Swisscom (SCMWY) 6-K Current report (foreign)

Form 6-K

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Report of Foreign Private Issuer
Pursuant to Rules 13a-16 or 15d-16 of
the Securities Exchange Act of 1934

Dated: April 1, 2003

Swisscom AG
(Translation of registrant’s name into English)

Alte Tiefenaustrasse 6
3050 Bern, Switzerland
(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F            Form 40-F  

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ___

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ___

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes            No  

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-______

Analyst meeting Annual results 2002 “rock-solid-return(s)” 26 March 2003, Zurich	1

Cautionary statement regarding forward-looking statements "This communication contains statements that constitute "forward-looking statements". In this communication, such forward-looking statements include, without limitation, statements relating to our financial condition, results of operations and business and certain of our strategic plans and objectives. Because these forward-looking statements are subject to risks and uncertainties, actual future results may differ materially from those expressed in or implied by the statements. Many of these risks and uncertainties relate to factors which are beyond Swisscom's ability to control or estimate precisely, such as future market conditions, currency fluctuations, the behaviour of other market participants, the actions of governmental regulators and other risk factors detailed in Swisscom's past and future filings and reports filed with the U.S. Security and Exchange Commission and posted on our Websites. Readers are cautioned not to put undue reliance on forward-looking statements, which speak only of the date of this communication. Swisscom disclaims any intention or obligation to update and revise any forward-looking statements, whether as a result of new information, future events or otherwise.”

2

2

Agenda Analyst meeting, 26 March 2003
Subject			Speaker	Starts on Slide
		The Overview	Jens Adrian CEO	4
Domestic wireline business			Adrian Bult,
	•	highlights 2002	CEO Swisscom	13
	•	the key questions & answers	Fixnet
Domestic wireline business			Carsten Schloter,
	•	highlights 2002	CEO Swisscom	22
	•	the key questions & answers	Mobile
Other businesses
	•	highlights 2002	Mike Shipton, CSO	28
	•	the key questions & answers
Group financials
	•	highlights 2002	Ueli Dietiker, CFO	36
	•	the key questions & answers
					3

The Overview
Jens Alder, CEO Swisscom
	4

2002 in review

Key financials Key achievements

in CHF mm	2002	change
Net revenue	14,526	2.5%
EBITDA	4,413	0.1%
EBIT1	2,408	7.7%
Reported net income	824	(83.4%)
CAPEX	1,222	(1%)
Net debt	642	nm
Book leverage2	9%	nm
Number of FTE's	20,470	(4.0%)
Adj. net income3	1,319	12.4%
Adj. EPS in CHF4	19.92	24.8%

1	before exceptional item
2	net debt / shareholders’ equity
3	adjusted only by substantial exceptional items, net of taxes
4	number of outstanding shares at YE 2002: 66.2mm

	Successfully defended strong market position
	Launched several new products and price packages in wireline and wireless markets
	On track with operating cost reductions
	Finalised new organisational structure, reduced workforce by 858 FTE's (-4%)
	Have not been able to execute large acquisition options, that would satisfy investment criteria
	Completed few minor investments into "ventures" as "entry-ticket-options" (more recently for example into public WLAN)
	Robust financial management and strong balance sheet
	Defined new return policy: "delivering full annual equity free cash flow to shareholders"

On the back of strong results, Swisscom proposes “rock-solid-returns” to shareholders
	5

Swisscom introduces new Return Policy to shareholders

from “dividend policy”		to “return policy”
paying approx. half of adjusted net income + opportunistic return of funds through share buy back		returning the full annual equity free  cash  flow (EFCF) to shareholders,  through:  • dividends  • par value reduction  • share buy backs

Rationale for new Return Policy:
		Better reflects corporate strategy
		Ties in capital structure considerations. Return Policy takes it from cash flow perspective instead of profit (P&L) perspective. Enables company to retain strategic flexibility, as balance sheet will not be weakened. Includes debt repayments so that strategic flexibility is restored as quickly as possible should the company acquire
		Offers better yield than current dividends can do. The minimum return will be half of adjusted net income (i.e. like dividends in the past), with more to be paid if EFCF is higher
		Builds on strong business outlook
			6

	New Return Policy - reflects strategy
			7

		New Return Policy - ties in considerations of strategic flexibility and capital structure
	Return Policy takes it from cash flow perspective. Current business cash flows are higher than profits mainly due to fact that depreciation charges are - and will be - substantially higher than level of capital expenditure. Taking profits as the basis for returns to shareholders would hence lead to creation of cash pile
	Return Policy deliberately subtracts cash required for acquisitions. This highlights the company’s view that acquisitions have to be cashflow accretive to make sense: otherwise money should be returned
	Return Policy reflects company’s desire to retain strong balance sheet by including debt repayments. Underlines company’s wish to restore strategic flexibility as fast as possible through conscious debt maturity management in case of debt-funded acquisitions

In conclusion, the new Return Policy prevents Swisscom from building again a cash pile, as all annual free cash generated is returned to either providers of debt or equity. At the same time, this Policy does not weaken the balance sheet
	8

	New Return Policy and financial year 2002: offers better yield than dividends only can do
		Remarks
		CHF 12/share compares to CHF 11 for 2001, and represents 60% of adjusted net income. Higher dividend also possible through the accretion effect of the 10% share buy back concluded in 2002. Reflects ongoing commitment to pay around half of adjusted net income in form of dividends. Will be paid on May 9, 2003
		To pay remaining EFCF after dividends in PVR would imply CHF 6/share. However, this would be sub-optimal, as we should reduce the PVR straight away to a final nominal value of CHF 1/share. Hence, the full remaining CHF 8/share will now be returned. Will be paid by August 2003 latest
		As a result, Swisscom will return the full EFCF plus an additional CHF 142mm to shareholders in 2003

