2017 Annual Report 2017 2017 2017 Annual Report Sustainability Report at a glance

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Annual report publications

The annual report, sustainability report and S­ wisscom at a glance together make up ­Swisscom’s reporting on 2017. The three publications are available online at: swisscom.ch/report2017

“Welcome to the networked world” concept

In our networked world, everything is becoming more and more connected. At the centre of this connectivity are high-performance and secure networks. That is why for years we have invested CHF 1.7 billion in the expansion, maintenance and innovation of our network infrastructure. We are extremely proud of our employees, who day in, day out, put their energy, heart and soul into making sure that our customers stay optimally connected no matter where they are.

The pictures in the 2017 annual report publications offer a peek behind the scenes into our working environment – where we build our network and support our customers. We want to open up the opportunities offered by a networked future and take advantage of them together with our customers.

A very big thank-you goes to Stefanie Haag, Tiziana Conzett, Natalija B., Mona W., Edvin Caminada, Pirmin Egloff, Manuel Haag, Peter Fritschi, and all the children who took time out to have their photos taken.

Table of contents

Introduction 1–14

Management Commentary 15–54

Corporate Governance and Remuneration Report 55–92

Financial Statements 93–160

Further Information 161–168 2 Introduction 2017 in review 2017 in review ­ financial CHF 22 share per will for the 2017 proposed be dividend Unchanged mobile telephony. packages comprising TV, Internet, telephony and Customers can together put their individual own a offers single package for at home and on the move. Swisscom has radically simplified price plansits and 1.3 mn inOne revenueNet CHF bn 11.7 customers mobile offering. mobile price fixed-line its streamlined has Fastweb

plans and launched anew

year at the Annual General Meeting.

EBITDA CHF bn 4.3

the allowance expire not at does Switzerland in which the data is the first subscription package in SimplyMobile

end of theend month. of

Net income Net CHF bn 1.6 ­bl is the name the of newcompany driving forward Ltd Blockchain­ Swisscom 50 ­c gainedIt ISO 14001 environmental standard Swisscom has had ateam working for the environment. sustainability. of in the service Since 1997, years 20 ertification in 1998. ertification Today, ockchain applications in and for Switzerland.

products with sustainability with products benefits.

full a offers that subscription is the name the of newmobile Flat Fair Wingo

service at an attractive price. an at attractive service ­ S wisscom offers some wisscomsome offers Capital expenditure Capital CHF bn 2.4 ­

(full-time equivalents) (full-time Employees 20,506 for mobiles too. advertising calls is now available unwanted counteract to filter Call over the past four years. (IP) Protocol Internet to telephony from conventional fixed-line lines of 90% have switched been IP All and CHIP confirm that for the trade conducted magazinesThe results tests of Connect network Best ­S wisscom’s is the best. network Switzerland lines Mobile mn 6.6 of operation up and setting the the far theSo only package for ICT Smart ­S offeringsfrom Amazon for SAP, together with Cloud and Enterprise­Service Cloud adding by Enterpriseportfolio Swisscom is expanding cloud its Cloud

ervices and Microsoft Azure. and Microsoft ervices

telephony and IT.

digitisation SMEs of to include Switzerland connections Swisscom TV mn 1.5 ­ g lobal lobal Web Web

wisscom customers’ against threats on the Internet. protected aredevices even better means Guard Internet the In 11 customers cities, can surf ­telephony mobile in Gbps 1 environment. Gbps radio per cell in atest transmission capacities over of 20 and isof conducting the first tests the 5G development forward of Swisscom is working hard to drive 5G 1

Gbps. ­Internet up at speeds of to ­ S Italy lines Broadband mn 2.5

3 Introduction 2017 in review 4 Introduction KPIs of ­Swisscom Group

In CHF million, except where indicated where except million, CHF In wisscom Group KPIs of employees full-time numberAverage of equivalent year of end at Full-time employees equivalent Employees share per Dividend Closing price lowest highest price Closing period of end at Closing price year of end at capitalisation Market issued shares of Number Swisscom share lines in Italy access Mobile lines in Italy access Broadband in Switzerland lines wholesale access Broadband lines in access Switzerland fixed Unbundled (RGU) units generating Revenue Switzerland lines in Switzerland access Mobile lines in Switzerland access TV Swisscom in Switzerland lines retail access Broadband lines in Switzerland access telephony Fixed period of end at data Operational period of end at debt Net assets intangible and plant and equipment in property, expenditure Capital cash flow free Operating year of end at ratio Equity year of end at Equity flows cash and sheet Balance shareEarnings per income Net (EBIT) income Operating revenue net asEBITDA %of (EBITDA) and amortisation depreciation before income Operating revenue Net Net revenue and results 1

n accordance with the proposal of the Board of Directors to the Annual General Meeting. General Annual the to Directors of Board the of proposal the with n accordance I

­ S

in t in t in t in t in t in t in t in t in t in t housand housand housand housand housand housand housand housand housand housand number number

CH CHF CHF CHF CH % % F F

11,662 20,506 429.80 51,802 518.50 20,836 12,165 26,859 527.00 22.00 1,467 4,295 1,065 1 2,047 2,014 6 30.31 2,131 2,451 2,378 2,159 7,447 7,645 36.8 34.7 ,568 ,637 2017 107 435

1

11,643 426.80 12,389 51,802 528.50 21,543 21,127 456.10 23,627 1,604 22.00 2,148 4,293 6,612 1 1,418 6 30.97 7,846 2,367 2,416 1 2 30.4 36.9 ,992 ,522 ,791 ,355 2016 364 128 676

–16.4% –13.5% Change –0.8% –5.1% –3.3% –2.2% 13.7% 13.7% –1.8% –2.9% 20.5% 19.5% –2.1% –1.6% 17.2% 5 0 0.0% 0.0% 0.0% 4.1% 0.4% 1 3.5% 7.5% .2% .1%

Business overview for SMEs. for 3.5 bn CHF bn 3.5 EBITDA 9.0 bn CHF Revenue networks. to service telecommunication other The Wholesale segment provides Wholesale IT maintains and the network The division plans, operatesand IT, Network &Infrastructure customers. for corporate structures and operatesentire infra ICT Customers designs, implements or or Whether voice ordata, mobile Enterprise Customers offerings as well ICT as andbroadband, mobile TV include These telephony,services. mobileoffers and fixed-line ResidentialThe Customers division Residential Customers ­ Switzerland Swisscom

infrastructures in Switzerland. fixed-line, individual products integrated solutions: Enterprise the S ­

providers with access providers access with wisscom fixed and mobile

solutions - for corporate customers. for corporate and customised solutions services comprehensiveprovides network operator). also It network an onthe basis phone services of In and customers. corporate forvideo-on-demand residential as well services as and TV comprises voice, data, broadband in portfolio Italy. product Its services broadband of providers Fastweb is the one of largest Fastweb 0.8 bn CHF EBITDA CHF bn 2.2 Revenue

addition, Fastweb mobile offers

MVNO contract (asMVNO contract avirtual directories (localsearch). directories online and directories telephone encompasses business with business models and also digital and services Internet areasgrowth in the fieldsof Business unit is on focused in core businesscomplements its (Billag),and collection (Swisscoming services Broadcast) maintenance (cablex), broadcast of subsidiariesWith in the areas Segments Operating Other 0.2 bn CHF EBITDA CHF bn 0.5 Revenue

related areas. ThenewDigital network construction and and construction network S ­ wisscom wisscom - 5 Introduction Business overview Visiting the historic cable tunnel on Bollwerk street in Berne, where the latest fibre-optic and copper cables provide parts of the city with Internet. market performance permitted permitted market performance challenging environment and achieved the targets set for 2017. An impressiveWe have succeeded once again: Shareholders Dear letter Shareholders’ the highest accolade among all international tested. networks ­S for 70% 2017 of capital expenditure. investments These are paying off:German magazineindustry CHIP named diture still nevertheless accounted for 20.4% revenue net of (prior year: 20.8%). CHF 2,378 million over the previous year given the expansion, enhanced of network our efficiency capital expen Swisscom continued to invest heavily infrastructure in in its 2017. Despite being marginally 1.6% by down to level ahigh at still expenditure: Capital while incoming orders grew 31%. by theof year. In the fiercely competitive market for corporate customers, consolidatedFastweb its market position, reason for this marked increase was Fastweb’s mobile launch phone offeringsover more of attractive the course mobile telephony, up connections with 58% by to more than 1million customers in astagnating market. The conditions, Fastweb’s broadband customer base grew 4.1% by to 2.45 million in 2017. also It made in strides Fastweb is performing well. revenue Net 8.3% roseby year-on-year to EUR 1,944 million. In spite difficult of market telephony mobile in growth strong Fastweb: revenue increasing from bundled contracts year-on-year 13.4% by to CHF 2,837 million. 2.7 million had connections already for inOne. opted This makes it i.e. just nine the months launch after the of line, flexible product more than1.3 million customers with around We are also successful extremely in the market our with newcombined package inOne: as at the end 2017, December of months than nine less in customers million than 1.3 more inOne: in November Entertainment with OS3, afully overhauled operating asimplified with system user interface. in popular spite providers. strong Themost of competition from television cable network in Switzerland was upgraded thing which of proud. we are Thenumber very of this: amarket with share 33% of (prior year: 32%), is it Switzerland’s popular most offering. digitalsomeAnd TV Broadband were connections (+1.1%) up 22,000 by to 2.0 million year-on-year. share in mobile telephony virtually in stable afiercely contested market. slightly (0.4%) million to 6.64 compared the with prior year, saturationof are also emerging in the mobile telephony market. Although the number roseonly connections of lines, the number fixed-line of phone fellconnections by year-on-year320,000 to around 2 million.The first signs line telephony and lower income more and from roaming As more customers are giving services. up their land Revenue in the Swiss core business fell slightly to CHF 9,058 million, mainly due to declining revenue from fixed- previous year at CHF 1,568 million. ciation and amortisation (EBITDA) at CHF 4,295 million. income Net also virtually remained on apar the with Swisscom’s­ revenue net was at stable CHF 11,662 million, as consolidated was its operating income depre before Swisscom generated revenue and earnings that were in line the with previous year in an increasingly fierce market. pressure market high of spite in targets its achieves Swisscom base. customer revenue expanding and its growing its performance, practically on apar with the previous year. Fastweb also posted another pleasing wisscom as while gave having our Connect themobile network, grade “outstanding” the phone best network – ­ S ­ S wisscom to generate revenue that was revenuethatwas generate wisscom to wisscom held its ground in an extremely S ­ wisscom TV connections rose by 3.5% roseby connections wisscom year-on-year TV to 1.47 million S ­ wisscom nonetheless managed to market keep its S ­ wisscom’s successful ever, most product with ­ S wisscom in Switzerland accounted ­ S wisscom TV is astrongwisscom driver TV of - - - - 7 Introduction Shareholders’ letter 8 Introduction Shareholders’ letter included digitising the commercial registers individual of cantons up and an setting international trading platform Blockchain Ltd the with aim tapping of into this field rapidlyas possible. as embarked The projects upon first More finely tuned corporate strategy for sustainable growth sustainable for strategy corporate tuned finely More the Switzerland,of whole of especially rural areas. towards technology-neutral access regulation reduces the incentive to invest in infrastructure –to the detriment adjustment to the ONIR limits and the associated measurement finally: And methods. the revisionof the Tele launch mobile generation. theprerequisitesecond of The fifth wouldbe a modest upa setting for 5G network This year should also the allocation see newmobile of frequencies for 5G bands prerequisite –avital for the proposal to increasementary the minimum bandwidth under the universal from 3to 10 service Mbps is pending. Swisscom’s licence to provide auniversal in Switzerland service has renewed for another been years. five Aparlia challenging remains environment Regulatory thewith decommissioning the of old infrastructure in these locations. regions Switzerland of has under been way 2018, since of the which start will allow matic filter for blocking unwanted advertisingcalls. Work on fullthe migrationof customer lines to IP in the major are already profitingfrom HD voice quality,personalised block lists, automaticcaller identification and anauto The digitisation (All theIP of fixedtechnology) network is progressingschedule. on Today,over 2 million customers from the fieldof FinTech to disruptive technologies such as blockchain. In 2017 outsourcing to the cloud as entrepreneurial areas Other opportunities. in which business we see potential range unleash in asizeable itself wave. and sometimes they recognise because do not theThis value added offers. it is creating abacklog that could well sufficientlygot to gripswith digitisationbecausenot – least they lack the time,resources to do so, expertise and Studies partners. logue local with show that small most to medium-sized enterprises in Switzerland have yet not healthcare, on financial transactions, on dealings with the authorities, on B2B, on energy, on or on transport dia that will play an even more prominent role in our daily lives and in cases encroach some on sensitive areas: on for success will factors These also be decisive for the phase second digitisation. of is It now all applicationsabout is intuitively.but understood This holds true for all innovations: they are only successful when their value added no longer explained, to needs be value added whose was immediately recognised all by customers –and which they could no longer do without. potential. Technical terms such as “IP-based broadcasting” and “cloud recording” were turned into aproduct to market that was brushed not by consumers off as a technologicalrather fad but embraced offeringas real incomprehensible such as data factors volume years ago. In ­S which is the filter for blocking unwanted advertisingcalls. Ideas such as these have a long tradition at we are doing to our constantly utmost inspire our customers innovative with ideas –one current example of concludes that Rethinking things or thinking in anewlight leads to value-adding St. innovation. HTP by Gallen conducted Astudy organisational and structures on tapping into newareas business. of CHF 100 million year. per At the same time we are focusing on agile and more streamlined working models and business areas in growth such as the cloud and security, Given the persistent market pressure in the core business and the time and to resources establish needed new announced annual that would its it cutting be base in cost Switzerland around by CHF million 60 year per 2020. by new business despite the decline activities, in our core business. example, For in 2016, February We are currently working on improving future and continue to inspire customers in an increasingly world. we And want to grow. networked customer and as acompany. The upcoming major second wave digitisation of will change our of day-to-day key aspects as lives both aresidential c ommunications could (TCA) have an Act on investments impact adverse in the pipeline, since aparadigm shift wisscom introduced innovative mobile phone subscriptions that are no longer billed on the basis largely of ­ S wisscom is the third innovative most company in Switzerland. We are pleased this. about Because ­ S wisscom as market leader to wants play adefining role in the technologiesof the S ­ wisscom aims this to exploit increasing future demand and IT for services IT S ­ wisscom’s health. This should assist us in raising sufficient funding for S ­ wisscom TV, ­S wisscom is raising this target for 2018 to 2020 to S ­ wisscom successfully brought aproduct S ­ wisscom founded ­ S wisscom to push forward S ­ ­ S ­ S wisscom: wisscom wisscom - - - ­ Yours sincerely Yours curious. trustworthy, Committed, facing uncertainties and is it because confronted major with challenges. We want to seize this opportunity. a trailblazer should it remain. Which is why we keep doing what in we do. Not spite of, the because but world is terms andaffi technology of its to –a customers picture nity diff that is very erent from the1980s And and1990s. commitment they demonstrate to Swisscom day. every much So that so today Switzerland is atrailblazer in both our sincereextend and thanks gratitude for the respect our to passionate our utmost employees, who deserve itself, for also, thebut entire to extent, some country. We thank you for your trust and your weloyalty. But also and our with customers and employees, acompany that has changed things. has It changed things only not for In a time rapid of change, ahead a future of shaped uncertainties, by we have created you, with dear shareholders, thanks Sincerest Swisscom share continues attractive. to be Meeting payment an of unchanged dividend CHF of 22 share per for the 2018 fi nancial year.canAs you see, the expenditure less of than CHF billion. 2.4 the If are targets met, Swisscom will to the propose 2019 Annual General 2018,For revenue net around of Swisscom CHF 11.6 expects billion, EBITDA around of billion CHF 4.2 and capital Outlook taking the gain in the share price into account, this translates into atotal return 19.4%. of The Swisscom share price 13.7% roseby in the year under review. Based on the closing price at the end 2016 of and Swisscom to maintain seeks and dividend a stable paid policy an out ordinary dividend CHF of 22 share per in 2017. Shareholder return and Swisscom just could not anational become even but an international pioneer in this area. for fi lm and television rights.There is a clear andfor obviouscentral need applications built around blockchain– Swisscom Ltd Chairman the of Board Directors of Loosli Hansueli CEO Swisscom Ltd Schaeppi Urs 9 Introduction Shareholders’ letter 10 Introduction Welcome to the networked world the networked world. networked the Welcome to Welcome to Welcome to scenes in areas where we give our best. The following profiles provide a glimpse behind the ­s because it is the basis for all of the products and the best service and the best network day in, day out – We are committed to delivering the best quality,

ervices that S ­ ­ S wisscom! wisscom offers its customers.

“We support our customers on-site in the case of a fault with the aim of providing them with the very best customer experience. Our services range from providing customised advice to guaranteeing interruption- free access lines, confi guring devices and integrating them into home networks.”

Edvin Caminada Service technician

Installations, fault rectifi cation and support for residential and business customers. On-site advice and sale of Swisscom products.

Approx. 850 technicians and 400 partner employees are working for our customers.

2,100 customer visits take place every day on average. “We are expanding and maintaining the best network – even during high winds and bad weather. It is physically demanding to splice and lay optical fi bres and climb up overhead lines. But I view it as a challenge and I am proud to be able to apply what I have learned directly on-site.”

Tiziana Conzett FCP apprentice network electrician specialising in telecommunication

In 2018 Tiziana will be the fi rst woman to complete her apprenticeship as an FCP network electrician.

1,500 employees and 80 apprentices work in the fi elds of network planning, construction and maintenance at subsidiary cablex.

In 300 municipalities every year, Swisscom is expanding its network.

Over 400,000 homes and businesses are connected to Swisscom’s fi bre-optic network every year. “Thanks to targeted research, we have developed a measuring procedure for displaying spatially averaged results of electromagnetic fi elds. This is based on international norms and is easier to reproduce than the manual method used in the past.”

Peter Fritschi, Project Manager, measurement robot Manuel Haag, Senior Innovation Engineer

Development of a robot that improves and automates the measurement of electromagnetic fi elds.

Ten times more stringent than the international average – precautionary limits in Switzerland.

More precise The use of the new measuring procedure ensures that transmitter emissions can be evaluated more realistically and precisely.

5G The applicable precautionary limits are an impediment to the introduction of new mobile technologies such as 5G. 99% of the Swiss population are equipped with 4G. 80% have 4G+, with up to 300 Mbps.

1 Gbps “We have done our job well when the more than can be reached in 11 Swiss cities. 440,000 travellers every day at Zurich Main Station can benefi t from the best mobile phone network. We work even when others are asleep.”

90% Pirmin Egloff of mobile sites in urban areas have Mobile communication technician reached their limit in terms of capacity and cannot be expanded any further. Guaranteeing the operation, fault rectifi cation and maintenance of all antenna locations and mobile radio cells. Management Commentary

Strategy and the Corporate strategy ______16 Objectives and achievement of targets______18 environment General conditions______19 Data protection ______23

Infrastructure Infrastructure in Switzerland______24 Infrastructure in Italy______27

Employees Employees in Switzerland ______28 Employees in Italy ______30

Brands, products and Swisscom brands ______31 Products and services in Switzerland______32 services Products and services in Italy______33 Customer satisfaction______34

Innovation as an important driver______35 Innovation and ______development Targeted innovation 35

Financial review Summary______39 Segment results______40 Depreciation and amortisation, non-operating results ______43 Cash flows______44 Capital expenditure ______45 Net asset position ______46 Value-oriented business management______48 Statement of added value______49 Financial outlook ______50

Capital market Swisscom share______51 Dividend policy______52 Indebtedness______52

Risks Risk situation______53 Risk factors______53 16 Management Commentary Strategy and the environment Corporate strategy strategy Corporate Trustworthy, committed and never losing sight of what is important. technology and innovation leader, and offering its customers the best. Swisscom’s corporate strategy is aimed at securing its position as amarket, environment the and Strategy their customer The is experience location. high-performance ona based infrastructure. ­c trust is everything of at the heart stance towards development further and sight never loses what of is when pursuing important goals. its inspirational experiences. ­S customers. In an increasingly is world, it taking networked and an role assertive in active shaping the future. as amarket, capacity In and its technology innovation leader, resources are available. business. Theresulting lower revenue in order and income offset toto be ensure need that sufficient financial tition even further. developments These have pressure exerted on the revenues generated in the companies are using their economies scale and of forcing themselves markets, into ICT stepping local up compe corerated market is becoming increasingly fierce,which is in turn intensifying price pressure. Global Internet and content,changing customer requirements and rapid technological progress. onthe satu competition The this of ples include increasing exponential the connectivity, datagrowing growth, data significancesoftware, of The market environment in which business. ­ Swisscom’s and the advancements made in the fieldof artificialintelligence medium-term to are short trends that impact The increasing proliferation the of Internet Things, of the 5G mobile telephony standard being ready for market changing and the economy our in the society long run and have along-term of on the impact activities Megatrends such as digitisation customisation and connectivity, and demographic change are shaping and provider retail for both and business customers in the Italian fixed-line market. occupies aleading market position in awide range business IT of Fastweb segments. is the leading alternative Swisscom is the Swiss market leader for mobile telecommunications, fixed-line telephony and television.It also General growing. aresult, As nological leader. Customer requirements vis-à-vis the availability are constantly and the of performance networks customersits to offer the IT latest and communications position infrastructure and its therefore as a tech assert In order to inspire customers, its customer experience Best help tostrategy. define the ompany’s In order to make activities. vision its areality, wisscom focuses on the needs of the people in everything that it does. Its employees towisscom work provide Its inthat concert in focusesdoes. on the the it of everything needs people Best customerBest experience ­ S wisscom up is that and setting operating are to second none networks in terms security, of S ­ wisscom is committed and trustworthy in its actions, consistentlywisscom actions, in its is and committed takes trustworthy acurious Together we inspire people in the networked world. networked the in Together people we inspire S ­ S ­ wisscom has at all to provide service times, them regardless the with best of As number 1, we are shaping the future. future. the shaping we are 1, number As S ­ wisscom operateshas changed radically in recent years. Characteristic exam wisscom and does, is reinforced the by reliability and sustainability the of Operational excellence Operational S ­ wisscom has three out strategic set aspirations which ­ S wisscom connects both residential both wisscom connects and corporate S ­ New growth New wisscom therefore aims S ­ wisscom core ­ S ­ C wisscom. ustomer - - - - analytics. In additionanalytics. to this, theof online channel, increasing the level process of automation and the greater use artificial of intelligence and ment is the internal digital transformation, which includes the virtualisation improvement functions, network of deployments, and staff optimisingbeing processes drivenby initiatives such Allas IP migration.Another key ele using agile development modernising methods, and consolidating the increasing platforms, IT of the efficiency the creationoperating efficient of procedures, example for by simplifying and adjusting portfolio, the product for developing newbusiness and opportunities secure profitability.of One the main focuses in optimising is costs of price competition and marginthe effects erosion.This is the onlyway whichin years few base inmises over cost order the next its to remain financially successful in the long term and to absorb the whole declining, resulting in even greater pressure. cost is It therefore key that Due to fierce competition, the revenuesbeing generatedby national telecommunications providers are service on excellence Operational the company, reinforcing to the brand customers’ and increasing loyalty agility and efficiency. customers.focuses on meeting In its thethis of needs way, offeringsupport for technical enquiries. When creating new experiences,digitaland services user interface. customers a personalised its one of and thanks entertainment every service todevelopment the the further of relevant, innovativesegment,TV offerings. In the Repair Centres, akey which customer meets requirement. example, For customers can have contact. of their damaged mobile phones repaired in no time at all in the nine count on us as reliable acompetent, and partner that enjoy is service individual, flexible personaland at allpoints principles and are inspirational service to provide the best experiences across the board. The key to the success enjoyed by solutions into hybrid environments. complements cloudown global with its solutions, thereby operating provider as that a service also integrates when utilising the company’s offerings.The thewith latest technologies (such as 5G), availability expanding and By performance. and upgrading fixed telephone its infrastructure and mobile network for example. models and organisational the development structures, relevant of key skills and technological transformation, striving to transform the corporateculture. To achieve this, will it focus on agile and customer-centric working ­s means by horizontal of customer portfolio solutions in relation to the cloud and digital security, high-quality thanksItaly to development the the further of mobile communications market, the expansion the of business realisation opportunities. growth of ­pa and platforms (such as blockchain). areas, When growth selecting on marketplaces (such as siroop and Mila), for digital SMEs (such services as localsearch), andtechnologies support launching are areas. based on newbusiness in newdigital these services of Some selected services models, focusing –as well services as theICT solutions business relating to digital and in security the cloud segment. in the medium too, such term as in healthcare other sectors, and banking –in which newconsumerof applications in the area the of Internet Things of (IoT). There for growth are opportunities further in entertainment growth of (such and in Wholesale as making or TV) by that use opportunities of arise as aresult Swisscom to wants realise developing further by core business opportunities its growth –for example means by market. telecommunications the in remains at ahigh that level, to the aslight extent drop in market on the whole, particularly revenue is expected to be industries of in awide variety andICT the relatively lowbroadband penetrationin Italy. price pressure Nevertheless, steadily on the whole. Themain driving forces behind this population are the increase modest growth, in use of Swisscom anticipates that the figures for the relevant markets in Switzerland Italywilland continue to grow growth New the network. ­u andvision forms services the of basis for new, scalable offerings that are produced in Switzerland. In develop order the further core to businessboth and also tap into newbusiness areas, due transparency, to its fairness and simplicity. focuses on future-orientedments, business models substantial with and is growth making increased use of ervice, the utilisationervice, partnerships of as which wellan cuts impressive as aconvergent portfolio figure product tilising an intelligent mix technologies of and reducing by the number involved partners in of the expansion of rtnerships. In addition mentioned above, to Italian the activities subsidiary Fastweb is playing akey role in the S ­ wisscom is also continually upgrading offerings, personal – service thesuch its with as Service My S ­ wisscom is increasing example for activities, itsby of investment the efficiency ­ S wisscom relationships is its customers. Thecompany’s its with main guiding ­ S wisscom is improving Fastweb’s market position and achieving in growth S ­ ­S wisscom is ensuring that customers enjoy its experiences the best wisscom Cloud is the key for the platform internal and external pro S ­ wisscom is continually simplifying operability and offers each S ­ S ­ wisscom is thus reducing and providing complexity wisscom is restoring customers the trust have its in S ­ wisscom is guided future by customer require ­ S wisscom can release the funds ­ S S ­ wisscom consistently opti wisscom provides vertical S ­ ­ S wisscom is continuously wisscom customers can S ­ wisscom always S ­ wisscom is ­ S wisscom - - - - 17 Management Commentary Strategy and the environment 18 Management Commentary Strategy and the environment

> wisscom’s sustainability and climate reports. ResponsibilityCorporate team. Clear mentioned. governance for the activities exists the with lies activities these management and of Coordination this programme. of progress the of reporting and climate change; creation and implementation aprogramme of relating to the issues determined; and monitoring Climate includes protection the following in particular: activities analysis and the of opportunities risks caused by able in mendations the of Task Force on Climate-related Financial Disclosures (TCFD). Further detailed information is avail > to the company’s core business. are centred around activities These the following areas: seven action focus on issuesactivities that have high relevance for stakeholder groups and at the same time are closely linked Swisscom is to developing committed and amodern future-oriented Switzerland. Corporate Responsibility Its responsibility corporate in Forerunner 2 1 Ultrafast broadband inItaly Ultrafast broadband inSwitzerland O Operational Excellence and equipment andintangible assets Capital expenditure inproperty, plant (EBITDA)and amortisation Operating income before depreciation Net revenue F into consideration.and social factors strategy, Based on its targets of achievement and Objectives >

> > > >

eady announcedin2017,thefinancialtargets for 2017have been adjustedas follows asa result of compensation from legal proceedings involving Fastweb: inancial targets inancial Basis: 4.3millionhomesand0.7businesses(S E As alr

ther targets BITDA ofapproximately 4.3bn. CHF conditions for more than million two 2020. by people F public and achieve a“Citizenship” 70 score of 100 of (Reptrak points out standard) 2020. by 35% compared to 1January 2016. Together customers, its with E bandwidth around Mbps 80 –with of 85% achieving connections of 100 speeds of Mbps or higher. N Su M W At people to use thepeople media safely and responsibly. and alsosector provide one million to use mobile working the with opportunity people models. as emits through it operations its including the supply chain 2020. by air supply chain: Inair supply the interests afair of supply chain, By 2020, By protection: climate and efficiency nergy etworked Switzerland: the end 2021, By of all of 90% some homes and businesses will have aminimum edia skills and security: Swisscom security: and aims skills edia the to market be leader 2020, by in data security helping one million By 2020, By life: and ork Swisscom wants to be one of the most attractive employers in Swisscom Switzerland attractive the one to of wants most be 2020. by employer: tractive stainability image: stainability S ­

1

S ­

wisscom various has itself short- set and long-term that targets take economic, ecological

Swisscom to wants improve sustainability the way its perceivedare by the efforts S ­ wisscom aims supporting to be one million offerings its with in people the healthcare

2

wiss Federal Statistical – Office SFSO).

C orverage of13mnhouseholdsby theendof2021 In 2017,r eduction ofcosteduction baseinSwiss business C overage of90%by theendof2021 ­ S wisscom plans to increase by another efficiency energy C apital expenditure for 2017 S ­ Gr wisscom is to improving committed employment of ar oup revenue for 2017 of ar of ar in e with FTTHandFTT ound CHF 11.6bn ound CHF S ­ xcess of80Mbps ound CHF 2.4bn ound CHF ound CHF 4.2bn ound CHF wisscom is aiming as to save much twice CO E BITDA for 2017 b y CHF 75mn y CHF Objectives S

­S wisscom applies the recom T arget achievement 2017 achievement arget CH CH CH 60% or8mn F 11,662mn F 2,378mn F 4,295mn Achieved g ­ eneral 55%

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2 1 Closing rate CHF/USD Closing rate CHF/EUR Yield ongovernment bonds(10years) Change GDPItaly Change GDPSwitzerland therefore onfinancial reporting. and USD) have aconsiderable influence on The three the of economy (Switzerland macroeconomic factors and Italy), interest rates and exchange rates (EUR environment Market conditionsGeneral hedged by foreign currency forward contracts. foreign by hedged contracts. currency forward money paid in out foreign currencies is higher than income. cash Thenet flows in foreign currency are partly outsideSwitzerland. operators of from network In thetion services core of business in Switzerland, the amount of Transaction risks primarily exist in the purchase end and of devices technical equipment as well as in the acquisi The exchange rate trends for foreign currencies on the impact have little very Currencies recognised in the consolidated financialstatements. designated for hedge accounting. Changes in market interest rates can result in high fluctuations fairin values In addition, ling CHF million. 500 84% financial of liabilities were charged a fixed interest rate. The average maturity is 5.3 years. thisexploited in 2017 and reduced the average interest expense to 1.7% (prior year: 1.9%) issuing by bonds total on ten-year government bonds increased slightly in 2017, they remain at ahistorically lowlevel. very impairment assessment recognised of goodwill and other items in the financialstatements.Although the returns pension liabilities in the consolidated financialstatements. In addition, ratesinterest are a key assumption for the The interest rate level has an on funding impact valuation the and also costs of long-term affects provisions and Interest rates ­F Economic fluctuations tend to have a larger on salesthe impact and revenue Italiangeneratedby subsidiary is more sensitive to cyclicalfactors. outbound traffic are included in the monthly fixed charges.business Project in the EnterpriseCustomers segment (inbound and outbound). alarge Nevertheless, and ever-increasing the of roaming in proportion terms services of from roaming is to subject increased services volatility due to being reliant on trips made outsideSwitzerland of fixed with monthly to charges,products attributed meaningeconomic fluctuations arelow. In revenuecontrast, on customer Ahigh segments. share the of revenues generated in the Residential Customers segment can be (GDP), despite the unabated inflation. lowrate of very Economic developments are havingrangewide a of impacts In the year under review, the Swiss economy grew approximately by 1% measured gross by product domestic Economy has classified been as a currency hedgeof carrying the amount. net Fastweb foreignof subsidiaries amounted to CHF 1.7 billion at the end 2017. of the of financial Aportion liabilities in EUR recognised and in equity have on the no impact results. Cumulative currency translation adjustments in respect the exchange rate applicable on the balance date. sheet Any differencesfrom the foreign currency translation are thethose of other foreign subsidiaries are translated into Swiss in francs the consolidated financialstatements at translation risk in the balance Fastweb’s which assets, sheet. net totalled EUR billion 2.8 at the end 2017, of and to 25%. In addition to the transaction risks on the operational cash flows in foreign currencies, there is a currency in EUR. thelesser last Over extent three years, the share the of funding denominated in EUR has gradually increased orecast Istat orecast SECO astweb for both residential for both astweb and business customers. F F

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2 1 19 Management Commentary Strategy and the environment 20 Management Commentary Strategy and the environment www.swisscom.ch/ targets_2018-2021 www.admin.ch www.admin.ch See See See

place. fromthe 2018 period to 2021. Thegoals for the previous 2014 of period to 2017 will to alarge remain extent in goals as well as goals relating to partnerships and investments. In 2017, the Federal Council approved the goals for Confederation as principal shareholder aims to achieve. include These financial strategic, personneland policy would to subject afacultative referendum. be four Every years, the Federal Council defines the goalswhich the government to dispose the of majority holding, this would require achange in the corresponding law, which work for capital marketobserves law, including the provisions concerning management remuneration. Thelegal frame company law and the Telecommunications as alisted capacity Enterprise In company, (TEA). its Act Swisscom is apublic limited company special with status under Swiss law. Corporate governance is governed by Swisscom’s legal framework environment Legal to the consolidated financialstatements 3.5).(Note statuseslocations. of The the office proceedingspotential post andof the out set financial in are thenotes effects vision and the live broadcast the of on ADSL paybroadband events sporting of wholesale TV services, connections as being conduct its unlawful, and has thus financial imposeddirect Thesanctions. proceedings refer to the pro which of the Competition Commissioncontext (COMCO) has classified market-dominant in awide range submarkets. of There are currently proceedings for open three issues, within the market-dominant by conduct companies. Swiss The authorities competition have classified isvices highly relevant for aresult theAs of company’s market position, competition law and for various ser (Federal Act) products Cartel (CartA) Act Federal Cartel awarded and the future framework conditions for the use the of frequencies. ranges will likely take place in 2018. decision No has made been as regards the way in which the ranges will be onwards bands (frequency MHz). MHz to 700 3,800 and MHz, 3,400 1,400 Therequisite awarding frequency of that allwith there technologies. will is It expected newmobile be communication frequencies available from 2019 CHF 360 million and paid the total amount in the same year. The licences run until the end 2028 of and used can be mobile communications were in sold an auction. Mobile phone licences are usually awarded means by public of tenders. In 2012, all ranges the of frequency for licence phone Mobile basic service. fund. sector-specific Up until now, for the disabled.services Thelaw provides that the the of basic overall are costs compensated net service for via a functional telephone line, Internet access aminimum with data (download) transfer 3 Mbps rate of and various arements determined periodically the by Federal Council. Thecurrent licence (2018 to 2022) comprises amulti population in all regions as well the of country. services of as Thescope the related quality and pricing require The aim the of basic is to provide reliable service and affordable basic telecommunications to of the allsections provision Basic service access) network (technology-neutral of the ongoing andis the hybridsubject fixed networks revision.TCA access regulationThe question whether network of should expanded to be include built newly fibre-optic-based provider seeking access cannot come to an agreement with only makesauthority ogies. The supervisory a decision about the access specific conditions (including price)if the cost-based this of provision, part service prices. As physical to access copper-based is network restricted technol Swisscom is required to grant other providersand access fixedtelecommunications tonetwork its at services access Network radio frequencies. Thegovernment is currently deliberating on revising the TCA. andThe TCA the associated legislation primarily access, basic provision govern network service and the use of Telecommunications (TCA) Act requiresThe TEA the Swiss Confederation to hold thea majority of capital and voting rights in Telecommunications and relationship (TEA) Enterprise the with Swiss Act Confederation (CartA). Act Cartel ­S wisscom’s business is primarily activities the Federal Telecommunications and (TCA) the Federal Act S ­ wisscom. The Federal Cartel Act allows sanctionsimposedfor to unlawful forwisscom. be direct Act TheFederal Cartel ­ S wisscom has abstained from bringing the to overall bear for costs the net ­ S wisscom acquired 42% bands the of for frequency auctioned S ­ wisscom on the conditions negotiation). (primacy of ­ S wisscom as being market-dominant and ­S ­ S wisscom. Were the wisscom as being S ­ wisscom also ------

100% fell. The proportion of mobile of fell. users subscriptions postpaid with The proportion now stands at 70% (prior year: 65%). ­p at around mobile Thepenetration with access lines 11 million. in Switzerland remains in the As 130%. about ­s market share remains unchanged from the previous year (postpaid: at 60% 62%; prepaid: 57%). Mobile communicationsMobile market and brands. third-party secondary offerings combining differenttechnologies, services from the corewhile and it products offers business also using and fixed-linebroadband TV Internet, with telephony. connection changes on new, convergent offeringswhich can also contain one or more mobile lines in addition to a fixed Various market participants adjusted offerings of theirduring portfolios the courseof 2017, with the focusof the theof increased price pressure, market most players are being confronted a trendwith towards sinking revenues. increasing pressure. Market saturation is ramping up the fierce competition in almost all submarkets.As a result telephony. Thetotal revenue generates it is estimated at around CHF 12 billion; however, this is being under put The Swiss telecoms market is broken into down the submarkets relevance of to the fixed-line futureof for both and mobile communications. infrastructures provide the idealtive network foundations for this. as welland involved services, as in the security ensuring this availability, play akey role here. highly Modern, effec bandwidths that enable high-quality fast, access to data and applications. Theuninterrupted availability data of to an increasing degree to the developments Internet. These are generating in constant demand growth for high playing an ever role, more storage important with capacity, processing all and relocating services power, software aroundservices the world, including telephony, SMS messaging and streaming Cloud solutions services. are also more global are competitors entering the Swiss telecoms market, offering free both and paying Internet-based is akey trend. In additionconnectivity to the established national telecommunications companies, more and vation and awide range Theconstant advancement voice and of and digitisation of services. data products and The Swiss telecommunications market is highly international by developed standards. is It characterised inno by services IT and intelecoms trends Swiss market consultations on the reference offeringsfrom for TIM for thewholesale2017. services lines of and deactivation andactivation for transferring fixed-line numbers. In 2017, AGCOM alsonew opened includingreductions, in the wholesale prices charged as well for bitstream services as charges the one-off for the approved awide range reference of offeringsfrom TIM for 2015 and 2016.This will bring a numberabout of ­C provisions and regulations for telecommunications companies, which have submitted to be the European authority, leGaranzie Autorità per nelle Comunicazioni (AGCOM), uses amarket analysis as the basis for passing isItaly required to have national legislation in line the with European legislative Italian The framework. regulatory The business Fastweb of are heavily activities influencedItalianby and European telecommunications legislation. environment andLegal regulatory in Italy providers providers operators).­virtual network market Other and players services. additionally products own offer their own mobileas services MVNOs (mobile Switzerland has three separate, market wide-area on which their thethose networks mobile of operators networks network. network. Market share

25% 50% 75% howing signs saturation. of this For reason, the number mobile of lines (SIM cards) in Switzerland has stagnated revious year, the number subscriptionspostpaid of taken increased, out while the number prepaid of customers ommission and the regulatory authorities other of member in states advance. In 2017, AGCOM retroactively 0%

Mobile subscribers Due to the high level market of penetration, the mobile communications market in Switzerland is so thatso available they can and make services products to their proprietary customers over the 2016

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S ­ wisscom is therefore up the setting networks S ­ wisscom’s range likewise includes bundled ­ S wisscom –mobile and fixed-line Swisscom’s ­ S wisscom - - 21 Management Commentary Strategy and the environment 22 Management Commentary Strategy and the environment Fixed-line telephony marketFixed-line the end the of year (prior year: 32%). market leader and expanded on this further leading position throughout 2017, achieving amarket share 33% of at increased the market share offering, digital own its of TV secured the Swiss broadcasting that rights previously for awide range were part for held the sports of by most tition has increased, particularly content. in Various terms TV of national and international companies have that over used can an be existing broadband regardless connection, the of Internet provider. Thelevel compe of offeringsfromother international companies. These international companies TV streaming and offer services market featuresTV awide range offerings of from national market participants, and is now also playing to host almost completely digitised, as the large-scale analogue broadcast of signals TV has discontinued. been TheSwiss In Switzerland, signals TV are transmitted via cable, broadband, satellite, antenna (terrestrial) and mobile. are They market TV lines. unbundled fully and (prior year: 54%) were for broadband access lines in 2017, corresponding to 67% astable market share all of broadband these, lines. 53% Of access lines providers. Telecom telecom of providers service accounted for service more than thirds two new of in broadbandGrowth access thus lines operators cable by provided lagged network behind that the of broadband and businesses. in the As previous year, the number broadband of increased connections around by 3% in 2017. number retail of broadband access lines in Switzerland totalled million, 3.8 corresponding to 85% households of telecommunications of based on the networks At providers operators. and the end 2017, cable of network the widespread most The access technologies for fixed broadband connections in Switzerland are infrastructures Broadband market 2017. throughout offerings new launching participants national and has globalCompetition competitors. gained momentum in the fixed-linesegment owing to market intodeveloped the key access point for customers. is It the basis for a wide-ranging offering both from product participants that so they can supply Thefixed broadband and their services. has connection products increasingly initiativeown at aregional infrastructures are largely level.network These also made available to other market utilities operating in particular cities and municipalities are building on andtheir operating fibre-optic networks coms companies, Moreover, operators. there cable by provided are network market also networks players such as Switzerland has almost 100% coverageAlongside fixed of broadband the offixed-line tele networks. networks marketFixed-line around 11% (prior year: 9%), remains it the one of leading on the Swiss services providers IT of market. aresult,tomers. As and automate processes and integrate existing solutions. integrated of viders digitisation solutions, in the marketThe shifts and innovations IT are creating for newopportunities tor and business related with processes consultancy. ing willingness customised Customers to procure usually to services their external services. individual expect sec This is aresult growth services. the of increasing number business-driven of as well projects as ICT the ever-grow segments offering application-based notably and cloud project-based most infrastructure security and services, years. few over the next The market generated revenue for services IT CHF of 10 billion in 2017 and will continue to enjoy moderate growth market in Switzerland services IT decline was the substitution mobile of for phones fixed-line connections. thewith number of Thenumber fixed-line of cable networks. telephony connections steadilyis declining.This trend accelerated in 2017, Fixed-line telephony is mainly based on lines running providers of the and service telecomthe over the fixed networks ­S Approximately are connections via provided cable or broadband TV of 90% networks. ings. wisscom. This has to position given themselves them the on the opportunity market their with newoffer own ­ S ­ S wisscom fixed-linefalling connections by around 14% to 2.0 million.The main reason for the wisscom is as seen adriver digitisation of in the Swiss economy. amarket With share of S ­ S ­ wisscom expects the strongest growth in the business strongest growth wisscom process outsourcing expects (BPO) and in wisscom end customers and 14% (prior year: 13%) for ­ S wisscom helps companies to improve customer experiences, simplify ­ S ­ S wisscom TV, over the past years. few wisscom also co-creates new IT services with its cuswisscom its with also co-createsservices newIT S ­ wisscom. As one of thewisscom. one of pro few As S ­ wisscom wholesale offerings S ­ wisscom has steadily ­ S wisscom is the ------www.swisscom.ch/ dataprotection See

n broadbandfast coverage has network continued to rise, 70% some with households of now having access to the TIM network (as MVNO”,TIM network a“full including 4G) represents an step in important Italian mobile communications market has stabilised at EUR 16 billion. Therelaunch mobile its offering of on the cessfully gain in a foothold the Italian market. a hard-fought After price war in the past few years, revenue in the ing the market in early 2018. will and to It suc mobile provider own up the attempt to fourth be its network set to customer strengthen loyalty. The French telecommunications provider Iliad has announced that will it enter be Italia, Wind Tre). are These increasingly marketing convergent offers to their large mobile customer bases in order the marketAfter consolidation in 2016, has Italy three major integrated providers on the market Vodafone (TIM, Italian mobile communications market 47% or 13 million households as at the end 2017. of sale offerings from TIM, Fastweb has made significant itsprogress ultrafast broadbandwith coverage, totalling in the residential customer segment and 29% in the major business customer Thanks segment. to the newwhole services. in 2017. Enel Fiber Open intends to offer all telecommunications companies access to the access lines wholesaleas provide 270 towns and citiesatotal with 9.5 of and million began work on the expansion FTTH connectionswith This development has spurred been the by ambitious expansion plans Enel of Fiber. Open Thecompany aims to and at the same time expanded and improved the wholesaleoffering, fibre-optic whichopen is to operators. all changed significantly.TIM significantly increased expansion the its ultrafast broadband for targets infrastructure popular. Due to the intensely environment, competitive the market is under considerable pricing pressure. Convergence offerings and mobileservices. network for communicationsthe fixed becomingare also increasingly andby the increasing new fibre-optic networks of growth of online use such streamingservices, as andgaming penetration in households has increased remains but to 60%, the below European average. This is driven the by Italy’s fixed broadband market is Europe’s largest, a with fourth revenue volumeof EUR 12 billion. Broadband market broadband Italian services telecoms in trends market Italian wisscom to provide strives information on issues relevant in to data non-technical protection language of the detail.andPart in befitting Finally, ­co confidentiality. A central data governance organisation has taskthe stipulatingof and enforcingframework andreviewed redefined. Technical measures have been also implemented further improveto and protection data measures.expands data protection its example, For all employee rights access of to critical data have been isstances data containing personal references handed over to or sold third parties. are on the basis conducted anonymised of and aggregated data no with personal reference. Under no circum data processing of proportion requires the consent Whenever theconcerned. persons of possible, data analyses upopen newareas business. of data in order to provide and continuously to offer customers improvean services, enhanced its experience and to business its of part activities, As protection Data share convergent of customers in the customer base. etwork. During theetwork. year under review, the situation regarding the ultrafast broadband infrastructure in Italy nditions for data processing. S ­ Fastweb is the second-largest provider in the broadband business amarket with TIM, share after 16% of ­ S wisscom is committed to protecting the privacy of the of wisscom persons concerned. A large is to the protecting privacy committed ­ S S ­ wisscom website is dedicated to this. wisscom processes data relating to various people. Fastweb significantly increasing the significantly Fastweb ­S ­ S wisscom processes this wisscom continuously Ultra - - - - - 23 Management Commentary Strategy and the environment 24 Management Commentary Infrastructure by by Rural regions in particular benefit from the highcapital levelof expenditure, two thirds almost whichof is financed that Switzerland information the one of possesses best and telecommunications infrastructures in the world. International studies carried the by out OECD, the Institute forStudies Advanced (IHS) and Akamai regularly show Leading international thanks position expansion to constant forms the basis for the digitisation the Swiss of economy. of strength locations to IP.its All IP enables faster and more flexible processes and operations, and boosting the is competitive lines. planned, As and infrastructure is its Internetnetwork Protocol (IP) technology, which used viacan be copper and fibre-optic that customersto thenow use fact awide range for devices accessing of the Internet. At the of the heart Bandwidth requirements in the Swiss fixed and mobile continuetelephone network to grow.This canbe attributed A uniform basis increasing for demand oil tanks and muchlifts, more. is the latest addition to the the achievement this of aim: the mobile(LPN).and the Low Powerthe Network fixed network network, LPN The a solid foundation for the digital transformation. on the ground both same and strategy in the air –to provide and Switzerland thus network the with provide best telecommunication theThe formSwiss of the backbone information networks society. infrastructure Network Switzerland in Infrastructure service and quality, and is also investing heavily in the networks of the future. Swisscom is unswervingly committed to meeting customer needs and delivering Infrastructure getting ever closer to the customer. the to closer ever getting i.e. Fibre tonection, the Curb Fibre (FTTC), to and the Street Fibre (FTTS) to the Building Optical fibre (FTTB). is as well architectures (FTTH) Home as in network which coppercables are in used the last the of metres few con in combination.line networks When talking technologies, fibre-optic about unique mix fibre-optic of technologies as well as convergent approaches that harness both the mobile and fixed- broadband coverage minimum with bandwidths In Mbps. 80 of doing is so, it focusing on establishing aglobally far,by in both the fixed In the andfixed-line mobile network. segment, from by these the of benefit endspeeds 2018.This makes ­S currently has up speeds of with up speeds of with to and Mbps, 4G+ to 300 4G+ 450 60% In Mbps. addition, In mobile communications, broadband LTE coverage the to of 99% population. now extends the of 80% population broadband in rural regions Switzerland of as is high twice as the EU average. from the advantages ofoffereders nowby benefit As IPtechnology. 2018, corporate customersmajority of to All IP the by end 2017. of This means that around 2 million wisscom already up provides speeds of to 1Gbps in 11 Swiss cities –and the 30% of Swiss population to is set ­S wisscom. According to thecarried by a study out IHS (Broadband Coverage in Europe 2016), the availability of ­ S wisscom, customers and its Switzerland as abusiness centre. The ­S wisscom converted the services and products for almost and all products wisscom the residential services converted customers and the S ­ wisscom network familysuchwisscom as and network machines, objects is to used connect vehicles, ­S wisscom currently that help operates three networks facilitate ­S wisscom the operator in largest Switzerland network ­S wisscom continues to ultrafast expand its S ­ wisscom transferring will start all of ­ S wisscom is referring to Fibre to the S ­ wisscom All IP initiative thus S ­ wisscom pursues the ­S wisscom custom ­ S wisscom - - www.swisscom.ch/ networkcoverage See

addition, lation surfing4G+ of at the web4G+up with of atspeeds toMbps 300 upwith 60% andspeeds to 450 Mbps. In the of 99% Swiss population 3G and 2G 4G, with coverage. Expansion is continuing, the of 80% Swiss with popu Voice Plus call provides users crystal-clear with technology quality. Calling, i.e. IP telephony via VoLTE (Voice over LTE) (WiFi Calling). and WLAN Furthermore, the launched newly HD meansby antennas. of coverage 4G and Thegood the availability buildings in most WLAN of allows for Advanced innovation, they can installed even be in the floor and be also used in business premises and publicindoor areas expanded newmobile with be telephony sites. Microcells can enhance the mobile sites. Thanks to a year.doubles every aresult As and owing to the stringent legal framework conditions, has the mobile network to willfrom also by these the of end speeds benefit 2018.The volumeof data transferred on the mobile network The Mbps. 6 come, such as in digital HD quality which TV requires 10and Mbps or Netflix YouTube in HD qualitywhich needs comparison,of Mbps will 500 of aspeed ensure that for many customers can services use cutting-edge years to 2016. enables G.fast bandwidths up coppercables of (up to Mbps on 500 short to 200 in metres length). way By the became first European telecommunications provider to introduce globallyG.fast thetechnology Septemberin In terms technology, of Innovative us technologiesright put edge the at cutting lines (+24% in comparison to the prior year) were equipped the with latest fibre-optic technology. to the prior year) speeds in with excess 50 of Mbps through continuous expansion. this Of number, over 3.1 million ­S thatwith thus the of mobile ensuring network, asignificantly customerAs at experience.the of end better 2017, broadband provision in regions. certain DSL+LTE Bonding combines the of fixed-line the performance network provisionsal service mandate. Thanks to the newDSL+LTE Bonding technology, is it also noticeably improving those achieving 100 speeds of Mbps or higher. In remote regions Switzerland, of homes and businesses will have a minimum bandwidth 80 Mbps the by of end 2021 of – aroundwith 85% of Swiss municipality should have access to increased bandwidths the by end 2021. of To this all end, of 90% some Swisscom ambitious has itself set goals as regards expansion: network living the people majority of in any given wisscom had established around 3.9 million ultrafast broadband to connections (+8% its service in comparison S ­ wisscom international by is mobile the one of best network standards. ­S wisscom already up provides speeds of to 1Gbps in 11 Swiss cities –and the 30% of Swiss population Fibreglass ­S wisscom has maintained leading its international position. example, For Copper > Fibre to theStreet (FTTS) > Fibre to theCurb(FTTC) > Fibre to theHome(FTTH) > Fibre to theBuilding(FTTB)

