PROSPECTUS October 3, ,253,872 Shares. Joint Global Coordinators. Regional Lead Managers. United Kingdom. Warburg Dillon Read

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1 PROSPECTUS October 3, ,253,872 Shares (nominal value CHF 25 per Share) in the form of Shares or American Depositary Shares Offer Price CHF 340 per Share and US$25.30 per ADS Swisscom AG and the Swiss Confederation are offering through the several International Underwriters 17,253,872 Shares, nominal value CHF 25 per Share, of Swisscom, as part of a Global Offering of 22,065,000 Shares. The offering being made hereby comprises (1) a public offering in Switzerland, (2) an institutional offering in the United Kingdom and Ireland and (3) an institutional offering in the Rest of the World, excluding Switzerland, the United Kingdom, Ireland, the United States and Canada. The Shares being offered in Switzerland include an offering of Shares to employees of Swisscom at a discount and pursuant to certain share ownership plans. The Global Offering also includes a concurrent offering in the United States and Canada, in the form of Shares or American Depositary Shares. See The Global Offering. Of the 22,065,000 Shares offered in the Global Offering, 7,550,000 Shares are newly-issued Shares being sold by Swisscom and 14,515,000 Shares are outstanding Shares being sold by the Confederation. Prior to the Global Offering, the Confederation owns all of the outstanding Shares of Swisscom. After completion of the Global Offering, the Confederation will own 51,485,000 Shares, representing 70.0% of the outstanding Shares of Swisscom (assuming no exercise of the Underwriters over-allotment option described herein). Swisscom will not receive any of the proceeds from the sale of the Shares by the Confederation. Prior to the Global Offering, there has been no public market for the Shares or the ADSs. The initial public offering price is CHF 340 per Share and US$ per ADS (based on an exchange rate of CHF = US$1.00). Shares offered in Switzerland in the priority retail portion of the offering are being offered at the initial public offering price less a discount of CHF 5 per Share. For factors considered in determining the initial public offering price, see Underwriting. The Shares have been approved for listing on the Swiss Exchange under the symbol SCMN and the ADSs have been approved for listing, subject to notice of issuance, on the New York Stock Exchange under the symbol SCM. Warburg Dillon Read Joint Global Coordinators J.P. Morgan Securities Ltd. The Shares are offered by the several International Underwriters outside the United States and Canada when, as and if delivered to and accepted by the International Underwriters and subject to their right to reject any order in whole or in part. It is expected that delivery of the Shares will be made in book-entry form against payment therefor in immediately available funds on or about October 8, 1998, through the facilities of SEGA, Euroclear and Cedel Bank. Switzerland Warburg Dillon Read Credit Suisse First Boston Cantonalbanks of Switzerland Regional Lead Managers Rest of the World J.P. Morgan Securities Ltd. Warburg Dillon Read Deutsche Bank United Kingdom Warburg Dillon Read J.P. Morgan Securities Ltd. HSBC Investment Banking To Swisscom ABN AMRO Rothschild Financial Advisors To the Confederation Goldman Sachs International

2 Joint Global Coordinators Warburg Dillon Read J.P. Morgan Securities Ltd. Warburg Dillon Read J.P. Morgan (Suisse) S.A. Banca del Gottardo Swiss Offering Credit Suisse First Boston Bank Julius Baer & Co. Ltd. Cantonalbanks of Switzerland Groupement des Banquiers Privés Genevois Bank J. Vontobel & Co AG Bank Sarasin & Cie. LGT Bank in Liechtenstein Aktiengesellschaft RBA-Zentralbank Schweizer Verband der Raiffeisenbanken Union Bancaire Privée Warburg Dillon Read ABN AMRO Rothschild U.K. Offering J.P. Morgan Securities Ltd. BT Alex. Brown International Goldman Sachs International HSBC Investment Banking Morgan Stanley Dean Witter J.P. Morgan Securities Ltd. Daiwa Europe Limited ABN AMRO Rothschild Goldman Sachs International Rest of the World Offering Warburg Dillon Read Dresdner Kleinwort Benson CA-IB Investmentbank Banca D Intermediazione Mobiliare IMI Deutsche Bank Paribas Enskilda Securities Skandinaviska Enskilda Banken SG Investment Banking To Swisscom ABN AMRO Rothschild Financial Advisors To the Confederation Goldman Sachs International

3 CERTAIN PERSONS PARTICIPATING IN THE GLOBAL OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SHARES AND THE ADSs OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE SHORT-COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE UNDERWRITING. No dealer, salesperson or other individual has been authorized to give any information or make any representation not contained in this Prospectus in connection with the offering covered by this Prospectus. If given or made, such information or representation must not be relied upon as having been authorized by Swisscom, the Confederation or any Underwriter. This Prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any of the securities offered hereby in any jurisdiction where, or to any person to whom, it is unlawful to make such offer or solicitation. Neither the delivery of this Prospectus nor any sale made hereunder shall, under any circumstances, create any implication that there has not been any change in the facts set forth in this Prospectus or in the affairs of Swisscom since the date hereof. Until October 28, 1998 (25 days after the date of this Prospectus), all dealers effecting transactions in the Shares or ADSs in the United States, whether or not participating in this distribution, may be required to deliver the U.S. Prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a Prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. No action has been or will be taken in any jurisdiction that would permit a public offering of the Shares or ADSs or possession or distribution of this document or any other offering or publicity material relating to the Shares of ADSs, in any country where action for that purpose is required, other than Switzerland and the United States. This Prospectus is intended for use only in connection with offers and sales of Shares and ADSs outside the United States and Canada and is not to be sent or given to any person within the United States or Canada. The Shares and ADSs offered hereby are not being registered under the United States Securities Act of 1933, as amended (the Securities Act ), for the purpose of sales outside the United States. There are restrictions on the offer and sale of the Shares and ADSs offered hereby in the United Kingdom. All applicable provisions of the Financial Services Act 1986 and the Companies Act 1985, as amended or supplemented, with respect to anything done by any person in relation to the Shares or ADSs in, from or otherwise involving the United Kingdom must be complied with. See Underwriting. TABLE OF CONTENTS Page Page Prospectus Summary... 5 Business The Global Offering Competition Use of Proceeds Regulation Dividend Policy Management and Employees Exchange Rate Information Description of Shares Nature of Swiss Trading Market Description of American Depositary Shares Relationship with the Swiss Confederation Taxation Capitalization Underwriting Dilution Validity of Shares and ADSs Selected Consolidated Financial and Statistical Data Experts Management s Discussion and Analysis of Financial Glossary of Selected Telecommunications Terms Condition and Results of Operations Index to Financial Statements... F-1 3

