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November 24, 2005 5:27 pm

State looks to sell stake in Swisscom

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The Swiss government on Thursday surprised investors with plans to privatise Swisscom, the state-controlled telecoms group.

The sale, should it happen, could liberate Swisscom – in which the state has a 66.1 per cent stake – in its so far largely unsuccessful efforts to expand in the European telecoms sector.

The Swiss company, facing rising competition in a stagnant domestic market, has confirmed it has had talks with Eircom of Ireland on a possible takeover. Swisscom, which last year failed to buy Telekom Austria, has been tipped as a possible bidder for TDC of Denmark, but declined to comment.

A sale of Swisscom could raise about SFr17bn ($12.9bn) for the government, based on the current share price of about SFr420. Swisscom shares were down 0.65 per cent at SFr420.50 at the close. However, analysts warned that Switzerland’s complex political system meant a sale was not certain – and would certainly not be fast. Any reduction of the state’s stake to below 50 per cent would require a change to the country’s telecoms law.

While the disposal has been welcomed by the centre-right Radicals and the ultra-nationalist Swiss People’s party, it has been opposed by the Socialists and the Christian Democrats.

Even if parliamentary approval was given, the controversial move would almost certainly be subject to popular referendum. With the prospect of job cuts and changes to service standards – let alone the risk of take-over by a bigger foreign operator – popular approval would not be certain, analysts said.     

Government officials said the aim was to complete parliamentary preparations in 2006, with a view to presenting legislation the following year. Allowing another year for a referendum, that meant a full sale might not be possible before 2008, said officials.

That timing would mean the measure could also run foul of Switzerland’s next elections, due in 2007. “I’m sure it will be an election issue,” said a senior official. 

Reducing or even entirely eliminating the state’s stake could benefit Swisscom’s expansion plans. One important handicap in last year’s abortive talks with Telekom Austria, which has been largely privatised, was that the target company would be acquired by a state-controlled group – reversing the Austrian government’s own privatisation policies.

The Swiss government said the federal finance ministry would be asked to prepare the requisite legislation. The government said selling the stake would remove business uncertainties and eliminate any conflict of interest bet-ween its role as main share-holder and ultimate regulator of the telecoms sector.

Swisscom was floated in October 1998 and has since then had mixed fortunes. While it the group has enjoyed significant profits from its high-price home market, attempts to expand abroad notably via debitel in Germany, have proved less successful.

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