Up t Up t Up t Up t S ­ wisscom currently supplies around o 100Mbps o 1,000Mbps o 500Mbps o 500Mbps S ­ wisscom will honour univer its S ­S ­ wisscom wisscom - - 25 Management Commentary Infrastructure 26 Management Commentary Infrastructure to its customersto as its they make their way in the digital world. needs, its tions to meet technology of “Journey to establish in to the the itself Cloud” digital portfolio, transformation. combining By different genera andcustomers.its of externallyInstead forof developing the benefit own its infrastructures, constant change of state on the market up backs other things, they are laying the foundation generation for the rollout mobile The of –5G. the of next technology can process large volumes times, reaction in data of short addition with to those in Zurich and Lausanne. Among alisation is functions bringing network of the about creation newgeographically of redundant platforms that IT (All IP) is increasing the requirements imposed on locations that previously Thevirtu telephony provided services. customersfor securely its data in centres. its to Theswitch data transmission only means by Internet of Protocol offerings in resultedpertotal of in daypetabytes 20 in or 7 2017,terabytes data growth which thanks to partnershipsportfolio internationally with renowned organisations. ThemyCloud and Storebox storage ­S only not bandwidthsIt’s that in are the constantly networks increasing, also but the usage cloud of services. IT infrastructure more than 95% the of Swiss population the by end 2017. of buildings, energy-efficient cities, machine-to-machinenetworking andnew digital applications. LPN The reached LTE standard LTE M1 Cat in 2018. technologies These form the basis for the Internet Things of and thus for smart Things: (LPN). Power the Low Network people. The Internet Things of has an long immense connected and number to devices one another objects of and to networks. ­ in Switzerland, hotspots 5,500 had around units and mobile exterior 2,600 5,800 communication antennas in buildings. around with And shares nearly approximately a quarter its of antenna 8,400 sites other with providers. At the end 2017, of ­n Swisscom is continually range expanding and extending the product increasing broadband its network, the of Things. to create agreat deal advantages of for the economy and companies, particularly in relation to the Internet Switzerland”“5G for programme, and is also in discussions other with industrial partners. ­c digitisation,of enabling up speeds of to 10 Gbps, real-time and reaction much larger capacities. The rollout 5G of and replacement 2G of are scheduled both for 2020. 5G is the mobile communication standard tinue to and exist side-by-side function over the coming years. the old Nevertheless, by and new offered the platforms technologiesnew opportunities andcosts. will cut con continues to make progress, good accompanied the by development applications modern of from that the benefit market-specific, value-addedthat services The areinfrastructure. based on industrialisationthe respective IT of ingly making use the of standardised and partners systemscreatedis turning its by to attention developing its Antenna inthe urrently working together Ericsson, with the EPFL and Ypsomed on research into the newstandard the of as part wisscom provider private, public of as positions is atrustworthy itself It and growing hybrid cloud services. its umber antenna of sites.coordinates It site expansions other with mobile providers wherever feasible and already cable duct 4G S ­ wisscom is the provider first in Switzerland set up to an additional dedicated to the Internetof network

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- - - - IT infrastructure IT infrastructure launched based on afull anewmobile MVNO service agreement TIM. with and 5millionwith technology 8million technology. In 2017, these equipped of FTTC FTTH with with Fastweb also coverage in the 29 end 2020, By cities. of FTTH Fastweb will have over 13 million ultrafast broadband connections, 1 Gbps or 200 respectively. Mbps, In 2016, Fastweb concluded astrategic partnership TIM (Flash with Fiber) to the households technologies and enabling businesses, and FTTS orthe 30% of population, up speeds of to FTTH with reaching the of Italian 60% some population. ultrafast broadband Its are connections around by used 8million spanning consistsnetwork infrastructure fibre-optic a of Fastweb’s network approximately 47,500 kilometres, infrastructure Network Italy in Infrastructure customers. level reliability, of and Thedata performance. centre security is fully for business operational services and hosts theof Fastweb data centres in Milan was the Italy first whichin recognisesto Tierreceive IV certification, the highest mainly for used corporatebusiness in other words services, for housing, hosting One or other cloud-based services. and adapting the centre as well as for the operational tasks Fastweb’s of infrastructure. IT Two data centres are storage capacity. data One centre is managed who is partner responsible atechnology by up, for setting designing consists and around of 1,500 virtual physical servers (4,000 5,500 servers), of databases servers 900 and 5petabytes Fastweb operatesfour large data centres square in area atotal with Italy surface 8,000 infrastructure TheIT of metres. 27 Management Commentary Infrastructure 28 Management Commentary Employees sets out the out key termssets and conditions employment of and the relationship between agreement (CEA) has in been force since 1 April 2015 and will replaced be on 1 July 2018. anewCEA by TheCEA which will the providing social by support partners suggestions for solutions. Thecurrent employment collective the employee associations. In the event any of controversial issues, an arbitration commission must convened be partners. At thepartners. end 2017, December of 83% the of Employees in Switzerland in Employees 959 apprentices Switzerland. in of whom 17,688 or 86% were employed in Switzerland. At the end of 2017, Employees E ment agreement (CEA) and the social plan constitute fair and consensual solutions. Under the Telecommunications transfair staff association) as well as the employee associations (employee representatives). employ The collective Swisscom is to fostering committed dialogue constructive social (the syndicom its partners with union and the Collective employment agreement (CEA) Report. ­ Sustainability amounted to 6.3% (prior the of year: workforce 5.8%). Further information on HR topics found can be in the time employees made up 19.6% (prior year: 18.8%). Terminations employment of employees by in Switzerland employees in Switzerland accounted for 99.6% contracts on open-ended (prior the of year: workforce 99.7%). Part- management in staff Switzerland, also known employmentas the collective agreement. In the year under review, mum standardObligationsofby defined the Code govern the employment law provisions applicable to based on the Swiss Obligations. of Code General terms and conditions employment of which the exceed mini Swisscom staff are employed under private law.The legal terms and conditionsof employment in Switzerland are Introduction employees also includes skill assessments, career advice and coaching sessions to enhance employability. employment and arranges external or internal temporary work placements. Theofferingby provided Worklink to the end the of social plan programme. by changesaffected in skill requirementsset or redundancy. In 2017, foundbefore anew job of affected those 77% inments similar areas in line commitment expertise, of its with to providing fair solutions for older employees ­S Worklink AG, asubsidiary of retraining measures in the long-term event of Responsibility job cuts. for implementing the social plan lies with the social plan makes use the of relevant means to increase the employability employees of and provides for redundancy. provided byto employees coveredby thewho the out benefits CEA are affected sets Furthermore, the of social planThe objective is to formulate socially acceptable restructuring measures and avoid It job cuts. plan Social account employability, of family-friendliness, work-life balance privacy. of and the protection requirements the of working worldthe of future as well as to fall in line market with conditions. takes It particular employee associations rights co-determination of in various areas. has ThenewCEA amended been in the of view Thepast core elements arein out aspects. the set Sustainability grants TheCEA the social and partners the Report. working salaries models, and professional salarypayments, holidays developments, and absences, among other ment agreement. Thekey terms and conditions employment in of out the govern set CEA working hours and nterprise Act (TEA), (TEA), nterprise Act wisscom special also supports employment schemes, such as phased partial retirement place or temporary ­ S wisscom is also obliged to draw employment up acollective agreement in consultation S ­ wisscom had 20,506 full-time equivalent employees, S ­ wisscom. provides employees It advice andin with their support search for new S ­ wisscom were employ workforce covered the by collective S ­ wisscom is also training ­ S wisscom and the social ­S wisscom with with - - - - See report See page 81 page ­p conduct-related contributions. Details on remuneration paid to members the of Group Executive Board are indicators and customer Individual loyalty. is performance measured according to the achievement results- of and business andtargets the the of targets respective segment or division. primarily Thetargets relate to key financial Businessexecutive functions. is performance measured based on achievement the of lated salary component is contingent on business as performance well as individual in performance the case of basic salary is determined individual based on function, and performance the job market. Theperformance-re ­S Competitive pay and packages retain help highly to attract skilled and specialists motivated and managerial staff. system Salary Employee remuneration of genderof for instance, ­S in their day-to-day work make experiences, ideasThe different perspectives, and skillsby provided allof the employeeswhen working together Diversity aresurveyed higher than or just as high as the those of benchmark. rate their work situation as positive, 33% them even. positive of The as very in79% at least employees of part one took survey. Theresults far show so that participating of 77% employees Three rounds survey have taken place 2016. since October Theresponse rate was 61% across the three rounds. promotes Thenewsurvey aculturements. feedback of which creates the shared basis to grow individual employees, individual teams and the entire organisation to respond to feedback and make improve sonal work situation several times ayear. Theresults are available to access for in everyone real time and allow Swisscom employees submit theirto awide range questions feedback respect of with revolving around their per Employee satisfaction 3.1 days on learning, training and development. develop newskills and shape their professional own development. In 2017, every models the of future as so to provide employees and management alearning with environment in which they can apioneer inAs the fieldof digitisation in Switzerland, tiveness in the long term. Employees internal to attend have the opportunity and external training programmes. employees andits managers in order to maintain and improve their employability and the company’s competi Swisscom’s market environment is constantly changing. company The in invests targeted professional training for Staff development CHF 2.1 billion. Salary increases were moreby thanthe decline offset in the numberof jobs. ically adjusted. In comparison the with previous year, the sum salaries of paid in out Switzerland fell 2.7% by to 0.3%by for individual salary adjustments. Salaries brought to that be needed in line the with market were specif increasedto be in line thewith market. The sum salaries of paid to out members management of was increased were made based on individual employee and performance specifically for salariesemployees with that needed 2017, salaries for employees participating in the were CEA increased 0.6% by the of total salary. Salary adjustments In 2016, Pay round and payroll development part-time has also risen marginally since 2015, fromto 18.8% Part-time 20.0%. male employees amount to 11.1%. number women of in management positions from 11.1% to 11.7% since 2015. Thenumber employees of working tance part-time of on job-sharing work, and on the promotion talent. This of has resulted in aslight increase in the work balance and familybetter between as well as on awide range measures of designed to increase the accep wisscom’s comprises salary system abasic salary, avariable performance-related component and bonuses. The wisscom aligns to the dimensions activities its gender, of inclusion, generations and language regions. In the area rovided in the Remuneration Report. Remuneration in the rovided ­ S wisscom andsocial signed its partners apay round agreement for 2016 and 2017.from April effect With ­ S wisscom is placing the emphasis on flexible working modelswhich help to promotea ­ S wisscom the successful and innovative company is. it To promote diversity, ­ S wisscom is dedicatedto to grips getting the with working ­ S wisscom values for the dimensions ­ S wisscom Group’s overarching ­ S wisscom employee spent ­ S wisscom together. ------29 Management Commentary Employees 30 Management Commentary Employees risultato agreed separately the with unions. the legal minimum Fastweb respects by salarythe defined CCNL. andperformance the situation in the labour market. Thevariable profit-sharingbonus is based on the Premio di meeting individual goals and company Thebasic targets. salary is determined according individual to function, non-managerial variable staff and a performance-related component for managerial staff which is contingenton managers. Thecompany’s comprises salary system abasic salary, variable acollective profit-sharingbonus for salaryFastweb competitive packages offers and retainingaimed at attracting highly qualifiedspecialists and Employee remuneration part-timetemporary work for mothers. unions in the Conciliazione famiglia e lavoro in 2001: flexibleoffice working for mothers and hours, choice ofshifts their work requirements and include These privateneeds. in particular the following measures agreed the with The company’s terms and conditions employment of enable employees to achieve ahealthy balance between Working model time 185 days. maternity leave and one day leave.20 weeks’ paternity of In the for work incapacity event due of to illness or The working week for employees covered the by CCNL include hours. isweeks’ Benefits five 40 annual leave, employees for agreement collective Industry-wide tional changes, involves them at an early stage. Fastweb engages in dialogue the with unions and the employee representatives and, in the major event of opera Employee representation and relations with the unions Fastweb and the unions.between between (CCNL), employment collective agreement. astate TheCCNL defines the terms and conditionsof employment termsStatutory and conditions employment of in nazionale are Italy collettivo based on the Contratto di lavoro Employment agreement for the telecoms sector Italy in Employees ­a ccident, Fastweb guarantees full payment the of employee’s salary for 180 days and half the salary for afurther ­S wisscom’s Italian subsidiary Fastweb also and employees. It its contains provisions governing relations - is an communications. corporate integralthe of entire part brand portfolio main market is Italy, where operatesunder it the Fastweb brand. Thestrategic management and development of which arebrands associated portfolio in other with its themes and business areas. Outside Switzerland, Swisscom’s under brands the secondary Wingo and SimplyMobile and the third-party brand also It M-Budget. has other Swisscom offfrom the core business services and products under ers the Swisscom branding, corporate as well as and experiences and infrastructure, entertainment, best as well and as digitisation. ICT flexible at samethe time, bridging known and concepts, new and thegap between likewise standing for network The brand is implemented across all units –in aconsistent and high-quality manner. also It has extremely to be and current motivate customers and to and and attract potential also partners, staff acts . reputation management. provides optimum It for support Swisscom’s business gives guidance activities, to The Swisscom brand is managed strategically as an intangible asset and an element important the of Group’s brands Swisscom customers in apersonalised and value-adding manner. Swisscom is committed to service and quality and to interacting with its services and products Brands, brand value over of CHF 5billion. Swisscom inplace. sits fourth This makes valuable the one of most it brands in Switzerland, amonetary with External rankings also confi rm this image.According to Swissthe “Best Brands”carriedby Interbrand,out survey global by standards.nications sector reason why the reputation values achieved by Swisscom are exceptionally high for a company in the telecommu- imagepositive the of Swisscom brand and enriches the Group’s multi-faceted customer relationships. This is one company and clearly positions itself and credibly through stance on responsibility. its All this rounds off the tance of Swisscom for Switzerland: Swisscom Switzerland,a modern of is part is always recognisable as a Swiss right decision in opting for Swisscom and in winning newcustomers, while also helping to underscore the impor- Trustworthiness remain in and confi service factors important rming existingto customers that they made the commitment towards the continuous improvement services. its of under – the siroope-commerce sector brand, improve the company’s onthe position market and refl its ect off erings a with market presence, such under as thecloudservices Swisscom brandexample or – for in the progressive Other market. entertainment Group in the the positioning to contribution make further Swisscom, a the ongoing success the of Swisscom business. TV TheTeleclub, and Kitag Cinetrade brands, also by operated in today’s world. This networked is embodied the by successful mobile telephony and bundled off erings, as well as Swisscom perceived to wants as be being and committed trustworthy, curious, and aims customers its to support Extract ofthebrand portfolio 31 Management Commentary Brands, products and services 32 Management Commentary Brands, products and services Thanks to home”, “inOne private individuals for Offerings to their needs. packages in spring 2017. Their modular allows the structure individual customers to select components according customerto Theofferings meet needs. werefurther simplified following the launch of theinOne subscription app and in the printed (Local Guide). telephone directory to find addresses, telephone numbers and detailed information on companies – on the via Internet, the mobile securely save their documents, passwords important and notesin Docsafe. secure management and sharing their of personal data, such and as videos photos, documents. Customers can This subscription service. of scope allows In mobile”, “inOne line telephony in components their individual package. andfunctions, the call free minutes/SMS allocation. Customers can also to not include and choose fixed- the TV mainly in terms Internet of the channels speed, number TV of available, the of recording the activation and replay from three customers separatelynents, canThe profiles select varying pricedprofileslevels differ service. with of and/or choice a TV with of needs fixed-line telephony of on the broadbandFor top all connection. three compo communicationscustomers the with best experiences, under brands the secondary Wingo and SimplyMobile and the third-party brand In M-Budget. order to provide its from the core business services and Swisscom products under offers the Customers Residential Switzerland in services and Products ­S any them and location, up sets to overcome the challenges an of increasingly interconnected world. Furthermore, Through the digital solutions on offer, from the cloud (Storebox, Office 365 software HomepageTool) and Microsoft as well solutions. as full service their and IT modify communications infrastructure at any time their to meet requirements. andvices Business Solutions), Network SMEs are gaining a measure flexibility of in their everyday work, canas they Thanks collaboration to modern (UCC) functions and (Dynamic modular components product Computing IT Ser and they actually pay need. for the services Customers from arange can choose profiles of with different In pricesthis and services. way, customers onlyuse and send unlimited SMS messages to all as Swiss well as networks, enjoy unlimited for surfing, an all-in rate.flat package their that In meets needs. addition, customers SME “inOne with mobile” can make unlimited phone calls Withinto include this service. the offering, customerscan TV the components choose and assemble them intoa andphony additional service such as services an Internet failover. SME The“inOne offering office” expanded be can more Business “Smart bundled Thetwo offerings Connect”. include a broadband a fixed-line connection, tele Swisscom companies offers with up fiveto “inOneoffice”, SME employees and companies with six or employees for SMEs Offerings offerings, thusing service catering its to changing customer needs. thewithout phone leaving the Customers can now hand their damaged mobile phones into nels, isoffering the first inSwitzerland in which the data expirenot allowance does at the of end the month. count on their subscription. Thenew“SimplyMobile” subscription, which is available sales Coop chan in selected mobile”,wide range customer of XTRA “inOne With needs. young under people the age 26 of will receive adis mobile“inOne prepaid” subscription alsofaster offers surfingspeeds and new three bundled packages a meet to sional no with monthly users prepaid the of mobile subscription network services Thebasic fee. tariffof the can use their mobile line the with same telephone number on up to three at once. devices mainly differ in termsof mobile data speeds and the inclusivewhen “inOneabroad. mobile”services customers SMS messages to all as Swiss well as networks, unlimited Internet surfing at rates. Theflat profiles in offering the wisscom gives SMEs access to in information the form localsearch, of services and which directory makes easy it S ­ wisscom has launched anewmobile subscription that provides customers an with even larger ­ S wisscom is able to offer private individuals a bundledoffering tailored to customer ­S wisscom Shop, while myCloud offers S ­ wisscom SME customers gives its the option to work on any or device in ­ S wisscom customers to make unlimited phone calls and send unlimited ­S wisscom offerings of is constantly adjusting portfolio its ­ S wisscom Repair Centres and have them repaired ­ S wisscom customers aSwiss solution for the S ­ wisscom branding, corporate as well as ­ S wisscom is also continually upgrad S ­ wisscomocca offers S ­ wisscom also offers ------Carrier Carrier Ethernetand leased TCA Line service, lines, service copper- of Swisscom and variety a provides fibre-optic-based per customer as requirements. connectors With the Wholesale system. providing by solutions providers networking andsector its implementing for service the patient electronic dossier companies assuming by the operationtheir of core systems. IT in thesupport digitisation processes and of thus increases theirlevels. It efficiency also helps health insurance to an development. Thecompany international and service provides hospitals to connectivity with ecosystem research. and afull tailored range to the services of banking industry, ranging from and IT business outsourcing to trend businesstion networking, process optimisation, and authentication solutions, SAP security solutions (mobile ID) workplacecloud, outsourcing, and UCC solutions, as well as mobile phone solutions, solutions, networking loca in comprises Switzerland. comprehensive This the most one of by portfolio portfolios solutions, supported ICT during theport digitisation company The process. together customers with to works develop future-oriented many years experience of as an integrated telecommunications and company IT in providing customers sup with working world in companies. therefore It requires solid communication networks. Digitisation is substantially changing business business processes, models, the customer experience and the Enterprise Customers experience. has WiFi on the performances the one market, of best while the new mobile app enhances further the customer potential Wi-Fi access point for the entire Fastweb community. Thenewcustomer –known as modem FastGate – Finally, Fastweb has WiFi upgraded sharing its solution (WoW-Fi), which can turn acustomer’s home router into a TIM (Flash Fiber), has expanded to been five additional major cities (Catania,Padua, Palermo, Perugia and Venice). has upgraded toof 1 network been offer Gbps, and speeds inthanks addition, theto FTTH the joint venture with of now provides up speeds to downstream; Mbps network 200 FTTS of the70% fibre-optic network. Fastweb its the public administration During segment. the year under review, Fastweb continued upgrading and expanding dled together). Fastweb alsoits leading affirmed role in in the sector corporate customers 2017,notably in most transparency (no promotions orhidden costs) and convergence and mobile (fixed communications network bun inand Italy. the performance best Fastweb’s offerings are characterisedsenseby a of simplicity (three price plans), ­F ultrafast broadband as well network as via unbundled access In lines 2017, TIM. of and wholesale products residentialFastweb provides its and corporatecustomers voice with and broadband through own services its Products and services in Italy ­s agreements. widths and/or and interfaces aflexible that Ethernetservice allows tailoredfor bandwidths level service and providers high-quality, with transparent, point-to-point that connections their meet arange with needs band of ticular in 2017. In addition to this, ervices (interconnection)ervices as well such as as infrastructure products the shared use cable of ducts. astweb enhancedastweb convergence its offeringsby launching on the market,service a mobile4G making coverageits ­S wisscomsecurity, cloudIT offering, expanded its digital consulting development in par software and ­S wisscom also basic provides of offeringstelecommunication for the connection systems and S ­ wisscomsolutions offers relating to the Things,Internetof ranging from access S ­ wisscom is driving digitisation in the healthcare ­ S wisscom Wholesale provides telecoms service ­ S wisscom makes use its of - - - - - 33 Management Commentary Brands, products and services 34 Management Commentary Brands, products and services The results these studies of and help surveys > > the variable performance-related component employees’ of pay. > recommendnot the company). recommend towards as the emotional customer well of Score (NPS), which loyalty depicts as aspects revealing customers’ attitudes are to which the customers extent are willing to recommend Wholesale segment measures once customer ayear. satisfaction all For metrics important the segments, most ­s Swisscom Switzerland segment-specific conducts studies and surveys in order to measure general customer satisfaction Customer atisfaction. It measures It atisfaction. ayear, twice customer satisfaction in the and quarters second the of year. fourth The

studies also regularly and buyers and quality. survey users service to determine satisfaction, product to whichthe customers extent are willing to recommend The The success on their completion. of projects can submit feedback or enter their comments in the order Customers system. can also assess the quality and placing deskdetermine each or after the interaction with service orders, After users customer IT satisfaction. customer experience chain. Feedbackinstruments are also in at used keypoints order customer to contact The and visitors to the The Residential Customers segment Wholesale segment Enterprise Customers segment ­ S wisscom. is TheNPS calculated promoters from the difference(customersbetween who wouldstrongly ­S wisscom) and (customers critics wouldwho only recommend S ­ wisscom Shops are questioned regularly waiting about timesfriendliness. and staff Product measures along customer the entire satisfaction customer chain. experience S ­ wisscom the following also conducts segment-specific studies:and surveys conducts surveys among surveys customers to measure conducts along the satisfaction conducts representative surveys to determine and representative surveys customer satisfaction conducts ­ S wisscom to improve its services and products andwisscom andthey influence to improve products services its S ­ wisscom to Callers others. to the ­ S wisscom to others and the related Promoter Net ­S wisscom with reservations or would wisscom reservations with S ­ wisscom hotline www.swisscom.ch/ innovation See

rapidly changing nature of of nature changing rapidly utmr needs customer ­ Innovation as an important driver important an as Innovation success. are constantly changing, acompany must be innovative to ensure long-term In adynamic environment in which the market situation and general conditions development Innovation and help the Group achieve goals: its Swisscom is focusing on innovationthe following its activities seven areas innovation, of which in turn directly Targeted innovation Innovation is akey driver in the bid to enter newmarkets and partake in up-and-coming technologies start-ups and thus makes makes thus and start-ups commercially successful implementation newideas of –are becoming increasingly ­S ing internal work processes. a tainment. participates It in start-ups and partner asinvestor, aproject them providing by supports tailored products ted to supporting young companies that offer progressivesolutions in thefields of IT, communications andenter theOutside company, and promotespractises decentralised ideas development. New product are generated throughout the company. an lever in important remaining relevant in the core business, front of technological of front development via collaborations start-ups. with Valley. branch offices Its run targeted trend scouting andtechnology operations and help to remain at the fore Entertainment the bestnetwork and differentiation through More efficient expansion Network of theoffer Increasing therelevance and automation for simplification Digitising internal processes e.g. through new contente.g. Digital wisscom, innovation takes place in all areas the of company as well as beyond. nd services, and them offers accessnd services, to infrastructures and markets. Swisscom­ ,

early as on, so to help shape actively the future telecommunications of and the Internet. At

S ­ wisscom promotes innovation throughout the industry. In particular,

targeted investments in promising FinTech ventures. ­S wisscom’s business environment, innovation environment, business wisscom’s ­ S wisscom strives to anticipatestrives strategic challenges, areas newgrowth and future Set-up ofdata driven and software-based Digital Business platforms in generating growth in new markets and in digitis and markets in new growth in generating

­ S wisscom in works collaboration with and development – in other words the S ­ wisscom is also Within the company, important. Innovation is also also is Innovation important. Added value beyond connectivity through artificial intelligencethrough artificial Building securitycapabilities and application business ­ S Better customer service Better customer service wisscom is commit present in present Silicon Analytics & Artificial &Artificial Analytics Internet of Things of Internet and external use in theplatform . Due to the Intelligence for internal S ­ wisscom Security FinTech FinTech - - - -

35 Management Commentary Innovation and development 36 Management Commentary Innovation and development www.swisscom.ch/lpn See

Swisscom continually invests in progressive solutions in these areas innovation. of Theaim > Security > Intelligence &Artificial Analytics In City: mart > (IoT): Things of Internet the for Switzerland in networks ationwide > Internet of Things Things of Internet ICT infrastructure for adigitalICT Switzerland, markets tap newgrowth > Network products: >

de annualtion. Its share the of total volume Asa consequence, traffic of workedout at 22%. the communetook the commune Montreux, of through centre traffic inwas city thecalculated precisely thanks to the the data delivered increases public Thefirst applicationexamples acceptance projects. of are available. In the solution. Thiscity solution will improve urban planning and accelerate the transformation towns of and cities as 20 billion datasetsthat or so are created daily on the into mobile traffic phone network indicators using a smart infrastructure in amore systematic manner and find easierways to manageIt is it. currently the able to convert is asmovement intended Theproject apilot: patterns. to act to improve trafficflows in thetown and relieve the burden on thetown centre by displaying extremely accurate artificial intelligence artificial threats themselves are becoming increasingly intelligent. sustainable cities: traffic management. managing than development are They before. better helping city to overcome challenges the one of biggest of such newindicators, as supplied by amounts data of regularly. applications: sensors which send data sporadically for battery-operated it be or for applications that transmit large It also offers global usability thanks to the 3GPPstandard. With this, consumption,data lowenergy rates, beneficial coverage hardware, network and indoor good highsecurity. very from 2018 to 2020. NB-IoT is opening awhole newchapter for big data, enabling millions low devices, networked of mobile communications-based IoT Narrowband-IoT networks (NB-IoT) and LTE M1 Cat are expanded to then be set make in strides 2017. the end By 2017, of coverage had network already reached the of Swiss90% population. The national Internet Things of applications. The expansion in the of Switzerland only Power Low Network continued to S efficiently.and work far more effectively service ­S A S N insights, etc.) and achieved major development insteps the data lake. In for customerexample, service, intelligence across various fields of application customerexperience (customerand document support, of of to G.fast, customers can benefit from customers bandwidthsto can G.fast, benefit of up to Mbps. 500 Europe to integrate the innovativetransmission G.fast G.fast standard is an important into fixed network. its websites and viruses. This is more protection comprehensive than as ever is before it based on aglobal blacklist. SME customers, Team. This team is able to respond to threats or existing incidents intervention with measures. residential For and secure network. Sincesecure September 2017, network. countermeasures. Artificial intelligence thus makes a considerable contribution towards ensuringsafe a and definitionof the globalstandard. 5G range different of areas, such as transportation smart virtualand reality.The research resultswill influence the ning to work together industrial with on developing partners and testing the potential applications in awide Lausanneogy (EPFL) as aresearch partner, their aim is to advance the development are They 5G. of also plan rations for the newgeneration mobile of technology. Working together the with Federal Institute Technol of 5 G wisscom launched that automatically aproduct categorises e-mails, making possible it to organise customer ecurity thanks to artificial intelligence: Thenumberintelligence: threats of tofrom artificial the thanks Internet continuesecurity to grow and G for Switzerland: the of “5G for Switzerland” part As programme, rtificial Intelligence: In 2017,Intelligence: rtificial .fast: cision to not go ahead atunnel of the with construction that would have CHF 150 million. cost follows It that S ­ wisscom’s and accommodatesstrategy Thanks the continuous within fixed network the network. data growth ( pronounced “gee At the fast”): end 2017, dot of Pully, Canton Vaud, of and other pilot anonymised, cities, aggregated mobile phone data is helping ­ S wisscom the “Internet developed Guard” in 2017 –network-based against protection phishing to automatically identify attacks and to automatically threats attacks as well identify as S ­ wisscom made targeted in improvements the area expertise to artificial its of S ­ ­ S wisscom’s solution among smart city a offer progressive others, way of wisscom presented initial applications to journalists in June 2017. ­ S wisscom has running been the Incident Computer Response Security S ­ wisscom the first became telecommunications company in S ­ wisscom plans to use algorithms and corresponding S ­ wisscom is helping towns and cities to plan their and offer its customers the best services and services andcustomersits best offer the ­ S wisscom will offer for the rightall IoTnetwork S ­ wisscom and Ericsson are making prepa Swisscom is laying the foundations for to initiate the corresponding is to provide the best S ­ wisscom solu ­ e lement the the - - - - > > > In the Digital Business innovation field, Business Digital > Digital > Entertainment tap new growth markets and offer its customers the best services marketsand products. tapservices newgrowth andcustomersits best offer the virtual and augmented reality. The aim is for by new offered technologies. In 2017,potential on it focused the of blockchain disruptive as welltechnology as In carries in it addition out innovation to the activities fields, intrapreneurship as as well through of company, promotion through the

K s (for example, time and budget) to realise innovation projects. 2018, andmore in proactive providing customers efficient, with digital self-care.With the completion of All IPin Incustomer 2017, service. for example, as the simplificationof crucial processes such as those involved in customerand problem-solving activation in includeThese work in agile (for example, structures use the of SaFE framework for agile development), as well digitalmodel company. In 2017, favourite out points shows that have missed been over the last seven days. sible impairment for customers asensory with and includes apersonal on-screen programme guide that the processes images TV-Box in super-sharp UHD quality. features It voice recognition in is dialect, fully acces consumption,energy dispensing adisruptive with fan and ensuring form. Thelatest generation acompact of duced in Switzerland in line the with wishes customers. paid Thedevelopers its of particular to attention low designers and engineers. TheUHD is TV-Box for therefore Switzerland aproduct which is and developed pro has continuously been pressing ahead the with development of percent customers. of When Fin S offeringwas with developed inputTV from our own customers in Switzerland by and our own in high-definition 2006, television,which is commonplace these wasstilldays, seen as exception.an ­S U iroop: iroop: wisscom TV 1.0 at the 1.0 end 2017. of wisscom TV offering generation Thefirst of isnow the lessIPTV by onlyused than one implification of processes: Toprocesses: of ahead get implification in adigital world, ickbox: After eleven years, After recognition: voice and quality picture of era anew for TV-Box HD Tech: ­Swisscom ­ S wisscom will take agiant step towards digitisation. own its Testing the marketplace new of Evero for consumer-to-consumer relationships Launch of two FinTechLaunch two of ventures (Swiss Credit Exchange, Establishment and setup an of intrapreneurship programme providing employees resources with ­ S wisscom TV came on thewisscom market TV in autumn was it ahead 2006 time. its of Back ­ S wisscom again aseriestargeted took of to steps take closer to it this goal. ­ S wisscom key innovations supported in 2017, within both and outside the S ­ wisscom in succeeded making the process for solving incidents much ­S wisscom toinfrastructure providefor a digitalthe best Switzerland, ­ S wisscom is constantly investigating the opportunities ­ S wisscom must first digitisea become itself and S ­ ­ S wisscom TV in recentwisscom years. entirely An TV new wisscom Blockchain Ltd) S ­ wisscom Ventures. Ventures. wisscom S ­ wisscom discontinued S S ­ ­ wisscom wisscom - - 37 Management Commentary Innovation and development 38 Management Commentary Financial review

Financial review Financial 2,250 1,500 3,000 Capital expenditure Capital Operating free cash flow cash free Operating Net revenue 1,500 2,250 3,000 12,000 16,000 4,000 8,000 750 750 0 0

0

11,678 1,844 2,409 1,862 1,828 9,816 581

in CHF million in CHF

2015 2015 2015

in CHF million in CHF 11,643 2,416 1,791 1,948 9,695 1,783

633 in CHF million in CHF

2016 2016 2016

11,662

2,378 2,159 1,686 9,507 2,155 692

2017 2017 2017

w/o Fastweb Swisscom Fastweb w/o Fastweb Swisscom Fastweb

Headcount 18,000 12,000 24,000 Net income EBITDA 1,000 1,500 2,000 1,500 3,000 4,500 6,000 6,000 500 0 0 0

in CHF million in CHF 21,637 19,236 4,098 3,479 2,401 1,362

in full-time equivalents in full-time 619

in CHF million in CHF

2015 2015 2015

21,127 18,659 1,604 4,293 3,572 2,468

721

2016 2016 2016

20,506 18,002 1,568 4,295 3,450 2,504 845

2017 2017 2017

w/o Fastweb Swisscom Fastweb w/o Fastweb Swisscom Fastweb

unchanged dividend CHF of 22 share per for the 2018 financial year at the 2019Annual General Meeting. Full-time equivalent employees at endofyear (number) Net debtat endofyear Capital expenditure inproperty, plant andequipment andintangible assets Operating free cashflow Earnings pershare (inCHF) Share ofnetincome attributable to equityholdersof Net income Operating income (EBIT) EBITDA as%ofnetrevenue wisscom expects net revenue net around of wisscom CHF 11.6 expects billion, EBITDA around of billion CHF 4.2 and capital expenditure 2018,For Operating income before depreciation (EBITDA) andamortisation Net revenue indicated where except million, CHF In Summary headcount in Switzerland or 3.7% fell FTEs to 17,688 684 by as aresult FTEs the of declining core business. Headcount decreased year-on-year 621 by or 2.9% to 20,506 FTEs In comparison FTEs. the with previous year, to debt EBITDAratio net of is 1.7 (prior year: 1.8). ment in working net capital. At CHF 7,447 million, was debt CHF net 399 million lower than at the end 2016. of The Operating cash free flow increasedby CHF 368 million or 20.5% to CHF 2,159 million,fuelled bychiefly the improve EUR CHFby 96 million or 5.4% to CHF 1,678 million. Capital expenditure at Fastweb EUR roseby 41 million or 7.1% to virtually unchanged at ahigh level. Withother investments declining, capital expenditure in Switzerland fell overall In Switzerland,the broadband capital expenditure networks. for the expansion remained the broadband of networks Capital expenditure fell CHF 38 million by or 1.6% to CHF 2,378 million. Progress continues made to be on expanding 2017 financial yearwill to Annualthe be proposed General Meeting. CHFdown 36 million to or 2.2% CHF 1,568 million. Payment an of unchanged dividend CHF of 22 share per for the CHF 17 million orto 0.8% CHF 2,131 million due to higher depreciation and amortisation, while income net was increased EUR by 58 million or 9.6% on an adjusted basis. Consolidated operating income by (EBIT) contracted on a like-for-like basis. Thedrop in revenuesavingsby was partially in Fastweb’s offset costs. EBITDA indirect EBITDArates, fell CHF 23 million by or 0.5%. In the Swiss core business, adecrease 2.4% of or CHF 88 million resulted in the Swiss business CHF of 61 million. Excluding non-recurring items and on the basis constant of exchange amounting to CHF 102 million (prior year: CHF million) 60 and associated expenses net headcount with reductions previous year. wasnon-recurring by impacted It items, including incomefrom one-off legal disputes at Fastweb At CHF 4,295 million, operating income depreciation before and amortisation (EBITDA) remained on a par the with or 4.1% to 2.45 96,000 by million. Revenuegrowth. EUR roseby 149 million or 8.3% to EUR million 1,944 and the number broadband of customers lower income from roaming TheItalian services. subsidiary strong revenue Fastweb reported and customer CHFby 199 million or 2.1% to CHF 9,058 million, mainly due to declining revenue from fixed-line telephony and while0.2%, on the basis constant of exchange Revenue fell rates it 0.2%. by in the Swiss core business decreased Swisscom’s revenue net was level the with previous year at CHF 11,662 million. revenue Reported increased by thanby threenatural quarters was the offset of reduction fluctuation vacancy and

622

million, mainly as aresult higher of customer-driven investment.

­ S

of less of than CHF billion. 2.4 to Subject achieving targets, its

­ S wisscom Ltd

­ S wisscom will payment propose an of 20,506 11,662 2,378 1,570 4,295 30.31 7,447 2,159 2,131 1,568 36.8 2017 management. management.

21,127 11,643 7,846 2,416 1,791 30.97 1,604 1,604 2,148 4,293 36.9 2016

Change –2.9% –5.1% –1.6% 20.5% –2.1% –2.1% –2.2% –0.8% 0.0% 0.2% More More

- 39 Management Commentary Financial review 40 Management Commentary Financial review

2 1 Operating income before depreciation (EBITDA) andamortisation Intersegment elimination Reconciliation itempensioncost Group Headquarters Other Operating Segments Fastweb Swisscom Switzerland IT, Network &Infrastructure Wholesale Enterprise Customers Residential Customers Fastweb Swisscom Switzerland Intersegment elimination IT, Network &Infrastructure Wholesale Enterprise Customers Residential Customers Net revenue indicated where except million, CHF In results Segment is reported as the reconciliation a operatingis incomes and the segments reported of Group item between operating income. fund expense. 19, Under IAS the the ordinary differencebetween employer contributions cost and the pastservice and assets self-constructed other income. includes Segmentexpense ordinary employer contributions as pension personnelSegment compriseandexpenses other costs, operating less direct capitalised of costs costs Customers and Wholesale correspond segments to contribution a costs. margin network before theof rental and administration buildings of and vehicles. Theresults the of Residential Customers, Enterprise revenue is credited to the IT, &Infrastructure segment within the with exception Network the segment reporting, controlled the by IT, &Infrastructure division, Network which is managed ascentre. acost this For reason, no in Switzerland the segmentsat market costs recharged are prices. between Network budgeted, monitored and are segments the between services Other segments. other to charge any management fees Headquarters The IT, charge & Infrastructure not segment does to Group other nor segments, does Network costs any network (radio transmitters) and cablexLtdand (network construction maintenance). ­customers in Italy. Operating Other primarily Segments comprises the Digital Business division, GroupSegments. Headquarters, which includes separately. non-allocated is reported costs, Swisscom’s focuses on the reporting three operating divisions Operating income before depreciation and amortisation (EBITDA) Revenue from external customers Intersegment elimination Group Headquarters Other Operating Segments the IT, &Infrastructure division. Network Fastweb is atelecommunications provider for residential and business land comprises the customer segmentsResidential Customers, Enterprise Customers and Wholesale, as well as

ating income ofsegments includesordinary employer contributions aspensionfundexpense. The diff Oper Including in erence to thepensioncost according to IAS 19isrecognised asareconciliation item.

1 tersegment settlements performed by othernetwork providers. ofservices

2

­ S wisscom Switzerland, Fastweb and Operating Other 11,662 (1,290) 4,295 3,500 9,058 3,512 2,508 6,053 2,164 (411) (614) (111) 2017 944 167 180 850 832 446 845 (92) (27) 1

S ­ 11,643 wisscom Broadcast Ltd (1,262) 4,293 9,257 3,616 3,651 1,957 2,540 6,265 (362) (700) (114) 2016 379 848 789 173 979 164 721 (22) (72) S ­ wisscom Switzer 2

–50.0% –12.3% –3.2% –2.1% Change 22.7% 27.8% –2.6% 17.2% 17.7% –1.9% –3.8% 13.5% 10.6% –3.5% –3.6% –1.3% –3.4% 0.0% 0.2% 9.8% 2.2% 7.7%

-

imately 2.7 million hadfor the inOne connections combined opted package . Intersegment revenue Revenue from external customers Revenue other Wholesale Merchandise Solution business Telecom services Net revenue and results indicated where except million, CHF In Swisscom Switzerland lion. the end 2017, December By of i.e. just nine anotherby or 1.1% 22,000 to 2.0 million, while the grew connections number 49,000 by or 3.5% TV of to 1.47 mil- becoming increasingly saturated, andhas customer number slowed. growth The broadband of rose connections number prepaid of lines decreased 65,000 by or 3.2% to million.2.0 The markets for broadband are andalso TV ­S The number mobile of subscribers 25,000 or roseby 0.4% year-on-year million to 6.64 in asaturated market. volumes. roaming inbound higher by offset largely lion. Wholesale, For lower as proceeds aresult in the of reduction termination were on mobile tariffs networks environment, competitive the very Enterprise Customers saw rise a 7% in incoming orders to around CHF 2.7 bil tions business large with customers, revenue increased CHF by 12 million or 1.1% to million. CHF 1,084 In spite of roamingof in fees basic subscription charges and lower prices in the Enterprise Customers In segment. the solu other half the of decrease resulted from for price newbundled cuts offerings, increased promotions, the inclusion scriber base in the fixed-line telephony business,which fellby connections or 320,000 13.5% to 2.0 million.The decreased CHF 198 million by or 3.0% to CHF 6,464 million, almost with half the of drop due to the declining sub andcompetition the downward trend in fixed-line telephony. Revenuefrom telecommunications services revenueNet for Full-time equivalent employees at endofyear (number) Capital expenditure inproperty, plant andequipment andintangible assets Capital expenditure and headcount Broadband access lineswholesale Unbundled fixed access lines Bundles Revenue generating units(RGU) Mobile access lines Swisscom access lines TV Broadband access linesretail Fixed telephony access lines thousand in period of end at data Operational Segment result Depreciation, and impairment amortisation losses Margin as%ofnetrevenue Segment result before depreciation (EBITDA) andamortisation Segment expenses Indirect costs Direct costs Net revenue were using a bundled package, which represents ayear-on-year increase 14.1%. of Revenue from bundled to the lower terminationof purchasing and lower on mobilecosts tariffs networks At goods. CHF 3,615 million, was on alike-for-like 2.0% basis. Thedecrease CHF of 85 million to CHF 1,943 in costs or direct 4.2% million is due sions recognised for headcount or regulatory reduction risks and gains the decrease from the sale properties, of Segment expense fell CHF 83 million by or 1.5% to CHF 5,558 million. Excluding non-recurring items such as provi increased year-on-year CHF 335 million by or 13.4% to CHF 2,837 million.

wisscom increased the number subscribersmillion, of to lines or postpaid 2.0% 4.64 to its 90,000 by whereas the

S ­ wisscom Switzerland or 2.1% as to CHF 9,058 million aresult fell fierce CHF 199 million by of

months after launch,months after over 1.3

At the end 2017, of 1.9 million customers

million customers representing approx 15,157 12,165 (5,558) (1,485) (3,615) (1,943) 3,500 8,977 2,015 9,058 1,654 2,014 2,047 1,467 6,464 6,637 1,084 1,907 38.6 2017 435 107 203 578 648 81

15,876 12,389 (5,641) (3,613) (2,028) (1,473) 9,257 9,175 2,143 3,616 1,072 6,662 1,755 1,672 6,612 1,418 1,992 2,367 39.1 2016 213 591 637 364 128 82

­ c ontracts ontracts –16.4% –13.5% –1.5% –2.1% –2.2% –6.0% –3.2% Change –4.2% –1.2% –4.7% –2.2% –3.0% –4.5% –5.8% 19.5% 14.1% –1.8% 0.1% 1.7% 1.1% 0.4% 3.5% 1.1% 0.8%

- - - - - 41 Management Commentary Financial review 42 Management Commentary Financial review

Mobile access linesat endofperiodinthousand Broadband access linesat endofperiodin thousand Full-time equivalent employees at endofyear (number) C Margin as%ofnetrevenue Segment result before depreciation (EBITDA) andamortisation Segment expenses Net revenue Intersegment revenue Revenue from external customers Wholesale Corporate Business Residential Customers In EUR million, except where indicated where except million, EUR In Fastweb CHF 1,654 million. resulting in adecline 2.4% million of on alike-for-like or 5.8%to 101 basis. Capital expenditure fell CHF by CHF 116 million or lower 3.2% at CHF 3,500 million. the of Alarge dropsavings, in by cost portion revenue was offset measuresefficiency FTEs or by4.5% 719 to 15,157.segment The result before depreciation and amortisation was tiallyby the capitalisedlowerself-constructedHeadcountof assets. offset fell costs year-on-year as a result of fellitems, 0.7%, indirect by costs whereby resulting the reduced costs from the decrease in headcount were par were onlyindirect costs marginally higher than the prior-year figureof CHF 3,613 million.Excluding non-recurring high high Revenue from residential customers Despite roseaccordingly the to EUR 986 million. or 8.8% EUR 80 million by andcustomer in the growth reduction the billing to four period introduced weeks in the quarter second 2017. of pricing in the Residential Customers segment as aconsequence fierce of was competition by more thanoffset 389,000 or 57.5% to 1.07 million due to mobile the launch offerings during attractive of 2017.The pressure on also growing in mobile telephony: compared to the previous year, the number mobile of access lines increased by conditions, Fastweb’s broadband customer or 4.1% base to grew around 96,000 by 2.5 million in 2017. Fastweb is Fastweb’s revenue net EUR 149 million rose by or 8.3% year-on-year to EUR 1,944 million. Despite difficult market at ahigh level, while customer-driven investment and investment in other infrastructure decreased Capital expenditure remained at ahigh level, totalling EUR 622 million. Headcount at Fastweb 36 FTEs roseby Theexpansion0.4 percentage to points Italy’s 34.2%. of broadband fibre-optic is continuing network as planned. mainly the result higher of revenue and improved regulatory conditions. Theadjusted EBITDA margin roseby (prior year: EUR 55 million). EBITDA by or Adjustedrose 9.6%.ThisEUR 58 million for these effects, increasewas increase EUR 98 million of This or 14.8%. includes incomefrom one-off legal disputes amounting to EUR 95 million The segment result depreciation before and amortisation totalled EUR 759 million, equivalent to ayear-on-year EURby 65 million or 37.1% to EUR 240 million. businessporate increased EUR by 4million or 0.6% to EUR 710 million, while wholesale business revenue was up 1.5% driven to 2,504 chieflyby FTEs, the appointmentof new employees

apital expenditure inproperty, plant andequipment andintangible assets level competition, Fastweb of strong held position its in the market for business customers.

