maga- zine connect, CHIP or network analyst Ookla. Swisscom now provides over 99% of the population with 3G and 4G coverage, 99% of the population with basic 5G coverage and 888 locations with 5G+ coverage. Network expansion Bandwidth requirements in the Swiss fixed and mobile telephone network continue to grow. In order to main- tain such a high level of service provision, further invest- ments in the networks are necessary. Swisscom there- fore invests around CHF 1.6 billion in IT and infrastructure in Switzerland every year. Compared to 2019, FTTH cov- erage will nearly double by the end of 2025. This means that 50 to 60% of all homes and offices will have a band- width of up to 10 Gbps. 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 10,000 Mbps Fibre Copper At the same time, Swisscom will continue to modernise its existing network in the coming years, giving 30 to 40% of homes and offices access to a bandwidth of 300 to 500 Mbps. Bonding technology is also helping to noticeably improve broadband provision in certain regions. Bonding combines the performance of the fixed-line network with that of the mobile network, thus ensuring a signifi- cantly better customer experience. Customer demand for data in the mobile network contin- ues to rise. According to an independent study conducted by the Sotomo research institute based on Swisscom net- work data, mobile data traffic has grown 200-fold since 2010 and there are now three times more devices on the network than in 2010. In this context, the 5G mobile com- munication standard not only enables new functions for current applications, but also brings a much-needed reduction in the load on the network, increases capacity and maintains the accustomed quality of the 4G network. Because of this, and owing to the stringent legal frame- work conditions that apply, the mobile network has to be expanded by the addition of new mobile telephony sites. Progress continues to be made on expanding 4G+ and 5G+. In the year under review and after 28 years of operation, Swisscom decommissioned the now obsolete second mobile generation (2G) in the space of just a few weeks. Swisscom is using the freed-up capacity for the more efficient successor generations. N See www.swisscom.ch/networkcoverage e r u t c u r t s a r f n I | y r a t n e m m o C t n e m e g a n a M 26 57 times higher data volume in nine years in million terabytes 628  556  431  353  267  170  11  25  49  96  2012  2013  2014  2015  2016  2017  2018  2019  2020  2021  Development of data volume in Swisscom networks in million terabytes Swisscom has been working together with Ericsson since 2015 on the introduction of 5G in Switzerland. In 2019, it was the first provider in Europe to put a 5G network into operation and is constantly expanding it. Swisscom cur- rently provides 99% of the Swiss population with a basic version of 5G and has already made the 5G+ version, which includes all the benefits of 5G, available in 888 loca- tions. According to the industry association asut, more than 1 million 5G-enabled devices were already in opera- tion in Switzerland by mid-2021. The 5G expansion will gradually provide the additional capacity that residential and business customers need. Things are proceeding slowly, however, as health concerns from the populace often dominate the discussion about network expansion. On 23 February 2021, an important addendum to the NISV enforcement recommendations was published that controls the operation of the new type of adaptive anten- nas. On 19 August 2021, OFCOM confirmed that mobile operators meet all technical and operational require- ments to apply correction factors to adaptive antennas. This enables operators to use adaptive antennas in accordance with their technical design – and, in doing so, to benefit from all the advantages offered by the latest generation of antennas. These are increased capacity and range with less exposure to people who are near the antenna but not using mobile communications. The Conference of Building, Planning and Environment Directors (BPUK) has expressed legal concerns about the aforementioned federal enforcement recommendations and called for a partial waiver of the application of the correction factor – based on legal expertise. At the time, however, a legal opinion from the industry supported the FOEN’s enforcement recommendation in all key respects. BPUK, FOEN, OFCOM and delegations from the cantonal NIS specialists as well as the operators subsequently met under the chairmanship of DETEC to find a joint solution. They achieved that goal prior to the end of the year and found binding solutions at ordinance level to the issues raised. One question remains unanswered, namely how adjustments made to antennas that do not have any impact on immissions can be regulated in a legally bind- ing manner. To answer that question, the task force men- tioned above intends to present solutions that take dif- ferent interests into account by the end of the first quarter of 2022. Since operational adjustments have to be made to mobile communications systems approxi- mately every 18 months, an appropriate regulation is essential. Some portions of the population still have reservations regarding the expansion of the mobile communications infrastructure and are resistant to the idea. The argu- ments for opposing expansion vary widely, with the underlying speculation and assumptions about 5G often lacking a factual basis. Even today, the controversy sur- rounding mobile communications has considerably delayed numerous network expansion projects, which is also affecting the expansion of the 4G network. Moreover, since strict regulation is currently preventing the new 5G technology from exploiting its full potential, the legal environmental framework will need to be adjusted if Switzerland is to make full use of the possibil- ities offered by 5G. In order to improve the level of infor- mation, Swisscom provides information on its channels and supports the industry association asut in its infor- mation campaigns, one of which is the joint information platform CHANCE5G. N See www.chance5g.ch 27 e r u t c u r t s a r f n I | y r a t n e m m o C t n e m e g a n a M 28 The Internet of Things (IoT) has long connected a multi- tude of objects and devices to one another and to users. The entry of international cloud providers into the IoT market has given new impetus to the integration and scaling of IoT. Thanks to strong partnerships with Ama- zon and Microsoft, Swisscom is well positioned in this respect. It is already the leading provider of IoT system solutions required for cloud and analytics implementa- tions and their operation. ‘Data as a Service’ rounds off Swisscom’s portfolio and, thanks to plug-and-play, makes it even easier for many customers to enter the IoT. In the year under review, for example, Swisscom imple- mented overarching applications that combine 5G, IoT, cloud, data-driven business and artificial intelligence in a project with its business partner Rhomberg Sersa Rail Group. The joint project has global appeal: Together, Rhomberg Sersa Rail Group and Swisscom have been awarded the Microsoft Partner of the Year Award 2021 by Microsoft in the Azure/IoT category. increasing is continually Swisscom its number of antenna sites. It coordinates site expansions with other mobile providers wherever feasible, and now shares nearly a quarter of its approximately 9,400 antenna sites with them. At the end of 2021, Swisscom had around 6,400 exterior units and 3,500 mobile communication antennas in buildings. With around 7,000 hotspots in Switzerland, it is also the country’s leading provider of public wireless local area networks (WLAN). Mobile frequencies Transmission of mobile signals requires the availability 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 Communica- tions 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 and 3G mobile commu- nications technologies. In February 2019, further mobile radio frequencies – 700 MHz, 1,400 MHz, 2,600 MHz and 3,500 MHz – were allocated in Switzerland, primarily for transmission via 5G. Swisscom currently uses these fre- quencies to offer its customers services via the 5G, 4G and 3G mobile communication technologies. It always does this within the legal limits, which in Switzerland are ten times stricter than those recommended by the World Health Organization in sensitive areas such as homes, schools, hospitals and permanent workplaces. IT infrastructure and platforms Swisscom operates six major data centres in Switzer- land. The IT infrastructure comprises over 75,000 virtual machines and around 4,300 servers. The central tele- communications functions for the operation of the fixed and mobile networks converge in four of the six data centres. In addition, four data centres (two data centres have a dual function) are used for the operation of IT applications. These include all business applications in connection with Swisscom services. The infrastructure is designed for redundant operation and high availability. Swisscom attaches the very highest priority to both sta- bility and resilience, and reviews and improves them on an ongoing basis. Since the quality and security culture is a central aspect of Swisscom, the company takes every possible precaution to continuously minimise the likeli- hood that major disruptions will occur. Swisscom positions itself as a reliable IT partner with a broad range of services. On the basis of an extended cloud strategy, it is expanding its cloud offering with hybrid ICT services. These services support Swisscom customers in setting up hybrid and multi-cloud environments and oper- ating them efficiently. Swisscom responds quickly and individually to the numerous needs of its customers using a flexible service modular system. As part of its strategy, it is strengthening its partnerships with the major public cloud providers (such as Amazon Web Services and Micro- soft Azure). In addition to its extensive public cloud service offering for business customers, Swisscom will be relying on Amazon Web Services to operate selected internal IT applications over the next few years. In order to accommodate the continuing advance of digi- tisation as well as the growing requirements imposed on connectivity services, Swisscom has distributed the virtu- alisation and containerisation of network functions across four locations. This enables the transfer of high data volumes with short response times while also ensur- ing the most resilient and stable operation possible. Swisscom consistently uses its cloud platforms to pro- vide internal and external communication services. It operates these cloud platforms in its own geographi- cally redundant data centres, which thus enables effi- cient, automated use and improves the customer expe- rience in a targeted manner. Swisscom is expanding its connectivity offering to include advanced software-de- fined networking (SDN), managed security and man- aged LAN, paying special attention to the combination of modern and established services. During the Covid-19 pandemic and in light of changing needs, the use of remote access services and cloud connectivity services has risen dramatically. The constant state of change on the market backs up Swisscom’s efforts to use the latest technologies both internally and externally for the ben- efit of its customers. Instead of developing its own infra- structure, Swisscom is increasingly making use of the standardised systems created by its partners. The focus on the development of market-specific, value-adding services based on such infrastructure has proven sound. 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. At the same time, the consistent dismantling of obsolete fixed-net- work technology such as TDM (Time Division Multiplex- ing) and traditional data centre infrastructure is reduc- ing complexity and creating space for new infrastructure. Nevertheless, the old and new technologies will con- tinue to exist and function side-by-side over the coming years. Here Swisscom is establishing its role in the digital transformation through 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 The market for ultra-fast broadband (UBB) in Italy is growing steadily. This development is further acceler- ated by an increasingly extensive use of digital services and related performance requirements. Fastweb plays a fundamental role in the sustainable development of UBB. To that end, it is investing in its own infrastructure and that of FibreCop, in which it holds a 4.5% stake. Fast- web’s goal is to provide UBB coverage to 90% of homes and offices by 2025. The expansion of UBB’s own fixed network through the use of FTTH/FFTS (Fiber to the Home/Street) and 5G FWA (Fixed Wireless Access) will help reach this goal. Fastweb’s UBB coverage had reached 9 million homes and offices, or about 30% of the population in Italy, by the end of 2021. The deployment of 5G FWA, in a strate- gic partnership with Linkem, will add another 10.5 mil- lion homes and offices by 2025. Finally, Fastweb reaches another 7 million homes and offices via FibreCop. IT infrastructure Fastweb currently uses four large data centres, three in the Milan area and one in Rome. One of the data centres is owned by a technology partner that manages and develops the data centre and handles all operational tasks relating to Fastweb’s IT infrastructure. Two other data centres are mainly used for the corporate business segment, including housing, the cloud, and other ICT-managed services. In view of the growth of the cloud ICT market and the business opportunities in cloud edge, Fastweb plans to expand its central and local data centre capabilities. It intends to mainly use additional white- space solutions for this purpose. The IT infrastructure comprises around 6,000 virtual servers and physical servers for its own needs. 29 s e e y o l p m E | y r a t n e m m o C t n e m e g a n a M 30 Employees In an environment that is changing at a rapid pace, 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 . At the end of 2021, Swisscom had 18,905 full-time equivalent employees, of whom 15,882 or 84% were employed in Switzerland . Swisscom is also training around 900 apprentices in Switzerland . Employees in Switzerland Digitisation presents many opportunities as well as great challenges for employees and companies. To take advan- tage of these opportunities and to overcome the chal- lenges requires motivated employees who use their indi- vidual skills and experience to inspire people in the networked world. Swisscom helps its employees develop their skills and provides them with five training and devel- opment days a year for this purpose to ensure that its employees continue to have the required skills and resources going forward. The One Swisscom Academy offers a wide range of training and development opportu- nities. For the most part, the One Swisscom Academy relies on digitalised learning methods, thanks to which employees can build their knowledge irrespective of loca- tion and time. The offerings are designed to develop skills that are needed now and in the future, as well as to strengthen employees’ employability. Swisscom positions itself on the ICT job market as an attractive employer, offering its employees the opportu- nity to assume responsibility, utilise their potential and further develop their professional skills. Swisscom staff are employed under private law on the basis of the Code of Obligations. Swisscom management employees in Switzerland are subject to general terms and conditions of employment, while all other employees are subject to Swisscom’s Collective Employment Agreement (CEA). The terms and conditions of employment exceed the minimum standard defined by the Code of Obligations. In the year under review, 98.6% of the employees in Switzerland were on open-ended contracts (prior year: 98.1%). Part-time employees made up 21.6% (prior year: 21.4%). The fluctuation rate, representing departing employees in Switzerland, was 6.2% of the workforce (prior year: 7.8%). Further information on HR matters can be found in the Sustainability Report. N See www.swisscom.ch/cr-report2021 The Covid-19 pandemic presented Swisscom with a multitude of challenges yet again in the year under review. However, experience gained in 2020 helped the company react swiftly and in a targeted manner. Swisscom’s Covid-19 task force continuously analysed the situation and – both quickly and transparently – informed the company internally about any decisions taken. Swisscom adapted its measures to the current circumstances as well as the regulations of the Federal Office of Public Health (FOPH) or the Federal Council on an ongoing basis. In the days when working from home was mandatory, over 80% of employees – even those in the call centres – worked from home. Swisscom plays a pioneering role in flexible working throughout Switzerland. Even before the Covid-19 pan- demic, working from home, on the road or at different locations was very popular and widespread among Swisscom staff. Employees appreciate the flexibility, the elimination of commuting and a better work-life bal- ance. Swisscom will continue to promote and expand flexible working models in the future. However, meeting regularly in the office and thus maintaining an informal exchange remains important for Swisscom employees. Collective Employment Agreement (CEA) Swisscom is committed to fostering constructive dia- logue 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 adopt the CEA, either in its original form or as adapted to specific sectors or lines of business, by means of an affiliation agreement. The subsidiaries cablex Ltd and Swisscom Directories Ltd (localsearch) negotiate their own CEA with the social partners. Under the Telecommunications Enterprise Act (TEA), Swisscom is obliged to draw up a collective employment agree- ment in consultation with the employee associations. In the event of any controversial issues, an arbitration com- mission must be convened which will support the social partners by providing suggestions for solutions. At the end of December 2021, 80% of the workforce in Switzer- land were covered by the Swisscom CEA (prior year: 81%). The CEA includes progressive employment condi- tions and benefits such as five days of further training per year, 18 weeks of maternity leave, three weeks of paternity leave and an option to purchase ten days of additional holiday time. The CEA also accords the social partners and employee representations rights of co-de- termination of varying degrees. 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. The social plan also makes use of instruments to increase the employa- bility of employees and provides for retraining measures in the event of long-term job cuts. Responsibility for implementing the social plan lies with subsidiary firm Worklink AG. It provides employees with advice and sup- port in their search for new employment and arranges temporary external or internal work placements. The services it offers include skill assessments, career advice and coaching. Swisscom also supports progressive work- ing models such as phased partial retirement. In 2021, 93% of those affected by personnel reduction measures had found a new job before the social plan programme ended (prior year: 80%). For employees with manage- ment contracts, there is also an arrangement in place to support them in their professional reorientation in the event of restructuring. Employee remuneration Competitive remuneration packages help to attract and retain highly skilled and motivated specialists and man- agerial 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 variable performance-related salary component depends on the success of the company. This is meas- ured by the achievement of overriding objectives such as financial parameters as well as business transformation metrics that fall into the areas of operating perfor- mance, customers, growth and sustainability. Details on remuneration paid to members of the Group Executive Board are provided in the Remuneration Report. In 2021, Swisscom and its social partners signed an agreement on the pay round for the year under review. With effect from April 2021, salaries for employees sub- ject to the CEA were increased by 0.8% of the total pay- roll: this took the form of a general salary increase, the level of which varied depending on the employee’s posi- tion in the salary band. The performance of employees whose salaries are in the upper range of the respective salary band was rewarded by a one-off payment. The payroll for managers increased by 0.6% to allow for indi- vidual salary adjustments. Equal pay Swisscom remunerates its employees fairly and in line with market conditions and also ensures equal pay between the sexes. The salary system is structured in such a way that equal salaries are paid for equivalent tasks and services. Employees’ salaries are adjusted within the scope of the annual salary review. Employees who have put in an above-average performance and whose wages are at the lower end of their respective sal- ary bands generally receive an above-average wage increase. Swisscom also periodically reviews the salary structure for differences between men’s and women’s wages using the federal government’s equal pay tool (Logib). Past reviews have only revealed minor pay dis- crepancies that are below the tolerance threshold set by the Federal Office for Gender Equality. In accordance with the new requirements under the Gender Equality Act, Swisscom carried out equal pay analyses for all Swiss Group companies with more than 100 employees. The formal review of the pay equal anal- yses required by law was carried out by PwC. According to its report, there are no indications that the analyses do not comply with the legal requirements in all respects. Internal staff development and external job market Swisscom’s market environment is constantly changing. The company invests in targeted professional training for its employees and managers in order to maintain and improve their employability and the company’s compet- itiveness in the long term. Employees have the opportu- nity to attend internal and external training pro- grammes. 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 2021, Swisscom employees spent an average of 3.5 days per person on learning, training and development. It is also Swisscom’s declared goal to fill as many positions as pos- 31 s e e y o l p m E | y r a t n e m m o C t n e m e g a n a M 32 sible internally. Where this is not possible, external recruitment is used. Here Swisscom has to compete with national and international companies for the best talent – especially in the IT professions. The shortage of skilled workers on the Swiss labour market is currently noticea- bly affecting DevOps engineers primarily. These engi- neers have a skills profile that is critical to companies’ competitiveness in the ICT market. Their skills help Swisscom become even more agile and respond quickly to changing markets. Although the Swiss labour market remains a priority, Swisscom operates DevOps centres in Rotterdam and in Riga. It does this primary to provide access to international talent outside the Swiss labour market, if needed. Employee satisfaction The Pulse survey gives Swisscom employees an opportu- nity to submit their feedback on a wide variety of issues relating to their personal work situation. The results and the comments in which employees give their assess- ments are available to all employees in real time. They enable every individual employee and team and the organisation as a whole to respond quickly to the feed- back and start making improvements. A survey of this type fosters a culture of feedback and trust, which pro- vides the basis for Swisscom and its employees to grow and develop together. The response rate to the Pulse survey was 68% in 2021 (previous year: 74%). More than 90% of the employees participating in the survey said they recommend Swisscom as an employer. Diversity Swisscom grows through diversity – as individuals, as a team, as a company. The different points of view, experi- ences, ideas and skills that every single employee brings to bear on their everyday work are what make Swisscom a successful, innovative company. To promote diversity, Swisscom focuses in its activities on the factors of gender, inclusion, generations and language regions. In the gen- der dimension, for example, Swisscom also 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. At the end of 2021, around 24% of Swisscom’s employees were women (prior year: 25%), and the pro- portion of women in management was around 14%. Swisscom is also committed to making jobs available to people with physical or psychological impairments in order to (re)integrate them into the workforce (inclusion). The proportion of such posts increased from 1.06% to 1.11% versus the previous year. Swisscom tries to earmark at least 1% of jobs for inclusion-related employment solu- tions. 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. Swisscom trains around 900 apprentices in Swit- zerland. Graduates of technical colleges and universities gain their first practical experience in our company as part of a step-in internship or as a trainee. Swisscom is represented in all of Switzerland’s language regions. It attaches importance to ensuring that the different lan- guages are adequately represented in all areas and accordingly offers apprenticeships, internships and talent programmes for all language regions. Employees in Italy Statutory terms and conditions of employment in Italy are based on the Contratto Collettivo Nazionale di Lavoro (CCNL), a state collective employment agreement. The CCNL defines the terms and conditions of employment between Fastweb and its employees. It also contains pro- visions 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. 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 acci- dent, Fastweb guarantees full payment of salary for 180 days and payment of half the salary for a further 185 days. The company’s terms and conditions of employment enable employees to achieve a healthy balance between their work demands and personal life. This is largely due to the following measures, which were set out in an agree- ment concluded with the trade unions: flexible office working hours, smart working and working from home, and for mothers the choice of shifts or temporary part- time jobs. Fastweb offers competitive salary packages aimed at attracting and retaining highly qualified specialists and managers. The company’s salary system comprises a basic salary, a collective variable profit-sharing bonus for non-managerial staff and a variable performance-re- lated component for managerial staff which is contin- gent on meeting individual goals and company targets. The basic salary is determined according to function, individual performance and the situation in the labour market. The variable profit-sharing bonus is based on the model agreed with the unions. Fastweb complies with the legal minimum salary defined by the CCNL. The Covid-19 pandemic also left its mark on Fastweb: Fastweb and the national trade unions of the telecommu- nications sector, together with the local representations and the Rappresentanza Sindacale Unitaria (RSU), have extended the preliminary agreement on Smart Working that was signed on 29 September 2020 until 30 June 2022. The goal is to renew the organisational and working model in a flexible and sustainable way – in order to guar- antee a high level of quality and the achievement of cor- porate goals as well as to facilitate the balance between work and family life. The agreement on Smart Working had been introduced on a trial basis on 16 October 2020. It provides full flexibil- ity and autonomy in the choice of working model for all employees of the company, including customer advisors. It gives Fastweb employees the option of using the smart working model on all business days or deciding each day, in consultation with their supervisor, whether to do their work in the office or remotely. This guarantees perfor- mance-based management that does not view success as being contingent upon employees’ on-site work. 33 ‘Ready for tomorrow’s competition’ More competitive thanks to our innovative solutions that leverage artificial intelligence, the Internet of Things, the cloud and 5G. ‘Ready for tomorrow’s competition’ ‘Ready for the digital working environment’ More efficient collaboration thanks to the web training we provide for your company’s employees. s e c i v r e s d n a s t c u d o r p , s d n a r B | y r a t n e m m o C t n e m e g a n a M 36 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 . Swisscom constantly adapts the range of services and products it offers to its customers’ needs . The ‘Swisscom blue’ product family, which combines all of Swisscom’s entertainment offerings in a single world of experience, became extremely well established on the market in the year under review . Swisscom brands The Swisscom brand is managed strategically as an intangible asset and an important element of the Group’s reputation management. It supports Swisscom’s business activities, gives guidance to customers and partners, and also acts to attract and motivate current and future staff. The Swisscom 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 the familiar and the new and standing equally for net- work infrastructure, best experiences, entertainment, ICT and digitisation. In Switzerland, Swisscom offers core business products and services under the main Swisscom brand, as well as under the secondary brand Wingo and the third-party brands Coop Mobile and M-Budget. Its portfolio also includes other brands which are associated with other themes and business areas. Outside Switzerland, Swisscom’s main market is Italy, where it operates under the Fastweb brand. The strategic management and development of the entire brand portfolio is an integral part of corporate communications. Main brand Product family Secondary brand Tertiary brands Other brands (excerpt) Swisscom brand portfolio Society, technology and the environment are changing ever more rapidly. A brand must absorb these changes while offering direction and stability. To that end, Swisscom has given the imagery and individual design elements of its brand a gentle makeover. Vision, values and the Swisscom promise determine the positioning of the Swisscom brand. To revitalise its brand both internally and externally, Swisscom works with the brand platform it created in 2020: ‘ready’. It expects its employees to demonstrate trustworthiness, commitment and curiosity in everything they do. Based on these foundations,   Swisscom presents itself as a reliable provider, builds on its position as market leader and opens up new business areas. Swisscom offers its customers the opportunity to make even easier use of the networked future and pre- pares them for this. The ‘ready’ brand platform expresses this positioning to the outside world, which has a positive effect on the brand perception measured. priced profiles with varying levels of service for each of the components. As the profiles differ mainly in terms of Internet speed, the number of TV channels available and the recording and replay functions, inOne can be easily adapted to individuals’ needs; new mobile devices such as smart watches, trackers and tablets are also easy to integrate. The ‘Swisscom blue’ product family, which combines all of Swisscom’s entertainment offerings, became well estab- lished on the market in the year under review. It ensures a high level of visibility and recognition, particularly via Swisscom blue TV and blue News. Swisscom blue aims to continue making the connection between the individual offerings clear, enables new offerings and makes the Swisscom brand even more appealing and dynamic. All this is in line with Swisscom’s one-brand strategy. Swisscom has also made its mark in terms of employer branding. The ‘My Internet App – MIA’ brings topics from the intranet to the mobile phones of all employees, thus strengthening identification with the company and help- ing employees to act as ambassadors for the brand. Trustworthiness and service remain important factors in confirming to existing customers that they made the right decision in opting for Swisscom and in winning new customers, while also helping to underscore the importance of Swisscom for Switzerland: Swisscom is part of a modern Switzerland, is always recognisable as a Swiss company and positions itself clearly and credibly through its stance on responsibility. All this rounds off the positive image of the Swisscom brand and enriches the Group’s diverse customer relationships. This is one reason why the reputation values achieved by Swisscom are exceptionally high for a company in the telecommu- nications sector by global standards. External assessments also confirm this image. In the ‘Switzerland 50’ study conducted by the consulting firm Brand Finance, Swisscom moved up one place in the list of the most valuable Swiss brands and is now ranked eighth. According to Brand Finance, the Swisscom brand is worth nearly CHF 5 billion. Products and services in Switzerland Residential Customers In order to offer the best communications experiences, Swisscom is constantly adjusting its portfolio of offer- ings to meet customer needs. It has further developed the successful inOne subscriptions and made them even more attractive. inOne includes a choice of TV, mobile and fixed-line telephony on top of the broadband con- nection. Customers can choose from three separately At the same time, Swisscom is continuously expanding the inOne mobile subscription. Thanks to inOne mobile go, customers benefit from unlimited use of their smart- phones in Switzerland. Swisscom is also the first pro- vider in Switzerland to include use within the EU/West- ern Europe in the subscription. Swisscom customers thus enjoy carefree calling, SMS messaging and surfing in the Internet in Switzerland and on most trips abroad. Plus, customers can add on devices such as tablets, lap- tops, smart watches, GPS trackers or a second smart- phone easily and inexpensively, all under their existing contract. Customers are increasingly keen to have devices of this kind with a mobile connection. Swisscom revised its offer for its younger customers in early 2021: Following the launch of inOne mobile go young, Swisscom customers not only surf and make phone calls across Europe without limits until their 30th birthday, but also at speeds of up to 2 Gbps. Home networking (smart home) for controlling lighting, music or alarm systems grew strongly in 2021. At the end of 2021, around 400,000 devices (+17%) were con- nected via the Swisscom Home app. The number of households that activated one or more devices in the app increased by 80%. In entertainment, Swisscom blue offers a comprehensive entertainment experience with TV, streaming and cinema along with the freedom of being able to access this content from anywhere. This new offering is based on blue TV. It is available both via the Swisscom Box as well as an app for smartphones and tablets, a web player for laptops at blue.ch and a smart TV app on Samsung and LG devices. The app is also avail- able with the complete blue+ offering on the TV boxes of UPC TV, Quickline, Wingo, Net+ and Apple TV. blue TV is thus not only accessible to Swisscom customers, but also to customers of other operators. The broadest blue TV package is still only available in com- bination with the Swisscom Box, because only the Swisscom Box integrates streaming offers from Netflix, Prime Video, Sky, OCS, DAZN, YouTube and Play Suisse in addition to traditional television and blue+ content (live sport, films and series). In addition, the Swisscom Box offers access to the MySports channels, which broadcast matches from the top Swiss ice hockey leagues, among other things. 37 s e c i v r e s d n a s t c u d o r p , s d n a r B | y r a t n e m m o C t n e m e g a n a M 38 Swisscom targets its other brands – Wingo, Coop Mobile 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 custom- ers straightforward attractive mobile, Internet and fixed-line services. Coop Mobile is exclusively a mobile subscription. Swisscom is constantly expanding its service offerings to meet the ever-changing needs of its customers. In addi- tion to the standard channels such as hotlines, chats and contact forms, customers can get in touch with Swisscom via WhatsApp, Facebook, Twitter and Google Business Messenger. In summer 2021, Swisscom also introduced automatic speech recognition on its hotline, thereby elim- inating the need to respond by pressing keys (after announcements such as ‘Select 1’). This approach con- nects customers even more quickly with the employees responsible for their concerns. Customers can go to the 115 Swisscom Shops to have damaged mobile devices repaired on site in eleven Swisscom Repair Centers. As a rule, repairs are carried out within 24 hours, or even in just three hours in the case of express repairs. myCloud offers Swisscom customers a Swiss solution for securely manag- ing and sharing their personal data such as photos, videos and documents. Thanks to the My Swisscom app, custom- ers always have an overview of their data and services and have the opportunity to view their bill, report a move, contact Swisscom or change other settings at any time. Business customers The digital transformation continues to be a key issue for companies and is changing their business processes, business models, customer experiences and working environments. The digital transformation depends on solid communication networks. Swisscom makes use of its many years of experience as an integrated telecom- munications and IT company in supporting its custom- ers through the digitisation process. It works together with customers to develop future-oriented solutions, supported by one of the most comprehensive ICT portfo- lios in Switzerland, which comprises cloud, outsourcing, workplace and IoT solutions, as well as mobile phone solutions for mobile working and communication, net- working solutions, location networking, business pro- cess optimisation, SAP solutions, security and authenti- cation solutions and a full range of services tailored to the banking industry. The company makes hospitals more efficient by providing them with support in the digitisation of their processes. It also helps health insur- ance companies by assuming the operation of their core IT systems. Swisscom is driving digitisation in the health- care sector by providing its networking solutions for ser- vice providers and implementing the electronic patient dossier system. inOne SME offers SME customers a standardised, yet cus- tomisable bundled package for Internet and telephony. SMEs with more complex needs can use Smart Business Connect, a scalable communication solution with collab- oration and networking features. Both bundled offerings include integrated services such as an Internet failover and can be supplemented with blue TV, blue TV Public or blue TV Host for hotels and homes. blue TV Host com- prises an info channel and an in-house channel and offers the best infotainment. IT infrastructure is increasingly becoming the lifeline of companies. SMEs are dependent on their IT functioning flawlessly throughout and being able to adapt easily and flexibly to market and company changes at any time. Swisscom thus provides SMART ICT, a complete IT outsourcing package, as a modular inte- grated solution. For this, Swisscom works together with regional IT partners to operate the ICT infrastructure and ensure customers’ data security in a professional manner. In the year under review, Swisscom also launched the Security Assessment and introduced the digital POS solu- tion Swisscom Business POS. Mobile subscriptions geared to the needs of business customers, IoT solutions or cloud- based software for mobile working and web services round off Swisscom’s SME portfolio. Swisscom gives SMEs access to information and directory services in the form of localsearch, which makes it easy to publish addresses, telephone numbers and detailed infor- mation on companies – on the Internet, via the mobile app and in the printed telephone directory (Local Guide). In addition, localsearch operates the local.ch and search. ch directories. The subsidiary Swisscom Broadcast AG pro- vides radio networks for broadcasting, security and pro- fessional mobile radio and makes around 450 transmitter sites available for co-use. Its offering also includes numer- ous video-related services, ranging from the provision of IPTV and Web TV platforms to sophisticated video sur- veillance solutions. It is supplemented by temporary ICT, media and entertainment services. Swisscom also offers infrastructure solutions and services for telecoms/ICT, transport, energy and companies or authorities in Swit- zerland via cablex Ltd. Wholesale Swisscom provides a variety of copper- and fibre-optic- based connectors as per customer requirements. With its Carrier Ethernet and Carrier Line services and lines leased under the TCA, Swisscom Wholesale offers tele- coms service providers high-quality, transparent con- nections tailored to their needs with a range of band- widths and interfaces and/or a flexible Ethernet service allowing tailored bandwidths and service level agree- ments. Swisscom Wholesale also provides basic offer- ings for the connection (interconnection) of telecoms systems and services, and supplies its customers with   infrastructure products such as the shared use of cable ducts and the mobile network. In addition, Swisscom Wholesale is opening up advanced business areas in the over-the-top (OTT) content field. Products and services in Italy In the residential customer segment, Fastweb has focused on transparency and simplicity in both the fixed and mobile markets. It introduced additional services in 2021 to further strengthen its Fixed-Mobile convergent busi- ness as well as its Go-To-Market approach. In the fixed net- work segment, Fastweb newly implemented 5G FWA (Fixed Wireless Access) in order to offer its customers bandwidths comparable to fibre-optic cables in locations where FTTH coverage is not yet available. Fastweb also launched the ‘NeXXt’ Internet box, which is the first Wi-Fi 6 router with the Alexa voice assistant built-in. This innovative Internet box transforms the Wi-Fi network into a home’s ‘digital heart’. In the mobile segment, Fastweb first launched 5G services in Milan, Bologna, Rome and Naples. It subsequently extended 5G coverage to Italy’s main city centres to provide the best possible data speeds to its mobile customers. This earned Fastweb top rankings in terms of customer satisfaction in the area of mobile communications – and the company held on to its leading position in terms of satisfaction among its fixed-network customers. Fastweb has maintained its leading position in the busi- ness customers segment, mainly in the corporate busi- ness segment, where Fastweb has a broadband market share of 34.5%. Fastweb’s market share grew to 46% within the public administration segment, partly as a result of the successful conclusion of national public framework contracts for wireline and ICT services. In order to expand its service offering in the ICT and secu- rity market, Fastweb acquired a 100% stake in Cutaway and a 70% stake in 7Layers in 2020. Fastweb has increased its autonomy through these two acquisitions. Not only is it now able to offer end-to-end cloud solutions, but is expanding its cybersecurity-related expertise. To take advantage of business opportunities in the public cloud, where telecommunications service providers have limited reach, partnering with a hyperscaler is essential. Fastweb 2021 has therefore partnered with global leader Amazon Web Services (AWS) to provide its customers with a multicloud offering through AWS’s Restack pro- gramme and further expand both its customer base and portfolio in the process. Fastweb also launched its own 5G mobile service for busi- ness customers, marking another step towards a fully con- vergent digital offering. In the wholesale market, Fastweb successfully provides ultra-fast broadband services to residential and business customers of Sky, WindTre, BT, Linkem, Tiscali and other companies. Customer satisfaction Swisscom Switzerland conducts segment-specific sur- veys and studies in order to measure customer satisfac- tion. It measures customer satisfaction twice a year, in the second and fourth quarters of the year. The Whole- sale segment measures customer satisfaction once a year. For all segments, the most important metrics are the extent to which customers are willing to recom- mend Swisscom to others and the related Net Promoter Score (NPS), which represents the emotional aspects of customer loyalty and reflects customers’ attitudes towards Swisscom. It is calculated from the difference between ‘promoters’ (customers who would strongly recommend Swisscom) and ‘critics’ (customers who would only recommend Swisscom with reservations or would not recommend the company). Swisscom also conducts the following segment-specific surveys and studies: ● ● ● The Residential Customers segment conducts repre- sentative 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 continuously survey buyers and users to determine product satisfaction, service and quality. The Business 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 inter- action 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 satisfac- tion along the entire customer experience chain. The results of these studies and surveys help Swisscom formulate measures to further improve its services and products. They also influence the variable perfor- mance-related component of remuneration for employ- ees and management. 