Swiss Government: To Block Swisscom Taking Over Foreign Cos

ZURICH -(Dow Jones)- The Swiss government plans to block any foreign acquisitions by telecommunications company Swisscom AG for the time being, Dieter Leutwyler, a spokesman for the Finance Ministry said Friday.

The Swiss government owns 66.1% of Swisscom, but plans to reduce its holding. The government's representative on Swisscom's board has veto rights.

Swisscom has been looking to expand abroad, considering deals with Telekom Austria AG and Cesky Telecom AS, both of which failed to go ahead. It is now in talks with Ireland's Eircom Group PLC.

Leutwyler said the goverment representative on the Swisscom board, Felix Rosenberg, has been instructed to block any foreign acquisitions or minority stakes.

The comment comes just one day after the Ministry of Finance said it wants to exit Swisscom as a shareholder, to allow the former monopoly increased freedom to take on risk to achieve growth.

Swisscom, the largest player in a saturated market, faces declining operating profits.

Swisscom couldn't immediately be reached for comment.

The government plans to block foreign takeovers -which it deems as too risky -until it succeeds in reducing its holding in Swisscom to a minority stake or exited as a shareholder altogether.

The Swiss government is bound by law to hold at least 50% of Swisscom, so the move to reduce its holding would require a change in law which has to be approved by parliament, and is likely to be preceded by a public referendum.

Finance Minister Hans-Rudolf Merz told reporters Thursday: "Swisscom works in an increasingly competitive market. To do this well it has to grow and be able to take risks. As the government isn't willing to fully share such risks, we are no longer the right shareholder for Swisscom,"

Merz added the government would eventually like to sell all its shares but a long political process lies ahead and the outcome is uncertain. He said it was possible the government could retain a minority stake in the company.

Company Web Site: http://www.swisscom.com

-By Hans Schoemaker, Dow Jones Newswires; +41 43 443 8040; hans.schoemaker@dowjones.com

(END) Dow Jones Newswires "

Posted to the site on 25th November 2005