Capital expenditure for the expansion remained the broadband of virtually unchanged networks

in business the corporate segment. (1,185) 1,936 1,944 2,504 1,065 2,451 39.0 2017 622 759 986 710 240 8

(1,134) 1,795 1,787 2,355 2,468 36.8 2016 661 175 706 906 676 581 Revenue from cor 8

. 14.8% Change 57.5% 37.1% 8.3% 8.3% 4.1% 1.5% 7.1% 4.5% 0.0% 0.6% 8.8% or or

- -

Depr Income before income taxes Share ofresults ofassociates Other financial result Net interest expense Operating income (EBIT) E Share ofnetincome attributable to non-controlling interests Share ofnetincome attributable to equityholdersof Net income Income taxexpense Full-time equivalent employees at endofyear (number) C Margin as%ofnetrevenue Segment result before depreciation (EBITDA) andamortisation Segment expenses Net revenue Intersegment revenue Revenue from external customers indicated where except million, CHF In Segments Operating Other declined, amounting to CHF 50 million (prior year: CHF 104 million). exchange rates this represents a rise 0.3%. of The amortisation intangible of assets related to business combinations Depreciation and amortisation increased year-on-year CHF by 19 million or 0.9% to CHF 2,164 million; at constant Operating income before depreciation (EBITDA) andamortisation indicated where except million, CHF In results non-operating amortisation, and Depreciation to 2,580 FTEs, driven primarily the by hiring newemployees of at cablex. CHF 16 million to CHF 180 million. This corresponds to aprofit marginHeadcount FTEs or of by 3.5% rose 21.2%. 87 ­S The increase was mainly due to higher rendered cablexfor revenue by services from construction revenueThe net Operating the of Other roseyear-on-year Segments CHF 61 million by or 7.7% to CHF 850 million. of net income holders of net of to attributable equity incomeNet fell CHF 36 million by to or 2.2% CHF 1,568 million. Earnings share per is calculated based on the share CHF 386 million), corresponding rateincometaxof to20.0% an(prior year: 19.4%). effective to CHF 149 million as aresult lower of average Income interestexpense was tax CHF 392 million costs. (prior year: Earnings share per fell from CHF 30.97 to CHF 30.31.

arnings pershare (inCHF) witzerland. segment The result depreciation before and improved amortisation year-on-year 9.8% by or apital expenditure inproperty, plant andequipment andintangible assets eciation, andimpairment amortisation losses

­ S wisscom Ltd

S ­ wisscom Ltd and the average number shares of outstanding.

Net interestNet expense declined CHF by 6million (2,164) 4,295 1,960 2,131 1,568 1,570 2,580 30.31 (149) (392) (670) 21.2 2017 2017 180 529 321 850 (11) (11) 58 (2)

(2,145) 1,604 1,990 2,148 4,293 30.97 1,604 2,493 (625) (386) (155) 20.8 2016 2016 789 270 519 164 49 (3) – –

­ S wisscom –2.2% –1.5% –0.8% Change Change –2.1% –2.1% –3.9% 18.9% 18.4% 0.0% 7.7% 9.8% 1.6% 0.9% 7.2% 1.9% 3.5%

43 Management Commentary Financial review 44 Management Commentary Financial review

Development of free cash flow the previous year.the previous been granted.hadExcluding effect this payment, operatingcash free byflow rose CHF 182 million or9.2% versus Net increase incashandequivalents Other cashflows Dividends paidto equityholdersof Issuance andrepayment offinancialliabilities, net Other cashflows from investing activities,net Net expenditures for company acquisitionsanddisposals Free cashflow Income taxes paid Net interest paid Operating free cashflow Change innetworking capitalandothercashflows from operating activities Capital expenditure inproperty, plant andequipment andintangible assets Operating income before depreciation (EBITDA) andamortisation million CHF In Cash flows the taking and out repayment fixed-term of In deposits. 2017, tion the of remaining shares Cinetrade of (prior year: sale stake of in Metroweb). cash Other chiefly flows include CHF 43 million). This includes, in particular, the purchase aTiscali of business division Fastweb by and the acquisi expenditureNet for company acquisitions and disposals amounted to CHF 106 million (prior year: of proceeds net appeal the with proceedings regarding broadband services. for the ongoing by the of ofpayment CHF 186 million penalty the was Competitionflow Commission affected cash flow.Operating cash free flow increased by CHF368 million to CHF 2,159 million. In the previous year, cash Free cash flow increased year-on-yearby CHF 409 million to CHF 1,715 million, mainly due to higher operating free CHF 900 million. million. 900 CHF gate nominal value CHF of million 500 and paid back debenture bonds and privateplacements totalling around CHF 50 million as aresult the of pension fund changes communicated 2016. in October the other. In the quarter second 2017, of the 4,295

EBITDA

Federal Court. It paid It CHF 186 million of the penalty Federal Court. in the first of quarter 2016, as no suspensive This is primarily attributable to lower trade receivables, on the one hand, and prepaid on expenses, Capital expenditure

–2,378

in CHF million in CHF

orking

­S net w Chang

capital 204

wisscom Ltd

e in

defined Chang benefit obligations

36

­ S ­ S wisscom pension fund (comPlan) also aone-time received payment of

wisscom consider not does justified the sanction and has lodged an e in

Other

2

S ­ wisscom issued debenture bonds an with aggre

2,159 Operating

flow fr

ee cash

(2,378) (1,140) 2,159 1,715 4,295 –155 (401) (106) (155) (289) paid Net in

2 242 120 179

017 (9)

terest

–289 Taxes

paid

(1,140) (2,416) 1,306 1,791 4,293 (101) (328) (157) 2016

(87) (14) (86)

43 7

cash flo Free

1,715 Change w (300) (149) 207 172 409 368 328

39 38

– 5 2 2

- -

pages 24—27 pages See report See Mobile network Expansion ofthefibre-optic network Fixed access &infrastructure indicated where except million, CHF In Italy, Fastweb is also systematically expanding infrastructure. the network an All-IP-based infrastructure, and modernising to the the mobile standards. latest mobile network network In Switzerland this involves making targeted investments in ultrafast broadband expansion, network migrating to Swisscom remains to maintaining committed the high quality and availability infrastructures.In network its of Capital expenditure customer-driven investment. Theratiocapital of expenditure to revenue was 32.0% (prior year: 32.4%). the in broadband as Italy planned. networks The rise in capital expenditure is primarily the consequence higher of ­c million. In local million 692 Fastweb increased or 9.3% capital expenditure its 59 to year-on-year CHF CHF by ­c the theof with broadband latest technologies remained networks virtually unchanged at ahigh level, while CHF 1,654 million, corresponding to 18.3% revenue net of (prior year: 19.0%). Capital expenditure for the expansion Capital expenditure incurred by while Fastweb accounted for 29% and Operating Other for Segments 1%. 20.4% revenue net of (prior year: 20.8%). million, corresponding 2,378 million to or 1.6%Capital to CHF expenditure 38 decreased year-on-year CHF by 1 Total capital expenditure as%ofnetrevenue Thereof foreign countries Thereof Switzerland Total capitalexpenditure andeliminationsGroup Headquarters Other Operating Segments Fastweb Swisscom Switzerland Projects andothers Customer driven

urrency, the rise amounted to EUR 41 million or 7.1% to EUR 622 million. Fastweb is continuing the expansion of decreased. infrastructure in other investment and investment ustomer-driven Including AllI

P migration.

1

­S iso wteln elndya-nya yCF 0 million or 5.8% to wisscom 101 Switzerland declined year-on-year CHF by

­S wisscom Switzerland accounted for 70% 2017 of capital expenditure, 2,378 1,654 1,678 20.4 2017 321 469 486 700 109 269 692 (26) 58

2,416 1,755 1,774 20.8 2016 642 633 361 176 231 476 511 (21) 49

–11.1% –38.1% –1.6% –5.8% Change –5.4% 23.8% 18.4% 16.5% –1.5% –4.9% 9.0% 9.3%

45 Management Commentary Financial review 46 Management Commentary Financial review

to 16%. to amounts liabilities financial interest-bearing variable Group’s the of share The obligations. Group’s financial the of advantage favourable of capital market conditions to aview with optimising the interest and maturity structure to debt EBITDAThe ratio net of was 1.7 at the end 2017 of (prior year: 1.8). In recent years, financing. for equivalents, Net operating assets Other operating assetsandliabilities, net Provisions Trade payables Trade receivables Intangible assets Goodwill Property, plant andequipment million CHF In Net asset position Swisscom debt/EBITDA anet targets ratioaround of 1.9. Net debt Net amountcarrying in the consolidated financialstatements totals EUR 2.9 billion (CHF 3.4 billion). item low. is amount carrying extremely Thenet Fastweb’s of goodwill is EUR 0.5 billion (CHF 0.6 billion). Fastweb’s ­c in 2001. Following the repurchase, the mobile,solutionsand fixed-network businesses were organisationally arose primarily in 2007 the with in repurchase connection the of 25% stake in goodwill was CHF billion, 5.2 the bulk which of relates to equipment by workinglower net capital.carrying as was offset The aresult amountnet of investing of activity operatingNet CHF assets roseby 0.3 billion or 1.6% to CHF 16.6 billion. Thehigher volume plant property, and of assets Operating Ratio netdebt/EBITDA Equity ratio at endofyear Equity financialassets other non-current Equity-accounted investees and Income taxassetsandliabilities, net Defined benefitobligations Net debt Development of net debt ombined and merged to create the new company 7,846

31.12.2016 Net debt

current financial of assets deposit,and and non-currentderivative financial certificates instruments

ee cashflow

fr Operating

in CHF million in CHF

–2,159

Dividends

1,140

­S wisscom (Switzerland) Ltd. The valuation risk this of goodwill e Net in xpense 149 terest

S ­

wisscom Switzerland (CHF 4.3 billion). This goodwill debt comprises financial liabilities less cash and cash cash and cash less liabilities financial comprises debt

T

axes paid 289 31.12.2017

­ S 16,618 10,697

(1,048) (7,447) (1,753) (1,077) wisscom Mobile Ltd to sold Vodafone 7,645 2,389 1,758 5,186 (582) (731) 34.7 253 1.7

Other eff ects 182 31.12.2016

16,354 10,177 (1,850) (7,846) (1,597)

6,522 2,425 1,756 5,156 ­S (447) (601) (962) 30.4 311 wisscom has taken 1.8

31.12.2017 Net debt 7,447 Change 1,123

(284) (115) (156) 802 399 264 520

(58) (36)

19 30 2

Finance leaseliabilities Private placements Debenture bonds Bank loans million CHF In control over financial liabilitieswill fall due for repaymentif a shareholderother than the Swiss Confederationgains majority was 1.7% (prior year: 1.9%), and the average residual term to maturity was 5.3 years. Alarge the of proportion amounted to CHF 1.7 billion at 31 2017. December In 2017, the average interest expense on all financial liabilities liabilities have aresidual term to more maturity of than one year. Financial liabilities aterm with one year of or less at 31As December2017, ing Standards (IFRS). 31 On 2017, December of the equity as disclosedequity in the consolidated balance prepared sheet in accordance International with Financial Report ­S Distributable are calculated reserves in on the basis the separate reported financial equity of statementsof translation losses recognised amounted in equity to CHF 1.7 billion (after tax). climbed from 1.074 at the end 2016 of to 1.17 at the end 2017. of 31 On December2017, cumulative currency resulting from currency translation CHF 0.1 billion of foreign of Group companies. TheCHF/EUR exchange rate includein equity non-cash actuarial gains from pension plans totalling CHF 0.7 billion as well as unrealised gains dividendexceeded payments CHF 1.1 of billion to the shareholders of billion30.4% recognised in income TheCHF 1.6 in to net directly 34.7%. equity and gains net CHF 0.8 billion of or 17.2%Equity CHF 1.1 billion roseby to CHF 7.6 billion, while to total the ratioequity assets increased of from Equity bution and pension increases and early retirements. surement (CHF 0.7 billion). method Unlike Swiss GAAP, IFRS measurement takes into account future salary, contri regard and to the risk discount sharing rate, life expectancy (CHF 1.1 billion), as well as adifferent actuarial mea compared IFRS are with the application differing of CHF 1.8 billion of actuarial assumptions,example for with surplus amounts to CHF 0.8 billion, corresponding to acoverage ratio108%. Themain of reasons for the difference In accordance the with Swiss accounting standards applicable to the pension fund (Swiss ARR), the funding GAAP which represents aCHF billion 0.8 decline year-on-year, mainly due to the return on plan CHF assets of 0.9 billion. International Financial Reporting Standards (IFRS). obligationsbenefit defined Net amounted to1.0 CHF billion, obligations benefit presentedDefined in the consolidated financial statementsare measured in accordance with Post-employment benefits Total interest-bearing financialliabilities Other financialliabilities ber 2017,ber and the of that representing general part reserves 20% the of share capital may distributed. be not 31 On Decem subsidiariesby as well as different accounting valuationand methods. Under Swiss company law, sharecapital this amountbetween anddisclosed in equity the consolidated balance is sheet essentially due to earnings retained

wisscom Ltd in accordance Swiss with company-law financial-reportingstandards, rather than on the basis of

S ­

wisscom Ltd held distributable CHF 5.25 of billion. reserves ­ S wisscom.

­ S wisscom’s financial liabilities amounted to CHF 8.3 billion.Around of the80% financial

D ue within 1,715 1,385 1 y 235 ear 23 72 – S ­

wisscom Ltd totalled CHF 5.31 billion. Thedifference o 2years ue within 1 t D 405 109 278 18 – – S ­

o 5years ue within wisscom gains Ltd. Net recognised directly 3 t D 2,173 1,670 445 28 30 –

years o 10 ue within 6 t D 2,291 2,085 176 27 3 –

0 years ue after D 1 1,573 363 150 960 100 –

8,156 6,100 Total 375 461 500 720

- - - - 47 Management Commentary Financial review 48 Management Commentary Financial review

Board of Directors andBoard Group Directors of Executive Board their are of paid remuneration aportion in the form of similar companies (European telecommunications companies) as well as the with prior year. Themembers the of aligned the with interests shareholders. of are management of interests financial the that ensure requirement shareholding minimum the and shares in Variablement. remuneration based on financial and non-financial the targets, partial ofpayment remuneration shares, which are three of blocked for aperiod years. are They also to subject aminimum shareholding require comparisons of depreciation and amortisation (EBITDA) and capital expenditure. Theenterprise value/EBITDA ratio also permits indicatorsKey performance for planning and managing business operations are revenue, operating income before management business Value-oriented as compared to other European countries. dividend policy, as wellattractive as the lower interest rates and lower corporate income rates intax Switzerland ratio the by is solid supported market position valuation is therefore well above the average for comparable companies in Europe’s telecoms sector. Thehigher resulted in an increase in the ratioenterprise of value to EBITDA (prior year: to 8.2 7.7). pension liabilities CHF of billion. 0.8 EBITDA With remaining unchanged, practically the higher enterprise value capitalisation 13.7% of or CHF billion 3.2 of CHF debt billion0.4 by ain net reduction was partially offset and in Swisscom’s enterprise value increased 6.3% by or CHF 2.1 billion to CHF 35.1 billion in 2017. Therise in market stock Ratio enterprise value/EBITDA Operating income before depreciation (EBITDA) andamortisation Enterprise value (EV) Non-controlling interests financialassets other non-current Equity-accounted investees and Defined benefitobligations Net debt Market capitalisation Enterprise value indicated where except million, CHF In

­ S wisscom’s enterprise value from derived the share price on the balance date sheet that with of

­ S wisscom has achieved thanks to ahigh level investment of and an

­ S wisscom’s relative market 31.12.2017 35,090 26,859 4,295 1,048 7,447 (253) (11) 8.2

­ S 31.12.2016 wisscom 33,020 23,627 1,850 7,846 4,293 (311) 7.7 8

-

Added value Added million CHF In valueuse added of rather than as an intermediate input. and depreciationindirect costs and amortisation. Personnel expense in the value statementadded of is treated as value. added direct Operating value added is equivalent revenue to purchased, net less and goods services other ­Swisscom makes contribution an to important Switzerland’s competitivenessand economic success and generates Thanks to amodern,high-performance infrastructure and acomprehensive, network offering, needs-driven service valueStatement added of suppliers in Switzerland approximately of or CHF 60% 2.9 billion. the purchasing volume in the Swiss business was around CHF billion 4.9 in 2017, value added with contributed by land’s economic Taking development. into account capital expenditure instead depreciation of and amortisation, In addition value, added to direct purchases from suppliers provide significantvalue added indirect for Switzer which was 1.9% less than in the previous year. higher was 1.2% In value added contrast, FTE per at CHF 262,000. the consolidatedOf operating value added CHF billion, of 5.2 91% or CHF 4.7 billion was generated in Switzerland, Intermediate inputs Depreciation andamortisation Other operating expenses Direct costs Capitalised self-constructed assetsandotherincome Net revenue 6 5 4 3 2 1 Total addedvalue Company (retained earnings) lenders(netinterestThird-party expense) Shareholders (dividends) Public sector Employees value added of Allocation Total addedvalue Other non-operating result Operating addedvalue Swisscom development of added value per employee in Switzerland

100 200 300 400 ompany: includingchanges indeferred income taxes anddefinedbenefitobligations. yees: employer contributions are aspensioncost, reported rather thanasexpenses according to IFRS. ublic sector: current income taxes,-operating taxes oncapitalandothertaxes result: notbasedonincome, aswell asComCo financial result excluding sanctions. netinterest shareexpense, ofprofits of investments inassociates, anddepreciation of andamortisation ating expense: excluding taxes oncapitalandothertaxes notbasedonincome. eciation excluding andamortisation: ofacquisition-related amortisation intangible assetssuchasbrands orcustomer relations. C P Emplo acquisition-related intangible assets. Other non Depr Other oper 0

4 272

5

2015

259

1

3

2016 6

2

in CHF thousand in CHF 262

2017

Switzerland (4,743) (1,946) (1,528) (1,594) 4,733 9,476 2,666 325 376

Shareholders 22% Public sector 8% Company 10% lenders Third-party 3% Allocation of added value added of Allocation

(1,727) Abroad 2,186

(720) (586) (604) 183 459 244

18

11,662 (6,470) (2,666) (2,114) (2,198) 5,120 5,192 5,120 1,148 2,910

Total 2017 508 519 149 394 (72)

in %

Switzerland

(4,838) (1,493) (1,634) (2,036)

9,665 4,827 2,651 325 308

(1,595) Abroad 1,978 (723) (548) (467) 143 383 224 13 Employees

57% 11,643 (6,433) (2,759) (2,041) (2,101) 5,103 5,103 5,210 1,148 2,875 (107) Total 2016 468 604 155 321

-

49 Management Commentary Financial review 50 Management Commentary Financial review

Swisscom Group Operating income before depreciation and amortisation (EBITDA) Fastweb Swisscom withoutFastweb Swisscom Group Net revenue indicated where except million, CHF In outlook Financial attractive dividend CHF of 22 share per attractive for the 2018 financial year at the 2019Annual General Meeting. and slightly higher at Fastweb. to Subject achieving targets, its shouldrevenue positivelyCapital affect beand expenditureto slightly EBITDA. expected loweris in Switzerland aroundof CHF 50 million. at the contrast, current By euro exchange rate, the currency translation Fastweb of ing standard for recognising revenue (IFRS 15) is applied, to be which is likely on to haveEBITDA anegative effect savings. by cost be to higher. Fastweb’s EBITDApositively affected expected is From 2018 onwards, a new account utable to price pressure and continued declines in the number fixed-line of telephony connections. EBITDAwill be wisscom anticipates revenue net around of CHF 11.6 billion, EBITDA around of billion CHF 4.2 and capital for to decline; Fastwebout is however, expected this shouldby a rise partially be in offset revenue.Fastweb’s EBITDA expenditure less of than CHF billion. 2.4 Due to strong competition and price pressure, 2018,For 2 1 Fastweb Swisscom withoutFastweb Swisscom Group expenditure Capital Fastweb Swisscom withoutFastweb

change rate CHF/EUR of1.16(CHF/EUR of1.11for financial year 2017). E Adjustmen S ­ wisscom, excluding lower to year-on-year. be Fastweb, is expected in reduction EBITDA is attrib Theexpected

t of CHF 41million:Fastwebt ofCHF litigation 61million. 102millionlesstermination income benefitsofCHF ofCHF ­ S

reported 11,662 2,378 4,295

2 017

pro-forma 11,662 2,378 4,254 ­ S 2017 wisscom will payment propose an of unchanged,

1

15 /o IFRS

w

Change 2018 > 0 < 0 < 0 > 0 < 0 > 0 < 0 < 0 < 0

S ­ wisscom’s revenue with I Impact FRS 15 FRS 2018 (50) (10) –

R 0.6bn F 1.6bn F 2.4bn R 0.7bn F 3.4bn F 4.2bn R 2.0bn F 9.2bn F 11.6bn ~ CH > CH ~ CH ~ CH < CH ~ CH ~ EU ~ EU > EU outlook 2018

- - - 2

www.swisscom.ch/ shareprice See

Swisscom’s market capitalisation as at 31 2017 December amounted to CHF 26.9 billion (previous year: CHF share Swisscom of Swisscom’s shares are listed on the SIX Swiss Exchange. The creditworthiness market Capital a ratio 1:10 of under (Pink SCMWY the symbol No.69769). Sheet United States (Over TheCounter, 1), Level they are in traded Receipts the (ADR) form American at of Depositary Swisscom shares are listed on the SIX Swiss Exchange under (Securities the SCMN symbol No. 874251). In the exchanges Stock ­T (TSR) the of 2016,of this equates Taking to areturn 4.9%. of into account the gain in share price, the total shareholder return 7AprilOn 2017, Shareholder return lion) ­S EUR). Average daily trading volume grew 16.9% by year-on-year to 156,147 shares. Thetotal trading volume of 13.7%by to CHF 518.50, outperforming the Stoxx Europe Telecommunications 600 Index (+5.1% in CHF; –3.63% in The Swiss Market Index (SMI) 14.1% roseby compared the with previous year. The rights such if voting rights 5% exceed the of company’s share capital. register of share entitles the holder to one vote. Voting rights can only exercised be the if shareholder is entered in the share Share performance 2017 550 350 400 450 500 elecommunications Index 9.8% in CHF and 0.7% in EUR. wisscom shares in 2017 amounted to CHF 18 billion.

­ S . Thenumber shares of issued remained the same at 51.8 million. Par value registered per share is CHF Each 1. wisscom is regularly assessed by international rating agencies.

S 02.01.17 wisscom S ­

28.02.17 wisscom Ltd voting with may rights. TheBoard Directors to of refuse enter ashareholder voting with S ­

wisscom share was 19.4% in 2017. TheTSR for the SMI was 17.9% and for the Stoxx Europe 600 S ­ wisscom paid an out ordinary dividend CHF of 22 share. per Based on the closing price at the end 31.03.17 SMI (indexed)

in CHF

30.04.17

31.05.17 Stoxx Europe 600 Telcos (inCHF, indexed) 30.06.17

31.07.17

31.08.17

30.09.17

31.10.17

30.11.17

29.12.17 S ­ wisscom share price increased

23.6

bil - 51 Management Commentary Capital market 52 Management Commentary Capital market ­S toattention balancing maturities and a diversificationof financing instruments, markets and currencies.

estimates, wasshare. per CHF 480 ahold rating48% and 35% asell rating. Theaverage price target at 31 2017, December according to the analysts’ studies on basis. Their findings and recommendations offer valuable indicators for 23investors. regularly analysts publish Investment specialists analyse Analysts’ recommendations shareholdings. unregistered in to hold the the majority of capital and voting at 31 rights. As 2017, December 20% some the of shares were held The majority shareholder as at 31 December 2017 was the Swiss Confederation, which is obligated current by law Total Institutions Natural persons Confederation structure Ownership level of and rating Moody’s agencies. To avoid downgrading, structural aratingWith A(stable) of (stable) and A2 respectively, financing and ratings Credit debt/EBITDA ratio1.7 of (prior year: 1.8). at 31As 2017, December amounted debt net to CHF 7.4 billion (prior year: CHF 7.8 billion), corresponding to anet as non-current fixed interest-bearing of deposit and derivative certificates financialinstruments on financing. sation). consists debt total Net of financial liabilities lesscash cashand equivalents, current financial as assets well Swisscom aims to have around of debt anet 1.9 times EBITDA (operating income depreciation before and amorti indebtedness of Level Indebtedness price CHF of 178 share, per this amounts to an average annual total return 5.4%. of paid atotal CHF out of 367 share per since the initial public offering. Together with theoverall increase in share in dividend payments, CHF billion 1.6 in capital reductionsand CHF 10.4 billion in share buybacks. Since going public in 1998, CHF 1,140 million. dividend CHF of 22 share per for the 2017 financial year.This equivalentis to a total dividend payoutof forthcoming Annual General Meeting on 4April 2018, will the Board an Directors of propose unchanged ordinary Swisscom pursues that dividend astable is policy on cash focused flow generation capitaland allocation. At the policy Dividend

wisscom’s solid financialstanding enabled accessit unrestricted to money capitaland markets again in 2017.

S ­ wisscom Ltd.

­ S wisscom. At the end 2017, of 17% the of analysts recommended rating abuy for the

­ S wisscom aims toThis have abroadlyinvolvesportfolio. diversified paying debt particular ­S S wisscom has distributed atotal CHF of 30.7 billion shareholders: to its CHF 18.7 billion hareholders N umber of 72,776 69,837 S ­ 2,938 wisscom’s business performance, results and market situation on an ongoing 1

umber of 51,801,943 20,365,711 26,394,000 5,042,232 N Shares

S ­ wisscom enjoysratings good from the Standard &Poor’s 31.12.2017 100.0% 39.3% 51.0% 9.7% Share i n % ­ S wisscom endeavours to raise financing at the

umber of hareholders S N 77,430 74,224 3,205 1

umber of 51,801,943 19,910,137 26,394,000 5,497,806 N Shares ­ S

wisscom share, ­S wisscom has 31.12.2016 100.0% 38.4% 10.6% 51.0% Share i n %

- See report See page 20 page tions. main The risks concern the possibility imposed on universal provision) service the supply chain separately are in reported the Sustainability Report. andmodel, technology human capital. Forthcoming regulatory decisions alatent pose risk which could impact trend inmarket the ICT will necessitate fundamental changes in the approach to risks related to the business machines, should compensate for the loss revenue of from the traditional core business. the long Over term, the the areas and the digitisation communication of products such security as and cloud between services, IT services, and government established policy. of Theimportance is telecoms continuing services in to decline. services New Risks are driven changes by in markets, competition, customer behaviour, technology, the regulatory environment situation Risk value. enterprise Swisscom’s risk management system is aimed at safeguarding the company’s Risks wisscom were forced to expansion spend more on network than planned, long-term projected or if earnings conditions as well as technical onan ongoing opportunities basis. were to fall. arise if coverage, expansionnetwork is determined population by densityand customer demand. Substantial risks would expansionnetwork that necessitates calls for major investments. To mitigate financial risks and ensure optimum current to as operators meet strives it andnetwork future customer market and own needs defendits share. The (smartphones,services IP TV, OTTs, etc.). Customer demand for broadband access is growing rapidly, as is the mobile of popularity and devices IP-based network access inthe bandwidth Increased risks The manner in which regulations are implemented (e.g. in telecommunications and antitrust legislation) entails Politics and regulation satisfaction. suchIf risks materialise, this could delay implementation or haveon customer the adetrimental of strategy effect current and future which competitors, would narrow for the investment, scope innovation and price reductions. synergies and economies scale. There of is arisk that communications internationally providers, the which purposeof is services to provide low-cost and major exploit ished. Moreover, atrend towards can currently national observed be and international among cooperation tele sustainably during the transformation process, while at the same time technical remains complexity undimin Here there is services. arisk thatattractive the revenue from the classic telecoms business will secured be not resultingcomplexity from the parallel operationold and of newtechnologies has reduced to to be enable new, telecomsown infrastructure is exerting transformation pressure on the business. During this transformation, the Increasing competition driven national by infrastructureproviders have who providersdo not and their service Telecommunications market Risk factors ­S could reduce the company’sand restrict for room manoeuvre, as well as sanctionsthe by Competition Commission, which termination and roaming services) and broadband (optical fibre),which would reducefurther sion the Telecommunications of heightens Act wisscom’s financial development, as illustratedby the The following main riskkey factors. selected risk in factors wisscom, which could have an on the impact adverse company’s financialposition and resultsof opera for S ­ ­ S ­ S S ­ wisscom minimises the risks adapting by the broadband expansion to thechanging of access network S ­ wisscom has initiated measures in various areas to manage these risks. wisscom’s operating results and cause reputational damage to the company. Theforthcoming revi threaten to fundamentally undermine the current competitive system. competitive current the undermine fundamentally to threaten ­S of price of regulation to mobile being communications extended (mobile wisscom tough faces competition from cable companies and other regulatory risk. Finally, excessively high political demands (e.g. those ­ S wisscom will able be not to its with align structures cost its ­ S wisscom’s income - - - - 53 Management Commentary Risks 54 Management Commentary Risks www.cdp.net See future and drive up costs. t ter stations and exchanges. local Theanalysis climate theby of risks posed change isof based on the official report operability of the permafrost) loss and of other resulting economic The and reputational could the developments factors. impact and extremes, temperature and temperatures higher average precipitation, of levels (increased climatic parameters Climate change risks for poses times stricter thantimes stricter the EU’s limits. The public’s to mobile attitude antenna wary sites in particular is impeding (ONIR), Switzerland has the adopted precautionary principle and introduced limits for base stations which are ten potentially harmful to the environment and health. Under the terms the of Ordinance on Non-Ionising Radiation Electromagnetic radiation (e.g. from mobile antennas or mobile handsets) has repeatedly claimed been to be environment the and Health averted. formore potential important threats recognised to be at an early stage, systematically and understood quickly the more difficult forbecomes. prevention attack, This opportunities of The widermeans the variety it even is asopportunities well as newrisks. The area has Internet of and security developed changed to immense with technology, respect with speed and competitiveness. impact Thetransformationcosts is being monitored the by Group Executive Board. implementation and operating phases. risks These have the potential to delay increase the rollout newservices, of Swisscom is in the midst atransformation of from to line-switched IP TDM technology technology. This trans Information and security technologies arrangements, alternative suppliers of locations, careful selection and other measures are designed to ensure that technologies can cause damage or interruption to operations. Built-in redundancy, contingency plans, deputising third (e.g. parties computer viruses, hacking) and the ever-growing and interdependence complexity modern of reputational risk. Force majeure, natural disasters, human error, failure, hardware criminal or software by acts and Any platforms. IT major disruption to business operationsa high poses financial risk as well as a substantial Usage of interruption Business legislation. Regulatory risks can jeopardise the achievement and targets of reduce the enterprise value. ment loss. Fastweb’s business operations are also influencedby the European Italianand telecommunications and risk the country premium. increase An in interest rates risk or the country premium could lead to an impair that this will result impairment in afurther loss. Major also uncertainty surrounds the future interest rate trend EBITDA margin and in reduction capital expenditure ratio). is future If lower growth than there is projected, arisk gent above all on achieving the financial out in targetsset the business plan (revenue improvement growth, in The recoverabilityassets. Fastweb’s of assets recognised net in the consolidated financialstatements is contin revenue Theimpairment inprojected growth. 2017 performed test confirmed the recoverablevalue of Fastweb’s dynamics risksThe competitive which carry could have adetrimental and on Fastweb’s impact strategy Fastweb’s of assets recoverability and regulation dynamics, Competitive that well as managing and efficiency, growth increasing employees’ toability adapt and renew their skills and ensuring challenges in this lie in context maintaining employee motivationand despite pressure, high cost loyalty staff as Constant changes in background conditions and markets mean that corporateculture to needs adapt. Thekey Employees ­S ­e to IPdatewith technology has positive. been f ­S netic radiation on the environment and health could further hamper further could health and environment the on radiation netic ormation should enable he Federal Office for thehe Federal Office Environment(FOEN) on climate change, publishedOctober 2011. in wisscom’s expansion. network legislation, Even stricter without publicof electromag concerns the about effects wisscom at all can deliver that times. thecustomers level service expect of conomics and society and theirconomics and society interdependencies. innovations New and capabilities go hand in hand new with ­ S wisscom remains an attractive employer. remainswisscom an attractive ­S wisscom’s is heavily services dependent on technical infrastructure such as communications networks S ­ wisscom’s telecoms infrastructure, particularly in the of view potential risk to base stations, transmit S ­ wisscom to produce more flexibly efficientlyand experience before. The than acquired ­S wisscom. risks These are driven legal by and regulatory changes, changes to physical ­ S wisscom’s complex architecture IT entails risks during the both the construction of wireless networks in wireless the of the construction networks j ­ eopardise - - ­ - - Corporate Governance and Remuneration Report

Corporate Governance 1 Principles ______56 2 Group structure and shareholders______57 3 Capital structure______58 4 Board of Directors______60 5 Group Executive Board______72 6 Remuneration, shareholdings and loans______77 7 Shareholders’ participation rights______77 8 Change of control and defensive measures ______78 9 Auditor______79 10 Information policy______80 11 Financial calendar______80

Remuneration Report 1 Governance ______81 2 Remuneration of the Board of Directors______83 3 Remuneration of the Group Executive Board______86 4 Other remuneration______91 Statutory Auditor’s Report______92 56 Corporate Governance and Remuneration Report Corporate Governance www.swisscom.ch/ basicprinciples See

­S report any violationsreport Conduct. the of of Code andresponsibility the environment, society for people, comply applicable with rules, demonstrate and integrity internal rules and regulations. contains approved is It importance Conduct the by the of Board Code Directors. of an explicit declaration by poration, Organisational Rules and the Rules particular Procedure of Of the of Board committees. Directors’ of Swisscom’s principles and rules on corporategovernance areprimarily out set in the company’s Incor of Articles to newrequirementsactivities as and when necessary. allows newstandards to the identify Board Directors at of an early stageand to adjust corporategovernance its investors, advisorsThe interaction of and proxy other stakeholder groups specialist the with respective divisions Compensation in Stock Listed Companies (OaEC). umbrella organisation representing Swiss business, and the requirements the of Ordinance against Excessive mendations for the Corporate of Governance Swiss Practice Best of 2014 Code issued economiesuisse, by assigned responsibilities and based on recognised standards. In this regard, and transparent effective practises Board Directors corporate governance, of which is characterisedby clearly ­S online The latest versions these documents of as well as their earlier, unamended and superceded versions viewed can be 1 governance as part of its effort to deliver long-term value. policy. fundamental governance of isa component Corporate Governance Corporate objective of of objective In and the performing their Board Group Directors of activities, Executive Board of wisscom commitment its of to absolute as integrity well as compliance the with law and all other external and wisscom shareholders, customers, employees and other interest groups into their decisions. To this end, the

Principles Principles

wisscom website under “Basic principles”. on the S ­ wisscom is committed to practising effective and transparentand corporate effective practising to wisscom iscommitted long-term and sustainable business management. incorporate They ­ S ­ S wisscom expects its employees to its take responsibilitywisscom expects for their show actions,

S ­ ­ S wisscom complies with wisscom’s corporate ­ S the legitimate interests of of interests legitimate the wisscom are guided the by the recom the the - - ae evcsProducts & Sales &Services Group Executive Board pages 137—138pages See report See report See page 40 page Marketing information found can be in onsegment reporting the Management Commentary. Group also operatesaDigital Business division and Group companies such as the Italian subsidiary Fastweb S.p.A. &Marketing, EnterpriseProducts Customers and IT, &Infrastructure, form the Group Network Executive Board. The Steering (CFO) and Group Human Resources (CPO) as well as the heads the of business divisions Sales &Services, management to the CEO of Communication &Responsibility and Group delegates Security.Board The the Directors day-to-day of business the five Group divisions Group Business Steering, Group Human Resources, Group GroupBoard & Services, Strategy Swisscom Ltd is the holding company responsible for the overall management the of roup structure 2.1 roup structure and shareholders 2 For financialFor the purposes, business reporting divisionsof of company, the head aGroup of or business division or other persons appointed the by CEO. representatives Other theof Chairman are the of Board Directors fulfilled of by the CEOof the with executive management Directors of the of company. In Group the important companies, the responsibilities includes an has external member. empowered the Delegatethe Fastweb of Board of S.p.A. TheBoard Directors of the HeadIT, of &Infrastructure and other representatives Network of are held the by CEO Fastweb of S.p.A. ­( subsidiary are classified Fastweb S.p.A. strategicas Group companies.of BoardThe of Directors divided into three categories: and important strategic, other. andment powers of responsibilities of the by Board set Directors of Strategic and financial managementof the Group companies is assured through the rules governing the assign Note 5.4to theNote consolidated financialstatements. companies, including company name, registered percentage office, of shares held and share capital, is in provided 2.1.1. ­S &Infrastructure. Theexecutive managementNetwork of Switzerland) Ltd comprises the CEO of wisscom (Switzerland) Ltd. This position is occupied the by CEO of

S ­

wisscom and, as also in members the external cases, parties of some Board serve Directors. of G G

O perational Group structure Group perational Customers Enterprise & Responsibility Communications Group ­ S wisscom Ltd. TheCEO, together the with heads the of Group divisions Group Business Infrastructure IT, Network &

­S wisscom Ltd, who acts aswisscom Chairman, Ltd, who acts together the with CFO of S ­ S CEO Directors Board of wisscom Ltd as Chairman, the CFO of wisscom Ltd ­ Steering Group Business & Board Services Group Strategy S ­ ­S wisscom are allocated to individual segments. wisscom (Switzerland) Ltd is delegated to the Head of S ­ wisscom Ltd, Resources Group Human Internal Audit S ­ wisscom Ltd. on the Seats Board Directors of ­ S wisscom Ltd, the CEO astrategic of Group S ­ wisscom Ltd. The Group companies are Group Security ­ S wisscom. also TheBoard Directors of ­S wisscom (Switzerland) Ltd and the S ­ wisscom Ltd and the HeadIT, of Digital Business S ­ wisscom Group. comprises It A list Group of ­S wisscom Ltd, S ­ wisscom Further Further - 57 Corporate Governance and Remuneration Report Corporate Governance 58 Corporate Governance and Remuneration Report Corporate Governance See report See page 152 page r cations provides that Enterprises (TEA) the Confederation shall Act hold the the majority of share capital and voting 50.95% the of issued share capital of the printing for their and certificates of delivery shares (registered shares with no right to printed certificates). may at any time confirmation request of the registered shares However, they hold. they have no right to request holdingsdepositary SIX of SIS AG, up to amaximum limit determined the by Swiss Confederation. Shareholders Registered shares of rights. preferential 2.2 Group comprises noother listed companies. As at 31As 2017, December market the stock capitalisation of ­S Mellon Corporation issues Shares the American Depository (ADS). are ADS American securities which represent ISIN: CH008742519; CUSIP for ADR: 871013108). Within the framework the of programme, TheBank York New of Trading in the United States over-the-counter is conducted (OTC) as 1programme aLevel (ticker symbol: SCMWY; Exchange (Securities No.: 874251; ISIN: companyisted zerland). is It listed in the Standard for Equity Securities, Sub-Standard International the of SIX Swiss Reporting, Swisscom Ltd is acompany governed Swiss by law and hasIttigen registered its office in (Canton of Berne,Swit 2.1.2 All registered shares the with exception treasury of shares held by share register of ­S certificates profit-sharing and participation hares, Each registered share of 3.2 found can be equity in the financialstatementsof the years 2015 to 2017. There is no authorised or conditional share capital. Additional information concerning shares a nominalwith value CHF of share. 1 per The shares are fully paid up. The share capital was unchanged in 31On December2017, the share capital of 3.1 structure apital 3 31On 2017, December the Swiss Confederation”), Confederation (“the as majority shareholder, continued on 31 December2017. According to the https://www.six-exchange- at ­ Regulation o holdings reach, or fall exceed these limits. below In August 2017, BlackRock, ashareholding York, New Inc., reported which are able not to independently how decide voting rights when are any exercised, their of report not need share FinancialFINMA Market Infrastructure Ordinance (FMIO-FINMA). nominee Under companies, the FMIO-FINMA, No cross-shareholdingsNo between exist 2.3 be exercised.be Thedetailed disclosure requirements and for calculating the method these limits are in specified the 33 whenever or group aperson to subject the disclosure obligation reaches, exceeds or falls 3, below 5, 10, 15, 20, 25, and Trading Derivatives (FMIA), there to disclose is aduty shareholdings to Pursuant on Financial 120 the of Federal to Act Article Market Infrastructuresand Market in Conduct Securities ights wisscom shares. Ten correspond ADS to one share. Receipts are TheADS (ADR). American by evidenced Depositary hareholders may only exercise their voting rights, however, they if have entered been voting with rights in the f 3.44% inf 3.44%

1/3

, 50 or 66 C S Cross-shareholdings M Capital

L wisscom Ltd. of ajor shareholders ­ S ­ S wisscomof Ltd. the Thenotification shareholding on canviewed thebe website of Exchange SIX 2/3 per cent per the of voting rights of ­S S ­ wisscom share register, Chase Nominee Ltd., London, held 3.04% the of voting rights in wisscom Ltd. ­S wisscom Ltd are issued not form, but are in held certificate book-entrysecurities as in the S ­ wisscom Ltd has apar value CHF of Each 1. share entitles the holder to one vote. ­ S wisscom Ltd, which is unchanged from the previous year. TheTelecommuni S ­ CH0008742519; ticker symbol SCMN). SCMN). symbol ticker CH0008742519; wisscom Ltd and other public limited companies. regulation.com/en/home/publications/significant-shareholders.html. ­ ­ S wisscom Ltd amounted to CHF 51,801,943, divided into registered ­S wisscom whether the of or Ltd, not voting irrespective rights can ­S wisscom Ltd. S ­ wisscom Ltd was CHF 26,859 million. ­ S wisscom are eligible for adividend. There are no S ­ wisscom Ltd and SIX Swiss Exchange wisscom The ­S wisscom Ltd ­ S to hold - - - www.swisscom.ch/ basicprinciples See report See report See See report See page 109 page page 77 page page 51 page See

and proxies”. and acquirer is entered in the share register as ashareholder or beneficial holder votingwithout other rights.The exceeds the limit 5% of all of registered shares entered in the commercial register. the With other shares, the shareholder total holding, its when if the newshares are to added any voting shares already registered name, in its Incorporation,3.5.1 of may the Board the of Directors Articles to of refuse recognise an acquirer shares of as a accordance Incorporation of are any of to thesubject with restrictions not Articles kind. In accordance Article with mitations on transferability and nominee registrations Swisscom shares are transferable, freely and the voting rights the of shares registered in the share register in 3.3 Swisscom Ltd has issued neither participation nor profit-sharing certificates. Commentary. ­ Management Further details on the shares are available 7“Shareholders’ in Section participation rights” as well as in the rights. voting the exercise accordance not receive not instructions,does the with it does instructions receives it from it the If holders. ADR enforce and exercise shareholder rights. TheBank York New of Mellon Corporation exercises the voting rights in the depository, ADR is listed as the shareholder in the share register. holders are ADR therefore unable to directly the execution voting of rights and the right to dividends). The Bank York New of Mellon as Corporation, which acts The holder an the of possesses rights ADR listed in Agreement the (e.g. Deposit the right to issue instructions for Swisscom issue not does options on registered shares of ­co Swisscom has no convertible bonds outstanding. Details the of debenture bonds are given to in the 2.2 Note 3.4 nominee). contractually or through common management or other means are treated as asingle shareholder (trustee or and disclosure obligations as binding. Trustees and nominees related in terms capital of or voting rights either the conclusion an of agreement which by the trustee or nominee acknowledges the applicable restrictions entry share register. trustees and of nominees Theentry as shareholders voting with rights is to subject application and hasthe Board Directors of issued regulations governing trustees and of the nominees entry in the forGeneral which Meeting, an absolute valid majority of is votescast required. In accordance this with provision, theowners of shares. This provision Incorporation of may thechanged of Articles be resolution by the of Annual must They lated also parties. able be to provide evidence the of names, addresses and holdings the of beneficial assurance provide the or otherwise necessary authority that they are for acting the account one or of more unre trustee capacity. In addition, they to must subject supervision be abanking by or financial market supervisory shares voting with rights for trustees and nominees in excess the of 5% threshold, theyprovided disclose their allow means by the Board Directors, of regulations of or agreements, toof permit registered the fiduciary entry To facilitate the tradability the of company’s shares exchange, on the stock Incorporation of (Article 3.6) the Articles Swisscom has issued special regulations governing the registration trustees and of nominees in the share register. ­s tatutory provisions transferabilitytatutory 7.1 on are restricted in described section “Voting this of right report, nsolidated financial statements.

