Telecommunications provider Swisscom AG (SCMN.VX) Thursday cut its full year sales outlook by CHF300 million to account for the Swiss franc's rise against the Euro.

The 2.5% cut to CHF11.5 billion came after the company reduced its estimates for the average EURCHF rate for the year to 1.20 from 1.30.

The change would reduce revenue and operating profit at Swisscom's Italian business, Chief Executive Schloter said, although the Swiss business would be unaffected.

With the franc at record levels against the euro, trading at 1.05210 at 0830 GMT Thursday, Schloter said the overall EUR/CHF average for the year could be lower than 1.20.

In Switzerland the currency benefits of cheaper purchasing was wiped out by cheaper handset prices, while roaming charges cancelled each other out, Schloter said.

"There could be a small effect on revenue and ebitda on a group level," Schloter said. "But currency does not have a cash flow impact."

He was speaking as Swisscom, which had 62% of Switzerland's mobile phone subscribers in 2010, reported a 3.8% dip in first half sales.

Revenue fell to CHF5.72 billion from CHF5.95 billion a year earlier, largely attributed to a lower contribution from its struggling Italian business Fastweb, which saw revenue fall 6.4% to EUR875 million.

In the second quarter, Swisscom's total revenue fell to CHF2.86 billion from CHF2.99 billion, below expectations of CHF2.91 billion.

Second quarter net profit for shareholders fell to CHF485 million from CHF494 million, below expectations of CHF516 million.

Schloter said he welcomed increased competition in Swisscom's home market following the decision by France Telecom (FTR.FR) to put its Swiss unit up for sale.

Swisscom would be barred from entering the bidding for the Orange business because of its dominant position in the country.

Analysts have said the Swiss unit could fetch around EUR1.5 billion, with private equity companies Apax Partners and Providence Equity among the likely bidders.

"Competitive intensity is influenced by scale and the shareholding structure of the other investors, whether they are ready or not to invest," said Schloter.

"Whatever happens we will see either a strengthening in the competition or regulation. We would prefer competition."

Lack of competition or willingness by rivals to invest could force Swisscom to carry out investments from which other market players could benefit from, he said.

-By John Revill, Dow Jones Newswires; +41 43 443 8042 ; john.revill@dowjones.com

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