Swiss government to spell out new strategy on foreign acquisitions for telcos

Swiss government to spell out new strategy on foreign acquisitions for telcos

	Published : Mon, 05 Dec 2005 11:05 By : Richard Owen Print this Story

ZURICH: Switzerland's telecom operator Swisscom AG has dropped its takeover plans of Ireland's Eircom in deference to the government's directive barring it from making any acquisitions abroad. The company said it had talks with representatives of the Swiss federal council in this regard and it is clear that the federal council wants to put in place a new strategy for 2006-2009 on this issue.

The Swiss federal council had come out with a statement saying it is barring the former state monopoly from making any overseas buyouts of telecoms firms that had a public service function until 21 December, when it is expected to come out with the new strategy. Its earlier directive had unilaterally banned the company from acquiring any overseas entities, which had resulted in muted reactions from investors.

The federal council said the guidelines will put in perspective the Swiss government's stance on foreign acquisitions.

Swisscom said in the circumstances, the talks with Eircom have now been broken off. It said in a statement that it has assured the government that it will not make any decisions on acquisitions of holdings on foreign telecoms companies with a public service mandate until the government strategy is spelled out.

The Swiss government has a 66 per cent holding in the telecom operator. The company has been looking for expansions abroad as it faced competition at home from companies like Cablecom and Sunrise, which affected its profitability. Earlier, it had been in talks to buy Cesky Telecom AS and Telekom Austria AG but the talks fizzled out.

Swisscom said since the acquisition has been put on hold, it will examine whether the surplus funds it holds can be distributed among shareholders while investing -- as much as 1 billion Swiss francs -- in its domestic operations. The maximum shareholder payout possible is 3 billion Swiss francs as it is limited to free reserves available.