High return for year 2002 through dividends and par value reduction payable in 2003. No share buy back (SBB) in 2003, unless government decides to dilute. That may trigger Swisscom to do a SBB in order to serve the interests of free float holders
	9

New Return Policy - builds on strong outlook

		Remarks
		Taxes payable in 2003 are expected to be substantially lower due to loss-carry- forward and timing effects. This is a positive one-off effect that cannot be expected in 2004
		Opportunity driven, but only if value accretive
		Without further debt-funded acquisitions, there will be no material further debt repayments to be done as of 2004
		Minimum return is approx. half of adjusted net income through ordinary dividend payment. Any top-up through share buy back in 2004
Return Policy made sustainable through targeted measures that increase the distributable reserves (see last chapter on group financials for details)			10

Update on the “quest for acquisitions”

Criteria	Explanation			Rationale
			What is the uniqueness of the constellation? what makes Swisscom a better investor than a financial investor directly:
sustainability	Focus on sustainable cash flow
	generation and accretion
	to group cash flows
strategic fit	Potential synergies, and ability
	to exploit these through		–	we may be the only acceptance
	control			buyer for a majority stake
			–	we can sweat the asset better
				thanks to our experience
management	Availability of experienced
	management team		–	we can extract some synergies with
				current operations
price	Attractive valuation		–	we may improve the position
				of the combination in the
size/risk	No major shift in existing			run-up to potential further
	risk profile			industry consolidation
So far not been able to execute convincing options. Having looked at most possibilities, the route forward is opportunistic. If new possibilities arise, Swisscom will continue to screen these, using its robust set of criteria
					11

In summary

Your 3 “bets” when investing in Swisscom
Swisscom is able to sustain strong annual equity free cash flows - through continued strong operational performance
Swisscom doesn’t have a long term strategic (scale) problem if it doesn’t acquire, and only acquires if this is value accretive
Swisscom will return all equity free cash flow to shareholders while preserving a strong balance sheet
	12

	Domestic wireline business
Adrian Bult, CEO Swisscom Fixnet
13

Highlights 2002

Key financials Fixnet Key achievements FX

in CHF mm	2002	change		Stabilised overall market share after
				renumbering at 59%
Net revenue 1	6,443	(2.2%)
EBITDA	1,903	(4.3%)		Reduced FTE’s by 7%, costs by 1%
				and CAPEX by 2% while increasing
EBITDA margin	29.5%	(2.3%)		investments in new business
EBIT	848	(6.7%)
CAPEX	585	(2.0%)		Exceeded target of Broadband; rolled
				out close to 200k lines
Number of FTE's	8,010	(7.3%)

Key financials Enterprise Solutions Key achievements ES

in CHF mm	2002	change		Improved customer relationships
Net revenue 1	1,450	(8.5%)		Moved from technology-driven products
				to target group offerings
EBITDA	68	(40.4%)
EBITDA margin	4.7%	(34.7%)		Established partnerships (e.g. with
				Unit.net)
EBIT	36	(55.6%)
CAPEX	23	(20.9%)		Reduced future cost base through
				ongoing restructuring
Number of FTE's	1,410	(9.4%)
1  including intersegment revenue

Strong cash generative business, however full focus on efficiency improvements required to ensure sustainability
	14

 Q1. Overall volume development?

Significant retail traffic reduction through renumbering
and market reduction

Change in retail traffic volumes of FX+ES (in mm minutes)		Decline in local and DLD traffic
			–	New renumbering introduced
				in April 2002 - one off effect
				(1,000mm)
			–	Market reduction on SCM
				retail traffic (388mm)
			–	Surf effect (350mm)
			–	Market share loss (270mm)
			–	Hard mobile substitution
		Increased F2M traffic due to higher
		mobile penetration
		Stable international traffic
		Reduction in value added services
			–	Reduced dial-up traffic due to
				ADSL substitution
			–	Carrier specific filtering

Action to stabilize market shares will be taken in 2003
1) Gross increase estimated at 73mm minutes; 7mm minutes lost due to hard mobile substitution
	15

Q2. Fixed-to-Mobile substitution?
Overall mobile impact on wireline revenues neutral
Estimated impact of Mobile on FX + ES national retail traffic 1

National traffic volumes (in mm minutes)
		Loss of ca. 1.5% access lines due to hard mobile substitution (largely line cancellation)
		–	Estimated impact 66,000 lines
		–	Traffic 79mm minutes
		Overall market reduction impacted Swisscom retail traffic by 388mm minutes
		–	Maximally 300mm attributed to soft mobile substitution
		–	Remaining reduction attributed to other behavioral changes (e.g., e-mail use)

Lost minutes gained back by mobile operators with Swisscom Mobile being main beneficiary
1 Includes national and F2M traffic. Not included is international and wholesale traffic
2 Revenues include CHF 10mm lost access revenues
3 Estimate of maximum impact based on observed market reductions of total 388mm minutes and analysis of national traffic
4 Attributable to traffic change. Other changes such as change in rebates are not included
	16

Q3. Voice over Cable?
Cablecom’s recent Voice offer appears quite attractive as first line offer