4 Swisscom assumes responsibility for the completeness and accuracy of the Prospectus. Swisscom confirms that, to the best of its knowledge and having made all reasonable inquiries, the information in this Prospectus is in all material respects in accordance with the facts and does not omit anything likely to affect the impact of such information in any material respect. The Swiss Confederation assumes responsibility for the completeness and accuracy of the information in this Prospectus under the captions Relationship with the Swiss Confederation and Regulation. The Swiss Confederation confirms that, to the best of its knowledge and having made all reasonable inquiries, the information in this Prospectus under the aforementioned captions is in all material respects in accordance with the facts and does not omit anything likely to affect the import of such information in any material respect. Other than as described herein, there has been no material adverse change in the business or financial situation of Swisscom since June 30, Swisscom will furnish the Depositary referred to under Description of American Depositary Shares with annual reports in English, which will include a review of operations and annual audited consolidated financial statements prepared in accordance with accounting principles generally accepted by the International Accounting Standards Committee ( IAS ), together with a reconciliation of net income and total shareholders equity to generally accepted accounting principles in the United States ( U.S. GAAP ). Swisscom will also furnish the Depositary with semi-annual reports in English, which will include unaudited interim consolidated financial information prepared in accordance with IAS. In addition, Swisscom will furnish the Depositary with summaries in English or an English version of all notices of shareholders meetings and other reports and communications that are made generally available to shareholders of Swisscom. The Depositary will make such reports, summaries and notices to all record holders of American Depositary Receipts ( ADRs ) evidencing American Depositary Shares ( ADSs ), each representing one-tenth of one registered share, nominal value CHF 25 per share (a Share ), of Swisscom and will promptly mail to all record holders of ADRs any notice (or a summary thereof) of a shareholders meeting. See Description of American Depositary Shares Notices and Reports. Swisscom publishes its financial statements in Swiss francs ( CHF ). Unless otherwise indicated, all amounts in this Prospectus are expressed in Swiss francs. For the convenience of the reader, this Prospectus contains translations of certain Swiss franc amounts into U.S. dollars ( US$ ) at CHF = US$1.00, the noon buying rate in The City of New York for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York (the Noon Buying Rate ) on June 30, On October 2, 1998, the Noon Buying Rate was CHF = US$1.00. See Exchange Rate Information. In addition, solely for the convenience of the reader, certain amounts denominated in foreign currencies appearing primarily under the heading Business International Activities have been translated into Swiss francs at then current exchange rates except where otherwise indicated. These translations should not be construed as representations that the amounts referred to actually represent such translated amounts or could be converted into the translated currency at the rate indicated. As used in this Prospectus, the term Swisscom, unless the context otherwise requires, refers to Swisscom AG and its consolidated subsidiaries. Prior to January 1, 1998, Swisscom operated as a department of the Swiss PTT, the Swiss state postal, telephone and telegraph authority, and as used in this Prospectus, Swisscom also refers to such predecessor. The term Confederation refers to the Swiss Confederation and the term Government refers to the government of the Swiss Confederation. Unless otherwise indicated, the information in this Prospectus assumes no exercise of the Underwriters over-allotment option in connection with the Global Offering. Swisscom s principal executive offices are located at Viktoriastrasse 21, 3050 Bern, Switzerland, telephone (+41 31) , and its registered office is Alte Tiefenausstrasse 6, Worblaufen, 3050 Bern, Switzerland. 4

