Swisscom Cuts Guidance, 2Q Net Profit Halved"

ZURICH -(Dow Jones)- Swisscom, Wednesday lowered its full year guidance and said second quarter net profit was slashed in half due to a CHF180 million charge related to a fine for overcharging termination fees.

The former monopoly operator, which is still state-controlled, said net profit attributable to holders fell to CHF299 million in the three months ending June 30 from CHF596 million in the year-earlier period.

The company said it now expects earnings before interest, taxation, depreciation and amortization - or EBITDA - of CHF3.7 billion in the full year, compared with earlier guidance for a figure around CHF4 billion. Swisscom cited the charge and an expected lower operating income contribution from Swisscom IT Services, in part due to a CHF49 million charge for contractual risks.

At 0702 GMT Swisscom shares had fallen CHF13.50 or-3.3% at CHF398.

The CHF180 million charge was flagged well in advance, although the provision for I.T. Services is new, said Christoph Ladner, an analyst at Sarasin.

"All in all, the result probably looks worse than it actually is, and the upcoming share buyback should provide enough support; if shares go down today I'd buy," he said.

In May, the company had warned that it would have to increase provisions for interconnection proceedings by CHF180 million, following a decision by a Swiss court to approve price reductions ordered by the Swiss Communications Commission, or ComCom.

The ComCom said Swisscom had overcharged on certain interconnection services at its fixed line unit in the years 2000 to 2003. Interconnection regulates the joint switching of Swisscom's networks and those of other telecommunication providers.

After the addition of another CHF180 million, the total of provisions set aside for the interconnection issue now stand at CHF537 million.

Sales fell to CHF2.4 billion from CHF2.47 billion, on weakness in all of its main three business lines; mobile and fixed line telephony; and Solutions, the unit that deals with business clients.

Swisscom suffers from competition from alternative carriers and technologies eating into its fixed line and business client revenue, while lower fees weigh at its mobile business - despite adding over 10% to its subscriber base.

The company reiterated it expects sales of CHF9.5 billion in 2005.

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 9th August 2006