Strong growth of broadband in 2002 Comparison of Cablecom to FX offers ²

		One Line		Two Lines
	Add-on to existing Cable BB-offer		-18%		-23%
	Combined Cable BB/Voice package		-8%		-12%
	Cable BB/Voice package as second line 3		+12%		+17%

However, similar to other European Cable providers in Europe, Cablecom will need to prove to be able to deliver satisfactory voice services
1 Estimated. Source: Swiss Press, Swisscable report
2 Relative to Swisscom FX retail prices (in %). Approximated values
3 Standard telephony access is kept at Swisscom	17

Q4. ADSL business case?
ADSL expected to be cash flow positive from 2004/2005

Background Business case characteristics

	Swiss market characterised by aggressive			Recurrent ARPU/Subs1) (CHF/month):
	growth in broadband market. Swisscom		–	around CHF 49 on a standalone basis
	pushes mainly for defensive reasons		–	around CHF 31 on a net basis (after substitution)
				CAPEX per new subs moving down towards CHF 500-550
				Swisscom ADSL expected to be cash flow positive in 2004/2005 - including negative effects from substitution, and earlier on a standalone basis. Latest review indicates approx. 400k subs for breakeven standalone
				Business case further improved through the side effect of protection of voice minutes that may otherwise be lost to cable operators

Breakeven - on a standalone basis - at approximately 400k ADSL
1) Blended ARPU, WS and retail over all bandwidth offers
2) Estimates. Source: Swiss press, Swisscable report	18

Q5. Swisscom and regulation?
A. General overview
New regulatory obligations in 2002		Important legal proceedings in 2002
	USO ’03-’07; price ceiling access/traffic		Cost-orientation of IC-charges
	Numbering plan and local CPS		ADSL WS-pricing and cross subsidies
	Lawful interception		Mobile termination prices
Regulatory obligations in progress
	Revision Telecommunications Act; Access to facilities, where Swisscom is considered market dominant (e.g. local loop unbundling); prohibition of bundles		Revision Antitrust Act; restrict handling of dominance and immediate sanctioning of abusing it
	Revision Telecommunications Ordinance; cost-oriented interconnection to leased lines, local loop unbundling		Revision Radio&TV Act; proposed subsidising of content provider by Infrastructure provider; restricted legal protection
				19

Q5. Swisscom and regulation?
B. Where does Swiss regulation differ from the rest of Europe?

	Ex-post type of regulation instead of ex-ante regulation as in Europe	No ULL in Switzerland
	Swiss regulator wanted to have ex-ante regulation introduced. Swiss government rejected to propose to parliament this extension of competence on 19.2.2003 Situation remains as is (i.e. ex-post)	Regulator wants to introduce all forms of unbundling. Government has decided on 19.2.2003 to introduce this both over change in ordinance, and simultaneously over a change in the telco law
	Swisscom is welcoming the government’s decision, since impact of ex-post type of regulation are more foreseeable	Swisscom is clearly opposing ULL:
			Introducing ULL over change of ordinance would infringe powers of parliament and would represent effective expropriation
			Broadband competition is strong without ULL thanks to strong alternative cable infrastructure
			ULL takes away investment incentives, and will leave large geographies excluded from access to broadband infrastructure
	Government proposes revision of telecommunications act to parliament with today’s ex-post regulation	Swisscom will actively fight against ULL:
			Change in ordinance will end up in supreme court
			Change in law requires lengthy process through parliament, and perhaps even referendum
		Effective introduction - if at all - not until '05/'06
		20

  Q6. Outlook Swisscom Fixnet?

Key Trends		Increasing regulatory pressure
		Increasing mobile substitution
		Continued Broadband growth
Strategy		Secure leading position in voice
		Continued cost reductions:
		platforms and products
		Continued broadband push
Targets 2003		EBITDA-Margin at 30%
		Improved customer satisfaction
		3 to 2 voice platforms
		Number ADSL lines in operation at YE: 350K
Retain strong position through operational improvements and targeted new offerings
21

	Domestic wireless business
Carsten Schloter, CEO Swisscom Mobile
22

Key financials and achievements
		Key financials			Key achievements
		in CHF mm	2002	change
				Grew revenues by 3.2% to CHF 4,1bln while Swisscom Mobile market share remained constant at 65%
Total subscribers (mm)	3.6	6.9%
ARPU (CHF/month)	86	-4.4%
Net revenue 1	4,112	3.2%
				Increased EBITDA by 5.2% to almost CHF 2bln (48% margin) due to lower COGS
EBITDA	1,974	5.2%
EBITDA margin	48.0%	1.9%
EBIT	1,685	6.3%		Launched several products for Messaging, Mobile Solutions and Wireless LAN, positioning Swisscom Mobile at the forefront in Europe
CAPEX	392	24.5%
Number of FTE's	2,358	11.2%
1 including intersegment revenue
	Robust performance thanks to innovative portfolio and strong customer base
23

Q7. Operational development?
		ARPU development	Comments
				Market penetration in CH reached 77.5% at YE 2002
				Market gross adds reduced to 1.6mm, of which Swisscom Mobile achieved over 50%
				Swisscom Mobile's successful retention program lead to a low churn of 17% churn p.a. (15% on postpaid, 20% on prepaid)
				ARPU non-voice (SMS, data traffic) at CHF 8 despite data tariffs on European average (9% of ARPU)
				ARPU voice decreased due to right grading, dilution from new subs, and economic downturn
	Slow down in ARPU erosion and decrease in churn
					24