39 Innovation and development Global competition, new technologies and changing customer needs are leading to an ever more rapid pace of change . Swisscom invests constantly in the development of new products and services for its customers and additionally optimises its processes to secure its long-term market position . Innovation as a key driver of business performance Innovation is central to the success of the company and to Swisscom’s strategic ambitions. Swisscom offers its customers the best customer experience by further developing products and improving customer journeys. With the help of analytical tools, artificial intelligence and automation, Swisscom designs processes to be even more efficient – and creates new growth by developing new products and business segments. Innovation also helps to differentiate the Swisscom brand, attract and retain top talent and counteract potential market dis- ruptions at an early stage. To this end, Swisscom works closely with partners, universities, start-ups and estab- lished technology companies. In its Silicon Valley office, Swisscom has been engaged in technology scouting and transfer for over 20 years. The Swisscom Ventures division networks Swisscom’s busi- ness units with start-ups in order to stimulate innova- tion. Since 2007, Swisscom has invested in more than 70 young companies – six to ten new start-ups every year with the volume of capital expenditure amounting to CHF  10 to 12 million per year. Swisscom also advises funds that invest an additional CHF 30 to 40 million. In the year under review, Swisscom made investments in nine new companies and twelve follow-up investments in existing holdings. SOPHiA GENETICS, another start-up funded by Swisscom, went public in 2021. This is the fourth IPO of a Swisscom Ventures start-up. Swisscom uses the Swisscom StartUp platform to support start- ups and entrepreneurs in Switzerland through consult- ing, discounts on IT and cloud services, expert know- how, coaching programmes, financing and community events. The Swisscom StartUp Challenge 2021 focused on the topic of cyber security. More than 80 start-ups and research teams worldwide applied for the promo- tional programme available for the winners of the StartUp Challenge. By the end of the Challenge, five win- ners had secured their spots in the week-long explora- tion programme, which included an exchange of experi- ences with Swisscom’s cyber security community as well as valuable contacts with mentors, potential partners and customers. Swisscom strengthens the internal inno- vation process through the internal intrapreneurship programme Kickbox, which provides employees with tools, a clear process and resources for innovation pro- jects. The programme is available to other companies via the spin-off rready AG. N See www.swisscom.ch/innovation t n e m p o l e v e d d n a n o i t a v o n n I | y r a t n e m m o C t n e m e g a n a M 40    Innovation focused on specific topics Swisscom is focusing its innovation activities on seven areas of innovation, which in turn directly help the Group achieve its goals: Analytics and artificial intelligence Entertainment Internet of Things Security Digital business Network and infrastructure Digital Swisscom Network and infrastructure Swisscom is focusing on a technology mix so that the whole of Switzerland can benefit from the best infra- structure. Its innovative architecture also enables it to renew all components from the core network to the con- nection. Swisscom is thus laying the foundations to ena- ble the rapid introduction of new services in the future and make new developments available to customers. Mobile communications New self-organising network (SON) algorithms auto- mate and improve the mobile network, for example, by automatically adjusting parameters, antenna inclina- tion, and power levels according to specifications. Before SON was introduced, network data was processed man- ually and resulted in 40 to 50 network adjustments per week. SON automated both the processing of network data and the creation of the improvement proposals, with some of those proposals being automatically uploaded to the Internet so that around 10,000 network adjustments are currently being made each week. Fixed network Broadband demand will continue to grow going for- ward. It has increased more than tenfold in ten years – with another growth surge prompted in particular by a heightened use of streaming services as well as an increase in video calls during the Covid-19 pandemic. For example, data usage per household in Europe increased by 40% within the space of one year. This is why Swisscom continually invests in network expansion and relies on both the latest technologies as well as digitisa- tion (such as that offered by software-defined network- ing). Similarly, network security and protection against cybercrime are issues that are gaining importance. In collaboration with the Swiss National Bank and the SIX Group, Swisscom and other telecommunications service providers collaborated in 2021 to launch the Secure Swiss Finance Network (SSFN). This network is based on the innovative SCION Internet architecture developed at the ETH; Swisscom has been providing financial support for its development for ten years now. SCION technol- ogy offers a very high level of protection against cyber- crime by operating the communications network sepa- rately from the conventional Internet and by clearly defining network users and data paths. Following a pilot project conducted within the SSFN framework, Swisscom is now offering products based on SCION technology to its business customers. Convergent products Swisscom developed a new device for Fixed Wireless Access (FWA) in 2021 that allows residential customers to use the mobile network as Internet access at home. Internet of Things (IoT) The Internet of Things (IoT) enables lucrative business models, automated processes, and novel customer interactions through smart products. Swisscom sup- ports companies through various formats to success- fully enter the IoT and to develop their systems further. Swisscom partnered with Microsoft to develop an advanced IoT solution for the Rhomberg Sersa Rail Group, a leading international full-service provider of 41 t n e m p o l e v e d d n a n o i t a v o n n I | y r a t n e m m o C t n e m e g a n a M 42 railway technology. The solution collects position and operating data from the equipment, analyses the data with the help of artificial intelligence and evaluates it. This approach to digitised railway construction is already enabling faster and correspondingly more economical work processes in several countries. At the same time, the IoT is becoming increasingly impor- tant to residential customers in their smart homes or on the move. The Swisscom Home app bundles smart helpers from ten manufacturers – like the Swisscom Smart Switch adapter, products from the Philips Hue family or devices from Sonos – and controls them centrally. Launched in 2021, the Home app offers even smarter rules for auto- mating homes and using TVs as smart home devices. In turn, users can conveniently use their TV remote control to operate the Swisscom Home app and play stations offered by blue radio on Sonos speakers. Analytics and artificial intelligence (AI) Swisscom makes targeted use of artificial intelligence (AI) to offer its customers even better service and opti- mise processes. It uses AI in its customer service and to detect network faults, for example. Since last year, cus- tomers have been navigating the automated voice dia- logue on the Swisscom hotline via AI-based speech rec- ognition instead of conventional numerical inputs through the keypad. This makes it possible for customer concerns to be identified via an automated process, clas- sified more quickly and for customers to be forwarded directly to the agent best qualified to assist them. Swisscom plans to expand the use of AI to customer ser- vice in other languages (French, Italian and English). Ongoing training of the AI application is improving the service continuously, so that certain customer enquiries can be resolved entirely via automated voice dialogue in the future. The same AI foundation is used in the Swisscom chatbot via webchat, Apple Business Chat (ABC), SMS and WhatsApp. The chatbot recognises cus- tomer enquiries and resolves them in an automated pro- cess whenever possible. If the chatbot is unable to resolve a case, it hands the case off to an agent. Cur- rently, the Swisscom chatbot already provides answers and solutions to around 180 different questions. In addi- tion, it is capable of resolving the ten most frequent cus- tomer enquiries completely independently. Security Security is part of Swisscom’s values and culture. Threats from the Internet are constantly growing in number and becoming increasingly intelligent. Many processes and business models in today’s companies are completely IT-based and thus become attractive targets for attackers. In addition, the use of multi-cloud and hybrid cloud solu- tions are making IT landscapes increasingly complex and vulnerable. By combining professional security services, skills, processes and tools, Swisscom offers highly effective security and thus the best possible protection for its cus- tomers, stakeholders and its own company. For business customers, Swisscom offers dedicated facilities through Managed Security Services to monitor and safeguard the infrastructure. In doing so, it adds new detection patterns to its Threat Detection & Response solutions and expands them to cover multi- and hybrid-cloud environments. In addition to the high level of protection that the Swisscom network offers every user as well as its premium virus pro- tection programme, Swisscom now also offers online iden- tity protection to its Residential Customers, which protects their data from being stolen by viruses, hackers or spyware. Swisscom has also launched an Internet legal protection insurance policy (Cyber Insurance): This policy helps cus- tomers in cases of online crime such as cyberbullying or cyberattacks and offers protection for online shopping. Entertainment Swisscom combined all its entertainment offerings under the new ‘Swisscom blue’ product family in 2020 and expanded the Swisscom blue offering even further during the year under review. blue TV is now available on LG devices, Apple TV and on Wingo’s TV box. A new sport hub on the TV makes sporting content even more enjoy- able as it gives users direct access to highlights from cur- rent sporting events. Swisscom also provides its custom- ers with a free media library entitled blue Play and launched the new Swisscom Box 21 in 2021, which fea- tures even lower energy consumption. Digital Swisscom In 2021, Swisscom again took further steps to digitise its network, jobs and processes, thereby consolidating its role as the leading service provider among Swiss telecommuni- cations providers. The new My Swisscom app passed the test carried out by trade magazine connect and came in first place with the highest score among all service apps operated by European telecommunications companies. This app delights some 500,000 customers a month with its revamped areas for billing and cost-related information (including a link to the TWINT payment sys- tem), a shopping area with personalised content, the weekly ‘Spin & Win’ competition and user-relevant noti- fications. Swisscom uses innovations from the field of digitisation on the customer channels it serves (such as in shops and call centres). During a pilot trial in 2021, for example, it successfully tested self-checkouts via the My Swisscom app in its own shop. In future, the self-checkout function will become an integral part of the My Swisscom app as one of the elements of the digital customer journey.   Digital business In the field of digital business innovation, Swisscom sup- ported developments within and outside its own com- pany in 2021, by setting up and further developing joint ventures with strategic partners and promoting intrapre- neurship. The Swisscom Digital Business Unit (DBU) focuses on digital services for SMEs via localsearch (Swisscom Directories Ltd), fintech activities and trust ser- vices. It is also continuously examining other action areas that could become relevant to its activities. Swisscom Directories Ltd (localsearch) Today, even small SMEs have to be competitive in the online world. The Swisscom subsidiary Swisscom Direc- tories Ltd (localsearch) offers efficient marketing prod- ucts that are geared to the needs of the SME segment: simple, inexpensive and time-saving solutions for the success of Swiss industry in the digital world. Thanks to localsearch products, SMEs can be found online, acquire new customers and retain existing ones. This is why localsearch brings the five principles of digital marketing to Swiss SMEs: seen, found, booked, bought and liked. In addition, localsearch operates the popular and well-used local.ch and search.ch directories. Fintech The fintech area of the Digital Business Unit focuses on the digital assets and trust services segments. In the dig- ital assets segment, Swisscom is working on the future of the Swiss financial infrastructure. It does this jointly with daura ltd and Custodigit Ltd (in which it holds a minority interest). Using the digital share platform of daura ltd, the existing share register can be easily digit- ised, capital increases can be processed quickly and inex- pensively, practically at the push of a button, and digital general meetings can be held. Custodigit Ltd offers regu- lated financial service providers an easy-to-integrate, secure platform to store and manage digital assets. Trust services Through its trust services, Swisscom, as a leading pro- vider of trust services, aims to digitally issue, verify, transmit and store high-quality documents such as con- tracts, certificates and register extracts. Swisscom sub- sidiary Ajila AG is already providing major support to numerous Swiss companies and administrations to help them completely digitise their document-based busi- ness processes. Customer identification and onboarding as well as contract signings often pose bottlenecks in the customer journey. However, fully digital processes call for tools that avoid media discontinuity and inte- grate seamlessly into companies’ offerings. This is ensured by Swisscom Trust Services, which is a leading provider in Switzerland and Europe of legally valid elec- tronic signature and identity solutions in accordance with the EU’s eIDAS Regulation and the Swiss Signatures Act ZertES. Swisscom transferred its existing trust ser- vices business division to the subsidiary Swisscom Trust Services Ltd in spring 2021. Intelligent automobile networking autoSense Ltd, a joint venture between Swisscom, AMAG and Zurich Insurance, focuses on the develop- ment of advanced automotive services. autoSense offers services related to the intelligent networking of cars for private individuals and companies as well as partner services. The portfolio of services includes a driver’s logbook, remote diagnosis with warnings in the event of engine problems, an app for cashless refuelling, pay-per-kilometre insurance and digital assistance for driving instructors and learners. The offering is con- stantly being expanded. Intrapreneurship Swisscom’s efforts to promote intrapreneurship gave rise to an innovation programme entitled Getkickbox. This software structures the company’s own innovation process and makes it easy to understand, thereby ena- bling easy access to this process for all employees. Whether it’s a flash of inspiration or a sophisticated, carefully conceived innovation, everything can be fed directly into the Kickbox. The Getkickbox software solu- tion gave rise to the new rready AG start-up during the year under review. rready’s goal is to promote employ- ees’ innovativeness, structure innovation processes and make innovation management globally scalable for companies in the process. 43 Financial review Alternative performance measures Swisscom uses key indicators defined in the Interna- tional Financial Reporting Standards (IFRS) throughout its entire financial reporting, as well as selected alterna- tive performance measures (APMs). These alternative measures provide useful information on the Group’s financial situation and are used for financial manage- ment and control purposes. As these measures are not defined under IFRS, the calculation may differ from the published APMs of other companies. For this reason, comparability across companies may be limited. The key alternative performance measures used at Swisscom for 2021 financial reporting are defined as fol- lows: Key performance measure  Adjustments  Swisscom definition  Significant items that, due to their exceptional nature, cannot be considered part of the Swisscom Group’s ongoing performance, such as termination benefits and significant positions in connection with legal cases or other non-recurring items . In addition, the application of changes in the IFRS accounting principles and standards can have an impact on comparability with the previous year if these principles are not applied retrospectively .  At constant exchange rates  Key performance measures considering currency effects (figures for 2021 are translated  at the 2020 exchange rate to calculate the currency effect) .  Operating income before depreciation and amortisation (EBITDA)  Operating income before depreciation, amortisation and impairment losses of property, plant and equipment, intangible assets and right-of-use assets, financial expense and financial income, result of equity-accounted investees and income tax expense .  Operating income (EBIT)  Capital expenditure  Operating free cash flow proxy  Free cash flow  Net debt  Operating income before depreciation and amortisation of property, plant and equipment, intangible assets and right-of-use assets, financial expense and financial income, result of equity-accounted investees and income tax expense .  Purchase of property, plant and equipment and intangible assets and payments for indefeasible rights of use (IRU) which are classified as leases under IFRS 16 . In general, IRUs are paid in full at the beginning of use .  Operating income before depreciation and amortisation (EBITDA) minus capital expenditure in property, plant and equipment, intangible assets and payments for indefeasible rights of use (IRU) and lease expense . Lease expense includes interest expenses on lease liabilities and depreciation of rights of use excluding depreciation of indefeasible rights of use (IRU) and impairment losses on right-of-use assets .  Cash flows from operating and investing activities excl . cash flows from the acquisition and sale of subsidiaries as well as income and expenses for equity-accounted investments and other financial assets .  Financial liabilities less cash and cash equivalents, listed debt instruments, certificates of deposit, derivative financial instruments held for hedging financial liabilities and other current financial assets .  Net debt incl. lease liabilities  Net debt and lease liabilities .  w e i v e r l a i c n a n i F | y r a t n e m m o C t n e m e g a n a M 44   Reconciliation of alternative performance measures in million CHF  Net revenue  Net revenue  Operating income before depreciation and amortisation (EBITDA)  EBITDA  Termination benefits  Gain from change in pension plan  Additions to provisions for legal proceedings in Switzerland  EBITDA adjusted  Capital expenditure  Capital expenditure in property, plant and equipment  and intangible assets  Payments for indefeasible rights of use (IRU)  Capital expenditure  In CHF million  Operating free cash flow proxy  Cash inflow from operating activities  Capital expenditure  Depreciation of right-of-use assets  Depreciation of indefeasible rights of use (IRU)  Impairment losses on right-of-use assets  Proceeds from finance leases  Change in deferred gain from the sale and leaseback of real estate  Change in operating assets and liabilities  Change in provisions  Change in defined benefit obligations  Gain on sale of property, plant and equipment  Expense for share-based payments  Revenue from finance leases  Interest received  Interest paid on financial liabilities  Dividends received  Income taxes paid  Operating free cash flow proxy  Free cash flow  Cash inflow from operating activities  Cash flow used in investing activities  Repayment of lease liabilities  Acquisition of subsidiaries, net of cash and cash equivalents acquired  Proceeds from sale of subsidiaries, net of cash and cash equivalents sold  Purchase of equity-accounted investees  Proceeds from sale of equity-accounted investees  Purchase of other financial assets  Proceeds from other financial assets  Free cash flow  2021 2020 Change reported Change at constant currencies 11,183 11,100 0.7% 0.6% 4,478 4,382 2 .2% 2 .0% 14 (60) 52 – – – 4,484 4,382 2.3% 2.2% 2,270 16 2,286 2,188 41 2,229 3 .7% –61 .0% 2.6% 3 .5% – 2.3% 2021 2020 Change 4,044 (2,286) (281) 23 1 (112) 11 (65) 73 9 10 (1) 120 (14) 81 (1) 279 1,891 4,044 (2,120) (259) 42 (1) 3 (149) 73 (120) 1,513 4,169 (2,229) (286) 24 7 (100) 16 (178) 22 (65) 10 (1) 101 (24) 93 (15) 309 1,853 4,169 (2,331) (287) 39 – 15 – 121 (20) 1,706 (125) (57) 5 (1) (6) (12) (5) 113 51 74 – – 19 10 (12) 14 (30) 38 (125) 211 28 3 (1) (12) (149) (48) (100) (193) 45           Summary In CHF million, except where indicated  Net revenue  Operating income before depreciation and amortisation (EBITDA)  EBITDA as % of net revenue  Operating income (EBIT)  Net income  Earnings per share (in CHF)  Operating free cash flow proxy  Capital expenditure  Net debt  Equity ratio  Full-time equivalent employees  Swisscom’s net revenue was up by 0.7% or CHF 83 million at CHF  11,183 million, while operating income before depreciation and amortisation (EBITDA) increased by 2.2% or CHF 96 million to CHF 4,478 million. Adjustments to post-employment benefits and provisions impacted EBITDA mainly in the Swiss core business, but these were balanced out across the Group as a whole. The consoli- dated net income of CHF  1,833 million is significantly higher than in the previous year (+20.0% or CHF 305 mil- lion), primarily due to non-recurring items in the financial result and the higher EBITDA. Payment of an unchanged dividend of CHF 22 per share for the 2021 financial year will be proposed to the Annual General Meeting. In the Swiss core business, net revenue decreased by 0.2% or CHF  17 million to CHF  8,233 million. The continuing competitive and price pressure led to a 3.3% drop in reve- nue from telecoms services to CHF 5,478 million. By con- trast, revenue in the solutions business with business cus- tomers increased by 5.0% or CHF 53 million. EBITDA in the Swiss core business decreased by 0.4% or CHF 13 million to CHF  3,453 million. On a like-for-like basis, there was an increase of 1.4%. The decline in revenue from telecoms services and the higher costs involved in services and sub- scriber acquisition and retention were offset by ongoing efficiency improvements. Revenue at the Italian subsidiary Fastweb increased by 3.8% or EUR 88 million to EUR 2,392 million. In the broadband business, Fastweb’s customer base remained close to stable over the year at 2.75 million despite fiercer competition, while in mobile communica- tions it grew by 26.1% to 2.47 million. EBITDA at Fastweb rose by 5.4% or EUR 42 million in local currency to EUR 826 million, as a result of the growth in revenue. 2021 11,183 4,478 40 .0 2,066 1,833 35 .37 1,891 2,286 5,689 43 .6 2020 11,100 4,382 39 .5 1,947 1,528 29 .54 1,853 2,229 6,218 39 .1 Change 0 .7% 2 .2% 6 .1% 20 .0% 19 .7% 2 .1% 2 .6% –8 .5% 18,905 19,062 –0 .8% Swisscom’s capital expenditure increased by 2.6% or CHF 57 million to CHF 2,286 million. Capital expenditure in the Swiss core business rose by 2.7% or CHF 43 million to CHF 1,642 million. Capital expenditure in broadband and mobile communications networks increased, while capital expenditure in other infrastructure decreased. Fastweb recorded an increase in capital expenditure of 2.4% or EUR 14 million to EUR 601 million as a result of higher customer-driven investments and higher invest- ment in the mobile network infrastructure. The operating free cash flow proxy increased by 2.1% or CHF 38 million to CHF 1,891 million. The improved oper- ating income before depreciation and amortisation (EBITDA) was partially offset by the higher capital expenditure. Net debt decreased by 8.5% to CHF 5,689 million, while the net debt/EBITDA after lease expense ratio fell from 1.5 to 1.4. The number of Swisscom employees decreased by 0.8% or 157 FTEs to 18,905 FTEs. In Switzerland, headcount decreased by 1.0% or 166 FTEs to 15,882 FTEs. Swisscom expects net revenue of CHF 11.1 to 11.2 bil- lion, EBITDA of around CHF  4.4 billion and capital expenditure of around CHF 2.3 billion for 2022. Subject to achieving its targets, Swisscom will propose payment of an unchanged, attractive dividend of CHF 22 per share for the 2022 financial year at the 2023 Annual General Meeting. w e i v e r l a i c n a n i F | y r a t n e m m o C t n e m e g a n a M 46 Segment results In CHF million, except where indicated  2021 2020 Change Net revenue  Residential Customers  Business Customers  Wholesale 1 Infrastructure & Support Functions  Intersegment elimination  Swisscom Switzerland  Fastweb  Other Operating Segments  Intersegment elimination  Revenue from external customers  Operating income before depreciation and amortisation (EBITDA)  Residential Customers  Business Customers  Wholesale  Infrastructure & Support Functions  Intersegment elimination  Swisscom Switzerland  Fastweb  Other Operating Segments  Reconciliation pension cost 2 Intersegment elimination  4,592 3,058 971 76 (464) 8,233 2,583 1,033 (666) 4,560 3,100 976 83 (469) 8,250 2,470 1,014 (634) 11,183 11,100 2,771 1,287 525 (1,131) 1 3,453 892 166 14 (47) 2,698 1,348 524 (1,104) – 3,466 840 184 (65) (43) Operating income before depreciation and amortisation (EBITDA)  4,478 4,382 0 .7% –1 .4% –0 .5% –8 .4% –1 .1% –0.2% 4 .6% 1 .9% 5 .0% 0.7% 2 .7% –4 .5% 0 .2% 2 .4% –0.4% 6 .2% –9 .8% 9 .3% 2.2% 1 Incl. intersegment recharges of services performed by other network providers. 2 Operating income of segments includes ordinary employer contributions as pension fund expense. The difference to the pension cost according to IAS 19 is recognised as a reconciliation item. Swisscom’s reporting focuses on the operating divisions Swisscom Switzerland and Fastweb. The other business divisions are grouped together under Other Operating Segments. Swisscom Switzerland comprises the cus- tomer segments Residential Customers, Business Cus- tomers and Wholesale, along with the Infrastructure & Support Functions business division. Fastweb is a tele- communications provider for residential and business customers in Italy. Other Operating Segments primarily comprises the Digital Business division, Swisscom Broad- cast Ltd (radio transmitters) and cablex Ltd (network construction and maintenance). For its services, the Infrastructure & Support Functions business division does not charge any network costs or management fees to other segments. All other services between the segments are charged at market prices. Network costs in Switzerland are budgeted, monitored and controlled by the Infrastructure & Support Func- tions segment, which is managed as a cost centre. For this reason, no revenue is credited to the Infrastructure & Support Functions segment within the segment reporting, with the exception of the rental and adminis- tration of buildings and vehicles. The results of the Resi- dential Customers, Business Customers and Wholesale segments thus correspond to a contribution margin before network costs. 47     w e i v e r l a i c n a n i F | y r a t n e m m o C t n e m e g a n a M 48 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  Direct costs  Indirect costs  Segment expenses  Segment result before depreciation and amortisation (EBITDA)  Margin as % of net revenue  Lease expense  Depreciation and amortisation  Segment result  Operating free cash flow proxy  Segment result before depreciation and amortisation (EBITDA)  Lease expense  EBITDA after lease expense (EBITDA AL)  Capital expenditure  Operating free cash flow proxy  Operational data in thousand and full-time equivalent employees  Fixed telephony access lines  Broadband access lines retail  TV access lines  Mobile access lines  Revenue generating units (RGU)  Broadband access lines wholesale  Headcount  2021 2020 Change 5,478 1,111 776 658 154 8,177 56 8,233 (1,826) (2,954) (4,780) 3,453 41 .9 (232) (1,475) 1,746 3,453 (232) 3,221 (1,642) 1,579 1,424 2,037 1,592 6,177 11,230 596 12,889 5,667 1,058 759 661 48 8,193 57 8,250 (1,772) (3,012) (4,784) 3,466 42 .0 (232) (1,509) 1,725 3,466 (232) 3,234 (1,599) 1,635 1,523 2,043 1,588 6,224 11,378 555 12,845 –3 .3% 5 .0% 2 .2% –0 .5% 220 .8% –0.2% –1 .8% –0.2% 3 .0% –1 .9% –0.1% –0.4% 0 .0% –2 .3% 1.2% –0 .4% 0 .0% –0.4% 2 .7% –3.4% –6 .5% –0 .3% 0 .3% –0 .8% –1 .3% 7 .4% 0 .3% Swisscom Switzerland’s net revenue decreased by 0.2% or CHF 17 million to CHF 8,233 million. The continuing competitive and price pressure led to a drop of 3.3% or CHF  189 million in revenue from telecoms services to CHF  5,478 million. Of this decline, CHF  105 million (–2.7%) was attributable to the Residential Customers segment and CHF 84 million (–4.9%) to the Business Cus- tomers segment. By contrast, revenue from the solu- tions business increased by 5.0% or CHF  53 million to CHF 1,111 million. The market is showing signs of saturation and competi- tive pressure in the area of mobile communications and fixed-network services. The subscriber base in mobile communications shrank by 0.8% or 47,000 year-on-year to 6.18 million. The number of postpaid lines increased by 128,000 year-on-year, while the number of prepaid lines decreased by 175,000. In the Residential Customers segment, the share of the secondary brand Wingo and third-party brands such as M-Budget Mobile and Coop Mobile in the postpaid portfolio increased from 19% to 23%. The number of broadband and TV connections remained virtually stable year-on-year, at 2.04 million broadband connections and 1.59 million for TV. As at the end of 2021, the Residential Customers segment had 2.52 million inOne customers. In this segment, inOne accounted for 66% of postpaid mobile lines and 81% of broadband connections. The number of fixed telephony access lines fell by 6.5% or 99,000 year-on-year to 1.42 million.       Segment expense fell by 0.1% or CHF  4 million to CHF  4,780 million. Direct costs increased by 3.0% or CHF 54 million to CHF 1,826 million. Costs for merchan- dise and services and costs for acquiring and retaining customers both went up. Indirect costs decreased by 1.9% or CHF  58 million to CHF  2,954 million. During 2021, indirect costs were also impacted by a CHF 52 mil- lion increase in provisions for litigation and an increase in provisions for headcount reduction. On a like-for-like basis, indirect costs fell by 4.0% or CHF 119 million, chiefly due to ongoing efficiency improvements. As a consequence of the acquisitions of Webtiser and JLS Dig- ital, the number of employees increased by 0.3% or 44 FTEs to 12,889 FTEs. The segment result before depreci- ation and amortisation decreased by 0.4% or CHF 13 mil- lion to CHF 3,453 million, but increased by 1.4% on a like- for-like basis. The decline in revenue from telecoms services and the higher costs associated with services and subscriber acquisition and retention were offset by ongoing efficiency improvements. Capital expenditure rose by 2.7% or CHF 43 million to CHF 1,642 million. Cap- ital expenditure on the expansion of broadband net- Fastweb works and mobile networks increased, while capital expenditure on other infrastructure decreased. As at the end of 2021, around 4.8 million Swiss homes and busi- nesses, or 90% of the total, were connected with ultra- fast broadband exceeding 80 Mbps. More than 3.9 mil- lion homes and businesses, or 72% of the total, enjoy even faster connections with speeds of more than 200 Mbps. There is currently a great deal of uncertainty shrouding the continued rolling out of the fibre-optic network to homes and businesses (FTTH), which Swisscom is imple- menting for the whole of Switzerland. In 2021, the Fed- eral Administrative Court confirmed the precautionary measures taken by the Competition Commission in December 2020, which partly call into question Swisscom’s network architecture. Until the situation is clarified, Swisscom is only building network elements relating to the P2P (point-to-point) network element (e.g. feeder to the home) or that are being built under cooperations. In EUR million, except where indicated  2021 2020 Change Net revenue and results  Residential Customers  Corporate Business  Wholesale  Revenue from external customers  Intersegment revenue  Net revenue  Segment expenses  Segment result before depreciation and amortisation (EBITDA)  Margin as % of net revenue  Lease expense  Depreciation and amortisation  Segment result  Operating free cash flow proxy  Segment result before depreciation and amortisation (EBITDA)  Lease expense  EBITDA after lease expense (EBITDA AL)  Capital expenditure  Operating free cash flow proxy  Operational data in thousand and full-time equivalent employees  Broadband access lines  Mobile access lines  Headcount  1,142 979 263 2,384 8 2,392 (1,566) 826 34 .5 (54) (590) 182 826 (54) 772 (601) 171 2,750 2,472 2,753 1,133 907 257 2,297 7 2,304 (1,520) 784 34 .0 (52) (577) 155 784 (52) 732 (587) 145 2,747 1,961 2,703 0 .8% 7 .9% 2 .3% 3.8% 14 .3% 3.8% 3 .0% 5.4% 3 .8% 2 .3% 17.4% 5 .4% 3 .8% 5.5% 2 .4% 17.9% 0 .1% 26 .1% 1 .8% 49        Fastweb’s net revenue rose by 3.8% or EUR  88 million year-on-year to EUR 2,392 million. Competition intensi- fied in the broadband business. Fastweb’s customer growth weakened in the course of the year. The cus- tomer base remained almost unchanged year-on-year, at 2.75 million (+0.1%). The number of mobile access lines increased by 26.1% or 511,000 year-on-year to 2.47 million, despite stiff competition. Bundled offers con- tinue to play an important role. 38% of broadband cus- tomers use a bundled offering combining fixed network and mobile. Residential customer revenue rose by 0.8% or EUR 9 million to EUR 1,142 million as a result of cus- tomer growth. Fastweb is also growing in the business customer market. Revenue from business customers Other Operating Segments In CHF million, except where indicated  Net revenue and results  Revenue from external customers  Intersegment revenue  Net revenue  Segment expenses  Segment result before depreciation and amortisation (EBITDA)  Margin as % of net revenue  Lease expense  Depreciation and amortisation  Segment result  Operating free cash flow proxy  Segment result before depreciation and amortisation (EBITDA)  Lease expense  EBITDA after lease expense (EBITDA AL)  Capital expenditure  Operating free cash flow proxy  Full-time equivalent employees  Headcount  The net revenue of the Other Operating Segments rose by 1.9% or CHF 19 million to CHF 1,033 million. This was due to higher revenue from construction services pro- vided by cablex. The segment result before depreciation and amortisation decreased by 9.8% or CHF 18 million to CHF  166  million, and the profit margin shrank accord- ingly to 16.1% (prior year: 18.1%). The headcount decreased by 7.1% or 251 FTEs to 3,263 FTEs, mainly as a result of the sale of the French subsidiary local.fr. was up by 7.9% or EUR  72 million to EUR  979 million, driven by higher revenue from public authorities. Reve- nue from wholesale business increased by 2.3% or EUR 6 million to EUR 263 million. The segment result before depreciation and amortisa- tion was 5.4% or EUR 42 million higher at EUR 826 million on the back of the growth in revenue. Capital expendi- ture increased by 2.4% or EUR 14 million to EUR 601 mil- lion as a result of higher customer-driven investments and higher investments in the mobile network infra- structure. Fastweb’s headcount increased by 1.8% or 50 FTEs to 2,753 FTEs as the company’s growth created a need for more personnel. 2021 2020 Change 431 602 1,033 (867) 166 16 .1 (11) (56) 99 166 (11) 155 (41) 114 445 569 1,014 (830) 184 18 .1 (12) (62) 110 184 (12) 172 (44) 128 –3 .1% 5 .8% 1.9% 4 .5% –9.8% –8 .3% –9 .7% –10.0% –9 .8% –8 .3% –9.9% –6 .8% –10.9% 3,263 3,514 –7 .1% Pension cost reconciliation and intersegment eliminations Net costs not allocated to the operating segments, which comprise pension cost reconciliation and intersegment elimination, fell by CHF 75 million year-on-year to CHF 33 million. The reconciliation item for pension cost is the dif- ference between total employer contributions and the cost under IFRS. The first half of 2021 included a non-re- curring expense reduction of CHF  60 million due to a change in plan. In addition, changes in assumptions (par- ticularly with regard to the discount rate) led to lower costs. Intersegment elimination relates to intragroup profits on capitalised services of other Group companies. w e i v e r l a i c n a n i F | y r a t n e m m o C t n e m e g a n a M 50       Depreciation and amortisation, non-operating results In CHF million, except where indicated  Operating income before depreciation and amortisation (EBITDA)  Depreciation and amortisation of property, plant and equipment and intangible assets  Depreciation of right-of-use assets  Operating income (EBIT)  Net interest expense on financial assets and liabilities  Interest expense on lease liabilities  Other financial result  Result of equity-accounted investees  Income before income taxes  Income tax expense  Net income  Attributable to equity holders of Swisscom Ltd  Attributable to non-controlling interests  Earnings per share (in CHF)  2021 4,478 (2,131) (281) 2,066 (60) (44) 200 (10) 2,152 (319) 1,833 1,832 1 35 .37 2020 4,382 (2,149) (286) 1,947 (69) (45) (38) 4 1,799 (271) 1,528 1,530 (2) Change 2.2% –0 .8% –1 .7% 6.1% –13 .0% –2 .2% 19.6% 17 .7% 20.0% 19 .7% 29 .54 19 .7% Swisscom’s net income rose by CHF 305 million or 20.0% to CHF 1,833 million, largely due to non-recurring items in the financial result and the higher EBITDA. Earnings per share rose accordingly from CHF 29.54 to CHF 35.37. Income before income taxes rose by 19.6%. The depreci- ation and amortisation of property, plant and equip- ment and intangible assets decreased by CHF 18 million or 0.8% year-on-year to CHF  2,131 million; these went down at Swisscom Switzerland and up at Fastweb. The non-recurring items in the financial result originate from the first quarter of 2021. As part of its strategic partner- ship with TIM, Fastweb transferred its stake in Flash- Fiber as a capital contribution to the newly established fibre-optic company FiberCop. This resulted in an upward revaluation of the participation recognised in the income statement of CHF  169 million. In addition, Swisscom realised a gain of CHF 38 million on the sale of its investment in Belgacom International Carrier Ser- vices. Income tax expense stood at CHF  319 million (prior year: CHF  271 million), which corresponds to an effective income tax rate of 14.8% (prior year: 15.1%). 51    Income taxes Income tax expense increased by CHF  48 million year- on-year, from CHF 271 million to CHF 319 million, corre- sponding to an effective income tax rate of 14.8% (prior year: 15.1%) The tax expense in 2021 was positively impacted by the low taxation of income from participa- tions and the capitalisation of deferred tax assets in con- nection with a change in Italian tax laws. Swisscom anticipates a future effective consolidated tax rate of 19.5%. The CHF 30 million decrease in income taxes paid to CHF  279 million was mainly due to the difference between the expense recorded and the payment of income taxes due. In CHF million, except where indicated  Switzerland Italy Other countries Total 2021 financial year  Income before income taxes  Income tax expense  Effective income tax rate  Income taxes paid  2020 financial year  Income before income taxes  Income tax expense  Effective income tax rate  Income taxes paid  1,827 339 18 .6% 264 1,669 242 14 .5% 299 306 (22) 19 2 –7 .2% 10 .5% 15 108 25 – 22 4 23 .1% 18 .2% 10 – 2,152 319 14 .8% 279 1,799 271 15 .1% 309 Swisscom operates principally in Switzerland and Italy, so the information on income taxes is divided into Swit- zerland, Italy and other countries. w e i v e r l a i c n a n i F | y r a t n e m m o C t n e m e g a n a M 52         Cash flows In CHF million  Operating income before depreciation and amortisation (EBITDA)  Lease expense  EBITDA after lease expense (EBITDA AL)  Capital expenditure  Operating free cash flow proxy  Change in net working capital  Change in defined benefit obligations  Net interest payments on financial assets and liabilities  Income taxes paid  Other operating cash flow  Free cash flow  Dividends paid to equity holders of Swisscom Ltd  Net expenditures for company acquisitions and disposals  Other changes  Decrease in net debt  The operating free cash flow proxy increased by 2.1% or CHF 38 million year-on-year to CHF 1,891 million. The higher operating income before depreciation and amortisation (EBITDA) was partially offset by the increased capital expenditure. Free cash flow decreased by 11.3% or CHF 193 million to CHF 1,513 million. Over- all, net debt decreased by 8.5% or CHF  529 million to CHF 5,689 million. Development of free cash flow   in CHF million   4,478  2021 4,478 (301) 4,177 (2,286) 1,891 (19) (9) (67) (279) (4) 1,513 (1,140) 105 51 529 2020 4,382 (300) 4,082 (2,229) 1,853 140 65 (69) (309) 26 1,706 (1,140) (54) 28 540 Change 96 (1) 95 (57) 38 (159) (74) 2 30 (30) (193) – 159 23 (11) The decrease in free cash flow was mainly attributable to the change in net working capital. Net working capi- tal went up by CHF  19  million in 2021 (prior year: decrease of CHF  140  million). The change in defined benefit obligations includes a one-off adjustment of CHF 60 million arising from a plan amendment in the first half of 2021, which is recognised in EBITDA. In 2021, net cash inflows from acquisitions and disposals included the proceeds of CHF 126 million from the sale of the participation in Belgacom International Carrier Services. Swisscom paid an unchanged dividend of CHF 22 per share in 2021. This is equivalent to a total dividend payout of CHF 1,140 million. –2,286  –301  1,891  –19  –279  –67  –13  1,513 EBITDA  Capital expenditure  Lease expense  Operating free cash flow proxy  Change in net working capital  Taxes paid  Interest payments  Other effects  Free cash flow 53              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  Swisscom Switzerland  Fastweb  Other Operating Segments  Elimination  Total capital expenditure  Thereof Switzerland  Thereof other countries  Capital expenditure as % of net revenue  2021 428 555 323 64 272 1,642 649 41 (46) 2,286 1,634 652 20 .4 Change –2 .3% 6 .9% 5 .6% –15 .8% 4 .6% 2.7% 3 .2% –6 .8% 7 .0% 2.6% 2 .4% 3 .0% 2020 438 519 306 76 260 1,599 629 44 (43) 2,229 1,596 633 20 .1 Capital expenditure climbed by CHF  57 million or 2.6% year-on-year to CHF 2,286 million, corresponding to 20.4% of net revenue (prior year: 20.1%). Swisscom Switzerland accounted for 72% of capital expenditure in 2021, and Fastweb for the remaining 28%. Capital expenditure incurred by Swisscom Switzerland increased by CHF  43 million or 2.7% year-on-year to CHF 1,642 million, corresponding to 19.9% of net revenue (prior year: 19.4%). Swisscom invested CHF  53 million more than in the previous year in the expansion of fibre-optic broadband in the fixed network and in the expansion of the mobile network. Fastweb increased its capital expenditure by CHF 20 mil- lion or 3.2% to CHF 649 million. Measured in local cur- rency, capital expenditure increased by EUR 14 million or 2.4% to EUR  601 million as a result of higher custom- er-driven investments and higher investments in the mobile network infrastructure. The ratio of capital expenditure to net revenue consequently fell to 25.1% (prior year: 25.5%). w e i v e r l a i c n a n i F | y r a t n e m m o C t n e m e g a n a M 54   Net asset position In CHF million  Property, plant and equipment  Intangible assets  Goodwill  Right-of-use assets  Trade receivables  Receivables from finance leases  Trade payables  Provisions  Deferred gain on sale and leaseback of real estate  Other operating assets and liabilities, net  Net operating assets  Net debt  Lease liabilities  Defined benefit assets and obligations, net  Income tax assets and liabilities, net  Equity-accounted investees and other non-current financial assets  Equity  Equity ratio  31.12.2021 31 .12 .2020 Change 10,771 10,725 1,714 5,157 2,134 2,315 99 (1,600) (1,149) (95) (438) 18,908 (5,689) (2,017) (13) (835) 459 10,813 43 .6 1,745 5,162 2,138 2,132 87 (1,525) (1,216) (106) (240) 18,902 (6,218) (1,988) (795) (643) 233 9,491 39 .1 46 (31) (5) (4) 183 12 (75) 67 11 (198) 6 529 (29) 782 (192) 226 1,322 Operating assets Net operating assets were unchanged at CHF 18.9 billion, of which CHF  12.5 billion or 66% was attributable to property, plant and equipment and intangible assets. 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. Follow- ing the repurchase, the mobile, fixed-network and solu- tions businesses were organisationally combined and merged to create the new company Swisscom (Switzer- land) 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 0.5 billion). The total car- rying amount of Fastweb’s net assets is EUR 3.4 billion (CHF 3.5 billion). Post-employment benefits Defined benefit obligations recognised in the consoli- dated financial statements are measured in accordance with IFRS provisions. Net defined benefit obligations were CHF 13 million. These were down steeply year-on- year, by CHF  782 million. The main reasons behind this were an increase in the interest rate used for the valua- tion, a change in the actuarial bases (in particular the life expectancy assumption) and a positive return on plan assets. Under the Swiss accounting standards applicable to the pension fund (Swiss GAAP FER), there is a funding surplus of CHF 2.0 billion, corresponding to a coverage ratio of 120% on the plan’s assets of CHF 13.1 billion. The main reasons for the difference of CHF 2.0 billion com- pared with the measurement according to IFRS are two- fold. Firstly, the use of different assumptions, in particu- lar the interest rate for discounting future pension benefits, has a net effect of CHF 1.4 billion. Secondly, the valuation method treats future salary increases, contri- bution rates scaled by age group and early retirement differently, resulting in a net effect of CHF 0.6 billion. The ordinary pension cost recognised in personnel expenses in accordance with IFRS is significantly higher than the actual contributions made. The difference between the contribu- tion payments and the IFRS expense is not included in the segment results; instead it is recognised in the reconcili- ation to EBITDA according to the consolidated financial statements. In 2021, a change in the pension plan resulted in a positive non-recurring effect in EBITDA of CHF 60 mil- lion and contributed to a positive overall reconciliation position of CHF 14 million (prior year: negative position of CHF 65 million). 55   Net debt Net debt and the net debt to EBITDA ratio are presented both with and without classification of leases as finan- cial liabilities. For credit rating purposes, rating agencies include lease liabilities in the calculation of net debt. How- In CHF million  Ratio of net debt/EBITDA after lease expense  Debenture bonds  Bank loans  Private placements  Other financial liabilities  Total financial liabilities  Cash and cash equivalents  Listed debt instruments  Derivative financial instruments for financing  Other current financial assets  Net debt  EBITDA after lease expense (EBITDA AL)  Ratio of net debt/EBITDA after lease expense  Ratio of net debt incl. lease liabilities/EBITDA  Net debt  Lease liabilities  Net debt incl. lease liabilities  EBITDA  Ratio of net debt incl. lease liabilities/EBITDA  ever, for the financial target of the Federal Council’s financing structure, leases are not classified as financial liabilities or part of net debt. 31.12.2021 31 .12 .2020 5,564 6,110 488 151 242 6,445 (401) (278) (19) (58) 5,689 4,177 1.4 5,689 2,017 7,706 4,478 1.7 484 151 297 7,042 (340) (271) (79) (134) 6,218 4,082 1.5 6,218 1,988 8,206 4,382 1.9 The ratio of net debt including lease liabilities to EBITDA was 1.7 at the end of 2021 (prior year: 1.9). Without clas- sification of the leases as financial liabilities, the ratio of net debt to EBITDA after lease expense was 1.4 (prior year: 1.5). Both ratios reflect an improved debt situation compared with the previous year. Swisscom’s goal of maintaining its single-A credit rating was achieved. The limit on net debt set by the Federal Council in the finan- cial targets of 2.1x EBITDA after lease expense was also complied with. 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 liabilities. The share of fixed-inter- est-bearing financial liabilities is 88%. At the end of 2021, the average interest expense on all financial liabilities was 0.9%, and the average residual term to maturity was 6.2 years. Swisscom also has two lines of credit totalling CHF 2.2 billion, which have not been used. Financial liabil- ities with a term of one year or less stood at CHF 0.6 bil- lion at 31 December 2021. w e i v e r l a i c n a n i F | y r a t n e m m o C t n e m e g a n a M 56     Equity Swisscom has equity of CHF  10.8 billion (prior year: CHF 9.5 billion) and an equity ratio of 43.6% (prior year: 39.1%). As the combined total of net income of CHF 1.8 billion and other comprehensive income of CHF 0.6 bil- lion was higher than the dividend payment of CHF 1.1 billion, equity increased by CHF 1.3 billion. The foreign currency differences arising from the translation of for- eign subsidiaries are recognised in equity. As a result of the weaker euro, cumulative currency translation losses increased by CHF 0.1 billion to CHF 1.9 billion (after tax) in 2021. 