Swisscom CEO Sees a ‘Clear Turnaround’ at Italian Operations

Swisscom AG Chief Executive Officer Carsten Schloter said business is improving in Italy, where the company controls Fastweb SpA, led by “excellent” performance selling phone and Internet services to corporate clients.

“In Italy, we clearly have a turnaround,” Schloter said today in Barcelona at a conference organized by Morgan Stanley. “It still doesn’t make honestly a very good investment, but it’s on its way to improve.”

Swisscom, which acquired Milan-based Fastweb in 2007 to offset slowing growth in the Swiss market, has suffered from competition in Italy and a weak euro that weighs on revenue converted into francs. The Bern-based company is Switzerland’s biggest phone operator.

Schloter also forecast “rather stable” revenue from the Swiss market, where the company is gaining market share. He predicted a “slight” dilution in earnings before interest, taxes, depreciation and amortization as newer products such as television offerings have lower margins than phone services.

The CEO said he isn’t worried about the impact of a sale of France Telecom SA’s Orange Switzerland division on mobile-phone service margins in Swisscom’s home market. Potential buyers of the rival business will not have an “easy case” as the unit needs investments that won’t allow aggressive pricing.

‘Simply No Room’

An investor would have to spend 300 million Swiss francs ($330 million) to 400 million francs on network upgrades to catch up with competitors, as well as about 200 million francs for a spectrum auction set for next year and additional costs for a long-term evolution network rollout, Schloter said. Those investments would give the new owner “simply no room” to attempt raising market share by reducing prices.

France Telecom is exiting Switzerland as part of a plan to reorient its business toward faster-growing markets in the Middle East and Africa. Orange Switzerland, which may cost about 2 billion euros, has attracted interest from Egyptian billionaire Naguib Sawiris, and bids are due by Dec. 12, Morningstar said this month.

The unit has also been targeted by Iliad SA’s billionaire founder Xavier Niel, who teamed up with Goldman Sachs Group Inc.’s private-equity unit in a bid, and from private-equity firms including Apax Partners LLP and EQT Partners, people familiar with the matter have said.

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