Swiss telecommunication services firm Swisscom AG (SCMWY.PK) Wednesday said expects a charge of 1.2 billion Swiss francs or $1.3 billion in 2011, resulting from impairment of its Italian fixedline subsidiary Fastweb SpA due to difficult economic situation and reduced growth prospects in Italy. However, cash flow and dividends to shareholders would not be adversely affected by this impairment, the company stated.
Swisscom noted that impairment test now values Fastweb at around 1.3 billion euros below its book value of net assets and the total burden on full year, after tax would be 1.2 billion Swiss francs. In 2010, Swisscom recorded a net income of 1.8 billion francs.
Swisscom has purchased Fastweb in 2007 for 4.6 billion Swiss francs. Following an initial growth phase, Fastweb has come under pressure in the last few quarters. In addition, the business was impacted by difficult economic environment in Italy due to the financial and sovereign debt crisis, an increasing saturation of the broadband market and very intensive price competition since the market entry of new providers. Fastweb developed positively since the acquisition and in 2010, the company's revenues increased by roughly 50 percent to 1.9 billion euros.
In addition, the company said the impairment would have no impact on the level of capital expenditures in Switzerland. However, the massive collapse of the euro would have various additional financial implications, Swisscom said. Subsequent to reduced revenues in the first two years, the company reduced its average annual revenue growth to 2.5% from 5.1% in the prior year.
Swisscom also said it will propose an increase in dividends by 1 francs to 22 francs per share at its upcoming annual general meeting.
In Zurich, Swisscom shares are currently trading at 346 francs, up 0.23 percent, on a volume of 91 thousand shares.
In US, SCMWY.PK closed Tuesday's regular trading at $35.76.
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