C Li onvertible bonds, debenture bonds and options ­ S wisscom employees. Ltd to its ­ S wisscom Ltd r ­ estrictions estrictions - 59 Corporate Governance and Remuneration Report Corporate Governance 60 Corporate Governance and Remuneration Report Corporate Governance oard of Directors 4

B

61 Corporate Governance and Remuneration Report Corporate Governance 62 Corporate Governance and Remuneration Report Corporate Governance www.swisscom.ch/ basicprinciples See

numerical for listed restrictions and non-listed Incorporation. of companies, the 8.3 of Articles arein out Article set definitionof the term “mandate” and informationother on mandates fallthat do not under the aforementioned consult the Chairman Details the of Board on the Directors. regulationof external mandates,of in particular the 2 1 Simoni Renzo Schlatter Theophil MühlemannCatherine Frei Barbara Alain Carrupt Alain Bircher Valérie Berset Abt Roland Loosli Hansueli Name 31 of As 2017, December comprises the Board Directors of the following non-executivemembers: Confederation has delegated Renzo Simoni as his successor. Hans Werder, from down at the the Board Annual stepped Directors of General Meeting on 3April 2017. TheSwiss Directors of Board the of embers currentlyThe Board Directors of consists nine of members. Therepresentative the of Swiss Confederation, 4.1 No memberNo exceeds the the of Board limits Directors for of mandates. set respectively. Prior to accepting newmandates outside the retirement-benefit foundations.However, the total numberof these mandates is also limited to ten seven and of on the restrictions numberThese mandates of apply do not to mandates aBoard by member order by performed additional mandates in non-listed companies. In total, more theythan may perform not ten such additional mandates. the mandates held outside the Group and other significant activities. affiliations and activities professional ducation, Details the of career and qualificationsof each memberof Board the below,areof Directors provided along with 4.2 Esser Frank

Board members no more may than perform three additional mandates

esignated by the Swiss Confederation. 2011 Chairman. 1September ince D S S ­

wisscom or to mandates in interest groups, charitable associations, institutions and foundations or employee

M E

2

1

witzerland

witzerland S S S Nationality Switzerland

Switzerland Switzerland Switzerland Switzerland Germany

witzerland

ear of birth of ear

Y 1966 1961 1958 1957 1970 1951 1976 1955 1955

ember, representative of the Confederation the of ember, representative Chairman eputy ember, representative of the employees the of ember, representative employees the of ember, representative M D Member Member Member M M Chairman Function Member

Swisscom Group, the Board members are obligated to

in listed companies and no more than ten

Pursuant Incorporation, of to the Articles

A nnual General Meeting nnual General T aking office at the at office aking 2006 2009 2012 2011 2014 2016 2016 2016 2017

Coop Group:Coop Chairman the of Board Directors, of Mandates companies: the of non-listed in Mandates Basel Group: Chairman Bell the of Board AG, Directors, of Mandates companies: listed in the Coop of Mandates man the of Executive Committee 2001–August 2011 Basel, Genossenschaft, Coop Chair tee and Group Coop Executive Committee; January Switzerland, Basel, Chairman the of Executive Commit Zurich, Zurich, Managing Director; 1997–2000 Coop 1992–1997 Procurement; Coop Product Non-Food – activities: significant Other suisse, until August 2017 economie- of and Committee Executive Directors of of order by Mandates Essen SE, Deichmann Board, Allschwil. mandates: Other Member the of Advisory Mineraloel Coop theof Board Directors, AG, of Chairman Basel; AG, Holding Transgourmet Directors, Waro AG, Volketswil, recently as most Adliswil, Controller Director; and Deputy 1985–1992 AG, Produktions 1982–1985 Mövenpick history: Career Controlling and Accounting Financial in Expert Education: Loosli Hansueli tor; 1992–1996 Switzerland, Coop Group Association, Basel; Chairman Commercial apprenticeship; Swiss Certified Commercial apprenticeship; Swiss Certified S ­ Member of the Board Board the of Member wisscom: Wangen, Director of of Wangen, Director Managing Direc Managing of theof Board of Coop Coop - - -

of the Board of Directors, Eisenbergwerk theof Board Directors, of Gonzen AG, Career history: 1985–1987 history: Career a CFO of (Dr. oec.) Education: Abt Roland – activities: significant Other Transport AG, Bremgarten, since May 2017 Sargans; member BDWM the of Board Directors, of Raiffeisenbank,Board Directors, of Zufikon; the of Member companies: non-listed in Mandates Conzzeta of AG, Zurich Directors of Board the of Member companies: listed in Mandates and Member the of Group Executive Board Tools), 2016 2004–December CFO, Fischer Georg AG, Machine Fischer Georg (currently Group Charmilles FischerGeorg Piping Systems, 1997–2004 CFO, Agie Fischer Group: 1996–1997 Chief Financial Officer (CFO), 1996–2016 Georg Manager, Activities; Cement Fibre Venezuela, 1993–1996 Plycem, Industrias Division 1991–1993 Controlling, CEO, 1987–1991 of Head 1987–1996 Eternit Group (currently Group): Nueva nies operations with in the areas and IT of real estate; Doctorate in business administration administration business in Doctorate group of compa of group Chairman Chairman -

63 Corporate Governance and Remuneration Report Corporate Governance 64 Corporate Governance and Remuneration Report Corporate Governance Education: Education: Alain Carrupt 2017 tee on Freedom Association, of ILO, since Geneva, June for theCommittee National Points on OECD Contact ment issues and as amember the of Federal Advisory tion (ILO) addressing finance economics, developand Nations (UN) and the International Labour Organiza which the role of United she on committees has served the State Secretariat for Economic Affairs (SECO) in Headthe of Internationaluty of Affairs Labour section Member of the Commit the of Member activities: significant Other Mandates: the ILO Board Directors. of ILO Committee; 2011–2014 and since 2017 Member of tripartite the and Companies Multinational for Guidelines (ISO), Human Resources Department;since 2007 Dep 2007 International Organization for Standardization 2006– Standards; Labour International of Department – activities: significant Other Mandates: Trade Union: syndicom 2011–2016 Chairman; 2008–2010 Chairman, and Head Personnel, of Secretary 2003-2008 Vice General Deputy 2000–2002 Union: Communications the of Telecommunicationsretary sector; 2000–2010 directorate in Sion; Union, Central 1994–2000 PTT Sec recently as HeadAdministration of at the telecoms 1978–1994 history: companies, Career most PTT Education: Education: BircherValérie Berset Organization (ILO), specialist in employment law in the of the 2005International Office history: Career Labour ary 2016 Chairman ary Swiss school-leaving economicsin certificate Doctorate in law (Dr. iur.)Doctorate – – 2011–2013 Joint Chairman, 2013–Febru Chairman, Joint 2011–2013 ------division; since 2016 December Schneider Electric, – activities: significant Other v “Austria”Electric and member Ges.m.b.H, the of Super Real Estate GmbH and, since JulySE 2017, Schneider GmbH, Schneider Holding Electric Germany GmbH, GmbH,CEO GmbH, Schneider ELSO of Merten Electric Mandates: for the group Schneider Paris Electric, 2017 Zone President Germany, Austria and Switzerland Head Strategic Reviews of Portfolio 2015 and Drives Control Unit, Managing Director; 2016 2013–December November Manager Mediterranean; Regional and Manager Country (Italy), Giovanni San Sesto Z tric GmbH, Germany, in she which was capacity also Chairman Schneider the of of Executive Committee Elec Career history: history: Career Lausanne IMD Administration, techn.), sc. ETH; Master Business of (Dr. Doctorate Education: Frei Barbara – activities: significant Other interXiontors, Holding N.V., Amsterdam Brussels;Group S.A.S.), member the of Board Direc of Board, Dalenysvisory (formerly Group Rentabiliweb S.A Super the of Member companies: listed in Mandates Executive Board the of Vivendi Group tion from 2005–2012 also amember the of Group Operating Officer (COO),2002–2012 CEO, in this func Française du Radiotéléphone (SFR): 2000–2002 Chief Board Mannesmann of Eurokom; 2000–2012 Société recently from 1996most as amember the of Executive Deutschland, Mannesmann 1988–2000 history: Career ­D Education: Esser Frank s gerial positions, including, in particular, 2008–2010 ABB .r.o., Prague, Manager; Country 2010–2013 S.p.A., ABB isory Board Schneider of isory Sachsenwerk Electric GmbH one President Germany until June 2017 and since July octorate in Economicsoctorate (Dr. rer. pol.) Degree in mechanical engineering, ETH; ETH; engineering, mechanical in Degree Mandates for Schneider Group: Electric Graduate in business administration, administration, business in Graduate 1998–2016 Group ABB in various mana for the Power Grids Paris: Paris: ­ - - - - - Mandates in non-listed companies: companies: non-listed in Mandates Board, Televisory Columbus AG, Berlin Member of the Super the of Member companies: listed in Mandates 2012 owner Baar,GmbH, until December partner, (Viacom), CEO; since 2008 Andmann Media Holding CentralMTV &Emerging Markets Media and AG Viva CentralMTV &Emerging Markets, CEO; 2005–2008 1997 Holcim (Switzerland) Ltd, Head Finance/ of gramme Researcher; 1999–2001 TV3, Programme Researcher;gramme TV3, 1999–2001 Mediaof Research; 1997–1999 SF1 and SF2, Pro – activities: significant Other A Education: Education: Mühlemann Catherine CFO and member the of Executive Committee; und Beratung AG, controller; 1991–1995 Sihl Papier AG, public accountant; 1985–1991 Holcim Management 1979–1985 history: Career STG &Lybrand, Coopers Education: Theophil Schlatter – activities: significant Other history: Career Mandates in non-listed companies: Mem companies: non-listed in Mandates Executive Board 1997–2011 Holcim Ltd., CFO and member the of Group Committee; Executive the of member and tration HSG); qualified public accountant Board of Directors, SchweizerischeBoard Directors, of Cement- Director; 2001–2003 Central, MTV CEO; Board MesseBerlin of GmbH, Berlin, since July 2017 Switzerlandof Tourism; member the of Supervisory ktiengesellschaft, Rapperswil-Jona ktiengesellschaft, Lic. phil.Lic. I Degree in business administration (lic. oec. oec. (lic. administration business in Degree 1994–1997 Swiss Television Vice-Chairwoman Vice-Chairwoman 2003–2005 2003–2005 DRS, Head ber of the the of ber Industrie- Adminis 1995– - - - ­

­G recently asmost Co-CEO; 2007–2017 AlpTransit Bauplanung AG, member the of Management Board, ­C Engineering Developer Civil AG, Partner + Basler Zurich,ETH (part-time); lecturer 1995–2002 Ernst Zurich Zurich), (ETH assistant; scientific 1995–1998 tion; 1989–1995 Federal Institute Technology of in assistant in Civil Engineering and Building Construc technical Group, Gruner 1985–1989 history: Career (Dr. sc. techn.), ETH Education: Simoni Renzo of Zurich, since January 2018 January since Zurich, of the Board the of Psychiatric Hospital the of University (PSU) Company 21”); Project (“Stuttgart Chairman of Bahn Deutsche of Stuttgart-UlmCommittee GmbH Advisory the of Member activities: significant Other GrunerBoard Directors, of AG, Basel, since April 2017 the of Member companies: non-listed in Mandates onsulting 2002–2006 Services; Helbling Beratung + otthard AG, Chairman the of Management Board Doctorate in mechanical engineering engineering mechanical in Doctorate - 65 Corporate Governance and Remuneration Report Corporate Governance 66 Corporate Governance and Remuneration Report Corporate Governance See report See page 142

are to the in consolidated provided 6.2 Note financialstatements. Customer and supplierTEA. relationships the Swiss between exist Confederation and significant commercial links with have held such arole in any the of three business years prior to the year. reporting TheBoard members have no assess independence. members hold No the an of Board executive Directors role of within the thewith company. ofa ThetermmemberBoard of office of the not a iscriterion of Directors bethat to used can executive management for at least three years and who have no or only comparatively minor business relations who were never Directors of a member the of executive management or who have a member been the not of for Corporate Governance.Practice Independent members shall thus mean non-executivemembers the of Board In order to determine independence, applies the Board Directors of the criteria in out the set Swiss Best of Code 4.4 tive are determined the by Federal Council. Annualdate the of next General Meeting. Themaximum term office of and age limitFederal for the representa exceptional special cases if circumstances Members who reach exist. the age 70 of retire from the Board as the of years. This flexible arrangement makespossibleit for shareholders the extend maximumto officetermof in The maximum by the Annual term for office of members elected GeneralMeeting, asa rule,twelve isatotal of constitutes itself.Board Directors of Compensation until to serve Committee the conclusion Annual the of next the General Meeting. Otherwise, nominatesthe Board Directors of achairman from among members or appoints its the missing member(s) the of the number members the of of Compensation falls Committee the below minimum number three of members, sion the of following Annual of the the If office is GeneralChairman permitted. Meeting. Re-election vacantor is the of Compensationbers individually Committee for aterm one year. of Theterm office of runsuntil the conclu The Annual the members and General the Meeting Chairman elects theas of Board well Directors of as the mem of Directors Telecommunications Enterprise employees must (TEA), granted be appropriate Act representation on the Board of Currently, Renzo Simoni is the only representative appointed the by Federal government. Under the terms the of Ltd, the Swiss Confederation is entitled to representatives appoint to two of the Board Directors of and,bers necessary, if the number increasedcan be temporarily. Incorporation of Under of the Articles office of term and lection Under seven and the Incorporation, termsof nine comprises the Board the of Directors Articles of between mem 4.3 the Board Renzo by Simoni, holds the the majority of capital and voting rights in federation, of the Board Directors of Carrupt was nominated the by syndicom trade union. the With exception the of representative the of Swiss Con Bircher and Alain Carrupt. Valérie Bircher Berset was nominated the by transfair staff association Alainand Since the Annual General MeetingApril of 2016, employee representatives the have elected Valérie been Berset employee representatives.two Employees are entitled to make proposals for their employee representatives.

E I ndependence ­ S wisscom Ltd. The Articles of Incorporation of wisscom also Ltd. stipulate TheArticles that must the Board include Directors of ­ S wisscom Ltd orthe ­S wisscom the by shareholders Ltd is elected at the Annual General Meeting. ­ S wisscom Group. Swiss The Confederation, represented on ­ S wisscom in accordance the with S ­ wisscom. Details these of S ­ wisscom Group or S ­ wisscom Ltd. ­S wisscom - - - - -

www.swisscom.ch/ basicprinciples See

related to the Italian subsidiary Fastweb and attend and Fastweb subsidiary Italian the to related Board, invites the Board members Directors the of of Group Executive Board, senior employees of allow them to prepare for the items on the agenda. To ensure further appropriate to reporting the members the of therequest inclusion items further on of the agenda. Board members receive documents prior to the meeting to of interestof are defined in Organisationalthe Rules and in the rules governingstanding the committees. The duties, responsibilities to and conflicts modus respect with operandi andconduct the of Board its Directors of that have implemented. been particular on the events, general course business of and major business transactions, as well as on any measures more, the Chairman theand of to Board each the Directors of CEO meeting on the of Board report Directors of tors and other internal as appropriate, and meetings on specific external experts, issues. its to attend Further Directors attends the attends Directors meeting is convened the by Vice-Chairman. TheCEO, the CFO and the HeadGroup of Strategy &Board Services meeting. Further meetings are convened as business requires. In the event that isThe Board usually Directors of convened once month per the by Chairman (except in July) for aone-to-two-day were constituted as follows as at 31 2017: December has delegated individual tasksThestanding to of the committees. of Board Directors committees of unlessauthority such is granted authority to the Annual law. General of Meeting virtue by TheBoard Directors of the company’s executive management. the supreme As governing the of Company, body has it decision-making isThe Board responsible Directors of operandi for modus the and strategic and organisation financialnternal managementof 4.5 of members regularly theof of Board Directors of challenges facing the Group and business divisions “company in-depth of as part experience days”. Themajority 2017. Each quarter, the members thealso of Board to explore Directors havethe of upcoming the opportunity once ayear and recently in most January 2017. Aone-day mandatory training course was held at the beginning of Board and individual its self-assessments, members. and The Board conduct theDirectors of committees usually great to importance the attaches ongoingThe Board Directors of development and continuing education the of regularly the The Chairman meetingsthe of attend Board Directors. of the agenda sets 2 1 view of Group of view management and the current are given atask-specific to introduction theirAt a one-day they introduction, activities. are with provided overan bers of the Board of Directors attended selected presentations selected attended the of Boardbers Directors of Without voting rights voting Without Directors of Board the of Committee the (-woman) of Chairman Frank Esser Esser Frank Committee Finance Hansueli Loosli Hansueli Simoni Renzo Catherine Mühlemann Mühlemann Catherine Carrupt Alain

I 1

­S wisscom Group’s annual management meeting.

Hansueli Loosli Loosli Hansueli Valérie Berset-Bircher Roland Abt Theophil Schlatter Schlatter Theophil Committee Audit operational challenges. are They also given an in-depthat topics look take In advantage addition, these opportunities. of individual mem Board of Directors of Board task-related training sessions. Whenever possible, the Board of

1 and seminars during the year. Board New members

the Chairman is unavailable, the Hansueli Loosli Loosli Hansueli Simoni Renzo Schlatter Theophil Esser Frank Barbara Frei Frei Barbara Compensation Committee ­S wisscom and for monitoring . Any Board member may

1

S ­ 2 wisscom, audi S ­

wisscom Ltd - - - -

67 Corporate Governance and Remuneration Report Corporate Governance 68 Corporate Governance and Remuneration Report Corporate Governance www.swisscom.ch/ www.swisscom.ch/ basicprinciples basicprinciples See See

Frank Esser Frank Carrupt Alain Bircher Valérie Berset Abt Roland Chairman Loosli, Hansueli Participation: (in duration Average hours) Total 2017. in The following the tableof Board meetings, givesconference Directors’ an of overview calls and circular resolutions circular resolutions resolutions circular followingThe the Finance of table an gives overview Committee’s composition, conference meetings, calls and requires, as but arule once quarter. per TheCEO, the CFO and the HeadGroup of Strategy and Board Services The Finance is Committee convened the by Chairman as member or at aCommittee the business of as request often Corporate Venturing. Details the of Committee’s arein out the set Finance activities rules procedure. Committee of making comes whento it issuing authority rules procedure of and in directives the areas Mergers of & Acquisitions and relatingon matters to major investments and TheFinance divestments. has Committee the ultimate decision- shareholdings, and entering into or terminating strategic alliances. in capacity an also TheCommittee advisory acts up or dissolving setting with in connection significant Group companies, acquiring or disposingof significant FinanceThe prepares Committee information transactions, for example, oncorporate for the Board Directors of Committee Finance toprovided the other members theupon request. of Board Directors of copies all of Finance and Audit meeting Committee minutes. Theminutes the of Compensation are Committee verbally report on the meetings. All latestcommittees members committee also the of Board Directors receive of aretees chaired other by members, however. At the following meeting the the chairs of Board Directors, of the of voting rights), the Chairman is the of Board amember Directors all of of the standing commit The committees. least the one of standing to Subject being committees. appointed to the Compensation (without Committee usually consist three of to member six arule,always the of Board also members. every As Directors of on sits at (Nomination)mittee tasked detailed examinations out carrying with Thecommittees importance. of matters of Directors of Board the of ommittees hasThe Board Directors of three standing (Audit, Finance committees and Compensation) and one ad-hoc com 4.7 responsibilities. and powers that the Chairman is the of Board unavailable, Directors of the Vice-Chairman, Theophil Schlatter, assumes his 2011.ber and Thepowers responsibilities the of Chairman are defined in Organisationalthe Rules. In eventthe Directors of Board the of hairman Hansueli Loosli has amember since the been of Board Directors of 2009and Chairman the of Board since Septem 4.6 2 1 Hans Werder Simoni Renzo Chairman Deputy Schlatter, Theophil MühlemannCatherine Frei Barbara Board, meetingsthe of Financeattend Depending Committee. on the agenda item, other members the of Group Executive priate, to also the meetings. attend

esigned from the Board of Directors as of 3 April 2017. 3April as of Directors of Board the from esigned 2017. 3April as of Directors of Board the to lected R E

C C the Management Boards the of strategic Group companies managers and project are called upon, as appro

2

1

in 2017. in

Meetings 5:30 12 12 12 12 12 12 12 11 11 9 2

C onference calls 0:15 0 1 1 1 1 1 1 1 1 1 1

C ircular resolutions – – – – – – – – – – – – –

- - - - ­

www.swisscom.ch/ basicprinciples See report See page 81 page See

Committee’s arein out the set Audit rules activities procedure. Committee of and has the finalsay on businessthose forwhich it matters has the corresponding competence.Details of the formulates positions on business which matters lie within the decision-making the of Board Directors authority of controlling important most instrument and is responsible for monitoring the Group-wide assurance It functions. that call for specific financial expertise policy,(dividend example). for The Board isCommittee the of Directors’ ance and the internal audit) and the external audit. also It handles dealt the matters by with Board Directors of 1 Loosli Hansueli Simoni Renzo MühlemannCatherine Carrupt Alain Chairman Esser, Frank Participation: (in duration Average hours) Total average of two hours and twenty minutes.average hours and two of twenty year: Hansueli Loosli (Chair), Valérie Bircher Berset and Frank Esser. meetings lasting held TheCommittee two an Nomination A comprisingBoard Directors. of Committee the following members wasin formed the 2017 financial upon the motion submitted to be the Annual General and Meeting for theapproval election members the of of appointsto The Board the the BoardDirectors members of the Directors. of of Group Executive Board or decides work based on a specific requirements profiledefined by the Board andofpresents suitableDirectors candidates over the by Chairman composition and its is determined basis. on acase-by-case carries its TheCommittee out new members to and the Board the Directors of Group is Executive BoardTheCommittee presided when needed. The Nomination is Committee on formed an ad-hoc basis for the preparing purposeof the groundwork for electing Committee Nomination informationFor “Remuneration onthe Compensation to refer the section Committee, Report”. Committee Compensation 2 1 Loosli Hansueli Hans Werder Bircher Valérie Berset Abt Roland Chairman Schlatter, Theophil Participation: (in duration Average hours) Total resolutions lar The following the tableof Audit gives an Committee’s overview composition, meetings, conference calls and circu publiclawyers, as required. accountants and experts tax management are called The Audit upon tocan attend. also Committee involve independent third such parties as ­e The CEO, CFO, HeadGroup of HeadAccounting, of HeadInternal Strategy of &Board Services, Audit and the the Chairman as member or at aCommittee the business of as request often requires, at least but once quarter. per remaining members Committee are experiencedin finance and accounting.The Audit Committee is convened by The Chairman and in onethe other financial member theare of Committee experts field, and of the the majority controlling, The Audit handles Committee all business relating to financial management example,(for accounting, financial Committee Audit

lected to the Board of Directors as of 3 April 2017. 3April as of Directors of Board the to lected esigned from the Board of Directors as of 3 April 2017. 3April as of Directors of Board the from esigned expert. inancial R F E xternal auditors the Audit attend meetings. Depending Committee on the agenda, other members of

1

2

financial planning and financing), assurance (risk management, theinternal system,control compli 1

in 2017. 2017. in

1

Meetings Meetings 4:55 3:35 3 3 5 1 3 3 5 5 5 3 5 3

C C onference calls onference calls 0:30 – – – – – – – 1 1 1 1 1 1

C C ircular resolutions ircular resolutions ­ S wisscom – – – – – – – – – – – – – –

- - 69 Corporate Governance and Remuneration Report Corporate Governance 70 Corporate Governance and Remuneration Report Corporate Governance www.swisscom.ch/ www.swisscom.ch/ targets_2018-2021 basicprinciples pages 53—54 pages See report See See See

Risks section of the Management Commentary. Management the of section Risks function table).function Committee isCommittee informed delay without any about significant new risks. the Organisational Rules and in Annex 2to the Organisational Rules, excess CHF of 50 million. and the Board the Directors Thedivision of CEO in out is between detail powers set of in afinancialwith exposure excessin of CHF 20 million and a investments with or financialdivestments exposurein transactions major of to importance the Group, including, for example, the acquisition or disposal companies of duties, on business decides the Incorporation. of Boardand In Directors addition of the statutory Articles to its hasThe Board Directors of delegated day-to-day business management to the CEO in accordance the with TEA these goals for afour-year in period accordance the with provisions the of TEA. goals that the Swiss Confederation, as majority shareholder, aims to achieve. TheSwiss Federal Council formulates determines the organisational, strategic, financial planning and accounting guidelines,taking into account the on decides theIt appointment and removal members of the of Group Executive Board. also The Board Directors of managing operations. company’s with the entrusted persons of supervision Obligations, of Code is the Board responsible Directors of first and foremost for theoverall management and non-transferable and irrevocable duties of the of Board Directors of authority of powers of ssignment The Telecommunications makes Enterprise (TEA) reference to Act the Swiss Obligations of Code regarding the 4.8 isk management management isk tation of the protecting company’s of hasThe Board the Directors objective of set enterprise value through the implemen 4.9.1 ­S andthe Board the Directors at of CEOleast once amonth meet to discuss fundamental issues concerning Board Executive Group the vis-à-vis Directors is comprehensively of The Board briefed Directors Board the of of powers can fulfil instruments it and so its responsibilities. controlling and nformation The Chairman of 4.9 matters. management, internal compliance control system, and internal audit and comprehensively is briefed onthese isThe Board responsible Directors of for establishing and monitoring the Group-wide assurance risk functionsof gations. is TheBoard informed Directors of immediately any of an of events exceptional nature. with the provisionsconflict regarding the reclusionof a member fromBoard deliberations or confidentiality obli is entitled toDirectors information request on all relating matters to the Group at any time, this provided not does non-financial information that for controllingis important steering memberand of Board the purposes. Every of accordance the with same accounting principles and standards as external financialIt also reporting. includes key operational and financial developments for the current financial year. The management is outreporting carriedin results operations, of cash flows and riskpositionof the Group It and segments. the also receives projections for Inments. addition, on the course business, receives the of aquarterly Board Directors report of financialposition, containing receives areport Board Directors of all key indicators performance relating to the Group and the seg information onthebusiness, course of and major events, any measures projects month, the Every adopted. ordinaryAt every meetingthe the CEO of Board Directors, also of providesdetailed with the Board Directors of issues. topical Boardutive as well as the heads other of Group and business divisions once ayear for an in-depth discussion of reporting. reporting. in the areas (including strategy of market risks), operations (including finance risks), compliance and financial wide, central risk management which system takes account external and both of internal captures It events. risks Executive Board are informed significant about risks, their and potential effects cators. cators. managed on the basis arisk of Therisks strategy. are evaluated in terms their of on key impact indi performance tions. line and func assurance functions other department, Strategy the Controlling department, the with closely rates end, the central Risk Management the to CFO and both unit, the which Controlling reports collabo department, ismentation. to identify, Theobjective assess and address significant risks time.and opportunities in good To this facilitatesopportunities the achievement this of Accordingly, objective. on aquarterly basis, and on the asemi-annual Board Directors of basis. wisscom Ltd andGroup its companies. TheChairman each in with also person member the meets of Group Exec

A I R S ­ wisscom assesses risks its and their in eventthe quantitative that the risks effects The crystallise. risks are ­ S wisscom and reviews updates risk its profile on a quarterly basis.The Audit Committee and the Group

Group-wide corporate culture risk management. A that promotes the conscious handling risks of ­S wisscom engages in level-appropriate, comprehensive and reporting maintains the appropriate docu S ­ “ wisscom Ltd. Pursuant 716a the to of Article Rules Procedure of and Accountability Significant risk factors risk Significant In urgent the cases, Chairman the of Audit S ­ wisscom has implemented aGroup- the remedial status of measures are in described the ” and and (see (see ------received and a report is drawn andreceived up areport on aquarterly basis for the Audit Committee. Chairman theand of Board the Directors of Chairman the of Audit are Committee informed notifications of dling raised objections of relating financial to external reporting, reporting and assurance function issues. The procedurereporting approved the by Audit ensures Committee the anonymous and confidential receipt and han facilitates the achievement this of objective. corporate culture which promotes the willingness to behave in away that complies the with relevant regulations employees from legal sanctions,financial losses and reputational damageby ensuring Group-wide compliance.A safeguarding of hasThe Board the Directors objective of set the 4.9.3 assessesof Committee on theICS the basis the and performance effectiveness periodic of the reporting. informed in timely a manner. measures Corrective to the remedy shortcomings are monitored centrally. Audit The annual basis. Should the risk ICS assessment change significantly, the Chairmanof the Audit Committee is measurescorrective to ayear the Audit in twice and Committee astatus report to on the an Board Directors of Significant shortcomings in identifiedtheICS during withthetogether monitoring activities the are reported Group Business Steering, and Internal Audit periodically monitor the functioningof theICS. and effectiveness information monitoring and activities, communication.activities, Accounting The to unit, which is attached nal control components: control environment, assessment financial of statement accounting risks, control cial the of Group statements companies and the Remuneration encompasses ICS The the following Report. inter nternal and financial system control reporting substantial to uncover prevent, and correct ance. errors acts in It the consolidated financial statements, the finan The internal control (ICS) system ensures the reliability financial of with reporting an appropriateof degree assur 4.9.2 and Audit in Committee its fulfilling andtheir regulatorystatutory Internal auditing is the carried by out Internal Audit unit. Internal the Audit supports 4.9.4 manner. assessment serious or if breaches are identified, the Chairmanof the Audit Committee is informed in a timely and riskonce year per activities Directors on its assessments. Should there significant be changes in the risk accordance the with Laundering Money Group Act). Compliance to the Audit and Committee the reports Board of annual audit the of implemented measures external by auditors is also (financial performed intermediation in tored. Group Compliance the reviews suitability of system the annually. and effectiveness In certain areas, an required measures. are of Theemployeesmeasuresinformed these affected and their implementation is moni nies are periodically reviewed manner in aproactive in risks order time in to identify good and determine the toring the by central Within system. these areas legal of compliance, the business the of Group activities compa legal applies department, a risk-based approach towards areas identifying legal of compliance that require moni ance Within system. the year framework this of Group every system, Compliance, aspecialist unit the of Group sion special audits based on presented to the Audit for approval. Committee Independently this of audit, the Audit can Committee commis annual plan the internal both of and external auditors, is prepared annually on the basis arisk of analysis and audit planning the with external auditors. Theintegrated strategic audit plan, which includes the coordinated accessunrestricted and to the audit audit documents Internal reports of Audit. Internal Audit closely coordinates Internal Audit liaises closely and exchanges information the with external auditors. Theexternal auditors have tion. At an administrative level, Internal to the HeadGroup of Audit provides reports Strategy &Board Services. to Internal ordinary reporting, Audit informs the Audit any of Committee irregularities which atten come to its Audit is on auditCommittee briefed findings statusand the of measures any corrective implemented. In addition to the Audit meetings, At which and Committee. its are reports Directors held at least on aquarterly basis, the Internal Audit maximum possesses independence. is It under control the the direct of Chairman the of Board of sational units the of assurance risk functionsof management, the internal control and system compliance management in all organi of, effectiveness in particular, the governance and controlsystemsof the operational processes as well as the sional auditing evaluation standards. an objective conducts and It audit the of appropriateness, and efficiency Internal Audit is responsible for planning and performing audits throughout the Group in compliance profes with the audit findings and monitors the implementationof measures. Audit management also supports highlighting by areas potential of

I I C nternal audit nternal ompliance Management ompliance ­S wisscom Group. information on received the whistle-blowing Internal by operated platform Audit. ­S wisscom has therefore implemented aGroup-wide, central compli for improving business documents It processes. supervisory and controlling supervisory obligations. Internal ­ S wisscom Group and andexecutive bodies its S ­ wisscom Ltd Board Directors of This This ------71 Corporate Governance and Remuneration Report Corporate Governance 72 Corporate Governance and Remuneration Report Corporate Governance roup Executive Board 5

G www.swisscom.ch/ basicprinciples See report See page 57 page See

Name the of composition the of Group overview An Executive Board as at 31 December2017 is given in the table below. Lehner over took as HeadEnterprise of Customers. appointed In the by JuneBoard Directors. of 2017, Christian the Group Executive Board, left Petit at which time Urs for the main to other members the part of Group Executive Board. Themembers the of Group Executive Board are executive management of in exceptionalpermitted Accordingly, cases. has the Board Directors of delegated responsibility for the overall membersmust of the be of Board not Directors of Board Executive Group the of embers Incorporation,In the Board of Executive accordance shall the Articles with comprise one ormore who members, 5.1 None of the of None members the of Group Executive Board limits the exceed set for mandates. ­ Incorporation. tioned numerical for listed restrictions and non-listed of companies, the 8.3 of Articles arein out Article set the definitionof the term “mandate” and informationother on mandates fallthat do not under the aforemen approval the of Chairman Details the of Board on the Directors. regulation of external mandates, of in particular dates outside the ever, the total number these mandates of is limited to ten and seven respectively. Prior to accepting newman- groups, charitable associations, institutions and foundations or employee retirement-benefit foundations.How apply to mandates an by Executive Board member performed order by of more than such perform not additional two mandates. on the restrictions number These mandates of do not date in listed companies and no more than additional two mandates in non-listed companies. In total, they may Incorporation, of the GroupArticles Executive Board members no more may than perform one additional man asummarywith the of mandates they hold outside the Group and other significant Pursuant activities. to the affiliations and activities professional ducation, Details the of careers and qualificationsof the membersof the GroupExecutiveBoard beloware provided along 5.2 1 Dirk Wierzbitzki Heinz Herren Lehner Urs Marc Werner Werner Hans C. Rossi Mario Schaeppi Urs

ince November 2013 CEO. November ince S

M E

1

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wisscom Group, the members the of Group Executive Board are obligated to obtain the S Germany Switzerland Switzerland Switzerland Switzerland Nationality S

witzerland witzerland and France S ­ wisscom Ltd to the CEO. TheCEO is entitled to delegate his to subordinates, powers

Y ear of birth of ear 1960 1960 1960 1968 1962 1967 1965 ­ S wisscom Ltd at the same time. Temporary exceptions are only

H H H H C C C Function

PO PO FO EO ead of Products &Marketing Products of ead &Infrastructure IT, of ead Network Customers Enterprise of ead &Services Sales of ead ­ S ­ S ­S wisscom Ltd wisscom wisscom Ltd wisscom wisscom Ltd wisscom

­ S wisscom or to mandates in interest

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73 Corporate Governance and Remuneration Report Corporate Governance 74 Corporate Governance and Remuneration Report Corporate Governance Customers, Solutions Ltd; 2007–August 2013 Head Enterprise of Directors, Swiss-AmericanDirectors, Chamber Commerce, of member of the Steering the of member Other significant activities: Member the of Board activities: significant Other dation, since 2017 December the Board Trustees of the of Swiss Entrepreneurs Foun Admeirathe Board Directors, AG, of Berne; member of Swiss Innovation Park Foundation, Berne; member of Lausanne;ment, member the Foundation of Council, Develop Management for Institute International IMD tions (asut), Berne; member the of Foundation Board, Board,utive Association Suisse Télécommunica des of by order Mandates Board Executive Since March member 2006 the of 7 November 2013 CEO ness, 6 1998–2006paper HeadCommercial factory; of Busi 1994–1998 history: plantCareer manager at Biberist HSG) oec. (lic. administration business Education: Schaeppi Urs ary 2013 Head of Department of of Department Schweiz, Berne; Board the member of the of Advisory Zurich; member the of Executive Board, Glasfasernetz Research (EAER), since June 2017 Economic of Affairs,Department Education and Energy and Communications (DETEC) and the Federal Transport, Environment, the of Department Federal Board onDigital Transformationthe Advisory for the land, Zurich (formerly Digital Zurich 2025); member of November 2013 CEO, acting ­S wisscom Mobile; 2006–2007 CEO, Degree inDegree engineering (Dipl. Ing. ETH) and ­S wisscom (Switzerland) Ltd; since Janu Economics the of Zurich;University of ­ S wisscom (Switzerland) Ltd; 23 July– ­S wisscom: wisscom: Committee of digitalswitzer of Committee ­ S Member of the Exec the of Member wisscom Ltd, since S ­ wisscom Group S ­ wisscom of of ------­

2009 Fastweb S.p.A., CFO; 2009–20122009 Fastweb S.p.A., CFO and member the of Group Executive Board; 2007– Chief Financial Officer (CFO);2006–2007 Group Controlling; 2002–2006 1998–2002 history: Career Other significant activities: activities: significant Other Berne Hasler Foundation, foundations: institutions and foundations, and employee benefit Mandates in interest groups, charitable associations, Public Accountant Board Trustees, of comPlan, Berne SIX Swiss ExchangeCommittee, Zurich Ltd, Education: Education: Mario Rossi CFO and member the of Mandates by order of of order by Mandates Board zerland) Ltd, CFO; since January 2013 Commercial apprenticeship; Swiss Certified Commercial apprenticeship; Swiss Certified Member the of Foundation Board the of S ­ wisscom: wisscom: S ­ wisscom Group Executive Member of the Sanctions the of Member ­ S wisscom Ltd, Head of S ­ wisscom Ltd, Fixnet Vice-President of the the of Vice-President S ­ wisscom (Swit S ­ ­S wisscom Ltd, wisscom Ltd, -

2011 East Schindler, HRPresident; Vice since September Head HR and of Training; 2010–2011 Europe and North Head Global of HR; 2007–2009 Schindler Aufzüge AG, Centreporate and HR 2003–2007 Shared Services, sion, 2002–2003 Head Human of Resources (HR) Cor Mandates by order of of order by Mandates member the of Divisional OperationOfficer, Reinsurance & RiskDivi 2001 Training, Business Training and Technical of Head Winterthur, Rector; 1999–2007 Swiss Re: 1999–2000 1997–1999 history: Career Kantonsschule Büelrain, business administration (Dr. oec.) Education: Werner Hans C. (iimt) Technology in Management of Institute national Council and Board the member of Inter the of Advisory Institute the of President activities: significant Other Board Trustees, of comPlan, Berne Swiss Employer’s Association, Zurich; member the of ­S wisscom Ltd, Chief Personnel Officer (CPO) and Graduate in business management, PhD in in PhD management, business in Graduate ­S wisscom Group Executive Board S ­ Member of the Board, Board, the of Member wisscom: - - - 2007 keting &Sales, member the of Executive Board; 2005– Management; Bluewin 2000–2004 AG, Head Mar of Marketingof and Sales and member the of Executive dential Customers and land) Ltd: 2008–2011 HeadMarketing of &Sales Resi Residential Customers; 2008–2013 foundations: foundations: institutions and foundations, and employee benefit Mandates in interest groups, charitable associations, 2017 DigitalBoard AG, since Directors, Festival of September siroopBoard Directors, AG, Zurich; of member the of of order by Mandates 2017 March Net-Metrix of Board Directors of AG, Zurich, until the of Member companies: non-listed in Mandates the of ber and sinceHead Sales of &Services January 2014 mem 2016 January since division, Customers Residential 2015 of Head 2013–December September Customers, dential Customers HeadResidential of and Deputy Career history: history: Career Business School St.of Gallen); Senior Executive Programme at London (University Programme Management Senior Executive; Club the of Executiveber Board the of SVC Swiss Venture –Association Swiss of Zurich;ASA Advertisers, mem Zurich; member the of Executive Board the of SWA- land (formerly the Verband SW Schweizer Werbung), Switzer Communication – KS/CS of Council cations Communi the of Member activities: significant Other secondary school diploma, school Marketingsecondary Swiss Certified Education: Marc Werner 2017 – Swiss Internet Association, Industry Zurich, until April ­C ustomers, 2012–2013ustomers, Head S ­ wisscom Ltd, Fixnet HeadMarketing of &Sales ­S wisscom Group Executive Board Technical apprenticeship with specialised specialised with apprenticeship Technical Member of the Board of Directors of simsaMember of the of Board Directors of 1997–2000 Minolta (Schweiz) AG, S ­ Deputy Head Residential of Deputy Chairman of the the of Chairman wisscom: of Customer Service Resi Customerof Service S ­ wisscom (Switzer Head Head ------75 Corporate Governance and Remuneration Report Corporate Governance 76 Corporate Governance and Remuneration Report Corporate Governance 2016–June 2017 HeadSales of &Services 2015 HeadMarketing of &Sales Enterprise Customers, Head Marketing of &Sales Corporate ­S Trivadis of Directors Holding AG; July 2011–June 2017 Trivadis Group, 2011–2013 member the of Board of Group, 2008–2011 Chief Operating Officer of (COO) member the of Group Executive Board Trivadis of Manager,recently: Solution 2004–2008 Portfolio 1997–2013 history: Career Trivadis Group, most St.University of Gallen (HSG) applied sciences), Executive MBA in Business Engineering, Education: Education: Lehner Urs Other significant activities: – activities: significant Other Brussels; member and the of Board Directors of Belgacom International S.A., Directors, of Carrier Services Board of Directors, Schweizerische Mobiliar Schweizerische Directors, of Board 2014 prises, 2011–2013 &IT; HeadNetwork of since January Enter Medium-Sized and Small of 2007–2010 Head Board;utive 2007–2013 2012December 2007– Enterprises; Medium-Sized and Small of Head 2001–2005 HeadMarketing of Wholesale, 2005–2007 Inalp Inc.; 2001–2007 Networks 3Com 1994–2000 Corporation; history: 2000 Career Education: Heinz Herren – activities: significant Other Mandates: Board prise Customers and member the of Group Executive Customers; since June 2017 Mandates in non-listed companies: Mem companies: non-listed in Mandates Board Group Executive the (formerly IT, &Innovation) Network and member of Mandates by order of of order by Mandates Berne, sinceschaft, May 2017 tive Board economiesuisse, of since August 2017 wisscom (Switzerland) Ltd: July 2011–December 2013 ­ S wisscom, HeadIT, of &Infrastructure Network Degree inDegree Engineering IT (UAS, university of Degree in electronic engineering (HTL) (HTL) engineering in electronic Degree – ­ S wisscom, member the of Group Exec S ­ Member of the Board Board the of Member wisscom: ­ S wisscom (Switzerland) Ltd: ­ S wisscom, Enter Head of ­ S wisscom AG: Fixnet Business, 2014– Business, Genossen Enterprise ber of the the of ber Execu - - - - - Mandates by order of of order by Mandates theof 2010–2015 Services; Communications for Director 2008–2010 tor for Consumer and Platforms, Internet Services for CommercialDirector Terminals, 2006–2008 Direc Vodafone 2003–2006 and Global Services, Products 2001–2003 Innovation for Management, Director management; product of 2001–2010 Vodafone Group: fone Germany): various management roles in the area 1994–2001 history: MannesmannCareer (now Voda Education: Dirk Wierzbitzki Other significant activities: – activities: significant Other Paris SoftAtHome, Directors, of ­S for ResidentialTV Customers; since January 2016, tomers, 2013–2015 Business HeadFixed-network of & Customerof Experience Design for Residential Cus 2010–2012 ResidentialManagement Customers, Head wisscom, Head of Products &Marketingwisscom, HeadProducts of and member ­S wisscom Group Executive Board Degree in electrical engineering inDegree electrical (Dipl. Ing.) ­S wisscom (Switzerland) Ltd: member of S ­ Member of the Board Board the of Member wisscom: - - - See report See page 81 page calculation of the percentage restriction. percentage the of calculation shares acquired through the exercise subscription, of option or conversion rights. AGroup clause applies to the shareholder or beneficial holder votingwithout rights.This on voting restriction rights also applies to registered shares entered in the commercial register. the With other shares, the acquirer is entered in the share register as a new shares are to added any voting shares already registered name, in its exceeds the limit 5% of all of registered acquirer shares of as ashareholder or beneficial holder with voting rightsif the latter’s total holding,when the entered in the share register of provided in the separate Remuneration Report. Remuneration separate in the provided All information on the remuneration and the of Board the Directors of Group Executive Board of emuneration, shareholdings loans and 6 third parties. with management agreements anagement agreements Neither 5.3 > > the voting shares represented in the following cases: requirements under the Swiss Obligations, of Code Incorporation of require the Articles atwo-thirds majority of absolute validmajority of Abstentions In votes cast. are addition votes tocast. deemed be not to the special quorum The Annual General Meeting Shareholders of of 7.2 the provision false of data. recognition or registration and did remove not any shareholders voting with rights from the share register due to allof registered shares as ashareholder or beneficial holder with voting rights, anyfor did reject not requests During the year under review, did the Board recognise not Directors of any acquirers shares of more with than 5% Annual for General which Meeting, an absolute valid majority of is votescast required. on votingThe restrictions Incorporation rights of for provided may in the changed Articles be resolution by the of him/her as ashareholder voting without rights. Theacquirerof the deletion must notified immediately. be consulting concerned, delete their theshare party register as ashareholder entry voting with rights and enter Where has an made entry been on the basis false of the by statements acquirer, the may, Board Directors of after rights. voting without holder. Should an acquirer shares of to refuse make such adeclaration, he/she will entered be as ashareholder upon that request he/she has acquired the shares in his/her name own and for his/her account own or as beneficial as ashareholder or beneficial holder with voting rights anyperson acquiring sharesfailswho expresslyto declare In addition to the percentage on voting restriction rights, may the Board Directors to of refuse recognise and enter > > > holder voting with rights, in particular in the following exceptional cases: may also recognise an acquirer shares of more with than 5% all of registered shares as ashareholder or beneficial c The 5% voting apply not to does the right Swiss restriction Confederation which, under the terms the of Tele proxies and restrictions right oting Each registered share entitles the holder to one vote. Voting rights can only exercised be the if shareholder 7.1 rights participation hareholders’ 7 ommunications Enterprise holds (TEA), the capital and Act voting majority of

