pay-time Dividends of CHF 861 mm Share buyback of CHF~2,000 mm Equity Free Cashflow of CHF 2,913 mm 2003 results, conference call 24 March 2004 1
pay-time Time division for this conference call: Part I [presented] The essentials & key messages Part II [not presented] Supporting background information 2
pay-time Part I The essentials & key messages Content 1. Time to Summarize 2003 Jens Alder, CEO Slide 4 2. Time to Pay Jens Alder, CEO 9 3. Time to Analyse Ueli Dietiker, CFO 12 Jens Alder, CEO 4. Time to Look Forward 29 5. Time for Q&A 34 3
pay-time 2003 results, conference call 24 March 2004 4
Part I 1. Time to Summarize 2003 Strategic review A company committed to strong fundamentals and financial discipline Leading Telco in CH Intelligent investor Solid financial footing Successfully defending strong market position Focused on operating cost and staff reductions to sustain margins Larger investment only if acquisition criteria satisfied Smaller investment into innovative entryticket options Preserving strong balance sheet to optimize strategic flexibility Returning all equity free cash flow to shareholders. Every year Optimize free cash flow from core business Create balanced risk-reward growth path Combine strategic flexibility with generous yield What have we delivered? 5
Part I 1. Time to Summarize 2003 Profitable growth (in CHFmm) 15,000 12,500 10,000 7,500 5,000 2,500 14,581 4,641 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 0,500 2,716 0,000 0,000 Net revenues EBITDA EBIT *) Adj. net CAPEX income **) *) EBIT before one-time items **) Net income calculations before large exceptional items, net of tax: 2000: before gains from sale of Cablecom / Tesion / D-Plus, gains from cross border lease transaction, gains from discontinuing operations 2001: before gains from sale of 25% stake in Swisscom Mobile to Vodafone, gains from sale of real estate, impairment charge debitel 2002: before impairment charge debitel 2003: before impairment charge debitel ***) Reported net income for 2003: CHF 1,569mm Improved profitability at stable revenues 2000 2001 2002 2003 1,769 ***) 1,213 6
Part I 1. Time to Summarize 2003 Adjusted earnings per share *) EPS on avg. number of outstanding shares prior to SBB 2002 EPS on avg. number of outstanding shares after SBB 2002 26.72 CHF 25 24.05 CHF 20 17.93 +34% 19.50 +37% 16.28 16.28 15.96 15.96 CHF 15 CHF 10 2000 2001 2002 2003 2000 2001 2002 2003 **) *) EPS before large exceptional items: for definition see footnote on previous page EPS after SBB 2002: calculated on avg. number of shares - 2000: 73.54mm, 2001: 73.54mm, 2002: 67.65mm, 2003: 66.20mm EPS before SBB 2002: calculated on avg. number of shares - 2000: 73.54mm, 2001: 73.54mm, 2002: 73.54mm, 2003: 73.54mm **) Reported EPS 2003: CHF 23.70 Very strong EPS growth, further stimulated through remaining accretion effect from 2002 share buy back 7
Part I 1. Time to Summarize 2003 Rock-solid balance sheet 25,000 Total shareholders' equity Other liabilities incl. minorities (in CHFmm) Interest bearing debt incl. leases 20,000 15,000 10,000 5,000 0,000 31.12.2001 31.12.2002 31.12.2003 Strategic flexibility intact: After shortening the balance sheet, among others by returning CHF 6.8 bln (~30% of balance sheet total!) to shareholders in less than 2 years, situation remains solid. Per 31.12.2003: net funds: CHF 1,5 bln equity ratio of 46% net interest coverage (EBITDA/net interest) at 80x multi-billion funding potential without loosing strong credit rating Balance sheet strength allowing for generous payout to shareholders 8