Q8.		Update on partnership with Vodafone?
	Enlarged operative co-operation and collaboration
	–	active use of global purchasing agreements
	–	complete integration into operative and financial benchmarks
	–	extensive management and specialist training and development
	–	governance through Supervisory Board, including Vodafone representatives
	Extensive cooperation with Vodafone GP&S
	–	Participation in all workgroups in technology and products
	–	Vodafone’s one-brand products implemented (e.g. Eurocall, assisted roaming)
	–	Rollout of Vodafone live! planned in Q4 2003
Strategic rationale of partnership confirmed
			25

Q9.	Update on roll out UMTS / WLAN?
Comments			Investments
	UMTS network rollout on track			CHF 113mm cumulative investment by end
				of 2002 - license inclusive
	Rollout based on an aggressive site
	acquisition			CHF 350 mm further capital expenditure
	–	Original license obligation of 20%		planned until end of 2005
		population coverage already surpassed
		by end of 2002		Will invest into WLAN as “add-on” to UMTS
	–	Increased public resistance of rollout of		Have signed already 350 hotspot contracts
		new antennas		in Switzerland, to be operational in 2003.
				These 350 hotspots cover approximately
	License obligation for end of 2004 is 50%			80% of relevant hotels and conference
	population coverage			centres. Currently >100 hotspots on-air,
				single-digit million additional investment
	First launch of commercial activities in 2003			required in 2003 for the remaining 250
	for corporate customers			hotspots
	Launched Public WLAN (in Switzerland			Will roll out in-train WLAN coverage
	under Swisscom Mobile, in other countries
	through Swisscom Eurospot)
	UMTS roll out advancing faster than competition,
	and at lower cost than originally anticipated
					26

Q10.  Outlook Swisscom Mobile?
	Key    trends
			3 On-going pressure on voice ARPU, continued growth in Data
			Emphasis on go to market for new products (e.g. MMS, Mobile Office
			solutions, WLAN, third parties B2B2C)
			Key regulatory issues: mobile termination costs and NISV
	Strategy
			Extend USP’s (Network Quality, Customer care, Innovative products and
			services) to maintain leading market position
			Roll out of UMTS network and WLAN with goal of best national and
			international coverage
			Reduce customer acquisition costs
			Further improve internal efficiency
	Targets     2003
			Stretch targets on penetration and ARPU of new products and services
			Increase lead on customer satisfaction
			Decrease churn
			Further increase absolute EBITDA and FCF
					27

Other businesses
Mike Shipton, CSO Swisscom
	28

Key financials and achievements - debitel

Key financials - debitel
in CHF mm	2002	change
Total subscribers (mm)	10.1	0.6%
ARPU (€/month)1	17	2.8%
Net revenue2	4,111	8.0%
EBITDA2	159	(15.0%)
EBITDA margin2	3.9%	(20.4%)
EBIT2	97	(28.7%)
CAPEX2	68	3.0%
Number of FTE's	3,299	(6.9%)
1  according debitel accounting standards (US GAAP)
2  under IAS accounting standards

Key achievements
	Robust performance
	– 8%-revenue2 increase (driven by all        countries)
	– further cost savings realised
	– increased equity ratio from 20% to        24%1
	– no net debt 1
	Positive EBIT-contribution of international
	business
	Strengthened distribution power

Positive business development despite difficult market conditions

29  

Q 11: Swisscom and Debitel?

1999 - Swisscom acquires majority in Debitel - for strategic reasons 2003 - Swisscom holds majority in Debitel - as important financial stake

Rationale:
	acquire UMTS license in Germany
	turn Debitel into an operator
	combine customer base with Swisscom
	Mobile - to realise economies of scale
Situation:
	not possible to acquire license at
	justifiable price
Decision:
	find different solution for gaining footprint
	for Swisscom Mobile (done through
	Vodafone partnership)
	refocus Debitel as a network independent
	ESP, with access to UMTS platforms
	without being a licensed operator
Implications (1):
	Debitel moves from strategic investment
	to an important financial investment

Implications (2):
	Swisscom has to treat Debitel as any
	other important financial investment
	Swisscom has to create options with
	flexibility
What to do:
	actively support Debitel in their corporate
	development: any action that generates
	shareholder value (also in the long run) is
	in the interest of its shareholders:
	Swisscom with a 93% direct stake
	inclusive
	review frequently the value of our
	investment, and do impairment test.
	Result: Swisscom now has € 10/share
	book value as per 31.12.2002
	create options that improve flexibility with
	respect to Swisscom's stake. Result:
	Swisscom secured a right (call option) to
	get above 95% stake. This provides
	freedom to either increase free float,
	squeeze out or sell stake. No decision
	imminent
	30

Key financials and achievements - segment Other

Key financials - segment Other Key achievements

in CHF mm	2002	change	Swisscom IT Services:
External revenue	833	12.3%		Completed PMI process with AGI
of which Systems	406	(14.7%)		Successfully positioned IT Services brand in the Swiss IT Market
of which IT Services	210	nm		Defined services & solutions portfolio
of which Broadcast	162	(10.6%)		Installed sales organisation & processes
Net revenue 1	1,463	4.3%		Integrated Conextrade
EBITDA	111	(18.4%)	Swisscom Systems:
EBITDA margin	7.6%	(21.6%)		Operational start as of January 1, 2002
EBIT	(114)	(22.6%)		Completed set up of a restructuring plan
CAPEX	103	(40.5%)		Completed full re-engineering of process
				and IT architecture
Number of FTE's	4,374	(0.1%)
1 including intersegment revenue

Both IT Services and Systems experience effects from more difficult market and macro economic environment
	31

Q12. How is the general economic development impacting your business?   