5 PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements (including the notes thereto) included elsewhere in this Prospectus. A glossary of selected telecommunications terms used in this Prospectus appears at the end of the Prospectus. Swisscom Overview Swisscom is the principal provider of telecommunications services in Switzerland, offering a comprehensive range of services to residential and business customers. Swisscom provides approximately 4.7 million fixed-line telephone access channels in Switzerland, including 740,000 ISDN channels, representing one of the highest ISDN penetration rates in the world. Swisscom also provides mobile telecommunications services, with more than 1.3 million mobile telephone customers. In addition, Swisscom offers a full range of state-of-the-art data services, from leased lines to integrated solutions for corporate customers, and through its Blue Window service is one of the leading Internet and on-line services providers in Switzerland. In 1997 and the first six months of 1998, Swisscom had consolidated net revenues of approximately CHF 9.8 billion and CHF 5.1 billion, respectively. Swisscom s telecommunications networks are among the most technologically advanced in the world, which Swisscom believes provides a significant competitive advantage by allowing it to develop and introduce new services quickly and in a cost-effective manner. Swisscom s fixed-line network features fully digitalized transmission and local switching and fully integrated ISDN. Swisscom s digital mobile network utilizes proprietary technology allowing customers to make and receive calls using remotely rechargeable prepaid cards and supporting a variety of value-added services. Swisscom was the first operator to increase the capacity of its mobile network by introducing commercial dual band service. Internationally, Swisscom seeks to meet the increasing demand by its customers for seamless cross-border telecommunications services while expanding the market for its services by extending its operations into neighboring regions of Germany, France, Italy and Austria and developing strategic points of presence in selected key cities or hot spots in Europe and elsewhere. Swisscom also offers its multinational customers seamless international services through international alliances. In addition, Swisscom has acquired participations in mobile telecommunications operators in Malaysia and India and in SPT Telecom, the principal telecommunications service provider in the Czech Republic. Switzerland has a highly advanced economy which generates strong demand for telecommunications services. In 1997, Switzerland had the highest per capita gross domestic product of all OECD countries except Luxembourg. Switzerland is a world leader in the information-intensive banking, insurance and other financial services industries and serves as the European or worldwide base for a large number of multinational corporations. Accordingly, a relatively high proportion of telecommunications spending in Switzerland is generated by business customers. At the same time, Switzerland has one of the lowest call rates (number of calls per access channel) in Europe, and Swisscom believes there is significant potential to increase telephone usage, particularly among residential customers. Swisscom s operations were historically a part of the Swiss PTT, an agency of the Swiss Government which operated the state monopolies for both public telecommunications (Swiss Telecom PTT) and postal services (Swiss Post). On January 1, 1998, upon implementation of the Swiss Telecommunications Enterprise Act of 1997 (Telekommunikationsunternehmungsgesetz) (the TUG ), Swiss Telecom PTT was separated from the Swiss Post and was transformed into an independent stock corporation under the name Swisscom AG, with the Swiss Confederation as its sole shareholder. On January 1, 1998, the Swiss telecommunications market was opened to full competition with the implementation of the Swiss Telecommunications Act of 1997 (Fernmeldegesetz) (the Telecommunications Act ). Since then, a number of 5

6 competitors have entered the Swiss market, with competition strongest in international voice telephony and services to larger business customers. In mobile telephony, national licenses have been granted to two competitors of Swisscom, which have announced their intention to begin operations in early In addition to measures promoting competition, the Telecommunications Act includes a transition provision requiring Swisscom to continue to provide certain basic telecommunications services comprising Universal Service throughout Switzerland until December 31, 2002, with certain of such services subject to price ceilings. Although Switzerland is not a member of the European Union ( EU ), the Swiss market has been liberalized on the schedule and in the manner set forth in EU directives mandating the liberalization of telecommunications services in member states. Strategy Swisscom s objectives for the coming years are to achieve growth in revenues, cash flow and earnings and to create value for its shareholders. To achieve these overall objectives, Swisscom has established the following specific strategies: Maintain Leadership and Promote Growth in the Swiss Market Strengthen Customer Loyalty. As competition intensifies in its markets, a critical competitive factor for Swisscom is its ability to maintain customer loyalty, and therefore Swisscom has made customer satisfaction a prime objective. To this end, Swisscom has introduced innovative pricing plans and bundled service packages, and is undertaking a comprehensive effort to improve its marketing and customer care. Promote Usage. Swisscom believes there are significant opportunities for growth in its domestic market and seeks to generate additional traffic on its networks by offering special pricing plans and emphasizing value-added services and Internet and on-line services, which typically increase traffic. Swisscom also believes the relatively low call rate in Switzerland represents an opportunity to increase telephone usage through promotion of new services. Offer Services to the New Wholesale Market. As a result of liberalization of the telecommunications sector, a market for wholesale services is developing in Switzerland. Swisscom is committed to taking full advantage of the opportunities presented by this new market, and has established a carrier services division responsible for developing its wholesale business. Leverage Technological Expertise and Customer Relationships to Market New Services With its fully digitalized network, technological expertise and established customer base, Swisscom is able to introduce new services quickly and efficiently in response to customer demand. Swisscom believes there will be increasing demand for value-added services in each of its business areas, as well as for bundled service packages and integrated network solutions which exploit the increasing convergence of fixed-line voice, mobile and data telecommunications. To meet this demand, Swisscom is promoting ISDN as a value-added alternative to standard PSTN access, developing new value-added services for mobile telecommunications utilizing its proprietary SICAP technology, offering managed bandwidth, frame relay and ATM data services as value-added alternatives to traditional leased lines, and expanding its Blue Window on-line and Internet service offerings. In addition, Swisscom is promoting bundled service packages, such as ISDN/Blue Window (soon to be introduced) and combined voice/mobile messaging services, while also offering its business customers customized, fully integrated network solutions which support the latest in multimedia applications. Reduce Costs and Improve Productivity Reduce Personnel and Improve Productivity. Swisscom is implementing measures to reduce personnel costs primarily through early retirement and natural attrition and, where appropriate, outsourcing of certain non-essential functions. From the December 31, 1997 level of 22,170, Swisscom has targeted a total net reduction by the end of the year 2001 of approximately 4,200 full-time equivalent employees. While Swisscom is increasing the number of employees in growth areas, particularly in its Mobile and Data & Multimedia businesses, 6