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 in the 2021 separate financial statements of Swisscom Ltd was CHF 4.8 billion. The dif- ference of CHF 6.0 billion versus the equity reported in the consolidated balance sheet is largely due to earnings retained by subsidiaries and different accounting meth- ods. Under accounting and measurement rules in 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 2021, Swisscom Ltd held distributable reserves of CHF 4.7 billion. Financial outlook Key figures or as noted  Net revenue  Swisscom Group  Switzerland 2 Fastweb  Operating income before depreciation and amortisation (EBITDA)  Swisscom Group  Switzerland 2 Fastweb  Capital expenditure  Swisscom Group  Switzerland 2 Fastweb  2021 reported 2022 outlook 3 CHF 11,183 mn CHF 8,600 mn EUR 2,392 mn CHF 4,478 mn CHF 3,586 mn EUR 826 mn CHF 2,286 mn CHF 1,637 mn EUR 601 mn CHF 11.1–11.2 bn CHF 8 .5–8 .6 bn ~ EUR 2 .5 bn 1 ~ CHF 4.4 bn ~ CHF 3 .5 bn EUR 0 .8–0 .9 bn ~ CHF 2.3 bn ~ CHF 1 .7 bn ~ EUR 0 .6 bn 1 EBITDA after lease expense (EBITDA AL) 2021: CHF 4,177 mn; EBITDA AL guidance 2022: ~ CHF 4.1 bn 2 Swisscom w/o Fastweb 3 Exchange rate CHF/EUR 1.04 (2021: CHF/EUR 1.08) Swisscom expects net revenue of CHF 11.1 to 11.2 bil- lion, EBITDA of around CHF  4.4 billion and capital expenditure of around CHF 2.3 billion for 2022. Subject to achieving its targets, Swisscom will propose payment of an unchanged, attractive dividend of CHF 22 per share for the 2022 financial year at the 2023 Annual General Meeting. 57            Value-oriented business management Key performance indicators for planning and managing business operations are revenue, operating income before depreciation and amortisation (EBITDA) and cap- ital 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 its peers (European telecommunications companies) and with its own figure for the prior year. The members of the Board of Directors and Group Exec- utive 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 mini- mum 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  Enterprise value  Market capitalisation  Net debt incl . lease liabilities  Defined benefit assets and obligations, net  Income tax assets and liabilities, net  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  31.12.2021 31 .12 .2020 26,657 7,706 13 835 (459) 2 34,754 4,478 7.8 24,715 8,206 795 643 (233) 1 34,127 4,382 7.8 Swisscom’s enterprise value increased by 1.8% or CHF  0.6 billion to CHF  34.8 billion in 2021. The main reason for this was the increase of CHF 1.9 billion in the company’s market capitalisation to CHF  26.7 billion. The ratio of enterprise value to EBITDA remained at 7.8 on higher EBITDA. Swisscom’s relative market valua- tion is therefore well above the average for comparable companies in Europe’s telecoms sector. The higher rela- tive valuation is supported by Swisscom’s solid market position and attractive dividend. In addition, the lower interest rates and lower income tax rates in Switzer- land compared with other European countries have a positive effect. w e i v e r l a i c n a n i F | y r a t n e m m o C t n e m e g a n a M 58    Statement of added value Thanks to a modern, high-performance network infra- structure and a comprehensive, needs-driven service offering, Swisscom makes an important contribution to Switzerland’s competitiveness and economic success and generates direct added value. In CHF million  Added value  Net revenue  Capitalised self-constructed assets and other income  Direct costs  Other operating expense 1 Lease expense  Switzer- land Other countries 2021 Total Switzer- land Other countries 2020 Total 8,579 2,604 11,183 8,614 2,486 11,100 459 (1,840) (1,184) (243) 139 (939) (661) (58) 598 362 (2,779) (1,784) (1,845) (1,147) (301) (244) 104 (885) (641) (56) 466 (2,669) (1,788) (300) Depreciation and amortisation 2 (1,500) (635) (2,135) (1,531) (618) (2,149) 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  (4,308) (2,154) (6,462) (4,344) (2,096) (6,440) 4,271 450 4,721 4,270 390 2,412 320 269 17 126 4,847 2,681 2,428 317 337 1,141 60 628 4,847 224 14 4,660 (110) 4,550 2,652 331 1,141 69 357 4,550 1 Other operating expense: excl. taxes on capital and other taxes not based on 4 Employees: employer contributions are reported as pension cost, rather than as income. expenses according to IFRS. 2 Depreciation and amortisation: excl. amortisation of acquisition-related intangi- 5 Public sector: current income tax expense, capital taxes and other taxes not ble assets such as brands or customer relations. 3 Other non-operating result: financial result excl. net interest expense, result of equity-accounted investees, and amortisation of acquisition-related intangible assets. based on income. Excl. payments for VAT and mobile communication frequencies. 6 Company: incl. changes in deferred income taxes and defined benefit obligations. Of the consolidated operating added value of CHF 4.7 bil- lion, 90% or CHF  4.3  billion was generated in Switzer- land. Operating added value in Switzerland was unchanged year-on-year. The value added per FTE was CHF  267,000 (prior year: CHF 263,000). In addition to direct added value, purchases from suppliers provide significant indirect added value for Switzerland’s econ- omy. Taking into account capital expenditure instead of depreciation and amortisation, the purchasing volume in the Swiss business was around CHF 4.4 billion in 2021, with added value of approximately 60% or CHF 2.7 bil- lion contributed by suppliers in Switzerland. 59             Capital market Swisscom achieved its financial targets in 2021 by consistently implementing its strategy, meaning it has succeeded in creating added value for shareholders once again this year . Thanks to its ratings of A (stable) from Standard & Poor’s and A2 (stable) from Moody’s, Swisscom is one of the best-rated telecommunications companies in Europe . Swisscom share Swisscom’s market capitalisation as at 31 December 2021 amounted to CHF 26.7 billion (previous year: CHF 24.7 bil- lion). 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 com- pany’s share capital. Share performance 2021   in CHF   580 530 480 430 515    . 0 2 2 1 1 3 . . 1 2 1 0 1 3 . . 1 2 2 0 8 2 . . 1 2 3 0 1 3 . . 1 2 4 0 0 3 . . 1 2 5 0 1 3 . . 1 2 6 0 0 3 . . 1 2 7 0 1 3 . . 1 2 8 0 1 3 . . 1 2 9 0 0 3 . . 1 2 0 1 1 3 . . 1 2 1 1 0 3 . . 1 2 2 1 1 3 . Swisscom  SMI (indexed)  Stoxx Europe 600 Telcos (in CHF, indexed)  The Swiss Market Index (SMI) rose by 20.3% compared with the previous year. The Swisscom share price increased by 7.9% to CHF 514.60, lagging somewhat behind the performance of the Stoxx Europe 600 Tele- communications Index (+11.5% in EUR). The average daily trading volume decreased by 34% year on year to 118,509 shares. The total trading volume of Swisscom shares in 2021 was CHF 30.1 billion. N See www.swisscom.ch/shareprice t e k r a m l a t i p a C | y r a t n e m m o C t n e m e g a n a M 60  Shareholder return On 05 April 2021, Swisscom paid out an ordinary divi- dend of CHF 22 per share. Based on the closing price at the end of 2020, this equates to a return of +4.6%. Taking into account the increase in the share price, the Swisscom share achieved a total shareholder return (TSR) of +12.9% in 2021. The TSR for the SMI was +23.7% and for the Stoxx Europe 600 Telecommunications Index +16.1% in EUR. Shareholder structure 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). Confederation  Natural persons  Institutions  Number of shareholders Number of shares 1 26,394,000 69,275 4,853,898 2,772 10,484,218 Unregistered shareholdings  – 10,069,827 31.12.2021 Share in % 51 .0% 9 .4% 20 .2% 19 .4% Number of shareholders Number of shares 1 26,394,000 69,308 4,817,812 2,833 10,891,021 – 9,699,110 31 .12 .2020 Share in % 51 .0% 9 .3% 21 .0% 18 .7% Total  72,048 51,801,943 100.0% 72,142 51,801,943 100.0% The majority shareholder as at 31 December 2021 was the Swiss Confederation, which is obligated by current law to hold the majority of the capital and voting rights. As at 31 December 2021, some 19% of the shares were held in unregistered shareholdings, as in the previous year. Analysts’ recommendations Investment specialists analyse Swisscom’s business per- formance, results and market situation on an ongoing basis. Their findings and recommendations offer valua- ble indicators for investors. Twenty-four analysts regu- larly publish studies on Swisscom. At the end of 2021, 17% of the analysts issued a buy rating for the Swisscom share, 50% a hold rating and 33% a sell rating. The aver- age price target at 31 December 2021, according to the analysts’ estimates, was CHF 502 per share. Dividend policy Swisscom pursues a return policy with a stable dividend. At the forthcoming Annual General Meeting on 30 March 2022, the Board of Directors will propose an unchanged ordinary dividend of CHF 22 per share for the 2021 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 35 billion to its shareholders: CHF 23 billion in dividend payments and CHF 12 billion in capital reduc- tions and share buybacks. Swisscom has paid out a total of CHF 455 per share since the initial public offering. Together with the overall increase in share price of CHF 176 per share, this amounts to an average annual total return of 5.1%. 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 sin- gle-A credit rating. To avoid structural downgrading, Swisscom endeavours to raise financing at the level of Swisscom Ltd. Swisscom aims to have a broadly diversi- fied debt portfolio. This involves paying particular atten- tion to balancing maturities and diversification of currencies. instruments, markets and financing Swisscom’s solid financial standing gave it unrestricted access to money and capital markets again in 2021. 61       s k s i R | y r a t n e m m o C t n e m e g a n a M 62 Risks Changes in competition, customer behaviour, technologies and the regulatory framework are drivers of risk . Swisscom uses opportunities and minimises risks by adapting its business model, innovating and undergoing transformation . Its risk management system is responsible for protecting the value of the company based on measures introduced at an early stage . Risk situation Sales in the core business of Swisscom are under pres- sure from intense competition. New offerings in the areas of digitisation and IT services, such as cloud ser- vices, IT security and IoT solutions, are intended to com- pensate at least in part for sagging revenue from the core business. Market developments result in changes to the business model and demand a profound transfor- mation of Swisscom’s own company and efficiency improvement. The key risk factors are addressed below. The risk factors arising in the supply chain are described in the Sustainability Report. N See www.swisscom.ch/cr-report2021 Risk factors Competitive dynamics in the telecommunications market Competitive dynamics are currently being driven by infra- structure providers and service providers without their own network infrastructure. Swisscom is countering this pressure and the decline in revenue from the traditional telecommunications business by transforming the com- pany and through constant innovation. Megatrends such as increasing connectivity, customisation and demographic change are indelibly shaping and altering our society and the economy and have a long-term impact on the activities of Swisscom. Swisscom conducts a comprehensive exter- nal environment analysis at least once a year in order to identify potential disruptions at an early stage, harness the opportunities these create and counter the risks in good time. It evaluates the future trends and developments identified by the analysis: for example, to categorise new, potentially disruptive developments and to model possible scenarios in a timely manner. Swisscom also produces reg- ular analyses of the economic and regulatory environment. It also examines the activities of global Internet corpora- tions in greater depth to identify relevant changes and respond with appropriate measures. To respond to changes in the market, Swisscom consistently focuses on customer needs when transforming its own company and optimises or adapts its processes and organisation. Policy, regulation and compliance The manner in which regulations are implemented entails risks for Swisscom, which could have an adverse impact on the company’s financial position and results of operations. Sanctions by the Competition Commis- sion could also reduce Swisscom’s operating results and cause reputational damage to the company. Finally, excessively high political demands threaten to funda- mentally undermine the current competitive system. Swisscom’s wide range of business activities, coupled with the complexity of the applicable regulations, calls for an effective compliance management system (CMS). Swisscom’s central CMS covers the entire Group. It mon- itors group-wide adherence to laws relating to anti-cor- ruption, money laundering, banking, data protection and confidentiality, antitrust and competition, telecom- munications, stock exchange and product safety. Increasing bandwidth in the access network Customer demand for broadband access is growing rap- idly, as is the growing popularity of mobile devices and IP-based (smart- (Internet Protocol-based) services phones, IPTV, OTTs, etc.). Swisscom faces tough competi- tion 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 expan- sion this necessitates calls for major investments. To mit- igate financial risks and ensure optimum network cover- age, network expansion is geared towards population density and customer demand. Swisscom also enters into partnerships for network expansion. Substantial risks would arise if Swisscom were forced to spend more on network expansion than planned or if projected long- term earnings were to fall. Swisscom minimises the risks by adapting the broadband expansion of the access net- work to changing conditions and technical opportunities on an ongoing basis. Health and the environment In the year under review, claims were again made that electromagnetic radiation (e.g. from mobile antennas or mobile handsets) is potentially harmful to health. Under the terms of the Ordinance on Non-Ionising Radiation (ONIR), Switzerland has adopted the precautionary prin- ciple. It has introduced limits for base stations that are ten times stricter than both those prescribed by the WHO and the legal provisions in neighbouring countries and they apply to all mobile frequencies (including 5G). The public’s wary attitude towards 5G, in particular when it comes to mobile communication antennas, is impeding Swisscom Switzerland’s network expansion. Even without stricter legislation, public concerns about the effects of electromagnetic radiation on the environ- ment 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 changes in climatic parameters (e.g. increased average or extreme temperatures, more intense precipi- tation, melting permafrost), changes in the legal frame- work and other economic or 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 sta- tions and local exchanges. The analysis of the risks posed by climate change reflects the various emissions scenar- ios and is largely based on the official reports of the Fed- eral Office for the Environment (FOEN) on climate change Impacts and CH2018 Climate Scenarios). (CH2014 Swisscom also publishes its annual climate report and takes into account the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) in the areas of governance and strategy. Swisscom made progress in 2021 in its efforts to implement the recom- mendations of the TCFD. N See www.swisscom.ch/climatereport2021 Competitive dynamics and regulation in Italy The competitive dynamics in Italy carry risks that have a detrimental impact on Fastweb’s strategy and could jeopardise projected revenue growth as a result. In par- ticular, risks may arise in connection with the entry of new competitors in the market. Fastweb is countering this pressure by constantly adapting its services, organi- sation, processes and partnerships. Changes in the legal and regulatory environment can have a negative impact on business activities and thus also on the value of the company. Business interruption Usage of Swisscom Switzerland’s and Fastweb’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 activities) and the ever-growing complex- ity 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 suppli- ers 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’s complex IT architecture entails risks during both the implementation and operating phases. These risks have the potential to delay the rollout of new ser- vices, increase costs and impact competitiveness. The transformation is being closely monitored by the Group Executive Board. The area of Internet security has devel- oped and changed with immense speed with respect to technology, economics and society and their interde- pendencies. Constant innovations and the capacity they create go hand in hand with new opportunities as well as new risks. Even if the rise in security threats posed by cyber attacks is making prevention increasingly difficult, the objective is to identify potential risks at an early stage, systematically document them and take appropri- ate steps to sustainably reduce them. 63 t r o p e R n o i t a r e n u m e R d n a e c n a n r e v o G e t a r o p r o C Corporate Governance _______ 1 Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 2 Group structure and shareholders . . . . . . . . . . . . . . . . . . . 66 3 Capital structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 4 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 5 Group Executive Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 6 Remuneration, shareholdings and loans . . . . . . . . . . . . . 88 7 Shareholders’ participation rights . . . . . . . . . . . . . . . . . . . . 88 8 Change of control and defensive measures . . . . . . . . . . 90 9 Auditor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 10 Information policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 11 Financial calendar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 Remuneration Report ________ 1 Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 2 Remuneration of the Board of Directors . . . . . . . . . . . . . 95 3 Remuneration of the Group Executive Board . . . . . . . . 98 4 Other remuneration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 Report of the statutory auditor . . . . . . . . . . . . . . . . . . . . . . . . . 105 65 Corporate Governance Corporate governance is a fundamental component of Swisscom’s corporate policy . Swisscom is committed to effective and transparent corporate governance as part of its effort to deliver long-term value . 1 Principles 2 Group structure and shareholders 2.1 Group structure Operational Group structure Swisscom Ltd is a holding company and responsible for the overall management of the Swisscom Group. It com- prises five Group divisions: Group Business Steering, Group Human Resources, Group Strategy & Board Ser- vices, Group Communications & Responsibility and Group Security, which have staff functions. The Board of Directors delegates day-to-day business management to the CEO of Swisscom Ltd. The Group Executive Board is comprised of the CEO of Swisscom Ltd and the heads of the Group divisions Group Business Steering (CFO) and Group Human Resources (CPO), plus the heads of the business divisions Residential Customers, Business Cus- tomers, and IT Network & Infrastructure. The Group also includes the Digital Business division and Group compa- nies such as the Italian subsidiary Fastweb S.p.A. Società. 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 manage- ment. They incorporate the interests of Swisscom share- holders, customers, employees and other interest groups into their decisions. To this end, the Board of Directors practises effective, transparent corporate governance, which is characterised by clearly assigned responsibilities 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 organisa- tion 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 divi- sions allows the Board of Directors to identify trends at an early stage and to adjust its corporate governance to new requirements as and when necessary. Swisscom’s principles and rules on corporate governance are set out primarily in the company’s Articles of Incorpo- ration, 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 consideration 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 e c n a n r e v o G e t a r o p r o C | t r o p e R n o i t a r e n u m e R d n a e c n a n r e v o G e t a r o p r o C 66  The operational Group structure is shown in the organisational chart below. Our Customers Residential Customers Business Customers IT, Network & Infrastructure Group Business Steering Group Human Resources Digital Business Fastweb Group Communications & Responsibility Group Strategy & Board Services Group Security CEO Swisscom Ltd Internal Audit Group Executive Board Board of Directors Organigram Swisscom Ltd The business activities are carried out by Swisscom Group companies. Strategic and financial management 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 Fastweb S.p.A. are classified as strategic companies. The members of the Board of Directors and the manag- ing directors of the strategic companies are appointed by the Board of Directors of Swisscom Ltd and elected via the competent statutory bodies. The Board of Directors of Swisscom (Switzerland) Ltd comprises the CEO of Swisscom Ltd as Chairman, the CFO of Swisscom Ltd and the Head of Business Customers. The CEO of Swisscom Ltd is responsible for the executive manage- ment 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 Chair, together with the CFO of Swisscom Ltd, the Head of IT, Network & Infrastruc- ture as well as one representative of Swisscom’s man- agement. The Board of Directors is supplemented by an independent external member and the delegate of the Board of Directors, who has been empowered with the executive management of the company. Fastweb con- trols two subsidiaries. All other Swisscom Group com- panies are assigned to a Group division or business divi- sion for management purposes. The members of the Board of Directors of the other Group companies and their managing directors are appointed by the CEO of Swisscom Ltd. In some cases, external parties also serve as members of the Board of Directors. A list of Group companies, including company name, registered office, percentage of shares held and share capital, is provided in Note 5.4 to the consolidated financial statements. D See report pages 161–162 For financial reporting purposes, Swisscom’s business divi- sions and Group companies are allocated to individual seg- ments. Further information on segment reporting can be found in the Management Commentary. D See report page 44 Listed company Swisscom Ltd is a company governed by Swiss law and has its registered office in Ittigen (Canton of Berne, Switzer- land). It is listed in the Standard for Equity Securities, 67 e c n a n r e v o G e t a r o p r o C | t r o p e R n o i t a r e n u m e R d n a e c n a n r e v o G e t a r o p r o C 68 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; for ADR: ISIN: CH008742519; CUSIP 871013108). Within the framework of the programme, the Bank of New York Mellon Corporation issues the American Depositary 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 2021, the stock market capitalisation of Swisscom Ltd was CHF 26,657 million. There are no other listed companies in the Swisscom Group. 2.2 Major shareholders Pursuant to Article 120 of the Federal Act on Financial Market Infrastructures and Market Conduct in Securities and Derivatives Trading (Financial Market Infrastruc- tures Act; FMIA), there is a duty to disclose a sharehold- ing 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 Infrastructure Ordinance FINMA Financial Market (FMIO-FINMA). Under the FMIO-FINMA, nominee com- panies which are not able to independently decide how voting rights are exercised are not required to disclose when any of their shareholdings reach, exceed or fall below these limits. As shareholders are only required to notify the company and SIX Swiss Exchange if their shareholdings reach, exceed or fall below one of the lim- its indicated above, the current percentage of shares actually held by significant shareholders may at any time differ from the percentage most recently disclosed. The shareholding notifications can be viewed on the web- site of the SIX Exchange Regulation at https://www. six-exchange-regulation.com/en/home/publications/ significant-shareholders.html In the 2021 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 4.02% of the voting rights in Swisscom Ltd on 31 December 2021. The Swiss federal government (Swiss Confederation), as majority shareholder, held 50.95% of the issued share capital of Swisscom Ltd on 31 December 2021, which was unchanged from the previous year. The Telecommu- nications Enterprise Act (TEA) provides that the Swiss Confederation shall hold the majority of the share capi- tal and voting rights of Swisscom Ltd. The Federal Coun- cil defines the goals which the Confederation as princi- pal shareholder of the company aims to achieve in the next four years. As a rule, stakeholder talks with the Chairman of the Board, the CEO and government repre- sentative are conducted three times a year by the responsible federal government departments – the Fed- eral Department of the Environment, Transport, Energy and Communications (DETEC) and the Federal Depart- ment of Finance (FEF) – led by the Head of DETEC. During these talks, the participants examine the status of tar- get achievement. After the close of the business year, target achievement is assessed by the Federal Council. N See www.swisscom.ch/ziele_2018-2021 N See www.swisscom.ch/ziele_2022-2025 2.3 Cross-shareholdings No cross-shareholdings exist between Swisscom Ltd and other public limited companies. 3 Capital structure 3.1 Capital The share capital of Swisscom Ltd has remained unchanged since 2009, totalling CHF 51,801,943. There is no authorised or conditional share capital. Informa- tion concerning equity can be found in the financial statements of Swisscom Ltd. D See report page 178 3.2 Shares, participation and profit-sharing certificates All of the shares issued by Swisscom Ltd are fully paid-up registered shares with a par value of CHF 1. Each share entitles the holder to one vote. Shareholders may only exercise their voting rights, however, if their shares 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 divi- dend. There are no preferential rights. Registered shares of Swisscom Ltd are not issued in certif- icate form but are held as book-entry securities in the depositary holdings of SIX SIS AG, up to a maximum limit determined by the Swiss Confederation. Shareholders may at any time request confirmation of the registered shares they hold. However, they have no right to request the printing and delivery of certificates for their shares (registered shares with no right to printed certificates). The holder of an ADR possesses the rights listed in the Deposit Agreement (e.g. the right to issue instructions for the exercise of voting rights and the right to divi- dends). The Bank of New York Mellon Corporation, which acts as the ADR depositary, 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. Swisscom Ltd has issued neither participation nor prof- it-sharing certificates. Further information on the shares is available in Section 7 ‘Shareholders’ participation rights’ as well as in the Man- agement Commentary. D See report page 88 D See report page 60 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 Incorporation 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 Corporate Governance report, ‘Voting right restric- tions and proxies’. N See www.swisscom.ch/basicprinciples D See report page 88 Swisscom has issued special regulations governing the registration of trustees and nominees in the share regis- ter. To facilitate the tradability of the company’s shares on the stock exchange, the Articles of Incorporation (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 supervision by a banking or financial market supervisory authority or otherwise provide the neces- sary 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 resolu- tion of the Annual General Meeting, for which an abso- lute majority of valid votes cast is required. In accord- ance with this provision, the Board of Directors has issued regulations governing the entry of trustees and nominees in the Swisscom Ltd share register. N See www.swisscom.ch/basicprinciples The entry of trustees and nominees as shareholders with voting rights is subject to application and the con- clusion of an agreement by which the trustee or nomi- nee acknowledges the applicable entry restrictions and disclosure obligations as binding. Trustees and nominees related in terms of capital or voting rights either con- tractually 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 con- solidated financial statements. D See report pages 124–127 Swisscom does not issue options on registered shares of Swisscom Ltd to its employees. 69 e c n a n r e v o G e t a r o p r o C | t r o p e R n o i t a r e n u m e R d n a e c n a n r e v o G e t a r o p r o C 70 4 Board of Directors 4.1 Members of the Board of Directors At the Annual General Meeting on 31 March 2021, the Chairman of the Board of Directors, Hansueli Loosli, stepped down from the Board of Directors, having served the maximum permitted twelve-year term of office. Information about him is available in the 2020 corporate governance report. The Annual General Meeting elected Michael Rechsteiner as the new Chairman of the Board of Directors and Guus Dekkers as a new Board member. N See www.swisscom.ch/report2020 As of 31 December 2021, the Board of Directors com- prised the following non-executive members: Name  Michael Rechsteiner 1 Roland Abt  Alain Carrupt  Guus Dekkers 2 Frank Esser  Barbara Frei  Sandra Lathion-Zweifel  Anna Mossberg  Renzo Simoni 3 Nationality  Switzerland  Switzerland  Switzerland  Netherlands  Germany  Switzerland  Switzerland  Sweden  Switzerland  Year of birth Function  Taking office at the Annual General Meeting 1963 1957 1955 1965 1958 1970 1976 1972 1961 Chairman  Member  Member, representative of the employees  Member  Deputy Chairman  Member  Member, representative of the employees  Member  2019 2016 2016 2021 2014 2012 2019 2018 Member, representative of the Confederation  2017 1 Since 31 March 2021 Chairman. 2 Elected to the Board of Directors on 31 March 2021. 3 Designated by the Swiss Confederation. 4.2 Education, professional activities and affiliations Key details of the career and qualifications of each mem- ber of the Board of Directors are provided in the sum- mary 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 com- panies and no more than ten additional mandates in non-listed companies. In total, they may not perform more than ten such additional mandates. These restric- tions on the number of mandates do not apply to man- dates 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 man- dates held by order of Swisscom is limited to ten, while the number of mandates in interest groups, charitable associations, institutions and foundations, and employee retirement-benefit foundations is limited to seven. The Board members are obligated to consult the Chairman of the Board of Directors prior to accepting new man- dates and to immediately advise him of any changes in their professional lives. If the Chairman is concerned, he shall consult or inform the Deputy Chairman. The Chair- man or Deputy Chairman, as the case may be, then informs the Board of Directors about these changes and potential conflicts of interest. The issue of affiliations is addressed with the Board of Directors as part of an annual internal training session that focuses on stock exchange regulations. Details on the regulation of exter- nal mandates, in particular the definition of the term ‘mandate’ and information on other mandates that do not fall under the aforementioned numerical restric- tions for listed and non-listed companies, are set out in Article 8.3 of the Articles of Incorporation. One member of the Board of Directors exceeds the limits set for man- dates in listed companies during a transitional period of six months until the mandate is relinquished at the end of the term of office. N See www.swisscom.ch/basicprinciples The members of the Board of Directors are required to order their personal and business affairs and take what- ever measures necessary to ensure that conflicts of interest are avoided as far as possible. Should a conflict of interest nevertheless arise, the member concerned must inform the Chairman of the Board of Directors and/or the Deputy Chairman immediately, for the atten- tion of the Board of Directors. The members of the Board of Directors and the Chairman are obliged to abstain from negotiations in business which conflict with their own interests or with the interests of natural or legal persons closely associated with them. Michael Rechsteiner Master of Science in Mechanical Engineering, Zurich Federal Institute of Technology (ETH); Master of Business Administration, University of St. Gallen (HSG) Career history 1990–2000 various roles at ABB Kraftwerke AG, most recently General Manager of ABB Power Generation Asia, Kuala Lumpur, Malaysia; 2000–2002 Head of Power Plants, Vice President Project Execution, Alstom Power; 2003–2007 Chief Operating Officer, Sultex; 2007–2015 various roles at Alstom Power, most recently CEO and Senior Vice President Power Service; 2015–2017 General Electric (GE) Officer and Vice President of Global Product Lines at GE Power Services; April 2017–March 2021 man- agerial responsibility for GE Power Services Europe and CEO of GE Gas Power Europe; since April 2021 external advisor to General Electric (Switzerland) GmbH; since March 2021 Chairman of the Board of Directors of Swisscom Ltd Mandates in non-listed companies Until March 2021 President of the Executive Board, Gen- eral Electric (Switzerland) GmbH, Baden, Switzerland; until January 2021 member of the Supervisory Board, GE Power Sp. z o.o., Warsaw Mandates in interest groups, charitable associations, institutions and foundations, and employee retirement-benefit foundations Member of the Board of Trustees of General Electric Switzerland Pension Fund Mandates by order of Swisscom Since September 2021 Member of the Board of Directors and the Board Committee of economiesuisse Other significant activities Until April 2021 Member of the Board of Swissmem 71 e c n a n r e v o G e t a r o p r o C | t r o p e R n o i t a r e n u m e R d n a e c n a n r e v o G e t a r o p r o C 72 Roland Abt Doctorate in Business Administration (Dr. oec.) University of St. Gallen (HSG) Alain Carrupt Swiss school-leaving certificate in economics Career history 1985–1987 CFO of a group of companies with opera- tions in the areas of IT and real estate; 1987–1996 Eter- nit Group (later Nueva Group): 1987–1991 Head of Con- trolling, 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), 2004–2016 CFO, Georg Fischer AG, and member of the Group Executive Board Career history 1978–1994 PTT companies, most recently as Head of Administration at the telecoms directorate in Sion; 1994–2000 PTT Union, Central Secretary of the Tele- communications sector; 2000–2010 Communications Union: 2000–2002 Deputy General Secretary and Head of Personnel, 2003–2008 Vice Chairman, 2008–2010 Chairman; 2011–2016 syndicom Trade Union: 2011– 2013 Joint Chairman, 2013–February 2016 Chairman Mandates – Mandates in listed companies Member of the Board of Directors of Bystronic AG (for- merly Conzzeta AG), Zurich Other significant activities President of the association Opération Boule à Zéro, Bel- faux Mandates in non-listed companies Mandates for Aargau Verkehr AG (AVA), Aarau: Chairman of the Board of Directors of Aargau Verkehr AG, Aarau, Chairman of the Board of Directors of Limmat Bus AG; other mandates: Chairman of the Board of Directors of Eisenbergwerk Gonzen AG, Sargans; Member of the Board of Directors of Raiffeisenbank Zufikon Mandates in interest groups, charitable associations, institutions and foundations, and employee retirement-benefit foundations President of the Board of Trustees of Fürsorgestiftung Conzzeta, Zurich Other significant activities – Guus Dekkers Master’s degree in Computer Science, Radboud University Nijmegen; Master of Business Administration, School of Management Rotterdam Career history 1990–2001 various functions, mainly in the area of busi- ness process optimisations, Volkswagen AG, Wolfsburg; 2002–2005 Head of Information Technology Europe & International and Vice President, Johnson Controls Auto- motive; 2005–2007 Chief Information Officer and Vice President, Siemens VDO Automotive AG, Germany; 2008–2016 Chief Information Officer, Airbus Group, France; since April 2018 Chief Technology Officer, Tesco PLC, London Frank Esser Graduate in Business Administration, Doctorate in Economics (Dr. rer. pol.) Career history 1988–2000 Mannesmann Deutschland, most recently from 1996 member of the Executive Board of Mannes- mann Eurokom; 2000–2012 Société Française du Radi- otéléphone (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 Viv- endi Group Mandates in listed companies Chairman of the Board of Directors of SES S.A., Luxem- bourg Mandates – Other significant activities – Other significant activities Member of the Advisory Board of the Fraunhofer Insti- tute for Secure Information Technology, Darmstadt; Member of the Advisory Board of the National Research Center for Cybersecurity, Darmstadt 73 e c n a n r e v o G e t a r o p r o C | t r o p e R n o i t a r e n u m e R d n a e c n a n r e v o G e t a r o p r o C 74 Barbara Frei Degree in Mechanical Engineering, ETH; Doctorate (Dr. sc. techn.), ETH Zurich; Master of Business Administration, IMD Lausanne Sandra Lathion-Zweifel Degree in Law, attorney-at-law; Master of Laws from the University of Zurich and Columbia University, New York; trader’s licence from SIX Swiss Exchange Career history 1998–2016 ABB Group in various managerial positions, including 2008–2010 ABB s.r.o., Prague, Country Man- ager; 2010–2013 ABB S.p.A., Sesto San Giovanni (Italy), Country Manager and Regional Manager Mediterra- nean; 2013–2015 Drives and Control Unit, Managing Director; 2016 Head of Strategic Portfolio Reviews for the Power Grids division; since December 2016 Schneider Electric, Paris: Chair of the Executive Committee of Schneider Electric GmbH, Germany, in which capacity she was also Zone President Germany until June 2017; July 2017–December 2018 Zone President Germany, Austria and Switzerland, January 2019–April 2021 Exec- utive Vice President Europe Operations, since May 2021 Executive Vice President Industrial Automation Mandates in listed companies Member of the Board of Directors, Swiss Prime Site, Olten Mandates in non-listed companies Mandates for Schneider Electric Group: until July 2021 Chairman of the Board of Directors of Schneider Nordic Baltic A/S; until July 2021 Member of the Board of Direc- tors of Schneider Electric Industries SAS, Rueil Malmaison Other significant activities – Career history 2005–2010 attorney-at-law for Mergers & Acquisitions, Lenz & Staehelin law firm, Zurich; 2010–2014 Head of Financial Products, Legal & Compliance, Credit Suisse AG, Zurich; 2014–2018 Head of department in the Asset Management division of the Swiss Financial Market Supervisory Authority (FINMA); 2018–2019 counsel for Banking & Finance, Lenz & Staehelin law firm, Geneva Mandates in listed companies Until December 2021 Member of the Board of Directors, Banque Cantonale du Valais, Sion Mandates in non-listed companies Since December 2021 Member of the Board of Directors of the Raiffeisen Switzerland cooperative, St. Gallen Other significant activities Member of the Advisory Board of the Capital Markets and Technology Association, Geneva; since March 2021 Member of the Executive Board of swissVR, Rotkreuz Anna Mossberg Executive MBA for Growing Companies, Stanford Business School, Palo Alto, USA; Master of Science in Industrial Engineering and Management, Luleå University of Technology Career history 1996–2010 Telia: in various roles, including Vice Presi- dent and Head of Business & Product Management, Head of Internet, Consumer Segment, Director Data Ser- vices, Product & Services; 2010 Bahnhof AB, CEO; 2011 Stanley Securities AB, Senior Advisor; 2012–2014 Deutsche Telekom, Senior Vice President Strategy and Portfolio Management; 2015–March 2018 Google Ltd, Sweden, member of the Management Team; March 2021 to February 2022 Managing Director Silo AI, Sweden Mandates in listed companies Member of the Board of Directors, Swedbank AB, Stock- holm; until April 2022 member of the Board of Directors, Schibsted ASA, Oslo; member of the Board of Directors, Orkla ASA, Oslo; since July 2021 member of the Board of Directors, Byggfakta AB, Stockholm (listed since 15 Octo- ber 2021) Other significant activities – Renzo Simoni Doctorate in Mechanical Engineering (Dr. sc. techn.), Zurich Federal Institute of Technology (ETH) Career history 1985–1989 technical assistant in Civil Engineering and Building Construction, Gruner Group; 1989–1995 scien- tific assistant, Federal Institute of Technology in Zurich (ETH Zurich); 1995–1998 lecturer (part-time), ETH Zurich; 1995–2002 Civil Engineering Developer Consulting Ser- vices, Ernst Basler + Partner AG; 2002–2006 member of the Management Board, most recently as Co-CEO, Hel- bling Beratung + Bauplanung AG; 2007–2017 Chairman of the Management Board, AlpTransit Gotthard AG Mandates in non-listed companies Member of the Board of Directors, Gruner AG, Basel; member of the Board of Directors, Rhätische Bahn AG, Chur; Chairman of the Board of the Psychiatric Hospital of the University of Zurich; Chairman of Verkehrsbe- triebe Luzern AG, Lucerne Other significant activities – 75 e c n a n r e v o G e t a r o p r o C | t r o p e R n o i t a r e n u m e R d n a e c n a n r e v o G e t a r o p r o C 76 4.3 Composition of the Board of Directors The Board of Directors regularly examines its composi- tion and plans the appointments to the committee posi- tions on an annual basis. The members of the Board of Directors possess comprehensive expertise in relevant areas and broad experience. The following diagrams show breakdowns of the Board of Directors by competency, term of office and gender. Board of Directors by career, experience, skills and knowledge   In % and (number of members) as of 31 December 2021  Telecommunications, IT, Media and/or entertain- ment  Innovation, technology and/or digitisation  Residential Customers (B2C)  Business Customers (B2B)  International business experience  33% (3)  56% (5)  33% (3)  78% (7)  67% (6)  Finance, Risk Management and/or M&A  89% (8)  Strategy and/or Transfor- mation  Human Resources  Legal  Sustainability  Leadership position in top management  Member of the Board of Directors in stock ex- change listed companies  89% (8)  89% (8)  11% (1)  44% (4)  89% (8)  55% (5)  Sector  Specialization  Role  Board of Directors by length of term of office   In % and (number of members) as of 31 December 2021  44% (4)  44% (4)  under 4 years  4 to 7 years  8 to 12 years  11% (1)  Board of Directors by gender   In % and (number of members) as of 31 December 2021  67% (6) 33% (3) Male  Female  The Board of Directors of Swisscom Ltd thus already complies with the requirements of Swiss company law regarding gender representation on the boards of direc- tors of listed companies. 4.4 Independence To establish the independence of its members, the Board of Directors applies the criteria set out in the Swiss Code of Best Practice for Corporate Governance published by economiesuisse. Independent members are thus under- stood to mean non-executive 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 Direc- tors 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 Telecommunications Enterprise Act (TEA). Customer and supplier relationships exist between the Swiss Con- federation and Swisscom. Details of these are provided in Note 6.2 to the consolidated financial statements. D See report page 166 4.5 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 Incorporation of Swisscom Ltd, the Swiss Confederation is entitled to appoint two representatives to the Board of Directors of Swisscom Ltd. At present, one representative is appointed. Under the terms of the TEA, employees must be granted appropriate representation on the Board of Directors of Swisscom Ltd. The Articles of Incorporation also stipulate that the Board of Directors is to include two employee representatives and that employees are entitled to make proposals for their employee repre- sentatives. Alain Carrupt was nominated as employee representative by the syndicom trade union and Sandra Lathion-Zweifel was nominated as employee represent- ative by the transfair staff association. The employee representatives are elected by the shareholders at the Annual General Meeting upon a motion proposed by the Board of Directors, as are the other members of the Board of Directors with the exception of the representa- tive of the Swiss Confederation, who is appointed by the Federal Council. The Annual General Meeting elects the members and the Chairman of the Board of Directors as well as the members of the Compensation Committee individually for a term of one year. The term of office runs until the conclusion of the following Annual General Meeting. Re-election is permitted. If the office of the Chairman is vacant or the number of members of the Compensation Committee falls below the minimum number of three members, the Board of Directors nominates a chairman from among its members or appoints the missing mem- ber(s) of the Compensation Committee to serve until the conclusion of the next Annual General Meeting. Other- wise, the Board of Directors constitutes itself. The maxi- mum term of office for members elected by the Annual General Meeting, as a rule, is a total of twelve years. This flexible arrangement makes it possible for shareholders to extend the maximum term of office in exceptional cases if special circumstances exist. Members who reach the age of 70 retire from the Board as of the date of the next Annual General Meeting. The maximum term of office and age limit for the representative of the Swiss Confederation are determined by the Federal Council. 4.6 Succession planning The Board of Directors regularly examines whether its members’ qualifications, abilities and experience are still aligned with the Board’s needs and requirements. The Board commences the evaluation of potential new members early on so as to ensure that it has access to the expertise it requires, is well-diversified and can nom- inate new members as needed in the future. As a guide for the ad-hoc Nomination Committee, the Board of Directors formulates a requirements profile specifying the qualifications, skills and experience that are desired. On the basis of this, the Nomination Committee evalu- ates potential candidates and makes recommendations to the Board of Directors for the election of new Board members by the Annual General Meeting. The Board of Directors submits a motion to the Annual General Meet- ing regarding the approval of new Board members. 4.7 Ongoing development and continuing education 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 its individual committees generally assess their own performance and efficiency once a year in December or January on the basis of a survey sent out in advance. This self-evaluation asks them to assess both the work of the respective body as well as the performance of the Board or Committee Chairman. The evaluation additionally covers the composition, organisation and work processes of the body, responsibilities under the Organisational Rules and the priorities and goals for the reporting year. The Board of Directors and the Committees meet to discuss the results of the survey and formulate goals and measures for the fol- lowing/current year. The Chairman also conducts a one-on- one annual discussion with each member in which possibil- ities for further individual development are addressed. Once a year, a one-day mandatory training course is held, most recently in January 2021 and 2022. At least four times per year, the members of the Board of Direc- tors also have the opportunity to explore in depth the upcoming challenges facing the Group and business divisions as well as the subsidiaries as part of ‘company experience days’. The majority of the Board members regularly take advantage of these opportunities. In addi- tion, all the members of the Board of Directors attend the Swisscom Group’s annual management meeting whenever possible. 