Overall economic environment Impact and outlook for Swisscom

	Slow economic recovery with modest but robust GDP growth - small improvement for 2003 and higher growth in 2004 expected		Residential Market: Revenues in fixed- line and mobile more protected against economic downturn and rise in unemployment rate:
	Continued structural weakness in equipment investments by Swiss enterprises and weak private and corporate consumption for non-basic needs		–  commodity serving basic needs –  non-cyclical behaviour Business Market: Investment related revenues from solutions business under pressure - however, less established operators suffering most

Impact on Swisscom of current weak economic environment is limited in residential segment, more serious in business segment
	32

Q13. Outlook Swisscom IT Services and Swisscom Systems?   

	Swisscom IT Services and Swisscom Systems
Key trends		Decline in demand for network and telephony equipment
		Delay of new investment in telecom and IT systems due to
		economic climate
		Market growth below expectations mainly due to pricing
		pressures and continuation of strong competition - even if
		further consolidation is taking place
Strategy
		Continue execution of restructuring plans
		Acquire necessary skill set for solution market
		Improve again our cost management
		Continuously streamline product portfolio
Targets
		Improved efficiency especially in improved sales- and
		delivery processes
		Improved customer satisfaction - long term success
		factor
			33

 Q14. How do you look at options for product bundling?

Residential: price bundles
	Swisscom well positioned to provide bundles as market leader in fixed and mobile telephony but considers bundles mainly for defensive reasons
	No aggressive price bundles launched by competitors so far in residential market and Swisscom not a first-mover
	Potential bundling packages that Swisscom could envisage are
	–	Voice/broad band
	–	Fixed/mobile
	However, potential regulatory hurdles for implementation (“market dominance”) exist

Corporate: solution bundles
	Corporate customers demand for integrated solutions including e.g. voice, data (both fixed and mobile) and IT
	Though international players are present in the market for corporate solutions, Swisscom has unique local capabilities
	Swisscom's Enterprise Solutions has been at forefront of corporate bundled solutions

Swisscom has a unique bundling capacity in Switzerland
for both residential and corporate

34

 Q15. How does your CAPEX-profile look?

	CAPEX development

Background
	80% of CAPEX in the Fixnet and Mobile segment
	Fixnet: CHF 585mm (-2% YOY)
	–	CAPEX in new businesses and capacity extension represent 60-65% of total with focus on ADSL, IP, SDH, optical cable and transport network
	–	Maintenance CAPEX on existing installations represents the remaining 35-40%
	Mobile: CHF 392mm (+24% YOY)
	–	Build-out of UMTS and W-LAN infrastructure; capacity increase of 2 and 2.5G networks
	–	Increase of CHF 77mm as result of UMTS investments
	CAPEX as % of sales of Swisscom incl. and excl. debitel sustainably below European peers, partially due to PPP, but also because of efficient asset and investment management

35

Group financials 2002
Ueli Dietiker, CFO Swisscom
	36

Key figures and financial highlights

Key figures

in CHF mm		2001	change
Net revenue		14,526	2,5%
EBITDA		4,413	0.1%
EBIT1		2,408	7.7%
Net income		824	(83.4%)
Net debt		642	nm
CAPEX		1,222	(0.1%)
Number of FTE's2		20,470	(4.0%)
ADj. net income3		1,319	12.4%
Adj. EPS in CHF4		19.92	24.8%
1	before exceptional item
2	excluding Work Link (252 people)
3	adjusted only by substantial exceptional items
4	number of outstanding shares at YE 2002: 66.2mm

Financial highlights

	Revenue development inline with expectations
	Solid EBITDA performance: CHF 4,4bln
	EBIT grew by 7.7% mainly due to lower depreciation and amortisation
	Impairment of debitel goodwill (CHF 0,7bln)
	Adjusted net income of CHF 1,3bln (+12.4%)
	Successful share buyback led to an adjusted EPS accretion of 11%
	In total, CHF 5,5bln (>20% of balance sheet total) in cash returned to shareholders in 2002
	Strong balance sheet and solid ratios, also after completion of share buyback
	Strong cash generation

Simply steady, simply solid. Simply Swisscom
	37

External revenue development

in CHF mm	Fixnet	Mobile	ES	debitel	Other	Corporate	Net revenue
2001 2002	4,921 4,888	3,127 3,255	1,486 1,365	3,808 4,111	742 833	90 74	14,174 14,526
%	(0.7%)	4.1%	(8.1%)	8.0%	12.3%	(17.8%)	2.5%

Stable at first sight, shifting underneath
	38

Cost overview

Compared to 2001, almost unchanged level of total OPEX
	39

Group EBITDA development

in CHF mm	Fixnet	Mobile	ES	debitel	Other	Corporate	EBITDA
2001 2002	1,989 1,903	1,876 1,974	114 68	187 159	136 111	107 198	4,409 4,413
%	(4.3%)	5.2%	(40.4%)	(15.0%)	(18.4%)	85.0%	0.1%

EBITDA stable, and in line with guidance

40  

Reported net income
(in CHF mm)	2001	2002
EBIT excluding exceptional items	2,235	2,408
Exceptional items 1	3,275	(702)
EBIT including exceptional items	5,510	1,706
Net financial result	(355)	(311)
Income before income taxes, equity in net income     of affiliated companies and minority interest	5,155	1,395
Income tax benefit (expense)	15	(361)
Equity in net income of affiliated companies	32	95
Minority interest	(238)	(305)
Net income	4,964	824
1 Exceptional items in 2001: impairment of goodwill CHF 1,130mm, gain on sale of real estate CHF 568mm and the gain on partial sale of Swisscom Mobile CHF 3,837mm; exceptional item in 2002: impairment of goodwill CHF 702mm
Substantial lower net income due to lack of exceptional gains and a further impairment of goodwill in 2002
			41