pay-time 2003 results, conference call 24 March 2004 9
Part I 2. Time to Pay EFCF jumps Definition of EFCF 2002 (in CHF mm) 2003 (in CHF mm) Remarks + EBITDA - CAPEX +/- working cap. - tax (cash) - net interest + dividends received - minorities = FCF from ops. - net acquisitions/divestm. + 4,413-1,222-22 - 537-78 + 9-304 = 2,259-140 + 4,641-1,213 + 75-73 - 58 + 147-393 = 3,126 + 537 highest EBITDA since IPO effective taxes paid are exceptionally low extra dividend from CT largely proceeds from sale Cesky Telecom (CT) - debt repayments (net) = - 1,000-750 no more outstanding interestbearing debt left EFCF available to shareholders in t+1 + 1,119 + 2,913 EFCF available to shareholders represents almost 2 x reported Net Income 10
Part I 2. Time to Pay Payout to shareholders doubles Return policy 2002 2003 Remarks (in CHF mm) (in CHF mm) EFCF available to shareholders in t+1 + 1,119 + 2,913 Return through: Size: Dividend + 794 + Par Value reduction + 530 + = Total pay out to shareholders + 1,324 Size: + 861 Share buyback 0 + ~2,000 + 0 + ~2,861 CHF 13/share compares to CHF 12/share for 2002, and represents 48.7% of adjusted net income. Dividends will be paid on April 30, 2004 CHF 2 bln share buyback program initiated through buying at market ( 2. Trading Line ) Striving to complete the return of these funds in 2004 Effective payout ratio on adjusted net income of 162%, representing a yield of approx. 10% on Swisscom s current market capitalization 11
pay-time 2003 results, conference call 24 March 2004 12
Part I 3. Time to Analyse Share buyback - overview SBB amount Methodology Key arguments Price Timing Government Capital reduction CHF ~2 billion SBB at market (2 nd trading line) most efficient way to maximise earnings accretion a slight premium compared to market price start: after general assembly 04, i.e. at the beginning of May 04; completion: targeted by YE 04 intends to participate the purchased number of shares are earmarked for deletion after the approval of the AGM 2005 13
Part I 3. Time to Analyse Share buyback - taxes Swiss private investor Swiss institutional investor Foreign investor Withholding tax 35% of purchase price minus nominal value of CHF 1/share fully reclaimable 35% of purchase price minus nominal value of CHF 1/share fully reclaimable 35% of purchase price minus nominal value of CHF 1/share bilateral tax treaty determines what can be reclaimed Income tax on purchase price minus nominal value of CHF 1/share on purchase price minus investor s book value depending on local tax law 14
Part I 3. Time to Analyse Wireline business improved financial margins Key financials Fixnet (in CHF mm) 2003 change YOY Net revenue 1 5,846 (6.6)% EBITDA 2,075 10.7% EBITDA margin 35.5% EBIT 992 21.1% CAPEX 583 (0.3)% Number of FTE's 7,657 (4.4)% Key financials Enterprise Solutions (in CHF mm) 2003 change YOY Net revenue 1 1,371 (9.9)% EBITDA 134 38.1% EBITDA margin 9.8% EBIT 101 55.4% CAPEX 13 (43.5)% Number of FTE's 1,117 (20.8)% 1 including intersegment revenue Key achievements Fixnet Strong EBITDA margin improvement (29.9% to 35.5%) Stabilised overall market share and increased international and F2M minutes Reduced FTE s by -4.4% and OPEX by -14.1% CAPEX flat YOY, continued investment in future OPEX reductions (TDM platform reduction) 487k DSL activations: up 292k YOY Focus on higher margin revenue and cost control pays off 15
