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Swisscom FY Net Profit Down; Proposes Flat Dividend

Swiss telecommunication services firm Swisscom AG (SWZCF.PK,SCMWY.PK) reported that its net profit for fiscal year 2018 was 1.521 billion Swiss francs, down 3.0% from last year.

Consolidated operating income before depreciation and amortisation (EBITDA) totaled 4.213 billion francs, 1.9% below that of the previous year. This included exchange rate developments and a number of non-recurring items. In the previous year, Fastweb had received 102 million francs in income from legal proceedings, while Swisscom's results had been affected by the formation of provisions for restructuring measures.

Furthermore, in the 2018 reporting year, EBITDA was impacted by new requirements governing the revenue recognition of customer contracts (IFRS 15). After adjustment, the decline in Swisscom's EBITDA was 0.8%. EBITDA excluding non-recurring items fell by 3.9% on thecore Swiss market, while that of Fastweb increased by 5.6%.

At 11.714 billion francs, Group revenue was stable at the prior-year level (+0.4%). In its saturated Swiss core usiness, Swisscom generated revenue of 8.817 billion francs, down 2.7%. The 242 million francs decline in revenue from telecommunications services can be largely attributed to persistent price pressure in various segments and to the downward trend in fixed-line telephony. Business in Italy developed positively - Fastweb reported revenue growth of EUR 160 million (+8.2%).

"In the current year, we aim to further consolidate our market position with attractive offers such as inOne mobile go with integrated roaming in the EU. The quality of our networks and our customer service remain important cornerstones of our success. In addition to this, we are driving forward our company's transformation and rigorously continuing to pursue our cost targets," said CEO Urs Schaeppi.

For 2019, Swisscom expects net revenue of around 11.4 billion francs, EBITDA of over 4.3 billion francs and capital expenditure of around 2.3 billion francs. The outlook for EBITDA is influenced by a new accounting standard for leasing (IFRS 16). From 2019 onwards, rental and leasing costs in the income statement will not be reported in EBITDA, which will raise this figure by some 200 million francs.

Subject to achieving its targets, Swisscom will propose payment of an unchanged, attractive dividend of 22 francs per share for the 2019 financial year at the 2020 Annual General Meeting.

As already announced, Swisscom aims to continue to reduce its cost base after 2018, by some 100 million francs annually in 2019 and 2020. The company aims to continue to realize savings mainly by simplifying work processes, using more reasonably priced systems and reducing the number of vacancies in divisions with declining business. In contrast, newjobs will generally be created in growth areas such as the cloud or security.

Swisscom said it expects vacancies in Switzerland to decline slightly in 2019, depending on market development. By means of long-term planning, Swisscom aims to continue to cushion the reduction in headcount through natural fluctuation and retirements as much as possible, or to find alternative solutions.

Swisscom said it pays special attention to employees' training and education. The collective employment agreement concluded in 2018 addresses this point by allowing every employee five training days. The goal is to maintain and strengthen the employability of Swisscom employees. As in the past, Swisscom is also firmly committed to the training of apprentices and will be making 960 apprenticeships available in 2019.

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