Where shares are acquired to aview with cementing along-term partnership or strategic alliance W W C I

ntroduction of restrictions on voting rights voting on restrictions of ntroduction hange Incorporation concerning of in the special Articles quorums for resolutions S R M S V here shares are acquired as aresult anon-cash of contribution or an exchange shares of here shares are acquired as aresult amerger of or business combination tatutory quorum requirements quorum tatutory ­ S wisscom Ltd nor any the of Group companies included in consolidation of the scope have entered into S ­ wisscom Ltd voting with may rights. TheBoard Directors to of refuse recognise an ­ S wisscom Ltd adopts its resolutionswisscom its Ltd the and adopts by elections holds its ­ S wisscom Ltd. TheBoard Directors of ­ S wisscom Ltd is is is ­ 77 Corporate Governance and Remuneration Report Corporate Governance 78 Corporate Governance and Remuneration Report Corporate Governance www.swisscom.ch/ basicprinciples See report See page 91 page See

to vote at the Annual General Meeting3April of 2017. website. Shareholders entered in the share register voting with rights as 4 p.m. of on 29 March 2017 were entitled and the proposal (Article 5.4.3 of the Articles of Association). of and the 5.4.3 of Articles the proposal (Article writing to at theleast Board 45 Directors of days prior to the Annual stating General the Meeting, agenda item may at leastof that CHF request 40,000 an placed item on be the agenda. This must submitted request in be isThe Board responsible Directors of for defining the agenda. Shareholders representing shares aparwith value ­s at least 10% the of share capital can demand in writing that an general extraordinary meeting convened, be registered or unregistered to all letter registered shareholders. or One more shareholders who together represent meeting means by an of announcement in the Swiss Commercial Gazette.Themeeting can also convened be by items agenda and Meeting General Annual the of onvocation mustThe Board convene Directors of the Annual General Meeting at least 20 calendar days prior to the date the of 7.3 Details on clauses on change control of are “Remuneration given in the section Report”. Trading, since this would the TEA. contradict There is thus to submit no duty atakeover bid on as defined ExchangesStock in Federalthe Act Securitiesand theof capital and voting rights in Under the terms the of Telecommunications Enterprise the Swiss (TEA), Act Confederation must hold the majority hange of control and defensive measures 8 Partnerships appointed as independent for up the proxy period until the conclusion the of General Annual Meeting in April 2018. the by Annualthe independent elected proxy General Meeting. Thelaw firm Reber Rechtsanwälte, Zurich,was Meeting General Annual the at epresentation Shareholders may represented be at the Annual General Meeting another by shareholder voting with rights or by 7.4 w tions from the share register made can be at any time regardless the of cut-off date.The cut-off date is announced and also for all unannounced agenda items and motions, entitlements, which is business afew Annual days the respective before General Meeting. Entries into and To ensure due procedure, the defines a Boardcut-off Directors of ownits date at determiningdiscretion for voting Shareholders entered in the share register voting with rights are entitled to vote at the Annual General Meeting. 7.5 Incorporation). of the Articles of receives no instructions,instructions. shall it If it abstain. Abstentions votes are cast to be deemed not motion or abstain. Theindependent must the proxy cast votesentrusted to him shareholders by according to their share Switzerland Ltd. Shareholders who are represented may aproxy by issue instructions for each Authorisation may granted be in writing or electronically via the shareholders’ Computer by operated platform represented their by legal representative eventhe is if latter ashareholder. not tating the agenda item and the proposal and, in the names the elections, case of candidates. the of proposed ith theith invitation to the Annual General Meeting and also published in the financialcalendar

C C R E ntries in the share register share the in ntries and legal entities may represented be authorised by signatories, while minors S ­ wisscom Ltd. This requirement Incorporation. is of also in out the set Articles stating whether they wish to vote for or against the and wards may be wisscom on the agenda item item agenda ­ (A rticle 5.7.4 ­S dele - - by theby auditors on current mandates the by auditors, being performed (where theexceeds CHF fee thousand). 300 to quarterly TheAudit the isby CFO Committee reported additional mandates service must approved be the by the CFO Group of local company the or by Audit Committee Directors. Directors. not participatenot in the meetingsthe of full Board Directors. of auditors andThe statutory Internal in Audit all part took of meetings five the Audit Committee in 2017. They did thewith Auditor-in-charge the beyond and meetingsthe of Committee regularly to the Board Directors. of reports regardwith to accounting and the internal control TheChairman system. the of Audit liaises Committee closely and on theCommittee conduct results the of audit the of annual financialstatements, as well as on their findings ing the annual financialstatement to Board the and They of Directors the audit. submitreport Audit written a meetings.inform They the in Committee detail on the and performance results their of in work, particular regard auditors, represented the by The statutory Auditor-in-charge and his deputy, usually all attend Audit Committee audit-related and non-audit services services. 9.2 2015. since in-charge a maximum seven years. of Hanspeter Stocker KPMG of AG has responsible been for the audit mandate as Auditor- regulatedAs the by Swiss Obligations, of Code who leads the person the audit may the mandate only perform for which is auditedexception Fastweb PriceWaterhouseCoopers by of S.p.A, since 1January S.p.A.) 2004. KPMG AG, Muri auditor bei Bern, as has of the statutory acted auditor’sthe statutory mandate infrom 2018the 2019 effect with financial year. from the 2008 financialeffect year. of Board The of Directors tion in favour one audit of firm The to Boardthelast tenderingof Directors. wasprocess launched in 2007with defines transparent criteriaselection and two proposalssubmits accompaniedby a substantiated recommenda auditor’s14 years. The statutory tenure is limited to 20 process, years. the The Audit selection steers Committee in a policy by the Board of Directors. Anewtender the by Boardin Directors. of apolicy dates (including alist prohibited of toprovided the Group and Group companies. TheAudit has Committee defined guidelines for additional manservice Board of Directors. Re-election is permitted. is permitted. Re-election Board Directors. of Auditor-in-charge the of office of term and mandate of duration process, election auditor isThe statutory appointed annually the by Annual General Meeting following aproposal submitted the by 9.1 9 s auditors the vis-à-vis instruments controlling and pervision The Audit verifies the Committee qualifications and auditors independencestatutory of asathe state- licensed, 9.4 CHF fees pplementary to owed KPMGThe fees AG for additional audit-related amounted to services CHF 388 thousand (previous year: 9.3 CHF year: CHF 3,239 thousand). as auditors for Fastweb PricewaterhouseCoopers receivedan S.p.A. audit of fee Remuneration for the auditing KPMG provided by AG in services 2017 amounted to CHF 2,843 thousand (previous to CHF 319 thousand (prior year: CHF 112 thousand). for additional to audit-related owed PricewaterhouseCoopersThe fees S.p.A. for Fastweb and amounted other services comprise Theotheradvising tax services services. and consulting regarding services regulatory requirements. audit-related comprise of electronic signatures, certifications services special reviews and reporting-related advisory includes the annual audit plan the internal both of and external auditors, and reviewing and issuing the newtender for the audit mandate. approves It the integrated strategic audit plan, which services, which is defined percentageservices, as a of the audit fees. upervised upervised

671 283 A Auditor Su Su S udit fees udit

thousand in 2017 (prior year: CHF 768 thousand). huad,adtefe o te evcswr H 121 thousandthousand), (prior year: were and CHF for the other fees services CHF 127 thousand). The It isIt also responsible rotation principle the statutory for for observing the Auditor-in-charge and for auditing firm as well as commissionedas theperformed of quality the auditservices by Board the of services). In aregulation, has it also athreshold set charged for fees for additional The policies for appointing auditor haveforth the statutory set been is issued auditor’s for the statutory mandate 10 at least to every In order to ensure the independence the of auditors, S ­ wisscom Ltd has to issue decided anewtender for ­S wisscom Ltd andGroup its companies (with the broken according down to audit services, the annual for the fee auditing services and annually annually and - - - ­ 79 Corporate Governance and Remuneration Report Corporate Governance 80 Corporate Governance and Remuneration Report Corporate Governance www.swisscom.ch/adhoc www.swisscom.ch/ www.swisscom.ch/ www.swisscom.ch/ www.swisscom.ch/ financialcalendar generalmeeting financialreports cr-report2017 See report See page 169 page See See See See See

sustainability in accordance report the with Global Reporting Initiative (GRI) and annual an an annual includingpublishes report also a It basis. quarterly a on information financial transparent and consistent comprehensive, > > Swisscom investors regularly meets throughout the year, financial its presents results at analysts’ meetings and ­m Swisscom pursues information an vis-à-vis open,active policy the general public and the capital markets. It nformation policy 10 nnual General Meeting for the 2017 financial year:April 4 2018,Forum Fribourg, Granges-Paccot > > calendar inancial 11 details andThe contact address the of head office be foundmay in the website imprint. responsibleThose for investor relations via the website contacted can e-mail, or by be telephone or post. available on the The comprehensive minutes the of Annual General Meeting 3 April of 2017 and minutes from past meetings are under Related presentations and the ad-hoc press release published by businessinformed its about through press releases. conferences forroad financial shows, selected attends analysts and investors, and its shareholders keeps continuously andinterim annual reports are available report on the The detailed financialcalendar is published on the > basis. directly from directly

anagement commentary, remuneration and governance the corporate financial report report, The statements. 3 H 1 A A

rd st nnual 2018: Report 2019 February alf-year Interim 16 Report: August 2018 F I Quarter Interim 2May Report: 2018 Quarter Interim 1November 2018 Report: “ Investors ­S wisscom. TheSustainability is available Report on the S ­ ” . It is. It possible to subscribe to the ad-hoc messages published by wisscom website. ­ S wisscom website under S ­ wisscom website under S ­ wisscom are available on the S ­ wisscom website under “ Investors S ­ “ wisscom. Investors ” and is updated on a ”

or may ordered be “ S ­ Company wisscom website ­ p ”. ublishes ­ r egular www.swisscom.ch/ www.swisscom.ch/ basicprinciples basicprinciples See See

1 to achieve long-term corporate success as well as added value for shareholders.tied to the generation of sustainable returns and therefore creates an incentiveRemuneration paid to the Board of Directors and the Group Executive Board is Report Remuneration of Directors and the Regulations Directors of the Compensation of Committee. The decision-making Incorporation, are of powers the Organisational governed the by Articles Rules the of Board ofof 2.6 the Organisationalinterest tosection conflicts isdefined in respect with the Board Directors of Rules. to participate in meetings at which their remuneration is discussed the of members of Theconduct or decided. (with the exception the of CEO). Neither the CEO nor the other members the of Group Executive Board are entitled remuneration, is empowered to decideupon the remuneration the of individual Group Executive Board members submits proposals to the in Boardand, this Directors of within context, the framework the of approved total The Compensation handles Committee all business the concerning of Board matters Directors of remuneration, question. in year financial General Meeting for the remuneration paid to be to and the Board the Directors of Group Executive Board for the the Group Executive Board. In doing takes so, it into account the maximum amounts approved the by Annual ation and the of Board on the decides Directors remuneration of the of CEO as well as the total remuneration for the general terms and conditions employment of for members the of Group the remuner Executive Board. sets It approves,The Board inter Directors of alia, the personnel and remuneration for the entire policy Group, as well as remuneration. the approved already the Group Executive Board who is appointed newly during for which aperiod the Annual General Meeting has defines the requirements for and the maximum levelof the additional amount thatcanbe paid to a member of 5.7.7 in out Articles set and 5.7.8 7.2.2 Incorporation Incorporation.of of also Article the of the Articles of Articles Details the of relevant regulation and the consequences anegative of decision the by Annual General Meeting are and the Group Executive Board for the following financial year by Board the the upon motionof proposed Directors. The Annual General Meeting approves the maximum total remuneration amounts payable to the Board Directors of Committee 1.2 4 April 2018. in previousAs years, the Remuneration will to put aconsultative Report be vote at the Annual General Meeting on “Basic principles”. these documents as well as revised or superseded versions online viewed can be on the Incorporation, the Organisational Rules and the Regulations the Compensation of latest version The of Committee. Swisscom’s internal principles for determining the level remuneration of are primarily of in out the set Articles Stock Companies (OaEC). eral principles issued SIX by Swiss Exchange 13 to and 16 Articles the of Ordinance against Excessive Compensation in Listed The Remuneration 3.5 is and based on sections the Report 5of annex to the Corporate Governance Directive 1.1 organisation representing Swiss business. representing organisation dations for the Corporate of Governance Swiss Practice Best of 2014 Code issued economiesuisse, by the umbrella

Governance D Gen ivision of tasks between the Annual General Meeting, the Board of Directors and the Compensation Compensation the and Directors of Board the Meeting, General Annual the between tasks of ivision S ­ wisscom implements the requirements the of OaEC and complies the with recommen ­S wisscom website under - - 81 Corporate Governance and Remuneration Report Remuneration Report 82 Corporate Governance and Remuneration Report Remuneration Report www.swisscom.ch/ basicprinciples See report See page 142 See

Note 6.2 to the consolidatedNote 6.2 financial statements.

the activities of the of Compensationmeeting the of Boardthe Directors. at of activities the Committee next June and December. convened can meetings Further be 6 5 4 3 2 1 (excl. CEO) Board Group the Executive of members the of Remuneration Board Total Group the Executive of remuneration CEO the of Remuneration Directors of Board the of Remuneration component salary performance-related variable the for targets the of Determination Board Group the Executive of employment terms of General plansGroup the of participation and performance-based Equity-share Directors of Board the of to members remuneration of Concept payments planssecurity social and retirement-benefit underlying Principles policy and remuneration Personnel Principles schemes for and performance-related equity-participation Board Group the Executive of members appointed newly of remuneration for amount Additional Board and Group Executive Maximum total amounts for remuneration of the Board of Directors of Board the of remuneration for amounts Maximum total Subject and the Compensation Committee. The table shows below the division responsibilities of the Annual between the General Board Directors Meeting, of nor do they maintain any significant commercial links with The members the of Compensation neither Committee work nor have worked for and the RegulationsBoard Directors of the Compensation of Committee. Incorporation, of The details as the well 6.5 of are Articles as governed Article by the by Organisational Rules the of Themeetingsthe of on the request. of Board Directors of Minutes are kept the of meetings, which are to provided the members and the of Committee to other members may called be auditorsthe upontheof toBoard meetings attend in Directors, capacity. or of experts an advisory cern or the the Board CEO Directors of and CPO, in which case the CEO and members are CPO Other present. not Rewardsof &HR-Analytics the meetings in attend capacity, an unless advisory the agenda items exclusively con made regard with to his remuneration. own TheCEO, CPO, HeadGroup of and Strategythe &Board Head Services man participate not inthe does of Board meetings Directors in of which discussions take place or decisions are the Chairmanelects to the of the Board Compensation Directors of he has Committee, no voting rights. TheChair appoints the Chairman the of Compensation which Committee, constitutes itself. the If Annual General Meeting member(s) midst from until its the conclusion Annual the of next General Meeting. TheBoard Directors of Annual General the Meeting. If number members of falls three, below appoints the Board the Directors missing of lection, composition and modus operandi of theThe Compensation Compensation consists Committee Committee three of to six individually members. are They elected each year the by 1.3 supplier relationships the Swiss Confederation and between exist

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tion can vary intion the members cancase of vary who made up a two-thirds of and cash a one-third portion share The amountequity the of portion. share purchase obliga Hans Werder Schlatter Theophil Simoni Renzo Esser Frank Chairwoman Frei, Barbara Participation: (in duration Average hours) Total calls and circular resolutions held or taken in 2017. conference meetings, following The the the Committee composition of the Committee, of table an gives overview manner, the remuneration (excluding pensionfringe meetingand attendance fees, benefits) fund benefits inDirector’s fee the form shares, of with Under the Management Incentive Plan, the members are the of Board Directors obligated of to draw 25% their of for participation in appointed ad-hoc committees basis. on acase-by-case CHF isof 10,000 net awarded for membership in astanding functional No allowance, committee. however, is paid the for the Audit net representative and Committee, the of CHF Swiss 40,000 Confederation. Annual remuneration The remuneration is made up which aDirector’s of fee varies in relation to the member’s meeting function, Incorporation. shares of equity and the 6.4 of 8.1 Articles arein out Articles set Thebasicble functions. principles regarding the remuneration and the of Board the Directors of allocation of and level responsibility of each of member and is to proportionate the normal market remuneration for compara the those of with theshareholders.of Board Directors of Theremuneration is commensurate the with activities and individuals motivated also to for theIt align Board seeks function. Directors’ of the interests the of members The remuneration for the and system members the is of retain Board designed Directors of experienced to attract 2.1 emuneration of the Board of Directors 2 4 3 2 1 Loosli Hansueli Index. No external consultants No Index. were called regard on with to the structuring of 2.2 to not adjustopted remuneration for the 2017 financial year. dation for remuneration adiscretionary of as decision part based on thepublished study in 2016 the Swiss ethos, by Foun year for ongoing appropriateness. 2016, In December assessed the appropriateness the Board Directors of the of cially in the of performance and to comply the with requirements on minimum shareholdings, thus ensuring participate they directly finan paid. Themembers the of Board Directors of attendance as fees well as pension fund and anyvariableNo fringeperformance-related benefits. emoluments are cated on thecated basis their of value rounded acceptedfor purposes, whole number tax up to the shares, of next and of theof management Switzerland’s of 204 Chairman and the Chairmen the of Finance and Compensation for the CHF net Chairman 50,000 Committees, of The functional allowances amount to CHF 255,000 year per net for the Chairman, each CHF net 20,000 for the Vice contributions is CHF 110,000 (net) year. per Thebasicfunctions. emolument for all members excluding the of Board Directors of employee social insurance isThe Director’s fee made up abasic of emolument and functional allowances as compensation for the individual fee Director’s

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- - - - -

83 Corporate Governance and Remuneration Report Remuneration Report 84 Corporate Governance and Remuneration Report Remuneration Report of Directors includes Directors of the employee’s share social of insurance

insurance, for the Thedisclosed members the of remuneration Board Directors. of Swisscom assumes social of insurance, the costs in particular old-age and Pension fund and fringe benefits meetings, attendance CHFFor of 1,100 fees are net paid for each full day and CHF 650 for each net half-day. Meeting attendance fees per share. valuea tax CHF of 387 share per (prior year: CHF 439). Their market value was CHF 461 (prior year: CHF 522.50) In April 2017, 1,493 shares were allocated to the members (prior the of Board year: Directors of 1,308 shares) with 1.19 of in ordermented afactor by to takevalue account tax the the of difference between and the marketvalue. year,reporting are recorded at market value on the date allocation. of Theshare-based remuneration is aug pany during the blocking Theshares, period. which are allocated in April each of the year of reporting in respect are to subject ablocking three of period years. This on disposal restriction also applies members if leave the com 2 1 Directors of Board the of Total remuneration to members Hans Werder Simoni Renzo Schlatter Theophil MühlemannCatherine Frei Barbara Esser Frank Carrupt Alain Bircher Valérie Berset Abt Roland Loosli Hansueli 2017, thousand inCHF is disclosed separately and is also included in the total

number meetings of were held. ation for 2017 is to attributable the change in that the composition and agreater the of committees the fact is presented in the tables below, broken into down individual components.Thehigher amount total of remuner Total remuneration paid to the individual members for the the of Board 2017 Directors of and 2016 financial years 2.3 included remuneration. in the reported incurred.actual costs Accordingly, neither and service-related nor out-of-pocket non-cash benefits expenses are taken. significant No service-related and non-cash benefits are rendered. Expenses are reimbursed on the basisof regardsWith to the disclosure and service-related of tax-based non-cashexpenses, a and benefits pointview of is

esigned from the Board of Directors as of 3 April 2017. 3April as of Directors of Board the from esigned 2017. 3April as of Directors of Board the to lected R E

T otal remuneration otal

2

1

remuneration 1,224 Cash an 112 120 158 315 90 96 96 96 96 45 d functional allowances d functional

hare-based remuneration. S B ase salary payment contributions. employer’s The share contributions of 186 7 66 71 25 78 57 57 57 57 93 3

fees ttendance a survivors’ insurance survivors’ and unemployment Meeting 185 paid to the members the of Board 22 18 18 15 21 21 21 28 16 5

security social to contributions Employer 116 12 12 11 29 10 10 10 10 10 2

To tal 2017 tal 2,250 184 284 224 181 20 181 185 193 55 55 5 8

- - -

Michel Gobet Michel Hugo Gerber Frei Barbara Esser Frank Carrupt Alain Bircher Valérie Berset Abt Roland Loosli Hansueli thousand inCHF 2016, exceptions at his discretion. his discretion. at exceptions cases such as personal hardship or legal obligations, the Chairman can the of approve Board Directors of individual drop in the share price, the difference be must made by no up later than review. the time of In the next justified theby Compensation amember’s If Committee. shareholding falls the below minimum requirement due to a through share purchases on the market. open Compliance the with shareholding requirement is annually reviewed The members are the of Board Directors required of to maintain aminimum shareholding equivalent to one annual 2.4 mum total amount approved the by 2016 Annual General Meeting (AGM) for 2017 CHF of 2.5 million. Total remuneration paid to the members for the the of Board 2017 Directors of financial year withinis the maxi 4 3 2 1 Directors of Board the of Total remuneration to members Hans Werder Schlatter Theophil MühlemannCatherine Torsten Kreindl to acquire the shareholding, in the form the of blocked shares paid remuneration of as part and, applicable, if emolument (basic emolument plus functional allowance). Themembers have the of Board Directors of four years

n comparison to last year’s report, remuneration for 2016 was adjusted with regard to compensation for social security contributions made abroad. made contributions security social for compensation to regard with adjusted 2016 was for remuneration report, year’s last to n comparison 2016. 6April as of Directors of Board the from esigned Directors of Board the of as member mandate the 2016 for 6April till fees) attendance meeting (including remuneration cash he 2016. 6April as of Directors of Board the to lected I R o T E f Worklink AG of CHF 2,500 is included. 2,500 CHF of AG f Worklink

M inimum shareholding requirement requirement shareholding inimum 1 4

2, 3

1

3

3, 4

1

4

remuneration 1,220 Cash an 134 112 112 158 315 64 64 40 34 96 32 59 d functional allowances d functional

hare-based S B ase salary payment 72 186 66 80 49 57 70 93 53 53 5 4 4 0

fees ttendance a Meeting 180 11 19 21 23 14 16 16 27 17 5 5 6

security social to contributions Employer 115 12 11 11 11 29 10 3 2 3 8 8 7

2016 otal T 2,235 284 248 206 212 139 126 141 179 557 43 47 53

-

85 Corporate Governance and Remuneration Report Remuneration Report 86 Corporate Governance and Remuneration Report Remuneration Report www.swisscom.ch/ basicprinciples See

2 1 Directors of Board the of members the by held Total shares Hans Werder Simoni Renzo Schlatter Theophil MühlemannCatherine Frei Barbara Esser Frank Carrupt Alain Bircher Valérie Berset Abt Roland Loosli Hansueli Number Directors of Board the of members the of hareholdings Blocked and non-blocked shares held members by and/or the of Board Directors of related parties 2.5 > on the following principles: a lasting increase in the enterprise value. is It systematic, transparent and long-term-oriented, and is predicated highly skilled and specialists motivated andover executivethe staff long term and provide an incentive to achieve The remuneration of policy 3.1 emuneration of the Group Executive Board 3 capital. the of None individuals/entities required to make holds notification voting sharesexceeding 0.1%of the share Group Incorporation. of the Executive of Board 8.1 Articles arein out Article set The basic principles regarding the performance-related remuneration and the profit and participation plansof the their of ponent salary in shares. Group Executive Board members have the possibility to draw up to 50% the of variable performance-related com interests shareholders. those of with To facilitate compliance the with minimum shareholding requirement, > their financial direct participation in the medium-termperformanceof the The members the of Group Executive Board are required to hold aminimum shareholding, which strengthens shares. variablepensionThe fund benefits. remuneration includes performance-relatedcash a in component settled and Thefixednents. component is made of abaseup salary, fringe (primarily, benefits the ofa companyuse car) and The remuneration the of Group Executive Board is abalanced combination fixed of variableand salary compo > ber 2016ber and 2017 are listed in the table below: esigned from the Board of Directors as of 3 April 2017. 3April as of Directors of Board the from esigned 2017. 3April as of Directors of Board the to lected R E

Total remuneration is and competitive is in an appropriate relation to the market structure. structure. are aligned the with interests shareholders. of T made to results the by area for which the member the of Group Executive Board is responsible. R

hrough financial direct participation performancein of the the emuneration is based in on performance line the with results achieved by R S Principles Principles

2

1

S ­ wisscom applicable to the Group Executive Board and is retain designed to attract

­S wisscom share, the interests management of ­S wisscom share and thus aligns their S ­ wisscom and the contribution as well as the internal salary 31.12.2017 1,443 7,648 1,419 2,733 784 160 213 213 205 478 – as at 31 Decem

31.12.2016 7,289 1,225 1,128 2,350 1,326 648 332 88 96 96 –

- - - ­S taking account the of market value the of component paid in shares. This ensures that the maximum performance-related the salaryexceed annual component not does base salary, even b tee, taking into account the evaluation performance the by CEO. are targets If up exceeded, to 130% the of target component paid to depends which out on the the extent are targets achieved, the asby Compensation set Commit represents 70% are the of base achieved objectives salary if (target bonus). Theamount the of performance-related The members the of Group Executive Board are entitled to avariable, performance-related salary component which member The base salary is the remuneration paid according to qualifications the function, performanceof and the individual emuneration components 3.2 formance these members of into account and to bring the salaries into line standard with market ­salaries members the of Group two of Executive Board during the course the year of reporting in order to take the per threeBoard years every employment. of Taking into account the benchmarks, adjusted the Board Directors of the a rule,As the Compensation individual reviews Committee remuneration paid to members the of Group Executive market external The Compensation discretion at its decides Committee on the level remuneration, of taking into consideration the Variable performance-related salary component salary performance-related Variable salary is paid in cash. terms revenue, of number employees of and international scope. an optimal the of relevant employment overview market panies as well as international comparisons. allow comparative sector two These perspectives the assessingFor purposeof market values, 18,800 employees. Theevaluation the of two external eleven western European countries with an with European countries western eleven comparison billion telecommunications covers sector The andCHF 4.7 people. employ 13,000 companies from the exception the of financial and pharmaceuticalOn average, companiesthese sectors. generate revenue of comparison the with Swiss market covers major companies domiciled in Switzerland with from various sectors, Base salary Base wisscom comparative referred to Towers two by studies conducted Watson, onus may paid. be Themaximum performance-related salary component is thus limited to 91% the of base salary. Purpose factors Influencing Instruments

R market value and for the function the for the salary structure Group’s executive management. Thebase of the of Group Executive Board. is It determined based on adiscretionary decision taking into account the value in the of function question, the internal and salary structure individual performance. and protection retention employee Employee recruitment, market qualifications, and experience Function, Fringe benefits Pension benefits salary Base Fixed remuneration

­ S comparative studies comparative wisscom relies market on cross-sector comparisons Swiss with com average revenue CHF of 8.9 billion and an average of workforce

Remuneration

targets performance annual of Achievement shares and component in cash Performance-related Variable remuneration Variable corporate resultscorporate andtargets sustainable annual on Focus for managerial positions. In the year under review, takes into responsibility accountof the extent in

a recognised a consultancy firm. The

shareholders interests shareholders with Alignment value enterprise of growth Long-term of amount minimum a Requirement to hold requirement shareholding Minimum S ­ wisscom shares wisscom r ­ emuneration levels. ­ S wisscom to form Assets

- - - 87 Corporate Governance and Remuneration Report Remuneration Report 88 Corporate Governance and Remuneration Report Remuneration Report See report See page 34 page Target levels

Total Segments Customers Segment are targets tailored to the each relevant of Group function Executive Board member found in the Management Commentary. which the Group Executive Board member is responsible. Further information on can customer be satisfaction Promoterthe Net Score –arecognised indicator –taking customer of loyalty into account the customer group for “Segments”. All members the of Group Executive Board are measured against targets at the levels “Group”, “Customers” and are Thetargets strategy. based on the relevanttargets to the year reporting remained largely unchanged in line the with Group’s continuing corporate following following year the the by Board by Compensation Directors proposalsubmitted a of The Committee. underlyingThe targets the variable performance-related component are annually adopted in for December the component Targets the variable for performance-related which have targets using met been a idated financial become statementsavailable. decisionIts basedis on a quantitative assessment to of extent the The Compensation determines Committee the level target of achievement in the following year once the consol Achievement targets of Group cial and non-financialAs in thetargets. previous year, these include financial ening the core business in Switzerland offering by best the areBoard Directors measured. of is Thetarget structure thus aligned to web S.p.A. (Fastweb),web S.p.A. based on which the Group Executive Board members delegated by through the realisation of new growth opportunities growth new of realisation through the achievement an of individual from (if 0% the target lower can limit vary is not the year under review, showing the three target levels, individual weighting. and targets the respective The following table illustrates the valid target structure for the CEO and other Group Executive Board members in were not fully met. Most of the of other the of targets segmentswerewere Most fully achieved. not met. In the year under review, the financialof targets the Group wereThe on customerexceeded. thewhole targets ­c ­s rates to be takenrates to be into account. Based on the overall achievement the targets, Compensation of Committee in assessing management the effective performance, allowing such specialfactors as fluctuations in exchange bonus. In determining the level target of achievement, the Compensation has Committee discretion adegree of according to the weighting the of individual Thepayment targets. is limited to amaximum 130% of the of target The overall achievement governing targets of the payment the of performance-related component is calculated is exceeded). Achievement scale

ubmits aproposal for approval to for the the Board amount Directors of the of performance-related salary omponent paid to be to the Group Executive Board and the CEO.

is limited if130%ofoverall targets are met(weighted target achievement across allindividualtargets). Payment oftheperformance-related component salary isbasedonindividual target achievement and Achievement of targets 100% 200% 130%

0%

egment targets egment

et promoter score promoter et Group consist targets financial of targets. Customertargets for yearthe reporting are measured using S

N N Objectives O E

BITDA margin BITDA perating free cash flow free perating et revenue et for each target limit Lower

target At

scale for the overachievement and underachievement each of The target. ­ S wisscom Group’s budget figures for 2017. limit Upper and developing further Fastweb in Italy. performance Measured of overallof targets are met Payment limitedif 130% infrastructure and customer experiences as well as W eighting of targets level eighting of targets ­S wisscom’s strategic priorities: strength targets for the Italian subsidiary Fast subsidiary Italian the for targets achieved) to 200% (if the upper limit 10 18% 18% 20% 20% 24% CEO 0%

­ S wisscom to Fastweb’s and consist of finan of consist and W o eighting of targets level eighting of targets f other members of the of members f other G roup Executive Board Executive roup 20–40% 12–18% 12–18% 16–24% 100% 20% - - - -

pages 129—134 pages See report See of of to increase this share up by to amaximum 50%. of savings, guarantee and risk and guarantee savings, The variable performance-related component is paid in April the of following year, 25% with being component the variablePayment of performance-related 102%between and 106% the of target bonus for the other members the of Group Executive Board. The subsequent payment in the reported remuneration. reported in the approved the by authorities, tax and other are expenses reimbursed on an basis. actual cost are They included not Out-of-pocket are expenses reimbursed on alump-sum basis in accordance expense reimbursement with rules ­s taken. Themembers the of Group Executive Board are entitled to the use acompany of car. Thedisclosed regardsWith to the disclosure and service-related of tax-based non-cashexpenses, a and benefits pointview of is ch). old age, death and disability through the comPlan pension plan (see pension fund regulations at www.pk-complan. The members the of Group Executive Board, like all eligible employees in Switzerland, are insured against the risks of Pension fund and fringe benefits to the members the of Group Executive Board. share and amarket value CHF of 461 (prior year: CHF 522.50) share per were allocated for the 2016 financial year In April 2017, a total 2,121 of shares (prior year: 1,841 shares) valuea tax with CHF of 387 (prior year: CHF 439) per rent year are allocated in April 2018. value and the value. tax The market value is determined as the of date allocation. of Shares the of cur in respect year under review is 1.19 augmented of in order afactor by to take account the the of differencemarketbetween employment relationship is terminated during the blocking Theshare-based period. remuneration disclosed in the shares, of bers and are to subject athree-year blocking This on disposal period. restriction also applies the if for ahigher share component. Theshares are allocated on the basis their of value, tax rounded up to whole num thecation of third-quarter results. In the year under review, three members the of Group Executive Board opted must communicated be prior to the end the year, of reporting no later but than in November following the publi whatof percentage the of variable performance-related salary component is drawn to be in the form shares of payment the of performance-related component for the current year is generally made in full in cash. Thedecision in cash.is In the settled adeparture event of from the Group Executive Board during the course the of year, the about thisabout is in provided 4.3 to Note the consolidated financialstatements. ­s bridging the of AHV costs pension paid comPlan by in the early event of retirement and the premium for the upplementary life insuranceupplementary concluded for ervice-related andervice-related rendered non-cash therefore benefits include an amount for private of the use companycar. S ­ wisscom shares, in accordance the with Management Incentive Plan. Group Executive Board members may opt The disclosed pension benefits disclosedThe pension(amounts benefits contributions paid the by employer to the pension plan. also They include the pro rata of theof performance-related component is 105% the of target bonus for the CEO S ­ which give rise to or increase pension entitlements) encompass all wisscom management in staff Switzerland. informationFurther The remainingThe the performance-related of component portion paid in the form and and - - - 89 Corporate Governance and Remuneration Report Remuneration Report 90 Corporate Governance and Remuneration Report Remuneration Report

In CHF thousand CHF In CEO is primarily to attributable the higher variable remuneration as compared to the previous year. 1.9% compared to the prior year. Theincrease in total remuneration paid to the Group Executive Board and the remuneration paid to the highest-earning member the of Group Executive Board (CEO, Urs Schaeppi) increased by Executive Board (CHF 2,867 thousand in total) was 76.7% the of base salary (CHF 3,736 thousand in total). Thetotal member. In the year under review, the variable performance-related salary component for members the of Group 2017 financial years, broken down into individual components and including the highest amountpaid to one remuneration otal The following table shows total remuneration paid to the members the of Group Executive Board for the 2016 and 3.3 The members the of Group Executive Board are required to hold aminimum amount of 3.4 maximum total amount approved the by 2016 Annual General Meeting (AGM) for 2017 CHF of 9.7 million. Total remuneration paid to the members the of Group Executive Board for the 2017 financial year withinis the 4 3 2 1 incl. benefits paid following retirement fromBoard Board, Executive Group to paid Total remuneration Board Executive Groupfrom retirement paidfollowing Benefits Board Executive Group the of members to Total remuneration benefits Retirement security to social Employer contributions benefits and non-cash Service-related paidin shares remuneration Variable performance-related paidin cash remuneration Variable performance-related paidin cash salary base Fixed ­m Chairman can the of approve Board Directors of individual exceptions at his discretion. no later than review. the time In the of cases justifiednext such personalas hardship or legal obligations, the minimum requirement due to adrop in the share price or asalary adjustment, the difference be must made by up requirement is annually reviewed the by Compensation amember’s If Committee. shareholding falls the below neration and, applicable, if through share purchases on the market. open Compliance the with shareholding four years to build up the required minimum shareholding in the form the of blocked shares paid remu of as part maintain ashareholding equivalent to one year’s base salary. Themembers the of Group Executive Board have

re included in the total remuneration. total inthe included re

ontractual compensation payments made during the notice period to a Group Executive Board member who resigned from Board during the financial year. financial the during Board from resigned who member Board Executive aGroup to period notice the during made payments compensation ontractual cushion to made contribution pension-fund special non-recurring the of members Board Executive Group the to attributable share the 2016 includes for amount he insurance) accident and benefits sickness daily and costs, administration incl. IV, FAK, (AHV, and EO security social to contributions mployer years. three for sale from blocked are and value market at reported are shares he a C rate. conversion the of lowering the from resulting reductions pension of impact the T E T inimum shareholding held to the be by CEO is equivalent years’ to two base salary. Theremaining members

T M inimum shareholding requirement requirement shareholding inimum

3

2

1

4

E xecutive Board 8,133 8,762 1,966 3,736 Group Total 2017 901 847 629 591 92

xecutive Board E 8,050 8,050 1,064 1,604 3 G ,782 To 2016 roup 5 975 84 41 tal –

rs Schaeppi

U ­ S Thereof 1,868 1,868 wisscom shares. 2017 486 882 193 141 145 21 –

rs Schaeppi

U Thereof 1 1 ,833 ,833 2016 284 189 882 126 338 The The 14 –

- such remuneration. contain do not They anon-competition clause or aclause on change control. of 4.3 current member or the the of Board Group Directors of Executive Board which are at arm’s not length. ment Christian Petit Lehner Urs Marc Werner Werner Hans C. Rossi Mario (CEO) Schaeppi Urs Number 2016ber and 2017 are listed in the table below: Board Executive the of members the of hareholdings Blocked and non-blocked shares held members by the of Group Executive Board or related as at parties 31 Decem 3.5 Group Executive Board or related are Nor there parties. any receivables any of kind outstanding. to former or current members or the related of or Board to former Directors of parties, or current members the of In the 2017 financial year, retirement paid to benefits the members of Board the and of Directors GroupExecutiveBoard. Swisscom basis Ltd has no statutory for the granting loans, of credit facilities andfrom pension the apart fund benefits Board their with in connection earlier as amember agoverning of activities body In the year under review, no remuneration was paid to former members the or of Group Board Directors of Executive 4.2 hold either within or outside the The members the of Group Executive Board are entitled to not separate remuneration for any directorships they were paid not Directors anyof out remuneration for workthis of kind in the year under review. order by of for those performed services additional for emuneration Swisscom may pay remuneration to members for the assignments of Board Directors of in Group companies and 4.1 remuneration ther 4 period. contracts mployment the of members the of GroupThe employment contracts Executive Board are notice to subject atwelve-month 3.6 the of None individuals/entities required to make hold notification voting sharesexceeding 0.1%of the sharecapital. 2 1 Board Executive Group the of members the by held Total shares Dirk Wierzbitzki Heinz Herren not at arm’snot There were length. also no payments made to individuals who are closely related to any former

esigned from the Group Executive Board as of 21 June 2017. June 21 as of Board Executive Group the from esigned 2017. June 21 as of Board Executive Group the oined R J

L O S R E Remuneration for former members of the Board of Directors or Group Executive Board and related parties related and Board Executive Group or Directors of Board the of members former for Remuneration contracts stipulate contracts that

oans and credits granted granted credits and oans

No terminationNo beyond salarythe apply payable benefits for a maximumtwelve of 1

2

S ­ wisscom granted no guarantees, loans, advances or credit facilities any of kind either S ­ wisscom may allow wrongfully awarded or paid remuneration to lapse S ­ S ­ wisscom (Article 6.4 of the Articles of Incorporation). of the of Articles 6.4 wisscom Themembers the (Article of Board wisscom Group.

of the company of and/or which are 31.12.2017 months. employ The - 8,953 1,068 3,964 1,236 1,586 234 115 750 –

or reclaim reclaim or 31.12.2016 8 3,229 1,027 1,337 1,333 ,269 382 897 64 or or –

- 91 Corporate Governance and Remuneration Report Remuneration Report 92 Corporate Governance and Remuneration Report Statutory Auditor’s Report Swiss law and articles 1 Swissand law yearIn ouropinion,theremunerationended31D the reportfor Opinion opinion.

The audit was limited to the information according to articles 14 - 16 of the Ordinance against Excessive Excessive against Ordinance 14 -16ofthe toarticles according was totheinformation auditlimited The the We haveaudited To the GeneralMeeting of Shareholders of Sw Report of theStatutory Auditor (“KPMG International”), a Swiss legal entity. rightsAll reserv KPMG AGis a subsidiary KPMG of H KPMG AG, Hofgut, PO Box 112, CH-3073 Gümligen-Berne forour abasis toprovide appropriate and issufficient obtained wehave theauditevidence that believe We presentation of the remuneration report. the of reasonableness the evaluating includes also audit This whether tofraudorerror. due report, in theremuneration misstatements including judgment, on theauditor’s depend selected procedures withreport to regard compensation, loans creditsand in accord intheremuneration made onthedisclosures evidence audit obtain to procedures performing involves An audit –16oftheOrdinance. with 14 Swissand articles law perform theauditto and plan requi standards Those with Standards. Swiss Auditing accordance Wec report. remuneration theaccompanying on anopinion istoexpress Our responsibility Auditor's Responsibility packages. remuneration individual defining compensation in Stock Exchange Listed Companies contained in th in contained Companies Listed StockExchange in compensation Companies (Ordinance). The Board of Directors is also responsible for designing the remuneration system and system theremuneration fordesigning isalsoresponsible of Directors Board The (Ordinance). Companies Listed Exchange inStock compensation Excessive against and theOrdinance with Swiss law in accordance fairpresentation overall and preparation forthe BoardofDirectorsisresponsible The Responsibility of the Board of Directors report. of theremuneration 81to91 pages Licensed Audit Expert Expert Audit Licensed Stocker Hanspeter KPMG AG Gümligen-Berne, 6 February 2018 2018 February 6 Gümligen-Berne, A uditor in Charge Charge in uditor accompanying remuneration reportofSwissco remuneration accompanying methods applied to value components of remuneration, as well as assessing the overall well theoverall assessing as as ofremuneration, components tovalue methods applied 4 –16oftheOrdinance. olding AG, which isa member o obtain reasonabl ed.

f the KPMG network of independent firms affiliated with KPMG In affiliated firms independent network of KPMG the f isscom Ltd,Ittigen e assurance about whether the remuneration report complies complies whether report theremuneration assurance about e Daniel Haas Haas Daniel

Licensed Audit Expert Expert Audit Licensed ecember 2017 of Swisscom Ltd. complies with Ltd.complies ofSwisscom 2017 ecember ance with articles 14 – 16 of the Ordinance. The The oftheOrdinance. with –16 articles 14 ance theassessmentofrisksmaterial re that we comply with ethical requirements withethical requirements thatwe re comply e sections 2.3,2.5,3.3 e sections m Ltd for the year ended 31 December 2017. 2017. 31December year ended the m Ltdfor (Berne) of the report remuneration ternational Cooperative Cooperative ternational , 3.5 and 4.1 to 4.3on , 3.5and4.1to onducted ourauditin Consolidated Ffinancial statements

Consolidated financial Consolidated statement of comprehensive income______94 Consolidated balance sheet______95 statements Consolidated statement of cash flows______96 Consolidated statement of changes in equity______97

Notes to the About this report______98 consolidated 1 Operational performance financial statements 1.1 Segment information ______100 1.2 Operating expenses ______105 2 Capital and financial risk management 2.1 Capital management and equity______106 2.2 Financial liabilities______108 2.3 Operating leases______111 2.4 Financial result______111 2.5 Financial risk management______112 3 Operating assets and liabilities 3.1 Net current operating assets______118 3.2 Property, plant and equipment______120 3.3 Goodwill______122 3.4 Intangible assets______124 3.5 Provisions, contingent liabilities and contingent assets______125 4 Employees 4.1 Employee headcount and personnel expense______128 4.2 Key management compensation______129 4.3 Post-employment benefits______129 5 Scope of consolidation 5.1 Group structure______135 5.2 Material changes in scope of consolidation______135 5.3 Equity-accounted investees______136 5.4 Group companies______137 6 Other disclosures 6.1 Income taxes ______139 6.2 Related parties______142 6.3 Other accounting policies______143 Statutory Auditor’s Report______145

Financial statements Income statement______152 Balance sheet______153 of ­Swisscom Ltd Notes to the financial statements______154 Proposed appropriation of retained earnings______158 Statutory Auditor’s Report______159 94 Consolidated financial statements Consolidated statement of comprehensive income

Direct costs Net revenue Income statement amounts share per for except million, CHF In income of comprehensive Consolidated statement Consolidated financial statements Basic anddilutedearningspershare (inCHF) share per Earnings Comprehensive income Non-controlling interests Equity holdersof Net income Non-controlling interests Equity holdersof Share of net income and comprehensive income Comprehensive income Other comprehensive income Net income Comprehensive income Items that are ormay bereclassified subsequently to income statement Other comprehensive income from equity-accounted investees Change incashflow hedges Change inavailable-for-sale financialassets Foreign currency translation adjustments offoreign subsidiaries Items that willnotbereclassified to income statement Other comprehensive income from equity-accounted investees gains andlossesfromActuarial definedbenefitpensionplans Other comprehensive income Net income Income taxexpense Income before income taxes Result ofequity-accounted investees Financial expense Financial income Operating income Depreciation, andimpairment amortisation losses Operating income before depreciation, andimpairment losses amortisation Capitalised self-constructed assetsandotherincome Other operating expense Personnel expense Other comprehensive income

­S ­S

wisscom Ltd wisscom Ltd

3.2–3.4 2.1, 5.3 1.2, 4.1 Note 1.1 1.2 2.4 2.1 2.1 2.1 2.1 2.4 1.2 5.3 2.1 1.2 2.1 6.1

11,662 (2,666) (2,164) (2,207) (3,002) 2,131 4,295 30.31 2,382 1,568 2,382 1,568 1,960 2,384 1,570 1,568 (204) (392) 2017 508 814 814 135 143 679 679 (11) 44 (2) (2) (5) (5) 2 –

11,643 (2,759) (2,145) (2,112) (2,947) 30.97 2,435 1,604 2,435 1,604 1,990 2,148 4,293 2,435 1,604 1,604 (386) (235) 2016 468 831 831 919 924 (88) (99) 80 (2) (5) (3) – – 9 4

Current income taxassets Other financialassets Other operating assets Trade receivables Cash andcashequivalents Assets million CHF In Consolidated balance sheet Total liabilitiesandequity Total equity Non-controlling interests Equity attributable to equity-holders of Other reserves Foreign currency translation adjustments Retained earnings Capital reserves Share capital Total liabilities Total liabilities non-current Deferred taxliabilities Deferred gain onsaleandleasebackofreal estate Provisions Defined benefitobligations Financial liabilities Total current liabilities Current income taxliabilities Other operating liabilities Provisions Trade payables Financial liabilities equity and Liabilities Total assets Total assets non-current Deferred taxassets Other financialassets Equity-accounted investees Intangible assets Goodwill Property, plant andequipment Total current assets

­S

wisscom Ltd

Note 6.1 3.1 4.3 6.1 2.1 5.3 3.4 3.1 3.3 3.5 3.5 3.2 2.2 2.2 2.1 3.1 6.1 3.1 6.1 2.2 2.1

31.12.2017 22,058 18,327 14,413 22,058 10,697 (1,689) 3,731 9,271 5,142 7,645 7,656 1,758 5,186 2,389 9,155 1,048 6,452 1,165 1,753 1,834 197 337 152 729 525 136 725 146 900 213 177 (11) 10 78 52 2

31.12.2016 21,454 17,825 14,932 10,780 21,454 10,177 (1,834) 4,152 3,629 6,522 6,514 8,148 1,850 7,371 1,123 1,597 1,125 1,756 5,156 2,425 136 621 158 780 125 182 281 262 193 177 680 329 52 18 12 8

95 Consolidated financial statements Consolidated balance sheet 96 Consolidated financial statements Consolidated statement of cash flows Result ofequity-accounted investees Income taxexpense Net income million CHF In of cash flows Consolidated statement Cash andcashequivalents at 31December Foreign currency translation adjustments inrespect ofcashandequivalents Cash andcashequivalents at 1January Net increase incashandequivalents Cashactivities flow usedinfinancing Other cashflows fromactivities financing Acquisition ofnon-controlling interests Dividends paidto non-controlling interests Dividends paidto equityholdersof Repayment offinancialliabilities Cash flow usedininvesting activities Proceeds from other financialassets Purchase ofotherfinancialassets Proceeds from sale ofequity-accounted investees Purchase ofequity-accounted investees Acquisition ofsubsidiaries, netofcashandequivalents acquired Sale ofproperty, plant andequipment andintangible assets Purchase ofproperty, plant andequipment andintangible assets Cash flow from operating activities Income taxes paid Interest paid Dividends received Interest received Change indeferred gain from thesaleandleasebackofreal estate Change inoperating assetsandliabilities Change indefinedbenefitobligations Change inprovisions Expense for share-based payments Loss ondisposalofproperty, plant andequipment Gain onsaleofproperty, plant andequipment Depreciation, andimpairment amortisation losses Financial expense Financial income Issuance offinancialliabilities

­S

wisscom Ltd

3.2–3.4 3.2, 3.4 Note 5.2 2.2 2.2 6.1 1.2 3.5 2.4 5.2 2.2 5.2 2.4 5.2 4.3 5.3 2.2 2.1 6.1 5.3 3.1

(1,657) (2,255) (1,140) (1,158) (2,378) 4,091 1,568 2,164 (289) (181) 2017 392 165 204 525 329 179 757 158 (44) (12) (24) (99) (58) (20) (63) 11 36 51 17 76 30 20 26 (9) (8) 2 2

(1,269) (2,446) (1,140) (2,416) 3,722 1,604 2,145 (999) (196) (328) (184) (141) 2016 386 329 324 898 235 (80) (16) (38) (17) (20) 92 88 27 17 27 68 (2) (4) (8) (3) (5) 3 7 3 9