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, the business and the current oper- ational challenges. In addition, they are introduced to topics related to the Italian subsidiary Fastweb S.p.A. and attend task-related training courses. 77 4.8 Chairman of the Board of Directors Hansueli Loosli stepped down as Chairman on 31 March 2021 after reaching the twelve-year term limit. The Annual General Meeting selected Michael Rechsteiner as his successor. 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 una- vailable or there is a potential conflict of interest, the Vice-Chairman, Frank Esser, takes over the Chairman’s tasks and responsibilities. N See www.swisscom.ch/basicprinciples 4.9 Internal organisation and modus operandi The Board of Directors is responsible for the strategic and financial management of Swisscom and for moni- toring the company’s executive management. As the supreme governing body of the company, it has deci- sion-making authority unless such authority is granted to the Annual General Meeting by virtue of law. The Board of Directors is usually convened once per month by the Chairman (except in July and November) for a one-to-two-day meeting. Further meetings are convened as business requires (ad-hoc meetings). In the event that the Chairman is hindered, the meeting is con- vened by the Vice-Chairman. The Chairman sets the agenda. Any Board member may request the inclusion of further items on the agenda. The Board members receive the agenda and supporting documentation approxi- mately ten days prior to the meetings, so that they can Total  Average duration (in hours)  Participation:  Michael Rechsteiner, Chairman 1 Hansueli Loosli, Chairman 2 Roland Abt  Alain Carrupt  Guus Dekkers 3 Frank Esser, Deputy Chairman  Barbara Frei  Sandra Lathion-Zweifel  Anna Mossberg  Renzo Simoni  prepare. The CEO, the CFO and the Head of Group Strat- egy & Board Services always attend the Board meetings as well. At every Board meeting, the Chairman of the Board, the CEO and the Chief Personnel Officer report on particular events, on the general course of business and major business transactions, as well as on any measures that have been implemented. To further ensure appro- priate reporting to the members of the Board, the Board of Directors invites members of the Group Executive Board and senior employees of Swisscom as well as audi- tors and other internal and external experts, as neces- sary, to all its meetings as dictated by the specific issues being addressed. Furthermore, as a result of the network outages experienced in July 2021, the CEO, in consulta- tion with the Board of Directors, commissioned an external follow-up audit on the audits related to last year’s network faults. The duties, responsibilities and modus operandi of the Board of Directors and its conduct with respect to con- flicts of interest are defined in the Organisational Rules and in the rules governing the standing committees. N See www.swisscom.ch/basicprinciples The following table gives an overview of the Board of Directors’ meetings and circular resolutions in 2021. The Board of Directors held individual meetings via videocon- ference due to the measures implemented by the author- ities as a result of the Covid-19 pandemic. Members were connected to individual meetings via videoconference. Meeting days Ad-hoc meetings Circular resolutions 13 07:21 2 02:10 13 3 13 13 10 13 13 13 12 13 2 2 2 2 2 2 2 2 2 2 1 – 1 1 1 1 1 1 1 1 1 1 1 Since 31 March 2021 Chairman. 2 Left the Board of Directors on 31 March 2021. 3 Elected to the Board of Directors on 31 March 2021. e c n a n r e v o G e t a r o p r o C | t r o p e R n o i t a r e n u m e R d n a e c n a n r e v o G e t a r o p r o C 78    4.10 Committees of the Board of Directors 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 2021: Board of Directors Audit & ESG Reporting Committee 1 Roland Abt 2 Sandra Lathion-Zweifel Renzo Simoni Michael Rechsteiner Compensation Committee Barbara Frei 2 Roland Abt Frank Esser Renzo Simoni Michael Rechsteiner 3 Finance Committee Frank Esser 2 Alain Carrupt Guus Dekkers Anna Mossberg Michael Rechsteiner 1 Called Audit Committee by the end of 2021 2 Chairman/chairwoman of the Board of Directors committee 3 No voting rights The Board of Directors has three standing committees (Finance, Audit & ESG Reporting and Compensation) and one ad-hoc committee (Nomination) tasked with carry- ing out detailed examinations of matters of importance. In accordance with the rules governing the committees, they usually each 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 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 lat- est committee meetings at the next meeting of the Board of Directors. All members of the Board of Direc- tors also receive copies of all meeting minutes from the Finance Committee and the Audit & ESG Reporting Committee. The minutes of the Compensation Commit- tee and the Nomination 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 exam- ple, in connection with setting up or dissolving signifi- cant Group companies, acquiring or disposing of signifi- cant shareholdings, and entering into or terminating strategic alliances. The Committee also acts in an advi- sory capacity on matters relating to major investments and divestments and examines specific current issues in depth. The Finance Committee has the ultimate deci- sion-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 and responsibilities 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 busi- ness requires, but as a rule once per quarter within the framework of a half-day meeting. The CEO, the CFO and the Head of Group Strategy & Board Services always attend the meetings of the Finance Committee. In 2021, all the meetings were also attended by other members of the Group Executive Board, members of the Manage- ment Boards of strategic Group companies or project managers, depending on the agenda items. The Finance Committee did not call on any external consultants dur- ing the reporting year. 79  The following table gives an overview of the Finance Committee’s meetings and circular resolutions in 2021. The Committee held individual meetings via videocon- ference due to the measures implemented by the authorities as a result of the Covid-19 pandemic. Mem- bers were connected to individual meetings via video- conference. Meetings Ad-hoc meetings Circular resolutions Total  Average duration (in hours)  Participation:  Frank Esser, Chairman  Alain Carrupt  Guus Dekkers 1, 2 Anna Mossberg  Michael Rechsteiner  Hansueli Loosli 3 5 03:40 5 5 4 5 5 1 – – – – – – – – – – – – – – – – 1 Elected to the Board of Directors on 31 March 2021. 2 Since 31 March 2021 member of the Committee. 3 Left the Board of Directors on 31 March 2021. Audit & ESG Reporting Committee The Audit & ESG Reporting Committee handles all busi- ness relating to financial management (for example, accounting, financial controlling, financial planning, tax strategy and financing), assurance (risk management, the internal control system, compliance and internal audit), data protection and security as well as external audit. It also handles matters dealt with by the Board of Directors that call for specific financial expertise (dividend policy, for example). In 2021, the Committee also addressed the topic of ESG (environment, social and governance) reporting in detail. The Committee is the Board of Directors’ most important controlling instrument and is responsible for monitoring the Group-wide assurance functions. It formu- lates 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 and responsibilities are set out in the rules of pro- cedure of the Audit & ESG Reporting Committee. N See www.swisscom.ch/basicprinciples The Audit & ESG Reporting Committee is composed of four independent members. The Chairman of the Com- mittee is an expert in the financial field, and the major- ity of the members are experienced in finance and accounting. The Audit & ESG Reporting Committee is convened by the Chairman or at the request of a Com- mittee member as often as business requires, but at least once per quarter and one additional time in December. The meetings usually last between three and six hours. The CEO, CFO, Head of Group Strategy & Board Services, Head of Accounting, Head of Internal Audit and the external auditors always attend the meetings. In 2021, the Board of Directors called upon other members of the Group Executive Board and Swisscom management to attend, depending on the agenda. The Audit & ESG Reporting Committee can also involve independent third parties such as lawyers, public accountants and tax experts as required. The Committee invited external consultants to one of its meetings during the reporting year. The Chairman of the Audit & ESG Reporting Committee also liaises closely with the Heads of Internal Audit and Accounting and the representatives of Swisscom’s external auditors outside of the meetings. He and indi- vidual members of the Committee also meet with the persons responsible for Fastweb’s internal and external audits once a year to discuss the current challenges fac- ing Fastweb. e c n a n r e v o G e t a r o p r o C | t r o p e R n o i t a r e n u m e R d n a e c n a n r e v o G e t a r o p r o C 80    The following table gives an overview of the Audit & ESG Reporting Committee’s meetings and circular reso- lutions in 2021. The Committee held one meeting via videoconference due to the measures implemented by the authorities as a result of the Covid-19 pandemic. Members were connected to one meeting via video- conference. Total  Average duration (in hours)  Participation:  Roland Abt, Chairman 1 Sandra Lathion-Zweifel  Renzo Simoni  Michael Rechsteiner 2 Hansueli Loosli 1, 3 Meetings Ad-hoc meetings Circular resolutions 6 04:25 6 6 6 5 1 – – – – – – – – – – – – – – 1 Financial expert. 2 Since 31 March 2021 member of the Committee. 3 Left the Board of Directors on 31 March 2021. Compensation Committee For information on the Compensation Committee, refer to the section ‘Remuneration Report’. D See report page 93 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 Commit- tee is presided over by the Chairman of the Board of Directors 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 outlining the qualifications and experience sought. It then presents suitable candi- dates to the Board of Directors, but has no further deci- sion-making authority. The Board of Directors appoints the members of the Group Executive Board and decides upon the motion to be proposed to the Annual General Meeting for the election and approval of members of the Board of Directors. The Nomination Committee is convened by the Chairman or at the request of a Com- mittee member as often as business requires. In the 2021 financial year, a Nomination Committee consist- ing of Michael Rechsteiner (Chairman), Frank Esser, Bar- bara Frei and Anna Mossberg held four meetings. The average duration of the meetings was 1  hour and 45 minutes. All members participated. Amendment as at 1 January 2022 The Board of Directors revised the corporate responsibility governance in 2021. From 2022 onward, the Board of Direc- tors will assume overall responsibility for ESG issues (envi- ronmental, social, governance), approve the sustainability strategy as part of the corporate strategy and monitor compliance with it. The Audit & ESG Reporting Committee is assigned a key role in the area of sustainability reporting. Accordingly, the Audit Committee has been renamed ‘Audit & ESG Reporting Committee’ as of January 2022. The new ESG governance is described in the Sustainability Report. N See www.swisscom.ch/cr-report2021 4.11 Assignment of powers of authority The Telecommunications Enterprise Act (TEA) refers to the Swiss Code of Obligations regarding the non-trans- ferable 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 supervision of persons entrusted with managing the company’s operations. It decides on the appointment and removal of members of the Group Executive Board. 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 Federal Coun- cil formulates these goals for a four-year period in accordance with the provisions of the TEA. N See www.swisscom.ch/ziele_2018-2021 N See www.swisscom.ch/ziele_2022-2025 The Board of Directors has delegated day-to-day busi- ness management to the CEO in accordance with the TEA and the Articles of Incorporation. In addition to the duties reserved for it under the law, the Board of Direc- tors decides on business transactions of major impor- tance to the Group, including, for example, the acquisi- tion 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 Organisa- 81   e c n a n r e v o G e t a r o p r o C | t r o p e R n o i t a r e n u m e R d n a e c n a n r e v o G e t a r o p r o C 82 tional Rules, ‘Rules of Procedure and Accountability’ (see function diagram). N See www.swisscom.ch/basicprinciples 4.12 Information and controlling 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 Chairman of the Board of Directors and the CEO discuss fundamental issues concerning Swisscom Ltd and its Group compa- nies at least once a month. The Chairman also meets in person with each member of the Group Executive Board as well as the heads of other Group and business divi- sions at least once a year for an in-depth discussion of topical issues. The CEO also provides the Board of Directors at every ordinary meeting 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 indica- tors 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 opera- tions and risk position of the Group and the segments. It also receives projections for operational and financial developments for the current financial year. The man- agement reporting is carried out in accordance with the same financial statement reporting policies as for exter- nal financial reporting. It also includes key non-financial information that is important for controlling and steer- ing purposes. The Board of Directors is informed in writ- ing about other current or material issues on an ongoing and timely basis. Every member of the Board of Direc- tors is entitled to request information on all matters relating to the Group at any time, provided this does not conflict with the provisions regarding the reclusion of a member from Board deliberations or confidentiality obligations. The Board of Directors is informed immedi- ately 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 comprehensively on these matters at least once a year. Risk management The Board of Directors has set the objective of protect- ing the company’s enterprise value through the imple- mentation of Group-wide risk management.  A corpo- rate culture that promotes the conscious handling of risks facilitates the achievement of this objective. Accordingly, Swisscom has implemented a Group-wide, central risk management system that is based on ISO Standard 31000 and takes account of both external and internal events. Swisscom engages in level-appropriate, comprehensive reporting and maintains the appropriate 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. The risk management system is examined periodically by an external auditor. Swisscom assesses its risks in terms of the probability that they will occur and their quantita- tive and qualitative effects in the event that they do occur. It manages risks on the basis of a risk strategy. The risks are evaluated in terms of their impact on key per- formance indicators. Swisscom reviews and updates its risk profile on a quarterly basis. The Audit & ESG Report- ing Committee and the Group Executive Board are pro- vided with a report on risks every quarter. The Board of Directors and the Audit & ESG Reporting Committee are provided with in-depth information in April and Decem- ber on significant risks, their potential effects and the status of remedial measures. In urgent cases, the Chair- man of the Audit & ESG Reporting Committee is informed without delay about any significant new risks. The risk factors are described in the Risks section of the Management Commentary. D See report page 62 Internal control system and financial reporting The internal control system (ICS) ensures the reliability of financial reporting with an appropriate degree of assur- ance. 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 follow- ing internal control components: control environment, assessment of accounting risks, control activities, moni- toring controls, information and communication. The Accounting unit, which reports to the CFO, manages and monitors the ICS. Internal Audit periodically reviews the functioning and effectiveness of the ICS. Significant shortcomings in the ICS identified during these monitor- ing and review activities are reported together with the corrective measures in a status report to the Audit & ESG Reporting 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 & ESG Reporting Committee is informed without delay. Corrective measures to remedy the shortcomings are monitored by the Accounting unit. The Audit & ESG Reporting Committee assesses the performance and effectiveness of the ICS on the basis of the periodic reporting. Compliance management The Board of Directors has set the objective of safe- guarding the Swisscom Group and its executive bodies and employees from legal sanctions, financial losses and reputational damage by ensuring Group-wide compli- ance. A corporate culture that promotes willingness to behave in a way that complies with the relevant regula- tions is intended to help achieve this objective. The applicable principles are laid down in the Code of Con- duct approved by the Board of Directors. Swisscom has therefore implemented a Group-wide, central compli- ance system. Within the framework of this system, every year Group Compliance applies a risk-based approach to identify areas of legal compliance that require monitor- ing by the central system. Within these areas of legal compliance, the business activities of the Group compa- nies are reviewed periodically in a proactive manner in order to identify risks in good time and determine the required corrective measures. The employees affected are informed of the measures and their implementation is monitored. The decentralised Compliance functions independently monitor legal compliance in the areas for which they are responsible and report their findings to Group Compliance. Once every year, Group Compliance reviews the appropriateness and effectiveness of the system. In certain areas, an annual audit of the imple- mented measures is also performed by external audi- tors (financial intermediation in accordance with the Money Laundering Act). Group Compliance reports to the Audit & ESG Reporting 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 & ESG Reporting Committee is informed without delay. N See www.swisscom.ch/basicprinciples Internal auditing Internal auditing is carried out by the Internal Audit unit. Internal Audit supports the Swisscom Ltd Board of Direc- tors and its Audit & ESG Reporting Committee in fulfill- ing their statutory and regulatory supervisory and con- Internal Audit also supports trolling obligations. management by highlighting areas of potential for improving business processes and the assurance func- tions. It documents the audit findings and monitors the implementation of measures. Internal Audit is responsible for planning and perform- ing audits throughout the Group in compliance with professional auditing standards and possesses maxi- mum independence. It is under the direct control of the Chairman of the Board of Directors and provides reports to the Audit & ESG Reporting Committee. At an adminis- trative level, Internal Audit provides reports to the Head of Group Strategy & Board Services. Internal Audit liaises closely and exchanges information with the external auditors. The external auditors have unrestricted access to the audit reports and audit files of Internal Audit. Based on a risk analysis and in close coor- dination with the external auditors, Internal Audit pre- pares the integrated strategic audit plan annually and presents it to the Audit & ESG Reporting Committee for approval. Notwithstanding the above, the Audit & ESG Reporting Committee can commission special audits, also based on information received on the whistle-blow- ing platform operated by Internal Audit. This reporting procedure, which has been approved by the Audit & ESG Reporting Committee, allows complaints relating to external reporting and financial reporting, among other things, to be submitted anonymously to Internal Audit, which in turn ensures that these will be followed up. At its meetings, which are held at least quarterly, the Audit & ESG Reporting Committee is briefed on audit findings, the reports submitted to the whistle-blowing platform and the status of any corrective measures implemented. The Head of Internal Audit took part in all six meetings of the Audit & ESG Reporting Committee in 2021. He reported on audit findings at one meeting of the full Board of Directors. 83 e c n a n r e v o G e t a r o p r o C | t r o p e R n o i t a r e n u m e R d n a e c n a n r e v o G e t a r o p r o C 84 5 Group Executive Board 5.1 Members of the Group Executive Board In accordance with the Articles of Incorporation, the Executive Board comprises one or more members, who must not be members of the Board of Directors of Swisscom Ltd at the same time. Temporary exceptions 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 Executive Board are appointed by the Board of Directors. The Board of Direc- tors has appointed Klementina Pejic as Head of Human Resources (CPO) and member of the Group Executive Board with effect from 1 February 2021. She succeeds Hans Werner, who stepped down with effect from 31 January 2021. The Board of Directors has appointed Eugen Stermetz as Chief Financial Officer (CFO), Head of Group Business Steering and member of the Group Exec- utive Board with effect from 1 March 2021. The current CFO, Mario Rossi, relinquished his position on 28 Febru- ary 2021. Further information regarding Hans Werner and Mario Rossi can be found in the 2020 Corporate Governance Report. N See www.swisscom.ch/report2020 D See report page 66 An overview of the composition of the Group Executive Board as at 31 December 2021 is given in the table below. Name  Urs Schaeppi 1 Eugen Stermetz  Klementina Pejc  Urs Lehner  Christoph Aeschlimann  Dirk Wierzbitzki  1 Since November 2013 CEO. Nationality  Switzerland  Austria  Germany  Switzerland  Switzerland  Germany  Year of birth Function  1960 1972 1974 1968 1977 1965 CEO Swisscom Ltd  CFO Swisscom Ltd  CPO Swisscom Ltd  Appointed to the Group Executive Board as of March 2006 March 2021 February 2021 Head of Business Customers  June 2017 Head of IT, Network & Infrastructure  February 2019  Head of Residential Customers  January 2016          5.2 Education, professional activities and affiliations Key details of the careers and qualifications of the mem- bers of the Group Executive Board are provided below along with a summary of the mandates they hold out- side the Group and other significant activities. Pursuant to the Articles of Incorporation, the Group Executive Board members may perform no more than one addi- tional mandate in listed companies and no more than two additional mandates in non-listed companies. In total, they may not perform more than two such addi- tional 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 retire- ment-benefit foundations. The number of mandates held by order of Swisscom is limited to ten, while the number of mandates in interest groups, charitable asso- ciations, institutions and foundations, and employee retirement-benefit foundations is limited to seven. Prior to accepting new mandates and other duties outside the Swisscom Group, the members of the Group Executive Board are obligated to obtain the approval of the Chair- man 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 exceeds the set limits for mandates. The members of the Group Executive Board perform most of their other significant activities by order of Swisscom. N See www.swisscom.ch/basicprinciples The members of the Group Executive Board are required to order their personal and business affairs and take whatever measures are necessary to ensure that con- flicts of interest are avoided as far as possible. Should a conflict of interest nevertheless arise, the member con- cerned must inform the CEO and/or Chairman immedi- ately. The members of the Group Executive Board are obliged to abstain from negotiations in business which conflict with their own interests or with the interests of natural or legal persons closely associated with them. Urs Schaeppi Degree in Engineering (Dipl. Ing., Zurich Federal Institute of Technology (ETH)) and Business Administration (lic. oec., University of St. Gallen (HSG)) Career history 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 Founda- tion Board, International Institute for Management Development (IMD), Lausanne; member of the Board of Trustees of the Swiss Entrepreneurs Foundation Other significant activities Member of the Board of Directors, Swiss-American Cham- ber of Commerce, Zurich; member of the Executive Board, Glasfasernetz Schweiz, Berne; member of the Advisory Board of the Department of Economics of the University of Zurich; member of the Steering Committee of digital- switzerland, Zurich (formerly Digital Zurich 2025); mem- ber of the international Advisory Committee of the ZHAW School of Management and Law, Winterthur 85 e c n a n r e v o G e t a r o p r o C | t r o p e R n o i t a r e n u m e R d n a e c n a n r e v o G e t a r o p r o C 86 Eugen Stermetz Degree in Business Administration (lic. oec.), University of St. Gallen; PhD in Social and Economic Sciences (Dr. rer. soc. oec.), Vienna University of Economics and Business Klementina Pejic Dortmund University of Applied Sciences; École Supérieure des Sciences Économique et Commerciales ESSEC, Cergy-Pontoise, International Business M. A. Career history 1996–2000 Boston Consulting Group, Munich and Vienna; 2001–2005 Chief Financial Officer (CFO), Ige- neon AG, Vienna; 2006–2008 CFO and Managing Direc- tor, F-star GmbH, Vienna; 2009–2011 CFO and member of the Executive Board, SVOX AG, Zurich; since 2012 Swisscom: until 2017 CFO Participations, 2017–2018 CFO Participations and Head of M&A, 2018–February 2021 Group Treasurer (Treasury, Insurance and M&A), since March 2021 Chief Financial Officer (CFO) and mem- ber of the Swisscom Group Executive Board Career history 2001–2002 Watson Wyatt AG, Zurich, Consultant; 2003–2020 Clariant International AG: 2003–2004 Divi- sional HR Manager, 2005–2007 Global HR Business Part- ner, 2008–2009 Head of Management Development Europe, 2009-2011 Head of Global Talent Management, 2012–2013 Head of Senior Management Development, 2014–2017 Head of SMD & People Excellence, 2018– January 2021 Head of Human Resources; since 1 Febru- ary 2021 Swisscom Ltd, Chief Personnel Officer (CPO) and member of the Group Executive Board Mandates by order of Swisscom Since March 2021 Vice President of the Board of Trustees of the comPlan pension fund, Berne Mandates by order of Swisscom Since February 2021 member of the Board of Trustees of the comPlan pension fund, Berne Other significant activities – Other significant activities – Urs Lehner Degree in IT Engineering (UAS, University of Applied Sciences), Executive MBA in Business Engineering, University of St. Gallen (HSG) Christoph Aeschlimann Degree in Computer Science (Dipl. Ing.), École polytechnique fédérale de Lausanne (EPFL); MBA, McGill University (Canada) 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 Enter- prise Customers, 2016–June 2017 Head of Sales & Ser- vices Enterprise Customers; since June 2017 Head of Enterprise Customers (known as ‘Enterprise Customers’ until 2019) and member of the Swisscom Group Execu- tive Board Mandates – Other significant activities Member of the Advisory Board of BKW Innovation GmbH, Berlin Career history 2001–2004 Odyssey Asset Management Systems, Soft- ware 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 Ltd, Head of IT, Network & Infrastructure and member of the Swisscom Group Executive Board Mandates – Other significant activities Member of Dell’s CIO Advisory Board; since January 2022, member of the Cisco Global Customer Advisory Board, San José 87 e c n a n r e v o G e t a r o p r o C | t r o p e R n o i t a r e n u m e R d n a e c n a n r e v o G e t a r o p r o C 88 Dirk Wierzbitzki Degree in Electrical Engineering (Dipl. Ing.) Career history 1994–2001 Mannesmann (now Vodafone Germany): various management roles in the area of product man- agement; 2001–2010 Vodafone Group: 2001–2003 Director for Innovation Management, Vodafone Global Products and Services, 2003–2006 Director of Commer- cial Terminals, 2006–2008 Director of Consumer Internet Services and Platforms, 2008–2010 Director of Commu- nications 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-net- work Business & TV for Residential Customers; since January 2016 Swisscom Ltd: until 2019 Head of Products & Marketing and since 2020 Head of Residential Customers; since 2016 member of the Swisscom Group Executive Board Mandates by order of Swisscom Member of the Board of Directors of SoftAtHome, Paris Other significant activities – 5.3 Management agreements Neither Swisscom Ltd nor any of the Group companies included in the scope of consolidation have entered into management agreements with third parties. 6 Remuneration, shareholdings and loans All information on the remuneration of the Board of Directors and the Group Executive Board of Swisscom Ltd is provided in the separate Remuneration Report. D See report page 93 7 Shareholders’ participation 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 regis- tered in its name, exceeds the limit of 5% of all regis- tered 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. The calculation of the percentage restriction is subject to the Group clause in accordance with Article 3.5.1 of the Arti- cles of Incorporation. N See www.swisscom.ch/basicprinciples The 5% voting right restriction does not apply to the Swiss Confederation, which, under the terms of the Tel- ecommunications Enterprise Act (TEA), holds the major- ity 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 exceptional cases: ● where shares are acquired as a result of a merger or a business combination ● where shares are acquired as a result of a non-cash contribution or an exchange of shares ● where shares are acquired with a view to cementing a long-term partnership or strategic alliance In addition to the percentage restriction on voting rights, the Board of Directors may refuse to recognise and enter as shareholders or beneficial holders with voting rights any persons acquiring shares who fail to expressly declare upon request that they have acquired the shares in their own name and for their own account or as bene- ficial holders. Should acquirers of shares refuse to make such a declaration, they will be entered as shareholders 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 the share register entry as a shareholder with voting rights and enter the acquirer as a shareholder without voting rights. The acquirer must be notified of the deletion immediately. The restrictions on voting rights provided for in the Arti- cles of Incorporation may be changed by resolution 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 quo- rum 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 ● conversion of registered shares to bearer shares ● 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 con- vened, 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 submit- ted 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 Arti- cles of Incorporation). 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 Annual General Meeting in March 2022. Partnerships and legal entities may be repre- sented by authorised signatories, while minors and wards may be represented by their legal representative, even if the representative is not a shareholder. A power of attorney may be granted in writing or elec- tronically via the shareholder portal operated by Com- putershare Switzerland Ltd. Shareholders who are repre- sented 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). In accordance with the measures prescribed by the Fed- eral Council to combat the coronavirus (Covid-19 Ordi- nance 3), the Annual General Meeting of 31 March 2021 took place without the physical participation of share- holders. Shareholders were able to authorise the inde- pendent proxy to cast their votes and execute their instructions on their behalf. The independent proxy cast the votes in person at the Annual General Meeting. 7.5 Entries in the share register Shareholders entered in the share register with voting rights are entitled to vote at the Annual General Meet- ing. To ensure due procedure, the Board of Directors defines a cut-off date at its own discretion for determin- ing voting entitlements, which is normally three busi- ness days before the respective Annual General Meet- ing. 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 89 e c n a n r e v o G e t a r o p r o C | t r o p e R n o i t a r e n u m e R d n a e c n a n r e v o G e t a r o p r o C 90 Annual General Meeting and also published in the finan- cial calendar on the Swisscom website. Shareholders entered in the share register with voting rights as of 5  p.m. on 26 March 2021 were entitled to vote at the Annual General Meeting of 31 March 2021. Sharehold- ers entered in the share register with voting rights as of 5 p.m. on 25 March 2022 are entitled to vote at the Annual General Meeting of 30 March 2022. 8 Change of control and defensive measures Under the terms of the Telecommunications Enterprise Act (TEA), the Swiss Confederation must hold the majority of the capital and voting rights in Swisscom Ltd. This requirement is also set out in the Articles of Incorpora- tion. There is thus no duty to submit a takeover bid as defined in the Financial Market Infrastructures Act, since this would contradict the TEA. Details on change of control clauses are given in the sec- tion ‘Remuneration Report’. D See report page 93 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 Audit & ESG Reporting Com- mittee. A new invitation to tender is issued for the stat- utory auditor’s mandate at least every ten to 14 years. The statutory auditor’s tenure is limited to 20 years. As stipulated by the Swiss Code of Obligations, the auditor- in-charge may only perform the mandate for a maxi- mum of seven years. A request for tenders for the audit mandate was issued in 2018. PricewaterhouseCoopers (PwC), Zurich, has performed the mandate since the 2019 financial year. The auditor-in-charge is Peter Kartscher. 9.2 Audit fees The fees paid to PwC as auditors for the 2021 financial year amount to CHF 3,084 thousand (prior year: CHF 2,989 thousand). 9.3 Supplementary fees The fees charged by PwC for additional audit-related services in the year under review amounted to CHF 701 thousand (prior year: CHF 802 thousand), and the fees for other services were CHF 120 thousand (prior year: CHF 34 thousand). Audit-related services include audit services in connection with IT outsourcing orders from business customers, IT pro- jects, reporting requirements related to the outstanding green bonds and the reporting of financial information. Other services include consulting services related to cyber- security, international VAT in connection with roaming, the reporting of financial information, and the variance analy- sis for international sustainability certification. 9.4 Supervision and controlling instruments vis-à-vis the auditors The Audit & ESG Reporting Committee verifies the qual- ifications and independence of the statutory auditors as a state-supervised auditing firm on behalf of the Board of Directors. It also assesses the performance and remu- neration of the auditors. Assessment criteria are the competence and availability of the audit team, the audit process, and reporting and communication. It is also responsible for observing the statutory rotation princi- ple for the auditor-in-charge and for reviewing and issu- ing the new invitations to tender for the audit mandate. The Audit & ESG Reporting Committee approves the integrated strategic audit plan, which includes the annual audit plan of both the internal and external audi- tors, and the annual fee for the auditing services pro- vided to the Group and Group companies. To help ensure independence, the Audit & ESG Reporting Committee has laid down principles for awarding additional services to the auditors, including a list of prohibited services. In order to ensure the independence of the auditors, addi- tional service mandates must be approved by the Audit & ESG Reporting Committee where the fee exceeds CHF 300 thousand. The Audit & ESG Reporting Commit- tee 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 ser- vices, audit-related services and non-audit services, and on their independence. The statutory auditors, represented by the auditor-in- charge and his deputy, usually attend all Audit & ESG Reporting Committee meetings. They inform the Com- mittee in detail on the performance and results of their work, in particular regarding the annual financial statement audit. They further submit a written report annually to the Board of Directors and the Audit & ESG Reporting 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 & ESG Reporting Committee liaises closely with the auditor-in-charge beyond the meetings of the Committee and regularly reports to the Board of Direc- tors. Representatives of PwC, the statutory auditors, attended all six meetings of the Audit & ESG Reporting Committee in 2021. They did not participate in the meetings of the full Board of Directors. The Head of Internal Audit attended all six meetings of the Audit & ESG Reporting Committee in 2021. He reported on audit findings at one meeting of the full Board of Directors. Swisscom meets investors regularly throughout the year, presents its financial results at analysts’ meetings and road shows, attends selected conferences for financial analysts and investors, and keeps its shareholders and other interested parties continuously 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 www.swisscom.ch/adhoc 10 Information policy Swisscom pursues an open, active information policy vis-à-vis shareholders, the general public and the capital markets. Shareholders are provided with notifications and announcements in accordance with Article 12 of the Articles of Incorporation, which are published in the Swiss Commercial Gazette. Swisscom publishes compre- hensive, consistent and transparent financial informa- tion on a quarterly basis. Furthermore, it publishes an annual sustainability report in accordance with the Global Reporting Initiative (GRI) and an annual report including a management commentary, corporate gov- ernance report, remuneration report, consolidated financial statements and a condensed version of the financial statements of Swisscom Ltd. The interim reports, annual report and financial statements of Swisscom Ltd 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/basicprinciples N See www.swisscom.ch/financialreports N See www.swisscom.ch/cr-report2021 The comprehensive minutes of the Annual General Meeting of 30 March 2021 and minutes from past meet- ings are available on the Swisscom website. N See www.swisscom.ch/generalmeeting Those responsible for investor relations can be con- tacted via the website or by email, telephone or post. The contact details and address of the head office may be found in the website publishing details. D See report page 185 11 Financial calendar ● Annual General Meeting for the 2021 financial year: 30  March 2022, in Volketswil, without the personal attendance of shareholders ● 1st Quarter Interim Report: 28 April 2022 ● Half-Year Interim Report: 4 August 2022 ● 3rd Quarter Interim Report: 27 October 2022 ● Annual Report 2022: 9 February 2023 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 91 e e t t i m m o C n o i t a s n e p m o C e h t f o r i a h C e h t m o r f r e t t e L | t r o p e R n o i t a r e n u m e R d n a e c n a n r e v o G e t a r o p r o C 92 Letter from the Chair of the Compensation Committee Dear Shareholders On behalf of the Board of Directors and the Compensa- tion Committee, I am pleased to present our Remunera- tion Report for the 2021 reporting year. tect the environment. Further details on our commit- ment can be found in the Sustainability Report. N See www.swisscom.ch/cr-report2021 The year under review was shaped by the measures taken to contain the Covid-19 pandemic and a slowly recovering economy. Over the past year, Swisscom was able to suc- cessfully assert itself in the saturated IT and telecoms markets, both of which are characterised by strong price and promotional pressure. It did so thanks to top-rated broadband and mobile networks, innovative products and services that have already received multiple awards. On top of that, simplification and a systematic digital transformation were able to reduce the cost base and hone the company’s competitive edge. In order to ensure high network quality, Swisscom invested CHF 1.6 billion in Switzerland again last year in the maintenance and expansion of its networks. In Switzerland, Swisscom saw growth in particular in the business customer market for IT services and in the residential customers market for home networking. Once again, Fastweb’s performance in the Italian market was impressive, with growth reported in terms of revenue, EBITDA and customers. Swisscom consolidated its role as a pioneer in the area of climate protection with the goal of becoming climate-neutral across the entire value chain in Switzerland by 2025. With regard to the compensation of the Group Executive Board, the Compensation Committee reviewed the vari- able remuneration system and proposed adjustments to the Board of Directors. The changes approved by the Board of Directors now tie remuneration even more closely to strategy implementation. They also weight long-term sustainable remuneration criteria more heav- ily. The variable performance-related salary component for members of the Group Executive Board will continue to be paid out in cash and blocked shares. As in the past, the Group’s financial performance indicators play a key role in determining overall target achievement. A new minimum EBITDA requirement was added to supple- ment the remuneration criteria. The Board of Directors also fleshed out the business transformation topics and added sustainability-related topics. With these changes, the remuneration system not only incorporates financial performance but also indicators relating to operating performance, customers, growth and sustainability. It now reflects our responsibility to make a significant con- tribution to society’s positive development and to pro- In addition to the excellent financial results, the year under review also saw exceptional performance in the areas of customer satisfaction and sustainability. In its overall eval- uation, the Board of Directors weighed this against oper- ating performance (network faults) that was not entirely satisfactory. This results in an overall target achievement of 118% to 120% for the members of the Executive Com- mittee, depending on their respective functions. As explained in this Remuneration Report, the total remuner- ation for the members of the Board of Directors for the 2021 reporting year is within the range approved by the 2020 Annual General Meeting. Likewise, the total remu- neration paid to members of the Group Executive Board is within the range approved at the 2020 Annual General Meeting. Like every year, you, dear shareholders, will have an opportunity at the 2022 Annual General Meeting to cast your vote on Swisscom’s remuneration principles and the remuneration system as part of the consultative vote on the Remuneration Report. In addition, the maxi- mum total remuneration paid to the Board of Directors and the Group Executive Board for the 2023 financial year will be put to a vote. The proposed amounts for the Board of Directors and the Group Executive Board remain unchanged over the prior year. To meet up to our responsibilities, the Compensation Committee will conduct regular reviews of the remuner- ation strategy and system again in the coming year to ensure that our principles are aligned with the interests of shareholders and other stakeholders and that perfor- mance is rewarded appropriately and sustainably. We look forward to your continued support and thank you for your trust. Kind regards Barbara Frei Chair of the Compensation Committee 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 . 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 recom- mendations of the Swiss Code of Best Practice for Corpo- rate Governance issued by economiesuisse, 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 Regula- tions of the Compensation Committee. The latest ver- sions of these documents as well as their earlier, una- mended and 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 Meet- ing on 30 March 2022. 1.2 Division of responsibilities 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 follow- ing 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. In addition, the Articles of Incorporation contain the following provisions relating to the remuneration policy: ● Remuneration of the Board of Directors (Articles 6.4 and 8.1) ● Compensation Committee (Article 6.5) ● Remuneration of the Group Executive Board (Articles 7.2 and 8.1) ● Contracts of the Board of Directors and the Group Executive Board (Article 8.2) ● Number of external mandates for the Board of Direc- tors and Group Executive Board (Article 8.3) The Board of Directors approves, inter alia, the person- nel 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 remu- neration of the Board of Directors and decides on the remuneration of the CEO as well as the total remunera- tion for the Group Executive Board. In doing so, it takes into account the maximum total 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 remunera- tion, 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 participate in meetings at which any change to their remuneration is discussed or decided. The decision-making powers are governed by the Arti- cles of Incorporation, the Organisational Rules of the Board of Directors and the Regulations of the Compen- sation Committee. N See www.swisscom.ch/basicprinciples 93  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 the remuneration of newly appointed members of the Group Executive Board  (Articles of Incorporation)  Personnel and remuneration policy  Principles of the performance and shareholding plans for the Board of Directors  and Group Executive Board (Articles of Incorporation)  Principles underlying retirement-benefit plans and social security payments  Equity-share and performance-based participation plans of the Group  General terms of employment of the Group Executive Board  Definition of performance targets for the variable performance-related salary component  Concept of remuneration to members of the Board of Directors  Remuneration of the Board of Directors  Remuneration of the CEO Swisscom Ltd  Total remuneration of the Group Executive Board  Remuneration of the members of the Group Executive Board (excl . CEO)  Remuneration report  Remuneration Committee Board of Directors Annual General Meeting V 1 V V V V V V V V V V V G 5, 6 V A 2 A G 4 A G G 4 G 4 G 4 G 4 G 5 G 5 G 5 – A 3 G G – G – – – – – – – – – 7 G 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. 7  Advisory vote. 