Swisscom Sees Positive Impact From ComCom Ruling

ZURICH -(Dow Jones)- Incumbent telecom operator Swisscom said Monday that interconnection price cuts levied by the regulator are less severe than expected, and should therefore boost its 2007 operating profit, as provisions unwind.

The Swiss communications regulator ComCom Monday ruled that Swisscom has overcharged on interconnection prices between 2004 and 2006, by 15% - 20% on average.

Two Swisscom competitors, Colt Telecom Group and Verizon Communications, can now demand reimbursement of excess payments. Other providers can benefit from the decision if they have included a corresponding third-party clause in their contract with Swisscom, ComCom said.

Interconnection defines the conditions under which competitors are allowed to use Swisscom's network, which Swisscom is obliged to provide at cost-oriented prices.

But the cuts are lower than seen, Swisscom said.

"Provisions accrued in the past few years, while proceedings were underway, are likely to exceed the necessary repayments, which will impact positively on 2007 operating income," the Bern-based former monopoly said in a statement.

The ruling is part of several interconnection disputes between Swisscom and its competitors. Swisscom has a total of CHF449 million in provisions in place, with around CHF200 million dedicated to the proceedings ruled on today.

"This is not a blue-sky scenario; we have been waiting for this ruling for some time," Thomas Hilfing, an analyst at Helvea said. He rates the stock at buy with a CHF490 target.

Hilfing said he does expect Swisscom to fight in court to get the cuts lower still. The company has a 30-day window to appeal.

Swisscom's shares dipped briefly on the ComCom release, but snapped back around 0.5% after Swisscom said the effect will likely be positive.

The stock was trading 0.7% lower at CHF437.70, down CHF3, at 1100 GMT.

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

(END) Dow Jones Newswires

Posted to the site on 17th December 2007