Nov. 5 (Bloomberg) -- Swisscom AG, Switzerland's largest phone company, said it won't meet full-year sales targets because of the Swiss franc's appreciation and reported third- quarter profit that fell more than analysts anticipated.

The sales forecast of about 12.3 billion Swiss francs ($10.5 billion) will probably not be achieved because of the current currency exchange rate, the Worblaufen-based company said today. Net income fell 32 percent to 473 million francs from 691 million francs a year earlier, missing the 482 million- franc median of nine analysts' estimates in a Bloomberg survey.

Third-quarter sales advanced 3.5 percent to 3.09 billion francs. Swisscom, which bought Italy's FastWeb last year, said its previous annual sales forecast was based on 1.65 francs per euro, compared with the current level of about 1.51 francs, reducing the value of FastWeb revenue when converted to francs.

Swisscom's average euro exchange rate for the year will be between 1.55 francs and 1.60 francs if the rate stays where it currently is, Chief Executive Officer Carsten Schloter said on a conference call today.

Earnings in the third quarter of 2007 were boosted by a 157 million-franc gain from Swisscom's sale of a Hungarian unit.

Swisscom lost 7 francs, or 1.9 percent to 360 in Zurich.

No Tiscali

Schloter, speaking on a conference call, ruled out buying Italian Internet provider Tiscali SpA and repeated Swisscom's criteria of ``sustainable growth'' at acquisition targets. ``Tiscali is clearly not on our agenda.''

Swisscom's operating free cash flow will be at the upper end of a 2.4 billion-franc to 2.5 billion-franc range for 2008, Swisscom said. Capital spending will be at the lower end of a 2.1 billion to 2.2 billion-franc range this year.

FastWeb, Italy's second-largest fixed-line phone company, said its third-quarter net loss narrowed to 2.1 million euros ($2.7 million) from 18.1 million euros a year earlier. The Italian unit contributed 426.8 million euros to Swisscom sales as it added a net 43,000 clients for its broadband offering.

The Italian company's earnings before interest, tax, depreciation and amortization gained 35 percent to 127 million euros.

In August, Milan-based FastWeb raised its 2008 Ebitda target to about 560 million euros. The company also predicted revenue will rise 15 percent to 1.64 billion euros this year. FastWeb said today that nine-month sales and Ebitda are in line with its full-year targets.

`Very Ambitious'

Swisscom Chief Financial Officer Ueli Dietiker said on a conference call that FastWeb's full-year targets mean fourth- quarter Ebitda will have to be about 160 million euros. ``It's very ambitious,'' Dietiker said. The Italian unit aims for higher-margin business in the fourth quarter, he said.

FastWeb jumped as much as 9.3 percent to 16.97 euros in Milan trading, making it the best performer on Milan's benchmark S&P/MIB Index. The stock traded at 16.60 euros as of 10:43 a.m.

Cheuvreux raised its recommendation on FastWeb's stock to ``outperform'' from ``underperform'' after the report.

Founded in 1999 to challenge Telecom Italia SpA, FastWeb has been unprofitable every year since its initial public offering in March 2000. In December, the company, led by CEO Stefano Parisi, postponed by one year to 2008 its forecast to break even for the first time.

FastWeb's strategy is focusing on selling more high-speed Internet access, challenging Telecom Italia for corporate customers, increasing market share, consolidating its position in the residential market and offering new services.

To contact the reporter on this story: Joseph Heaven in Zurich at jheaven1@bloomberg.net; Chiara Remondini in Milan at cremondini@bloomberg.net

Last Updated: November 5, 2008 11:39 EST