Swisscom posts 22 percent fall in 1st quarter net profit on provisions for Fastweb tax case

Swisscom reports 22 pct drop in Q1 net profit

GENEVA — Swisscom AG reported a 22 percent drop in first-quarter net profit Wednesday due to provisions for a tax case against its Italian broadband unit Fastweb.

The former Swiss telecoms monopolist said net profit attributable to shareholders fell to 377 million Swiss francs ($341 million) from 484 million francs during the same quarter of 2009.

Swisscom set aside 102 million francs to cover possible fallout from the Fastweb probe in Italy, where the broadband provider is being investigated for alleged involvement in a euro2 billion ($2.7 billion) money-laundering ring.

Fastweb denies the accusations and says it was a victim of a criminal organization.

Bern-based Swisscom said revenue increased 1.3 percent to 2.92 billion francs in the first quarter as economies recovered from the downturn and more people signed up to its Internet TV service.

Mobile subscriber numbers rose 4.4 percent to 5.7 million in the country of just under 8 million people.

The Swiss Competition Commission last month rejected a merger of Swisscom’s smaller rivals Orange and Sunrise, arguing that having only two players in the market would further diminish competition. Consumer groups say mobile prices in Switzerland are far higher than in neighboring Austria.

Fastweb’s customer base grew 8.8 percent in the quarter to 1.7 million, benefiting from several large corporate and state contracts in Italy, Swisscom said.

The company expects business in Switzerland to slow over the year due to competition, unbundling fixed line networks and saturation of the mobile and broadband markets.

Analysts at Zuercher Kantonalbank welcomed the results, noting the strong cash flow that points to the possibility of big dividend payouts.

Swisscom shares closed up 0.7 percent at 364.50 francs ($327.72) on the Zurich exchange.