7 significant reductions are planned in personnel responsible for fixed-line network operations and certain back office and regional sales functions. In addition to workforce reduction, Swisscom is introducing programs to optimize the use of its existing workforce and increase productivity and is aligning the interests of Swisscom s management and employees more closely with those of shareholders by implementing employee share ownership plans and performance-based compensation. Improve Other Operating Expense Margins. Swisscom believes it will be able to achieve sustained reductions in its other operating expense margins through improved process management and streamlining of its operations. Swisscom is reducing its network provisioning and maintenance costs through more professional and centralized purchasing of network material. Swisscom is streamlining its offerings in a variety of areas, including customer premises systems and equipment and customer service and in its traditional leased line business. Focus Capital Expenditures. Swisscom s highly modern fixed-line network is largely the result of previous high levels of investment. Swisscom has now adopted a strictly market-oriented approach to network planning and construction, seeking to optimize the balance between proactive and reactive network investment and has been able to lower capital expenditures on its fixed-line networks. Swisscom plans to continue to invest in new technologies, but does not intend to roll out such technologies on a network-wide basis unless clearly justified from a commercial point of view. In the case of its mobile network, Swisscom will continue to invest in infrastructure as necessary in order to maintain quality of service while meeting market demand. Expand Internationally into Neighboring Regions and Key Cities and Strengthen Existing International Digital Mobile Position Extend Home Market and Develop Points of Presence in Key Cities. Swisscom is extending its operations into neighboring regions of Germany, France, Italy and Austria in order to provide seamless service to its cross-border customers, while substantially expanding the potential markets for its services. In addition, Swisscom is establishing points of presence or hot spots in certain key cities in Europe and elsewhere in order to offer end-to-end managed services to its large business customers and increase its range of wholesale carrier services, while improving its cost structure through reduced termination costs. Offer Seamless International Service to Multinational Customers. An important component of Swisscom s international strategy is to provide seamless international voice, data and networking services to multinational customers through international alliances. Strengthen Existing International Digital Mobile Position. Swisscom has made direct investments as a strategic partner in mobile operators in Malaysia and India and believes that these markets present opportunities for long-term growth. Swisscom s current focus is on strengthening its existing participations by increasing its operational influence. 7

8 The Global Offering Global Offering... Swisscom and the Swiss Confederation are offering 22,065,000 Shares, representing 30.0% of the Shares of Swisscom to be outstanding after the offering, in the global offering described herein (the Global Offering ). The Global Offering may be increased to a total of 25,374,750 Shares, representing 34.5% of the Shares of Swisscom to be outstanding after the offering, if the over-allotment option described below is exercised in full. Of the 22,065,000 Shares offered in the Global Offering, 7,550,000 Shares are newly-issued Shares being sold by Swisscom and 14,515,000 Shares are currently outstanding Shares being sold by the Confederation. The Global Offering comprises four regional offerings: (1) an offering of 9,929,250 Shares by way of a public offering in Switzerland (including an offering of 398,128 Shares to Swisscom employees at a discount and in connection with certain employee share ownership plans); (2) an offering of 4,413,000 Shares to institutional investors in the United Kingdom and Ireland; (3) an offering of 4,413,000 Shares by way of a public offering in the United States and an offering to institutional investors in Canada; and (4) an offering of 3,309,750 Shares to institutional investors in the rest of the world, excluding the Swiss, U.K. and U.S. Offering regions. The final allocation of Shares among the four regional offerings may differ from the amounts set forth above. Over-allotment Option... Shares Outstanding... Initial Public Offering Price... As a part of the Global Offering, the Confederation has granted an option for the purchase of up to an additional 3,309,750 Shares to the Underwriters solely to cover over-allotments, if any. See Underwriting. 73,550,000 Shares upon completion of the Global Offering. CHF 340 per Share and US$ per ADS (based on an exchange rate of CHF = US$1.00). Shares offered in Switzerland in the priority retail portion of the offering are being offered at the initial public offering price less a discount of CHF 5 per Share. Principal Shareholder... Prior to the Global Offering, the Confederation owns all of the outstanding Shares of Swisscom. After completion of the Global Offering, the Confederation will own 51,485,000 Shares, representing 70.0% of the outstanding Shares of Swisscom (or 48,175,250 Shares, representing 65.5% of the outstanding Shares of Swisscom, if the Underwriters over-allotment option is exercised in full). The Confederation is required by Swiss statutory law to hold a majority of the capital and voting rights of Swisscom. The Confederation currently has made no plans with respect to the disposition of any further Shares of Swisscom following the Global Offering. See Relationship with the Swiss Confederation. Lock-ups... Each of Swisscom and the Confederation has agreed that, for a period of 365 days after the date of the initial public offering of the Shares, it will not offer, sell or otherwise transfer or dispose of Shares or certain related securities without the prior written consent of the Joint Global Coordinators, other than the Shares and ADSs offered in the Global Offering. See Underwriting. 8