In CHF million CHF In of changes in equity Consolidated statement Balance at 31 December 2015 31 at December Balance Balance at 31 December 2016 31 at December Balance interests non-controlling Transactions with shares Treasury paid Dividends Comprehensive income comprehensiveOther income income Net Balance at 31 December 2017 31 at December Balance interests non-controlling Transactions with paid Dividends Comprehensive income comprehensiveOther income income Net

capital Share 52 52 52 – – – – – – – – – – –

36 36 reserves

Capital 136 1 1 – – – – – – – – – – –

arnings 17) ,140)

,140) Retained e

(1 (1 8 2,249 2,523 1,604 6,783 9 1,570 ,148 ,155 (102) 919 679 ( (1)

45 adjustments translation

currency (1,689) (1,834) (1,733) Foreign (101) (101) 145 1 – – – – – – –

)

0)

reserves Other (10) (1 12 13 13 (1 – – – – – 2 – –

olders of o equity 17) ,140)

,140) attributable h Swisscom

t (1 (1 2,384 2,435 6,514 5,237 1,604 7,656 1,570 Equity (102) 814 831 ( (1)

) controlling

interests Non- (11) 11 (2) (8) (2) (8) (9 5 8 – – – – –

6)

(1,148) (1,148) 2,382 5,242 2,435 6,522 1,604 7,645 1,568 equity (111) Total 814 831 (1) (

97 Consolidated financial statements

Consolidated statement of changes in equity 98 Consolidated financial statements Notes to the consolidated financial statements

version shall prevail. This financial is a translation report from the originalGerman version. caseof In any inconsistency Germanthe financial statements consolidated the to Notes Cashactivities flow usedinfinancing Cash flow usedininvesting activities Cash flow from operating activities statement flow Cash liabilities Non-current Current liabilities assets Non-current Current assets sheet Balance Other operating expense Direct costs Income statement million CHF In > xpenses for materials are used and now designated services as costs». «direct Commissions paid to dealers > In addition, the following changes were made to improve the presentation the of consolidated financialstatements: > > > informationreporting for decision-making amendments These purposes. encompass the following: are fundamentally redesigned in order to enhance, addressees, for the its transparency and relevance the of financial Compared to the prior year, the 2017 of the and contents structure report this About The prior-yearThe amounts as were follows: restated >

d a abroad. Until the dealer present, commissions and traffic charges were classified under other operatingcosts. other of telecommunicationworks providers abroad are now disclosed under traffic charges of subsidiaries are now classified In addition, acquisition costs. underof usage contract direct chargesas part costs for net e r e m activities. activities. in the balance sheet. eduction of the complexity of note disclosures of the of complexity eduction through highlighting and the use tables. of limination of irrelevant and immaterial information. immaterial and irrelevant of limination ll revenue and accruals cost which apply in the normal course business of are now disclosed as current items ividends as received well as interest paid and are received now disclosed under cashfrom flow operating odification of the structure of structure the of notes. theodification

­ S wisscom consolidated financial statements (10,954) Reported 17,919 (1,453) (2,402) (3,978) (2,548) (2,323) 3,862 3,535

Adjustment (140) (174) (436) 184 174 436 (44) (94) 94

(10,780) Restated 17,825 (1,269) (2,446) (4,152) (2,112) (2,759) 3,722 3,629

-

remains, as in the prior year, the Swiss Confederation (“Confederation”). CHFof 1 and are fully paid-up. Each share entitles the holder to one vote. Themajority shareholder of Exchange. Thenumber issued of shares, as in the prior year, aggregated 51,801,943. Theshares have anominal value The preparation consolidated of financialstatements is dependent estimates upon and assumptionsbeing made policies accounting statement financial the in applying assumptions and estimates judgments, accounting Significant standing the of consolidated financialstatements out notesin areset the to thespecific financial statements. financialstatementpolicies. Materialreporting financialstatement policies of reporting relevance for an under tion prescribes another measurement basis for aparticular caption in which case this is in explicitly the stated The consolidated financialstatements are drawn up on the historical basis, cost unlessstandard a or interpreta consolidatedThe financial of statements Basis preparation of General MeetingShareholders of of had events sheet occurred. Theconsolidated financialstatementswill be for submitted approval to Annualthe functional currency of months. consolidated The financialstatements are presented in Swiss francs (CHF)which corresponds to the Reporting Standards (IFRS) and in compliance the with provisions Swiss of law. covers twelve period Thereporting ance these consolidated of financialstatements on 6 law to hold the the majority of capital and voting rights. TheBoard Directors of ber primarily in Switzerland and Italy. Theconsolidated financialstatements of as and for the year ended Decem 31 ­company incorporated in accordance Swiss with law, under and aprivate statute, hasIttigen registered its office in The informationGeneral Further information as to the changes in IFRS which must applied be in 2018 or later arein out 6.3. Note set Amendements to IAS 12 Amendements to IAS 7 Standard Group. the of Reporting Standards (IFRS) and Interpretations, which have no material on the impact results or financialposition from 1JanuaryAs 2017 onwards, period accounting the in time first the for applied to be are which Interpretations and Standards Reporting Financial International Amended Defined benefitobligations Provision for regulatory andcompetition law procedures Provisions for dismantlement andrestoration costs Useful lives ofproperty, plant andequipment andintangible assets Description the following positions: in applying the accounting policies for which management can exercise judgment. degree of a certain This concerns (Berne). address Its is: R ecoverability ofGoodwill

2 ­ S 017 comprise wisscom Group (hereinafter referred to as “

S ­

wisscom Ltd, as parent company, andsubsidiaries. its S ­

S ­ wisscom Ltd, Tiefenaustrasse Alte Worblaufen. 3048 6,

wisscom Ltd. Unless all noted, otherwise amounts are in millions stated Swiss of francs. Name R Disclosur ecognition ofdeferred taxassetsfor unrealised losses

­ S S ­ wisscom various adopted amendments to existing International Financial wisscom Ltd held to on be 4April 2018. e initiative ­S wisscom have prepared been in accordance International with Financial

­S wisscom”) provides telecommunication and is active services

F ebruary

2 018. As of this018. of As date, no material post-balance- The ConfederationThe wisscom has approved the issu of S ­

S ­ wisscom Ltd is alimited-liability wisscom is listed on the ­ S is obligated current by Note 3.2and3.4 F S ­ urther information urther wisscom Ltd SIX Note 3.3 Note 4.3 Note 3.5 Note 3.5

Swiss - - - -

99 Consolidated financial statements Notes to the consolidated financial statements 100 Consolidated financial statements Notes to the consolidated financial statements 1.1 ­S areas customer close with the proximity company’s and boost market.in theICT effectiveness Swisscom has increased further the level digitalisation of within organisational its in structure order to strengthen General ­a Customers The segment. prior-year amounts were accordingly. restated Segment is reporting now made in ciency in orderciency to create greater for innovation. scope aresult the As of organisational changes, the Small and Medium been been perational performance 1 Other Operating Segments Fastweb IT, Network &Infrastructure Wholesale Enterprise Customers Residential Customers Segment ­C ­S S now included in the Residential Customers segment segment of reporting. as part search) has transferred been to the newDigital Business division, under which Operating is Other reported ­e The classification according to operatingsegments corresponds system to used internallythe reporting to This informationchapter outs sets on the operating of performance wisscom to improve strives the ized Enterprises segment (SME) of egments. Inegments. addition,of allfunctions fieldservice ccordance the with following segments: ustomers segment. Fleet ustomers Fleet segment.

valuate and performance allocate resources, as well as to

S O Residential Customers ­transferred to the IT, &Infrastructure segment and the Network Health division merged into the Enterprise

egment information information egment

Customers

Enterprise

Swisscom Switzerland management from the Participations division (Other Operating Segments) has also Segments) Operating (Other division Participations the management from includes the support functions Finances, functions includes the support Human Resources and Strategy for of standardised inSwitzerland. ITandnetwork services Inaddition, IT, Network &Infrastructure also as themanagement of real estate andthevehicle fleet in Switzerland. ­S The segmen Activity field oftelecommunication. the fieldof andmaintenanceconstruction ofwired andwireless networks in Switzerland, primarilyinthe Ltd. BillagLtd collects radio and licensefeesTV onbehalfoftheSwiss Confederation. cablex Ltd operates in of cross-platform for services customers inthe media fieldandofsecuritised radio transmissions. directories. Participations consist principallyofthesubsidiariesBillagLtd, cablex Ltd and comprises primarily Other Oper The includes thesaleofmerchandise. residential customers andcustomers from small-andmediumsize enterprises. Furthermore, thesegment network andmobilephonesubscriptionsaswell asnational andinternational telephoneanddata traffic for En products to complete businesssolutions. product offering inthefieldofbusiness ICT infrastructure covers thewhole range ofservices from individual operators whose customers use products asaresult oftheunbundling“lastmile”for othertelecommunication providers. service service providersservice networks andtheuseofthird-party by This segmen F also provides comprehensive andcustomised solutions. network services Fastweb o broadband for and residential aswell asvideo-on-demand services TV andcorporate customers. Inaddition, astweb isoneofthelargest providers ofbroadband inItaly. services Itsproduct portfolio covers voice, data, wisscom’s network infrastructure andallITsystems. Itisresponsible for thedevelopment andproduction terprise Customers focuses on complete communication solutionsfor large businesscustomers. Its segment Residential Customers comprises connection fees for broadband and services, fixed-TV

customer experience from asingle source, simplify processes and enhance effi ­ S ff wisscom Switzerland was split up. TheSME telecommunications business is ating Segments mainlycomprise theareas DigitalBusinessundParticipations. DigitalBusiness ers mobilephoneser t IT, Network &Infrastructure isresponsible foroperation theplanning, andmaintenance of t comprises theuse of Wholesale ­ S wisscom Directories AG (localsearch), whichisactive inthefieldofonlineandtelephone

Swisscom Group ­ S wisscom Broadcast Ltd istheleading provider inSwitzerland ofradio services, S ­ & Infrastructure ­ S vices onthebasisofanMVNO contract network operator). (as avirtual It

wisscom Switzerland under are the Residential reported wisscom’s mobilenetworks, aswell asbroadband andregulated services IT, Network S ­ wisscom fixed andmobilenetworks by othertelecommunication S ­

wisscom’s management structure.

­S wisscom for the current year. reporting ­ S wisscom. Italsoincludesroaming withforeign Fastweb

S ­ wisscom (local Directories

­S wisscom Switzerland as well Other operating ­ S ­ I wisscom Broadcast segments n this manner,

- - - ­

Fastweb Swisscom Switzerland Elimination Total segment result Elimination Reconciliation pensioncost Group Headquarters Other Operating Segments Fastweb Swisscom Switzerland IT, Network &Infrastructure (before IT, Network &Innovation) Wholesale Enterprise Customers Small andMedium-Sized Enterprises Residential Customers yearfinancial 2016 Segment result Total netrevenue Elimination Group Headquarters Other Operating Segments remaining the segmentsare recharged between at market services prices. the IT, nor does &Infrastructure segment charge to services, other The Network segments. costs any network Group charge Headquarters not does any management to financial other fees segmentsfor its management reporting. in segment separately “Other Operating Segments”. In addition, “Group Headquarters”, which includes non-allocated is disclosed costs, and “IT, &Infrastructure”, Network which are grouped under Reporting is made on the basis the of segments“Residential IT, Network &Infrastructure (before IT, Network &Innovation) Wholesale Enterprise Customers Small andMedium-Sized Enterprises Residential Customers yearfinancial 2016 Net revenue million CHF In information segment of Restatement 2016 “Residential IAS the retirement-benefitand the otherreconciliation of operatingreflect not do segments itemin accordance with plant and property, equipment of talised and costs other income. segment The results of tion and amortisation less revenues from the rental and administration buildings of and vehicles as well as capi Thesegment result IT, costs. of &Infrastructure consistsnetwork operating of Network and expenses deprecia pension reconciliation cost item in accordance IAS with in the columnreported “Eliminations”. In 2017, an CHF expense of the ordinarydifferencebetween employer contributions andpension the as cost provided for 19 under IAS is co direct and indirect costs which anddirect include indirect costs personnel expense, other operatingless self- capitalised of costs costs

nstructed assets and assets other income. Retirement-benefitnstructed expense includes ordinary employer contributions. The

19. Thesegment results Fastweb of correspond to the operating results.

­ C

ustomers”, “Enterprise Customers” and “Wholesale” correspond to acontribution margin prior to

1 9 (prior year: CHF 72 million). The results the of segments C ­ ­ S ustomers”, “Enterprise Customers”, “Wholesale”, wisscom Switzerland, as well and as “Fastweb”

9 2

m illion is disclosed under “Eliminations” as a Reported 11,643 (2,508) Segment expense encompasses the the encompasses expense Segment 2,197 9,440 2,148 1,367 2,748 2,611 5,160 1,957 (114) (350) (816) 129 847 594 722 388 989 124 (72) (14) 27 2

Adjustment S ­ (1,367) wisscom Switzerland 1,105 (183) (847) 753 195 116 (54) (12) (10) (71) 17 54 32 44 (9) – – – – – – – –

Restated 11,643 (2,491) 2,148 2,143 9,257 3,501 1,957 2,540 6,265 (114) (362) (700) 124 379 754 789 173 979 (14) (72) 81 – 2 –

- -

­ 101 Consolidated financial statements Notes to the consolidated financial statements 102 Consolidated financial statements Notes to the consolidated financial statements

Direct costs Net revenue Net revenue from othersegments Net revenue from external customers Wholesale customers Corporate customers Residential customers 2017, million inCHF 2017 information Segment 1 and intangible assets Capital expenditure inproperty, plant andequipment Segment result Depreciation, andimpairment amortisation losses Segment result before depreciation andamortisation Indirect costs Direct costs Net revenue Net revenue from othersegments Net revenue from external customers Revenue other Wholesale Merchandise Solution business Telecom services 2017, million inCHF 1 Operating free cashflow Other Change inoperating networking capital Change indefinedbenefitobligations Change inprovisions and intangible assets Capital expenditure inproperty, plant andequipment Segment result before depreciation andamortisation Net income Income taxexpense Income before income taxes Result ofequity-accounted investees Financial income andfinancial net expense, Segment result Depreciation, andimpairment amortisation losses Segment result before depreciation andamortisation Indirect costs informationSegment 2

roceeds from thesaleofproperty, change innetworking capitalfrom operating plant andequipment, non-cash activities,change indeferred gain from thesaleand

leaseback ofreal estate, anddividendpayments to owners ofnon-controlling interests. Including capitalisedc P Including capitalisedc 2

1 1

osts ofself-constructed assetsandotherincome. osts ofself-constructed assetsand otherincome.

S ­ wisscom Switzerland 2017

Switzerland Residential C Swisscom ustomers (1,485) (1,654) (1,943) (1,397) (3,615) (1,144) 3,500 3,512 8,977 5,971 2,002 2,015 3,386 9,058 6,053 5,971 2,428 5,363 3,500 (126) (186) 184 578 157 451 (56) (11) 81 82 39

– –

Customers Enterprise Fastweb 2,164 2,155 2,508 2,402 1,097 1,084 1,101 (589) (716) (603) (948) (728) (692) 256 845 267 791 748 832 106 197 186 845

(84) (72) 20 38 (4) (1) 9 – –

Operating Segments Whole-

Other (639) (478) 850 321 529 529 180 180 446 446 944 366 578 578 (96) (31) (20) (50) (58) sale 84 81 – – – – – – – – – – 9

& etwork Infrastructure N quarters (2,565) (1,290) (1,396) (1,275) (1,445)

Group Head- (111) (111) (112) (111) 167 141 (96) (12) 26 26 IT, 1 – 1 – 1 – – – – – – – – 7 1 7 –

nation nation Elimi- Elimi- (113) (119) (411) (614) (411) (614) (119) 268 672 (14) (14) (58) 24 92 26 6 – – – – – – – – – – – – – 1 – –

Switzerland

Swisscom 11,662 11,662 (1,485) (2,164) (2,666) (1,654) (3,615) (1,943) (2,378) (4,701) 2,015 3,500 9,058 8,977 2,159 1,568 1,960 2,131 4,295 4,295 3,749 7,068 1,084 6,464 (392) (160) Total Total 845 203 578 648 165 (10) (11) 81 36 51 –

Direct costs Net revenue Net revenue from othersegments Net revenue from external customers Wholesale customers Corporate customers Residential customers restated million, inCHF 2016, 2016 information Segment 1 and intangible assets Capital expenditure inproperty, plant andequipment Segment result Depreciation, andimpairment amortisation losses Segment result before depreciation andamortisation Indirect costs Direct costs Net revenue Net revenue from othersegments Net revenue from external customers Revenue other Wholesale Merchandise Solution business Telecom services restated million, inCHF 2016, 1 Operating free cashflow Other Change inoperating networking capital Change indefinedbenefitobligations Change inprovisions and intangible assets Capital expenditure inproperty, plant andequipment Segment result before depreciation andamortisation Net income Income taxexpense Income before income taxes Result ofequity-accounted investees Financial income andfinancial net expense, Segment result Depreciation, andimpairment amortisation losses Segment result before depreciation andamortisation Indirect costs informationSegment 2

roceeds from thesaleofproperty, change innetworking capitalfrom operating plant andequipment, non-cash activities,change indeferred gain from thesaleand

leaseback ofreal estate, anddividendpayments to owners ofnon-controlling interests. Including capitalisedc P Including capitalisedc 2

1 1

osts ofself-constructed assetsandotherincome. osts ofself-constructed assetsand otherincome.

S ­ wisscom Switzerland 2016

Switzerland Residential C Swisscom ustomers (1,473) (1,755) (2,028) (1,427) (3,613) (1,187) 3,616 3,651 9,175 6,132 1,640 2,143 3,501 9,257 6,265 6,132 2,452 5,518 3,616 (150) (187) (160) 133 591 157 457 (62) 82

(3) 4 – –

Customers Enterprise Fastweb 1,957 1,948 2,540 2,421 1,072 1,144 (597) (721) (515) (126) (920) (772) (633) 124 721 191 769 988 754 848 119 180 134 721

(94) 25 45 9 – – – 1

Operating Segments Whole-

Other (591) (562) 789 270 519 519 164 164 379 379 979 388 591 591 120 (83) (34) (38) (49) sale 81 – – – – – – – – – – 1 4

& etwork Infrastructure N quarters (2,491) (1,262) (1,442) (1,229) (1,423)

Group Head- (114) (114) (143) (116) (114) 173 142 (12) (41) 31 31 14 (2) IT, 2 1 1 – 1 – – – – – – – – –

nation nation Elimi- Elimi- (362) (700) (362) (700) 244 745 (86) (94) (94) (45) 24 40 41 72 21 8 – – – – – – – – – – – – – – – –

Switzerland

Swisscom 11,643 11,643 (1,473) (2,145) (2,759) (1,755) (3,613) (2,028) (2,416) (4,591) 2,143 3,616 9,257 9,175 1,791 1,604 1,990 2,148 4,293 4,293 3,741 7,120 1,072 6,662 (141) (386) (155) Total Total 782 213 591 637 (17) 82 68 (3) – 4

103 Consolidated financial statements Notes to the consolidated financial statements 104 Consolidated financial statements Notes to the consolidated financial statements

Disclosure by products and services Disclosure products by Total Not allocated Other countries Italy Switzerland million CHF In Disclosure by geographical regions Wholesale Merchandise Solution business Telecom services Category Accounting policies Total netrevenue Revenue other Wholesale Merchandise Solution business Telecom services million CHF In

R Ser from maintenance isrecorded evenly over thetermofmaintenance contracts. onastraight-linecapitalised asotherassetsandamortised basisover theduration ofthecontract. Revenue provided to thecustomer. Start-up costs relating to andtheintegration ofnew outsourcing transactions are total costs. Revenue for long-termoutsourcing contracts isrecorded basedonthevolume ofservices the percentage-of-completion methodwhichisbasedontheratio ofcosts incurred to date to theestimated and outsourcing services.Revenues from customer-specific construction contracts are accounted for using include applications aswell astheintegration, andservices operation andmaintenance ofdata networks the implementation, maintenance andoperation ofcommunication infrastructures. Furthermore, they abroad. The telec other telecommunication providers service isrecorded gross. used ortheagreed contractual rates at isprovided. the timetheservice Revenue from roaming with services basis over theduration ofthecontract. Roaming are services recorded asrevenue on the basisofminutes telecommunication providers service (roaming). Revenue from leased linesisrecorded onastraight-line The ser R is recorded at thetimeofdeliveryisprovided. andwhentheservice S F Mobile phoneser foreign operators whosecustomers usethe mobile phonetraffic generated by straight-line basisover thecontractual term. connection withtelephony services. The subscriptionfees are fixed (flat rate). Revenue is recognised a on to income minutesare asandwhenactual usedorwhenthecards expire. recorded at the time the calls are Revenue made. from the sale of prepaid call cards is deferred and released and business customers, as well asbusiness with prepaid callingcards. Revenue from telephonyis services provision ofadditionalservices. provided by the customer for the multi-component transaction whose payment is not dependent on the revenue to berecognised for eachindividualcomponent ofthetotal consideration islimitedby that part various component onthebasisofrespective parts individualsalespricesthereof. the Inthisrespect, transaction. The priceoftheentire multi-component transaction isspread onapro-rata basisover the ofabundledofferingmobile handsetissoldasapart withasubscription, itistreated asamulti-component basis. Ifnominimumcontract termhasbeenagreed, revenue isrecognised onthedate ofconnection. Ifa Connection fees are deferred and released to income over the minimum contract term on a straight-line contract. Dependingonthesubscription, revenue isrecorded minutesused. onthebasisofactual monthly flat-rate the fee, revenue from whichis recognised onastraight-line basis over thetermof ixed-network encompass services primarilynational andinternational telephony traffic for residential evenue recognition wisscom provides offerings bundled service whichincludeInternet andTV as well as anoptional fixed-line evenue arisingfrom thesaleofmobilephones, fixed-line devices, routers,TV-Boxes andotheraccessories vices inthefieldof communication andITsolutionsprimarilyinclude as well as consultancy services

vices encompass primarilyleasedlinesandtheuseof om services includetheprovisionom services ofmobileandfixed-line telecommunications in Switzerland and

vices encompass basicsubscriptioncharges; andinaddition, domesticandinternational

S ­ wisscom customers inSwitzerland orabroad aswell asroaming by N et revenue 11,662 9,476 2,155

S ­ 31 wisscom network. –

Non-current 18,327 14,400

3,359 assets 2017 534 34 ­ S wisscom offers subscriptions at afixed

et revenue S ­ wisscom’s fixed network by other

N 11,643 11,662 1,948 9,665 8,269 1,084

2017 765 845 699 30 –

Non-current 11,643 17,825 14,273 1,072 8,321 2,877 assets 2016 2016 771 782 697 543 132

Total costs direct National traffic fees Costs ofobtainingacontract International traffic fees Traffic feesof foreign subsidiaries purchasedServices Customer premises equipment andmerchandise million CHF In expenses perating costs Direct 1.2 diately and obtaining disclosed of as costs acontract. subscription. of dependent on the Subscriber type acquisition and are loyalty-programme imme expensed costs Swisscom pays commissions to dealers for the acquisition and retention customers. of Thecommission payable is costs acquisition Subscriber Accounting policies for internal use. and infrastructures the software development of network of the construction Capitalised self-constructed of assets include technical forof costs the personnel production costs installations, 2 1 Total costs indirect Total capitalisedself-constructed assetsandotherincome Miscellaneous income Gain onsaleofproperty, plant andequipment Income from litigations Capitalised self-constructed assets Total otheroperating expense Miscellaneous operating expenses Allowances for receivables Administration expense Consultancy expenses andfreelance workforce andsellingexpensesAdvertising costsEnergy Rental expense Maintenance expense Information cost technology Total personnelexpense Other personnelexpense andsocialsecurityexpensesSalary million CHF In costs Indirect

See Note3.5. See Note4.1.

O

2

1

3,002 2,207 2,666 4,701 1,128 2,856 (508) (102) (327) 2017 2017 176 400 249 306 296 682 146 302 108 109 284 431 105 206 (24) (55) 91

2,947 2,759 4,591 2,112 2,868 1,141 (468) (347) 2016 2016 216 114 199 256 271 169 304 282 392 471 649 122 191 (41) (20) (60) 79 94

-

105 Consolidated financial statements Notes to the consolidated financial statements 106 Consolidated financial statements Notes to the consolidated financial statements The apital and financial risk management risk financial and apital 2 Basic anddilutedearningspershare (inCHF) Weighted average numberofshares outstanding(number) Share ofnetincome attributable to equityholdersof indicated where except million, CHF In share per Earnings aggregate dividend distribution CHF of 1,140 million. dividend payment date is Theexpected on 10 April 2018. the payment an of ordinary dividend CHF of 22 share per the of 2017 in respect financial year.This equates to an to the proposes AnnualThe Board Directors of Shareholders’ Meeting of Dividends paid Ordinary dividendpershare (inCHF) Number ofregistered shares eligiblefor dividend(inmillionsofshares) indicated where except million, CHF In Shareholders. Treasury shares are not Swisscom­ Ltd. At 31 2017, December rather financial but statements on the basis in the as statutory reported equity statements of of Distributable are determined not reserves on the basis in the as consolidated the of reported equity financial Swisscom aims to achieve which dividend astable is policy based on cash-flow generation and capital.allocationof policy Dividend Equity ratio in% Total assets Equity million CHF In Swisscom to achieve strives at aminimum. ratio30%, an of equity ratio is Theequity computed as follows: ratio Equity Ratio netdebt/EBITDA Operating income before depreciation, andimpairment amortisation losses Net debt million CHF In Net interest and depreciation, amortisation and impairment losses). Exceeding this ratio temporarily is permitted. Swisscom to achieve strives indebtedness anet approximately of 1.9 xEBITDA (operating result taxes, before ratio Net-debt-to-EBITDA received. Thenet-debt-to-EBITDAreceived. ratio is as follows: non-current fixed interest-bearing of deposit and derivative certificates financialinstruments for financing 2.1 the risks assumed. Furthermore, guarantees ability to its continue as agoing concern and its to investors offer an appropriate return based on the financial risks whichto are below out theSet procedures and guidelines governing management the active resources equity and of of ments whichments will to providecustomers future benefits and enhanced returns to investors.

d de

ividend is proposed by the Board of Directors andividend the by is Board must approved proposed Directors of be the by Annual General Meeting of C Ca

bt consistsbt total of financial liabilities lesscash cashand equivalents, current financial as assets wellas

pital management and equity and management pital

S ­ wisscom is exposed.

­ S wisscom maintains financial resources to enableit to makecapital invest e ­ ntitled tontitled adividend.

S ­ wisscom Ltd’s distributable amounted reserves to CHF ­ S wisscom Ltd S ­

wisscom to achieve strives arobust basis capital equity which

­ S wisscom paid the following dividends in 2016 and 2017:

S ­ wisscom Ltd held to on be 4 51,800,771 31.12.2017 31.12.2017 51.801 22,058 30.31 1,140 4,295 1,570 22.00 7,447 7,645 34.7 ­­ t 2017 2017 he parent company, 1.7

5 ,251 million. 51,800,352

A 31.12.2016 31.12.2016 pril 2018 51.800 21,454 1,140 30.97 22.00 6,522 4,293 7,846 1,604 30.4 2016 2016 1.8 -

Income taxexpense benefit pensionplans gains andlossesfromActuarial defined Net income Balance at 31December 2016 million CHF In earnings as retained well of as comprehensiveDevelopment and reserves other income 2017 Supplementary information on equity Income taxexpense Equity-accounted investees benefit pensionplans gains andlossesfromActuarial defined Net income Balance at 31December 2015 million CHF In earnings as retained well of as comprehensiveDevelopment and reserves other income 2016 Balance at 31December 2017 non-controlling interests Transactions with Dividends paid Comprehensive income Other comprehensive income Income taxexpense Equity-accounted investees Gains andlossestransferred to income statement Change infair value of foreign subsidiaries Foreign currency translation adjustments to income statement Items that willnotbereclassified Balance at 31December 2016 Transactions with Change infair value of foreign subsidiaries Foreign currency translation adjustments to income statement Items that willnotbereclassified subsequently to income statement Items that are ormay bereclassified non-controlling interests Treasury shares Dividends paid Comprehensive income Other comprehensive income subsequently to income statement Items that are ormay bereclassified Income taxexpense Equity-accounted investees Gains andlossestransferred to income statement

Retained Retained earnings earnings

(1,140) (1,140) 8,148 6,783 9,155 8,148 2,249 2,523 1,570 1,604 1,162 (102) (171) (238) 679 850 919 679 919 (17) (5) (1) – – – – – – – – – – – –

adjustments adjustments translation translation currency currency (1,834) (1,733) (1,689) (1,834) Foreign Foreign (101) (101) (101) 145 166 145 145 (19) (21) (83) (4) (2) – – – – – 2 – – – – – – – – – – 5 –

air value

air value

F F reserve reserve (11) (5) (5) (5) (3) – 5 – – – – – 9 – – – – – – 1 9 – – – 7 – – 5 4 4 4 4 – –

Hedging Hedging reserve reserve (5) (5) (5) (6) (2) (6) (1) – 3 1 – – – – – – 3 2 – – – – – – – – – – – 9 9 9 – 8

quity olders of

quity olders of

h h Swisscom Swisscom (1,140) (1,140) 1,570 6,326 1,604 5,049 7,468 2,384 6,326 2,435 1,162 E E (171) (238) (102) 135 166 679 850 919 814 831 (88) (17) (11) (17) (21) (84) 15 (5) (5) (1) (2) 2 4

controlling controlling interests interests Non- Non- (11) 11 (2) (2) (9) (8) (8) – – – – – – – 8 – – – – – – – 8 – – – 5 – – – – – – –

(1,148) (1,148) 2,382 6,334 1,604 5,054 7,457 1,568 6,334 2,435 1,162 (238) (111) (171) Total Total 814 919 135 166 679 850 831 (88) (11) (17) (84) (21) 15 (5) (5) (6) (1) (2) 2 4

107 Consolidated financial statements Notes to the consolidated financial statements 108 Consolidated financial statements Notes to the consolidated financial statements

Repayment ofprivate placements Repayment ofdebenture bonds Repayment ofbankloans Issuance financialliabilities of Issuance ofotherfinancialliabilities Issuance ofprivate placements Issuance ofdebenture bonds New bankloans Balance at 1January liabilities inancial million CHF In 2.2 3 2 1 Total bankloans Bank loansinUSD Bank loansinUSD Bank loansinEUR Bank loansinEUR Bank loansinEUR Bank loansinEUR Bank loansinCHF million CHF In 2022, 31 of respectively. As Swisscom has confirmed two linesof fromcredit banks each amounting millionto CHF1,000 maturing in 2020 and lines Credit 2 1 Thereof financialliabilities non-current Thereof current financialliabilities Total financialliabilities Other financialliabilities Derivative financialinstruments Finance leaseliabilities Private placements Debenture bonds Bank loans Balance at 31December Other changes Change infair value Change infinanceleaseliabilities Foreign currency translation adjustments Interest payments Interest expense Repayment financialliabilities of Repayment ofotherfinancialliabilities Repayment offinanceleaseliabilities Bank loans Bank

ted for hedge accounting ofnetinvestments inforeign operations. ixed interest-bearing. ariable interest-bearing. Designa F V See Note5.1. See Note2.5.

F

2, 3 2 1, 3 1 1

2 2

2

M

2017–2024 2013–2020 2016–2017 2009–2028 2009–2028 2015–2020 2016–2017 D

1 aturity years aturity

ecember

currency 2 017, nonethese lines of credit of had drawn been down, as in the prior year in P ar value 150 200 180 48 54 60 70

rate nterest i +0.386% –0.20% Euribor Nominal 7.65% 8.30% 0.67% 0.76% 0.05%

rate nterest i –0.52% –0.22% –0.20% Effective 4.63% 4.62% 0.67% 0.11%

31.12.2017 (1,158) 8,286 8,496 8,286 6,452 1,834 6,137 (250) (640) (247) (181) 2017 375 760 175 238 211 757 224 461 500 160 177 493 760 (19) (26) 60 62 74 80 17 (2) (3) – – –

C arrying amount arrying 31.12.2016 8,593 8,496 8,496 7,371 1,125 6,140 (999) (599) (184) (375) 2016 898 175 700 753 219 258 294 508 738 753 168 (20) (22) 21 66 76 64 70 63 19 19 (3) 2 – 2 –

.

The bank loans may due for become immediate repayment the if shareholding the of Swiss Confederation in monthly basis in the amounts CHF of 70 million and EUR million. 60 (ISIN: CH0032254739) (ISIN: Debenture bondinCHF million CHF In bonds Debenture capital of was received so applied to repay existing loans. In 2016, During quarter the 2017, fourth of wisscom issued three debenture an bonds of aggregate nominal amount CHF of 700 million. Thefinancing In 2016, nominal amount million CHF of 600 upon maturity. werereceived applied to repay existing In the debt. third quarter 2017, of anominal of bond amount CHF of 150 million acoupon with 0.75% rate of and aterm 16 of years. Thefunds a coupon 0.375% rate of and aduration 10 of years. In quarter the 2017, fourth of In the quarter second 2017, of 1 Total debenture bonds CH0268988182) (ISIN: Debenture bondinCHF CH0373476164) (ISIN: Debenture bondinCHF CH0336352775) (ISIN: Debenture bondinCHF CH0254147504) (ISIN: Debenture bondinCHF CH0317921663) (ISIN: Debenture bondinCHF CH0362748359) (ISIN: Debenture bondinCHF CH0344583783) (ISIN: Debenture bondinCHF CH0247776138) (ISIN: Debenture bondinCHF XS1288894691) (ISIN: Debenture bondinEUR CH0188335365) (ISIN: Debenture bondinCHF CH0268988174) (ISIN: Debenture bondinCHF CH0114695379) (ISIN: Debenture bondinCHF XS1051076922) (ISIN: Debenture bondinEUR XS0972165848) (ISIN: Debenture bondinEUR CH0104691628) (ISIN: Debenture bondinCHF so received was received so applied to repay existing loans.

ted for hedge accounting ofnetinvestments inforeign operations. Designa ­ S

­ S wisscom falls one below third another or if shareholder can exercise control over 1 1

M 2015–2025 2014–2021 2015–2035 2017–2033 2016–2032 2014–2029 2016–2028 2017–2027 2016–2027 2014–2026 2012–2024 2015–2023 2010–2022 2009–2018 2007–2017 2013–2020 aturity years aturity S ­ wisscom up took adebenture anominal of bond amount CHF of 350 million with ­ S wisscom up took abank loan EUR of 150 million maturing in 2024. Thefinancing

currency

in P ar value 1,385 250 500 500 500 600 150 150 300 160 200 350 200 200 500 500

rate nterest

­ S wisscom up took short-term bank loans on and aweekly i Nominal 0.25% 2.63% 1.88% 2.00% 3.25% 3.75% 1.00% 0.75% 0.13% 1.50% 0.38% 0.38% 0.38% 1.50% 1.75% 1.75%

rate nterest

i S ­ wisscom repaid adebenture a of bond –0.37% –0.39% –0.06% Effective 2.81% 2.06% 2.22% 3.44% 3.76% 0.96% 0.71% 0.14% 1.47% 0.30% 0.38% 1.47% 1.77%

­ S wisscom issued adebenture 31.12.2017 6,137 1,396 S ­ wisscom. 253 500 585 585 152 151 299 161 202 351 197 202 599 504 –

C arrying amount arrying 31.12.2016 6,140 1,434 152 299 161 202 198 202 554 504 253 500 536 535 610 t ­­ he he – –

109 Consolidated financial statements Notes to the consolidated financial statements 110 Consolidated financial statements Notes to the consolidated financial statements

Swisscom agreements concluded in two 2001 for the sale real of At estate. the same time, liabilities lease Finance value, relating to these leaseback agreements arein out the set following table: The minimum lease payments, financial liabilities and futurethe payment thereof, in termsof their present net term the of individual rateinterestof the finance leases. Theeffective lease liabilities 4.9%. was totalled CHF 146 million (prior year: CHF 158 million). gains Thedeferred are released to other income over the realised on real classified estate as finance of As leases deferred. 31 was long-term agreements to the lease of real back which, sold qualify part as estate in finance part, leases.Thegain permanently give majority shareholding up its in remaining privateplacements are entitled to resell their investments to 2019 may due for become immediate repayment the if shareholding the of Swiss Confederation in the capital of The Swiss-franc-denominated privateplacements value acarrying with CHF of 343 million maturing in 2018 to maturing private placement CHF of 150 million was prolonged term for15 afurther of years. In quarter the 2017, fourth of Total private placements Private placements inCHF Private placements inCHF Private placements inCHF Private placements inCHF million CHF In placements Private basis over the lease term as other income. on sale-and-leaseback Losses transactions are immediately. expensed reliablycan be allocated. Gains on sale-and-leaseback transactions are and deferred released on a straight-line for landLease interestcontracts method. and buildingsthe effective areseparately recorded if the lease payments component the of lease payments is recognised as interest expense over the lease term computed on the basis of lease payments and is over the amortised lesser the of asset’s estimated useful life and the lease term. The interest asset are passed on. Theasset is initially fair recorded at the lower its value of and the present value the of minimum Financial liabilities are initially measured at fair In value subsequent transaction less costs. direct accounting periods, liabilities Financial Accounting policies amountNet carrying ofbuildingsacquired underfinancelease Thereof financeleaseliabilities non-current Thereof current financeleaseliabilities Total minimumlease payments/carrying amount After 5years Between 1and5years Within 1year million CHF In ­S A lease is recorded as afinance leasewhen substantially allof the risks and rewards incidental ownershipto of an leases Finance they are re-measured using cost interest at amortised method. the effective

wisscom falls 35% below another or if shareholder can exercise control over

M 2016–2031 2007–2019 2007–2018 2007–2017 aturity years aturity

­ S wisscom repaid aprivate placement CHF of 250 million on maturity. In 2016, a

currency

in P ar value

150 278 250 S ­ 72 wisscom.

rate nterest

i 31.12.2017 Variable Variable Nominal 0.56% 0.80% 985 144 793 M 48 inimum leasepayments

rate nterest

S ­ wisscom should the Swiss Confederation i 31.12.2016 Effective

0.56% 1.25% 1.31% 1.56% D 1,178 984 149 ecember 45 S ­

wisscom. Theinvestors in the

2 31.12.2017 31.12.2017 017, the gains deferred S ­ wisscom entered into 493 150 272 328 438 461 390 71 23 48 23 –

C C arrying amount arrying arrying amount arrying 31.12.2016 31.12.2016 382 492 508 452 738 150 269 249 16 40 16 70

Between 4and5years Between 3and4years Between 2and3years Between 1and2years Within 1year million CHF In operating of are lease asrespect follows: contracts operating leases amounted to CHF 201 million (prior year: CHF 198 million). Future minimum leases perating lease payments in Operating leases relate primarily to the rental real of held for estate business In purposes. 2017, payments for 2.3 4 3 2 1 Net interest expense Financial income andfinancial net expense, Total financial expense Other financial expense Change infair value ofinterest rate swaps Present-value adjustments onprovisions Interest expense ondefinedbenefitobligations Interest expense onfinancialliabilities Total financialincome Other financialincome Capitalised borrowing costs Gain from saleofequity-accounted investees Change infair value ofinterest rate swaps Foreign exchange gains Interest income onfinancialassets million CHF In Lease arrangements which transfer do not all the significant risks and rewardsownershipof are classifiedoperating as Accounting policies Total minimumleasepayments from operating lease After 5years 2.4 Gains and losses on sale-and-leaseback transactions are in recorded directly the income statement. leases. Payments are recorded as other operating expense using the straight-line over the method lease period.

See Note3.5. See Note4.3. See Note5.2. See Note2.5.

O F inancial result inancial

4

1 1

2

3

31.12.2017 (160) (204) (160) (149) 2017 987 112 138 157 178 317 (11) (27) 11 85 44 10 (6) 8 – 6 5 4

31.12.2016 (155) (235) (155) (168) 2016 936 305 113 126 142 162 (21) (10) (11) (25) 13 88 80 12 42 – 7 6

111 Consolidated financial statements Notes to the consolidated financial statements 112 Consolidated financial statements Notes to the consolidated financial statements

Currency risks Risk thereof on the financial effects adverse situation of ­management in is accordance conducted established with risk guidelines containing of Financial the with objective the potential activities. financing and business its from arising risks management risk inancial financial various to exposed is Swisscom 2.5 as investments net in foreign shareholdings for hedge-accounting purposes. value EUR of 1,330 million (CHF 1,555 million) (prior year: EUR million; 1,240 CHF 1,332 million) which were designated In addition, Net exposure Hedges Currency swaps Foreign currency swaps Forward currency contracts Net exposure before hedges Net exposure to forecasted cashflows inthenext 12months Net exposure at amounts carrying Trade payables Financial liabilities Other financialassets Trade receivables Cash andcashequivalents million CHF In regardsAs financial instruments, the currency risks andfor hedging foreign contracts currencies of as 31 risks exchange Foreign below: are presented them ber

transactions and financial business activities from operating Credit risks Interest rate risk Liquidity risk

2016 and 2017 are analysed to be as follows: F

hrough its operating business activities and derivative business activities operating hrough its

udent liquidity management involves the holding the management involves liquidity udent f acounterparty.

wisscom is exposed toexchange foreign changes is exposed wisscom S ­

nancial instruments and financialnancial instruments investments, wisscom has financial liabilities outstanding of as December 31 2017 with an aggregate nominal

nterest-rate risks result from changes in interest rates changes in from interest result risks nterest-rate

wisscom is exposed to the risk default to the of is exposed wisscom

T o Source Pr I

S S fi fi w h m o w o n o

f f obtaining corresponding credits. cash and cash equivalents, of reserves f adequate nancial result and equity. and result nancial edging instruments. edging egotiable securities as well as possibility the securities egotiable hich can impact the Group’s the impact hich can cash flows, hich can negatively impact the financial the situation impact negatively hich can arket value of certain financial assets, liabilities and liabilities assets, financial certain of value arket

­S

wisscom. Interest-rate fluctuations can impact the can impact Interest-ratefluctuations wisscom.

­S wisscom. The identified risks and measures to minimise

or counterparties or

eduction in volatility by use of financial of use by instruments in volatility eduction

o ensure adequate liquidity adequate ensure o

eployment of interest-rate swaps to reduce interest-rate swaps of eployment

(2,249) (2,248) (1,346) (2,377) ocedures and principles ocedures

103 819 902

e volatility of planned cash planned flows of e volatility ctive interest-rate risk management ctive (71) EUR

83 89 uideline establishing minimum requirements minimum establishing uideline

>

> > Ris > > > >

> > >

>

1 – 7

( Pr e D A t th D E f F f D T U I G a R

k reduction SDA (International Swaps and Derivatives Association) SDA (International and Derivatives Swaps foreign-currency transaction and translation risk) transaction foreign-currency oreign-currency options and swaps currency wo guaranteed bank credit lines bank credit guaranteed wo oreign-currency financing (EUR & oreign-currency USD) mployment of netting agreements foreseen under foreseen agreements netting of mployment ach of CHF 1,000 million 1,000 CHF of ach nd designation for hedge-accounting purposes se of collateral agreements collateral of se esignated counterparty limits counterparty esignated eployment of foreign currency forward transactions, forward currency foreign of eployment 31.12.2017

(204) (393) (405) (144) 189 189 230 USD (80) 12 – – 3 3

(1,133) (1,982) (2,071) (2,161)

849 752

(66) EUR 97 89 93 55

– 8

31.12.2016

D

ecem

(429) (470) (148) 402 406 244 USD (27) (68)

41 10 (4) – 3

-

The structure of interest-bearing of The structure financial instruments at nominalvalues is as follows: risks rate Interest hedging contracts.