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 Commit- tee, which constitutes itself. If the Annual General Meet- ing elects the Chairman of the Board of Directors to the Compensation Committee, 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 meetings, which are provided to the members of the Committee and to other members of the Board of Directors on request. The Chairman of the Compensation Committee reports verbally on the activities of the Committee at the next meeting of the Board of Directors. The meetings of the Compensation Committee are generally held in February, June and December. Further meetings can be convened as and when required. The Compensation Committee did not call on any external consultants during the reporting year. The details are governed by Article 6.5 of 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 The members of the Compensation Committee neither work nor have worked for Swisscom in an executive capacity, nor do they maintain any significant commercial links with Swisscom Ltd or the Swisscom Group. Customer and supplier relationships exist between the Swiss Con- federation and Swisscom. Details of these are provided in Note 6.2 to the consolidated financial statements. D See report page 166 t r o p e R n o i t a r e n u m e R | t r o p e R n o i t a r e n u m e R d n a e c n a n r e v o G e t a r o p r o C 94      The following table gives an overview of the composition of the Committee, the Committee meetings and circular resolutions in 2021. Total  Average duration (in hours)  Participation:  Barbara Frei, Chairwoman  Roland Abt  Frank Esser  Renzo Simoni 1 Michael Rechsteiner 2, 3 Hansueli Loosli 2, 4 Meetings Ad-hoc meetings Circular resolutions 3 01:10 3 3 3 3 2 1 – – – – – – – – – – – – – – – – 1  Representative of the Confederation. 2  Participation without voting rights. 3  Elected to the Committee on 31 March 2021. 4  Left the Board of Directors on 31 March 2021. 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. The basic principles regarding the remunera- tion 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 The remuneration is made up of a fixed Director’s fee that varies in relation to the member’s function (basic emolument plus functional allowances), statutory and regulatory employer contributions to social security and to the occupational pension, as well as any addi- tional benefits. Additional remuneration is not given for attendance at meetings. No variable perfor- mance-related emoluments are paid. The members of the Board of Directors are obligated to draw a portion of their fee in the form of equity shares and to comply with the requirements on minimum shareholdings, thus ensuring they directly participate financially in the performance of Swisscom’s shares. The remuneration is normally reviewed every Decem- ber for the following year for ongoing appropriateness. In December 2020, the Board of Directors assessed the appropriateness of the remuneration as part of a dis- cretionary decision. The Board of Directors compared Swisscom’s remuneration with that of other listed companies domiciled like Swisscom, must fulfil Swiss and foreign legal require- ments, including full personal liability. The Board of Directors used as a comparison the remuneration paid by Compagnie Financière Richemont, Geberit, Givaudan, Lonza, SGS, Sika and Swatch Group. The Board of Directors did not call on any external consult- ants with regard to the determination of the remuner- ation nor to review its appropriateness. in Switzerland, which, 95    2.2 Remuneration components Director’s fee The Director’s fee is made up of a basic emolument and allowances as compensation for the individual func- tions. The following amounts are paid per year: in CHF  Base salary per member  Functional allowances 1 Presidium  Vice presidium  Representative of the Confederation  Audit Committee & ESG Reporting, Chair  Audit Committee & ESG Reporting, Member  Finance Committee, Chair  Finance Committee, Member  Remuneration Committee, Chair  Remuneration Committee, Member  1  No functional allowance is paid for participation in ad-hoc committees appointed on a case-by-case basis. Under the Management Incentive Plan, the members of the Board of Directors are obligated to draw one third of their Director’s fee in the form of shares. For members who resign from the Board of Directors at the Annual General Meeting, the fee is paid fully in cash on a pro rata basis. The shares are allocated on the basis of their tax value, rounded up to whole numbers of shares. Shares are blocked from sale for three years. This restric- tion on disposal also applies if members leave the com- pany during the blocking period. The shares, which are allocated in April of the reporting year for the reporting year, are recorded at market value on the date of alloca- tion. 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 2021, a total of 1,512 shares were allocated to the mem- bers of the Board of Directors (prior year: 1,548 shares) with a tax value of CHF 423 per share (prior year: CHF 439). Their market value was CHF  504 (prior year: CHF 522.80) per share. 2021 Gross 2020 Gross 146,000 146,000 308,000 308,000 25,000 48,000 61,000 17,000 25,000 17,000 25,000 15,000 25,000 48,000 61,000 17,000 25,000 17,000 25,000 15,000 Contributions to social security and occupational pension as well as additional benefits Swisscom pays the statutory and regulatory employer contributions to social security and occupational pen- sion on the fee. The contributions are disclosed sepa- rately and are included in the total remuneration. If required by law, the individual members of the Board of Directors are insured against the economic conse- quences of old age, death and disability; their basic emolument is covered through the comPlan pension plan (see www.pk-complan.ch for the regulations) and their functional allowances are covered as part of a 1e plan with VZ Sammelstiftung. The reported pension benefits cover all savings, guarantee and risk contribu- tions paid by the employer to the pension plan. The disclosure of service-related and non-cash benefits and expenses relies on a tax-based point of view. Swisscom does not offer any significant service-related or non-cash benefits. Expenses are reimbursed on the basis of actual costs incurred. Accordingly, neither ser- vice-related and non-cash benefits nor out-of-pocket expenses are included in the reported remuneration. t r o p e R n o i t a r e n u m e R | t r o p e R n o i t a r e n u m e R d n a e c n a n r e v o G e t a r o p r o C 96        2.3 Total remuneration The total remuneration paid to the individual members of the Board of Directors for the 2020 and 2021 financial years is presented in the tables below, broken down into individual components. The higher total compensation in 2021 is primarily due to higher contributions to the occupational pension plan. Total remuneration to members of the Board of Directors  1,400 761 1  Elected as chairman on 31 March 2021. 2  Left the Board of Directors on 31 March 2021. 3  Elected to the Board of Directors on 31 March 2021. 4  Frank Esser is subject to social security contributions in Germany. No employer contributions are paid. 5  Anna Mossberg is subject to social security contributions in Sweden. 2021, in CHF million  Michael Rechsteiner, Chairman 1 Hansueli Loosli, Chairman 2 Roland Abt  Alain Carrupt  Guus Dekkers 3 Frank Esser 4 Barbara Frei  Sandra Lathion-Zweifel  Anna Mossberg 5 Renzo Simoni  2020, in CHF thousand  Hansueli Loosli  Roland Abt  Alain Carrupt  Frank Esser 1 Barbara Frei  Sandra Lathion-Zweifel  Anna Mossberg 2 Michael Rechsteiner  Renzo Simoni  Base salary and functional allowances Cash remuneration Share-based payment Employer contributions to Employer pension plan contributions to SS Total 2021 279 126 159 109 82 152 124 109 109 151 167 – 95 65 49 91 74 65 65 90 47 – 35 – – – – 22 – 33 137 25 – 15 8 8 – 12 10 32 14 518 126 304 182 139 243 210 206 206 288 124 2,422 Base salary and functional allowances Cash remuneration Share-based payment Employer contributions to pension plan Employer contributions to social security Total 2020 335 159 109 152 124 109 109 109 151 200 95 65 91 74 65 65 65 90 – 35 7 – – 22 – – 33 97 23 15 8 – 12 10 32 10 14 558 304 189 243 210 206 206 184 288 124 2,388 Total remuneration to members of the Board of Directors  1,357 810 1  Frank Esser is subject to social security contributions in Germany. 2  Anna Mossberg is subject to social security contributions in Sweden. The total remuneration paid to the members of the Board of Directors for the 2021 financial year is within the maxi- mum total amount approved by the 2020 Annual General Meeting (AGM) for 2021 of CHF 2.5 million. 97                  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). As a rule, they have four years from the start of their term of office or assumption of a new func- tion to acquire the prescribed shareholding in the form of the blocked shares paid as part of remuneration and, if necessary, through share purchases on the open mar- ket, observing internal and legal trading restrictions. Compliance with the shareholding requirement is reviewed annually by the Compensation Committee. If a member’s shareholding falls below the minimum Number  Michael Rechsteiner  Hansueli Loosli 1 Roland Abt  Alain Carrupt  Guus Dekkers 2 Frank Esser  Barbara Frei  Sandra Lathion-Zweifel  Anna Mossberg  Renzo Simoni  requirement due to a drop in the share price, the differ- ence 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 Direc- tors can approve individual exceptions at his discretion. 2.5 Shareholdings of the members of the Board of Directors As at 31 December 2020 and 2021, 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. 31.12.2021 31 .12 .2020 565 – 915 692 148 1,152 1,336 367 475 831 233 3,856 726 563 – 972 1,189 238 346 652 Total shares held by the members of the Board of Directors  6,481 8,775 1  Left the Board of Directors on 31 March 2021. 2  Elected to the Board of Directors on 31 March 2021. 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 enterprise value. It is systematic, transparent and long-term-oriented, and is predicated on the following principles: ● Total remuneration is competitive and is in an appro- priate relation to the market as well as the internal salary structure. ● Remuneration is based on performance in line with the results achieved by Swisscom. ● Through direct financial participation in the perfor- mance of the Swisscom share, the interests of manage- ment are aligned with the interests of shareholders. The remuneration of the Group Executive Board is a bal- anced combination of fixed and variable salary compo- nents. The fixed component is made up of a base salary, fringe benefits (mainly a car allowance) and retirement benefits. The variable remuneration includes a perfor- mance-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 shareholders. To facilitate com- pliance 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-related remuneration and the profit and equity participation plans of the Group Executive Board are set out in Arti- cle 8.1 of the Articles of Incorporation. N See www.swisscom.ch/basicprinciples t r o p e R n o i t a r e n u m e R | t r o p e R n o i t a r e n u m e R d n a e c n a n r e v o G e t a r o p r o C 98   Remuneration system Remuneration components and determining factors Remuneration Assets Instruments Fixed remuneration Variable remuneration Base salary Pension benefits Fringe benefits 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 discretion on the level of remuneration, taking into consideration the external market value of the function in question, the internal salary structure and individual performance. For the purpose of assessing market values, Swisscom relies on cross-sector market comparisons with Swiss companies as well as international sector comparisons. These two comparative perspectives allow Swisscom to form an optimal overview of the relevant employment market for managerial positions. In the year under review, Swisscom consulted a national and international comparative study conducted by Willis Towers Watson in 2020. The comparison with the Swiss market covers twelve major companies domiciled in Switzerland from various sectors, with the exception of the financial and pharmaceutical sectors. On average, these companies generate revenue of CHF 14.63 billion and employ 16,403 people. The international sector comparison covers tele- communications companies from eight western Euro- pean countries with median revenue of CHF 7.5 billion and a median workforce of 19,500 employees. The evalu- ation of the two comparative studies takes into account the comparability of the extent of responsibility in terms of revenue, number of employees and international scope. In 2020, both the Compensation Committee and the Board of Directors took an in-depth look at the fur- ther development of the remuneration system. A consul- tancy firm was called on in order to review the existing remuneration system from an external perspective and factor in the latest developments. This company had no other Swisscom mandates. The Compensation Commit- tee did not call on any external consultants during the reporting year. As a rule, the Compensation Committee reviews the individual remuneration paid to members of the Group Executive Board every three years of employment. The Board of Directors made no adjustments to the salary of any member of the Group Executive Board during the year under review. 3.2 Remuneration components Base salary The base salary is the remuneration paid according to the function, qualifications and performance of the individ- ual member of the Group Executive Board. It is deter- mined based on a discretionary decision taking into account the external market value of the function and the salary structure for the Group’s executive manage- ment. 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 in full (performance-related bonus). The amount of the performance-related component paid 99 t r o p e R n o i t a r e n u m e R | t r o p e R n o i t a r e n u m e R d n a e c n a n r e v o G e t a r o p r o C 100 out depends on the extent to which the targets are achieved, as set by the Compensation Committee, tak- ing into account the performance evaluation by the CEO. If targets are exceeded, the performance-related bonus may amount to no more than 130% of the target bonus. The maximum performance-related salary component is thus limited to 91% of the base salary. This ensures that the 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 and achievement of targets for the variable performance-related salary component The Board of Directors adjusted the targets for the vari- able performance-related component during the year under review. This was done to: ● ● ● reduce complexity align the targets more closely with the interests of shareholders specifically take long-term and sustainable aspects into consideration The targets for the members of the Group Executive Board consist of financial targets as well as topics relat- ing to the business transformation. The target structure therefore increasingly anchors long-term, strategic con- siderations such as strengthening the core business by offering the best customer experiences and the best infrastructure, realising new growth opportunities, and continuously developing operational excellence. Overall target achievement also depends on the achieve- ment of the minimum EBITDA requirement, referred to as the ‘EBITDA threshold’. The EBITDA threshold is set annu- ally by the Board of Directors in relation to the Group EBITDA target. Once the EBITDA threshold is reached, over- all target achievement is measured based on financial tar- get achievement and topics related to business transfor- mation (0-130%). If the EBITDA threshold is not reached, overall target achievement for the members of the Group Executive Board is 0% and no variable performance-re- lated salary component is paid out. Determination of target achievement As the decisive basis for the payment of the performance-related component Financial targets Business transformation a b c Net revenue Operating perfomance EBITDA margin +/- Customers = OpFCF proxy Growth Financial targets Fastweb Sustainability Overall target achievement (depending on the achievement of the ‘EBITDA threshold’) between 0% and 130% a) Financial targets The financial targets underlying the variable perfor- mance-related salary component are adopted annually in December for the following year by the Board of Directors following a proposal submitted by the Com- pensation Committee. The targets relevant to the reporting year are left unchanged from the previous year, in line with the Group’s continuing corporate strat- egy. The targets are based on the budget figures for the respective year under review. The financial targets include net revenue, operating income before interest, taxes, depreciation and amorti- sation as a percentage of net revenue (EBITDA margin), and operating free cash flow proxy. The Group Executive Board members delegated by Swisscom to the Board of Directors of the Italian subsidiary Fastweb S.p.A. are also measured on the basis of the Fastweb financial targets. The Compensation Committee’s decision is based on an assessment of the extent to which financial targets have been met using a scale for the overachievement and/or underachievement of each target. The achievement of an individual target can vary from 0% to 200%. The achieve- ment of the financial targets is determined according to the weighting of the individual targets and cannot exceed 200% overall. Weighting of financial targets Financial targets Net revenue EBITDA margin Free cash flow proxy Financial targets Fastweb Weighting CEO, CFO and Head of  IT, Network & Infrastructure Weighting other members of Group Executive Board 24% 24% 32% 20% 30% 30% 40% 0% b) Business transformation The topics relevant to Swisscom’s long-term success are summarised under the term ‘business transformation’. These topics sharpen the degree to which compensation is focused on shareholder interests even further by allowing Swisscom’s performance, which is geared to the long term, to be assessed even more comprehen- sively. As a result, indicators on market share, network and service stability and reputation have been included in the assessment of operating performance. The topic of customers includes customer satisfaction as meas- ured by the Net Promoter Score for residential and busi- ness customers; this is a recognised indicator of cus- tomer loyalty. Growth is measured on the basis of innovation indicators and the implementation of strate- gic projects, while the new topic of sustainability indicators on employee satisfaction and includes Business transformation topics Securing long-term success Swisscom’s contribution toward protecting the environ- ment (CO2 reduction; ESG criterion). This therefore incor- porates Swisscom’s responsibility to help promote socie- ty’s positive development and protect the environment into the remuneration system. Further information on customer satisfaction can be found in the Management Commentary. Further information on Swisscom’s contri- bution to the environment and society can be found in the Sustainability Report. D See report page 39 N See www.swisscom.ch/cr-report2021 The Compensation Committee uses key figures and deviations from the multi-year average or previous year to deliberate on the performance of the business trans- formation. It assesses the outcome at its own discretion on a scale of +/– 0 to 20 percentage points. Business transformation Topics Assessment based among others on Operating Performance Customers Growth • Market share • Stability • Reputation • Customer satisfaction or net promoter score • Innovation or strategic projects Sustainability • Employees • Environment • Quantitative key figures per topic • Multy-year average • Previous year • Current year +/– 0 to 20 per- centage points on financial target achievement 101 t r o p e R n o i t a r e n u m e R | t r o p e R n o i t a r e n u m e R d n a e c n a n r e v o G e t a r o p r o C 102 c) Overall target achievement Overall target achievement is calculated based on achievement of financial targets plus or minus the busi- ness transformation assessment. In order to ensure that this definition of overall target achievement appropri- ately describes the Group’s performance and reflects shareholders’ interests in terms of long-term value crea- tion, the Compensation Committee may, in exceptional situations, exercise its discretion in determining the overall target achievement in order to appropriately depict actual management performance. In doing so, it may take into account certain special factors e.g. currency fluctua- tions, extraordinary financial effects or unforeseen indus- try and market developments. The overall achievement of targets is limited to a maximum of 130%. Based on the overall achievement of targets, the Compensation Committee submits a proposal for the approval of the Board of Directors for the amount of the perfor- mance-related salary component to be paid to the Group Executive Board and the CEO. Thresholds for overall target achievement t n e m e v e i h c a t e g r a T 200% 130% 0% Lower threshold (EBITDA minimum requirement) Upper threshold (Cap at 130 % target achievement) 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 Management Incentive Plan. Group Executive Board members may opt to increase the share component up to a maximum of 50% of the total variable performance-related compensation. The remaining por- tion of the performance-related component is settled in cash. In the event of a departure from the Group Execu- tive 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 as to what percentage of the variable performance-related salary component is to be drawn in the form of shares must be communicated prior to the end of the reporting year, but no later than in November following the publication of the third-quarter results. In the year under review, two members of the Group Executive Board opted for a higher share component. The shares are allocated on the basis of their tax value, rounded up to whole numbers of shares. Shares are blocked from sale for three years. This restriction on disposal also applies if the employment relationship is terminated during the blocking period. The share-based remuneration disclosed in the year under review is augmented by a factor of 1.19 in order to take account of the difference between the market value and the tax value. The market value is determined as of the date of allocation. The allocation of shares for the year under review will be made in March 2022. In April 2021, a total of 1,454 shares (prior year: 1,452 shares) with a tax value of CHF 423 (prior year: CHF 439) per share and a market value of CHF 504 (prior year: CHF 522.80) per share were allocated for the 2020 financial year to the members of the Group Executive Board. Pension fund and fringe benefits The members of the Group Executive Board, like all eligi- ble employees in Switzerland, are insured against the financial consequences of old age, death and disability through the comPlan pension plan (for pension fund regulations, see www.pk-complan.ch). The reported pension benefits cover 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 151-156 A tax-based point of view is taken in reporting ser- vice-related and non-cash benefits and expenses. The members of the Group Executive Board are entitled to a car allowance. Out-of-pocket expenses are reimbursed on a lump-sum basis in accordance with expense reim- bursement 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 2020 and 2021 financial years, broken down into individ- ual components and including the highest amount paid to one member. In the year under review, the financial targets relevant to remuneration were considerably 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  1  The shares are reported at market value and are blocked from sale for three years. 2  Employer contributions to social security (AHV, IV, EO and FAK, incl. adminis- tration costs, and daily sickness benefits and accident insurance) are included in the total remuneration. exceeded. At the same time, expectations were also exceeded in the context of the business transformation. This mainly related to the topics of customers and sus- tainability. The EBITDA threshold was reached. The resulting overall target achievement of the perfor- mance-related component is 118% of the target bonus for the CEO and between 118 and 120% for the other members of the Group Executive Board. The Board of Directors took network faults into account when deter- mining target achievement. In the year under review, the variable performance-related salary component for members of the Group Executive Board (CHF 2,769 thou- sand in total) was around 88% of the base salary (CHF 3,165 thousand in total). The total remuneration paid to the highest-earning member of the Group Executive Board (CEO, Urs Schaeppi) increased by 5.7% compared to the prior year. The increase in total remuneration paid to the Group Executive Board and the CEO is primarily attributable to the higher variable remuneration as compared to the prior year. Total Group Executive Board 2021 Total Group Executive Board 2020 Thereof Urs Schaeppi 2021 Thereof Urs Schaeppi 2020 3,165 1,916 853 118 526 766 7,344 1,026 3,221 1,708 731 109 510 796 7,075 190 882 547 217 17 146 149 1,958 – 882 477 189 18 139 148 1,853 – 8,370 7,265 1,958 1,853 3  Contractual compensation payments made during the notice period to Group Executive Board members who resigned from Board during the financial year or in 2020. Total remuneration paid to the members of the Group Executive Board for the 2021 financial year is within the maximum total amount approved by the 2020 Annual General Meeting (AGM) for 2021 of CHF 8.7 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 equiva- lent to two years’ base salary and the other Group Exec- utive Board members are required to maintain a share- holding equivalent to one year’s base salary. The members of the Group Executive Board build up the pre- scribed shareholding over four allocation periods in the form of the blocked shares paid as part of remuneration and, if necessary, through share purchases on the open market, observing internal trading restrictions. Compli- ance with the shareholding requirement is reviewed annually by the Compensation Committee. If a mem- ber’s shareholding falls below the minimum require- ment due to a drop in the share price or a salary adjust- ment, 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. 103        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 2020 and 2021 are shown in the table below. None of the individuals required to make notifi- cation holds voting shares exceeding 0.1% of the share capital. Number  Urs Schaeppi (CEO)  Eugen Stermetz 1 Mario Rossi 2 Klementina Pejic 3 Hans C . Werner 4 Urs Lehner  Christoph Aeschlimann  Dirk Wierzbitzki  Total shares held by the members of the Group Executive Board  31.12.2021 31 .12 .2020 5,445 – – – – 1,019 422 1,323 8,209 5,069 – 1,897 – 1,588 821 145 1,122 10,642 1  Elected to the Group Executive Board on 1 March 2021. 2  Left the Group Executive Board on 28 February 2021. 3  Elected to the Group Executive Board on 1 February 2021. 4  Left the Group Executive Board on 31 January 2021. 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 employ- ment contracts stipulate that Swisscom may allow any wrongfully awarded remuneration to lapse or may reclaim any remuneration that is wrongfully paid. The contracts do not contain either a non-competition clause or a clause on change of control. 4 Other remuneration 4.1 Remuneration for additional services Swisscom may pay remuneration to members of the Board of Directors for assignments in Group companies and assignments performed by order of Swisscom (Arti- cle 6.4 of the Articles of Incorporation). No such remu- neration was paid in the year under review. N See www.swisscom.ch/basicprinciples The members of the Group Executive Board are not enti- tled to separate remuneration for any directorships they hold either within or outside the Swisscom Group. 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 connec- tion with their earlier activities as a member of a gov- erning body of the company or which are not at arm’s length. Similarly, no such remuneration was paid to former members of the Group Executive Board. Fur- ther, there were no payments 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 2021 financial year, Swisscom did not grant any collateral, 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 par- ties. There are therefore no corresponding receivables outstanding. t r o p e R n o i t a r e n u m e R | t r o p e R n o i t a r e n u m e R d n a e c n a n r e v o G e t a r o p r o C 104   Report of the statutory auditor to the General Meeting of Swisscom Ltd Ittigen We have audited the remuneration report of Swisscom Ltd for the year ended 31 December 2021. 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 93 to 104 of the remuneration report. Board of Directors’ responsibility The Board of Directors is responsible for the preparation and overall fair presentation of the remuneration report in accord- ance with Swiss law and the Ordinance against Excessive Compensation in Stock Exchange Listed Companies (Ordi- nance). The Board of Directors is also responsible for designing the remuneration system and defining individual remunera- tion packages. Auditor’s responsibility Our responsibility is to express an opinion on the 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 Ordi- nance. 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 re- port, 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 of Swisscom Ltd for the year ended 31 December 2021 complies with Swiss law and articles 14–16 of the Ordinance. PricewaterhouseCoopers AG Peter Kartscher Audit expert Auditor in charge Zürich, 2 February 2022 Petra Schwick Audit expert PricewaterhouseCoopers AG, Birchstrasse 160, Postfach, CH-8050 Zürich, Switzerland Telefon: +41 58 792 44 00, Telefax: +41 58 792 44 10, www.pwc.ch PricewaterhouseCoopers AG is a member of the global PricewaterhouseCoopers network of firms, each of which is a separate and independent legal entity. 105 s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C   Consolidated Financial Statements ________________ Consolidated statement of comprehensive income . . . . 108 Consolidated balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 Consolidated statement of cash flows . . . . . . . . . . . . . . . . . . 110 Consolidated statement of changes in equity . . . . . . . . . . . 111 Notes to the consolidated financial statements _________ 1 Operating performance 1 .1 Segment information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 1 .2 Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 2 Capital and financial risk management 2 .1 Capital management and equity . . . . . . . . . . . . . . . . . . . 122 2 .2 Financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124 2 .3 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 2 .4 Financial result . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 2 .5 Financial risk management . . . . . . . . . . . . . . . . . . . . . . . . . 131 3 Operating assets and liabilities 3 .1 Net current operating assets . . . . . . . . . . . . . . . . . . . . . . . 139 3 .2 Property, plant and equipment . . . . . . . . . . . . . . . . . . . . 142 3 .3 Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144 3 .4 Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145 3 .5 Provisions and contingent liabilities . . . . . . . . . . . . . . . . . 147 4 Employees 4 .1 Employee headcount and personnel expense . . . . . . . 150 4 .2 Key management compensation . . . . . . . . . . . . . . . . . . . 151 4 .3 Post-employment benefits . . . . . . . . . . . . . . . . . . . . . . . . . 151 5 Scope of consolidation 5 .1 Group structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158 5 .2 Changes in the scope of consolidation . . . . . . . . . . . . . . 158 5 .3 Equity-accounted investees . . . . . . . . . . . . . . . . . . . . . . . . 159 5 .4 Group companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161 6 Other disclosures 6 .1 Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163 6 .2 Related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166 6 .3 Other accounting policies . . . . . . . . . . . . . . . . . . . . . . . . . . 167 Report of the statutory auditor . . . . . . . . . . . . . . . . . . . . . . . . 168 107 Consolidated Financial Statements Consolidated statement of comprehensive income In CHF million, except for per share amounts  Note 2021 2020 Income statement  Net revenue  Direct costs  Personnel expense  Other operating expense  Capitalised self-constructed assets and other income  Operating income before depreciation and amortisation  Depreciation and amortisation of property, plant and equipment and intangible assets  Depreciation of right-of-use assets  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 cash flow hedges  Other comprehensive income from equity-accounted investees  Items that may be reclassified 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 1 .2 3 .2, 3 .3 2 .3 2 .4 2 .4 5 .3 6 .1 2 .1 2 .1 2 .1 2 .1 2 .1 11,183 11,100 (2,779) (2,667) (1,857) 598 4,478 (2,131) (281) 2,066 269 (173) (10) 2,152 (319) 1,833 638 71 709 (75) (6) 2 (79) 630 1,833 630 2,463 1,832 1 1,833 2,462 1 2,463 (2,669) (2,717) (1,798) 466 4,382 (2,149) (286) 1,947 41 (193) 4 1,799 (271) 1,528 261 (9) 252 (5) (3) (5) (13) 239 1,528 239 1,767 1,530 (2) 1,528 1,769 (2) 1,767 Basic and diluted earnings per share (in CHF)  2 .1 35.37 29.54 e m o c n i e v i s n e h e r p m o c f o t n e m e t a t s d e t a d i l o s n o C | s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C 108                         Consolidated balance sheet In CHF million  Assets  Cash and cash equivalents  Trade receivables  Receivables from finance leases  Other operating assets  Other financial assets  Current income tax assets  Total current assets  Property, plant and equipment  Intangible assets  Goodwill  Right-of-use assets  Equity-accounted investees  Receivables from finance leases  Other financial assets  Defined benefit assets  Deferred tax assets  Total non-current assets  Total assets  Liabilities and equity  Financial liabilities  Lease liabilities  Trade payables  Other operating liabilities  Provisions  Current income tax liabilities  Total current liabilities  Financial liabilities  Lease 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  Hedging reserves  Equity attributable to equity-holders of Swisscom Ltd  Non-controlling interests  Total equity  Total liabilities and equity  Note 31.12.2021 31 .12 .2020 3 .1 2 .3 3 .1 6 .1 3 .2 3 .3 3 .4 2 .3 5 .3 2 .3 4 .3 6 .1 2 .2 2 .3 3 .1 3 .1 3 .5 6 .1 2 .2 2 .3 4 .3 3 .5 2 .3 6 .1 2 .1 2 .1 2 .1 401 2,315 33 1,179 93 2 4,023 10,771 1,714 5,157 2,134 30 66 691 11 204 340 2,132 33 1,029 137 4 3,675 10,725 1,745 5,162 2,138 155 54 425 – 183 20,778 24,801 20,587 24,262 559 217 1,600 1,617 118 230 4,341 5,886 1,800 24 1,031 95 811 9,647 13,988 52 136 12,485 (1,864) 2 10,811 2 10,813 24,801 792 226 1,525 1,269 144 186 4,142 6,250 1,762 795 1,072 106 644 10,629 14,771 52 136 11,085 (1,791) 8 9,490 1 9,491 24,262 109       s w o fl h s a c f o t n e m e t a t s d e t a d i l o s n o C | s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C 110 Consolidated statement of cash flows In CHF million  Net income  Income tax expense  Result of equity-accounted investees  Financial income  Financial expense  Note 6 .1 5 .3 2 .4 2 .4 Depreciation and amortisation of property, plant and equipment and intangible assets  3 .2, 3 .3 Depreciation of right-of-use assets  Gain on sale of property, plant and equipment  Expense for share-based payments  Revenue from finance leases  Proceeds from finance leases  Change in deferred gain from the sale and leaseback of real estate  Change in operating assets and liabilities  Change in provisions  Change in defined benefit obligations  Interest received  Dividends received  Interest payments on financial liabilities  Interest payments on lease liabilities  Income taxes paid  Cash flow from operating activities  2 .3 1 .2 2 .3 3 .1 3 .5 4 .3 5 .3 2 .2 2 .3 6 .1 Purchase of property, plant and equipment and intangible assets  3 .2, 3 .3 Proceeds from sale of property, plant and equipment and intangible assets  Acquisition of subsidiaries, net of cash and cash equivalents acquired  Proceeds from sale of subsidiaries, net of cash and cash equivalents sold  Acquisition of equity-accounted investees  Proceeds from sale of equity-accounted investees  Purchase of other financial assets  Proceeds from other financial assets  Other cash flows from investing activities  Cash flow used in investing activities  Issuance of financial liabilities  Repayment of financial liabilities  Repayment of lease 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 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 5 .2 5 .2 5 .2 2 .2 2 .2 2 .3 2 .1 2021 1,833 319 10 (269) 173 2,131 281 (10) 1 (120) 112 (11) 65 (73) (9) 14 1 (81) (44) (279) 4,044 (2,270) 17 (42) 1 (3) 149 (73) 120 (19) (2,120) 350 (792) (259) (1,140) (1) – (14) 2020 1,528 271 (4) (41) 193 2,149 286 (10) 1 (101) 100 (16) 178 (22) 65 24 15 (93) (45) (309) 4,169 (2,188) 16 (39) – (15) – (121) 20 (4) (2,331) 732 (1,110) (287) (1,140) (1) (1) (17) (1,856) (1,824) 68 340 (7) 401 14 328 (2) 340     Consolidated statement of changes in equity In CHF million  Share capital Capital reserves Foreign currency Retained translation earnings adjustments Equity attributable Non- to equity Hedging holders of controlling interests Swisscom reserves Balance at 1 January 2020  52 136 10,454 (1,781) 11 8,872 Net income  Other comprehensive income  Comprehensive income  Dividends paid  Other changes  – – – – – – – – – – 1,530 252 1,782 (1,140) (11) – (10) (10) – – Balance at 31 December 2020  52 136 11,085 (1,791) Net income  Other comprehensive income  Comprehensive income  Dividends paid  Other changes  – – – – – – – – – – 1,832 709 2,541 (1,140) (1) – (73) (73) – – Balance at 31 December 2021  52 136 12,485 (1,864) – (3) (3) – – 8 – (6) (6) – – 2 1,530 239 1,769 (1,140) (11) 9,490 1,832 630 2,462 (1,140) (1) 10,811 3 (2) – (2) (1) 1 1 1 – 1 (1) 1 2 Total equity 8,875 1,528 239 1,767 (1,141) (10) 9,491 1,833 630 2,463 (1,141) – 10,813 111             Notes to the consolidated financial statements The 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 telecommunications services, and is active primarily in Switzerland and Italy. The consolidated financial statements for the year ended 31 December 2021 comprise Swisscom Ltd, as the parent company, and its subsidiaries. Swisscom Ltd is a public limited company with special status under Swiss law 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 totals 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 approved the issuance of these consolidated financial statements on 2 February 2022. As of this date, no material events after the reporting date have occurred. The consolidated financial statements are subject to approval by the shareholders of Swisscom Ltd in its Annual General Meeting to be held on 30 March 2022. 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 interpreta- tion prescribes another measurement basis for a particular line item, 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 judgement. In par- ticular, this concerns the following positions: Description  Leases  Property, plant and equipment  Intangible assets  Goodwill  Provisions for dismantlement and restoration costs  Provision for regulatory and competition law procedures  Defined benefit plans  Further information  Note 2 .3  Note 3 .2  Note 3 .3  Note 3 .4  Note 3 .5  Note 3 .5  Note 4 .3  s t n e m e t a t s l a i c n a n fi d e t a d i l o s n o c e h t o t s e t o N | s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C 112   Amendments to International Financial Reporting Standards and Interpretations which are to be applied for the first time in the financial year Standard  Name  Amendments to IFRS 9, IAS 39, IFRS 7,  IFRS 4 and IFRS 16  IBOR reform: phase 2  As of 1 January 2021, Swisscom adopted various amendments to existing International Financial Reporting Standards (IFRS) and Interpretations, which have no material impact on the results or financial position of the Group. Further information regarding the changes to the IFRS which must be applied in 2022 or later are set out in Note 6.3. Changes in the presentation In order to better reflect the operating nature of proceeds from finance lease arrangements, these will be reported under cash flows from operating activities from 2021 onwards. Previously, these cash flows were presented in investing activities. The prior year’s comparatives have been restated accordingly. As a result of the amendment, cash inflow from operating activities and cash outflow from investing activities each increased by CHF 100 million for the 2020 financial year. 113   1 Operating performance This chapter sets out 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 Changes in segment reporting As of 1 January 2021, Swisscom amended its organisational structure in Switzerland and the segment formerly known as IT, Network & Infrastructure was renamed Infrastructure & Support Functions. The departments with overlapping functions were merged organisationally at Swisscom Switzerland. As a result, the Group Headquarters division is no longer reported separately in segment reporting. In addition, Swisscom transferred various divisions between the segments of Swisscom Switzerland and the Other Operating Segments as of 1 January 2021. The prior year’s figures were restated as follows: In CHF million  Net revenue  2020 financial year  Residential Customers  Business Customers  Wholesale  Infrastructure & Support Functions (previously IT, Network & Infrastructure)  Elimination  Swisscom Switzerland  Fastweb  Other Operating Segments  Elimination  Total net revenue  Segment result  2020 financial year  Residential Customers  Business Customers  Wholesale  Infrastructure & Support Functions (previously IT, Network & Infrastructure)  Swisscom Switzerland  Fastweb  Other Operating Segments  Group Headquarters  Elimination  Total segment result  Reported Adjustment Restated 4,564 3,100 976 85 (450) 8,275 2,470 1,020 (665) 11,100 2,586 1,235 523 (2,556) 1,788 166 111 (64) (99) 1,902 (4) – – (2) (19) (25) – (6) 31 – (2) 3 – (64) (63) – (1) 64 – – 4,560 3,100 976 83 (469) 8,250 2,470 1,014 (634) 11,100 2,584 1,238 523 (2,620) 1,725 166 110 – (99) 1,902 s t n e m e t a t s l a i c n a n fi d e t a d i l o s n o c e h t o t s e t o N | s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C 114        General information Swisscom Group Swisscom Switzerland Residential Customers Business Customers Wholesale Infrastructure & Support Functions Fastweb Other Operating Segments Segment  Activity  Residential Customers  Business Customers  Wholesale  Infrastructure & Support  Functions  Fastweb  The Residential Customers segment provides mobile and fixed-network services in Switzerland, such as telephony, broad- band, TV and mobile offerings . The segment also includes the sale of terminal equipment .  The Business Customers segment focuses on telecom services and overall communications solutions for large corporations and customers from small and medium-sized enterprises in Switzerland . Its offering in the area of business ICT infrastruc- ture covers the entire range from individual products to complete solutions .  This segment incorporates the use of the Swisscom fixed-line and mobile network by other telecommunications service providers and the use of external networks by Swisscom . In addition, Wholesale includes roaming by foreign operators whose customers use the Swisscom mobile network, as well as broadband services and regulated access services to the access network .  The segment Infrastructure & Support functions 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 IT and network services in Switzerland . In addition, Infrastructure & Support Functions also includes Group-wide support functions such as finance, human resources or strategy as well as the management of real estate and the vehicle fleet in Switzerland .  Fastweb provides broadband and mobile services to residential, business and wholesale customers in Italy . The offering includes telephony, broadband and mobile offerings . For business customers, Fastweb offers comprehensive ICT solutions .  Other Operating Segments  Other Operating Segments mainly comprises Digital Business and Participations . Digital Business mainly comprises Swiss- com Directories Ltd (localsearch), which operates in the field of online directories and telephone directories . Participations mainly comprises the subsidiaries cablex Ltd and Swisscom Broadcast Ltd . 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 divided into the segments Residential Customers, Business Customers, Wholesale, and Infra- structure & Support Functions, which are grouped under Swisscom Switzerland, as well as Fastweb and Other Operating Segments. For its services, the Infrastructure & Support Functions segment does not charge any network costs or manage- ment fees to other segments. Any other services between the segments are charged at market prices. The results of the Residential Customers, Business Customers and Wholesale segments thus correspond to a contribution margin before network costs. Segment expense encompasses the direct and indirect costs, which include personnel expense and other oper- ating costs less capitalised costs of self-constructed assets and other income. Pension cost includes ordinary employer contributions. The difference between the ordinary employer contributions and the pension cost as provided for under IAS 19 is reported in the column ‘Eliminations’. The Eliminations segment result of CHF –20 million (prior year: CHF –99 million) includes income of CHF 14 million (prior year: expense of CHF 65 million) as a pension cost reconciliation item in accordance with IAS 19. Leases between the segments are not recognised in the balance sheet in accordance with IFRS 16. The reported lease expense of the segments comprises depreciation and interest on right-of-use assets excl. depreciation of pre- paid indefeasible rights of use (IRU) of CHF 23 million (prior year: CHF 24 million), impairments on right-of-use assets of CHF 1 million (prior year: CHF 7 million) and the accounting for the rental of buildings between segments. The lease expense of assets of low value is presented as direct costs. 