Swisscom To Give Back Cash To Shareholders

by Ulrika Lomas, Tax-News.com, Brussels

15 February 2002

Swisscom is to hand back up to $2.5bn to investors after admitting it has failed to find a suitable acquisition target on which to spend its cash pile. The Swiss firm is an anomaly among global telcos, as it has substantial monetary reserves after successfully disposing of some of its non-core assets and paying relatively little for 3G licences.

But after failing to make use of its cash, the company has now announced it will offer investors a buy-back share option scheme totalling 10 per cent of the firm's shares. Swisscom has chosen a novel way of doing this: buying back shares via a pro-rata allocation of put options at a premium to the current price, which shareholders can exercise or sell in the market. The structure is costly, but it ensures equal treatment for all, while giving investors the choice of tendering or maintaining their existing holdings. In effect, it is a reverse rights issue

The former state monopoly, partially privatised in October 1998, is flush with cash from asset sales. "The cash in the company does not belong to the management but to the shareholders," Jens Alder, chief executive, said. He denied suggestions Swisscom was narrowing its focus to domestic business and its stake in Debitel, the German telecoms provider.

The group has been seeking a strategic investment in either European mobile telecommunications or data transmission, but has not been able to find a suitable target despite reviewing more than 100 opportunities. "We had a few conditions - strategic fit, good management, price - and it was a mixture of reasons why we rejected possibilities," Mr Alder said. "We are not ending our activities. We remain on the look-out for possibilities. But we do not expect to need a multi-billion Swiss franc investment in the foreseeable future."

The Swiss state has a 65.5% stake in Swisscom and the government is participating proportionally in the buy-back. The company said it expected 2001 core profit or ebitda to be at least 9% higher than in 2000 and repeated it saw substantially higher net income.

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