9 Use of Proceeds... Dividends... Voting Rights... Listing... Settlement... The net proceeds to Swisscom from the Global Offering are estimated to be approximately CHF 2.4 billion. Swisscom intends to use approximately CHF 2.05 billion of such net proceeds to repay indebtedness owed to the Swiss Post and the Federal Treasury. Swisscom will not receive any of the proceeds from the sale of Shares by the Confederation. See Use of Proceeds. The Shares and ADSs offered in the Global Offering will entitle the holder thereof to any dividends paid or declared in respect of the financial year ending December 31, 1998 (which is expected to be paid in the second quarter of 1999) and subsequent years. Subject to certain constraints, and in the absence of unforeseen developments, the Board of Directors expects to propose to shareholders that a dividend of CHF 11 per Share be paid in 1999 in respect of In respect of future years, subject to certain constraints, Swisscom has set as a target an annual dividend pay-out ratio of approximately 50% of net income. Dividends will be subject to deduction of Swiss withholding tax. See Dividend Policy and Taxation. Each Share carries one vote. Voting rights may be exercised only after a shareholder has been recorded in Swisscom s share register as a shareholder with voting rights. The Board of Directors of Swisscom may refuse to register a shareholder as a shareholder with voting rights to the extent such shareholder s voting rights would exceed 5% of Swisscom s Shares (as registered in the commercial register). See Description of Shares. Holders of ADRs are entitled to instruct the Depositary to vote or cause to be voted the Shares represented by the ADSs on the basis of one vote for every ten ADSs. See Description of American Depositary Shares Voting of the Underlying Shares. The Shares have been approved for listing on the Swiss Exchange SWX (the Swiss Exchange ) under the symbol SCMN. The ADSs have been approved for listing, subject to notice of issuance, on the New York Stock Exchange under the symbol SCM. It is expected that the Shares will be included in the Swiss Market Index ( SMI ) of the Swiss Exchange 14 days following commencement of trading in the Shares, with an index weighting based on the free float of the Shares outstanding. The Shares are expected to be accepted for clearance though the Swiss Clearing System (Schweizerische Effekten-Giro AG) ( SEGA ), Cedel Bank, société anonyme ( Cedel Bank ) and Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the Euroclear System ( Euroclear ). The ADSs are expected to be eligible for clearance through the facilities of The Depository Trust Company ( DTC ). See The Global Offering Settlement. 9

10 Summary Consolidated Financial and Statistical Data The summary consolidated financial data below have been extracted or derived from, and should be read in conjunction with, Swisscom s consolidated financial statements, including the Notes thereto, as of December 31, 1995, 1996 and 1997 and for each of the years in the three-year period ended December 31, 1997 (the Financial Statements ) and Swisscom s unaudited interim consolidated financial statements, including the Notes thereto, as of June 30, 1998 and for the six months ended June 30, 1997 and 1998 (the Interim Financial Statements ) included elsewhere in this Prospectus. The Financial Statements were prepared in accordance with IAS, which differs in certain respects from U.S. GAAP. For a reconciliation of the material differences between IAS and U.S. GAAP as they relate to Swisscom, see Note 27 to the Financial Statements and Note 22 to the Interim Financial Statements. The Interim Financial Statements were prepared on a basis consistent with the Financial Statements and reflect all adjustments, consisting only of normal recurring adjustments, necessary to a fair statement of Swisscom s financial position and results of operations for the periods presented CHF Year Ended December 31, Six Months Ended June 30, 1996 CHF 1997 CHF 1997 (1) US$ 1997 CHF 1998 CHF 1998 (1) US$ (in millions except per Share and ADS amounts) Consolidated Statement of Operations Data: Amounts in accordance with IAS: Net revenues... 9,515 9,532 9,842 6,496 4,859 5,106 3,371 Capitalized cost and changes in inventories Total... 9,860 9,850 10,119 6,679 5,003 5,202 3,434 Goods and services purchased... 1,351 1,389 1,666 1, Personnel expenses... 2,154 2,348 2,584 1,706 1,274 1, Other operating expenses... 1,557 1,881 2,090 1, (2) 649 (2) Depreciation and amortization... 1,751 1,727 1,739 1, Restructuring charges... 1,726 (3) 1,139 (3) Total operating expenses... 6,813 7,345 9,805 6,472 3,695 3,703 (4) 2,445 (4) Operating income... 3,047 2, ,308 1,499 (4) 989 (4) Interest expense... (581) (487) (428) (282) (204) (189) (124) Financial income Income (loss) before income taxes and equity in net loss of affiliated companies... 2,519 2,044 (89) (58) 1,115 1,354 (4) 894 (4) Income tax expense (5)... (1) (1) (1) (1) (1) (103) (68) Equity in net loss of affiliated companies... (103) (213) (325) (215) (119) (118) (78) Net income (loss)... 2,415 1,830 (415) (274) 995 1,133 (4) 748 (4) Pro forma income tax (expense) benefit (5)... N/A (510) (278) N/A N/A Net income (loss) after taxes or pro forma taxes (5)... N/A 1,320 (392) (259) 717 1,133 (4) 748 (4) Earnings (loss) per Share (6) (6.29) (4.15) Earnings (loss) per ADS (6) (0.63) (0.42) Earnings (loss) after pro forma taxes per Share (5)... N/A (5.94) (3.92) Amounts in accordance with U.S. GAAP: Net income... N/A 2, , (4) 531 (4) Pro forma income tax expense (5)... N/A (557) (73) (48) (313) N/A N/A Net income (loss) after taxes or pro forma taxes (5)... N/A 1,461 (48) (31) Earnings per Share (6)... N/A Earnings per ADS (6)... N/A Earnings (loss) after pro forma taxes per Share (5)... N/A (0.73) (0.47)