Part I 3. Time to Analyse a) Access 1) Shift from narrow to broadband 2) 55k lines lost due to mobile substitution and 25k due to sale of TFL (Liechtenstein) 3) Proportion of access revenues from PSTN and ISDN shifting swiftly: 93% in 02 vs. 87% in 03 4) ADSL - both wholesale and retail growing rapidly 5) Bluewin still by far the largest ISP and with a market share in ADSL access of approx. 57% 6) Access revenues growing partially at expense of traffic revenues PSTN ISDN ADSL Wholesale ADSL Bluewin Narrowband Bluewin Total Lines -2.4% +1.4% +148% +152% -10.8% Weighted avg. price +2.8% -0.2% +3.5% +15% -6.6% Revenues +0.3% +1.2% +155% +190% -16.7% +8.5% Access revenues: CHF 1,715mm (+8.5% YOY) 16
Part I 3. Time to Analyse b) Local and DLD traffic (FX+ES) 1) Estimated total relevant market down 4.8% YOY largely through mobile substitution and direct access in segment ES 2) Avg. market share (excl. surf traffic) down 2-%points YOY to 67% (partially caused by introduction of local CPS in May 2002) 3) Swisscom volume hence back by 7.8% YOY to 8,9 bln minutes 4) Effective tariff flat Swisscom revenues 1) Market volume (excl. surf traffic) 100 75 50 2) Market share (excl. surf traffic) National traffic revenues excl. surf traffic: CHF 555mm (-7.5% YOY) incl. surf: CHF 603mm (-12.1% YOY) 4) Tariff = Index 2002 = Index 2003 3) Swisscom volume 17
Part I 3. Time to Analyse c) International traffic (FX+ES) 1) Estimated total relevant market down 0.5% YOY 2) Avg. market share down 1.8-1) Market volume 100 %points YOY to 52% 3) Swisscom volume hence down 3.8%: 100 (99.5 x 52/53.8) = 3.8% Swisscom revenues 75 2) Market share 4) Effective prices slightly higher 50 due to larger proportion of volumes into higher tariff countries. Effect on weighted price +3.5% 4) Tariff 3) Swisscom volume Int l traffic revenues: CHF 306mm (-0.3% YOY) = Index 2002 = Index 2003 18
Part I 3. Time to Analyse d) F2M traffic (FX+ES) 1) Total market up 1% YOY through higher penetration Mobile 1) Market volume 100 2) Avg. market share up 0.5- %points YOY to 64% 3) Swisscom volume hence up Swisscom revenues 75 2) Market share 1.5% 4) Avg. tariff 2% lower 50 4) Tariff 3) Swisscom volume F2M traffic revenues: CHF 600mm (-0.7% YOY) = Index 2002 = Index 2003 19
Part I 3. Time to Analyse e) Internet dialup traffic (bluewin / 0840) 1) Total market down 16% YOY entirely through substitution by ADSL 2) Avg. market share unknown, but if assumed that traffic share is same as narrow band subscriber share, then this should be stable at around 47% 3) Swisscom volume hence down 16% YOY 4) Effective rate 2% higher due to different composition of Freeway and Highway customers (resp. with and without subscription) Swisscom revenues 4) Tariff 1) Market volume 100 75 50 25 0 3) Swisscom volume 2) Market share Dialup traffic revenues: CHF 162mm (-14.3% YOY) = Index 2002 = Index 2003 20
Part I 3. Time to Analyse f) Wholesale business (FX) 1) National volume almost unchanged 2) Int l volume down by 25% YOY, mainly due to closed hotspots in Europe and sale of US business (end 2002) 3) Regulated national wholesale prices (calculated on LRIC) for Swisscom revenues 1) National volume 100 75 50 25 0 2) Int l volume 2003 down by ~10% YOY 4) Avg. int l wholesale prices 13% lower Wholesale revenues: CHF 755mm (-24.8% YOY) 4) Avg. int l tariff = Index 2002 = Index 2003 3) Avg. national tariff 21
Part I 3. Time to Analyse f) Other wireline revenues (excl. intersegment) Fixnet: -12.6% to CHF 907mm (payphones, operator services, card services, VAS, directories, CPE, surf traffic) Enterprise Solutions: -6.5% to CHF 759mm (corporate LL, Intranet, Infonet CH, private Networks, Inhouse and Processes) Other revenues: CHF 1,666mm (-9.9% YOY) 22
