Swisscom AG (SCMN.VX) Wednesday said it will invest "several hundred million" Swiss francs over the next five years to overhaul its mobile phone network.

The move will consolidate the company's position in the growing mobile phone data services market and help it overcome the erosion of revenue in its mobile phone voice business.

Swisscom's revenue has fallen by 4.9% this year as flat-rate tariffs for mobiles grew in popularity and charges for mobile termination and data roaming fell.

In contrast, revenue from mobile phone data transmission has risen by 12.5% as more people bought smart phones and the volume of data traffic doubled.

To deal with the increased demand, Swisscom said Wednesday it will work with Ericsson to update the technology in all of its 6,000 mobile phone base stations.

Analysts welcomed the additional investment, saying it could help Swisscom, Switzerland's dominant player with 62% Swiss mobile subscribers, defend its market share against rivals such as France Telecom's (FTR.FR) Orange unit and privately held Sunrise.

"Data has become increasingly important," said Michael Inauen, an analyst at Zuercher Kantonalbank. "But as a result of the increased use the network in certain places is quite slow. If you want to sell more data service you have to have a very good service."

Swisscom already had the widest coverage in Switzerland, but this investment would widen the gap further with Orange and Sunrise.

"This shows Swisscom is not standing still," he said.

It could also help Swisscom sell more of its quadruple bundles of TV, fixed-line, mobile and broadband to consumers, which are more profitable and create more customer loyalty.

Swisscom declined to reveal the exact amount of the investment, but said it would be part of its normal capital expenditure of around CHF2 billion.

The company said the investment was being made to meet increasing customer demand.

"More and more people are using their phones to browse the Internet while on the move, and they expect to be connected everywhere to listen to music, watch TV or access their emails," Swisscom spokesman Carsten Roetz said.

Swisscom needed to increase the speed of its network in order to maintain its existing customers and attract new ones, he said.

Swisscom said it will also increase network capacity at heavily frequented locations and press ahead with LTE expansion--the faster broadband system used for data services on mobile phones.

In addition, the maximum possible speed of the existing HSPA network will be doubled to 84 megabits per second.

Swisscom, which is 54% owned by the Swiss government, said the measure will begin in January 2012, with all 6,000 base stations upgraded by mid-2014.

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

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