Swisscom AG (SCMN.VX) Wednesday said the difficult economic situation in Italy has led to an impairment at its Italian unit Fastweb, which will reduce its 2011 net income by 1.2 billion Swiss francs.

MAIN FACTS:

- The difficult economic situation and increasing interest rates have lead to reduced prospects for growth and higher cost of capital in Italy.

- As a result, the business plan of the Italian subsidiary Fastweb has been adapted and the book value impaired, which will reduce Swisscom's net income in the 2011 annual financial statements by CHF1.2 billion.

- Cash flow and dividends to shareholders will not be adversely affected by this impairment.

- At the upcoming Annual General Meeting, an increase in dividends by CHF 1.00 to CHF22.00 per share is being proposed.

- The impairment will also have no impact on the level of capital expenditures in Switzerland.

- Swisscom acquired Fastweb in 2007 to profit from the growth in the Italian broadband market through that company's modern fibre optic infrastructure, and thus to allow it compensate for the expected erosion in revenues and earnings in the Swiss business.

- Fastweb developed positively since the acquisition: in 2010, the company's revenues increased by roughly 50% to EUR1.9 billion; during the same period, EBITDA adjusted for one-off items rose by more than 50% to approximately EUR490 million.

- In the wake of the sovereign debt crisis, Italy's economic situation has worsened in the last few months. Yields on government bonds have increased significantly, as have the spreads over the low-risk interest rates of the euro.

- High sovereign debt, weak economic growth, increasing unemployment and political uncertainty are risk factors which have impaired future growth and thus the company's value.

- In an impairment test for Fastweb, Italy's increased country risk premium was therefore accounted for through a supplement to the cost of capital and the company's growth outlook reduced.

-Zurich Bureau, Dow Jones Newswires, +41 43 443 80 47; zurichdjnews@dowjones.com

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