Swisscom Faces Sanction On Mobile Termination Rates

ZURICH -(Dow Jones)- Telecommunications company Swisscom, Monday said a draft ruling from the Competition Commission recommends that the company pays a CHF489 million fine for misuse of mobile termination rates.

The Bern-based former monopoly said it rejects the allegation of misuse and views the threatened sanction as unjustified.

Termination rates are the fees mobile network operators charge for routing calls from other operators into their networks.

Swisscom said that the secretariat of the Competition Commission took the view that, while all Swiss mobile carriers had a monopoly on incoming calls within their network, only Swisscom Mobile misused its dominant position on the market in the period between Apr 1 2004 to May 31 2005 by demanding excessively high termination fees.

Swisscom cut its termination rates in June 1 2005. The company said the investigation into the period following the reduction of fees is to be continued and will also cover the other Swiss mobile carriers.

Swisscom said it will outline its arguments to the Competition Commission in detail on May 22.

The operator added that it reserves the right to contest the ruling, should it take the present form. The company could lodge an appeal with the Appeals Commission for Competition Matters and, in the final instance, with the Federal Court, "should this prove necessary," Swisscom said.

Swisscom will review the potential impact of the draft ruling on its 2006 operating results.

The company said that depending on the outcome, it may have to set aside provisions to cover the fine, which would negatively hit 2006 net income. The timing of any payment depends on a legal decision and is subject to a possible appeal by Swisscom.

"It looks like the Competition Commission wanted to show it's not a toothless institution, and took a big bite," said Vontobel analyst Panagiotis Spiliopoulos, who rates Swisscom at market perform.

He said the size of the possible sanction is higher than seen by either the market or Swisscom itself "that's why the company said it might have to restate its outlook to reflect this."

Swisscom said it rejects the charges of misuse, saying among other things it doesn't derive any benefits from termination fees imposed on other mobile carriers.

It said that instead, because its termination rates have always been lower than that of competitors, it has for years been making net payments to TDC unit, Sunrise and France Telecom's Orange. Swisscom Mobile is the market leader with roughly 60%.

It also said that "taking into account location-specific costs and purchasing power," Swisscom mobile termination fees are within the European average.

Spiliopoulos said that Swisscom's reasoning makes sense, "but it's hard to fight the regulator, who views things from a different angle."

Swisscom shares closed at CHF424.25, and are indicated to open around 0.2% lower.

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

-By Hans Schoemaker, Dow Jones Newswires; +41-43-4438045; hans.schoemaker@dowjones.com

(END) Dow Jones Newswires"

Posted to the site on 10th April 2006