115   Capital expenditure consists of the purchase of property, plant and equipment and intangible assets and pay- ments for indefeasible rights of use (IRU). In general, IRU are paid in full at the beginning of the usage period. If the criteria of IFRS 16 are met, they are classified as a lease. From an economic point of view, pre-paid IRU will be considered as capital expenditure in the segment information. IRU payments in 2021 amounted to CHF 16 mil- lion (prior year: CHF 41 million). Swisscom Switzerland sometimes sells mobile handsets at a subsidised rate as part of a bundled offering with a mobile contract. As a result of the reallocation of revenue over the pre-delivered components (mobile handset), revenue is recognised earlier than the date of invoicing. This results in contract assets deriving from this business being recognised. In the segment reporting of Swisscom Switzerland, the recognition and derecognition of these contract assets is reported as other revenue. The amounts invoiced are reported under revenue from telecoms services or merchandise. Segment information 2021 2021, 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  Segment result before depreciation and amortisation  Lease expense  Depreciation and amortisation  Segment result  Interest expense on lease liabilities  Operating income  Financial income and financial expense, net  Result of equity-accounted investees  Income before income taxes  Income tax expense  Net income  Swisscom Switzerland 4,515 3,004 658 8,177 56 8,233 (1,826) (2,954) 3,453 (232) (1,475) 1,746 Other Operating Segments – 431 – 431 602 Fastweb 1,233 1,057 285 2,575 8 2,583 1,033 (933) (758) 892 (58) (637) 197 (72) (795) 166 (11) (56) 99 Elimi- nation – – – – (666) (666) 52 581 (33) – 13 (20) Segment result before depreciation and amortisation  Capital expenditure  Lease expense  Operating free cash flow proxy  3,453 (1,642) (232) 1,579 892 (649) (58) 185 166 (41) (11) 114 (33) 46 – 13 Total 5,748 4,492 943 11,183 – 11,183 (2,779) (3,926) 4,478 (301) (2,155) 2,022 44 2,066 96 (10) 2,152 (319) 1,833 4,478 (2,286) (301) 1,891 s t n e m e t a t s l a i c n a n fi d e t a d i l o s n o c e h t o t s e t o N | s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C 116         Segment information Swisscom Switzerland 2021 Residential Customers Business Customers Whole- sale Infrastructure & Support Functions Elimi- nation Total Swisscom Switzerland 2021, in CHF million  Fixed-line  Mobile  Telecom services  Solution business  Merchandise  Wholesale  Revenue other  Net revenue from external customers  4,515 2,982 Net revenue from other segments  Net revenue  Direct costs  Indirect costs  77 4,592 (1,135) (686) 76 3,058 (821) (950) Segment result before depreciation and amortisation  2,771 1,287 1,987 1,854 3,841 – 548 – 126 927 710 1,637 1,111 228 – 6 (40) (55) (31) (67) 2,676 1,189 – – – – – 658 – 658 313 971 (426) (20) 525 (1) – 524 – – – – – – 22 22 54 76 (7) (1,200) (1,131) (160) (1,353) (2,644) (40) (42) – (1,560) Swisscom Switzerland 4,484 3,048 661 8,193 57 8,250 (1,772) (3,012) 3,466 (232) (1,509) 1,725 Other Operating Segments – 445 – 445 569 Fastweb 1,214 973 275 2,462 8 2,470 1,014 (887) (743) 840 (56) (618) 166 (70) (760) 184 (12) (62) 110 – – – – – – – – (464) (464) 563 (98) 1 – – 1 – Elimi- nation – – – – (634) (634) 60 466 (108) – 9 (99) Lease expense  Depreciation and amortisation  Segment result  Capital expenditure  Segment information 2020 2020, 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  Segment result before depreciation and amortisation  Lease expense  Depreciation and amortisation  Segment result  Interest on lease liabilities  Operating income  Financial income and financial expense, net  Result of equity-accounted investees  Income before income taxes  Income tax expense  Net income  Segment result before depreciation and amortisation  Capital expenditure  Lease expense  Operating free cash flow proxy  3,466 (1,599) (232) 1,635 840 (629) (56) 155 184 (44) (12) 128 (108) 43 – (65) 2,914 2,564 5,478 1,111 776 658 154 8,177 56 8,233 (1,826) (2,954) 3,453 (232) (1,475) 1,746 (1,642) Total 5,698 4,466 936 11,100 – 11,100 (2,669) (4,049) 4,382 (300) (2,180) 1,902 45 1,947 (152) 4 1,799 (271) 1,528 4,382 (2,229) (300) 1,853 117             Segment information Swisscom Switzerland 2020 2020, in CHF million, restated  Fixed-line  Mobile  Telecom services  Solution business  Merchandise  Wholesale  Revenue other  2,012 1,934 3,946 – 524 – 14 960 761 1,721 1,058 235 – 12 Net revenue from external customers  4,484 3,026 Net revenue from other segments  Net revenue  Direct costs  Indirect costs  76 4,560 (1,088) (774) 74 3,100 (810) (942) Segment result before depreciation and amortisation  2,698 1,348 Residential Customers Business Customers Whole- sale Infrastructure & Support Functions Elimi- nation Total Swisscom Switzerland – – – – – 661 – 661 315 976 (433) (19) 524 (1) – 523 – – – – – – 22 22 61 83 (8) (1,179) (1,104) (155) (1,361) (2,620) – – – – – – – – (469) (469) 567 (98) – – – – – 2,972 2,695 5,667 1,058 759 661 48 8,193 57 8,250 (1,772) (3,012) 3,466 (232) (1,509) 1,725 (1,599) (43) (71) (33) (77) 2,584 1,238 (27) (40) – (1,532) Lease expense  Depreciation and amortisation  Segment result  Capital expenditure  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  2021 Non-current assets 15,984 3,811 11 972 2020 Non-current assets 15,814 4,044 67 662 Net revenue 8,614 2,462 24 – Net revenue 8,579 2,575 29 – 11,183 20,778 11,100 20,587 2021 7,673 1,111 851 942 606 2020 7,770 1,058 828 936 508 11,183 11,100 s t n e m e t a t s l a i c n a n fi d e t a d i l o s n o c e h t o t s e t o N | s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C 118              Accounting policies Telecoms services Telecoms services encompass mobile and fixed-network services both in Switzerland and abroad. Mobile phone services comprise the basic charges; in addition, they include the domestic and international cellular traffic 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 is generally 12 or 24 months. If a mobile handset is sold as part of a bundled offering with a mobile contract, it is considered as a multiple-element contract. Similar multiple-element contracts are grouped into portfolios for revenue accounting. The transaction price for multiple-element contracts is allocated to each identified perfor- mance obligation on the basis of relative stand-alone selling prices. In this process, the stand-alone selling price of each component is considered in relation to the sum of the stand-alone selling prices of all performance obli- gations 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 which do not constitute a separate performance obligation are considered as part of the total transaction price and allocated to the sep- arate performance obligations arising under the customer contract on a pro rata basis. In the event that there is no minimum contract term, the revenue is recognised at the time of connection. Fixed-network services princi- pally comprise the basic charges for fixed telephony, broadband and TV connections, 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 principally comprise advisory services and the implementa- tion, maintenance and operation of communication infrastructures. Furthermore, the area includes applications 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 out- sourcing contracts is recognised as a function of performance to date provided to the customer. The duration of these contracts is generally between three and seven years. Transition projects in connection with an outsourc- ing contract are not recorded as separate performance obligations. Maintenance revenues are recognised on a straight-line basis over the term of the maintenance contracts. Variable consideration is only included in the transaction price if it is highly probable that no significant revenue reversals will occur in the future. 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 and 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 telecommuni- cations 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 principally comprise leased lines and the use of the Swisscom fixed network by other telecommuni- cations 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 as contractually agreed charges as of the time of providing the service. Roaming fees charged to other telecommu- nications service providers are reported on a gross basis. 119 1.2 Operating expenses Direct costs In CHF million  Customer premises equipment and merchandise  Services purchased  Costs to obtain a contract  Costs to fulfil a contract  Network access costs of Swiss subsidiaries  Network access costs of foreign subsidiaries  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  Energy costs  Advertising and selling expenses  Consultancy expenses and freelance workforce  Call centre services purchased  Administration expense  Allowances for receivables and contract assets  Miscellaneous operating expenses  Total other operating expense  Capitalised self-constructed tangible and intangible assets  Own work for capitalised contract costs  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. 2021 1,035 730 219 31 338 426 2020 980 646 285 20 344 394 2,779 2,669 2021 2,580 87 2,667 257 284 120 201 127 139 59 64 606 1,857 (432) (60) (11) (95) (598) 2020 2,657 60 2,717 255 267 116 186 130 136 57 94 557 1,798 (359) (40) (11) (56) (466) 3,926 4,049 Capitalised self-constructed tangible and intangible assets include personnel costs for the manufacturing of tech- nical installations, the construction of network infrastructure and the development of software for internal use. s t n e m e t a t s l a i c n a n fi d e t a d i l o s n o c e h t o t s e t o N | s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C 120           Accounting policies Costs to obtain a contract Swisscom pays commissions to dealers for the acquisition and retention of mobile-phone customers. The com- mission 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, Swisscom will reimburse the dealer for any handset subsidies they grant to customers when they take out a Swisscom mobile subscription at the same time. The associated costs are deferred and recognised on a straight-line basis over the contract term as the costs of obtain- ing a contract. The amortisation period corresponds to the related revenue-recognition period. See Note 1.1. Costs to fulfil a contract In connection with a broadband or TV subscription, the customer must purchase a router or TV box in order to 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 fulfil a contract and amortised over the minimum term of the contract. The set-up costs incurred to transfer and integrate outsourcing transactions with corporate cus- tomers 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-recognition period. See Note 1.1. 121  2 Capital and financial risk management The following chapter sets out the procedures and guidelines governing the active management of the capital structure and the financial risks to which Swisscom is exposed . Swisscom strives to achieve a robust equity basis, which enables 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 Ratio of net debt to EBITDA after lease expense Swisscom has a single A credit rating with rating agencies Standard & Poor’s and Moody’s. Swisscom aims to maintain this single A credit rating. An important quantitative criterion for the credit rating and the assessment and control of the financial situation by the management is the ratio of net debt to operating result before depreciation, amortisation and impairment losses after lease expense (EBITDA AL). Net debt comprises financial liabilities less cash and cash equivalents, listed debt instruments, certificates of deposit, derivative financial instru- ments held for hedging financial liabilities and other current financial assets. Lease expense includes depreciation and interest on right-of-use assets excluding depreciation on prepaid indefeasible rights of use (IRU) and impair- ment losses. The net debt to EBITDA AL ratio is as follows: In CHF million  Net debt  EBITDA after lease expense (EBITDA AL)  Ratio net debt/EBITDA AL  31.12.2021 31 .12 .2020 5,689 4,177 1.4 6,218 4,082 1.5 Equity ratio Swisscom strives to achieve an equity ratio of a minimum of 30%. The equity ratio is computed as follows: In CHF million  Equity  Total assets  Equity ratio in %  31.12.2021 31 .12 .2020 10,813 24,801 43.6 9,491 24,262 39.1 Dividend policy Swisscom pursues a dividend policy with a stable dividend, taking into account its financial situation and cash flow generation. 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. As at 31 December 2021, Swisscom Ltd’s distributable reserves amounted to CHF 4,691 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 2020 and 2021: 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  2021 51 .802 22 .00 1,140 2020 51 .802 22 .00 1,140 The Board of Directors will propose the payment of an unchanged dividend of CHF 22 per share for the 2021 financial year to the Annual General Meeting of Shareholders of Swisscom Ltd on 30 March 2022. This equates to an aggregate dividend distribution of CHF 1,140 million. The expected dividend payment date is 5 April 2022. s t n e m e t a t s l a i c n a n fi d e t a d i l o s n o c e h t o t s e t o N | s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C 122   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)  2021 1,832 2020 1,530 51,801,334 51,800,587 35.37 29.54 Supplementary information on equity Development of retained earnings and other reserves as well as comprehensive income 2021 In CHF million  Balance at 1 January 2021  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  Foreign currency translation losses of foreign  subsidiaries transferred to income statement  Fair value losses of cash flow hedges transferred  to income statement  Equity-accounted investees  Income tax expense  Items that may be reclassified  to income statement  Other comprehensive income  Comprehensive income  Dividends paid  Other changes  Foreign currency Retained translation earnings adjustments 11,085 (1,791) 1,832 777 84 (152) 709 – – – – – – 709 2,541 (1,140) (1) – – – – – (107) 25 – 2 7 (73) (73) (73) – – Balance at 31 December 2021  12,485 (1,864) Hedging reserves Equity holders of Swisscom Non- controlling interests 8 – – – – – – – (7) – 1 (6) (6) (6) – – 2 9,302 1,832 777 84 (152) 709 (107) 25 (7) 2 8 (79) 630 2,462 (1,140) (1) 10,623 1 1 – – – – – – – – – – – 1 (1) 1 2 Total 9,303 1,833 777 84 (152) 709 (107) 25 (7) 2 8 (79) 630 2,463 (1,141) – 10,625 123       Development of retained earnings and other reserves as well as comprehensive income 2020 Foreign currency Retained translation earnings adjustments Hedging reserves Equity holders of Swisscom Non- controlling interests 10,454 (1,781) 11 In CHF million  Balance at 1 January 2020  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  Items that may be reclassified  to income statement  Other comprehensive income  Comprehensive income  Dividends paid  Other changes  1,530 330 (10) (68) 252 – – – – 252 1,782 (1,140) (11) – – – – – (5) – (5) (10) (10) (10) – – – – – – – – (3) – (3) (3) (3) – – 8 Balance at 31 December 2020  11,085 (1,791) 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 other financial liabilities  Repayment of financial liabilities  Interest expense  Interest payments  Foreign currency translation adjustments  Change in fair value  Accrual of deferred purchase price margins from business combinations  Expenses for deferred consideration arising on business combinations 1 Other changes  Balance at 31 December  Bank loans  Debenture bonds  Private placements  Derivative financial instruments 2 Other financial liabilities  Total financial liabilities  Thereof current financial liabilities  Thereof non-current financial liabilities  1 Reported in the cash flow statement as cash flow used in investing activities. 2 See Note 2.5. See Note 5.2. 8,684 1,530 330 (10) (68) 252 (5) (3) (5) (13) 239 1,769 (1,140) (11) 9,302 3 (2) – – – – – – – – – (2) (1) 1 1 2021 7,042 221 100 29 350 (192) (544) (56) (792) 63 (81) (88) (25) 6 (10) (20) 6,445 488 5,564 151 64 178 6,445 559 5,886 Total 8,687 1,528 330 (10) (68) 252 (5) (3) (5) (13) 239 1,767 (1,141) (10) 9,303 2020 7,460 2 719 11 732 (557) (540) (13) (1,110) 75 (93) (41) 6 – (26) 39 7,042 484 6,110 151 90 207 7,042 792 6,250 s t n e m e t a t s l a i c n a n fi d e t a d i l o s n o c e h t o t s e t o N | s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C 124            Credit lines Swisscom has two confirmed lines of credit. In 2021, one line of credit was increased from CHF 1,000 million to CHF 1,200 million and the maturity date was extended to 2026. The second line of credit of CHF 1,000 million was converted in 2021 into a sustainability linked loan with a maturity date in 2026. The amount of the credit margin is linked to the achievement of defined sustainability targets by Swisscom. The two confirmed lines of credit are affected by the Interest Rate Benchmark Reform (known as the IBOR Reform). In Switzerland, the changeover from the reference interest rate LIBOR to SARON is taking place. In the course of the renewal or con- version of the lines of credit, the reference interest rate for CHF was also changed from LIBOR to SARON in each case. As of 31 December 2021, none of these lines of credit had been drawn down, as in the prior year. Bank loans In CHF million  Bank loans in CHF 1 Bank loans in EUR 1, 3 Bank loans in EUR 2, 3 Bank loans in USD 2 Bank loans in USD 2 Total bank loans  1 Variable interest-bearing. 2 Fixed interest-bearing. Maturity years 2020–2021 2021–2023 2017–2024 2009–2028 2009–2028 Par value in currency Nominal interest rate Effective interest rate 31.12.2021 31 .12 .2020 Carrying amount 199 0 .00% 200 Euribor +0 .63% 150 58 51 0 .67% 8 .30% 7 .65% 0 .00% 0 .10% 0 .67% 4 .62% 4 .63% – 207 155 68 58 488 199 – 163 66 56 484 3 Designated for hedge accounting of net investments in foreign operations. As of 31 December 2021, Swisscom had not taken on any short-term bank loans on a weekly or monthly basis (prior year: CHF 199 million). In the second quarter of 2021, Swisscom took on a bank loan of EUR 200 million (CHF 207 million), maturing in 2023. The funds received were used to repay existing debt. Bank loans to the value of EUR 350 million (CHF 362 million) may become due for immediate repayment if the shareholding of the Confederation in the capital of Swisscom falls below one third, or if another shareholder can exercise control over Swisscom. 125       Debenture bonds In CHF million  Maturity years Par value in currency Nominal interest rate Effective interest rate 31.12.2021 31 .12 .2020 Carrying amount Debenture bond in EUR  (ISIN: XS1051076922) 1 Debenture bond in CHF  (ISIN: CH0114695379)  Debenture bond in CHF  (ISIN: CH0268988174) 2 Debenture bond in CHF  (ISIN: CH0188335365)  Debenture bond in EUR  (ISIN: XS1288894691)  Debenture bond in CHF  (ISIN: CH0247776138)  Debenture bond in EUR  (ISIN: XS1803247557) 1 Debenture bond in CHF  (ISIN: CH0344583783) 2 Debenture bond in CHF  (ISIN: CH0362748359)  Debenture bond in CHF  (ISIN: CH0317921663)  Debenture bond in CHF  (ISIN: CH0437180935)  Debenture bond in EUR  (ISIN: XS21692434791) 1 Debenture bond in CHF  (ISIN: CH0254147504)  Debenture bond in CHF  (ISIN: CH0419040982)  Debenture bond in CHF  (ISIN: CH0515152467)  Debenture bond in CHF  (ISIN: CH0336352775)  Debenture bond in CHF  (ISIN: CH0373476164)  Debenture bond in CHF  (ISIN: CH1112455766)  Debenture bond in CHF  (ISIN: CH0580291968)  Debenture bond in CHF  (ISIN: CH0268988182) 2 Debenture bond in CHF  (ISIN: CH0494734335)  Total debenture bonds  2014–2021 2010–2022 2015–2023 2012–2024 2015–2025 2014–2026 2018–2026 2016–2027 2017–2027 2016–2028 2018–2028 2020–2028 2014–2029 2019–2029 2020–2031 2016–2032 2017/ 2019–2033 2021–2033 2020–2034 2015/ 2018–2035 2019–2044 500 500 250 500 500 200 500 200 350 200 150 500 160 200 100 300 230 100 100 300 125 1 .88% 2 .06% 2 .63% 2 .81% 0 .25% –0 .38% 3 1 .75% 1 .77% 1 .75% –0 .06% 4 1 .50% 1 .47% 1 .13% 1 .25% 0 .38% –0 .37% 3 0 .38% 0 .39% 0 .38% 0 .30% 0 .75% 0 .72% 0 .38% 0 .53% 1 .50% 1 .47% 0 .50% 0 .43% 0 .13% 0 .15% 0 .13% 0 .14% 0 .75% 0 .66% 0 .25% 0 .27% 0 .25% 0 .27% 1 .00% 0 .26% 3 0 .00% 0 .00% – 503 252 504 537 202 515 203 351 202 151 511 161 201 100 299 233 100 100 314 542 503 255 504 578 202 538 208 351 202 151 534 161 201 100 299 233 – 100 323 125 5,564 125 6,110 1 Designated for hedge accounting of net investments in foreign operations. 2 Thereof CHF 575 million designated for fair value hedge accounting. 3 After hedging with interest rate swap. 4 After hedging with currency swap and taking hedge accounting into consider- ation. s t n e m e t a t s l a i c n a n fi d e t a d i l o s n o c e h t o t s e t o N | s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C 126          In the second quarter of 2021, Swisscom issued a green bond for CHF 100 million. It has a coupon of 0.25% and matures in 2033. The funds raised were used within the Green Bond Framework. Swisscom repaid a EUR 500 million (CHF 544 million) bond upon maturity in the third quarter of 2021. In the second quarter of 2020, Swisscom became the first listed company in Switzerland to issue a Green Bond in EUR. The amount borrowed totalled EUR 500 million (CHF 519 million). The coupon was 0.375% and the bond has a maturity of 8.5 years. The funds raised will be used within Swisscom’s Green Bond Framework. In the third quarter of 2020, Swisscom issued a CHF 100 million bond with a maturity of 11 years and a coupon of 0.125%. In the fourth quarter of 2020, Swisscom issued a CHF 100 million bond with a maturity of 14 years and a coupon of 0.245%. The funds received were used to repay existing debt. Swisscom repaid a EUR 500 million (CHF 540 million) bond upon maturity in the third quarter of 2020. Private placements The outstanding private placement of CHF 150 million matures in 2031. It may become due for immediate repay- ment if the shareholding of the Confederation in the capital of Swisscom falls below 35% or if another share- holder can exercise control over Swisscom. Other financial liabilities As at 31 December 2021, the carrying amount of other financial liabilities was CHF 178 million (prior year: CHF 207 million), consisting primarily of loans. 2.3 Leases Lessee Swisscom’s leases comprise the rental of operation and office buildings, antenna sites, and network infrastructure in particular. In addition, indefeasible rights of use (IRU) are classified as leases under IFRS 16. In general, IRU are paid in full at the beginning of use. The Italian subsidiary Fastweb procures various access services from other fixed-network operators and uses their connection cables to the end customer. Swisscom applies the low value asset exemption for these leases. Accordingly, no right-of-use assets and lease liabilities will be recognised for these access services, the costs of which will be reported as direct costs. There are no material lease commit- ments arising from leases that began after the balance sheet date. 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 at 31 December 2021, the carrying amount of the deferred gains was CHF 95 million (prior year: CHF 106 million). The deferred gains are released to other income over the term of the individual leases. 127 Right-of-use assets In CHF million  At cost  Balance at 1 January 2020  Additions  Disposals  Business combinations  Foreign currency translation adjustments  Balance at 31 December 2020  Additions  Disposals  Sales of subsidiaries  Foreign currency translation adjustments  Balance at 31 December 2021  Accumulated depreciation and impairment losses  Balance at 1 January 2020  Depreciation  Impairments  Disposals  Foreign currency translation adjustments  Balance at 31 December 2020  Depreciation  Impairments  Disposals  Foreign currency translation adjustments  Balance at 31 December 2021  Net carrying amount  Net carrying amount at 31 December 2021  Net carrying amount at 31 December 2020  Net carrying amount at 1 January 2020  Lease liabilities In CHF million  Balance at 1 January  Additions  Interest expense  Payments  Disposals  Business combinations  Foreign currency translation adjustments  Balance at 31 December  Land and buildings  Technical installations  Other leases  Total lease liabilities 1 Thereof current lease liabilities  Thereof non-current lease liabilities  1  Note 2.5 shows the maturity analysis for lease liabilities. Land and buildings Technical installations Other right-of-use assets 1,999 202 (29) 1 (1) 2,172 261 (78) (1) (13) 2,341 (393) (223) (7) 22 – (601) (223) (1) 71 3 (751) 1,590 1,571 1,606 1,006 53 (9) – (4) 1,046 47 (12) – (43) 1,038 (442) (53) – 9 1 (485) (53) – 12 21 (505) 533 561 564 8 3 (1) – – 10 9 (1) – – 18 (1) (3) – – – (4) (4) – 1 – (7) 11 6 7 2021 1,988 317 44 (303) (7) – (22) Total  3,013  258  (39)  1  (5)  3,228  317  (91)  (1)  (56)  3,397  (836)  (279)  (7)  31  1  (1,090)  (280)  (1)  84  24  (1,263)  2,134  2,138  2,177  2020 2,027 258 45 (332) (8) 1 (3) 2,017 1,988 1,653 349 15 2,017 217 1,800 1,624 356 8 1,988 226 1,762 s t n e m e t a t s l a i c n a n fi d e t a d i l o s n o c e h t o t s e t o N | s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C 128                                       Income and expenses arising from leases In CHF million  Revenue  Income from leases excluding subleases  Income from subleases  Other income  Deferred gain on sale and leaseback of real estate  Financial income  Interest income on finance lease  Direct costs  Expense from leases of low value assets  Depreciation and impairment losses  Depreciation of right-of-use assets  Impairment losses on right-of-use assets  Financial expense  Interest expense on lease liabilities  2021 189 6 11 2 2020 187 7 16 2 (110) (134) (280) (1) (279) (7) (44) (45) Lessor Swisscom supplies other providers of telecommunications services with access lines for use, which are classified either as finance or operating leases. At the same time, Swisscom leases space in operations and offices buildings and at antenna sites, which is classified as an operating lease. Future lease payments in respect of receivables from finance leases as at 31 December 2020 and 2021 break down 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 future payments from finance leases  Future interest income  Total receivables from finance leases  Thereof current receivables from finance leases  Thereof non-current receivables from finance leases  31.12.2021 31 .12 .2020 33 24 7 6 4 26 100 (1) 99 33 66 34 22 6 4 3 19 88 (1) 87 33 54 Future lease payments in respect of operating leases are as follows as at 31 December 2020 and 2021: 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  31.12.2021 31 .12 .2020 44 40 39 39 38 38 62 41 39 38 15 16 Total future payments from operating leases  238 211 129           Significant judgements or estimates When determining the terms of leases, management considers all facts and circumstances that encompass an economic incentive to exercise renewal options or not exercise termination options. Renewal and termination options are only included in the contract term where there is sufficient certainty that they will be exercised. This assessment is reviewed in the event of a material occurrence or change in circumstances that may affect the previous assessment, where this is within the lessee’s control. Accounting policies 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. Leases A lease is a contract or part of a contract that transfers the right to control the use of an identifiable asset for an agreed period of time in return for payment. In particular, Swisscom leases comprise the rental of operation and office buildings, antenna sites as well as network infrastructure and indefeasible rights of use (IRU). As a lessee, for each lease Swisscom recognises a lease liability for future lease payments and a right of use for the underly- ing asset as at the time when the leased asset becomes available to Swisscom. The lease payments are divided into a repayment component and an interest component. The interest component is recognised as an interest expense over the lease term computed on the basis of the effective interest method. The right-of-use asset is depreciated on a straight-line basis over the shorter of the useful life and the lease term. As a lessor, Swisscom has to distinguish between finance and operating leases. A lease is recorded as a finance lease whenever essentially all of the risks and rewards incidental to ownership of the asset are transferred. Unless implicitly specified in the lease, the interest rate used to measure the rights of use and lease liabilities is the incremental borrowing rate. In the area of network access services, for selected leases Swisscom applies the exemptions regarding the sepa- ration of lease and non-lease components. The non-lease components are accounted for in accordance with other standards. Swisscom procures various access services from other network operators and uses their connec- tion cables to the end customer. Under IFRS 16, part of these access services is classified as a lease. The value of the individual connection cable fulfils the criteria as an asset of low value. Swisscom applies the low value asset exemption for these leases. 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. The exemption for short- term leases is not applied. A number of leases for the rental of operation and office buildings include renewal and termination options which are taken into account in the initial measurement by category of building. Rental contracts of antenna sites have an initial lease term of 10 to 15 years. In general, these rental contracts include renewal and mutual termination options. For these leases, it is not reasonably certain that all renewal options will be exercised. Accordingly, no renewal options are taken into account in the initial measurement of lease con- tracts of antenna sites. Given Swisscom’s planning horizon of a maximum of five years and technological develop- ments, it is not possible to estimate the amount of additional undiscounted payments which are currently not included in the lease liabilities. s t n e m e t a t s l a i c n a n fi d e t a d i l o s n o c e h t o t s e t o N | s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C 130   2.4 Financial result In CHF million  Interest income on financial assets  Foreign exchange gains  Change in fair value of interest rate swaps 1 Gain on sale of equity-accounted investees 2 Gain on exchange of financial assets  Other financial income  Total financial income  Interest expense on financial liabilities  Interest expense on lease liabilities  Interest expense on defined benefit obligations 3 Foreign exchange losses  Change in fair value of interest rate swaps 1 Present-value adjustments on provisions 4 Other financial expense  Total financial expense  Financial income and financial expense, net  Interest expense on lease liabilities  Net interest expense on financial assets and liabilities  1 See Note 2.5. 2 See Note 5.3. 3 See Note 4.3. 4 See Note 3.5. 2021 3 14 21 219 – 12 269 (63) (44) (1) – – (32) (33) (173) 96 (44) (60) 2020 6 – – – 31 4 41 (75) (45) (2) (5) (9) (39) (18) (193) (152) (45) (69) In the third quarter of 2020, Swisscom exchanged certificates of deposit for U.S. treasury bond strips (listed debt instruments). The exchange of financial assets resulted in a valuation difference of CHF 31 million, which was rec- ognised as financial income. 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)  ● Reduction in translation risk by foreign currency  financing and designation for hedge accounting  ● Hedging of currency risk of foreign currency financing  by use of currency swaps  ● Use of interest rate swaps to manage  fixed/variable share of financial debt  ● Guideline establishing minimum requirements  for counterparties  ● Designated counterparty limits  ● Employment of netting agreements foreseen under  ISDA (International Swaps and Derivatives Association)  Interest rate risks result from changes in interest rates  which can negatively impact cash flows and the financial  situation of Swisscom .  Through its operating business activities and derivative  financial instruments and financial investments,  Swisscom is exposed to the risk of default  of a counterparty .  Interest rate risk  Credit risks  from operating  business activities  and financial  transactions  Liquidity risk  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  totaling CHF 2,200 million  131                                           Foreign exchange risks As regards financial instruments, the following currency risks and hedging contracts existed for foreign currencies as of 31 December 2020 and 2021: 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 11 6 13 (1,931) (60) (1,961) (15) (1,976) – 131 517 648 (1,328) 31.12.2021 31 .12 .2020 USD 14 7 403 (217) (41) 166 (219) (53) 219 (36) – 183 130 EUR 30 (15) 30 (2,350) (37) (2,342) 2 (2,340) – 86 540 626 (1,714) USD 19 9 315 (221) (49) 73 (307) (234) 307 (34) – 273 39 In addition, as at 31 December 2021, Swisscom had outstanding financial liabilities with a nominal value totalling EUR 1,350 million (CHF 1,395 million, prior year: EUR 1,650 million, CHF 1,782 million), which are designated for hedge accounting of net investments in foreign operations. In 2021, income of CHF 61 million (prior year: income of CHF 9 million) arising from the measurement of financial liabilities was recognised in other comprehensive income in the position of foreign currency translation of foreign Group companies. As at 31 December 2021, the cumulative positive amount of foreign currency translation differences in equity totals CHF 304 million. 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. The analysis assumes that all other variables, in particular the interest rate level, remain constant. In CHF million  31.12.2021  EUR volatility 5 .02%  USD volatility 6 .24%  31.12.2020  EUR volatility 5 .14%  USD volatility 6 .39%  Income impact on Hedges for balance sheet items balance sheet items Planned Hedges for cash flows planned cash flows 98 (10) 120 (5) (32) 2 (32) 2 1 14 – 20 – (14) – (22) The volatility of balance sheet positions and scheduled cash flows is partially offset by the volatility of the related hedging contracts. s t n e m e t a t s l a i c n a n fi d e t a d i l o s n o c e h t o t s e t o N | s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C 132               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  31.12.2021 31 .12 .2020 6,050 230 6,280 (275) (584) (859) 5,421 (354) 1,092 738 5,775 (1,092) 4,683 5,421 6,565 274 6,839 (271) (561) (832) 6,007 (287) 1,115 828 6,294 (1,115) 5,179 6,007 Interest rate sensitivity analysis A shift in interest rates by 100 basis points has an impact of CHF 7 million on the income statement (previous year: CHF 8 million), but no impact on equity as at 31 December 2020 and 2021. 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 receivables, receivables from finance leases and contract assets) may be analysed as follows: In CHF million  Cash and cash equivalents  Financial assets at amortised cost  Derivative financial instruments  Other assets valued at fair value  Total carrying amount of financial assets  31.12.2021 31 .12 .2020 401 356 19 2 778 340 391 79 1 811 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  31.12.2021 31 .12 .2020 118 530 75 11 44 778 87 441 218 40 25 811 133   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 divides the credit risks from operating activities between Swisscom Switzerland and Fastweb. Default risks are principally impacted by the individual attributes of the customers. They are also influenced by the default risk of customer groups and indus- try sectors. Swisscom has a receivables management system in place to minimise default losses. New customers are reviewed for their creditworthiness and maximum payment targets are set for customer groups. As regards their creditworthiness, customers are divided into groups for the purposes of monitoring default risk. In the process a differentiation is made between individual and business customers, among other things. In addition, the ageing structure of the receivables is taken into account, as is the industry segment in which a business customer is active. The split of trade receivables and contract assets by operating segment is as follows: In CHF million  Notional amount  Residential Customers  Business Customers  Wholesale  Infrastructure & Support Functions  Swisscom Switzerland  Fastweb  Other Operating Segments  Total notional amount  Allowances for doubtful debts  Residential Customers  Business Customers  Wholesale  Infrastructure & Support Functions  Swisscom Switzerland  Fastweb  Other Operating Segments  Total allowances for doubtful debts  Total notional amount less allowances for doubtful debts  31.12.2021 31 .12 .2020 868 559 186 36 1,649 821 170 2,640 (51) (22) (4) (1) (78) (48) (25) 1,003 421 141 22 1,587 643 219 2,449 (59) (14) (2) (2) (77) (60) (27) (151) (164) 2,489 2,285 As at 31 December 2021, the maturities of trade receivables and contract assets as well as any related valuation allowances may be analysed as follows: In CHF million  Not overdue  Past due up to 3 months  Past due 4 to 6 months  Past due 7 to 12 months  Past due over 1 year  Total  Rate 0 .30% 3 .80% 40 .82% 45 .83% 76 .29% 5.72% Par value 1,657 789 49 48 97 31.12.2021 Allowance (5) (30) (20) (22) (74) 2,640 (151) s t n e m e t a t s l a i c n a n fi d e t a d i l o s n o c e h t o t s e t o N | s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C 134           As at 31 December 2020, the maturities of trade receivables and contract assets as well as any related valuation allowances may be analysed as follows: In CHF million  Not overdue  Past due up to 3 months  Past due 4 to 6 months  Past due 7 to 12 months  Past due over 1 year  Total  Rate 0 .65% 6 .82% 42 .31% 27 .88% 67 .68% 6.70% 31 .12 .2020 Par value Allowance 1,681 513 52 104 99 (11) (35) (22) (29) (67) 2,449 (164) Movements in valuation allowances for trade receivables and contract assets may be analysed as follows: In CHF million  Balance at 1 January  Additions to allowances  Write-off of irrecoverable receivables subject to allowance  Release of unused allowances  Sales of subsidiaries  Foreign currency translation adjustments  Balance at 31 December  Liquidity risk Contractual maturities including estimated interest payable 2021 164 87 (66) (23) (9) (2) 151 2020 144 97 (74) (3) – – 164 In CHF million  31.12.2021  Bank loans  Debenture bonds  Private placements  Derivative financial instruments  Other financial liabilities  Lease liabilities  Trade payables  Total  In CHF million  31.12.2020  Bank loans  Debenture bonds  Private placements  Derivative financial instruments  Other financial liabilities  Lease liabilities  Trade payables  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 488 526 5,564 5,779 151 64 178 2,017 1,600 158 61 178 2,680 1,600 10,062 10,982 7 556 1 (1) 27 261 1,517 2,368 214 293 1 (3) 45 245 70 865 173 1,832 2 28 20 600 13 132 3,098 154 37 86 1,574 – 2,668 5,081 Carrying Contractual Due within Due within Due within 1 year 1 to 2 years 3 to 5 years amount payments Due after 5 years 484 526 6,110 6,356 151 90 207 1,988 1,525 159 83 207 2,653 1,525 10,555 11,509 206 606 1 14 11 271 1,502 2,611 7 181 556 1,409 132 3,785 155 55 79 2 11 24 1 3 93 233 15 908 560 1,589 8 – 2,195 5,795 135           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  Contract value  Positive fair value  Negative fair value  31.12.2021 31 .12 .2020 31.12.2021 31 .12 .2020 31.12.2021 31 .12 .2020 575 517 575 540 1,092 1,115 166 166 200 36 131 53 420 90 90 200 34 87 216 537 19 – 19 – – – – – – – 19 1 18 37 41 78 – – – 1 – – 1 79 1 78 – (2) (2) (2) (2) (58) – (1) (1) (60) (64) (4) (60) – – – (3) (3) (79) – (1) (7) (87) (90) (11) (79) Total derivative financial instruments  1,678 1,742 Thereof current derivative financial instruments  Thereof non-current derivative financial instruments  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 contains forward contracts, designated as cash flow hedges, for hedging future purchases of goods 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 exclusively comprise 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. The interest rate and currency swaps entered into by Swisscom are affected by the Interest Rate Benchmark Reform (known as the IBOR Reform). In Switzerland, the changeover from the reference interest rate LIBOR to SARON is taking place. In the EUR zone, the EURIBOR was recently reformed and ESTR is to be replaced by the EONIA. In 2021, Swisscom switched the reference interest rate for interest rate swaps worth CHF 775 million and for currency swaps worth EUR 500 million. s t n e m e t a t s l a i c n a n fi d e t a d i l o s n o c e h t o t s e t o N | s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C 136     Valuation category 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 receivables and liabilities whose carrying amount corresponds to a reasonable estimation of their fair value. In CHF million  Other financial assets  Term deposits  Listed debt instruments  Loans  At amortised cost  Equity instruments valued at fair value  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  Derivative financial instruments  Other financial liabilities  Total financial liabilities  In CHF million  Other financial assets  Term deposits  Quoted debt instruments  Loans  At amortised cost  Equity instruments valued at fair value  At 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  Derivative financial instruments  Other financial liabilities  Total financial liabilities  Carrying amount Fair value 31.12.2021 Level 57 278 21 356 26 381 407 2 19 21 784 488 5,564 151 64 178 6,445 57 273 21 351 26 381 407 2 19 21 779 514 5,717 154 64 187 6,636 2 1 2 1 3 2 2 2 1 2 2 2 Carrying amount Fair value 31 .12 .2020 Level 107 271 13 391 91 91 1 79 80 562 484 6,110 151 90 207 7,042 107 277 13 397 91 91 1 79 80 568 519 6,381 160 90 223 7,373 2 1 2 3 2 2 2 1 2 2 2 Financial assets amounting to CHF 284 million (prior year: CHF 277 million) are not freely available as they serve as security for liabilities. 137             Accounting policies Derivative financial instruments Derivative financial instruments are initially recognised at fair value and are subsequently 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 comprehensive income, and are recognised in the hedging reserve as part of equity. If a hedge of an anticipated transaction 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 statement as income or expense in the same period as the cash flows of the intended or agreed future transaction occur. Changes in the fair value of derivative financial instruments that are not designated as hedging instruments are immediately recorded as income. 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 quo- tations 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 deter- mined 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. s t n e m e t a t s l a i c n a n fi d e t a d i l o s n o c e h t o t s e t o N | s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C 138   3 Operating assets and liabilities The following chapter discloses information on the movement in net operating assets and liabilities as well as in significant non-current tangible and intangible assets . In addition, it outlines the allocation of goodwill to the individual cash-generating units and the results of any applicable impairment tests . Changes in provisions and contingent liabilities are also presented in this chapter . 3.1 Net current operating assets Movements in operating assets and liabilities In CHF million  2021 financial year  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. In CHF million  2020 financial year  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. Trade receivables In CHF million  Billed revenue  Accrued revenue  Allowances  Total trade receivables 1 1 Credit risks. See Note 2.5. 01 .01 .2021 Operational changes Other 1 changes 31.12.2021 2,132 1,029 (1,525) (1,269) 367 269 161 (110) (385) (65) (86) (11) 35 37 (25) 2,315 1,179 (1,600) (1,617) 277 01 .01 .2020 Operational changes Other 1 changes 31 .12 .2020 2,183 1,156 (1,614) (1,194) 531 (54) (127) 86 (83) (178) 3 – 3 8 14 2,132 1,029 (1,525) (1,269) 367 31.12.2021 31 .12 .2020 2,335 131 (151) 2,315 2,180 116 (164) 2,132 139               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  Miscellaneous liabilities  Total other operating liabilities  Contract assets and liabilities In CHF million  Contract assets  Swisscom Switzerland  Other  Total contract assets  Contract liabilities  Swisscom Switzerland  Fastweb  Other  Total contract liabilities  31.12.2021 31 .12 .2020 174 263 84 114 430 38 22 54 153 224 79 120 349 17 27 60 1,179 1,029 1,012 172 68 43 19 303 1,617 737 160 100 45 12 215 1,269 31.12.2021 31 .12 .2020 113 61 174 559 379 74 1,012 89 64 153 535 122 80 737 Contract assets of Swisscom Switzerland primarily include deferrals arising in connection with the sale of bundled offerings in the mobile-phone area. In part, mobile handsets are sold on a subsidised basis, together with a mobile contract in a 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. Contractual liabilities above all cover deferrals from payments for prepaid cards and prepaid Swisscom Switzerland subscription fees. In 2021, an amount of CHF 305 million was recorded as revenue which had been recognised as a contract liability as at 31 December 2020. Swisscom avails itself of the rules of IFRS 15.121 regarding the disclosure of the transaction price allocated to the performance obligations that are unsatisfied. The exemption is not applied in the case of mobile-phone contracts with the sale of a sub- sidised mobile handset and a minimum contract term. These contracts incorporate revenue of CHF 613 million (2022: CHF 462 million; 2023: CHF 151 million). s t n e m e t a t s l a i c n a n fi d e t a d i l o s n o c e h t o t s e t o N | s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C 140               Contract costs Contract costs include deferred costs to obtain a contract as well as costs to fulfil a contract, which may be ana- lysed as follows: In CHF million  Costs to obtain a contract  Swisscom Switzerland  Fastweb  Other  Total costs to obtain a contract  Costs to fulfil a contract  Router and TV boxes  Initial costs from outsourcing contracts  Total costs to fulfil a contract  Total contract costs  Accounting policies 31.12.2021 31 .12 .2020 39 54 45 138 34 91 125 263 42 25 41 108 44 72 116 224 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 homogene- ous credit risk attributes, reviewed collectively for impairment and, whenever required, impairment losses are recognised. In addition to the 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 expenses. 141           Technical installations Land, buildings and leasehold improvements Advances made and assets installations under construction Other 3.2 Property, plant and equipment In CHF million  Cost of acquisition  Balance at 1 January 2020  Additions  Disposals  Adjustment to dismantlement and restoration costs  Reclassifications  Foreign currency translation adjustments  27,955 1,241 (1,042) 46 135 (18) 1,684 2 (10) – (1) – 4,614 209 (110) 18 70 – Balance at 31 December 2020  28,317 1,675 4,801 Additions  Disposals  Adjustment to dismantlement and restoration costs  Reclassifications  Business combinations  Sales of subsidiaries  Foreign currency translation adjustments  Balance at 31 December 2021  Accumulated depreciation and impairment losses  Balance at 1 January 2020  Depreciation  Impairment losses  Disposals  Foreign currency translation adjustments  Balance at 31 December 2020  Depreciation  Impairment losses  Disposals  Sales of subsidiaries  Foreign currency translation adjustments  1,020 (946) 15 158 – – (248) 28,316 (19,548) (1,198) (8) 1,038 10 (19,706) (1,215) (3) 943 – 156 4 (15) – 15 – – (4) 197 (444) (36) 97 1 (1) (1) 1,675 4,614 (1,390) (18) – 8 – (3,270) (303) – 103 – (1,400) (3,470) (17) – 14 – 2 (298) (4) 438 1 – Balance at 31 December 2021  (19,825) (1,401) (3,333) 484 229 – – (205) – 508 489 – – (270) – – (2) 725 – – – – – – – – – – – – Total 34,737 1,681 (1,162) 64 (1) (18) 35,301 1,710 (1,405) (21) – 1 (1) (255) 35,330 (24,208) (1,519) (8) 1,149 10 (24,576) (1,530) (7) 1,395 1 158 (24,559) 10,771 10,725 10,529 Net carrying amount  Net carrying amount at 31 December 2021  Net carrying amount at 31 December 2020  Net carrying amount at 1 January 2020  8,491 8,611 8,407 274 275 294 1,281 1,331 1,344 725 508 484 Commitments for future capital expenditures Firm contractual commitments for future capital investments in property, plant and equipment as at 31 Decem- ber 2021 aggregated CHF 899 million (prior year: CHF 800 million). Non-cash investing and financing transactions As a result of changes in the assumptions made in estimating the provisions for dismantlement and restoration costs, a decrease therein of CHF 21 million (prior year: increase of CHF 64 million) was recognised in property, plant and equipment with no impact on the income statement. See Note 3.5. s t n e m e t a t s l a i c n a n fi d e t a d i l o s n o c e h t o t s e t o N | s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C 142                 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. Accounting policies Property, plant and equipment is recognised at historical cost less depreciation and impairment losses. In addi- tion to historical cost and the costs directly attributable to bringing the asset to the location and condition nec- essary for it to be capable of operating in the manner intended by management, the purchase or manufacturing cost also includes the estimated costs for dismantling and restoring the site. Borrowing costs are capitalised insofar as they are directly attributable to the acquisition or production of a qualifying asset. Costs of replace- ment, 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  Ducts 1 Cables 1 Transmission and switching equipment 1 Other technical installations 1 Buildings and leasehold improvements  Other installations  1 Technical installations. Years 40 15 to 30 4 to 15 3 to 15 10 to 40 3 to 15 Whenever significant parts of an item of property, plant and equipment comprise individual components with differing useful lives, each component is depreciated separately. The process for estimating useful lives takes into account the expected use by the company, the expected wear and tear, technological developments, as well as empirical values with comparable assets. Leasehold improvements and installations in leased premises are depreciated on a straight-line basis over the shorter of their estimated useful lives and the remaining minimum lease term. The impact from adjusting useful economic lives and residual values is recognised on a prospective basis. Whenever indications exist that the value of an asset may be impaired, the recoverable amount of the asset is determined. If the recoverable amount of the asset, which is the greater of the fair value less costs to sell and the value in use, is less than its carrying amount, the carrying amount is written down to the recoverable amount. The carrying amount of an item of property, plant and equipment is de-recognised upon disposal or whenever no future economic benefits are expected from its use. Gains and losses arising on the disposal of property, plant and equipment are recognised as other income or other operating expenses. 