Part I 3. Time to Analyse Wireline business - cost control OPEX Fixnet OPEX Enterprise Solutions 5) Total 1) Goods and services purchased 100 90 80 70 60 50 2) Personnel expenses 5) Total 1) Goods and services purchased 100 90 80 70 60 50 2) Personnel expenses 4) Intersegment OPEX, net 3) Other OPEX 4) Intersegment OPEX, net 3) Other OPEX OPEX: CHF 3,771mm (-14.1% YOY) OPEX: CHF 1,237mm (-13.2% YOY) = Index 2002 = Index 2003 23
Part I 3. Time to Analyse Wireless business - stable financial results Key financials Mobile in CHF mm 2003 1 including intersegment revenue change YoY Subscribers (thousand) 3,796 5.3% ARPU (CHF/month) 81 (4.7)% Net revenue 1 4,140 0.7% EBITDA 1,984 0.5% EBITDA margin 47.9% EBIT 1,674 (0.7)% CAPEX 431 9.9% Number of FTE's 2,418 2.5% Key achievements Mobile Slightly higher revenues at CHF 4,1bln EBITDA margin at robust 48% Stabilised overall market share at close to 65% Right grading, lower usage and price pressure (esp. in the business segment) cause ARPU to decrease to CHF 81 YTD CAPEX +10%, mainly resulting from UMTS and WLAN rollout Vodafone Live! launched (13.11.2003), >100k registered subs at March 2004 Robust EBITDA, successfully defending market position backed by superior network quality and innovative products 24
Part I 3. Time to Analyse Mobile revenue analysis *) Penetration 1) Swiss penetration up to 82% from 76% year earlier 2) Market share at 64% 3) AMPU down from 126 to 121 minutes 4) Avg. price per minute voice almost flat YOY 5) SMS traffic up 15% YOY 6) Avg. price per SMS flat 7) Avg. subscription fee (postpaid) slightly down YOY due to right-grading Total external revenues ( 02=100%) Subscription fees postpaid ( 02=100%) 7) 8) 110% 90% 70% 50% 30% 6) 4) Price per SMS ( 02=100%) 1) 2) Market share 3) AMPU ( 02=100%) Avg. voice price per minute ( 02=100%) Total external revenues: CHF 3,434 mm (+1.8% YOY) *) data partially based on market research and estimates 5) SMS usage ( 02=100%) = Index 2002 = Index 2003 25
Part I 3. Time to Analyse Wireless business - OPEX overview 1) Goods and services purchased increased by 6% mainly due to an increase in number and price 1) Goods and services purchased of purchased handsets 100 2) Personnel costs up 10% (+60 FTE s, ~2% salary increase and change in mix of workforce) 3) Other OPEX flat despite the service fee paid to Vodafone 5) Total 75 50 25 0 2) Personnel expenses 4) SAC at CHF 181mm reduced by 15%, SRC grew by CHF 26mm to CHF 167mm mainly because the number of retention offers went 5) Intersegment OPEX, net 3) Other operating expenses, net up by 124k to 682k Operating expenses: CHF 2,156mm (+0.8% YOY) 4) SAC and SRC = Index 2002 = Index 2003 26
Part I 3. Time to Analyse Other businesses debitel - revenues up 10.8% YOY to CHF 4,555mm (+6.5% in EUR), backed by 571k new subscribers (mainly postpaid) in Germany. EBITDA margin of 3.0% Swisscom Systems - restructuring program progressing as planned. 510 FTE s reduced in 2003 to 1,057 FTE s per YE Swisscom IT Services- restructuring steps led to extra costs and a lower operating result in 2003. Planned reduction of workforce by YE 2004: -300 FTE s Billag - revenues 2003 flat YOY, doubling in 2004 thanks to acquisition of T-Systems Card Services as per YE 2003 SIMAG (real estate company) - restructuring announced, leading to 14% reduction of workforce by YE 2004 (-55 FTE s). Related charges taken in 2003 Swisscom Eurospot - secured prime position in Europe s P-WLAN business within 1 year: 2,000 contracted hotspots in 10 countries, of which 750 operational (March 2004) operational hotspots are equipped with over 9,000 access points additional coverage through roaming (~1,100 locations) 27