Adjusted net income
(in CHF mm)	2001	2002
Net income	4,964	824
Impairment of debitel goodwill	1,130	702
Gain on sale of real estate portfolios	(568)
Gain on partial sale of Swisscom Mobile	(3,837)
Tax effect on exceptional items, net	(515)	(207)
Adjusted net income	1,174	1,319
Number of shares (in mm, at ye)	73.55	66.2
Adjusted EPS (in CHF)	15.96	19.92
Share buyback in 2002 led to an adjusted EPS accretion of 11%
			42

Reconciliation: loss under US GAAP resulting from new rule on impairment accounting

	under IAS	under US GAAP			P+L impact
(in CHF mm)	Goodwill	Goodwill	Customer list		delta US GAAP to IAS
Balance at YE '01	2,085	2,648	174
Impairment because of new US GAAP standard		(1,636)			(1,636)
Additions	(28)	4	8
Amortization '02	(302)	(30)	(81)		191
Balance at YE '02, before impairment '02	1,755	986	101
Impairment '02	702	(986)			(284)
Balance at YE '02, after impairment '02	1,053	0	101		(1,729)
Fair value (€ 10/share)	1,053	0	1,053
Additional impairment and amortization charges for debitel goodwill due to new US GAAP accounting standard leads to a net loss under US GAAP
						43

Group capital structure

	(in CHF mm)	31.12.2001	31.12.2002
	Short term debt	1,757	1,016
	Long term debt	2,413	1,505
	Interest bearing debt excl. finance lease	4,170	2,521
	Long term net finance lease obligation	1,330	1,192
	Less: financial assets from lease-and-leaseback transactions	(1,295)	(1,104)
	Less: cash, cash equivalents and securities	(7,104)	(1,967)
	Net (cash) debt	(2,899)	642
	Shareholders’ equity	12,069	7,299
	Balance sheet total	24,349	16,958
	Book leverage ¹	(24.0)%	8.8%
	Equity ratio ²	49.6%	43.0%
	Strong balance sheet ratios, offering opportunity to increase return to shareholders - introduction of “return policy”
1	Book leverage = Net debt / Shareholders’ equity
2	Equity ratio = Shareholders’ equity / Total assets
				44

  Q16. What’s the situation with your distributable reserves?

	(in CHF mm)	Shareholders' equity Swisscom AG	Share capital		non- distributable reserves		distri- butable reserves
	31.12.2001	8,013	1,250		250		6,513
	Dividend, PVR and SBB paid in 2002	(5,521)	(654	)	(131	)	(4,736	)
	Net income under Swiss GAAP	1,599					1,599
	31.12.2002 before extra reserves	4,091	596		119		3,376
	Extra reserves created through change in accounting treatment of dividends from group companies	1,125					1,125
	31.12.2002 before 2002 profit distribution	5,216	596		119		4,501
	Dividend in 2003	(794)					(794	)
	PVR in 2003	(530)	(530	)	(106	)	106
	After 2002 profit distribution, before 2003 profits	3,892	66		13		3,813
	Effective distributable reserves increased, supporting continuation of Return Policy over years to come
45

Q17a. Pension fund: facts at YE 2002?
Under-funding under Swiss pension regime of CHF 304mm (represents a 94%-coverage) determines future CF impact
		46

 Q17b. Pension fund: implications?

	From the difference under IAS between the PV of funded obligations and the fair value of plan assets, legally only the under-funding of CHF 304mm determined by Swiss pension regime requires further financing measures
	There are different ways to finance the under-funding of CHF 304mm:
	—	increased contributions from Swisscom,
	—	higher employee's contribution,
	—	changed pension fund benefits and / or
	—	improvement of the plan's rate of return
	No decision to be expected before summer 2003
	Impact on annual results 2003:
	—	P&L:	max CHF 50mm, from
			—  a)  recognition of actuarial losses
			—  b)  change in assumptions of the expected rate of return on plan assets
	—	CF:	max CHF 15mm per %-point increase in employer contribution
			subject to decision of the pension fund committee
				47

 Q18. Overall outlook?

¹ Compared to 2002

Outlook 2002 - striving for CHF 4,4bn EBITDA
	48

Thank you for your attention! (Other) Questions & Answers For further information, please contact: Swisscom - Investor Relations phone +41 31 342 2538 fax +41 31 342 6411 or visit our homepage: www.swisscom.com/ir
	49

Analyst meeting Annual results 2002 “back-up slides” handout at analyst meeting 26 March 2003, Zurich
	1

	2

1. Swisscom Fixnet
	3

Stabilized decline in Fixnet revenues
		Price increase ISDN light
		Hard mobile substitution
		Increased F2M traffic
		Introduction renumbering plan
		Market share losses, surf effect1 and mobile subs.
		Higher volumes WS and ADSL growth
		Lower LRIC pricing
		ADSL growth
		Price reduction cards and shrinking use of 111
		Reduction volumes and prices voice traffic
		Price reduction leased lines
		1 Shift to VAS
			4

Penetration still very high, but access substitution due to mobile starting to become visible