31.12.2016 USD volatility of7.78% volatilityEUR 6.25% 31.12.2017 million CHF In all other variables, in particular the interest rate level, remain constant. exchange rates change in line their with implicit months. twelve This volatility over analysis the next assumes that The following analysis sensitivity shows the on the impact income statement should the EUR/CHF and USD/CHF analysis sensitivity currency Foreign Total amount financialassets carrying of Other assetsvalued at fair value Derivative financialinstruments Loans andreceivables Cash andcashequivalents million CHF In debtors) may analysed be as follows: valuesThe carrying cash of and cash equivalents and other financial to credit riskexposed assets (excluding trade transactions financial from risks Credit risks Credit 31 in interestA shift 100 rates by basis has points no material on the impact income statement andas of equity Interest rate sensitivity analysis Total interest-bearing financialassetsandliabilities, net Fixed interest-bearing, net Variable through interest rate swaps Fixed interest-bearing Variable interest-bearing, net Variable through interest rate swaps Variable interest-bearing Total interest-bearing financialassetsandliabilities, net Total interest-bearing financialassets Variable interest-bearing financialassets Fixed interest-bearing financialassets Total interest-bearing financialliabilities Variable interest-bearing financialliabilities Fixed interest-bearing financialliabilities million CHF In The volatility the of balance positions sheet and planned cash by flows the volatilityis partially offset USD volatility of10.35% volatilityEUR of7.47%

December 2016December and 2017.

o n sheet balance In

come impact items 155 140 (4) (1)

edges for sheet alance b H it ems (63) (56) 7 5

flows ash 31.12.2017 31.12.2017 c Planned (1,244) 7,145 7,145 7,875 1,296 5,849 7,220 1,244 7,093 (730) (603) (127) 655 887 100 201 525 49 32 61 52 (7) –

flows ash edges for

of the related related the of 31.12.2016 31.12.2016 H c planned (1,177) 8,096 7,490 6,037 1,453 7,490 7,331 7,214 1,177 (606) (117) (489) 707 274 329 765 276 (49) (20) 63 41 – –

113 Consolidated financial statements Notes to the consolidated financial statements 114 Consolidated financial statements Notes to the consolidated financial statements

other receivables are insignificant.The splitof trade receivablesby operating segment is as follows: Credit risks on trade receivables and other receivables arise from the Group’s Credit risks operating from activities. Financial operating risks from activities Total Without rating to BBB+ BBB– A– to A+ to AA+ AA– AAA million CHF In amountsThe carrying analysed Standard by &Poor’s rating the of counterparties may summarised be as follows: Total Past dueover 1year Past due7to 12months Past due4to 6months Past dueupto 3months Not due million CHF In The due dates trade receivables of as well as the related valuation allowances are analysed to be as follows: Total trade receivables, net Trade receivables, net Total allowances for doubtfuldebts Other Operating Segments Fastweb Swisscom Switzerland IT, Network &Infrastructure Wholesale Enterprise Customers Residential Customers Allowances for doubtful debts Total trade receivables Other Operating Segments Fastweb Swisscom Switzerland IT, Network &Infrastructure Wholesale Enterprise Customers Residential Customers Trade receivables million CHF In

G ross amount 2,582 1,824 124 167 377 90

Allowances 31.12.2017 (193) (130) (24) (17) (18) (4)

ross amount G 31.12.2017 31.12.2017 2,608 2,389 2,582 1,632 1,881 (193) (131) 168 101 366 136 531 956 433 342 102 814 887 (52) (10) (47) 92 43 22 56 34 (2) (3) –

Allowances 31.12.2016 31.12.2016 31.12.2016 2,608 1,746 2,425 1,020 (183) (183) (141) (116) 118 744 149 495 707 243 351 (54) (48) (25) (13) 82 42 57 14 (7) (3) (7) (2) (1) (3)

Contractual maturities including estimated interest payable interest estimated including maturities Contractual risk Liquidity Balance at 31December Foreign currency translation adjustments Release ofunusedallowances Write-off ofirrecoverable receivables to allowance subject Additions to allowances Balance at 1January million CHF In The table the presents below changes in valuation allowances for trade receivables. Total Derivative financialinstruments Other payables Trade payables Other financialliabilities Finance leaseliabilities Private placements Debenture bonds Bank loans 31.12.2016 million CHF In Total Derivative financialinstruments Other payables Trade payables Other financialliabilities Finance leaseliabilities Private placements Debenture bonds Bank loans 31.12.2017 million CHF In

10,392 10,382 Carrying Carrying am am 6,137 6,140 1,597 1,753 ount ount 375 294 461 508 493 738 299 343 760 753 63 60

Contractual Contractual payments payments 11,725 11,483 6,575 1,597 1,178 6,658 1,753 375 985 514 830 108 299 294 765 826 108 343

ear ue within ear ue within D D 3,119 3,999 1,497 1,576 1,718 1 y 1 y

235 299 253 731 207 340 48 74 80 45 4 4 7

o 2years ue within o 2years ue within 1 t 1 t D D

1,998 1,533 109 280 261 608 42 67 80 10 44 73 73 23 4 – 4 3

o 5years ue within o 5years ue within 2017 3 t 3 t 193 183 D D (90) 10 93 (3)

2,026 2,319 1,836 1,248

102 328 105 281 367 28 11 11 11 12 2 – 3 –

ears ue after ears ue after

D D 4,582 4,557 5 y 5 y 3,146 3,175 2016 984 158 179 793 158 342 184 183 (92) 89 26 86 95 (4) – – – – 3 –

115 Consolidated financial statements Notes to the consolidated financial statements 116 Consolidated financial statements Notes to the consolidated financial statements Thereof derivative non-current financialinstruments Thereof current derivative financialinstruments Total derivative financialinstruments Total otherderivative financialinstruments Forward currency contracts inUSD Currency swaps inEUR Currency swaps inUSD Interest rate swaps inCHF Total cashflow hedges Currency swaps inUSD Total fair value hedges Currency swaps inEUR Interest rate swaps inCHF million CHF In instruments financial Derivative forward rates asforward the of balance date. sheet ­F on the basis acomputational of Interest-rate model. and currency swapsare discounted at market rates. assets consist investments of in various investment funds and individual companies. Thefair value is determined exchanges are computed on the basis future of maturing payments discounted at market interest 3 Level rates. as the of balance-sheet date. Thefair value 2financial Level of assets and liabilitieswhich are not on quoted The fair value publicly of and instruments equity debt traded 1is Level of based upon their -exchange quotations > > > Fair values are allocated to the one of following three hierarchical levels: values fair of Estimation Valuation and categories fair valuefinancial of instruments instruments are taken immediately to income. transaction occur. Changes in the fair value derivative financialof instruments that are designated not as hedging in the income statement as income or expense in the same the cash period of the flows intended or future agreed financial or asset financial Otherwise, theliability theresults. amountsrecorded impacts in recognisedareequity ­l equity. a hedge a future If of transaction subsequently results in the recording a financial of or asset financial flow hedges” are dealt with otherin comprehensive income and recognised in of the hedging as part reserve income Changes statement. in the fair value derivative financial of instruments that were designated as “cash financial instruments that were designated as hedging“fairvalue instruments hedges” for are recognised in the futureof cash flows in casefuturetheof transactions (“cashhedge”).flow Changes in the fair value of derivative ­p enteringby such transaction. the On is date entered aderivative contract into, management designates the recording of method the fluctuations fairin value depends on the underlying transaction pursued and the objective financialDerivative instruments are initiallyfair at recorded value and subsequently re-measuredfair at value. The instruments financial Derivative Accounting policies

iability, the amount included is in recognised equity in the income statement in the same in period which the oreign-currency transactions forward and foreign-currency swapsare valued reference by to foreign exchange

urpose of the of urpose hedging relationship: hedge the of fair value an of asset or liability value hedge”) (“fair or ahedge L L L evel 3: evel which on markets 2:areevel other factors observable for assets and liabilities, either or directly 1: evel

factors that market are based factors on not observable data. exchange quotedmarkets prices in for active identical assets or liabilities;

31.12.2017 1,904 1,244 511 200 425 101 210 149 819 149 – C

ontract value ontract 31.12.2016 2,048 1,177 636 335 200 235 235 752 425 97 4

1.12.2017 3 100 P 99 97 99 ositive fair value fair ositive 1 1 – – 1 – – – 2

31.12.2016 32 41 32 29 9 5 – – 5 – 4 4 3

fair egative value 1.12.2017 3 N (60) (55) (54) (56) (2) (3) (4) (1) (2) (3)

indirectly; – – –

31.12.2016 (63) (61) (62) (60) (2) (1) (1) (2) – – – – –

Loans Certificates ofdeposit Term deposits assets financial Other million CHF In receivables and liabilities amount carrying whose corresponds to areasonable estimation their of fair value. table. included Not therein are cash and cash equivalents, trade receivables and payables as wellfollowing as miscellaneousthe in summarised are liabilities financial and assets financial of values fair and amounts carrying The Valuation and categories fair valuefinancial of instruments as security for bankas security loans. Financial assets amounting to CHF 145 million (prior year: CHF 152 million) are available, freely not as they serve Total financialliabilities Other financialliabilities Derivative financialinstruments Finance leaseliabilities Private placements Debenture bonds Bank loans liabilities Financial Total otherfinancial assets Fair value through profit orloss Derivative financialinstruments Debt instruments heldfor trading Available-for-sale Equity instruments valued at cost Equity instruments valued at fair value Equity instruments valued at fair value Loans andreceivables

Carrying am 8,286 6,137 ount 100 375 161 415 461 145 201 493 760 61 10 60 41 53 49

2 7

9,045 6,439 value 432 161 100 218 162 375 879 504 788

Fair 61 53 41 10 49 60 2 7

31.12.2017

Level 2 1 – 3 1 2 2 2 2 2 2 2 1 2

Carrying amount

8,496 6,140 439 104 274 152 294 508 738 753 41 63 61 41 15 29 93 63 5

9,463 1,049 6,517 value 455 104 290 168 294 758 782 Fair 41 63 61 41 15 29 93 63 5

31.12.2016

Level 3 1 2 2 2 2 1 2 2 1 – 2 2 2

117 Consolidated financial statements Notes to the consolidated financial statements 118 Consolidated financial statements Notes to the consolidated financial statements

perating assets and liabilities 3 1 Total trade receivables Allowances Accrued revenue Billed revenue million CHF In Trade receivables CHF 145 million (prior year: CHF 174 million). ­ba 31 of As 2017, December other of operating assets which the portion will consumed be the 12 months after 1 Total operating assetsandliabilities, net Other operating liabilities Trade payables Other operating assets Trade receivables yearFinancial 2016 million CHF In 1 Total operating assetsandliabilities, net Other operating liabilities Trade payables Other operating assets Trade receivables yearFinancial 2017 million CHF In

Movements in and operatingMovements assets liabilities 3.1

edit risks. SeeNote2.5. oreign currency translation andadjustments from acquisitionandsaleofsubsidiaries. oreign currency translation andadjustments from acquisitionandsaleofsubsidiaries. movements in provisions, contingent liabilities and contingent assets are presented in this section. over the individual cash-generating units and on the results any of applicable impairment Furthermore, tests. non-current tangible and intangible In assets. addition, provides information it as to the allocation goodwill of The following discloses information section on the movement in current net assets as well as in material F F Cr

lance date sheet amounts to CHF 85 million (prior year: CHF million) 94 and that other of operating liabilities

O N et current operating assets operating current et

1

31.12.2016 31.12.2015

(1,123) (1,171) (1,597) (1,486) 2,425 2,396 385 370 680 631

Operational Operational changes changes (165) (117) (11) (85) (98) 29 17 47 53 34

31.12.2017 changes changes 2,389 2,389 O O (193) 193 ther ther (20) (31) (71) 20 62 (2) (4) (5) 1 6

1 1

31.12.2016 31.12.2016 31.12.2017 (1,123) (1,597) (1,165) (1,753) 2,425 2,401 2,425 2,389 (183) 207 385 680 200 729

Accruals for annualholiday, overtime Value-added taxes payable Deferred revenue Total otherliabilities Miscellaneous liabilities Liabilities from construction contracts Liabilities from collection activities Accruals from international roaming traffic Total otheroperating liabilities Total liabilities othernon-financial liabilities Other non-financial Advance payments received Advance payments made Prepaid expenses Inventories Total otherreceivables Allowances Other receivables Receivables from collection activities Receivables from construction contracts Accruals from international roaming traffic million CHF In assets operating Other receivables are recognised as other operating expense. consideration in determining futureValuation cashfrom portfolio. flows the the expected allowances for trade are recognised. In addition to contractually foreseen payment conditions, historical default rates are taken into generalegards valuation portfolio-based allowances, financial assets are grouped togetherbased on hetero g As ­v receivables are recognised, depending on the nature the of underlying transaction, in the form individual of Trade and other receivables are measured less impairment cost at amortised Impairment losses. losses on trade Trade receivables sheet. balance Total operating assets and liabilities in used the normal course business of are disclosed as current items in the liabilities and assets Operating Accounting policies revenuesDeferred mainly comprise payments deferred for prepaid cards and prepaid subscription fees. Accruals for variable performance-related bonus million CHF In liabilities operating Other Total otheroperating assets Total assets othernon-financial assets Other non-financial Value-added taxes receivable Costs to fulfilla contract aluation allowances or portfolio-based general valuation allowances which cover the anticipated default risk. risk. default anticipated the cover which allowances valuation general portfolio-based or allowances aluation eneous credit-risk for and impairment attributes collectively reviewed and whenever required, valuation allowances

r

31.12.2017 31.12.2017 1,165 157 822 186 448 119 343 729 113 460 277 168 16 43 10 35 66 41 69 20 19 91 34 74 (7) 8 8

31.12.2016 31.12.2016 1,123 824 198 440 299 143 680 419 263 154 107 30 62 94 92 14 18 32 31 29 45 34 67 51 (7) 9 4

­

119 Consolidated financial statements Notes to the consolidated financial statements 120 Consolidated financial statements Notes to the consolidated financial statements

Foreign currency translation adjustments Reclassifications Adjustment to dismantlement andrestoration costs Disposals Additions Balance at 31December 2015 cost At million CHF In equipment and plant roperty, 3.2 recognised plant in property, and equipment on the no 3.5. impact with Note income See statement. ­d (prior year: CHF 19 million). aresult As changes of in the assumptions made in estimating the provisions for Additions plant to property, and equipment include additions from finance leases amounting to CHF transactions financing and investing Non-cash aggregated CHF 857 million (prior year: CHF 741 million). Firm contractual commitments for future investments plant in property, and equipment as 31 of 2017 December Commitments future for expenditures capital 1 amountNet carrying at 31December 2015 amountNet carrying at 31December 2016 amountNet carrying at 31December 2017 carryingNet amount Balance at 31December 2017 Foreign currency translation adjustments Reclassifications Disposals Depreciation Balance at 31December 2016 Foreign currency translation adjustments Reclassifications Disposals Depreciation Balance at 31December 2015 losses and impairment depreciation Accumulated Balance at 31December 2017 Foreign currency translation adjustments Reclassifications Adjustment to dismantlement andrestoration costs Disposals Additions Balance at 31December 2016

Buildings acquir ismantlement an and increase restoration costs, CHF of 49 million (prior year: decrease CHF of 49 million) was

P

ed under finance lease. SeeNote2.2. ed underfinancelease.

i nstallations

(18,716) (19,880) (19,247) T 28,175 27,023 26,129 echnical (1,114) (1,103) 7,413 7,776 8,295 1,298 1,423

(208) (663) (550) 386 108 668 550 (47) (40) 36 21 95 21 1

and, buildings nd leasehold

L improvements a

(1,996) (2,040) (2,019) 2,696 2,743 2,762 766 724 656 (63) (30) (35) (37) 17 13 (1) (3) 8 4 – 4 5 – 7 – – 1

1

ther assets O

(2,524) (2,891) (2,696) 4,273 4,019 3,838 1,314 1,323 1,382 (137) (141) (315) (308) 107 270 242 132 136 (12) 13 82 (2) 1 – – – –

assets nd nder construction vances made

u

Ad a (226) (204) 364 234 354 197 362 362 354 364 (1) – 2 – – – – – – – – – – – – – –

2 0 million (23,236) (24,811) (23,962) 35,508 34,139 33,091 10,177 10,697 (1,464) (1,448) 9,855 1,806 1,869 (211) (863) (722) To 817 699 397 (20) (41) (49) 21 49 tal (9) 9 2

depreciated. estimated The useful lives for the main plant categories property, and of equipment are: Systematic depreciation/amortisation is calculated using the straight-line except for land, method which is not or manufacturing measured can be costs reliably. amount replaced Thecarrying is the of parts de-recognised. are capitalised as replacement investments afuture if economic inflow is of benefits probable and the purchase aqualifying replacement, of of production asset.Costs renewal plant or renovation property, and of equipment theof site. External are borrowing capitalised costs insofar as they allocated can to be the directly acquisition or management, purchase or manufacturing also cost includes the for dismantling estimated costs and restoration the asset to the and location capable conditionto for it be operating necessary of in the manner intended by amortisation and impairment In losses. addition to the purchase to attributable and bringing directly cost the costs plantProperty, and equipment is recorded at acquisition or manufacturing less accumulated cost depreciation/ Accounting policies ­f concerning future expectations technologicalforecast economic and developments, legal changes as well as company from the use the of Useful assets. economic lives are annually reviewed on the basis historical of and installations and equipment on the basis the of anticipated over whichwill period economic accrue benefits to the Management estimates the useful economic lives and residual values technical of facilities, real and estate other Material accounting judgements estimation or uncertainties equipment are as recorded other income orother operating expenses. fromits use. Gains future expected are economic and losses benefits arising on the plantdisposalof property, and amountThe carrying plant an of item property, and of equipment is de-recognised upon disposal or whenever no is less than amount, carrying its the amount carrying to down the is recoverable written amount. theIf recoverable amount the of asset, which is the greater the of fair value to sell less costs and the value in use, indicationsIf that exist the value an of asset may impaired, be the recoverable amount the of asset is determined. term. lease minimum remaining leased premises are on astraight-line amortised basis over their the of shorter estimated useful lives and the developments as well as empirical values comparable with Leasehold assets. improvements and installations in estimated lives takes into account the anticipated use the by company, wear and tear, the expected technological differing useful lives, each component is depreciated/amortisedseparately. The process for determining useful plant Whenever of itemequipment significant property, of and an parts comprise individual with components 1 Other installations Buildings andleaseholdimprovements Other technicalinstallations Transmission andswitching equipment Cables Ducts Category on a prospective basis.on a prospective

echnical installations. urther external factors. factors. external urther T 1 1

1

The impact from changingThe impact useful economic lives and residual values are recorded

1

10 t 4 t 3 t 3 t Years o 15 o 15 o 40 o 15 30 40

121 Consolidated financial statements Notes to the consolidated financial statements 122 Consolidated financial statements Notes to the consolidated financial statements Switzerland segment and merged the Health division into the segment Enterprise Customers

detailed planning aterminal period, value was computed capitalising by the normalised cash flows using an horizon years five of is for used the impairmentextendingof cash For test free theFastweb. beyond flows the the business plans approved management. by In general, the business plans cover athree-year Aplanning period. in use, using the discountedcash free cash flowsestimated flow The projected are (DCF) method. on the basisof to an impairmentjected Therecoverable amount test. acash-generating of unit is determined value based on its In quarter the 2017 fourth of completion business and of after planning, individual goodwill amounts were sub testing Impairment Switzerland. ­Swisscom Reclassifications Additions Balance at 31December 2016 Foreign currency translation adjustments Balance at 31December 2015 cost At million CHF In 3.3 for risk the country is then added. interest 2.5% rate of (Switzerland) and 3.0% (abroad) was cash-generating For used. units abroad, arisk premium toused, subject aminimum interest 1.5% rate of (Switzerland) and (abroad). 2.0% In the prior year, aminimum rate, the yield from government bonds (abroad –Germany) aduration with 10 of years and azero-interest rate is and theweighted For equity external risk-free own borrowing of cost costs. interest rate underlying the discount or market. The discount rate is from derived the Pricing Capital Asset (CAPM). Model This comprises latter the assumed long-term rates applied rate. Thegrowth constant are growth those customarily assumed for the country Swisscom amendedorganisational its and structure dissolved 2 1 amountNet carrying at 31December 2015 amountNet carrying at 31December 2016 amountNet carrying at 31December 2017 carryingNet amount Balance at 31December 2017 Foreign currency translation adjustments Balance at 31December 2016 Balance at 31December 2015 losses impairment Accumulated Balance at 31December 2017 Foreign currency translation adjustments Impairment losses Foreign currency translation adjustments

cash-generating units Telecommunications Business with with Business Telecommunications units cash-generating land (see 1.1). Note Thesegment division, goodwill amounting to CHF 25 million was transferred to the cash-generating unit Enterprise Customers Health of merger the with connection In units. cash-generating other under financialstatements consolidated Residential Clients Accordingly, the previous goodwill amounting to CHF 656 million was transferred to the cash-generating unit merged into the organisation and business the processes of Residential Customers (SME telecommunications business) and

-generating unitsinclude Wholesale elecom business withsmallandmedium-sized enterprises inSwitzerland.

The cash T

Goodwill

­S wisscom Switzerland. The goodwill of

­S wisscom Switzerland, Small and Medium and Small

­ S wisscom Directories. The SME The telecommunicationswisscom Directories. business was fully

­ S wisscom Directories andImprove Digital. Switzerland Residential Customers

Swisscom ized Enterprises - 2,620 2,620 3,277 3,277 2,620 2,620 ­S 656

– – 1 – – – – – – S ­

mall and

medium-sized wisscom continues Directories classifiedto be in the small and medium and small Switzerland enterprises the Small and Medium and Small the S Swisscom (656) 656 656 656 656

– – – – – – – – – – –

1

Switzerland Customers ­S Enterprise Swisscom wisscom Switzerland consisted the of

907 907 932 932 907 907 25 – – – – – – – – – ized enterprises in Switzerland Switzerland in enterprises ized - ­s

- Fastweb ­ S (1,492) (1,370) (1,383) ­ Sized Enterprises Enterprises Sized

2,070 1,899 1,916 wisscom Switzerland unit. (122) 533 529 578 169 (17) 13 – – 2

cash-generating ­ S

wisscom Switzer Other units 422 444 445 445 444 399 (23) (25) (23) (1) – – – 3 – –

2

Swisscom Swisscom ­

(1,515) (1,370) (1,383) 5,161 5,156 5,186 6,701 6,526 6,544 (122) Total 173 (23) (18) 13 – 2

- -

higher than the amount carrying relevant for the impairment test. the of measurementAs date, the recoverable amount at all cash-generating units, based on their value in use, was changes in key assumptions which would can cause rationally the amount carrying expected the be of cash Residential Customers and Enterprise Customers impairment of Results and tests sensitivity information. The discount rates take used into consideration the risks specific relating to cash-generatingthe beingunit Other cash-generating units Fastweb SME telecommunication businessSwitzerland Enterprise Customers Residential Customers unit Cash-generating rates Discount and rates long-term growth greater the of fair disposal value of less costs and the value in use. recoverable amount acash-generating of unit is lower than amount. carrying Therecoverable its amount is the impaired, the cash-generating unit is for tested impairment at that time. impairment An loss is recognised the if annuallyis performed on amandatory basis. there If is any indication during the year that goodwill may be the theFor of impairment purposes goodwill is test, allocated to the cash-generating units. Theimpairment test Accounting policies the discounting and on the basis the growth rate of factor historic of data and expectations. forecast tosubject Management’s judgement. This comprises the estimation future of cash the determination flows, of The allocation goodwill of to the cash-generating units as well as the computation the of recoverable amount is Material accounting judgements estimation or uncertainties Long-term rate growth Post-tax discount rate Normalised capitalexpenditure rate Normalised EBITDA margin as inthebusinessplan Average rate annualgrowth withthesameEBITDA margin amount carrying net EUR by 332 million (CHF 386 million). In the prior year, the difference amounted to EUR the of date theAs of impairment no impairment test, goodwill of resulted. Therecoverable amount the exceeded Fastweb g ­c equates toamount: carrying the net lion (CHF 768 million). Thefollowing changes in material assumptions lead to asituation where the value in use

onsidered. cash Theprojected flows and management assumptions externalaresourcesby corroborated of enerating units to the exceed recoverable amount

­S

­S

wisscom Switzerland wisscom Switzerland

5.88–14.38% 5.88% 5.92% 9.10% pre-tax W ACC ­ S

wisscom Switzerland – .

4.64–9.72% Assumptions post-tax 7.02% 4.64% 4.64% WACC 7.02% – 1.0% 5.2% 21% 33%

rate rowth

g

Long-term ­ S 0–1.5% wisscom believes nonethe of anticipated 1.0% 2 0% 0% 017 Sensitivity –

7.71% 0.1% 2.8% 23% 31% 2017 6.6–12.2%

9.63% 6.66% 6.64% 6.66% pre-tax WACC Assumptions

7.38% 5.3–9.5% 1.0% 6.3% 20% 34% post-tax 7.38% 5.25% 5.25% 5.25% WACC

rate rowth g

Sensitivity Long-term 7 0–1.0% 10 –0.8% 8.84% 1.0% 4.3% 23% 31% 2016 2016

m 0% 0% 0% il

­- - 123 Consolidated financial statements Notes to the consolidated financial statements 124 Consolidated financial statements Notes to the consolidated financial statements

Foreign currency translation adjustments Business combinations Reclassifications Disposals Additions Balance at 31December 2015 cost At million CHF In assets ntangible 3.4 projects of CHF of 171projects million (prior year: CHF 215 million). 31 of As 2017, December other intangible assets included advance payments made and uncompleted development Balance at 31December 2015 losses impairment and amortisation Accumulated Balance at 31December 2017 Foreign currency translation adjustments Sales ofsubsidiaries Business combinations Reclassifications Disposals Additions Balance at 31December 2016 Amortisation Amortisation Balance at 31December 2016 Foreign currency translation adjustments Reclassifications Disposals Impairment losses Net carrying amountNet carrying at 31December 2015 amountNet carrying at 31December 2016 amountNet carrying at 31December 2017 carryingNet amount Balance at 31December 2017 Foreign currency translation adjustments Reclassifications Sales ofsubsidiaries Disposals Impairment losses

I

Purchased software (1,586) (1,738) (1,949) 2,035 2,428 2,166 (234) (234) (105) 115 449 428 479 187 215 105 (12) (93) (75) 10 39 31 75

(4) (2) (2) (1) 2 – 4 9

generated Internally software (1,013) 1,427 1,477 1,471 (970) (895) (202) (443) (246) (277) 228 152 138 200 501 464 532 442

(33) 12 71 (1) (9) (5) 1 – – 1 2 – –

Licenses

(143) (169) (150) 454 413 451 311 282 263 (52) (29) (26) 52 (3) (7) – – – – 9 5 – – – – – 3 – – – –

ands and

Br customer relations (1,120) (1,192)

1,332 1,332 (421) (852) 560 852 212 140 139 (10) (12) (94) (55) (26) 27 53 22 10 12 – – – – – – – – – –

intangible

assets Other (224) (272) (291) (256) 636 225 714 247 612 388 442 345 (93) (51) (61) (86) (78) 14 45 22 46 (1) (3) (6) (9) – – – 2 – –

(4,043) (4,384) (3,706) (1,513) 5,904 5,464 6,140 1,861 1,756 1,758 1,497 (343) (689) (137) (670) Total 572 168 597 335 (24) 56 20 22 23 (4) (2) (8) (9) (7) 9 4

Other intangible assets Licenses Brands andcustomer relationships following estimated useful economic lives: values basis. are recorded on aprospective Systematic amortisation is computed on astraight-line basis over the the useful lives. from changing Theimpact would to the modify suggest need useful economic lives and residual begins It as as soon the the isof related contract. operational, network unless other information is at hand which lated and amortisation impairment Systematic losses. mobile of amortisation phone licenses is onthe based term as brands and customer relationships, are recorded at fair market value as the of date acquisition, of less accumu manufacturing less accumulated cost amortisation. Intangible assets resulting from business combinations, such Mobile as phone well licenses, as self-developed other intangible software assets are recorded at purchase or Accounting policies ­t economic lives are annually reviewed on the basis historical of concerning and expectations forecast future ­a Management estimates the useful economic lives and residual values intangible of assets on the basis the of Material accounting judgements estimation or uncertainties millionCHF 84 (prior year: CHF 104 million). 31 of As 2017, December firm contractual commitments futurefor investments in intangible aggregated assets Commitments future for expenditures capital the timing dismantling of ten years afurther by would lead in to areduction the provision CHF by 10% by estimatedof would costs result in an increase CHF of 57 million in the amount the of provision. in Ashift 2020. after the increase An income the of provisions Thenon-current settled to statement. be portion is expected impactingwithout the income and statement, CHF totallingments CHF resulting in an CHF of impact 55 million (prior year: CHF –103 million). In 2017, as aresult reassessments, of adjust CHF 1million (prior year: CHF 47 million). index for used computing Thecost the dismantling was amended costs using an average interest 1.19% rate of (prior year:of 1.18%). using The effect different interest rates amountedto The provisions are computed reference by to estimates future of anticipated dismantling and are costs discounted Provisions dismantling for costs and restoration 1 Thereof provisions non-current Thereof current provisions Balance at 31December 2017 Foreign currency translation adjustments Use ofprovisions Release ofunusedprovisions Present-value adjustments Additions to provisions Balance at 31December 2016 million CHF In Provisions 3.5 is less than amount, carrying its the amount carrying to down the is recoverable written amount. theIf recoverable amount the of asset, which is the greater the of fair value to sell less costs and the value in use, indicationsIf that exist the value an of asset may impaired, be the recoverable amount the of asset is determined. Software internally generated andpurchased Category

echnological developments, economic and legal changes as well as external factors. further See Note4.1. nticipated over whichwill period economic accrue benefits to the companyfrom the of the use Useful assets.

P

rovisions, contingent liabilities and contingent assets contingent and liabilities contingent rovisions,

5 3

m

illion (prior year: CHF 49 million) were plant recorded under property, and equipment,

Dismantlement a nd restoration costs 600 600 542 61 (8) (3) – – 8

egulatory aw proceedings nd competition 1

m a l illion (prior year: CHF 4million) which was recognised in R 156 156 150 – – – – – 6

ermination T benefits 112 (28) (34) 14 98 95 79 – –

1

Other 130 209 191 (32) (36) 79 85 (1) 2

76 million. 5 t 3 t 2 t 1,077 3 t Years o 10 o 10 o 16 To 900 177 247 962 (63) (78) o 7 tal 2 7

- -

125 Consolidated financial statements Notes to the consolidated financial statements 126 Consolidated financial statements Notes to the consolidated financial statements further proceedings against against proceedings further for the year ended31 against against In the event that alegally enforceable finding as to market abuse is reached, civil-law claims mightbe asserted At the beginningFederal Court. 2016, of paid it CHF of the 186 penalty million as no suspensivewas granted. effect third quarter 2015. of million to CHF in principleCourt upheld the Weko decision and reduced imposedon the penalty has appealed against the ruling to the Federal Administrative In September 2015, Court. the Federal Administrative a market-dominant position during in the ADSL case of services through the period to the end 2007. of In 2009, the Competition Commission (Weko) totalling apenalty levied CHF 220 million on to them by providers demanded from the Federal to other telecommunication providers in Switzerland. service In previous years, several telecommunication ­I Provisions proceedings and competition-law regulatory for See uncertainthere receivable no further arising exists to which from the conditions settlement are attached. from each other. In the quarter second 2017, of TIM made apayment EUR of 95 million (CHF 102 million). For and TIM reached an out-of-court which encompassed settlement due parties the receivables both contested of claimed damages from TIM and initiated therewith. in legal connection In quarter action the 2015, fourth of as amarket-dominant company andEUR of imposedapenalty 104 million. Related to the same matter, Fastweb has In 2015, the Italian competition authorities (AGCM) found TIM (formerly Telecom Italia) unlawful of guilty conduct litigation from assets Contingent improbable for which reason no provisions have recognised been in in manner. alawful itself conducted to tender the of Swiss for the corporatenetwork in Post the Federal Administrative as considers it Court that has it ­Swisscom has challenged the rulings Weko of as concerning well on pay broadcasts TV as the of live invitation sports CHF of 8million.penalty access for business clients. this Because of judged conduct unlawful to be under Competition Law, Weko ruled a Weko2008, reached the conclusion that In November 2015, investigation in its as to the invitation to tender the of Swiss for the corporatenetwork in Post Commission Competition The ( proceedings competition-law from arising liabilities Contingent thepayments the of provisions of non-current portion could likely occur within three years. provisionsOther include provisions for environmental, and contractual non-income-related risks. tax Any applicable theOn basis legal of opinions, Other provisions Other could occur within years. five Any applicable payments will depend upon the date on which legally-binding and decrees decisions are issued and penalty of CHF of penalty pursuant to the Anti-Trust in Law the area broadcastingon pay events of TV. In live-sport May 2016, Weko a decreed legally enforceable findingof market abuse is reached, Wekocan penalty on a impose under civil law might against asserted be n accordance the with revised Telecommunications Act,

Note ­Swisscom.

1.2. ­S wisscom. Thedetermination during the of prices for access services 2013 to 2017 is still pending.

1 72 86

wisscom in proceedings. these million on

m illion. aresult As the of decision,

D ­S wisscom consider not does justified to the be penalty and has lodged an appeal to the ecember ­ ­ S ­ S wisscom might be initiated. be might wisscom ­ S wisscom has established provisions for regulatory and competition-law proceedings. Weko) is conducting several proceedings against

2 017, as in the prior year. In the Weko, of by view past proceedings conducted S ­ C ­ wisscom considers last sanctions inof of appeal the the court levying as ommunications Commission (ComCom) in a reduction the prices charged ­S ­ S wisscom. In April 2013, Weko initiated an investigation against wisscom has market-dominant a onthe position market for broadband ­ S wisscom recognised aprovision CHF of ­S wisscom provides access the consolidated financialstatements of as and S ­ wisscom Weko by from CHF S ­ s ­ wisscom. In the event that a ervices (incl.ervices interconnection) ­ S wisscom. In addition, claims S ­ wisscom for abuse of

1 86

m illion in the ­ S ­S wisscom F ­ wisscom F ­ astweb, astweb, astweb astweb s ­ ervice ervice

2 20

part of the of acquisitionpart the of installations costs and are over the amortised useful lives the of installations. The thirdby in the parties locations where these installations dismantling of Thecosts are erected. are capitalised as land belonging to third following parties decommissioning and to original owned restore to its the state property Swisscom is legally obligated to dismantle transmitter stations and telecommunication installations on located Provisions dismantling for costs and restoration Provisions are discountedis material. the if effect Provisions are raised liability whenever alegal as or defacto exists aresult an of occurrence in the the past, Accounting policies which cannot reliably be Possible liabilities occurrence whose as the of balance-sheet date cannot assessed, be or liabilities, the level of possiblethe best estimate the of ultimate liability. which are fully or not not covered provisions by be or existing insurance. Theprovisions established so constitute Depending cash on theof proceedings,outcome these outflows. claimsexpected maybe made against the group Provisions for pending litigation are measured on the basis available of information and an estimate probable of as wellcosts as the timing the of dismantling. theof provisions is determined to asignificant degreeby estimationthe futureof dismantling and restoration and transmitter stations as well as the original restoration to its land of state Thelevel owners. held third by party The provisions for dismantling relate and restoration costs to the dismantling telecommunication of installations Material accounting judgements estimation or uncertainties capitalised asset shall amount. carrying net Any excess its exceed not is taken to income directly the of from related the cost to or deducted capitalised the asset. The amount of from related the cost deducted ­p provisions are measured at the present value the of aggregate and under future are long-term costs reported ­o the implementation of the programme. the of implementation the announcement and/or communication to personnel associations equivalent are to be to deemed commencing involved have in advised been sufficientdetail as to the main terms of thedownsizing programme. A public thereof reliably can be estimated, and the implementation the of programme or the individuals has started management to adownsizing commits itself plan, is it probable that aliability has incurred, been the amount relatingCosts to the implementation personnel of downsizing programmes are in expensed when the period Provisions termination for benefits utflow of resources to settle the of resourcesliability settle to utflow is probable and the amountof the liabilitycanestimatedbe reliably. rovisions. Whenever the provision is re-measured, the present value the of changes in the liability are either added estimated, are disclosed as contingent liabilities. liabilities. contingent as disclosed are estimated, . 127 Consolidated financial statements Notes to the consolidated financial statements 128 Consolidated financial statements Notes to the consolidated financial statements

Average numberofemployees Thereof foreign countries Thereof Switzerland Total headcount Group Headquarters Other Operating Segments Fastweb Swisscom Switzerland IT, Network &Infrastructure Wholesale Enterprise Customers Residential Customers In full-time equivalent full-time In expense personnel and headcount mployee Employee headcount 4.1 4 employees participating in the social plan. declining business areas. Themeasures planned will result in the elimination positions of in Switzerland and in savingscost principally through astreamlining work of processes and an on-going job vacancies of in reduction ­S timethe necessary and means for developing newbusiness areas, in growth such as the Cloud and security, In the of view sustained market pressure core in business, its potential higher efficiency through digitalisation and ­S lished provisions CHF of 95 million, less the release provisions of no longer required CHF of expense for plans personnelThe net reduction amounts to CHF 61 million. This amount consists estab newly of basis.on atemporary company Worklink Theemployment AG. company Worklink AG hires participating out employees to third parties plan asby downsizing well employees as certain affected age andservice, of length may transfer to the employment by downsizing Swisscom employees affected supports throughsocial a plan.Depending on the relevantsocial benefits Termination 1 Thereof foreign countries Thereof Switzerland Total personnelexpense Other personnelexpense Termination benefits Expense for share-based payments Expense ofdefined contribution plans Expense ofdefinedbenefitplans Social securityexpenses andwageSalary costs million CHF In expense Personnel

Swisscom has over employees, which 20,000 of 17,700 are in Switzerland. In is this found to be information section See Note4.3. as theabout employee headcount and personnel expense, the compensation paid to individuals in key positions, wisscom has raised this target for 2018 to 2020 to CHF wisscom announced that basis the cost in Switzerland is reduced CHF to by be

well as retirement-benefit obligations. aswell retirement-benefit Employees E

1

1 00

m illion annum. per 31.12.2017 15,157 20,506 20,836 17,688 4,826 2,818 2,580 5,638 4,605 2,504 265 88

6 0 ­ S

wisscom continues to achieve

m illion annum per until 2020.

31.12.2016 3 4 21,127 15,876 21,453 18,372 3,002

2,493 2,468 5,072 4,651 6,065 2,755 2,759 2,214 m 2017 375 290 243 257 illion. During 2016, 88 10 83 61 2

–2.9% –4.5% Change –2.9% –3.7% –8.6% –4.9% –1.0% –7.0% 2,947 2,718 2,268 2.3% 3.5% 1.5% 0.0% 2016 229 338 253 56 20 3 9

- may consist restructuring of contributions, the of levying a lower level interest of or zero interest accruing on the theof funding deficit and a of a restoration financial equilibriumwithin a of 5timeframe to 7 years. The measures accounting principles (Swiss ARR), the Foundation GAAP Council lays measures down which lead to an elimination and the employer. In the afunding event of computed in accordance shortfall, Swiss with financialstatement formalThe regulatory framework contains various provisions concerning risk sharing the beneficiaries between mined as apercentage the of insured salary and is independent the of number years. service of additionally aOASI bridging pension until the standard retirement age. Theamount disability of pensions is deter paid in out, full in the or in form acapital of part, payment. In early case of retirement, the employer finances ment-savings account a conversionby in out rate the set pension-fund rules.can The retirement be also benefits reduced old-age pension. Theamount the of old-age pension results from multiplying the individual retire death andstandardThe disability benefits. retirement age is 65. Employees are entitled to early retirementa with savingsby contributions the of employer and employees. In addition, the employer pays risk contributions to fund to the financial situationpensionof the fund. The amounts credited to the individualsavings accounts arefunded interest applied to be to the retirement-savings accounts each is year set the by Foundation Council, having regard beneficiary, towhich are creditedsavings contributionsvarying with age as well as interest accruing. rateThe of formal regulatory framework the of pension plan. Individual retirement-savings accounts are maintained for each The pension-fund rules, together the with legal provisions concerning occupational pension plans, constitute the Foundation Council which is made up an of equal number representatives of the of employees and the employer. pension plan which has the legal form afoundation. of Thesupreme governing the of pension body plan is the comPlan the of medium the through is implemented scheme retirement-benefit The scheme. retirement-benefit Social securitycontributions Pension contributions Benefits paid following retirement from Group Executive Board Share-based payments Current compensation Total compensation to theBoard membersof Directors of Social securitycontributions Share-based payments Current compensation compensation ey management million CHF In 4.2 accumulated employee savings, the or loweringin a combination benefits of of such measures. Shouldstructural a The majority of comPlan plans benefit Defined 4.3 Ltd. Swisscom­ andBoard Group Directors of Executive Board arein out the set notesto the consolidated financial statementsof in out theset chapter containing the Remuneration Shares Report. in The disclosures required the by Swiss Ordinance against Excessive Compensation in Companies Listed (OaEC) are in shares. TheGroup Executive Board to members increase may elect this share to 50%. 25%variableof thebenefits. performance-related shareof the membersof the GroupExecutiveBoard is paid out in cash and settled shares,portion payments in kind and non-cashas well benefits pensionas socialand insurance Group Executive Board consists a fixed of basic cash,in salary variable component a settled performance-related (excluding meeting allowances) is paid in shares. the form equity of Compensation paid to the members the of functional allowances and third One meeting attendance fees. the entire of compensation the Board of Directors of of Individuals in key positions of Total compensation to theBoard membersof theGroup Directors andof of Executive Board Total compensation to theGroup membersof Executive Board to the sum employee of restructuring contributions. Under the formal regulatory framework, the employer has no situation adapting by The employer’s future benefits. restructuring contributions at a must, minimum,equalbe funding as exist aresult insufficient shortfall of currentinterest-induced funding, is the to top priority remedy this S ­

wisscom Ltd. Compensation paid to members consists the of Board Directors basic of emoluments plus K P ost-employment benefits

e ­ mployees in Switzerland is insured for the risks old age, of death and disability the by

­S wisscom are the members the of Group Executive Board and the Board Directors of

­ S wisscom Ltd held the by members the of

11.0 2017 2.2 8.8 0.6 0.1 0.6 1.4 5.8 0.9 0.9 0.7

S ­ wisscom 10.3 2016 8.1 2.2 0.1 0.7 1.4 0.5 1.1 1.0 5.5 –

- -

129 Consolidated financial statements Notes to the consolidated financial statements 130 Consolidated financial statements Notes to the consolidated financial statements to required amendments future of benefits. of theof conversion rate and an increase in recurring savings contributions the of employees and employer. In addition upon various measures to ensure afinancialequilibrium. The core of elements the measures comprise a lowering aresult theAs of lowinterest-rate level and increasing the Foundation life expectancy, Council in decided 2016 obligation.­ sharewithin costs the futuremeaning of benefit 19.87(c)IAS of is assumed be at theto levelof the de-facto contributions derives from customary company-specific The in the past. practice upper limitof the employer’s ­S legal obligation to pay additional contributions to eliminate more than 50% afunding of In the case of shortfall. CHF In 2016, the the of initial impact application risk-sharing of features in the financial assumptions totalled recognised inothercomprehensive income Expense (income) definedbenefitplans of recognised infinancial result Return onplanassetsexcluding thepart Change inshare ofemployee contribution (risksharing) Experience adjustments to definedbenefitobligations Change ofthefinancialassumptions Change ofthedemographical assumptions gains andlossesfromActuarial million CHF In recognised inincome statement Total expense definedbenefitplans of Total recognised infinancial expense Interest expense onnetdefinedbenefitobligations Total recognised inpersonnelexpense Administration expense Plan amendments Current cost service million CHF In 1 period of 5years of period in order to cushion future the of impact pension reductions. to this, special contributions are credited to to be the savings accounts older of beneficiariesover a maximum The main reasons for the difference compared with IFRS are the of a use higher surplus at 31 2017 December amounts to CHF billion 0.8 acoverage with ratioaround of 108% (prior year: 101%). In accordance the with Swiss accounting standards relevant for the pension fund (Swiss ARR), the funding GAAP amendment. risk-sharing features, million anegative past-serviceCHF of 546 cost would have resulted in 2016 from the plan amendment and the current actuarial assumptions which take into account the risk-sharing features. Ignoring the pension-fund obligations using the market values the of plan assets valid as the of date the of pension-fund various measures gave rise in 2016 to apast-serviceCHF of 3million. cost This is based on arevaluation the of net an anticipated amount approx. of CHF theof special contributions through an payment extraordinary CHF of 50 million in 2017. Theremaining of costs

Pension cost from defined-benefit pension plans Pension defined-benefit from cost the end which 2006 of are recorded in the balance obligations. as sheet defined-benefit Fastweb. Employees the of Italian subsidiary Fastweb have acquired entitlements to future pension up to benefits pensionOther plans for exist individual Swiss subsidiary companies which are affiliated not to comPlan and for plans pension Other actuarial measurement future of recognition adeferred with retirement-benefit the method of costs benefits

eason behindthedecrease intheshare ofemployee contribution 246millionisthereduction inthestructural fundingshortfall, ofCHF whichismainly attributable to thepositive result onplanassets. The r wisscom, obligation ade-facto over and above the legal minimum obligation to pay additional or restructuring

8 56

m

illion, which of CHF

7

11

m

illion is to attributable the limit on the employer share and CHF

2 50

m

illion will financed be by usingfreely availablefunds of comPlan. The

1

comPlan comPlan (853) (131) (879) 372 383 368 246 (17) (72) 11 11 4 –

plans ther plans ther

O O 3 – – – 3 1 – 2 3 3 – – –

(850) (131) (876) 2017 2017 386 375 370 246 S ­ (17) (72) 11 11 wisscom bears ashare the of costs 5 – discount rate as well as adifferent

omPlan omPlan

c c (1,161) (308) (711) (280) 354 329 322 102 25 25 36 4 3

plans ther plans ther

O O (1) (3) – 9 – – 9 1 – 8 – – 2

1

45

m (1,162) . (308) (711) (278) illion 2016 2016 102 363 338 330 25 25 33 5 3

Business combinations losses(gains)Actuarial Benefits paid Employee contributions Interest cost ondefinedbenefitobligations Current cost service Balance at 1January obligations benefit Defined million CHF In plans pension of Status (prior year:(prior 18 years). The weighted average duration present the value of net obligations the of recorded defined-benefit is 17 Balance at 31December Transfer of pensionplansto comPlan recognised inothercomprehensive income Expense (income) ofdefinedbenefitplans Business combinations Employer contributions andbenefitspaid Pension cost, net Balance at 1January million CHF In Movements in recognised obligations defined-benefit beare to analysed as follows: Net definedbenefitobligations recognised at31December Net definedbenefit obligations Balance at 31December Transfer ofpensionplansto comPlan Administration expense recognised infinancial result Return (expense) onplanassetsexcluding thepart Benefits paid Employee contributions Employer contributions Interest income onplanassets Balance at 1January Plan assets Balance at 31December Transfer ofpensionplansto comPlan Plan amendments

11,894 10,864 11,635 comPlan comPlan 9,826 1,809 1,030 1,030 (853) (335) (471) (471) 879 186 186 335 368 383 78 72 26 46 67 26

(4) – – –

plans ther plans ther

O O 105

(72) (26) (46) 64 35 18 41 18 17 (1) (4) (3) (1) – 3 – – 1 – – – 2 1 3 – 3

11,740 11,929 10,881 1,850 9,890 1,048 1,048

(472) (339) (471) (850) 2017 2017 186 370 386 186 338 876 78 67 26 (5) – – 1 – 1 –

omPlan omPlan

12,183 11,635 c c (1,161)

2,876 9,307 1,809 1,809 9,826 (325) (853) (325) (268) 178 113 322 354 178 268 308 88 14 (4) 3 – 8 – 6

plans ther plans ther

O O

105 117 (14) 74 41 43 41 64 (1) (9) (8) (3) (6) (9) (1) (1) 2 3 1 – 1 2 1 8 1 9 –

12,300 11,740 (1,162) 2,919 1,850 1,850 9,890 9,381

y (271) (334) (334) (854) 2016 2016 363 180 114 330 308 180 271 ears 89 (5) – 1 – – 3 1

131 Consolidated financial statements Notes to the consolidated financial statements 132 Consolidated financial statements Notes to the consolidated financial statements

Private debt Government bondsemerging markets, World Corporate bondsdeveloped markets, World Government bondsdeveloped markets, World Corporate bondsSwitzerland Government bondsSwitzerland Category comPlan Breakdown pension plan of assets is 6.56 years (prior year: 5.52 and segmentsinindustry developed emerging both markets. Theinterest rate duration interest-bearing of assets achieved through abroad diversificationof risks variousover investmentcategories, markets, currencies and risk its of tolerance and thus generating of income on along-term basis all to meet financial obligations.This is pursuesThe investment the goal strategy achieving of the highest possible return on assets within the framework and is the central coordination steering, and monitoring for the management body the of pension-plan assets. the legal provisions. Within terms its reference, of the Investment Commission undertakes the asset allocation The Foundation Council determines bandwidths and the investment tactical within strategy the framework of Total planassets alternative investments Cash andcashequivalents and Cash andcashequivalents andotherinvestments Private markets Commodities Real estate Realestate World Real estate Switzerland Equity instruments Equity shares emerging markets, World Equity shares developed markets, World Equity shares Switzerland debtinstruments Third-party CHF 270 million. CHF CHF (prior year: CHF In 2018, 31 of As 2017, December plan assets include Additional information plan on assets for theof value fluctuation 17.8%reserve (basis: 2018 financial year). makements up 27.8% total of plan Following assets. this investment strategy, comPlan anticipates atarget value apre-determined to ratio88% (CHF of meet sary or CHF-hedged). Theunquoted and therefore lesser liquid invest foreign currency positions are against hedged the Swiss franc neces following to the extent acurrency strategy

397 million). million). 397

­ S wisscom expects to makewisscom payments to the expects pension funds for regulatory employee contributions

5 m

illion). return on plan Theeffective assets in 2017 amounted to 943CHF million (prior year:

years) and the average rating these assets is of Within A–. all the overall portfolio,

Investment

100.0%

strategy 46.0% 25.0% 12.0% 17.0% 10.0% 12.0% 11.0% 1.0% 8.0% 7.0% 9.0% 8.0% 5.0% 6.0% 4.0% 6.0% 7.0% 6.0% ­ S wisscom Ltd shares and bonds afair with value CHF of 6million

10.7% 27.1% 32.3% 72.2% Quoted 13.2% 10.0% 2.1% 2.1% 3.6% 7.1% 8.4% 5.5% 0.0% 7.4% 7.4% 5.7% 1.8% 0.0% 0.0%

27.8% 10.9% quoted 7.2% 0.0% 9.7% 2.0% 2.5% 4.7% 0.0% 0.0% 0.0% 6.2% 0.0% 0.0% 0.0% 0.0% 3.5% 0.6% 8.3% Not

31.12.2017 100.0% 17.9% 27.1% 42.0% 13.0% 11.8% 13.2% 10.0% 4.1% 6.1% 8.4% 5.5% 6.2% 7.4% 7.4% 5.7% 5.3% 0.6% 8.3% Total

11.2% 26.9% 33.1% 73.1% Quoted 13.3% 1.9% 1.9% 3.7% 7.5% 8.4% 5.2% 0.0% 7.2% 9.2% 8.4% 6.0% 2.3% 0.0% 0.0%

10.7% 26.9% 10.4% quoted 5.8% 0.0% 2.0% 1.2% 4.6% 0.0% 0.0% 0.0% 6.2% 0.0% 0.0% 0.0% 0.0% 4.5% 1.4% 7.0% Not

31.12.2016 ­ t 100.0% otalling 12.3% 17.0% 26.9% 43.8% 12.1% 13.3% 1.4% 7.0% 3.9% 4.9% 8.4% 5.2% 6.2% 7.2% 9.2% 8.4% 6.0% 6.8% Total

- -

Life expectancy at age of65–women (numberofyears) Life expectancy at age of65–men(numberyears) Share ofemployee contribution to fundingshortfall Interest onoldage savings accounts Expected rate ofpensionincreases Expected rate increases ofsalary Discount rate at 31December Assumptions computations actuarial underlying Assumptions 1 Life expectancy at age of65(change +/–0.5year) Share ofemployee contribution to fundingshortfall (change +/–10%) Interest onoldage savings accounts (change +/–0.5%) Expected rate ofpensionincreases (change +0.5%;–0.0%) Expected rate increases ofsalary (change +/–0.5%) Discount rate (change +/–0.5%) million CHF In and assumed limited to be the to of funding 60% gap. This is based on the legal and regulatory provisions concerning and the employees. Thelegal obligation and de-facto the of employer to pay additional contributions is unchanged the regulatory contributionsbetween andamended thestepin benefits the first are spread over the employer is computed the with discount step, asecond the present As 0.69%. rate value of the of remaining funding gap applies the currentmandatory the portion conversion legal conversion rate portion, rate. In the extra-mandatory conversion rate using a mixedconversion The rate for the rate in mandatory portions. the and extra-mandatory 10 years in order to the close interest-induced funding structural gap. This is based upon for aforecast the future Foundation Council will on decide agradual lowering future of pensions 5.4% by (prior year: 5.6%) of over aperiod were takenshortfalls into account in the financial assumptions step,As a itfirst steps. is two assumedin that the The risk-sharing contained attributes in the formal regulatory framework relating to the handling funding of assumption. change in accounting estimate. In the previous year, BVG 2015 generation tables were for used the life- retirement-benefit obligations by CHF million,100 which was recognised other in comprehensive income a as improvement 1.75%.mortality rate of Thefirst-time applicationof CMIgave the model rise to ain net reduction improvements in Switzerland actually observed in theThecomputations past. are made afuture with long-term improvements in accordance investigation the continuous with (CMI), model mortality onthe based mortality In 2017, assumptions are life-expectancy arrived at for the time first throughfutureof mortality a projection able. The interest rate used to compute interest accruing on the individual retirement savings is the discount rate. recent years. in future No pensions growth is anticipated as comPlan has insufficient availreserves fluctuation issuers and listed on the Swiss Exchange Thedevelopment salaries SIX. of corresponds to the historical average of The discount rate is based upon CHF-denominated rating and domestic corporatebonds an with of foreign AA Sensitivity analysis 2017 analysis Sensitivity comPlan analysis Sensitivity the employeeof contribution was recognised in other comprehensive income. as achange in accounting estimate in 2016 and recognised in other comprehensive income. In 2017, the reduction takingof employee contribution. this Theeffect the expected into consideration for the first time was with dealt obligations ina reduction defined-benefit of CHF the employer in Assuming the past. the limitation the of employer’s share the of funding this shortfall, results in the elimination funding of as well shortfalls as the measures actually upon the by decided Foundation Council and

The sensitivityr

efers to thecurrent cost service recorded inpersonnelexpense.