Part I 3. Time to Analyse Key figures and financial highlights Key figures Swisscom Group Net revenue 14,581 0.4% EBITDA 4,641 5.2% EBIT 1 2,716 59.2% Net Income 1,569 90.4% reported EPS * 23.70 94.6% CAPEX 1,213 (0.7)% EFCF 2,913 160.3% Net funds 1,492 n.m. FTE 2 19,207 (6.2)% 1 before impairment charge debitel 2 excluding WORK_LINK * avg. number of outstanding shares in 2003: 66.2 mm avg. number of outstanding shares in 2002: 67.6 mm Highlights revenues overall flat YOY: increases from debitel and wireline access charges (esp. DSL) decreases from sold int l WS businesses and new accounting method for VAS lower wireline traffic EBITDA increased by 5% thanks to cost control, esp. consulting, maintenance, staff Net income and EPS almost double YOY EFCF at CHF 2.9 bln (up by 160% YOY) Interest bearing debt (excl. lease obligations) repaid Operational focus pays out 28
pay-time 2003 results, conference call 24 March 2004 29
Part I 4. Time to Look Forward Regulation: update Wireline LRIC: ComCom (6 November 2003) requiring to reduce IC prices in favour of 2 competitors by 25-35% retroactively for the years 2000-2003; final decision of Swiss Federal Court outstanding ULL: no final resolution to be expected until 2005/2006 Access Reselling: obligation to offer access reselling is verified by Swiss Competition Commission Wireless Termination tariffsand SMS: are non-regulated tariffs, but are verified by Swiss Competition Commission Handling regulatory pressure remains core competence 30
Part I 4. Time to Look Forward Potential sale debitel debitel represents a financial investment Swisscom is currently in discussions for a potential sale debitel sbook value in 2003 further reduced by impairment charge of CHF 280mm, and stands at CHF 848mm as per year-end 2003 (of which CHF 710mm goodwill) Cumulative Translation Adjustments of CHF 221mm (non-cash) to be expected in 2004 accounts Cash proceeds from a potential sale would add to the EFCF of 2004 31
Part I 4. Time to Look Forward Telekom Austria Fact: it appears that ÖIAG (representing the Austrian government as single largest shareholder of Telekom Austria) would prefer to sell its stake in the open market and not in a block trade to a strategic investor Opinion: Swisscom regrets that a deal with ÖIAG does not seem to be possible under current circumstances Swisscom confirms it is still interested in a partnership with Telekom Austria Swisscom is of the opinion that a deal could make sense: it would represent an option to optimise the capital structure through an industrial deal it would bring an option for further expansion (e.g. in mobile operations in Eastern Europe) Telekom Austria would have a competent and stable majority partner with similar strategic views in a consolidating telecommunication environment 32
Part I 4. Time to Look Forward Summary and Outlook Summary 2003 EBITDA of CHF 4,6 bln - strongest since IPO EPS doubled and EFCF jumped by 160% Core competence is and will be further efficiency improvements Dividend payment improved by 8.3% YOY and SBB of CHF 2 bln Outlook full year 2004 excl. debitel Net revenue flat at CHF 10bln EBITDA of approx. CHF 4,3bln CAPEX at around CHF 1,3bln 33
pay-time 2003 results, conference call 24 March 2004 34
Part I 5. Time for Q&A Thank you for your attention! Questions & Answers Please also refer to separate background slides detailing the presentation of the key messages For further information, please contact: Phone : +41 31 342 6410 Fax : +41 31 342 6411 Email : investor.relations@swisscom.com Homepage : www.swisscom.com/ir 35