				2%
Access Lines (Voice)	Comments
		Overall penetration still at over 98% households
		Loss of ca. 1.5% access lines due to hard mobile substitution1
		Estimated impact 66,000 lines
		ISDN growth less aggressive than in the past due to ADSL increase and first indications of a saturation on the market
		Similar trend in 2003; no discontunuities expected
		1	Subscriber cancels access subscription. Estimated overall impact CHF 10mm (access only)

5

Stabilized traffic market shares

Overall market share stabilized at 59%1	Substantial additional win-backs achieved, net-churn reduced
1 Estimated values
		6

Improved Service to the customer

Substantial improvements in Customer Care

		2001		2002
	First resolution rate — fulfillment — assurance	N.A. 60%		90% 80%
	Response time high value customers	90 secs1)		<20 sec's for 80%

	Customer satisfaction high, stable and comparable to competition
	Residential customers satisfaction index stable at 8.5			Trust, brand and quality of service recognized as clear distinction factors
				Still negative price-perception: will be addressed with new marketing campaign
1) Not discriminated for different segments
					7

Tight OPEX control: OPEX reduced, despite increased restructuring costs

	Description
		Headcount reduction (>600 FTE’s)
		Increased restructuring charges (CHF 50mm higher than in 2001)
		Reduced mobile termination costs
		Reduced international termination costs
		Reduced network maintenance costs
		Reduced IT-infrastructure costs
		Reduced marketing costs
			8

Reduced CAPEX while growing in new businesses

CAPEX
(in CHF mm)

Investing in the future

	9

Strong ADSL growth, surpassed the inflection point of maximum cash exposure

ADSL growing faster than cable	Aggressive growth last months of 2002 to exceed 215 k contracts signed1
	1 ADSL connections in operation per YE 2002: 195k
		10

Bluewin secured leadership

Despite aggressive broadband growth sustained narrowband leadership

Portal Reach2 : re-confirmed market leadership

				2nd	Microsoft.com	21.9%
1st	Bluewin.ch	28.9%
				3rd	Google.ch	21.4%
1 Estimated. Source: Swiss Press, Swissable report
2 Nielsen/Netrating, December 2002
							11

2. Swisscom Mobile
	12

Strong operational performance 2002
Subscriber development	Comments
		Market penetration in Switzerland reaches 77.5% at year-end
		Market gross adds reduced to 1.6mm, of which Swisscom Mobile achieves over 50%
		Swisscom Mobile’s successful retention program leads to a low churn of 17% churn p.a. (15% on postpaid, 20% on prepaid)
		Market share remain almost constant with Swisscom Mobile at 65% and competitors at about the same share
			13

High management attention to improve cost efficiencies
Breakdown of costs	Comments
		Network and interconnection cost stable although traffic increased
		SAC at CHF 212mm reduced by 15%, SRC doubled to CHF 141mm
		Total COGS down to 34% of revenue (35% in 2001)
		Further investment in staff to 2,359 FTE’s to push new business opportunities (UMTS, WLAN, Mobile Solutions)
		Other OPEX stable
			14

Strict customer focus to provide superior quality
	USP network quality:
	–	We offer to our customers all state-of-the-art technologies on mobile communication such as GSM, GPRS, UMTS, WLAN at the best coverage within Switzerland and abroad.
	USP customer service:
	–	We offer to our customers at all touch points such as shops, call centers and communication a superior service with an emotional touch.
	USP products:
	–	We offer for customers the broadest range of products fitting to their needs both on business and leisure. We are the leader in innovation on messaging services and mobile solutions.
				15

3. debitel
	16

debitel operational performance 2002
		Customer growth despite deactivation of sleeping customers (Germany: 1.4mm, international: 0.3mm) and saturated markets
		International contribution increased from 28% (2001) to 30% (2002)
		17% revenue increase from debitel international mainly caused by acquisitions made in France and The Netherlands
		Further improvement of successful customer retention measures
		Proven first class service: awarded as no. 1 by customers and sales channels
			17

Strengthening of distribution power through attractive distribution program
		Extension of the exclusive distribution contract with EP: for five more years (Germany); EP: took a 2%-stake in debitel; retention programme open for further sales partners
		Co-operation with additional sales channels such as Ringfoto (Germany)
		Acquisition of Videlec and Télécom Option (France), Tiscali (Denmark)
			18

3G
Current status - ESP implementation
	Implementation of ESP model in Germany on track
	–	First company to offer content billing
	–	Specified access to network operators' infrastructure ensured by ESP-contracts
	–	Advanced product and service development of Jamba!
	–	Technical ability of hosting platforms such as portal platform
	Roll out of ESP-model in Slovenia and the Netherlands
	–	ESP contract with KPN mobile and extended cooperation agreement with O2 (The Netherlands)
	–	extended Cooperation agreement with Mobitel (Slovenia)
			19

3G
ESP model - general conditions for further implementation
Secure debitel’s positioning regarding the German regulatory framework for UMTS
	–	debitel is actively involved to review German telecommunication law
	Ability of billing various services and contents
	–	implementation of new billing system to cover various tariffs and products on the way
	Ability to design products and mobile value added services and to extend service offerings
	–	develop “answer” to network operators portal strategy in line with ESP-strategy
	–	launch of own MMS-services
			20

Product / service development
	Extension of debitel mobile service offerings:
	–	Multi-Media Messaging Services (MMS)
	–	in addition to own portal (Jamba!) access to network operator portals such as i-Mode, Vodafone Life!
	–	launch of “partner card” (2 SIM-cards, 1 monthly fee) across different networks
	–	innovative tariffs such as “debitel Automatic in Denmark” (monthly fee will automatically decreased according to usage)
	Content billing for Jamba!/debitel and third parties (e.g. Club Nokia, Microsoft Network Online)
	Further service developments follow ESP strategy
			21

