International News

(Telecompaper) Swisscom is writing down the book value of its Italian subsidiary Fastweb. The difficult economic situation and increasing interest rates have lead to reduced prospects for growth and higher cost of capital in Italy, prompting the Swiss operator to take an impairment charge on Fastweb of CHF 1.3 billion. While this will reduce full-year net profit by a net CHF 1.2 billion, Swisscom said cash flow would not be affected, and it still plans to raise its annual dividend by CHF 1.00 to CHF 22.00 per share. Fastweb has been hurt by growing competition in recent quarters, as prices fall and customers are increasingly willing to switch providers. It also carries a high amount of bad debt. After the impairment charge, its net book value will be reduced to EUR 2.9 billion. Swisscom is launching a new business plan to turnaround the Italian company. While lower revenues are expected in the next two years, the overall five-year plan predicts average annual sales growth of 2.5 percent. This will be driven by the company's partnership with Sky Italia, higher quality of services and an expansion in mobile services. Increased efficiency coupled with cost reductions amounting to EUR 120 million over the next two years and a further reduction in losses from bad debts should also lead to an improved EBITDA margin of 34 percent by 2016. The first successes have already been achieved, with an improved collection of receivables and an increased share of new subscribers, the operator said. The plan also targets a drop in capital expenditure to revenues to below 18 percent.