pay-time Part II Supporting background information Content Slide 1. Wireline business 2. Wireless business 3. Regulation 37 40 41 4. Group financials 42 36
Part II 1. Wireline business Fixnet revenues and EBITDA 4,888 (8) (118) 4,762 (143) (113) 72 4,578 (56) (1.7)% (136) 134 (22) 4,498 (in CHFmm) 10.7% 2,075 1,874 1,874 Rep. ext. Rev. FY 02 VAS, bus. numbers - transfer to ES WS, direct link - transfer to Mobile Rest. ext. Rev. FY 02 VAS, netting - new reporting practice Int'l WS operations - halted in Europe - sold in US Release of deferred Rev. + phonecards Comp. ext. Rev. FY 02 Retail traffic + F2M/ Int. - Local CPS - Surf effect - Dial-up WS traffic, net - LRIC prices Access fees + ADSL (90%) + ISDN (10%) Other + Terminals + Directories - OPS / PPS - Leased Lines Rep. ext. Rev. FY 03 = net revenue = restatements = exceptional effects = revenue changes = EBITDA 37
Part II 1. Wireline business Fixnet leading Swiss broadband provider (in thousand) Active ADSL subs, cumulative 500 400 300 250 200 195 110 86 150% 317 140 100 109 140 177 0 487 383 213 167 274 216 31.12.02 31.3.03 30.6.03 30.9.03 31.12.03 (in CHF mm) 75 50 25 0 Broadband revenues, per quarter 26 12 14 34 15 19 154% 44 19 25 22 31 29 37 Q4 02 Q1 03 Q2 03 Q3 03 Q4 03 5 3 66 Bluewin Other ISP's Bluewin Wholesale 38
Part II 1. Wireline business Enterprise Solutions revenues and EBITDA (8.2)% 1,365 8 1,373 (58) (20) (32) (2) 1,261 (in CHFmm) 97 38.1% 134 Rep. ext. Rev. FY 02 VAS, bus. Numbers Rest. ext. Rev. FY 02 Traffic Inhouse & Processes Networking Other Rep. ext. Rev. FY 03 + transfer from Fixnet = net revenue = restatements = exceptional effects = revenue changes = EBITDA 39
Part II 2. Wireless business Mobile revenues and EBITDA 2.6% 118 3,373 (48) 23 3,348 63 16 (13) 20 3,434 3,255 0.5% (in CHFmm) 1,974 1,974 1,984 Rep. ext. Rev. FY 02 WS, direct link + transfer from Fixnet Rest. ext. Rev. FY 02 VAS, netting - new reporting practice Release of deferred Rev. Comp. ext. Rev. FY 02 Voice Data and VAS Base fees Other Rep. ext. Rev. FY 03 = net revenue = restatements = exceptional effects = revenue changes = EBITDA 40
Part II 3. Regulation Current framework Universal service provision Interconnection 2003-2008 licence Reference interconnection offer Non-discrimination Cost orientation Transparency Access Voice Directories Payphones Carrier selection Number portability No ULL Ex-post IC regulation Most (but not all) issues comply with standard EU practice 41
Part II 4. Group financials Solid operating performance... EBITDA and margins Per employee ratios 1 in CHF mm 4,950 4,750 4,550 4,350 4,150 3,950 28.7% 4,034 31.1% 30.4% 31.8% 4,409 4,413 4,641 35% 30% 25% 20% 15% in CHF thousand 1000 900 800 700 600 500 196 637 207 665 216 710 242 759 250 225 200 175 150 125 in CHF thousand 3,750 2000 2001 2002 2003 EBITDA EBITDA margin 10% 400 100 2000 2001 2002 2003 Revenue per FTE employee at end of period EBITDA per FTE employee at end of period 1 FTE employee numbers at end of period: 20,604 (2000), 21,328 (2001), 20,470 (2002) and 19,207 (2003) 42
Part II 4. Group financials... and ongoing healthy balance sheet Net debt and net debt/ebitda Book leverage and equity ratio in CHF mm 3000 2000 1000 0-1000 -2000-3000 -4000 2,891 0.72 642 0.15-0.32-0.66-1,492-2,899 2000 2001 2002 2003 1.5 1.0 0.5 0.0-0.5-1.0-1.5 70% 60% 50% 40% 30% 20% 10% 0% -10% -20% -30% 49.6% 38.9% 43.0% 46.4% 33.7% 8.8% -24.0% -19.5% 2000 2001 2002 2003 55.0% 40.0% 25.0% 10.0% -5.0% -20.0% Net debt Net debt to EBITDA (x) Book leverage Equity ratio Book leverage = net debt / shareholders equity Equity ratio = shareholders equity / total assets 43