11 1995 CHF Year Ended December 31, 1996 CHF 1997 CHF Six Months 1997 (1) Ended June 30, 1998 US$ CHF US$ (1) (in millions) Consolidated Balance Sheet Data (end of period ): Amounts in accordance with IAS: Cash and cash equivalents Other current assets... 2,238 2,279 2,306 1,522 2,554 1,685 Property, plant and equipment... 11,037 11,329 11,453 7,560 11,030 7,280 Investments ,602 1, , Other non-current assets Total assets... 15,291 16,010 15,473 10,213 15,563 10,272 Short-term debt... 3, , ,786 (7) 1,179 (7) Trade accounts payable and other current liabilities... 3,160 2,479 3,102 2,048 2,254 1,488 Long-term debt and finance lease obligation... 6,150 8,636 6,639 (8) 4,382 (8) 6,233 (7) 4,114 (7) Accrued pension cost... 3,013 3,086 2,277 1,503 1,880 1,241 Accrued liabilities and other long-term liabilities... 1,181 1,182 1, , Total liabilities... 16,685 16,094 14,243 9,401 13,167 8,691 Shareholder s equity... (1,394) (84) 1,230 (8) 812 (8) 2,396 1,581 Amounts in accordance with U.S. GAAP: Total assets... N/A 16,349 16,154 10,663 16,192 10,688 Shareholder s equity... N/A 255 2,009 1,327 2,845 1,877 Consolidated Cash Flow Data: Amounts in accordance with IAS: Net cash provided by operating activities prior to nonrecurring pension fund contribution... 4,674 4,115 3,435 (9) 2,267 (9) 1,679 (9) 1,108 (9) Net cash provided by operating activities... 4,674 4,115 1, ,528 1,008 Capital expenditures: Fixed-line networks... 1,365 1,432 1, Mobile networks Buildings Other Total capital expenditures... 2,173 2,278 2,374 1, Purchases of investments in affiliates Year Ended December 31, Six Months Ended June 30, Statistical Data: Fixed-line access channels (end of period, in thousands) (10) : PSTN lines... 4,280 4,189 4,076 4,001 ISDN channels Total fixed-line access channels... 4,480 4,571 4,688 4,741 Mobile telephone customers (end of period, in thousands) ,044 1,322 Traffic (in millions of minutes): National fixed-line telephony (11)... 14,679 15,184 16,780 9,078 Outgoing international fixed-line telephony (12)... 1,733 1,835 1, Incoming international telephony... 1,480 1,578 1,723 (13) Mobile telephony (14) Blue Window on-line service subscribers (end of period )... 15,169 70, ,538 Number of full-time equivalent employees (end of period ) (15).. 20,557 21,951 22,170 21,806 11

12 Notes to Summary Consolidated Financial and Statistical Data (1) Solely for the convenience of the reader, the financial data for 1997 and 1998 have been translated into U.S. dollars at the rate of CHF to US$1.00, the Noon Buying Rate on June 30, (2) Other operating expenses for the six months ended June 30, 1998 include a one-time expense of CHF 260 million for stamp tax owed upon Swisscom s incorporation. See Note 5 to the Interim Financial Statements. (3) In 1997 Swisscom adopted plans to reduce its staffing levels through early retirement and outsourcing, which resulted in personnel restructuring charges of CHF billion. In addition, Swisscom recognized write-downs from the impairment of long-lived assets and other restructuring charges in the aggregate amount of CHF 400 million, including a charge resulting from the decision to discontinue the operations of its analog mobile telephony network due to the reallocation of radiocommunication frequencies to competitors. See Note 9 to the Financial Statements. (4) Swisscom believes operating expenses for the six months ended June 30, 1998, excluding the effect of the stamp tax (which is included in other operating expenses), are relatively low and should not be considered indicative of the full year 1998 or See Management s Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Operating Expenses. (5) Prior to its incorporation effective January 1, 1998, Swisscom was not subject to normal income taxes. Subsequent to its transformation into a stock corporation, Swisscom became subject to normal corporate income taxation. The pro forma information presents net income (loss) after income tax expense and earnings per Share on a pro forma basis, as if Swisscom had been subject to normal taxation. Swisscom s effective tax rate in the six months ended June 30, 1998 was reduced by a one-time deferred tax credit arising from the difference between pension cost as calculated for Swiss law purposes, which is applicable for tax purposes, and pension cost for IAS purposes. Excluding the effect of the one-time tax benefit, Swisscom s effective income tax rate is approximately 25%. (6) Earnings per Share have been calculated retroactively based on 66,000,000 Shares, the number of Shares issued to the Confederation in connection with the initial capitalization of Swisscom as adjusted for a subsequent stock split. Earnings per ADS are based on the ratio of one-tenth of one Share to one ADS. Diluted earnings per Share in all years are the same as basic earnings per Share. (7) Total debt at June 30, 1998 includes debt outstanding to the Swiss Post and the Federal Treasury in the aggregate principal amount of approximately CHF 6.7 billion. (8) In December 1997, as part of the initial capitalization of Swisscom as a stock corporation, the Swiss Government advanced a loan in the principal amount of CHF 3.5 billion to Swisscom, of which CHF 3.2 billion was converted into equity in Swisscom as of December 31, Proceeds of the loan were applied by Swisscom to make the first pension fund contribution referred to in Note 9 below and to repay part of the debt outstanding to the Central Treasury of the PTT. On January 1, 1998 the Central Treasury of the PTT assigned its rights to all remaining debt to the Swiss Post. (9) Substantially all of Swisscom s employees are eligible for retirement benefits under a statutorily defined benefit plan provided through the Federal Pension Administration. The Confederation required Swisscom to assume liability for funding approximately CHF 2.25 billion of the accrued pension liability under such plan as calculated under Swiss law at December 31, On December 31, 1997, Swisscom made a payment to the pension fund of CHF 2.1 billion and in March 1998 Swisscom paid the pension fund the remaining CHF 151 million. See Management and Employees Pensions. (10) Based on lines in service, including courtesy and service lines and lines for payphones. Access lines are expressed in the equivalent number of access channels. A PSTN line provides one access channel, a basic ISDN line provides two access channels and a primary ISDN line provides 30 access channels. (11) Management estimates. Includes traffic on courtesy and service lines, which is estimated to be 3% of total national fixed-line traffic. Includes traffic from Swisscom s fixed network to mobile networks and to private user networks and certain data services. Does not include traffic generated by Swisscom s toll-free, cost shared and premium rate telephone number services for business customers or by Swisscom s information services. (12) Management estimates, based on minutes of outgoing international traffic as determined for international settlement purposes. Includes international calls made from payphones. Does not include transit traffic originating outside Switzerland. (13) Minutes of incoming international traffic through June 30, 1998 are not yet available. Incoming international traffic for the five months ended May 31, 1998 was 722 million minutes. (14) Management estimates. Includes both outgoing domestic and international calls. Excludes calls by customers of other mobile operators roaming in Switzerland. (15) As a part of the restructuring which occurred in connection with the separation of Swisscom from the PTT and the Swiss Post, at year-end employees and at year-end employees were transferred to Swisscom from the PTT and the Swiss Post. 12

