Generation Shift at Swisscom Amidst Technology Challenges

Author: Martina Kurth, CEO

Generation Shift at Swisscom Amidst Technology Challenges

von Martina Kurth, CEO

The Swiss incumbent, which is 51% owned by the Swiss government, announced a "strong financial result in 2021," when it recorded growth in revenue and operating income despite the difficulties related to the pandemic. Putting customer experience at the center of all activities, while pursuing a drastic operational paradigm shift, and tireless focus on efficiency improvements and cost savings over the past years, have paid off. As a result, Swisscom is well positioned to cope with structural and changes in demand, which will ultimately shake up the technology strategy of any CSP post-Covid.

Unexpectedly coinciding with the timing of the paradigm shift, the CEO Urs Schaeppi decided to step down on June 1 after 9 years as CEO. 

Furthermore, Swisscom is still seeking clarity with the Swiss Competition Commission (ComCo) and the Federal Administrative Court (FAC) regarding the planned expansion of its mission-critical fiber-optic network expansion to drive digitization forward.

The focus is now on the deployment of fiber-to-the-home (FTTH). Swisscom had aimed to double FTTH coverage to around 60% in Switzerland by 2025, but said the intervention by the authorities would make such a feat significantly more expensive and would reduce the planned coverage to 50%.

Swisscom was one of the European early mover technology innovators to introduce 5G in 2019. In terms of 5G coverage, Swisscom claims it currently covers 99% of the Swiss population with a basic version of 5G. 

New Company Leadership from the Technology Side of the House

Swisscom announced that Christoph Aeschlimann, currently head of infrastructure, network and IT, and a member of Swisscom's group executive board since 2019, will take over the top job when Schaeppi leaves on June 1, 2022.

During his 3 years as CTIO at Swisscom, Aeschlimann was taking a strong leadership position to drive the required organizational alignment alongside operational and technology change. Among his achievements is the promotion of "Value Streams" – interdisciplinary teams and adaptive organizational process organizations with and end-to end responsibility to create, design and deliver a product or service, spanning business, development as well as operations. 

This position is also reflected in its financial position:

Strong Financial Year Result 2021

For the 2022 financial year, Swisscom is forecasting net revenue of CHF 11.1 billion to CHF 11.2 billion ($12 billion to $12.2 billion), EBITDA of around CHF 4.4 billion ($4.77 billion) and capital expenditure of around CHF 2.3 billion ($2.5 billion). Swisscom is proposing an unchanged dividend of CHF 22 ($23.86) per share for both 2021 and 2022.

In 2021, group revenue increased by 0.7% year-on-year to CHF 11.2 billion (US$12.1 billion), once again primarily owing to growth at Italian unit Fastweb. Group EBITDA increased by 2.2% to CHF 4.45 billion ($4.82 billion). In Switzerland, revenue fell slightly by 0.2% to CHF 8.2 billion ($8.89 billion) due to heavy price pressure. 

Fastweb remains the cash-cow, with reported year-on-year revenue growth of 3.8% to €2.4 billion ($2.7 billion), meanwhile, as well as a 5.4% rise in EBITDA to €826 million ($932.6 million).

Future Outlook

Swisscom remains the undisputed leader in the Swiss telecommunications market. Yet with the given market saturation and extremely high competition and squeezed profit margins, there are limited domestic growth opportunities. 

The question is how could Aeschlimann grow the business in the future? Options include: Exploiting the untapped revenue potential in B2B with cloud-based, as-a-service business models, or venturing into the MVNO business in other markets. 

Last but not least, a viable, impactful growth option could be to acquire telcos in European markets. This strategy has paid off in Italy, yet previous attempts to acquire for example Eircom in Ireland, TDC Denmark, or Czesky Telecom, which then got acquired by Telefonica, have failed.


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