Part II 4. Group financials Key figures 2003 per quarter 4,000 3,500 3,000 2,500 Avg. 03: 3,645 (in CHF mm) 2,000 1,500 1,000 0,500 Avg. 03: 1,160 Avg. 03: 679 Avg. 03: 392 Avg. 03: 303 Avg. 03: 728 0,000 Net revenue EBITDA EBIT *) Net income **) CAPEX EFCF Q1 03 Q2 03 Q3 03 Q4 03 Avg. 02 Avg. 03 *) before impairment charge debitel, **) reported net income 44
Part II 4. Group financials Group revenues and EBITDA 1.8% 14,526 (191) (113) 95 14,317 (68) 86 (124) 444 (72) (2) 14,581 (in CHF mm) 4,413 4,413 5.2% 4,641 Rep. ext. Rev. FY 02 VAS, netting Int'l WS business Release of deferred Rev. Comp. ext. Rev. FY 02 Fixnet Mobile Enterprise Solutions debitel Other Corporate Rep. ext. Rev. FY 03 = net revenue = exceptional effects = revenue changes = EBITDA 45
Part II 4. Group financials Group OPEX overview (in CHF mm) Goods and services purchased 4,959 4,834 Personnel expenses Other operating expenses 2,593 2,535 2,827 2,827 Depreciation 1,578 1,564 Amortisation 427 361 FY 2003 FY 2002 46
Part II 4. Group financials Headcount development 20000 21,946 21,777 20,604 21,328 19,254 17,459 17,784 20,470 1 17,171 1 19,207 16,084 1 15000 10000 5000 0 1998 1999 2000 2001 2002 2003 Swisscom incl. debitel Swisscom excl. debitel * All numbers exclude employees of WORK_LINK 1 The number of FTE employees at the year end 2001 includes 493 employees of AGI which were integrated as per 31.12.2001 47
Part II 4. Group financials Costs related to workforce reduction (I) (in CHF mm) EBITDA 31.12.2002 31.12.2003 rest. charge EBITDAr * EBITDA rest. charge EBITDAr * Fixnet 1,874 86 1,960 2,075 63 2,138 Enterprise Solutions 97 10 107 134 41 175 Mobile 1,974 0 1,974 1,984 0 1,984 debitel 159 0 159 137 0 137 Other 111 101 212 156 48 204 Corporate, net 198 (79) 119 155 3 158 Corporate 14 42 Elimination (119) (106) WORK_LINK, total exp., net 26 67 Group 4,413 118 4,531 4,641 155 4,796 * EBITDAr = EBITDA before restructuring charges 48
Part II 4. Group financials Costs related to workforce reduction (II) (in CHF mm) Q1 02 Q2 02 Q3 02 Q4 02 FY 02 Q1 03 Q2 03 Q3 03 Q4 03 FY 03 Fixnet 2 60 11 13 86 42 6 5 10 63 Enterprise Solutions 2 7-1 10 31 1-9 41 Mobile - - - - - - - - - - debitel - - - - - - - - - - Other 1 3 12 85 101 1 3-44 48 Swisscom IT Services AG 1 2 12 4 19 1 3-44 48 Swisscom Systems AG - 1-81 82 - - - - Corporate net, excl. Work_Link (17) (19) (9) (60) (105) (44) (6) 6 (20) (64) Corporate 1 8 2 3 14 4 2 8 28 42 Elimination (18) (27) (11) (63) (119) (48) (8) (2) (48) (106) Termination benefits (12) 51 14 39 92 30 4 11 43 88 WORK_LINK, total exp., net 5 5 4 12 26 7 8 36 16 67 Group (7) 56 18 51 118 37 12 47 59 155 49
Part II 4. Group financials Impairment of debitel goodwill, under IFRS (in CHF mm) Equity Goodwill Book value Value of debitel as per 31.12.2002 125 1,077 1,202 Amortization of goodwill (172) (172) Impairment of goodwill (280) (280) Other adjustments, net 13 *) 85 98 **) Value of debitel [93%] as per 31.12.2003 138 710 848 *) currency translation adjustment of CHF 77mm and acquisition of CHF 8mm **) per share book value of debitel as per 31.12.2003: EUR 6.56 (YE 2002: EUR 10) 50
Part II 4. Group financials Overview of income tax payments P+L Statement 1998 1999 2000 2001 2002 2003 Current income tax expense 409 317 439 499 123 241 Deferred income tax (benefit) expense (90) 218 201 (514) 238 259 Total income tax expense 319 535 640 (15) 361 500 CF Statement Income taxes paid 26 135 398 678 537 73 Balance Sheet Current tax liabilities, net 225 457 519 359-57 120 Difference between current and paid income taxes 383 182 41-179 -414 168 51
