Swisscom: on the ascent!

The telco’s gains may be modest, but its share price rises have been large!

What a difference the Alps make. Last year, Swisscom became the first big European telecoms incumbent to show a morsel of growth after the sector’s recent doldrums.

High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/3/db3f0004-93e5-11e3-a0e1-00144feab7de.html#ixzz2tZ3IQZ3M

ts third-quarter sales and margins (at the earnings before interest, tax, depreciation and amortisation level) inched forward, year-on-year. Now the listed group, 51 per cent-owned by the Swiss state, has followed up with solid fourth-quarter numbers and forecast “moderate” sales and ebitda growth (about 1 per cent) in 2014.

Its shares are up 50 per cent from the 2012 lows, easily beating European peers’. They put the group on an enterprise value to 2014 consensus ebitda multiple near to 8 – a premium to the sector – yet offer a dividend yield of 4 per cent. Heidi should be yodelling from the Eiger.

True, Swisscom is not troubled by the regulatory pricing pressures that Brussels has wished on EU-based counterparts. Its heartland helps, too. The telco has an affluent customer base, and Swiss broadband penetration is the highest in the world.

Swisscom’s main competitors, meanwhile, are private equity-owned Sunrise (where talk of a market flotation has circulated) and Orange Switzerland. Neither has even begun to threaten the incumbent’s commanding market position (it has 60 per cent of mobile subscribers).

Still, there has been recent price pressure. And Liberty’s Cablecom, Switzerland’s biggest broadband cable operator, is pushing into the mobile area. Where Swisscom has helped itself, though, is in its early recognition of the potential for bundled services, which reduce customer churn. It has also been successful in building revenues by basing mobile tariffs, in part, on data speeds. Past acquisition strategy has been more fraught. But ending up with the Fastweb Italian cable business does not look too shabby today: Vodafone’s interest is often rumoured. Swisscom stock is pricey. But the quality is, well, Swiss – and for those who care the yield is rock-solid. Almost Alpine, in fact.