Strategic direction 2003
	Further consolidation of the telecommunication market, especially in Germany - will be closely examined by debitel
	Additional expansion to be evaluated
	Target setting 2003 and onwards:
		22

4. Other
	23

Operational performance 2002
Swisscom Systems			Swisscom IT Services
	Operational performance			Completed PMI process below assumed costs
	–	approx. 3,000 PBX sold and 90,000 rent and maintain contracts
				Market growth below expectations generated high price pressure
	Market development
	–	Swisscom Systems suffered from a declining demand for network and telephony equipment caused by the deteriorating economic situation, which has led many customers to postpone new investments in telecommunications equipment.		Above market growth of external revenue although missing external revenue target
				EBIT target exceeded
				Adjusted resources according to weak market demand
				Further cost improvement measures identified through benchmarks

24

Product-/service development

Swisscom Systems
	Successfully introduced IP-based systems and system extensions of major suppliers (Siemens, Nortel, Ascom) to serve those customers who need a VoIP or integrated Voice/VoIP infrastructure
	The product line of Alcatel was introduced to the portfolio as an alternative to Ascom in the small customer segment
	With the purchase of a CTI / Unified Messaging solution for MS Outlook Swisscom Systems can offer an add-on solution to its customers in the strategically important overlap between desktop computing and telephony

Swisscom IT Services
	Redefined existing solution sets to meet market requirements and demand
	Defined portfolio across 3 key trends in the Swiss market:     — business integration      — business mobility      — IT - outstanding
	Focusing industry verticals: financial services, telecom
	Assessing opportunities in new industry verticals: healthcare, insurance, government
		25

5. Group Financials
		26

Solid operating performance ...

EBITDA and margins	Per employee ratios1
	1 FTE employee numbers at end of period: 20,604 (2000), 20,835 (2001) and 20,471 (2002)
		27

... and ongoing healthy balance sheet

Net debt and net debt/EBITDA	Book leverage and equity ratio
	Book leverage = net debt / shareholders’ equity Equity ratio = shareholders’ equity / total assets
		28

Headcount development
	29

Cost breakdown
Goods and services purchased	Other operating expenses
		30

Impairment of debitel goodwill, under IAS
(in CHF mm)	Goodwill
Book value of debitel as per 31.12.2001, € 18	2,084
Amortisation of goodwill	(265)
Impairment of goodwill	(702)
Other adjustments, net	(64)
Book value of debitel [93%] as per 31.12.2002, € 10	1,053
Future amortisation p.a.	156
		31

Drivers of financial result
Financial expense 2002		Financial income 2002
(in CHF mm)		(in CHF mm)
Interest on debt and finance lease	246	Interest	168
PV adjustment on accrued liabilities	25	Dividends	8
Impairment charge on Infonet	111	Gain on CB tax lease transactions	28
Impairment charge on Swiss	41	Other	2
Currency losses	71
Other	23
Total financial expense	517	Total financial income	206
				32

Overview of income tax payments
	1998	1999	2000	2001	2002
P+L Statement
Current income tax expense	409	317	439	499	123
Deferred income tax (benefit) expense	(90)	218	201	(514)	238
Total income tax expense	319	535	640	(15)	361
CF Statement
Income taxes paid	26	135	398	678	537
Balance Sheet
Current tax liabilities, net	225	457	519	359	-57
Difference between current and paid income taxes	383	182	41	-179	-414
						33

	Tax calculation 2002
	(in CHF mm)	EBT1	Income tax expense			Tax rate
			current	deferred	total
	reported numbers	1,395	123	238	361	25.9%
	Result of the transition from a parent company to a holding company, net			(115)	(115)
	Impairment of debitel goodwill	702	127	80	207
	adjusted numbers	2,097	240	213	453	21.6%
	1 EBT = earnings before taxes
							34

	Group cash flow statement (I)
	(in CHF mm)		2001	2002
	EBITDA		4,409	4,413
		Change in working capital, net	275	2
		Payments for early retirements	(225)	(43)
		Special contribution to pension fund	(440)
		Net interests	48	(78)
		Income taxes paid	(678)	(537)
		Gain from cross-border tax lease transactions		28
		Net cash provided by operating activities	3,389	3,785
					35

Group cash flow statement (II)
(in CHF mm)	2001	2002
Net cash provided by operating activities	3,389	3,785
CAPEX	(1,234)	(1,222)
Proceeds from sale of real estate	1,734
Proceeds from partial sale of Swisscom Mobile	4,282
Proceeds from sale of affiliated companies	73	42
Investments, net	(894)	(92)
Purchase (sale) of current financial assets, net	(3,059)	2,896
Other cash flows from investing activities, net	(53)	(52)
Net cash from investing activities	849	1,572
Net cash used in financing activities	(2,709)	(7,454)
Net increase (decrease) in cash and cash equivalents	1,529	(2,097)
Cash and cash equivalents at the end of the perios	3,788	1,682
			36

CAPEX analysis
Group CAPEX development	Capital expenditures 2002
		37

Change of net debts
	38

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Swisscom AG

Dated: April 1, 2003 by:
Name:
Title: /s/ Stephan Wiederkehr
Stephan Wiederkehr
Senior Counsel
Head of Corporate & Financial Law