143   3.3 Intangible assets In CHF million  Cost of acquisition  Balance at 1 January 2020  Additions  Disposals  Reclassifications  Business combinations  Sales of subsidiaries  Foreign currency translation adjustments  Balance at 31 December 2020  Additions  Disposals  Reclassifications  Business combinations  Sales of subsidiaries  Foreign currency translation adjustments  Balance at 31 December 2021  Accumulated amortisation and impairment losses  Balance at 1 January 2020  Amortisation  Impairment losses  Disposals  Foreign currency translation adjustments  Balance at 31 December 2020  Amortisation  Impairment losses  Disposals  Reclassifications  Sales of subsidiaries  Foreign currency translation adjustments  Balance at 31 December 2021  Net carrying amount  Net carrying amount at 31 December 2021  Net carrying amount at 31 December 2020  Net carrying amount at 1 January 2020  Purchased software Internally generated software Brands and customer relations Other intangible assets Licenses 2,143 190 (16) 34 2 – (6) 2,347 210 (10) 11 – (13) (80) 2,465 (1,696) (229) – 16 5 (1,904) (229) (1) 10 14 6 69 (2,035) 430 443 447 1,404 145 (26) 79 – (2) – 1,600 194 (111) 107 – – (8) 1,782 (955) (252) (1) 26 – (1,182) (221) – 110 (14) – 6 (1,301) 481 418 449 949 61 (2) – – – (1) 1,007 83 (26) – – – (12) 1,052 (246) (98) – 2 – (342) (113) – 26 – – 3 (426) 626 665 703 461 – – – – – (1) 460 – (67) – 29 – (13) 409 (381) (32) (2) – – (415) (21) – 67 – – 12 (357) 52 45 80 284 114 (7) (112) 16 – – 295 78 (35) (118) 2 (1) (2) 219 (121) (8) – 7 1 (121) (9) – 35 – – 1 (94) 125 174 163 Total 5,241 510 (51) 1 18 (2) (8) 5,709 565 (249) – 31 (14) (115) 5,927 (3,399) (619) (3) 51 6 (3,964) (593) (1) 248 – 6 91 (4,213) 1,714 1,745 1,842 As at 31 December 2021, other intangible assets include advance payments made and uncompleted development projects of CHF 107 million (prior year: CHF 150 million). Commitments for future capital expenditures As at 31 December 2021, firm contractual commitments for future capital investments in intangible assets aggre- gated CHF 63 million (prior year: CHF 54 million). Significant judgements or estimates Management estimates the useful economic lives and residual values of intangible assets 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 tech- nological developments, economic and legal changes as well as further external factors. s t n e m e t a t s l a i c n a n fi d e t a d i l o s n o c e h t o t s e t o N | s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C 144                  Accounting policies Mobile-phone licences, self-developed software as well as other intangible assets are recorded at historical cost less accumulated amortisation. Intangible assets resulting from business combinations, such as brands and customer relationships, are recognised at cost less accumulated amortisation, which equates to fair market value as at the date of acquisition. Mobile-phone licences are amortised based on the term of the licence. It begins as soon as the related network is ready for operation, unless other information is at hand which would suggest the need to modify the useful lives. The impact from adjusting useful economic lives and residual values is recognised on a prospec- tive basis. Amortisation is computed on a straight-line basis over the following estimated useful economic lives: Category  Software internally generated and purchased  Brands and customer relationships  Licenses  Other intangible assets  Years 3 to 7 5 to 10 2 to 16 3 to 10 Whenever indications exist that the value of an asset may be impaired, the recoverable amount of the asset is determined. If the recoverable amount of the asset, which is the greater of the fair value less costs to sell and the value in use, is less than its carrying amount, the carrying amount is written down to the recoverable amount. 3.4 Goodwill Goodwill is allocated to the cash-generating units of Swisscom based upon their business activities. Goodwill arising in a business combination is allocated to each cash-generating unit which can derive synergies from the business combination. The goodwill allocated to the cash-generating units may be analysed as follows: Residential Customers Swisscom Switzerland Business Customers Swisscom Switzerland Fastweb Other cash- generating units 1 In CHF million  At cost  Balance at 1 January 2020  Foreign currency translation adjustments  Balance at 31 December 2020  Additions  Foreign currency translation adjustments  2,769 – 2,769 – – 1,453 – 1,453 9 – 1,922 (7) 1,915 – (83) Balance at 31 December 2021  2,769 1,462 1,832 Accumulated impairment losses  Balance at 1 January 2020  Foreign currency translation adjustments  Balance at 31 December 2020  Foreign currency translation adjustments  Balance at 31 December 2021  Net carrying amount  Net carrying amount at 31 December 2021  Net carrying amount at 31 December 2020  Net carrying amount at 1 January 2020  – – – – – – – – – – 2,769 2,769 2,769 1,462 1,453 1,453 (1,384) 6 (1,378) 60 (1,318) 514 537 538 1 Comprises the cash-generating units Wholesale Swisscom Switzerland and Swisscom Directories. 403 – 403 9 – 412 – – – – – 412 403 403 Total 6,547 (7) 6,540 18 (83) 6,475 (1,384) 6 (1,378) 60 (1,318) 5,157 5,162 5,163 145                    Impairment testing In the fourth quarter of 2021 and after the conclusion of business planning, individual goodwill amounts were subjected to an impairment test. The recoverable amount of a cash-generating unit is determined based on its value in use, applying the discounted cash flow (DCF) method. The projected free cash flows are estimated on the basis of the business plans approved by management, which as a rule cover a three-year period. A planning horizon of five years was used for the Fastweb impairment test. For free cash flows extending beyond the detailed planning period, a terminal value was computed by capitalising the normalised cash flows. A steady long-term growth rate that corresponds to the growth rates customary in the country or market was assumed. The projected cash flows and management assumptions are corroborated by external sources of information. The discount rate is derived from the Capital Asset Pricing Model (CAPM). This latter comprises the weighted value of own equity and external borrowing costs. For the risk-free interest rate which forms the basis of the discount rate, the yield from Swiss government bonds is taken (abroad: Germany) with a maturity of ten years and a zero-interest rate, subject to minimum interest rates of 1.5% (Switzerland) and 2.0% (abroad). For cash-gener- ating units abroad, a risk premium for the country risk is then added. Discount rates and long-term growth rates Cash-generating unit  Residential Customers Swisscom Switzerland  Business Customers Swisscom Switzerland  Fastweb  Other cash-generating units  WACC pre-tax 5 .01% 4 .99% 7 .21% 5 .01– 9 .64% 2021 WACC post-tax Long-term growth rate 4 .09% 4 .09% 5 .36% 4 .09– 8 .28% 0% 0% 0 .8% 0– 1 .0% WACC pre-tax 5 .25% 5 .25% 6 .91% 5-25– 7-27% 2020 WACC post-tax Long-term growth rate 4 .30% 4 .30% 5 .13% 4 .30– 5 .84% 0% 0% 0 .5% 0% Results and sensitivity of impairment tests Residential Customers and Business Customers Swisscom Switzerland As at the measurement date, the recoverable amount at all cash-generating units, based on their value in use, is higher than the carrying amount relevant for the impairment test. Swisscom believes none of the anticipated changes in key assumptions which can rationally be expected would cause the carrying amount of the cash-gen- erating units to exceed the recoverable amount. Fastweb As at the date of the impairment test, no impairment of goodwill resulted. The recoverable amount exceeded the net carrying amount by EUR 641 million (CHF 680 million). In the prior year, the difference amounted to EUR 2,241 million (CHF 2,398 million). The following changes in material assumptions would lead to a situation where the value in use would equate to the carrying amount: Average annual revenue growth until 2026 (2025)  with EBITDA margin unchanged compared to business plan  Normalised EBITDA margin  Normalised capital expenditure rate  Post-tax discount rate  Long-term growth rate  2021 2020 Assumptions Sensitivity Assumptions Sensitivity 6 .6% 31% 21% 5 .36% 0 .8% 5 .6% 30% 22% 6 .27% –0 .4% 8 .8% 33% 20% 5 .13% 0 .5% 5 .6% 28% 25% 8 .10% –3 .3% Significant judgements or estimates The allocation of goodwill to the cash-generating units as well as the computation of the recoverable amount is subject to the judgement of Management. This encompasses the estimation of future cash flows, the determi- nation of the discounting rate, and the growth rate on the basis of historic data and current forecasts. s t n e m e t a t s l a i c n a n fi d e t a d i l o s n o c e h t o t s e t o N | s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C 146             Accounting policies For the purposes of the impairment test, goodwill is allocated to the cash-generating units. The impairment test is performed annually on a mandatory basis. Whenever there is any indication during the year that goodwill may be impaired, the cash-generating unit is tested for impairment at that time. An impairment loss is recognised if the recoverable amount of a cash-generating unit is lower than its carrying amount. The recoverable amount is the greater of the fair value less costs to sell and the value in use. 3.5 Provisions and contingent liabilities Provisions In CHF million  Balance at 1 January 2021  Additions to provisions  Dismantlement and restoration costs Regulatory and competition law proceedings Termination 1 benefits 741 – 233 63 – 28 – (148) – 176 – 176 63 30 – – (17) (21) – 55 44 11 Other 179 88 – – (26) (31) (4) 206 74 132 Total 1,216 181 (21) 32 (43) (212) (4) 1,149 118 1,031 Adjustments recorded under property, plant and equipment  (21) Present-value adjustments  Release of unused provisions  Use of provisions  Sales of subsidiaries  Balance at 31 December 2021  Thereof current provisions  Thereof non-current provisions  1 See Note 4.1. 4 – (12) – 712 – 712 Provisions for dismantling and restoration costs The provisions are computed by reference to estimates of future anticipated dismantling costs and are discounted using an average interest rate of 0.91% (prior year: 0.58%). Adjustments as a result of reassessments in the amount of CHF -21 million were recognised under property, plant and equipment with no impact on the income state- ment in 2021. Of this amount, CHF -45 million resulted from the use of different interest rates, CHF 9 million from the adjustment of the cost index used to calculate dismantling costs and CHF 15 million from other effects. An increase of estimated costs by 10% would result in an increase of CHF 69 million in the amount of the provi- sion. A delay of another ten years in the timing of the dismantling would lead to an increase of CHF 41 million in the provisions. Provisions for regulatory and competition law proceedings In accordance with the revised Telecommunications Act, Swisscom provides access services (incl. interconnection) to other telecommunications service providers in Switzerland. In previous years, several telecommunications service providers demanded ComCom reduce the prices charged to them by Swisscom. In February 2019, ComCom issued its decision on the disputed access prices for 2013 to 2016. Swisscom has filed an appeal against this decision with the Federal Administrative Court. In its judgement of 16 July 2021, the Federal Administrative Court ruled on the appeal and referred the matter back to ComCom for reassessment on a number of points. The procedures for setting access prices for 2013 onwards are still pending before ComCom. In February 2020, a provider of telecom- munications services requested from ComCom that the interest on recovery claims from access-related proceed- ings should be based on the weighted average cost of capital (WACC). This led to a reassessment of the interest effect, which was recognised as a present value adjustment in the amount of CHF 15 million. In June 2021, Com- Com confirmed this interest rate regulation. Swisscom has appealed against this complaint before the Federal Administrative Court. The appeal procedure is pending. In its investigation as to the invitation to tender for the corporate network of the Swiss Post in 2008, the Compe- tition Commission (COMCO) reached the conclusion in November 2015 that Swisscom has a dominant position on the market for broadband access for business clients. As a result of this conduct, which was judged to be unlawful under competition law, COMCO imposed a penalty of CHF 8 million. Swisscom challenged COMCO’s rul- 147       ing concerning the invitation to tender for the corporate network of Swiss Post in the Federal Administrative Court. In June 2021, the Federal Administrative Court largely confirmed COMCO’s ruling and ordered Swisscom to pay a fine of CHF 7 million. Swisscom has filed an appeal against this decision with the Federal Court. In the event of a legally binding finding of abuse of a market-dominant position, claims could be asserted against Swisscom under civil law. In 2009, COMCO imposed a fine on Swisscom for abuse of a market-dominant position in the area of ADSL services during the period to 2007. Swisscom challenged the fine in the last instance before the Federal Court. In Decem- ber 2019, the Federal Court dismissed Swisscom’s appeal and confirmed the sanction. As a result of the legally binding determination of market abuse, civil law claims were filed by telecommunications service providers in the second quarter of 2020. In the third and fourth quarters of 2021, negotiations took place with telecommuni- cations service providers, which were concluded with an out-of-court settlement. On 17 December 2020, COMCO opened an investigation into Swisscom’s optical fibre network and ordered pre- cautionary measures. Swisscom has filed an appeal against these precautionary measures. In its ruling of 30 Sep- tember 2021, the Federal Administrative Court confirmed the precautionary measures ordered by COMCO and dismissed Swisscom’s appeal. Swisscom has filed an appeal against this decision with the Federal Court. The proceedings are still pending. On the basis of legal opinions, Swisscom has recognised provisions for regulatory and competition law proceed- ings. As a result of the reassessment of these proceedings, provisions of CHF 63 million were made in 2021 and present-value adjustments of CHF 28 million were recorded. Any payments to be made will depend upon the date on which legally binding decrees and decisions are issued, and could probably occur within five years. Other provisions Other provisions mainly include provisions for contractual risks. Any necessary payments of the non-current por- tion of the provisions could likely occur within three years. Contingent liabilities for regulatory and competition law proceedings The Competition Commission (COMCO) is conducting several proceedings against Swisscom. In the event that a legally enforceable finding of market abuse is reached, COMCO might impose a penalty on Swisscom. In addition, claims under civil law might be asserted against Swisscom. In April 2013, COMCO opened an investigation against Swisscom under the Federal Cartel Act concerning the broadcasting of live sporting events on pay-TV. In May 2016, COMCO imposed a penalty of CHF 72 million on Swisscom in these proceedings. On 25 August 2020, COMCO launched an investigation against Swisscom into allegations that it abused its market-dominant posi- tion for broadband connections to interconnect company sites. As things stand, Swisscom does not believe it is probable that a court of final appeal will levy a penalty and, as in prior years, has therefore still not recognised a provision in its consolidated financial statements as at 31 December 2021. In view of the previous proceedings conducted by COMCO, further proceedings against Swisscom might be initiated. s t n e m e t a t s l a i c n a n fi d e t a d i l o s n o c e h t o t s e t o N | s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C 148   Significant judgements or estimates The provisions for dismantling and restoration costs relate to the dismantling of telecommunications installa- tions and transmitter stations as well as the restoration to its original state of land held by third-party owners. The level of the provisions is determined to a significant degree by the estimation of future dismantling and restoration costs, as well as the timing of dismantlement. The provisions and contingent liabilities for regulatory and antitrust proceedings relate to proceedings in connection with regulated access services provided by Swisscom and proceedings initiated by COMCO. The legal and accounting assessment of these proceedings is associated with significant uncertainties in estimation and scope for discretion with regard to the probability of occurrence and the amount of a possible cash outflow. The provisions recognised in this way constitute the best estimate of the liability. Possible liabilities whose occurrence as at the balance-sheet date cannot be assessed, or liabilities for which the level cannot be reliably estimated, are disclosed as contingent liabilities. Accounting policies Provisions are recognised whenever a legal or constructive obligation arises from past events, the outflow of resources to settle the liability is probable, and the amount of the liability can be estimated reliably. Provisions are discounted if the effect is material. Provisions for dismantling and restoration costs Swisscom is legally obligated to dismantle transmitter stations and telecommunications installations located on land belonging to third-parties following decommissioning, and to restore to its original state the property owned by third-parties in the locations where these installations are erected. The costs of dismantling are capital- ised as part of the acquisition costs of the installations, and are amortised over their useful lives. The provisions are measured at the present value of the aggregate future costs, and are reported under non-current provisions. Whenever the provision is re-measured, the present value of the changes in the liability is either added to or deducted from the cost of the related capitalised item of property, plant and equipment. The amount deducted from the cost of the related asset may not exceed its carrying amount. Any excess is taken directly to income. Provisions for termination benefits Costs in connection with the implementation of restructuring programmes are first expensed when manage- ment commits itself to a restructuring plan, it is probable that a liability has been incurred, the amount thereof can be reliably estimated and the implementation of the programme has commenced, or the individuals involved have been advised in sufficient detail as to the main terms of the restructuring programme. A public announce- ment and/or communication to personnel associations are deemed to be equivalent to commencing the imple- mentation of the programme. 149  4 Employees Swisscom currently has around 19,000 full-time equivalent employees, of whom almost 16,000 are in Switzerland . This chapter contains information on employee headcount and personnel expense, the compensation paid to key management personnel as well as retirement-benefit obligations . 4.1 Employee headcount and personnel expense Employee headcount In full-time equivalent  Residential Customers  Business Customers  Wholesale  Infrastructure & Support Functions  Swisscom Switzerland  Fastweb  Other Operating Segments  Total headcount  Thereof Switzerland  Thereof other countries  31.12.2021 31 .12 .2020 2,875 5,045 81 4,888 12,889 2,753 3,263 18,905 15,882 3,023 3,082 4,931 83 4,749 12,845 2,703 3,514 19,062 16,048 3,014 Average number of employees  19,099 19,095 Personnel expense In CHF million  Salary and wage costs  Social security expenses  Expense of defined benefit plans 1 Expense of defined contribution plans  Expense for share-based payments  Termination benefits  Other personnel expense  Total personnel expense  Thereof Switzerland  Thereof other countries  1 See Note 4.3. 2021 2,060 248 260 11 1 13 74 2,667 2,399 268 Change –6 .7% 2 .3% –2 .4% 2 .9% 0.3% 1 .8% –7 .1% –0.8% –1 .0% 0 .3% 0 .0% 2020 2,065 243 338 10 1 (1) 61 2,717 2,493 224 Termination benefits Swisscom supports employees affected by restructuring through a social plan. In addition to other benefits, the social plan benefits include continued salary payments beyond the contractual notice period for a maximum period of time, which depends on the seniority and age of the employee concerned. Under certain conditions, older employees affected by job cuts may transfer to the subsidiary Worklink AG at reduced guaranteed continued salary payments. Worklink AG aims to place participants with third-parties for temporary work assignments, whereby the participants are paid a share of the turnover as a wage supplement. Net expenditure for personnel reduction was CHF 13 million (prior year: minus CHF 1 million). This is comprised of newly established provisions of CHF 30 million, less the release of unused provisions to the value of CHF 17 million. As already announced, these personnel down- sizing measures are connected with Swisscom’s aim for 2022, which is, as in previous years, to reduce the cost base by around CHF 100 million. s t n e m e t a t s l a i c n a n fi d e t a d i l o s n o c e h t o t s e t o N | s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C 150       4.2 Key management compensation In CHF thousand  Current compensation  Share-based payments  Pension contributions  Social security contributions  Total compensation to members of the Board of Directors  Current compensation  Share-based payments  Benefits paid following retirement from Group Executive Board  Pension contributions  Social security contributions  Total compensation to members of the Group Executive Board  Total compensation to members of the Board of Directors and of the Group Executive Board  2021 1,400 761 137 124 2,422 5,199 853 1,026 766 526 8,370 10,792 2020 1,357 810 97 124 2,388 5,038 731 190 796 510 7,265 9,653 Swisscom’s key management personnel are the members of the Group Executive Board and Board of Directors of Swisscom Ltd. Compensation paid to members of the Board of Directors consists of a base salary plus functional allowances. One third of the entire compensation of the Board of Directors is settled in the form of equity shares. Compensation paid to the members of the Group Executive Board consists of a fixed basic salary paid in cash, a variable performance-related component settled in cash and shares, payments in kind and non-cash benefits, as well as pension and social insurance contributions. 25% of the variable performance-related share of the members of the Group Executive Board is settled in shares. The Group Executive Board members may elect to increase this share to 50%. The disclosures required by the Swiss Ordinance against Excessive Compensation in Listed Companies (OaEC) are set out in the chapter Remuneration Report. Shares in Swisscom Ltd held by the members of the Board of Directors and Group Executive Board are set out in the notes to the Consolidated Financial Statements of Swisscom Ltd. 4.3 Post-employment benefits Pension plans comPlan The majority of employees in Switzerland are insured under the Swisscom pension plan against the risks of old age, death and disability. The pension plan is implemented by the comPlan foundation. The supreme governing body of the pension fund is the Foundation Council, which is made up of an equal number of representatives from the employees and the employer. The pension fund rules, together with the legal provisions concerning occupational pension plans, constitute the formal regulatory framework of the pension plan. Individual retirement savings accounts are maintained for each beneficiary, to which savings contributions varying with age are cred- ited as well as any interest which accrues. The rate of interest to be applied to the retirement savings accounts is set each year by the Foundation Council, having regard to the financial situation of the pension fund as well as the statutory minimum interest rate. The amounts credited to the individual savings accounts are funded by savings contributions from both the employer and employees. In addition, the employer pays risk contributions to fund death and disability benefits. The standard retirement age is 65. Employees are entitled to early retirement with a reduced old-age pension. The amount of the old-age pension is the result of multiplying the individual retirement savings account at the time of retirement by a conversion rate set out in the pension fund rules. The retirement benefits can also be paid out in the form of a capital payment either in full or in part. In case of early retirement, the employer also finances an OASI bridging pension until the standard retirement age. The amount of disability pensions is determined as a percentage of the insured salary and is independent of the number of years of service. The formal regulatory framework contains various provisions concerning risk sharing between the beneficiaries and the employer. In the event of a funding shortfall, computed in accordance with Swiss accounting standards for pension funds (Swiss GAAP FER 26), the Foundation Council lays down measures which shall lead to the elim- ination of this funding deficit and the restoration of financial equilibrium within a timeframe of five to seven 151 years. Such measures may include a reduced or zero interest rate on retirement savings accounts, a reduction in future benefits, the levying of restructuring contributions or a combination of these measures. Should a struc- tural funding shortfall exist as a result of insufficient current interest-induced funding, the top priority is to remedy this situation by adapting future benefits. Employer’s restructuring contributions must, at a minimum, be equal to the sum of employee restructuring contributions. Under the formal regulatory framework, the employer has no legal obligation to pay additional contributions to eliminate more than 50% of a funding short- fall. From past common business practice, Swisscom has a de facto obligation over and above the legal minimum to pay additional or restructuring contributions in the case of funding shortfalls and structural funding deficits. The upper limit of the employer’s share of future benefit costs within the meaning of IAS 19.87(c) is assumed to be at the level of the de facto obligation. In the second quarter of 2021, the comPlan Board of Trustees adopted various measures to improve intergener- ational equity. The key points of the measures include a reduction in the conversion rate in monthly steps from 1 January 2023 to 1 May 2024 and an increase in savings contributions. To cushion the impact of the conversion rate reduction, special monthly contributions are credited to the individual retirement savings of active insured persons during the reduction period. The special contributions are fully financed from comPlan’s reserves. In addition, the vested or future spouse’s or partner’s pensions will be standardised at 60% of the old age pension from 2023. The plan amendment will result in a net decrease of CHF 45 million in the defined benefit obligation in the second quarter of 2021. An amount of CHF 60 million was recognised as negative past service cost in the income statement and an amount of CHF 15 million was recognised as actuarial loss from changes in assump- tions in other comprehensive income. This is based on a remeasurement of the net defined benefit obligation using the current fair values of plan assets at the inception of the plan amendment and current actuarial assump- tions, taking into account the risk-sharing characteristics. The past service cost is the difference between the valuation with the previous regulatory benefits and contributions and the valuation with the amended regula- tory benefits and contributions. In accordance with the Swiss accounting standards (Swiss GAAP FER 26) which are relevant for the pension fund, as at 31 December 2021 comPlan had a technical coverage ratio of 120% (prior year: 112%). The main reasons for the difference compared with IFRS are the use of a higher discount rate as well as a differing actuarial measure- ment method with the deferred recognition of the costs of future retirement benefits. Other pension plans Other pension plans exist for individual Swiss subsidiary companies which are not affiliated to comPlan and for Fastweb. Employees of the Italian subsidiary Fastweb have acquired entitlements to future pension benefits up to the end of 2006, which are recorded in the balance sheet as defined benefit obligations. The discount rate used was 0.34% (prior year: 0.77%). Pension cost In CHF million  Current service cost  Employment termination benefits  Plan amendments  Administration expense  Total recognised in personnel expense  Interest expense on net defined benefit obligations  Total recognised in financial expense  Total expense of defined benefit plans recognised  in income statement  comPlan Other plans 2021 comPlan Other plans 312 – (60) 3 255 1 1 256 4 – – 1 5 – – 5 316 – (60) 4 260 1 1 326 5 – 3 334 2 2 261 336 3 – – 1 4 – – 4 2020 329 5 – 4 338 2 2 340 s t n e m e t a t s l a i c n a n fi d e t a d i l o s n o c e h t o t s e t o N | s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C 152   In CHF million  Actuarial gains and losses from  Change of the demographical assumptions  Change of the financial assumptions  Experience adjustments to defined benefit obligations  Change in share of employee contribution (risk sharing)  Return on plan assets excluding the part  recognised in financial result  Asset ceiling  comPlan Other plans 2021 comPlan Other plans 2020 (250) 23 127 455 (1,161) 30 – – (1) – – – (250) (114) 23 126 455 44 41 107 (1,161) (409) 30 – – – 1 – – – 1 (114) 44 42 107 (409) – (330) Total (income) expense of defined benefit plans recognised  in other comprehensive income  (776) (1) (777) (331) Status of pension plans In CHF million  comPlan Other plans 2021 comPlan Other plans 2020 Defined benefit obligations  Balance at 1 January  Current service cost  Interest cost on defined benefit obligations  Employee contributions  Benefits paid  Actuarial losses (gains)  Change in scope of consolidation  Employment termination benefits  Plan amendments  Foreign currency translation adjustments  Transfer of pension plans  Balance at 31 December  Plan assets  Balance at 1 January  Interest income on plan assets  Employer contributions  Employee contributions  Benefits paid  Return (expense) on plan assets excluding the part recognised  in financial result  Administration expense  Change in scope of consolidation  Balance at 31 December  12,740 42 12,782 12,664 38 12,702 312 39 175 (509) 355 – – (60) – 1 13,053 4 – – – (1) 3 – – – (1) 47 316 39 175 (509) 354 3 – (60) – – 326 29 177 (537) 78 – 5 – – (2) 3 – – – 1 (1) – – (1) 2 329 29 177 (537) 79 (1) 5 – (1) – 13,100 12,740 42 12,782 11,968 19 11,987 11,627 17 11,644 38 264 175 (509) 1,161 (3) – – 5 – – – (1) – 38 269 175 27 268 177 (509) (537) 1,161 409 (4) – (3) – – 4 – – – (1) (1) 27 272 177 (537) 409 (4) (1) 13,094 23 13,117 11,968 19 11,987 Net defined benefit obligations (assets)  Net defined benefit obligations (assets) before asset ceiling  Asset ceiling  (41) 30 Net defined benefit obligations (assets) recognised at 31 December  (11) Thereof defined benefit asset  Thereof defined benefit obligations  (11) – 24 – 24 – 24 (17) 30 13 (11) 24 772 – 772 – 772 23 – 23 – 23 795 – 795 – 795 153           s t n e m e t a t s l a i c n a n fi d e t a d i l o s n o c e h t o t s e t o N | s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C 154 Movements in recognised defined benefit obligations (assets) are to be analysed as follows: In CHF million  Balance at 1 January  Pension cost, net  Employer contributions and benefits paid  Change in scope of consolidation  (Income) expense of defined benefit plans,  recognised in other comprehensive income  Foreign currency translation adjustments  Transfer of pension plans  Balance at 31 December  comPlan Other plans 2021 comPlan Other plans 772 256 (264) – (776) – 1 (11) 23 5 (5) 3 (1) – (1) 24 795 261 (269) 3 1,037 336 (268) – (777) (331) – – 13 – (2) 772 21 4 (4) – 1 (1) 2 23 2020 1,058 340 (272) – (330) (1) – 795 The weighted average duration of the cash value of the defined benefit obligations for comPlan is 16 years (prior year: 17 years). Breakdown of comPlan pension plan assets 31.12.2021 31 .12 .2020 Category  Government bonds Switzerland  Corporate bonds Switzerland  Government bonds developed markets, World  Corporate bonds developed markets, World  Government bonds emerging markets, World  Private debt  Third-party debt instruments  Equity shares Switzerland  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  Investment strategy Quoted Not quoted Total Quoted Not quoted 5 .0% 7 .0% 5 .0% 10 .0% 8 .0% 5 .0% 2 .0% 5 .5% 4 .6% 9 .8% 7 .7% 0 .0% 40.0% 29.6% 7 .0% 7 .5% 25.0% 27.1% 14 .5% 7 .0% 21.5% 3 .5% 9 .0% 1 .0% 6 .9% 0 .7% 7.6% 1 .5% 0 .0% 0 .0% 4 .9% 5 .5% 4 .6% 9 .8% 7 .7% 4 .8% 1 .1% 5 .8% 5 .4% 9 .9% 7 .9% 0 .0% 37.3% 30.1% 7 .5% 7 .1% 14 .3% 13 .6% 5 .3% 6 .7% 27.1% 27.4% 2 .9% 0 .0% 0 .0% 0 .0% 0 .0% 4 .8% 7.7% 0 .0% 0 .0% 0 .0% 0.0% 7 .6% 6 .7% Total 4 .7% 5 .8% 5 .4% 9 .9% 7 .9% 5 .0% 38.7% 7 .1% 13 .6% 6 .7% 27.4% 13 .9% 6 .2% 3 .6% 0 .0% 0 .0% 0 .0% 0 .0% 5 .0% 8.6% 0 .0% 0 .0% 0 .0% 0.0% 6 .7% 5 .2% 14 .5% 7 .4% 14.3% 21.9% 1 .9% 9 .3% 1 .0% 3 .4% 9 .3% 1 .0% 7 .2% 1 .0% 8.2% 1 .7% 0 .0% 0 .0% 11.9% 20.1% 2 .2% 9 .4% 0 .5% 3 .9% 9 .4% 0 .5% Equity shares developed markets, World  13 .0% 14 .3% Equity shares emerging markets, World  5 .0% 5 .3% 13.5% 1.5% 12.2% 13.7% 1.7% 12.1% 13.8% Total plan assets  100.0% 65.8% 34.2% 100.0% 67.4% 32.6% 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 frame- work 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 7.9 years (prior year: 7.8 years), and the average rating of these assets is BBB+ (prior year: 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). Following this investment strategy, comPlan expects its results prepared in accordance with Swiss GAAP FER to show a target value for the value fluctuation reserve of 18.4% of total assets.       Additional information on plan assets As at 31 December 2021, plan assets include Swisscom Ltd shares and bonds with a fair value of CHF 12 million (prior year: CHF 10 million). The effective income from plan assets was CHF 1,199 million in 2021 (prior year: CHF 436 million). In 2022, Swisscom expects to make payments to the pension funds for statutory employer contri- butions totalling CHF 268 million. Assumptions underlying comPlan actuarial computations Assumptions  Discount rate  Expected rate of salary increases  Expected rate of pension increases  Interest on old age savings accounts up to 5 years  Interest on old age savings accounts after 5 years  Share of employee contribution to funding shortfall  Share of employee contribution to surplus  Life expectancy at age of 65 – men (number of years)  Life expectancy at age of 65 – women (number of years)  2021 0 .30% 1 .23% –% 1 .54% 0 .54% 40% 50% 22 .09 23 .83 2020 0 .19% 1 .08% –% 0 .36% 0 .36% 40% n .a . 22 .40 24 .20 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 pension increases are expected because comPlan does not have sufficient fluctuation reserves for this under pension law. The interest rate on the individual savings balances was determined taking into account the BVG minimum interest rate for the mandatory BVG portion. Life-expectancy assumptions are arrived at through a projection of future mortality improvements in accordance with the Continuous Mortality Investigation Model (CMI) and is based on improvements in mortality observed in Switzerland in the past. The computations are made with a future long-term rate of mortality improvement of 1.75%. The actuarial gain of CHF 250 million resulting from changes in demographic assumptions in 2021 is mainly due to the application of new mortality tables. The insured person can draw the retirement benefit in full or in part by means of a one-off lump-sum payment. Based on past values, a lump-sum withdrawal ratio of 24% (prior year: 22%) was assumed. 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 a gradual lowering of future pensions by 3.0% (prior year: 9.7%) over a period of ten years will take place 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 0.30%. 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. The change of the employee share is recognised in other comprehensive income. If there is a surplus under IFRS, no limit is placed on the employer’s share of a funding shortfall in the second step. Instead, the gross surplus is reduced by an employee contribution of 50%. As at 31 December 2021, there is a gross surplus, which has been reduced by the employee contribution of CHF 31 million. In the prior year, the limitation of the employer’s contribution to the funding shortfall resulted in a reduction of the pension obliga- tion of CHF 423 million. The change in the employee’s contribution to the funding shortfall or surplus is recog- nised in other comprehensive income. 155 Sensitivity analysis comPlan Sensitivity analysis 2021 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%)  Share of employee contribution to surplus (change +/–10%)  Life expectancy at age of 65 (change +/–0 .5 year)  Sensitivity analysis 2020 Defined benefit obligations Current service cost Increase assumption Decrease assumption (431) 32 368 53 – 6 108 467 (25) – (46) – (6) (103) Increase assumption (34) 6 6 7 – – 5 Decrease assumption 41 (6) – (7) – – (5) In CHF million  Discount rate (change +/–0 .5%)  Expected rate of salary increases (change +/–0 .5%)  Expected rate of pension increases (change +0 .5%; –0 .0%)  Interest on old age savings accounts (change +/–0 .5%)  Share of employee contribution to funding shortfall (change +/–10%)  Life expectancy at age of 65 (change +/–0 .5 year)  Defined benefit obligations Current service cost Increase assumption Decrease assumption Increase assumption Decrease assumption (573) 39 558 21 106 142 668 (37) – – (106) (143) (35) 6 26 7 – 4 41 (6) – – – (4) 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, respectively. In the process only one of the assumptions is adjusted each time, the other parameters remaining unchanged. In the sensitivity analysis, no change was made in view of a negative movement in pension increases as it is not possi- ble to reduce current pensions. The assumed gradual reduction in conversion rates is left unchanged in the sen- sitivities of the discount rate shown. Due to the limitation of the assets, an increase in the discount rate of 0.5% in the calculation of the conversion rate reduction does not lead to an increase in the pension obligation. Significant judgements or estimates The determination of post-employment retirement benefit obligations requires an estimation of the future ser- vice periods, the development of future salaries and pensions, 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 pay- ments are discounted with the yields of Swiss franc-denominated corporate bonds from domestic and foreign issuers quoted on the Swiss Exchange with an AA rating. The discount rates match the anticipated payment maturities of the liabilities. s t n e m e t a t s l a i c n a n fi d e t a d i l o s n o c e h t o t s e t o N | s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C 156            Accounting policies Actuarial computations of pension expenses and the related defined benefit obligations are carried out using the projected unit credit method. Current service costs, past service costs arising from pension plan amendments and plan settlements as well as administrative costs are reported in the income statement under personnel expense and interest accruing on net obligations as a finance expense. Actuarial gains and losses and the return on plan assets, excluding the 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 gov- erning 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 related to funding and measures to be taken to eliminate funding shortfalls. Risk-sharing features in the formal regulatory framework are taken into account when arriving at financial assumptions; these limit the employer’s share of the costs of future benefits as well as involving employees in any necessary payment of additional contributions in order to eliminate funding deficits. Should the level of committed long-term disability benefits (disability pensions), irrespective of the number of years of service, 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. Any net asset value from a defined benefit plan is recognised at the lower of the surplus and the present value of any economic benefit in the form of refunds or reductions in future con- tributions, provided that the value fluctuation reserve set as a target by the Board of Trustees is exceeded. 157 5 Scope of consolidation The following chapter sets out details of the Group structure of Swisscom and includes disclosures concerning subsidiaries, joint ventures and associates . In addition, it outlines material changes in Group structure and the corresponding impact on the consolidated financial statements . 5.1 Group structure Swisscom Ltd is the parent company of the Group. It essentially holds direct majority shareholdings in Swisscom (Switzerland) Ltd, blue Entertainment 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. Swisscom raises finance in EUR through Swisscom Finance B.V. in the Netherlands. 5.2 Changes in the 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  Proceeds from sale of subsidiaries, net of cash and cash equivalents sold  Expenses for shareholdings accounted for using the equity method  Proceeds from sale of equity-accounted investees 1 Acquisition of non-controlling interests  Total cash flow from the purchase and sale of shareholdings, net  1 See Note 5.3. 2021 (32) (10) 1 (3) 149 – 105 2020 (13) (26) – (15) – (1) (55) Acquisitions and disposals of subsidiaries in 2021 are not individually material. Business combinations in 2021 include the full acquisition of Webtiser AG and JLS Digital as well as acquisition of a 90% stake in the Innovative Web Group. Following its acquisition, Webtiser AG was merged with Swisscom (Switzerland) Ltd. Swisscom also sold all its shares in local.fr SA in 2021 and relinquished control of Custodigit AG. Additionally in 2021, Swisscom sold its shares in the equity-accounted investments Belgacom International Carrier Services SA, Medgate AG, SEC Consult (Schweiz) AG, SmartLife Care AG, SwissSign Group AG and tiko Energy Solutions AG. For further information, see Note 5.3. s t n e m e t a t s l a i c n a n fi d e t a d i l o s n o c e h t o t s e t o N | s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C 158      Accounting policies Consolidation Subsidiaries are all companies over which Swisscom Ltd has the effective ability to control the 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. Intra- group balances and transactions, income and expenses, shareholdings and dividends as well as unrealised gains and losses are fully eliminated. Non-controlling interests in subsidiaries are reported within equity in the consoli- dated balance sheet, but separately from equity attributable to the shareholders of Swisscom Ltd. The non-con- trolling interests in net income or loss are shown in the consolidated income statement as a component of the consolidated net income or loss. Changes in shareholdings of subsidiary companies are reported as trans actions 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 sub- sidiaries 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. Acquisition costs are recognised at fair value as at the date of the business combination. The purchase consideration includes the amount of cash paid and the fair value of the assets ceded, liabilities incurred or assumed, and own equity instruments ceded. Liabilities depending on future events based on contractual agreements are recognised at fair value. All identifiable assets and liabilities that satisfy the recognition criteria are recognised at their fair values at the time of acquisi- tion. The difference between the cost of acquisition and the fair value of the identifiable assets and liabilities acquired or assumed is accounted for as goodwill, after taking into account any non-controlling interests. 5.3 Equity-accounted investees In CHF million  Balance at 1 January  Additions  Disposals  Dividends  Share of net results  Share of other comprehensive income  Impairment losses  Foreign currency translation adjustments  Balance at 31 December  2021 155 18 (131) (1) (5) (2) (5) 1 30 2020 156 16 – (15) 9 (5) (5) (1) 155 159  As part of its strategic partnership with TIM, Fastweb transferred its stake in Flash Fiber as a capital contribution to the newly established fibre-optic company FiberCop. For contributing its 20% stake to Flash Fiber, Fastweb has received a 4.5% stake in FiberCop. The transaction was completed in March 2021. The fair value of the FiberCop investment is EUR 210 million (CHF 232 million). The transaction resulted in a gain on the Flash Fiber participation of CHF 169 million, which was recognised in the income statement in the first quarter of 2021. In addition, in the first quarter of 2021, Swisscom sold its share in Belgacom International Carrier Services SA (BICS) for a sale price of EUR 115 million (CHF 126 million). Swisscom realised a gain of CHF 38 million from the sale of BICS. Selected key performance indicators for equity-accounted investees In CHF million  Income statement  Net revenue  Operating expense  Operating income  Net income  Other comprehensive income  Balance sheet at 31 December  Current assets  Non-current assets  Current liabilities  Non-current liabilities  Equity  2021 2020 368 (369) (1) (34) (9) 158 19 (69) (30) 78 1,614 (1,541) 73 41 (23) 820 1,343 (951) (594) 618 s t n e m e t a t s l a i c n a n fi d e t a d i l o s n o c e h t o t s e t o N | s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C 160          5.4 Group companies Group companies in Switzerland Registered name  Registered office  31.12.2021 Capital and voting rights share in % 31 .12 .2020 Capital and voting rights share in % Share capital    in million  Currency  Segment 4 Switzerland  AdUnit Ltd 2 Ajila AG 2 Artificialy SA 2,3 autoSense Ltd 2,3 Billag Ltd in liquidation 1 Blue Entertainment Ltd 1 cablex Ltd 2 Credit Exchange Ltd 2,3 Custodigit Ltd 2,3 daura Ltd 2,3 ecmt AG 2,3 Entertainment Programm AG 2,3 finnova ltd bankware 2,3 Global IP Action Ltd 2 Innovative Government Ltd 1 Innovative Web Ltd 1 Innovative We Marketing & Service Ltd 1 itnetX (Switzerland) AG 2 JLS Digital AG 2 kitag kino-theater Ltd 2 Medgate Ltd 2,3 Medgate Technologies Ltd 2,3 Mona Lisa Capital AG in liquidation 2 SEC consult (Switzerland) Ltd 2,3 SmartLife Care Ltd 2,3 Swisscom Blockchain Ltd 2 Swisscom Broadcast Ltd 1 Swisscom Digital Technology SA 1 Swisscom Directories Ltd 1 Swisscom eHealth Invest GmbH 2 Swisscom Health AG 2 Swisscom Real Estate Ltd 1 Swisscom IT Services  Finance Custom Solutions Ltd 2 Swisscom (Switzerland) Ltd 1 Swisscom Services Ltd 2 Swisscom Trust Services Ltd 2 Swisscom Ventures Ltd 2 SwissSign Group Ltd 2,3 Teleclub AG 2 tiko Energy Solutions SA 2,3 United Security Provider Ltd 2 Worklink AG 1 1 Participation directly held by Swisscom Ltd.   2 Participation indirectly held by Swisscom Ltd.   