13 THE GLOBAL OFFERING General Swisscom and the Swiss Confederation are offering 22,065,000 Shares, representing 30.0% of the Shares of Swisscom to be outstanding after the offering, in the global offering described herein (the Global Offering ). The Global Offering may be increased to a total of 25,374,750 Shares, representing 34.5% of the Shares of Swisscom to be outstanding after the offering, if the over-allotment option described below is exercised in full. Of the 22,065,000 Shares offered in the Global Offering, 7,550,000 Shares are newly-issued Shares being sold by Swisscom and 14,515,000 Shares are currently outstanding Shares being sold by the Confederation. The Global Offering comprises: (1) an offering of 9,531,122 Shares (the Swiss Offering ) through the Swiss Underwriters to the public in Switzerland and 398,128 Shares offered by Swisscom to Swisscom employees at a discount and in connection with certain employee share ownership plans described below; (2) an offering of 4,413,000 Shares (the U.K. Offering ) to institutional investors in the United Kingdom and Ireland; (3) an offering of 4,413,000 Shares (the U.S. Offering ) through the U.S. Underwriters to the public in the United States and to institutional investors in Canada; and (4) an offering of 3,309,750 Shares (the Rest of the World Offering ) to institutional investors in the rest of the world, excluding the Swiss, U.K. and U.S. Offering regions. The final allocation of Shares among the four regional offerings may differ from the amounts set forth above. The Swiss Underwriters, the U.K. Underwriters and the Rest of the World Underwriters are referred to collectively as the International Underwriters, and the International Underwriters and the U.S. Underwriters are referred to collectively as the Underwriters. The U.S. Underwriters may elect to receive all or a portion of their Shares in the form of ADSs. Except for the discounts offered to Swiss retail investors in the priority retail offering in Switzerland and in connection with the employee offering described below, Shares and ADSs sold in the Global Offering are being sold at the initial public offering price per Share or per ADS set forth on the cover page of this Prospectus. As a part of the Global Offering, the Confederation has granted an option for the purchase by the Underwriters of up to an additional 3,309,750 Shares solely to cover over-allotments, if any. See Underwriting. Priority Retail Offering in Switzerland In order to ensure adequate allocation of Shares to retail investors, a portion of the Shares in the Swiss Offering is being offered to retail investors at the initial public offering price less a discount of CHF 5 per Share and reserved for sale on a preferential basis. All Swiss residents were eligible to participate in the priority retail portion of the Swiss Offering. In order to participate, retail investors were required to register with a bank in Switzerland or directly with a designated registration center on or before September 11, Following such registration, eligible retail investors received a numbered subscription form for use in placing orders. Each order was limited to a minimum of 10 Shares and a maximum of 200 Shares. PricewaterhouseCoopers has been appointed by Swisscom as independent trustee to monitor and review the rules and procedures in place with respect to the allotment of Shares offered in the priority retail portion of the Swiss Offering. Under these rules and procedures, each order of a particular size is being allocated the same number of Shares. Retail investors who wish to purchase more than the maximum number of Shares were able to place orders for Shares at the initial public offering price in the general portion of the Swiss Offering, although there can be no assurance as to the amount of any allocation received. Offering of Shares to Swisscom Employees In order to encourage employee ownership of Shares, Swisscom employees (other than members of middle and upper management and the Executive Board) were offered the opportunity to purchase Shares at the initial public offering price less a discount of 20%. Each employee taking advantage of the offer is permitted to invest up to CHF 4,000 to acquire Shares with a maximum value of CHF 5,000 at the initial public offering price and is required to invest a minimum of CHF 1,000. Employees will be required to hold the Shares for a minimum period of four years. Pursuant to a ruling by the Swiss tax authorities, the discount on such Shares will not be subject to Swiss federal or cantonal 13

