2nd UPDATE:Swisscom Confident Of Dividend But Misses Targets
August 04 2010 - 4:55AM
Dow Jones News
Swisscom AG (SCMN.VX) Wednesday kept investor hopes for a hefty
dividend alive as it posted strong cash flow despite missing
second-quarter sales and net profit expectations.
The Bern-based telecommunications company said it generated
CHF1.42 billion in operating free cash flow in the first six
months, giving investors confidence the company is on track to meet
its full-year goal of CHF2.6 billion and maintain its reputation
for strong shareholder payouts at the year end.
Swisscom also maintained its full-year outlook for sales of 9.15
billion Swiss francs ($8.8 billion) excluding Italian broadband
unit Fastweb SpA (FWB.MI), earnings before interest, depreciation
and amortization of CHF3.75 billion, and capital expenditure of
roughly CHF1.3 billion.
Still, second-quarter net profit missed analysts' expectations
falling 7% to CHF493 million from the year earlier period, while
revenue fell 0.3% to CHF2.99 billion as Italian broadband unit
Fastweb SpA (FWB.MI) contributed lower sales.
Swisscom made a CHF100 million provision in the first-quarter
for Fastweb after prosecutors placed its head Stefano Parisi under
investigation for alleged tax fraud. Parisi voluntarily suspended
himself in April, as part of an agreement with prosecutors to avoid
placing the company under court administration.
Fastweb's chairman and Swisscom CEO Schloter is standing in as
CEO of the Italian unit while the investigation is under way.
Swisscom shares, which have shed 1.7% so far this year amid a
6.9% drop in the Stoxx Telecom index, fell in early trading. At
0854 GMT, the stock was CHF6.20 lower, or down 1.6%, at CHF388.90,
amid a 0.9% fall in the sector index.
But analysts lauded Swisscom's strong figures from its home
country of Switzerland, where it faces competition and
liberalization, as well as the favorable cash flow which was helped
by seasonally lower spending.
Swisscom, which is majority-owned by the Swiss government, has
seen increasing competition in recent years as international brands
such as France Telecom SA's (FTE) Orange and Danish TDC AS's
(TDC.KO) Sunrise enter the Swiss market.
"There was no strong trigger but the quality of the Swiss
business is strong and is clearly compensating the more volatile
Italian business and the actual currency risks," Bank Vontobel
analyst Serge Rotzer said. He rates the stock at hold with a CHF405
target price.
The free cash flow goal doesn't account for costs Swisscom may
face because of legal action, Chief Executive Carsten Schloter
said. Swiss rival Orange Tuesday threatened to lodge a complaint
against Swisscom with federal communication authority ComCom if the
two mobile phone providers cannot agree on mobile termination
rates. These are the fees mobile phone companies charge other
carriers for calls on their networks. Swisscom in turn said it is
also weighing the option of legal action if the two cannot resolve
their differences.
-By Katharina Bart, Dow Jones Newswires; +41 43 443 8043;
katharina.bart@dowjones.com
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