Zurich  Sursee  Lugano  Zurich  Fribourg  Zurich  Muri near Berne  Zurich  Zurich  Zurich  Embrach  Zurich  Lenzburg  Freienbach  Freienbach  Freienbach  Zurich  Rümlang  Lucerne  Zurich  Basel  Basel  Ittigen  Zurich  Wangen  Zurich  Berne  Geneva  Zurich  Ittigen  Ittigen  Ittigen  Olten  Ittigen  Ittigen  Zurich  Ittigen  Opfikon  Zurich  Ittigen  Berne  Berne  100 60 18 33 100 100 100 25 41 26 20 33 9 68 90 90 90 100 100 – – – 100 – – – 100 75 100 100 – 100 100 100 100 100 100 – – – 100 100 100 60 18 33 100 100 100 25 75 31 20 33 9 79 – – – 100 – 100 40 40 100 47 48 100 100 75 100 100 100 100 100 100 100 – 100 10 100 29 100 100 0 .1  CHF  0 .1  CHF  1 .1  CHF  0 .3  CHF  0 .1  CHF  0 .5  CHF  5 .0  CHF  0 .1  CHF  1 .8  CHF  0 .4  CHF  0 .1  CHF  0 .6  CHF  0 .5  CHF  0 .2  CHF  0 .1  CHF  0 .1  CHF  0 .1  CHF  0 .1  CHF  1 .0  CHF  1 .0  CHF  0 .7  CHF  0 .1  CHF  5 .0  CHF  0 .1  CHF  0 .2  CHF  0 .1  CHF  25 .0  CHF  0 .1  CHF  2 .2  CHF  1 .4  CHF  0 .1  CHF  100 .0  CHF  0 .1  CHF  1,000 .0  CHF  0 .1  CHF  1 .0  CHF  2 .0  CHF  12 .5  CHF  1 .2  CHF  13 .3  CHF  0 .5  CHF  0 .5  CHF  OTH OTH OTH OTH OTH SCS OTH OTH OTH OTH OTH SCS SCS OTH OTH OTH OTH SCS SCS SCS OTH OTH OTH OTH OTH OTH OTH SCS OTH OTH SCS SCS SCS SCS SCS OTH OTH OTH SCS OTH SCS SCS 3 Investment is accounted for using the equity method. Through its representa- tion on the Board of Directors of the company, Swisscom can exercise a signifi- cant influence.   4 SCS = Swisscom Switzerland, FWB = Fastweb, OTH = Other   161                                            Group companies in other countries Registered name  Registered office  31.12.2021 Capital and voting rights share in % 31 .12 .2020 Capital and voting rights share in % Share capital    in million  Currency  Segment 4 Belgium  Belgacom International Carrier Services Ltd 2,3 Brussels  – 22 1 .5  EUR  SCS Germany  Swisscom Telco GmbH 2 France  local .fr SA 2 SoftAtHome SA 2,3 Great Britain  Ajila UK Ltd 2 Italy  7Layers Group S .r .l . 2 7Layers S .r .l . 2 Fastweb S .p .A . 2 Fastweb Air S .r .l . 2 Flash Fiber S .r .l . 2,3 Swisscom Italia S .r .l . 2 Latvia  Swisscom DevOps Latvia SIA 2 Liechtenstein  Swisscom Re Ltd 1 Luxembourg  DTF GP S .A .R .L 2 DTF GP II S .A .R .L . 2 Digital Transformation Fund  Carried Partner SCSp 2 Digital Transformation Fund  Initial Limited Partner SCSp 2 Netherlands  NGT International B .V . 2 Swisscom DevOps Center B .V . 2 Swisscom Finance B .V . 1 Austria  Swisscom IT Services Finance SE 2 Singapore  Swisscom IT Services Finance Pte Ltd 2 Spain  Webtiser Spain SA 2 USA  Swisscom Cloud Lab Ltd 2 1 Participation directly held by Swisscom Ltd. 2 Participation indirectly held by Swisscom Ltd. Leipzig  100 100 –  EUR  OTH Bourg-en-Bresse  Comment/Section  London  Porcari  Florence  Milan  Milan  Milan  Milan  Riga  Vaduz  – 10 60 – 70 100 100 – 100 86 10 60 70 70 100 100 20 100 1 .0  EUR  6 .5  EUR  OTH SCS –  GBP  OTH –  EUR  0 .2  EUR  41 .3  EUR  –  EUR  –  EUR  505 .8  EUR  FWB FWB FWB FWB FWB SCS 100 100 –  EUR  SCS 100 100 5 .0  CHF  SCS Luxembourg  Luxembourg  Luxembourg  Luxembourg  Capelle a/d IJssel  Rotterdam  Rotterdam  100 100 100 100 100 – 100 100 100 100 100 100 100 100 –  EUR  –  EUR  –  EUR  –  EUR  –  EUR  –  EUR  –  EUR  OTH OTH OTH OTH SCS SCS OTH Vienna  100 100 3 .3  EUR  SCS Singapore  100 100 0 .1  SGD  SCS Madrid  100 – 0 .1  EUR  SCS Delaware  100 100 –  USD  OTH 3 Investment is accounted for using the equity method. Through its representa- tion on the Board of Directors of the company, Swisscom can exercise a signifi- cant influence. 4 SCS = Swisscom Switzerland, FWB = Fastweb, OTH = Other s t n e m e t a t s l a i c n a n fi d e t a d i l o s n o c e h t o t s e t o N | s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C 162                                                                                                                                                                                                                          6 Other disclosures This chapter details information which is not already disclosed in the other parts of the report . For instance, it includes disclosures regarding income taxes and related parties . 6.1 Income taxes Income tax expense In CHF million  Current income tax expense  Adjustments recognised for current tax of prior periods  Deferred income tax expense  Total income tax expense recognised in income statement  Thereof Switzerland  Thereof other countries  2021 337 (3) (15) 319 339 (20) 2020 325 (5) (49) 271 242 29 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  Change in cash flow hedges  Total income tax expense recognised in other comprehensive income  2021 (7) 139 13 (1) 144 2020 – 69 (1) – 68 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 is 18.3% (prior year: 18.7%). The decline in the applicable income tax rate can be attributed to a reduction in the tax rates in various Swiss cantons. In CHF million  Income before income taxes in Switzerland  Income before income taxes other 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 changes in tax law in Switzerland  Effect of changes in tax law in other countries  Effect of use of different income tax rates in Switzerland  Effect of use of different income tax rates in other 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  2021 1,827 325 2,152 18 .3% 394 2 5 (57) 1 6 1 – (30) (3) 319 2020 1,669 130 1,799 18 .7% 336 (2) (29) – 7 1 3 (14) (26) (5) 271 14 .8% 15 .1% 163     As a result of a change in tax law in Italy, Fastweb was able to revaluate its own goodwill to the carrying amount for tax purposes in the third quarter of 2021. The revaluation resulted in a positive tax effect of CHF 57 million. On 1 January 2020, various legislative changes affecting corporate taxation came into force in Switzerland. These changes fundamentally abolish tax privileges for companies, such as the privileged taxation of the profits of holding companies. In return, most of the cantons reduced the corporate income tax rates. In 2020, this led to positive tax effects of CHF 29 million resulting from the revaluation of deferred tax liabilities. 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 other countries  Current income tax liabilities at 31 December, net  Thereof current income tax assets  Thereof current income tax liabilities  Thereof Switzerland  Thereof other 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 other countries  2021 182 334 (9) (264) (15) 228 (2) 230 222 6 2020 170 320 1 (298) (11) 182 (4) 186 182 – Assets Liabilities 31.12.2021 Net amount Assets Liabilities 31 .12 .2020 Net amount 50 12 102 – 12 140 316 (611) (561) (62) (93) (24) – (133) (923) (50) 9 (24) 12 7 (607) 204 (811) (629) 22 45 – 91 118 57 117 428 (617) (82) (87) – – (103) (889) (572) (82) 4 118 57 14 (461) 183 (644) (443) (18) 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 other countries  31.12.2021 31 .12 .2020 – 18 5 23 18 5 – 26 20 46 26 20 s t n e m e t a t s l a i c n a n fi d e t a d i l o s n o c e h t o t s e t o N | s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C 164          Other disclosures Deferred tax liabilities of CHF 6 million (prior year: CHF 6 million) were recognised on the undistributed earnings of subsidiaries as at 31 December 2021. Temporary differences of subsidiaries and equity-accounted investees for which no deferred tax liabilities are recognised as at 31 December 2021 amounted to CHF 2,838 million (prior year: CHF 2,102 million). In 2021, the tax authorities definitively assessed some tax years. The assessments have resulted in no material uncertain tax positions remaining as at 31 December 2021. 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 as a general rule deferred taxes are recognised 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, 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 distributions of undistributed prof- its of Group companies are only recognised if the distribution of profits is to be made in the foreseeable future. If it is probable that the tax authority will accept the chosen tax treatment, the tax amount in the consolidated financial statements is the same as that entered in the tax return submitted. However, if this is not probable, the amounts will be different. The uncertainty is taken into account in the measurement, which requires a best-possible estimate of the expected cash outflow. If there are few possible outcomes of the tax treatment, the most likely outcome is used to determine the tax liability. If there are a large number of possible tax consequences, an expected value is determined on the basis of a probability calculation. Current and deferred tax assets and liabil- ities are offset whenever they relate to the same taxing authority and taxable entity. 165  6.2 Related parties Majority shareholder and equity-accounted investees Majority shareholder Pursuant to the Swiss Federal Telecommunications Enterprises Act (TEA), the Swiss Confederation (‘the Confed- eration’) is obligated to hold a majority of the share capital and voting rights of Swisscom. On 31 December 2021, 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 the right of optional referen- dum 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 telecommunications services to, and also procures services from, the Confederation. The Confederation comprises the various ministries and administrative bodies of the Confederation and the other companies controlled by the Confederation (primarily the Swiss Post, Swiss Federal Railways, RUAG and 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 under 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  Income Expense Receivables Liabilities 2021 financial year  Confederation  Equity-accounted investees  Total 2021/balance at 31 December 2021  186 18 204 69 50 119 278 6 284 159 4 163 In CHF million  Income Expense Receivables Liabilities 2020 financial year  Confederation  Equity-accounted investees  Total 2020/balance at 31 December 2020  181 62 243 80 111 191 187 22 209 359 22 381 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 is disclosed in Note 4.2. s t n e m e t a t s l a i c n a n fi d e t a d i l o s n o c e h t o t s e t o N | s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C 166        6.3 Other accounting policies Foreign currency translation Foreign currency transactions which are not denominated in the functional currency are translated into the func- tional currency using the exchange rate prevailing at the dates of the transactions. Monetary items as at the bal- ance sheet date are translated into the functional currency at the exchange rate prevailing at the balance sheet date, while non-monetary items are translated using the exchange rate on the date of the transaction. Trans- lation differences are recognised in the income statement. Assets and liabilities of subsidiaries 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 the average exchange rate. 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  31.12.2021 31 .12 .2020 1 .033 0 .912 1 .080 0 .880 Closing rate 31 .12 .2019 1 .085 0 .966 2021 1 .080 0 .912 Average rate 2020 1 .072 0 .937 Amended International Financial Reporting Standards and Interpretations, whose application is not yet mandatory The following International Financial Reporting Standards and Interpretations published up to the end of 2021 are mandatory for annual periods beginning on or after 1 January 2022: Standard  Name  Effective from References to conceptual framework  Amendments to IFRS 3  Property, plant and equipment: Income before intended use  Amendments to IAS 16  Onerous contracts: Cost of fulfilling a contract  Amendments to IAS 37  Amendments to IFRS 2018–2020  Various  Insurance contracts  IFRS 17  Classification of liabilities as current or non-current  Amendments to IAS 1  Amendments to IFRS 10 and IAS 28  Sale or deposit of assets between an investor and an associated company or joint venture  1 January 2022 1 January 2022 1 January 2022 1 January 2022 1 January 2023 1 January 2023 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 2022 and which Swisscom did not choose to adopt earlier than required. At present, Swisscom anticipates no material impact on the consolidated financial statements. 167   r o t i d u a y r o t u t a t s e h t f o t r o p e R | s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C 168 Report of the statutory auditor to the General Meeting of Swisscom Ltd Ittigen Report on the audit of the consolidated financial statements Opinion We have audited the consolidated financial statements of Swisscom Ltd and its subsidiaries (the Group), which comprise the consolidated statement of comprehensive income for the year ended 31 December 2021, the consolidated balance sheet as at 31 December 2021, the consolidated statement of cash flows and the consolidated statement of changes in equity for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies. In our opinion, the accompanying consolidated financial statements (pages 108 to 167) give a true and fair view of the consolidated financial position of the Group as at 31 December 2021 and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with the International Financial Reporting Standards (IFRS) and comply with Swiss law. Basis for opinion We conducted our audit in accordance with Swiss law, International Standards on Auditing (ISAs) and Swiss Auditing Standards. Our responsibilities under those provisions and standards are further described in the “Auditor’s responsibili- ties for the audit of the consolidated financial statements” section of our report. We are independent of the Group in accordance with the provisions of Swiss law and the requirements of the Swiss au- dit profession, as well as the International Code of Ethics for Professional Accountants (including International Independ- ence Standards) of the International Ethics Standards Board for Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have ob- tained is sufficient and appropriate to provide a basis for our opinion. Our audit approach Overview Overall materiality for the consolidated financial statements: CHF 80 million We conducted full scope audit work at four Group companies in two countries. These Group companies represent over 90% of the Group’s revenue. In addi- tion, specified procedures were performed on selected balance sheet and in- come statement line items for one additional Group company located in Swit- zerland. As key audit matters the following areas of focus have been identified: • Recoverability of Fastweb goodwill • Revenue recognition – Solutions business with Business Customers • Recoverability of technical installations and intangible assets • Assessment of litigation arising from regulatory and competition law pro- ceedings PricewaterhouseCoopers AG, Birchstrasse 160, Postfach, CH-8050 Zürich, Switzerland Telefon: +41 58 792 44 00, Telefax: +41 58 792 44 10, www.pwc.ch PricewaterhouseCoopers AG is a member of the global PricewaterhouseCoopers network of firms, each of which is a separate and independent legal entity.   Materiality The scope of our audit was influenced by our application of materiality. Our audit opinion aims to provide reasonable assurance that the consolidated financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if, individually or in aggregate, they could reasonably be expected to influ- ence the economic decisions of users taken on the basis of the consolidated financial statements. Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall Group materiality for the consolidated financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate, on the consolidated financial statements as a whole. Overall Group materiality CHF 80 million Benchmark applied Profit before tax Rationale for the materiality bench- mark applied We chose profit before tax as the benchmark because, in our view, it is the benchmark against which the performance of the Group is most commonly measured, and it is a generally accepted benchmark. We agreed with the Audit Committee that we would report to them misstatements with impacts on the income statement above CHF 4 million identified during our audit as well as any misstatements below that amount which, in our view, war- ranted reporting for qualitative reasons. Audit scope We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consoli- dated financial statements as a whole, taking into account the structure of the Group, the accounting processes and con- trols, and the industry in which the Group operates. The Group consists of three operating segments (Swisscom Switzerland, Fastweb, Other Operating Segments) and op- erates mainly in Switzerland and Italy. Swisscom (Schweiz) Ltd generates most of the revenue. Another company that we identified as significant is Fastweb S.p.A. (Fastweb). The audits of Swisscom (Schweiz) Ltd and Swisscom Ltd were performed by the Group audit team. The audit of Fast- web was performed by the PwC component auditor in Italy, to whom we provided instructions and with whom we are in regular contact to discuss the treatment of transactions that are material to the consolidated financial statements as well as questions regarding valuation and disclosure. In addition, we participate in important discussions with Fastweb’s man- agement. The audit of these three companies addresses the major part of the consolidated financial statements. Another company in Switzerland is audited by a Swiss PwC component auditor, whom we have instructed and with whom we are also in regular contact. Finally, we identified an additional subsidiary with significant balance sheet and income state- ment items, which is audited by the Group audit team. Group-wide topics, such as treasury, taxes, pension obligations, investments including goodwill and the implementation of new accounting requirements are addressed by the Group audit team. Key audit matters Key audit matters are those matters that, in our professional judgement, 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. Swisscom Ltd | Report of the statutory auditor to the General Meeting 169 r o t i d u a y r o t u t a t s e h t f o t r o p e R | s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C 170 Recoverability of Fastweb goodwill Key audit matter How our audit addressed the key audit matter The impairment testing of goodwill relating to Fastweb was deemed a key audit matter for the following reasons: • As at 31 December 2021, the goodwill relating to the Fastweb operating segment amounted to CHF 514 million (2020: CHF 537 million), which is a significant amount. • In performing the annual impairment test of the Fast- web goodwill, management has considerable scope for judgement regarding the expected future cash flows, the discount rate (WACC) used and the fore- casted growth. Please refer to note 3.4 ‘Goodwill’ (page 145) in the notes to the consolidated financial statements. During our audit, we assessed with regard to the impair- ment test whether a correct valuation method was used, the calculation was coherent and the assumptions made were appropriate. In doing so, we challenged the input data and assumptions relating to the underlying cash flows of the impairment test. In addition, we compared the results of the current year with the forecasts made in the previous year in order to as- sess the appropriateness of the previous year’s assump- tions. With regard to the discount rate used, we analyzed to- gether with our own valuation specialists how it was de- rived and compared it with our own calculation. We also examined whether the information on impairment testing in the notes to the consolidated financial statements was disclosed correctly and whether the sensitivity anal- yses presented indicate appropriately the risks of impair- ment. We consider the valuation method and the assumptions used by management to test for the impairment of the Fast- web goodwill to be appropriate. Swisscom Ltd | Report of the statutory auditor to the General Meeting   Revenue recognition – Solutions business with Business Customers Key audit matter How our audit addressed the key audit matter For the 2021 financial year, Swisscom reports net revenue of CHF 11,183 million (2020: CHF 11,100 million). Of this amount, CHF 1,111 million (2020: CHF 1,058 million) is generated by the Solutions business with Business Cus- tomers. The Solutions business with Business Customers comprises integrated communications solutions (e.g. IT outsourcing) for large enterprises in Switzerland. We consider revenue recognition in the Solutions business with Business Customers to be a key audit matter for the following reasons: • The specific projects within the Solutions business are based on complex individual contracts that may in- clude multiple performance obligations. The account- ing treatment of these contracts requires management to estimate the expected transaction price and the tim- ing of revenue recognition of the individual perfor- mance obligations. • The projects typically last between three and seven years. To ensure a loss-free valuation of ongoing pro- jects, management has significant scope for judge- ment in its assessment of the future costs of each pro- ject. Please refer to note 1.1 ‘Segment information’ (page 114) in the notes to the consolidated financial statements. We assessed the design and effectiveness of the controls implemented to ensure the correct recognition of revenue in the Solutions business with Business Customers. Further, we performed analytical audit procedures. On the basis of internal and external reports, we defined our ex- pectations and critically assessed deviations from them. For a sample of contracts entered into in the 2021 financial year, we assessed the accounting treatment applied by Swisscom. In doing so, we assessed whether manage- ment’s estimate of the expected transaction price and of the timing of revenue recognition relating to individual per- formance obligations is appropriate. To address the significant scope for judgement when as- sessing future costs to ensure a loss-free valuation, we performed the following audit procedures: • We gained an understanding of the process imple- mented by management to assess future develop- ments in the Solutions business and critically as- sessed that process. • We discussed with Swisscom their expectations re- garding the future development of individual projects and critically assessed those expectations on the basis of current developments. • Using a sample of projects, we compared Swisscom’s forecasts from the previous year with actual develop- ments in the current financial year and analysed any variances. Finally, on the basis of a sample, we assessed whether the revenue in the Solutions business with Business Cus- tomers was recorded correctly. To do so, we checked cash receipts for individual revenue transactions and ob- tained external balance confirmations from Swisscom cus- tomers. We consider management’s estimates relating to the recognition of revenue in the Solutions business with Busi- ness Customers to be appropriate. Swisscom Ltd | Report of the statutory auditor to the General Meeting 171 r o t i d u a y r o t u t a t s e h t f o t r o p e R | s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C 172 Recoverability of technical installations and intangible assets Key audit matter How our audit addressed the key audit matter We consider the impairment testing of technical facilities and intangible assets to be a key audit matter for the fol- lowing reasons: We assessed the design and effectiveness of the controls implemented to ensure the correct impairment testing of technical installations and intangible assets. • Swisscom recognises as of 31 December 2021 tech- nical installations with a net book value of CHF 8,491 million (2020: CHF 8,611 million) and intangible assets with a net book value of CHF 1,714 million (2020: CHF 1,745 million). Both represent significant amounts. • Management has significant scope for judgement when assessing and determining the useful life of technologies that are in use. Please refer to note 3.2 ‘Property, plant and equipment’ (page 142) and note 3.3 ‘Intangible assets’ (page 144) in the notes to the consolidated financial statements. We also discussed with management the estimates of the future useful lives of existing technologies and critically as- sessed these on the basis of current developments at Swisscom and other telecommunications companies. In addition, we assessed the completeness and appropri- ateness of changes in useful lives and actual impairments in the 2021 financial year. We consider management's assessment of the expected period over which Swisscom derives economic benefits from the use of existing technologies to be appropriate. Swisscom Ltd | Report of the statutory auditor to the General Meeting   Assessment of litigation arising from regulatory and competition law proceedings Key audit matter How our audit addressed the key audit matter Swisscom recorded as at 31 December 2021 provisions amounting to CHF 1,149 million (2020: CHF 1,216 million). Of this amount, CHF 176 million (2020: CHF 233 million) relates to provisions for litigation arising from regulatory and competition law proceedings. To address the significant scope for judgement in estimat- ing the probability, the timing and the amount of a potential cash outflow due to litigation, we performed together with an internal legal expert the following audit procedures: Swisscom provides regulated access services to other tele- communications service providers in accordance with the Telecommunications Act. The prices charged by Swisscom are subject to reviews by the Federal Communications Commission (ComCom). If the Commission issues a ruling against Swisscom, the prices charged must be reduced with retroactive effect. Swisscom is also a party to proceedings conducted by the Federal Competition Commission (COMCO). In the event of a final verdict establishing market abuse by Swisscom, COMCO may impose sanctions. A final verdict establishing market abuse issued by COMCO could lead to civil claims against Swisscom. We consider the assessment of the financial implications of litigation arising from regulatory and competition law pro- ceedings to be a key audit matter because management has significant scope for judgement in estimating the prob- ability, the timing and the amount of a potential cash out- flow due to litigation. Please refer to note 3.5 ‘Provisions, contingent liabilities and contingent assets’ (page 147) in the notes to the con- solidated financial statements. • We discussed pending litigation with management and Swisscom’s internal legal counsel. • We obtained written statements from Swisscom’s ex- ternal and internal legal counsel. • We gained an understanding of the process and con- trols implemented by management to identify, assess and recognise pending litigation, and critically as- sessed it. To assess the amount of the provisions established, we considered whether the underlying data were adequately factored into the calculation of the provisions. Finally, we assessed the recognition and disclosure in the consolidated financial statements of litigation arising from regulatory and competition law proceedings. We consider management’s approach to the treatment in the consolidated financial statements of litigation arising from regulatory and competition law proceedings to be ap- propriate. Other information in the annual report The Board of Directors is responsible for the other information in the annual report. The other information comprises all information included in the annual report, but does not include the consolidated financial statements, the stand-alone financial statements and the remuneration report of Swisscom Ltd and our auditor’s reports thereon. Our opinion on the consolidated financial statements does not cover the other information in the annual report and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information in the annual report and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Swisscom Ltd | Report of the statutory auditor to the General Meeting 173 r o t i d u a y r o t u t a t s e h t f o t r o p e R | s t n e m e t a t S l a i c n a n i F d e t a d i l o s n o C 174 Responsibilities of the Board of Directors for the consolidated financial statements The Board of Directors is responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with IFRS and the provisions of Swiss law, and for such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated financial statements that are free from material mis- statement, whether due to fraud or error. In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s responsibilities for the audit of the consolidated financial statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law, ISAs and Swiss Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with Swiss law, ISAs and Swiss Auditing Standards, we exercise professional judg- ment and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrep- resentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropri- ate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and re- lated disclosures made. • Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty ex- ists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evi- dence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclo- sures, and whether the consolidated financial statements represent the underlying transactions and events in a man- ner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with the Board of Directors or its relevant committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the Board of Directors or its relevant committee with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safe- guards applied. Swisscom Ltd | Report of the statutory auditor to the General Meeting   From the matters communicated with the Board of Directors or its relevant committee, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on other legal and regulatory requirements In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists which has been designed for the preparation of consolidated financial statements according to the instructions of the Board of Directors. We recommend that the consolidated financial statements submitted to you be approved. PricewaterhouseCoopers AG Peter Kartscher Audit expert Auditor in charge Zürich, 2 February 2022 Petra Schwick Audit expert Swisscom Ltd | Report of the statutory auditor to the General Meeting 175 n o i t a m r o f n I r e h t r u F Further Information ___________ Financial statements Swisscom Ltd General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178 Income statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178 Balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179 Further information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179 Proposed appropriation of retained earnings . . . . . . . . 179 Glossary Technical terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180 Other terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182 Five-year review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183 177 Financial statements Swisscom Ltd General information This is a condensed version of the financial statements of Swisscom Ltd. The full version and the auditors’ report can be viewed on the Swisscom website. N See www.swisscom.ch/financialstatements2021 Swisscom Ltd is a holding company under Swiss law. As at 31 December 2021, the Swiss Confederation, as majority shareholder, continued to hold 51.0% of the issued shares of Swisscom Ltd as in the prior year. The Telecommuni- cations Enterprise Act (TEA) provides that the Swiss Confederation shall hold the majority of the share capital and voting rights of Swisscom Ltd. The financial statements of Swisscom Ltd have been prepared in accordance with statutory requirements and the Articles of Incorporation. 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 state- ments of Swisscom Ltd. The equity totalled CHF 4,753 million in the 2021 annual financial statements of Swisscom Ltd. 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 2021, Swisscom Ltd held distributable reserves of CHF 4,691 million. The dividend is proposed by the Board of Directors and must be approved by Swisscom Ltd’s Annual General Meeting of Shareholders on 30 March 2022. Treasury shares are not entitled to a dividend. 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  2021 19 16 35 (33) (12) (45) (10) (37) 73 163 189 (4) 185 2020 100 29 129 (62) (75) (137) (8) (107) 150 62 97 (8) 89 d t L m o c s s i w S s t n e m e t a t s l a i c n a n i F | n o i t a m r o f n I r e h t r u F 178   Balance sheet In CHF million  Assets  Cash and cash equivalents  Financial assets  Participations  Other assets  Total assets  Liabilities and equity  Interest-bearing liabilities  Other liabilities  Total liabilities  Share capital  Legal capital reserves/capital surplus reserves  Voluntary retained earnings  Own equity interest  Total equity  Total liabilities and equity  Further information 31 .12 .2021 31 .12 .2020 337 4,217 8,222 56 217 6,080 8,196 82 12,832 14,575 7,944 135 8,079 52 21 4,680 – 4,753 12,832 8,693 175 8,868 52 21 5,635 (1) 5,707 14,575 Information on the participation rights held by the members of the Board of Directors and the Group Executive Board is also disclosed in the Remuneration Report (sections 2.5 and 3.5). As at 31 December 2021, guarantee obligations exist for Group companies in favour of third parties totalling CHF 275 million (prior year: CHF 253 million), and financial assets totalling CHF 155 million (prior year: CHF 149 million) were not freely available. These assets serve to secure commitments arising from bank loans. Swisscom Ltd carried out the equal pay analysis in accordance with the Gender Equality Act using the standard analysis tool Logib and this was reviewed by PwC. PwC states in its report that during the formal review of the equal pay analysis, it did not come across any facts from which it would have to conclude that the equal pay analysis does not comply with the legal requirements in all respects. Proposed appropriation of retained earnings The Board of Directors proposes to the Annual General Meeting of Shareholders to be held on 30 March 2022 that the available retained earnings of CHF 4,680 million for the financial year ending on 31 December 2021 be appro- priated as follows: In CHF million  Appropriation of retained earnings  Retained earnings from previous year  Ordinary dividend  Balance carried forward from prior year  Net income for the year  Changes in treasury shares  Retained earnings available to the Annual General Meeting  Ordinary dividend of CHF 22 .00 per share  Balance to be carried forward  31 .12 .2021 5,634 (1,140) 4,494 185 1 4,680 (1,140) 3,540 In the event that the proposal is approved, a dividend of CHF 22 per share will be paid to shareholders on 5 April 2022. 179         y r a s s o G l | n o i t a m r o f n I r e h t r u F 180 Glossary Technical terms 4G/LTE (Long-Term Evolution): 4G/LTE is the fourth gen- eration of mobile technology. At present, LTE enables mobile broadband data speeds of up to 150 Mbps. 4G+/LTE Advanced: 4G+/LTE enables theoretical broad- band data speeds of up to 700 Mbps via the mobile net- work. To do so, it bundles 4G/LTE frequencies to achieve the required capacity. dynamically via the Internet as needed. The data c entres, 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 (bonding technology): In the telecommu- nications sector, ‘convergence’ normally refers to an interaction of mobile communication and fixed-net- work technologies or to products that encompass both mobile communication and fixed-network services. 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. FTTH topologies (P2P and P2MP): There are two differ- ent common topologies in a fibre-optic network: point- to-point (P2P) or point-to-multipoint (P2MP). With P2P, a separate optical fibre is laid between each apartment and the nearest node (usually a local exchange) – if ten apartments in a neighbourhood are connected, ten opti- cal fibres are also available at the node. By contrast, with P2MP there is only a single optical fibre running from the node to the vicinity of the apartments. From there, a ‘splitter’ breaks up the light signal and distributes it to several optical fibres, which then lead to the apartments. FTTS (Fibre to the Street)/FTTB (Fibre to the Building)/ FTTC (Fibre to the Curb): FTTS, FTTB and FTTC refer to 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. 5G: 5G is the latest generation in mobile network tech- nology. 5G brings with it even more capacity, very short response times and higher bandwidths, and supports the digitisation of Swiss business and industry. There are two types: 5G (also known as 5G-wide) and 5G+ (also known as 5G-fast). Both types are more efficient than predecessor technologies in terms of both energy con- sumption and the use of electromagnetic fields. 5G (5G-wide): This type has been using existing mobile frequencies and antennas for a long time – in simplified terms it is a software update. It enables widespread cov- erage and up to 1Gbit/s of data throughput. 5G+ (5G-fast): This type uses newly acquired frequencies. It offers very high capacities and speeds but shorter ranges. This type is required to fully exploit all the oppor- tunities offered by 5G, and also calls for next-generation antennas. All IP: All IP means that all services such as television, the Internet and fixed-line phone run over the same IT net- work. Swisscom switched all existing communication networks to Internet Protocol (IP) by the end of 2019. The IP services within Switzerland 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 capac- ity of a medium, also known as the data transmission rate. The higher the bandwidth, the more information units (bits) can be transmitted per unit of time (second). It is defined in bps, kbps or Mbps. Cloud: Cloud computing makes it possible for IT infra- structures such as computing capacity, data storage, ready-to-use software and platforms to be accessed ICT (Information and Communication Technology): The terms ‘information technology’ and ‘communication technology’ were first combined in the 1980s to denote the convergence of information technology (informa- tion and data processing and the related hardware) and communication technology (technically aided commu- nications). 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 identification of fail- ing machine components. IoT facilitates new business models based on these data or opens up new opportuni- ties for interacting with customers. IoT NB (IoT Narrowband): IoT NB is a connection technol- ogy for the Internet of Things (IoT). It is designed for maximum range, minimum energy consumption and a high density of devices, but dispenses with some of the features of LTE. IoT NB is mainly used for mass market applications such as electricity and water meters or monitoring sensors (massive IoT applications). LAN (Local Area Network): A LAN is a local network for interconnecting computers, usually based on Ethernet. LTE-M: LTE-M is a connection technology for the Internet of Things (IoT). It dispenses with some of the features of LTE to increase efficiency and reduce complexity and costs. It enables all conventional IoT applications and – in contrast to IoT Narrowband (IoT NB) – allows voice trans- mission (e.g. in lift telephones). LTE-M is particularly suit- able for quality-sensitive applications such as security and monitoring solutions (Critical IoT applications). MVNO (Mobile Virtual Network Operator): MVNO denotes a business model for mobile communications. In this case, the corresponding business (the MVNO) has either a limited network infrastructure or no network infrastructure at all. It therefore accesses the infrastruc- ture of other mobile communication providers. Network convergence: Network convergence refers to the dissolution and reconstitution of previously separate networks into one large convergent network, such as in the case of the fixed and mobile networks of Swisscom. Optical fibre: Optical fibre is a transport medium for optical data transmission – in contrast to copper cables, which transmit data through electrical signals. OTT (Over the Top): OTT refers to content distributed by service providers over an existing network infrastructure that they do not themselves operate. OTT companies offer proprietary services on the basis of the infrastruc- tures of other companies in order to reach a broad range of users quickly and cost-efficiently. Petabyte: Unit of measurement for data size. 1 peta- byte is equivalent to approximately 1,000 terabytes, 1,000,000 gigabytes or 1,000,000,000 megabytes. Roaming: Roaming is when a mobile user makes calls, uses other mobile services or participates in data traffic outside his or her home network, i.e. usually abroad. This requires that the mobile device in question is compati- ble with the roaming network. Router: A router is a device for connecting or separating several computer networks. The router analyses incoming data packets according to their destination address and either blocks them or forwards them accordingly (routing). Routers come in different types, ranging from large machines in a network to the small devices used by resi- dential customers. 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. 181 y r a s s o G l | n o i t a m r o f n I r e h t r u F 182 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 uti- lisation. 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. TDM methods are now at the end of their life cycle. Terabyte: Unit of measurement for data size. 1 terabyte is equivalent to approximately 1,000 gigabytes or 1,000,000 megabytes. Ultra-fast broadband: Ultra-fast broadband denotes broadband speeds of more than 50 Mbps – on both the fixed-line and mobile networks. Other terms ComCo (Competition Commission): ComCo enforces the Federal Cartel Act, the aim of which is to safeguard against the harmful economic or social impact of cartels and other constraints on competition in order to foster competition. ComCo combats harmful cartels and mon- itors 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): Com- Com is the decision-making authority for telecommuni- cations. Its primary responsibilities include issuing con- cessions for use of the radio frequency spectrum as well as basic service licences. It also provides access (un - bundling, interconnection, leased lines, etc.), approves national numbering plans and regulates the conditions governing number portability and freedom of choice of service provider. 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 Communica- tions Commission (ComCom). FTE (full-time equivalent): Throughout this report, FTE is  used to denote the number of full-time equivalent positions. Interconnection: Interconnection means linking up the systems and services of two TSPs so as to enable the logical interaction of the connected telecoms components and services and to provide access to third-party services. Interconnection allows the customer of one provider to communicate with the subscribers of another provider. Under the terms of the Federal Telecommunications Act, market-dominant telecommunications service providers are required to allow their competitors interconnection at cost-based prices. Unbundling: Unbundling of the last mile (Unbundling of the Local Loop, ULL) enables fixed-line-network compet- itors 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 tele- phone exchange (Unbundling of the Local Loop (ULL) or Local Loop Unbundling (LLU), known as TAL in Switzer- land) with currently around 600 unbundled locations; and unbundling at distribution box level (sub-loop unbun- dling, known as T-TAL in Switzerland), in which no com- petitor has yet shown any interest. Five-year review In CHF million, except where indicated  2017 2018 1 2019 2 2020 2021 Net revenue and results  Net revenue  11,662 11,714 11,453 11,100 11,183 Operating income before depreciation and amortisation (EBITDA)  4,295 4,213 4,358 4,382 EBITDA as % of net revenue  Operating income (EBIT)  Net income  Earnings per share  Balance sheet and cash flows  Equity  Equity ratio  Cash flow from operating activities  Capital expenditure  Net debt  Employees  36 .8 2,131 1,568 30 .31 36 .0 2,069 1,521 29 .48 38 .1 1,910 1,669 32 .28 39 .5 1,947 1,528 29 .54 4,478 40 .0 2,066 1,833 35 .37 7,645 8,208 8,875 9,491 10,813 34 .7 4,091 2,378 7,447 36 .3 3,720 2,404 7,393 36 .6 4,019 2,438 6,758 39 .1 4,169 2,229 6,218 43 .6 4,044 2,286 5,689 Full-time equivalent employees  20,506 19,845 19,317 19,062 18,905 Average number of full-time equivalent employees  20,836 20,083 19,561 19,095 19,099 Operational data  Fixed telephony access lines in Switzerland  Broadband access lines retail in Switzerland  Mobile access lines in Switzerland  TV access lines in Switzerland  2,047 2,014 6,637 1,467 1,788 2,033 6,370 1,519 1,594 2,058 6,333 1,555 1,523 2,043 6,224 1,588 1,424 2,037 6,177 1,592 Revenue generating units (RGU) in Switzerland  12,165 11,710 11,540 11,378 11,230 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  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  Full-time equivalent employees  1 Swisscom has been applying IFRS 15 ‘Revenue from Contracts with Custom- ers’ since 1 January 2018. The prior year’s figures have not been adjusted. 2 Swisscom has been applying IFRS 16 ‘Leases’ since 1 January 2019. The prior year’s figures have not been adjusted. 107 435 2,451 1,065 87 481 2,547 1,432 70 515 2,637 1,746 56 555 2,747 1,961 41 596 2,750 2,472 51 .802 51 .802 51 .802 51 .802 51 .802 26,859 24,331 26,554 24,715 26,657 518 .50 469 .70 512 .60 477 .10 514 .60 527 .00 530 .60 523 .40 577 .80 562 .40 429 .80 427 .00 441 .10 446 .70 456 .30 22 .00 72 .59 22 .00 74 .63 22 .00 68 .16 22 .00 74 .48 22 .00 3 62 .20 9,476 3,451 1,678 9,274 3,419 1,645 8,969 3,508 1,770 8,614 3,522 1,596 8,579 3,569 1,634 17,688 17,147 16,628 16,048 15,882 3 In accordance with the proposal of the Board of Directors to the Annual General Meeting. 183                         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. s t n e m e t a t s g n i k o o l - d r a w r o F | n o i t a m r o f n I r e h t r u F 184 Publishing details Key dates 3 February 2022 Publication of 2021 Annual Results and Annual Report 30 March 2022 Annual General Meeting 1 April 2022 Ex dividend date 5 April 2022 Dividend payment 28 April 2022 2022 First-Quarter Results 4 August 2022 2022 Second-Quarter Results 27 October 2022 2022 Third-Quarter Results 9 February 2023 Publication of 2022 Annual Results and Annual Report Published and produced by Swisscom Ltd, Berne Translation Lionbridge Switzerland AG, Glattbrugg Production MDD Management Digital Data AG, Lenzburg Printing Stämpfli AG, Berne Photographer Manuel Rickenbacher, Zurich Johannes Diboky, Zurich Printed on chlorine-free bleached paper © Swisscom AG, Berne The Annual Report is published in English, French and German. Online versions of the Annual Report German: www.swisscom.ch/bericht2021 English: www.swisscom.ch/report2021 French: www.swisscom.ch/rapport2021 A condensed version of the 2021 Annual Report is also available in English, French, German and Italian at www.swisscom.ch/ataglance2021. The Sustainability Report 2021 is published online at www.swisscom.ch/cr-report2021. 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: E-mail: Internet: www.swisscom.ch/investor + 41 58 221 99 11 investor.relations@swisscom.com Social and environmental information Swisscom Ltd Group Communications & Responsibility CH-3050 Berne E-mail: Internet: www.swisscom.ch/responsibility corporate.responsibility@swisscom.com For the latest information, visit our website www.swisscom.ch Printed Matter myclimate.org/01-22-797764 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● swisscom.ch/report2021 

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