Part II 4. Group financials Group income statement (in CHF mm) 31.12.2002 31.12.2003 change YOY EBITDA 4,413 4,641 5.2% Depreciation 1,578 1,564-0.9% Amortisation of other intangible assets 124 148 19.4% Amortisation of goodwill 303 213-29.7% Impairment of goodwill 702 280 EBIT 1,706 2,436 42.8% Net financial result (311) (14) -95.5% Income tax expense (361) (500) 38.5% Equity in net income of affiliated companies 95 (7) -107.4% Minority interest (305) (346) 13.4% Net income 824 1,569 90.4% Avg. number of shares outstanding (in thousands) 67,648 66,200-3.0% EPS (in CHF) 12.18 23.70 94.6% 52
Part II 4. Group financials Adjusted net income (in CHF mm) 2001 2002 2003 Net income 4,964 824 1,569 Impairment of debitel goodwill 1,130 702 280 Gain on sale of real estate portfolios (568) Gain on partial sale of Swisscom Mobile (3,837) Tax effect on one-time items, net (515) (207) (80) Adjusted net income 1,174 1,319 1,769 Avg. number of shares (in mm) 73.55 67.65 66.20 Adjusted EPS (in CHF) 15.96 19.50 26.72 53
Part II 4. Group financials CAPEX analysis CAPEX development for group without debitel CAPEX 2003 in CHF mm 2500 2000 1500 1000 500 0 13.8% 11.2% 11.5% 11.6% 1,391 1,168 1,154 1,165 2000 2001 2002 2003 CAPEX CAPEX/net revenue 15% 13% 10% 8% 5% 3% 0% in CHF mm 1250 1000 750 500 250 0 1,213 8.3% total group 1,165 11.6% group excl. debitel 10.0% 583 Fixnet 10.4% 431 Mobile CAPEX CAPEX/net revenue CAPEX/revenue incl. intersegment 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 54
Part II 4. Group financials Change of net debt /net funds (in CHF mm) Net cash provided by operating activities 4,732 Net debt 31.12.02 642 (1,213) CAPEX (794) Dividends Par value reduction (530) (393) Dividends paid to minorities Proceeds from CT sale 510 Other (178) Net funds 31.12.03 1,492 55
Part II 4. Group financials Group capital structure (in CHF mm) 31.12.2002 Short term debt 1,016 Long term debt (esp. cross border tax lease) 1,505 Long term net finance lease obligation 1,192 Total interesting-bearing debts 3,713 Less: financial assets from lease-and-leaseback transactions (1,104) Less: cash, cash equivalents and current financial assets (1,967) Net debt / (net funds) 642 Shareholders equity 7,299 Balance sheet total 16,958 Book leverage ¹ 8.8% Equity ratio ² 43.0% 1 Book leverage = net debt / shareholders equity, 2 Equity ratio = shareholders equity / total assets 31.12.2003 576 1,374 1,070 3,020 (1,011) (3,501) (1,492) 7,669 16,540 (19.5)% 46.4% 56
Part II 4. Group financials Distributable reserves as per YE 2003 (in CHF mm) Shareholders' equity Swisscom AG Share capital nondistributable reserves distributable reserves 31.12.2002 before 2002 profit distribution 5,216 596 119 4,501 Dividend in 2003 (794) (794) PVR paid in 2003 (530) (530) (106) 106 Net income under Swiss GAAP 1,154 1,154 31.12.2003 before 2003 profit distribution 5,046 66 13 4,967 Dividend in 2004 (861) (861) Share buyback in 2004 (2,000) (2,000) After 2003 profit distribution, before 2004 profits 2,185 66 13 2,106 57
Cautionary statement regarding forward-looking statements This communication contains statements that constitute "forward-looking statements". In this communication, 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 past and future filings and reports filed with SWX Swiss Exchange and the U.S. Securities and Exchange Commission and posted on our 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. 2003 results, conference call 24 March 2004 58