14 income taxes. Swisscom plans to recognize the 20% discount offered from the initial public offering price, representing a cost of approximately CHF 10 million, as a reduction to shareholder s equity in the six months ending December 31, 1998 under IAS. This accounting principle differs from U.S. GAAP which requires recognition of the discount as compensation expense in the statement of operations in this same period. The employee offering also includes Shares offered to employees pursuant to leveraged share ownership plans. Under the Leveraged Executive Asset Plan ( LEAP ), members of middle and upper management, including members of the Executive Board and the Board of Directors ( LEAP Participants ), are able to invest up to a certain amount to purchase Shares in the Global Offering at the initial public offering price and for each Share purchased will be entitled to receive, if the market price of a Share at the end of five years is equal to or greater than 101% of the initial public offering price, additional Shares with a market value equal to four times the amount of the increase over the initial public offering price. In addition, under a supplementary LEAP, members of the Executive Board and the Board of Directors will also be entitled to invest a further amount on less favorable terms. Under such supplementary plan, eligible participants will be entitled to receive for every two Shares purchased at the initial public offering price, if the price of a Share at the end of five years is equal to or greater than 126% of the initial public offering price, additional shares with a market value equal to three times the amount of the increase over 125% of the initial public offering price. Under the SuperShares Plan, all Swisscom employees (other than LEAP Participants) are entitled to invest CHF 1,000 to purchase Shares at the initial public offering price with substantially similar rights as Shares purchased under the LEAP, with the additional benefit that if the market price of a Share at the end of five years is equal to or less than the initial public offering price, the Shares purchased under the SuperShares Plan will be automatically resold to Swisscom at a price equal to the initial public offering price. Shares purchased pursuant to each of these Plans must be held for at least five years. See Management and Employees Incentive and Share Ownership Plans. Listings The Shares have been approved for listing on the Swiss Exchange under the symbol SCMN. The ADSs have been approved for listing, subject to notice of issuance, on the New York Stock Exchange under the symbol SCM. It is expected that the Shares will be included in the SMI of the Swiss Exchange 14 days following commencement of trading in the Shares, with an index weighting based on the free float of the Shares outstanding. See Nature of Swiss Trading Market General. Settlement The Shares are expected to be accepted for clearance through SEGA, Cedel Bank and Euroclear. The Shares sold in the Global Offering will be delivered into collective custody in Switzerland at SEGA. Shares may be credited at the option of investors either to the account of a Swiss bank with SEGA for the account of such investor or to the accounts of participants with Cedel Bank or Euroclear. Shares held by the Depositary referred to under Description of American Depositary Shares will be credited to the SEGA account of the custodian for the Depositary. The ADSs are expected to be eligible for clearance through the facilities of DTC. The SEGA security number (Valorennummer) for the Shares is 874,251, the ISIN for the Shares is CH , the Common Code Number (Cedel Bank and Euroclear) for the Shares is and the CUSIP number for the ADSs is

15 USE OF PROCEEDS The net proceeds to Swisscom from the Global Offering are estimated to be approximately CHF 2.4 billion, after deducting estimated expenses and underwriting discounts. Approximately CHF 2.05 billion of the net proceeds of the Global Offering will be used by Swisscom to repay indebtedness to the Swiss Post and the Federal Treasury. At September 30, 1998, Swisscom had outstanding indebtedness to the Post consisting of several unsecured loans in an aggregate principal amount of CHF 6.2 billion, which mature at various dates between June 30, 1999 and June 30, 2003 and bear interest at an average annual rate of 4.4%. At October 2, 1998, Swisscom had outstanding indebtedness to the Federal Treasury consisting of one short-term loan in an aggregate principal amount of CHF 500 million. Pending such application, a portion of such net proceeds may be deposited in banks or invested in short term, high quality debt obligations. The remaining approximately CHF 350 million of net proceeds will be available for general corporate purposes. Swisscom will not receive any of the proceeds from the sale of Shares by the Confederation. DIVIDEND POLICY The distribution of dividends proposed by the Board of Directors of Swisscom requires the approval of the shareholders of Swisscom in a general shareholders meeting. In addition, Swisscom s statutory auditors are required to declare that the dividend proposal of the Board of Directors is in accordance with Swiss law. It is expected that the shareholders meeting to approve any dividends will be held in the second quarter of each year. Dividends, to the extent approved at the shareholders meeting, will be paid shortly thereafter. See Description of Shares Net Profit and Dividends. The distribution of dividends will be dependent upon Swisscom s earnings, its financial condition, the condition of the markets and the general economic climate, and other factors, including cash requirements, business prospects, and tax, regulatory and other legal considerations. Swisscom will also take into account the dividend payment practices of other major Swiss companies and international telecommunications operators. Although Swisscom expects to pay annual dividends to its shareholders, there can be no assurance that any dividend will actually be paid, nor can there be any assurance as to the amount which will be paid in any given year. Subject to these constraints, and in the absence of unforeseen developments, the Board of Directors expects to propose to shareholders that a dividend of CHF 11 per Share (equal to a total of approximately CHF 800 million) be paid in 1999 in respect of It is expected that this dividend will be distributed and paid soon after its approval by the shareholders in the second quarter of In respect of future years, and subject to the constraints set forth above, Swisscom has set as a target an annual dividend pay-out ratio of approximately 50% of net income. Owners of ADSs will be entitled to receive dividends, if any, payable in respect of the underlying Shares. Cash dividends will be paid to the Depositary in Swiss francs. The Deposit Agreement provides that the Depositary will convert cash dividends received by the Depositary to U.S. dollars and, after deduction or upon payment of the fees and expenses of the Depositary relating to such conversion, make payment to the holders of ADSs in U.S. dollars. See Description of American Depositary Shares Dividends, Other Distributions and Rights. Fluctuations in the exchange rate between the Swiss franc and the U.S. dollar will affect the U.S. dollar amounts received by holders of ADSs on the conversion by the Depositary into U.S. dollars of such cash dividends. See Exchange Rate Information. Dividends paid to holders of Shares and ADSs will be subject to Swiss withholding tax. See Taxation. 15