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TWST: Could we begin with a brief introduction to Swisscom (SCM)?

Mr. Alder: Swisscom is Switzerland’s incumbent telecom operator and had a monopoly until 1997. Since 1998, Switzerland has deregulated more or less in line with other European Union countries. In fall 1998, we went public and today we are listed both in Zurich and New York. As of today, the Swiss Government owns 62.7% of the shares of Swisscom and the rest is free float. We have a number of institutional investors, particularly in the US. Swisscom’s revenues are 14 billion Swiss franks annually (approximately US9 billion). Of the total revenue, 10 billion Swiss franks is derived from Switzerland and the remaining 4 billion comes from abroad, mainly from debitel the German mobile service providing company we acquired in 1999. Our market share in Switzerland is roughly two-thirds, both in the fixed line and the mobile business. We are quite a conservative company in regard to our balance sheet, which is very strong, has nearly no debt and is likely amongst the best in the telecom sector. We produce an annual free cash flow in the order of 2 billion Swiss franks (US1.3 billion). Our strict requirements for large acquisition possibilities abroad have helped us secure an excellent reputation in the financial market. Although, following market trends, and in absolute terms, our share price has been subject to a decrease over the last 3-4 months, it has outperformed both the Swiss Market Index and the DJ EU Stoxx Telecom Index over the last two years. So, we are an attractive company for value investors.

TWST: The criteria for acquisitions does not necessarily include a strategic fit, I believe?

Mr. Alder: That’s right. We had initially stated that there must be a strategic fit with obvious synergies. Otherwise, it would probably have made more sense for our shareholders to invest directly. But, so far we have not been able to identify and justify any acquisitions under these criteria. Nevertheless, the market is full of opportunities and we therefore said that we will consider options in the future if they fulfill a number of very stringent criteria (sustainability, good price, good management, size of transaction and strategic fit). Whereas four criteria are still reasonable, we should be open not only to pursue synergy-driven investment, but also to consider value investments to improve our current value profile. To achieve this, we will no longer base our criteria exclusively on strategic fit, but will also take into consideration other drivers, such as focus on value, uniqueness of constellation, creation of industrial option value, in order to increase value. In the long term there should still be a potential for synergies, which actually means that there might also be parts of incumbents in Europe that will be of interest to us.

TWST: One of the drivers you mentioned in the telecom space generally was technology. Can you comment on some of the innovative projects and developments Swisscom has on the agenda to utilize technology?

Mr. Alder: First of all, we try to separate the two businesses -- mobile and fixed line businesses. Most probably the largest pond for innovation potential is mobile because here we are just beginning to introduce mobile data platforms. Those data platforms, either by definition of GPRS and certainly UMTS, are open platforms and we can therefore conclude that something similar to the Internet will happen again but this time on a mobile basis, which is far more attractive than fixed line. Here, particularly in the consumer segment, I see any type of combination of mobile data and pictures, such as merging cameras with mobile telephones in the consumer segments. And in the business segment, I see particularly the combination of emails and calendars on mobile palmtops that are integrated IT solutions for businesses. That I think is a potential we are not really touching on right now. In the fixed line business I see a development towards broad band applications because as soon as you need broad band you need physical infrastructure and therefore a fixed network. Of course, we now have a significant DSL base push. The service today is just simply fast Internet, but the base is fantastic for all sorts of applications, be it very solution oriented or be it mass market oriented.