4 65

m

illion (prior year: CHF Assumption

comPlan Increase 1.08% 0.69% 0.69% 23.90 22.10 D (116) (556) 40% 536 126 efinedbenefit obligations 44 21 –

plans ther

Assumption O Decrease 1.30% 22.10 23.90

(127) 7 2017 116 650 (41) (19) 11 – – – – –

m illion), which corresponds to Assumption comPlan Increase 0.64% 1.08% 0.64% 24.32 22.26 40% (39) 29 5 7 – – 8

plans ther

C urrent cost service ­e xpectancy xpectancy Assumption O Decrease 1.03% 0.74% 0.91% 24.32 22.26 2016 47 (5) (7) (7) – – – –

-

1

133 Consolidated financial statements Notes to the consolidated financial statements 134 Consolidated financial statements Notes to the consolidated financial statements

1 Life expectancy at age of65(change +/–0.5year) Share ofemployee contribution to fundingshortfall (change +/–10%) Interest onoldage savings accounts (change +/–0.5%) Expected rate ofpensionincreases (change +0.5%;–0.0%) Expected rate increases ofsalary (change +/–0.5%) Discount rate (change +/–0.5%) million CHF In 2016 analysis Sensitivity which the event causing the disability occurs. years, the same be forservice all insured are forrecognised these benefits employees, theon the costs date on Should long-term the level committed of disability (disability benefits pensions), of the numberirrespective of deficits. funding as well as imposing obligations on employees, where applicable, to make additional contributions to eliminate assumptions in the formal regulatory framework which limits the employer’s share future of benefits the of costs eliminate funding From 2016 shortfalls. onwards, risk-sharing features are taken into account in defining financial plans,benefit in particular the provisions contained therein concerningfunding and measurestakenbe to to prise the rules the of pension fund as well as the relevant laws, ordinances and concerning directives occupational plan in compliance legal with provisions. regards As the Swiss pension plans, the relevant formal regulations com The assumptions regarding out in are futureset the formal net benefits of regulationsset governingpension the other interest in net under comprehensiveincome,plan for except are amounts assets, reported reflected income. expense and interest accruing obligations on net as financeexpense. Actuarial gains and losses and the return on and as plan well settlements as administrative in the are income reported costs statement under personnel arising costs past service unit Current from pension-plan creditprojected costs, method. service amendments Actuarial computations the of pension expense and related obligations defined-benefit are undertaken using the Accounting policies liabilities. the of maturities payment foreign issuers and quoted on the Swiss Exchange rating. Thediscount aAA with rates match the anticipated future payments are discounted the with yields Swiss-franc-denominated of and domestic corporatebonds of This evaluationshortfall. is made on the basis prior of experience and anticipated future trends. Anticipated savings accounts, the timing contractual of pension payments benefit and the employees’ shareof fundingthe theperiods, development future of salaries and pensions as well as interest accruing on the accumulated employee The determination post-employment of retirement obligations benefit requires estimationan of future the service Material accounting judgements estimation or uncertainties inpossible. pension is not benefits analysis,sensitivity in anegative of movement view in pension increases, no change was made as the reduction process, only the one of assumptions is adjusted each time, the other parameters remaining unchanged. In the s analysisThe sensitivity takes into consideration the movement obligations in defined-benefit as well as current-

ervice costs in adjusting costs ervice the actuarial assumptions half by apercentage point and half ayear, respectively. In the The sensitivityr

efers to thecurrent cost service recorded inpersonnelexpense.

I ncrease Assumption ncrease

D (178) (574) 547 128 efinedbenefit obligations 47 25

ers Assumption Decrase (129) 178 670 (45) (23) –

Assumption Increase (40) 30 5 7 – 8

ers Assumption Decrase C urrent cost service 48 (5) (7) (8) – –

-

1 ­ T P E E Acquisition ofnon shareholding. and Theput call options may exercised be as from mid-2018, 31 of respectively. As 2017, December Swisscom holds a 69% shareholding in wisscom (Switzerland) Ltd as well as an intermediate company in Italy. company. reinsurance Group’s in-house via (Switzerland) Ltd, consolidation of cope 5 owners of non-controlling interests are disclosed as financial liabilities. The balance sheet date for all consolidated consolidated all for date sheet balance The liabilities. financial as disclosed are interests non-controlling of owners transactions within insofar equity as control previously existed and continues options Put to granted exist. to the consolidatedof income in net Movements orloss. shareholdings subsidiary of companies as are reported non-controlling income interestsin net orloss are shown in the consolidated income as statement component a idated balance withinsheet separately equity from that to attributable the shareholders of gains and losses are fully eliminated. Non-controlling interests in subsidiary companies in the are consol reported Intercompany balances and transactions, income and shareholdings expenses, and dividends as well as unrealised from the date on which they are acquired and deconsolidated from the date they are disposed of, respectively. voting rights or potential voting rights the of company. Companies acquired and are sold included in consolidation business policies. Control is generally assumed where which over companies all are Subsidiaries Consolidation Accounting policies financial income. EUR quarter 2017. of In 2016, December This sale resulted in again on disposal CHF of In September 2017, Technology SA from 51% to 75%. and PlazaVista of Entertainment AG. Furthermore, in 2017 EURof 45 million (CHF 50 million). In November 2017, In 2017, the Italian subsidiary Fastweb acquired the large corporate-client business Tiscali of for apurchase price management. by owned chain Ltd, which of In order to accelerate the development blockchain of applications, Expenses for businesscombinations netofcashandequivalents acquired million CHF In cashfromNet flows the acquisition and disposalof participations maybe analysed as follows: 5.2 in the consolidated financialstatementsof the fair value the option amounts of put to CHF 231 million (prior year: CHF 233 million), which has recognised been ­S of Sellbranchof as AB well Cinetrade subsidiary as Ltd CT its of with companies Teleclub Kino-Theater AG, Kitag AG Swisscom Ltd is the parent company the of Group and holds principally majority shareholdings direct in 5.1 otal cashflow from thepurchaseof shareholdings, andsale net xpenses for shareholdings accounted for usingtheequitymethod xpenses for deferred consideration arisingonbusinesscombinations roceeds from saleofequity-accounted investees subsidiary companies, joint ventures and associated companies. In addition, material changes in Group structure details out the of The following Group sets of structure section are discussed, together their with on the impact consolidated financialstatements. wisscom has granted Tamedia option, a andput Tamedia has granted

­ S

8 S M G 0

roup structure m aterial changes in scope of consolidation of scope in changes aterial

illion (CHF 86 million) resulting in again on disposal CHF of 41 million which was recognised in other

-controlling interests S ­ wisscom Broadcast Ltd and ­S S ­ wisscom shareholding its sold in AWIN AG for a sales price EUR of wisscom holds 70% the of capital as majority shareholder, the remaining 30% shares being

­ S wisscom shareholding its sold for asales price of in Metroweb S.p.A. ­S wisscom Ltd, Directories the remaining shares being held Tamedia. by

­S wisscom Ltd has the effective ability of controlling their financial and and financial their controlling of ability effective the has Ltd wisscom ­ S wisscom Ltd under other financial liabilities.Note 2.2. See

1 S ­

m wisscom Directories Ltd. Fastweb S.p.A. (Fastweb)wisscom Ltd. Fastweb Directories is S.p.A. held indirectly illion which was recognised in other financial income in the third ­S wisscom acquired the remaining shares minority in Mila Ltd ­S wisscom Ltd or indirectly directly holds the the majority of

­S wisscom increased shareholding its in

S ­ wisscom as well as note disclosures concerning S ­

wisscom Ltd has established ­S wisscom a call option for Tamedia’s 31% ­ S wisscom Re Ltd in Liechtenstein is the

6 2

m illion (CHF 71 million). (106) 2017 (44) (20) (19) (99) ­S 76 wisscom Ltd. The ­S ­S

wisscom Digital

wisscom Block ­ S wisscom 2016 (32) 43 88 (4) (3) (6)

- - , 135 Consolidated financial statements Notes to the consolidated financial statements 136 Consolidated financial statements Notes to the consolidated financial statements

fair values. The difference between the cost of fairacquisition the values. cost Thedifferencebetween fairand the value of the identifiable andassets liabilities time acquisition, of all identifiable assets and liabilities the recognitionthat satisfy criteria are recognised at their ­L as the fair value liabilities the of assets ceded, incurred or assumed as well instruments as equity own ceded. acquisition are recognised costs at fair value. Thepurchase consideration includes the amount cash of paid as well Business combinations are accounted for using the acquisition the of date the As of method. combinations Business the voting rights are held. using Asignificant method. the equity influence is generally assumed20% between of exist wheneverand to 50% Shareholdings over which parent company. subsidiaries is 31 December. There are no material on the restrictions transfer funds of from the subsidiaries to the Equity liabilities Non-current Current liabilities assets Non-current Current assets 31 at December sheet Balance Net income Operating income Operating expense Net revenue Income statement million CHF In investees equity-accounted for indicators key performance Selected year: CHF 29 million) on loans which are considered as investments net in equity-accounted investees. share results net of in equity-accounted investees. Included therein are impairment CHF losses of 28 million (prior In 2017, an aggregate negative amount CHF of 11 million (prior year: CHF 3million) was recognised as the attributable Balance at 31December Foreign currency translation adjustments Share ofothercomprehensive income Share ofnetresults Dividends Disposals Additions Balance at 1January million CHF In 5.3 acquired or assumed is accounted for taking as goodwill after into account any non-controlling interests.

iabilities depending on future based upon events contractual agreements are recognised at fair value. At the

E

quity-accounted investees quity-accounted

­S wisscom exercises significant influencenotdoes but have control, are accounted for

­ b (2,065) 2,120 usiness combination, (485) (926) 2017 2017 193 152 860 942 391 (20) (76) 10 17 55 26 17 2

(2,371) 2,453 1,178 (113) (899) 2016 2016 223 368 202 193 (41) (17) 11 34 82 26 (2) (7)

Billag Ltd BFM BusinessFleetManagement Ltd Ad UnitLtd. Admeira Ltd Switzerland name Registered roup companies Group companies in Switzerland 5.4 4 3 2 1 Worklink AG VirtualAds AG Teleclub Programm AG Teleclub AG Swisscom VenturesLtd Swisscom Ltd Services Swisscom (Switzerland) Ltd Swisscom Finance ITServices Custom SolutionsLtd Swisscom Real Estate Ltd Swisscom HealthAG Swisscom Event &MediaSolutions Ltd Swisscom SolutionsLtd Energy Swisscom eHealthInvest GmbH Swisscom Directories Ltd Swisscom Digital Technology SA Swisscom Broadcast Ltd Swisscom Blockchain Ltd SmartLife Care Ltd siroop Ltd SEC consult (Switzerland) Ltd PlazaVista Entertainment AG MyStrom Ltd Mona LisaCapital AG Mila AG Medgate TechnologiesLtd Medgate Ltd kitag kino-theater Ltd Ltd Action Global IP finnova ltd bankware LtdDatasport CT Cinetrade AG cablex Ltd

wisscom Switzerland, FWB =Fastweb, OTH =Other, (unallocated GHQ=Group costs). Headquarters vestment isaccounted for usingtheequitymethod. Through itsrepresentation ontheBoard ofDirectors ofthecompany, indirectlyarticipation heldby directlyarticipation heldby SCS = In P P influence.

­S G 2

1

2,3 2

2 2

1,3

1 2,3

2

2

2

1

2

2

2 2,3 2 2

2

2,3 2

1 ­S 2

1 1

wisscom Ltd.

2,3 S ­ wisscom Ltd. 1

2 2,3

2

1 2

1

2

2

Ittig L Ittig Berne Z P Ittig Z Basel Wangen Zurich Ittigen Zurich Zurich Ittigen Ittigen Berne Zurich Ittigen Zurich Basel Ittigen Fribourg Berne Gerlafingen Zurich Ittigen Zurich Berne office Registered

Olten Zurich Zu Ittig Z Gene Ittig

enzburg urich urich urich fäffikon

g

en en en en en

va

nd voting right

a S

hare capital of

100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 i n % 52 52 33 40 75 69 83 33 69 70 48 50 47 75 40 9

Currency

CHF CHF CHF CHF CHF CHF CHF CHF CHF CHF CHF CHF CHF CHF CHF CHF CHF CHF CHF CHF CHF CHF CHF CHF CHF CHF CHF CHF CHF CHF CHF CHF CHF CHF CHF CHF

hare capital

­S wisscom canexercise asignificant S in 1,000.0 million 100.0 13.3 25.0 0.4 0.1 0.7 1.0 0.2 0.5 0.2 0.5 5.0 0.1 1.0 0.1 0.3 0.5 1.1 0.6 1.2 2.0 0.1 0.1 0.1 0.1 1.4 2.2 0.1 0.1 0.2 0.1 0.1 0.1 0.1 5.0

Segment GHQ GHQ GHQ OTH OTH OTH OTH OTH OTH OTH OTH OTH OTH OTH OTH OTH OTH OTH SCS SCS SCS SCS SCS SCS SCS SCS SCS SCS SCS SCS SCS SCS SCS SCS SCS SCS

4 137 Consolidated financial statements Notes to the consolidated financial statements 138 Consolidated financial statements Notes to the consolidated financial statements

VirtualAds Services GmbH VirtualAds Services Swisscom TelcoGmbH Mila Europe GmbH Abavent GmbH Germany Belgacom International Carrier Ltd Services Belgium name Registered Group companies in countries other 4 3 2 1 Swisscom CloudLabLtd USA Swisscom Finance ITServices Ltd Pte Singapore Sellbranch AB Sweden Swisscom Finance ITServics SE Austria NGT International B.V. Improve DigitalB.V. Netherlands Initial LimitedPartner SCSp Digital TransformationFund DTF GPS.A.R.L Luxembourg Swisscom Re Ltd Liechtenstein Swisscom ItaliaS.r.l. Flash Fiber S.r.l. Fastweb S.p.A. Italy SoftAtHome SA local.fr SA France

wisscom Switzerland, FWB =Fastweb, OTH =Other, (unallocated GHQ =Group costs). Headquarters vestment isaccounted for usingtheequitymethod. Through itsrepresentation ontheBoard ofDirectors ofthecompany, indirectlyarticipation heldby directlyarticipation heldby SCS = In P P influence.

­S

2

2

2

2

2,3

2 2,3 1

2 2 2

2

2

2 ­S

wisscom Ltd. S ­ 2 wisscom Ltd.

2

2

2

2,3

V C L Amsterdam Milan Delaware C Leipzig Luxembourg Stockholm Milan Bourg-en-Bresse Berlin Vaduz Kempten office Registered

Brussels Singapore Lux Milan

eipzig olombes apelle a/d IJssel ienna

embourg

nd voting right

a S

hare capital of

100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 i n % 10 22 20 83

Currency

USD SGD CHF CHF EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR SEK

hare capital

­S wisscom canexercise asignificant S in million 505.8 41.3 6.5 0.9 0.3 1.5 0.1 0.1 3.3 5.0 – – – – – – – – –

Segment GHQ GHQ GHQ FWB FWB OTH OTH OTH OTH OTH OTH OTH SCS SCS SCS SCS SCS SCS SCS

4 Total income taxexpense recognised inothercomprehensive income Gains andlossesfrom cashflow hedges transferred to income statement Change inthefair value ofavailable-for-sale financialinvestments gains andlossesfromActuarial definedbenefitpensionplans Thereof foreign countries Thereof Switzerland Total income taxexpense recognised inincome statement Deferred taxexpense Current income taxexpense million CHF In ncome taxes expense tax Income 6.1 disclosures ther 6 to CHF 79 million. on taxesincome other in resultantcomprehensive The purposes. for tax effect asserted income in 2016 amounts under other comprehensive income. a result As restructuring of in 2016, these impairment losses can no longer be In the income past, taxes on foreign-currency related impairment losses on Group subsidiaries were recognised Foreign currency translation adjustments offoreign subsidiaries million CHF In follows: In addition, other comprehensive income includes current and income deferred taxes which may analysed be as Adjustments recognised for current taxofpriorperiods for information out sets This which section is already includes,not It disclosed the inof report. the other parts

instance, disclosures regarding income taxes and related parties. O I

2017 2017 171 188 392 349 338 19 20 54 23 (1) (1)

2016 2016 322 238 339 386 305 83 47 81 1 – –

139 Consolidated financial statements Notes to the consolidated financial statements 140 Consolidated financial statements Notes to the consolidated financial statements

Effective income tax rate Total income taxexpense Effect ofincome taxofpriorperiods Effect expenses income ofnon-taxable andnon-deductible Effect of exclusively tax-deductible expenses andincome Effect of recognition andoffset oftaxlosscarry-forwards not recognised inprior years Effect ofnon-recognition oftaxlosscarry-forwards Effect ofusedifferent income tax rates in foreign countries Effect ofusedifferent income tax rates in Switzerland Effect oftax rate changes ondeferred taxes Effect from result ofshareholdings accounted for usingtheequitymethod Reconciliation income to reported taxexpense Income taxexpense at theapplicableincome taxrate Applicable income taxrate lncome before income taxes Income before income taxes foreign countries Income before income taxes inSwitzerland million CHF In quence lower of cantonal rates. tax applicable income-tax rate is 20.4% (prior year: 20.9%). Thedecrease in the applicable income rate tax is aconse weighted average income rate tax calculated on the basis the of Group’s operating subsidiaries in Switzerland. The The applicable income to prepare rate tax which serves the following analysis income of expense is tax the Analysis income taxes of Thereof foreign countries Thereof Switzerland Thereof current income taxliabilities Thereof current income taxassets Current income taxliabilitiesat 31December, net Income taxes paidinforeign countries Income taxes paidinSwitzerland Recognised inothercomprehensive income Recognised inincome statement Current income taxliabilitiesat 1January, net million CHF In Current and assets liabilities income tax

20.4% 20.0% 1,960 1,724 (279) 2017 2017 400 107 203 236 213 369 392 198 (14) (37) (12) (10) (10) 20 11 16 20 2 2 – 5

19.4% 20.9% 1,990 1,817 (324) 2016 2016 416 305 125 386 173 105 125 107 (26) (12) (18) (8) (2) (4) 5 – 6 6 5 1 2

-

Accounting policies CHF Total taxassets(taxliabilities) Other Tax losscarry-forwards Defined benefitobligations Provisions Intangible assets Property, plant andequipment million CHF In and assets liabilities income tax Deferred are netted whenever they relateare netted to the same taxing and authority taxable entity. theif distribution be is profits to of made in the foreseeablefuture. Current tax and deferred assets and liabilities against future taxable income. Income liabilities tax on undistributedof Group profits companies are only recognised assets are tax Deferred periods. only recognised as that assets to is the it extent probable that they offset can be in the consolidated financialstatementsvalue tax for purposes its andwhichand willas reported reverse futurein differences. differencesTemporary between arise the carrying fromamount differences ofa balance position sheet computed using the balance liability sheet whereby method taxes deferred are recognised in principle on all temporary income, such as taxes on real and estate on capital are recorded as other operating taxes are Deferred expenses. Income taxes encompass all current and taxes deferred which are based on income. Taxes which are based on not ecember 2017. Temporary differencesof subsidiaries equity-accountedand whichon investees, no incomedeferred taxes are recognised as 31 of 2017, December amounted to CHF as 31 of liabilities tax Deferred CHF of 6million (prior year: none) were recognised on the undistributed earnings subsidiaries of Thereof foreign countries Thereof Switzerland Total unrecognised taxlosscarry-forwards No expiration Expiring within2to 7years Expiring within1year million CHF In Tax loss carry-forwards for which assets were tax no deferred recognised, expire as follows: Thereof foreign countries Thereof Switzerland Thereof deferred taxliabilities Thereof deferred taxassets

1,390

D

million). million).

A ssets 565 186 153 102 34 90 –

Liabilities (1,093) (110) (309) (623) (51) – –

31.12.2017 amount (528) (588) (725) (309) (589) 197 186 Net 60 43 90 51

Assets

138 118 359 729 1,117 78 36 31.12.2017 –

164 125 114 million (prior year: (prior million 50 39 Liabilities – (1,069)

(326) (568)

(99) (76) – –

31.12.2016 31.12.2016 amount (340) (435) (621) (326) (532) 281 118 359 113 Net 95 39 41 72 27 86 2 –

141 Consolidated financial statements Notes to the consolidated financial statements 142 Consolidated financial statements Notes to the consolidated financial statements

­C resolutions concerning dividend distributions the and of members the of Board the election Directors. of meetings shareholders of which are taken the by absolute validly majority of This votes. cast relates primarily to the majority shareholder, the Swiss Confederation has the to power control the decisions the of annual general upon the voted by Swissbe Parliament and would also to subject a facultative be referendum Swiss by As voters. theof Confederation’s holding amajority shareholding below would require achange in law which would to need is obligated to hold thea majority of share capital and voting rights of supplies telecommunication to and from the Confederation in Confederation.The addition, services procures services Pursuant to the Swiss Federal Telecommunication Enterprisesthe Swiss (TEA), Confederation”) Act Confederation (“the shareholderMajority parties elated shareholder investees Majority and equity-accounted 6.2 individuals in key positions are disclosed in 4.2. Note Transactions between Occupational pensionand schemes compensationpayable to individuals in key positions Total 2016/Balance at 31December 2016 Equity-accounted investees Confederation yearFinancial 2016 million CHF In Total 2017/Balance at 31December 2017 Equity-accounted investees Confederation yearFinancial 2017 million CHF In balances and Transactions 5.3. Note in to/by provided equity-accountedServices investees are based upon market prices. Such participations are listed investees Equity-accounted terms. unrelated third In addition, parties. financing trans transactions are on the basis conducted normal of customer/supplier relationships and on conditions applicable to ­c comprises the various ministries and administrative the Confederation of and bodies the other companies

ontrolled the by Confederation (primarily the Swiss Swiss Post, Federal Railways, RUAG as well as Skyguide). All onfederation, as majority shareholder, continued to hold 51% the of issued shares of

R

S ­

wisscom and the various pension funds are detailed in 4.3. Note Compensation paid to

­a ctions arections entered into the with Swiss on normal Post commercial Income Income 269 324 247 233 36 77

­S wisscom. 31 On December 2017, the E E xpense xpense 127 277 146 131 215 88

­S wisscom Ltd. Any reduction R R eceivables eceivables 175 164 289 269 11 20

­ S wisscom L L iabilities iabilities 239 233 166 163 6 3

­ comprehensive ­d whereas the income statement and the cashstatement flow are translated at averageexchange rates. Translation in adifferentfunctional currency are translated at exchangethe rates prevailing on the balance date sheet ­d and items non-monetary are translated using the exchange rate on the date the of transaction. Translation datesheet are translated into the functional currency at the exchange rate prevailing at the balance date sheet currency using the exchange rates prevailing at the dates items the of as transactions. the of Monetary balance Foreign-currency transactions which are denominated not in the functional currency are translated into the functional policies accounting ther Foreign translation currency 6.3 disclosure information. ­q ­c obligationperformance in relation to the relative stand-alone selling Furthermore, prices. the standard new to IFRS 15 multi-component explicitly rules that contracts, the transaction price is allocated to be to each distinct risksof the and of transfer but opportunities control of to the over the customers. and goods regards With services is recognised to be as revenue. regards As determining the date is it orno period, longer aquestion the of transfer from received to customers be as considerationexpected for the to transfer the customer and goods of services whichmodel is applied to be customers. with to In all accordance contracts IFRS 15, with the amount which is In contrast to the provisions currently in force, the newstandard provides for asingle, principles-based, five-step Customers with 15IFRS Revenue Contracts from the conversion as 1January of 2018. recording losses impacting of income. the newprovisions and also in the cases, provisions new certain regarding value impairment will lead to the earlier impairments and the recording hedging of relationships. Inchanges cases, certain in classificationwill resultfrom The Standard includes newrules to classify and measure financial assets and liabilities, the valuerecognitionof Instruments Financial 9 IFRS indescribed the following paragraphs. ­S 1 January on or after 2018effect and forwhich Swisscom will financial reviewits of for new those thereporting and standardsimpact amended which take Various Various 16 IFRS 15 IFRS 9 IFRS 2 Amendements to IFRS Amendements to IAS 28 23 IFRIC 22 IFRIC Standard The following Standards and Interpretations published up to the end 2017 of are mandatory for accounting periods InternationalAmended Financial Standards Reporting mandatory application yet and is whose Interpretations, not 1 USD 1 EUR Currency Significant translation foreign-currency rates beginning 1January on or after 2018:

ontains new rules regarding fulfilment of the costs and acquiring as well a contract as guidelines as to the wisscom anticipates nomaterial onconsolidated impact financialexcept for the reporting amendments ifferences arisingfrom the translation of net assets and statementsincome are recorded otherin ifferences are recognised in Assets andthe statement.income liabilities of subsidiaries and associates reporting uestion when areuestion such capitalised. to costs be In addition, the standard new requires new, more detailed note

O

i ncome. ncome.

ong-term investments inassociates andjoint ventures ­ Uncer F Amendemen Amendemen Leases R F Na L Classifica oreign currency transactions and advance consideration inancial instruments evenue from contracts withcustomers andrelatedIFRS 15 clarifications to me

tainty over income taxtreatments

tion andmeasurement ofshare-based payment transactions ts to IFRS 2015–2017 ts to IFRS 2014–2016 ts to IFRS S ­ wisscom expects apre-tax decrease CHF some of in 20wisscom equity million expects from

31.12.2017 1.170 0.976 S ­ wisscom did make not voluntary early application. At present,

31.12.2016

1.019 1.074

C 31.12.2015 losing rate losing 0.995 1.084

0.985 1.113 2017

1 Januar 1 Januar 1 Januar 1 Januar 1 Januar 1 Januar 1 Januar 1 Januar 1 Januar A E verage rate ffective from ffective 0.990 1.090 y 2018 y 2018 y 2018 y 2019 y 2019 y 2019 y 2018 y 2018 y 2019 2016

143 Consolidated financial statements Notes to the consolidated financial statements 144 Consolidated financial statements Notes to the consolidated financial statements arrangements in financial statements. The differentiation between finance and operating lease arrangements arrangements lease operating and finance between differentiation The in financialstatements. arrangements theFor from lessee, IFRS 16 1 January (effective 2019) provides for a comprehensive model for dealing leasewith 16IFRS Leases mix distribution of channels as well as future movements in volumes, prices and costs. CHF financial For acquisition costs. performance contract year and contract 2018, conversion. Thisfrom flows the impact initial recognitionof contractual assets and liabilities as well as accrued Swisscom anticipates apre-tax increase million CHF some of in 400 equity as 1January of 2018 resulting from ary fulfilledbeen of 1 as January 2018.The resultantof conversion impact will be recognised equity of 1 as in Janu applying IFRS 15 revenue net will decrease around by CHF thiswith transitional method, Swisscom to hasapplyapproach theretroactive for modified elected the initial of adoptionIFRS 15. In accordance > > IFRS 15 will have the following material on the impact consolidated financialstatementsof required until 17 now under IAS is thus dropped in future for the shall Thelessee lessee. recognise leasing obligations the previous provisions 17. under IAS lease arrangements. In this regard, the accounting foreseen under model IFRS 16 materially not does differfrom financialasset. For the lessorpurposes, reporting shall continue to differentiate between finance operating and balancein its for sheet all future lease payments made to be as well as recognising aright to use the underlying 16 can only made be once adetailed analysis is completed. rial on the impact consolidated financialstatements.However, a reliableestimate of of the applyingimpact IFRS

contract. contract. routersof and set-top boxes costs) performance (contract are capitalised and over expensed the term the of C revenue will recognised be earlier. Thetotal revenue remains unchanged over the duration the of contract. the revenue will reallocated be over the pre-delivered components (mobile handset) the with result that the R

2018, thus on the having statement.Theincome prior year’s no effect amountswill be restated. not

evenues: evenues: ontract costs:ontract Handset subsidies and commissions paid to dealers acquisition (contract costs) as well as costs 4 0

m illion. IFRS How In the case of multi-component contracts (mobile-phone subsidised a with In multi-component the caseof contract contracts mobile handset),

1 5 will future impact results will depend on future business the models and products, S ­ wisscom must which apply onlyhave IFRS 15 for retroactively those contracts not S ­ wisscom expects that the comprehensivewisscom expects modificationswill have a mate

1 0

m illion will and costs increase direct around by ­ S wisscom estimates that from ­ S wisscom: - -

Grundlage für unser Prüfungsurteil zu dienen. zudienen. unser Prüfungsurteil für Grundlage umals sind, geeignet und ausreichend Prüfungsnachweise erlangten von uns die dass sindderAuffassung, Wir Anforderungen erfüllt. wirunsere und haben (IESBA Code), dem CodeofEthicsforProfessi u Vorschriften gesetzlichen denschweizerischen mit einstimmung Über- in unabhängig demKonzern sindvon Wir beschrieben. weitergehend Berichts unseres Konzernrechnung" diesen Vorschriften undStandard Vorschriften diesen (PS)durch Prüfungsstandards den Schweizer (ISA)sowie Auditing on Standards Gesetz, denInternational mitdemschweizerischen Übereinstimmung in Prüfung unsere haben Wir Grundlagefür dasPrüfungsurteil und (IFRS) Standards Reporting Übereins in Jahr endende dasdann Cashflows für und Ertragslage dessen sowie 2017 Dezember 31. zum Konzerns des Finanzlage und Vermögens- der Bild entsprechendes Verhältnissen tatsächlichen den ein bis147) 96 (Seiten dieKonzernrechnung vermittelt Beurteilung Nach unserer Rechnungslegungsgrun endende Jahr sowie dem Anhang der dem Anhang sowie Jahr endende konsoli der und Eigenkapitalveränderungsrechnung konsolidierten der Gesamtergebnisrechnung, konsolidierten der 2017, zum 31.Dezember Bilanz aus derkonsolidierten der Konzernrechnung die Wir haben Prüfungsurteil Bericht zurPrüfungderKonzernrechnung AG, Ittigen(Bern) Swisscom An dieGeneralversammlung der Bericht derRevisionsstelle

Key AuditKey Matters financial positionofthe 2017,andits Groupasat31December financial 94 (pages statements financial theconsolidated In ouropinion totheconsolidat notes and ended, then year flows forthe statementofcash consolidated and equity in ofchanges statement consolidated income, Provisions andcontingent liabilities forregulatory and compet goodwill Fastweb Capitalization of technica Revenue recognition for Responsibilities Auditor’s responsib Our Standards. Auditing (ISAs)andSwiss onAuditing with Standards our auditinaccordance Swiss law,We conductedInternational Opinion Basis for with law. Swiss andcomply(IFRS) Standards Reporting Financial with International accordance in ended year then flows forthe cash consolidated ofcomprehensive statement theconsolidated 2017, at 31December as sheet balance consolidated comprise the theconsolidat haveaudited We Opinion Report ontheAuditofConsolidatedFinancialStatements (Berne) Ittigen Ltd, Swisscom of Meeting General the To Statutory Auditor’s Report theseprovide on aopinion separate matters. we not do and thereon, opinion our in forming whole, and asa statements financial oftheconsolidated audit matterswere addresse These current period. ofthe statements financial consolidated the audit of our were in ofmost significance matters that,inourprofessionaljudgment, Keyaudit mattersarethose Pension fund obligations comPlan opinion. forour abasis toprovide appropriate and issufficient obtained wehave theauditevidence that believe We with requirements. these accordance in responsibilities ethical aswell IESBACodeprofession, asthe of Ethics for Professiona oftheSwissof audit with Swiss therequirements theprovisions and law ance inaccord theGroup of independent

Besonders wichtige Prüfungssachverhalte Prüfungssachverhalte Besonders wichtige verhalten ab. hierzu Prüfungsurteils unseres Bildung der undbei Ganzes als Konzernrechnung der Prüfung mitunserer wurden imZusammenhang verhalte Sach- waren. Diese Zeitraums aktuellen des Konzernrechnung der Prüfung fürunsere sen ambedeutsamsten Sachverhalt solche sind wichtige Prüfungssachverhalte Besonders Personalvorsorgeverpflichtung comPlan regulatorische für Eventualverbindlichkeiten und Rückstellungen Goodwill Fastweb Aktivierungvon technischenAnlagen und Software Umsatzerfassung

dsätze – geprüft. –geprüft. dsätze l facilities and software l facilitiesandsoftware the Audit of the Consolidated Financial Statementssect oftheConsolidated theAudit onal Accountants des International Ethics Standards Board for Accountants forAccountants Board Standards Ethics desInternational Accountants onal ed financial statements ofSwissc statements ed financial entspricht schweizerischendem Gesetz. s sindimAbsch ed financial statements,incl ed financial ilities under those provisions and standards are further described in the in the described arefurther standards and thoseprovisions under ilities Swisscom AG und ihrer Tochter AGundihrer Swisscom berücksichtigt, und wir und berücksichtigt, geben ke Konzernrechnung einschliesslich einer Zusammenfassung bedeutsamer bedeutsamer Zusammenfassung einer einschliesslich Konzernrechnung sonstigen beruflichen Verhal beruflichen sonstigen nitt "Verantwort

uding a summary of significant accounting policies. policies. accounting ofsignificant asummary uding to 144) give atrueandfairviewof theconsolidated to 144)give consolidated financial performance and its and performance financial consolidated lichkeiten der Revisionsst lichkeiten l Accountants, and we have fulfilled our other our fulfilled wehave and l Accountants, nd den Anforderungen des Anforderungen nd den om Ltd and its subsidiaries (the Group), which (theGroup), itssubsidiaries om Ltdand dierten Geldflussrechnung für das dann dann fürdas Geldflussrechnung dierten tenspflichten in Übereinstimmung mit diesen mitdiesen inÜbereinstimmung tenspflichten timmung mit den International Financial Financial mitdenInternational timmung geführt. UnsereVerant ition-law proceedings in gesondertes Prüfungsurteil zu diesen Sach- zudiesen Prüfungsurteil in gesondertes gesellschaften (derK gesellschaften e, die nach pflichtgemässenunserem Ermes- und wettbewerbsrechtliche Verfahren ion of ourreport.Weare ion wortlichkeitennach onzern) – bestehend –bestehend onzern) d in the context ofour d inthecontext elle für die Prüfung der Prüfung elle fürdie Berufsstands sowie Berufsstands 1 1 145 Consolidated financial statements Statutory Auditor’s Report 146 Consolidated financial statements Statutory Auditor’s Report

Grundlage für unser Prüfungsurteil zu dienen. zudienen. unser Prüfungsurteil für Grundlage umals sind, geeignet und ausreichend Prüfungsnachweise erlangten von uns die dass sindderAuffassung, Wir Anforderungen erfüllt. wirunsere und haben (IESBA Code), dem CodeofEthicsforProfessi u Vorschriften gesetzlichen denschweizerischen mit einstimmung Über- in unabhängig demKonzern sindvon Wir beschrieben. weitergehend Berichts unseres Konzernrechnung" diesen Vorschriften undStandard Vorschriften diesen (PS)durch Prüfungsstandards den Schweizer (ISA)sowie Auditing on Standards Gesetz, denInternational mitdemschweizerischen Übereinstimmung in Prüfung unsere haben Wir Grundlagefür dasPrüfungsurteil und (IFRS) Standards Reporting Übereins in Jahr endende dasdann Cashflows für und Ertragslage dessen sowie 2017 Dezember 31. zum Konzerns des Finanzlage und Vermögens- der Bild entsprechendes Verhältnissen tatsächlichen den ein bis147) 96 (Seiten dieKonzernrechnung vermittelt Beurteilung Nach unserer Rechnungslegungsgrun endende Jahr sowie dem Anhang der dem Anhang sowie Jahr endende konsoli der und Eigenkapitalveränderungsrechnung konsolidierten der Gesamtergebnisrechnung, konsolidierten der 2017, zum 31.Dezember Bilanz aus derkonsolidierten der Konzernrechnung die Wir haben Prüfungsurteil Bericht zurPrüfungderKonzernrechnung AG, Ittigen(Bern) Swisscom An dieGeneralversammlung der Bericht derRevisionsstelle Key AuditKey Matter Notes to the consolidated financ Notes totheconsolidated — For further recognitionrefertothefol information on revenue dependent onITsystems. arehighly ofinvoicing accuracy the and period intheappropriate elements contractual identified ofthe recognition correct The separately. recorded transactions elements often thatvarious contain are transactions. The contracts these underlying ofIT-based volume a high by characterized Swisscom’s businessis telecommunication AuditKey Matter software IFRScriteria. fulfilthe and facilities technical self-developed and acquired is importantthatthecosts ofSwisscom’s Inthisregard,it business. development the strategicrolein a and software plays facilities technical innew sector,investment telecommunication inthe change thetechnological Given Capitalization of technica Revenue recognition

Besonders wichtige Prüfungssachverhalte Prüfungssachverhalte Besonders wichtige Aktivierungvon technischenAnlagen und Software Umsatzerfassung verhalten ab. hierzu Prüfungsurteils unseres Bildung der undbei Ganzes als Konzernrechnung der Prüfung mitunserer wurden imZusammenhang verhalte Sach- waren. Diese Zeitraums aktuellen des Konzernrechnung der Prüfung fürunsere sen ambedeutsamsten Sachverhalt solche sind wichtige Prüfungssachverhalte Besonders Personalvorsorgeverpflichtung comPlan regulatorische für Eventualverbindlichkeiten und Rückstellungen Goodwill Fastweb

dsätze – geprüft. –geprüft. dsätze capitalized in relation to relation in capitalized l facilities and software l facilitiesandsoftware onal Accountants des International Ethics Standards Board for Accountants forAccountants Board Standards Ethics desInternational Accountants onal entspricht schweizerischendem Gesetz. s sindimAbsch Swisscom AG und ihrer Tochter AGundihrer Swisscom berücksichtigt, und wir und berücksichtigt, geben ke Konzernrechnung einschliesslich einer Zusammenfassung bedeutsamer bedeutsamer Zusammenfassung einer einschliesslich Konzernrechnung sonstigen beruflichen Verhal beruflichen sonstigen ial statements, No.1.1–Segm ial statements, nitt "Verantwort Our any variances. analyzed and expenses personnel actual basedon bySwisscom used rates hourly the basis, , onasample recalculated We employees. by Swisscom workrendered hours of of identification proper and amount the analyzed weprojects, new ofmaterial development tothe relation Furthermore, in in time. point andtookplace at theappropriate met thecriteria facilit relating toasampleoftechnical ofcosts whether thecapitalization weassessed A effectively. operated with theseguidelines thecompliance controls over whetherkey the with and IFRS comply guidelines whether capitalization We tested Swisscom’s assessed deviations from our expectations. expectations. fromour deviations assessed we critically and category, andproduct segment most keyimportant performance indicators per revenue tothe trendsrelated we analyzed reports, on internal Based procedures. we analytical performed In addition, systems. IT byvarious recording and service performance specialists, toreflectthehi relevant systems,with t controls ofaccounting- IT of effectiveness the operating sample basis, their operati ona and tested, recognition torevenue controls relating key identified We ledger. general inthe recorded accurately and arecompletely whether transactions contract tothereceiptofpayment andassessed ofa theconclusion from theprocess analyzed We response Our be recognized for the individual components. components. for theindividual be recognized intime point the determined whether the weassessed products, With respecttosignificantnewlyintroduced mong others, using astatist using mong others, lowing: r esponse esponse lichkeiten der Revisionsst lichkeiten nd den Anforderungen des Anforderungen nd den dierten Geldflussrechnung für das dann dann fürdas Geldflussrechnung dierten tenspflichten in Übereinstimmung mit diesen mitdiesen inÜbereinstimmung tenspflichten timmung mit den International Financial Financial mitdenInternational timmung geführt. UnsereVerant in gesondertes Prüfungsurteil zu diesen Sach- zudiesen Prüfungsurteil in gesondertes gesellschaften (derK gesellschaften ent information ent information e, die nach pflichtgemässenunserem Ermes- und wettbewerbsrechtliche Verfahren

he assistance of our IT IT ofour he assistance Group appropriately appropriately Group ng effectiveness. We tested We effectiveness. ng gh degree ofintegration degree gh and amount of revenue to ofrevenue amount and ical sampling procedure procedure sampling ical wortlichkeitennach onzern) – bestehend –bestehend onzern) elle für die Prüfung der Prüfung elle fürdie Berufsstands sowie Berufsstands ies andsoftware 1 2

For further information on the Fastweb goodwill refer to the following: refertothe goodwill Fastweb the on For furtherinformation Notes to the consolidated financ Notes totheconsolidated — Grundlage für unser Prüfungsurteil zu dienen. zudienen. unser Prüfungsurteil für Grundlage umals sind, geeignet und ausreichend Prüfungsnachweise erlangten von uns die dass sindderAuffassung, Wir Anforderungen erfüllt. wirunsere und haben (IESBA Code), dem CodeofEthicsforProfessi u Vorschriften gesetzlichen denschweizerischen mit einstimmung Über- in unabhängig demKonzern sindvon Wir beschrieben. weitergehend Berichts unseres Konzernrechnung" diesen Vorschriften undStandard Vorschriften diesen (PS)durch Prüfungsstandards den Schweizer (ISA)sowie Auditing on Standards Gesetz, denInternational mitdemschweizerischen Übereinstimmung in Prüfung unsere haben Wir Grundlagefür dasPrüfungsurteil Reporting Standards (IFRS) und und (IFRS) Standards Reporting Übereins in Jahr endende dasdann Cashflows für und Ertragslage dessen sowie 2017 Dezember 31. zum Konzerns des Finanzlage und Vermögens- der Bild entsprechendes Verhältnissen tatsächlichen den ein bis147) 96 (Seiten dieKonzernrechnung vermittelt Beurteilung Nach unserer Rechnungslegungsgrun endende Jahr sowie dem Anhang der dem Anhang sowie Jahr endende konsoli der und Eigenkapitalveränderungsrechnung konsolidierten der Gesamtergebnisrechnung, konsolidierten der 2017, zum 31.Dezember Bilanz aus derkonsolidierten der Konzernrechnung die Wir haben Prüfungsurteil Bericht zurPrüfungderKonzernrechnung AG, Ittigen(Bern) Swisscom An dieGeneralversammlung der Bericht derRevisionsstelle

rate (WACC) used and the expected growth. growth. theexpected usedand rate (WACC) theexpected cashflows,regarding future thediscount judgements by management’s affected significantly on test impairment annual The 578 the CHF to to related 529million). CHF (2016: million amounted goodwill Fastweb the segment 2017 operating December 31 At AuditKey Matter goodwill Fastweb financ Notes totheconsolidated — financ Notes totheconsolidated — faciliti oftechnical For furtherinformationoncapitalization

Besonders wichtige Prüfungssachverhalte Prüfungssachverhalte Besonders wichtige verhalten ab. hierzu Prüfungsurteils unseres Bildung der undbei Ganzes als Konzernrechnung der Prüfung mitunserer wurden imZusammenhang verhalte Sach- waren. Diese Zeitraums aktuellen des Konzernrechnung der Prüfung fürunsere sen ambedeutsamsten Sachverhalt solche sind wichtige Prüfungssachverhalte Besonders Personalvorsorgeverpflichtung comPlan regulatorische für Eventualverbindlichkeiten und Rückstellungen Goodwill Fastweb Aktivierungvon technischenAnlagen und Software Umsatzerfassung

dsätze – geprüft. –geprüft. dsätze the Fastweb goodwill is theFastweb onal Accountants des International Ethics Standards Board for Accountants forAccountants Board Standards Ethics desInternational Accountants onal entspricht schweizerischendem Gesetz. s sindimAbsch Swisscom AG und ihrer Tochter AGundihrer Swisscom berücksichtigt, und wir und berücksichtigt, geben ke ial statements, No.3.3–Good ial statements,

Konzernrechnung einschliesslich einer Zusammenfassung bedeutsamer bedeutsamer Zusammenfassung einer einschliesslich Konzernrechnung sonstigen beruflichen Verhal beruflichen sonstigen ial statements, No.3.4–Intangible assets ial statements, equipment and plant No.3.2–Property, ial statements, nitt "Verantwort Our response response Our Fastweb goodwill impairment test, the calculation was test,thecalculation impairment goodwill Fastweb forthe was used method valuation appropriate whether an we assessed ouraudit, In thecourseof deviations. any assessed andcritically amounts thoseto and capitalized theexpectedfor significantprojects coststobe we also compared budgets monthly thebasisof On impairment test. the in therisksembedded reflect adequately whether thedisclos assessed inrelation disclosures of appropriateness the alsoconsidered We adequacy. methodological with respect to mathematical accuracyand us model We evaluatedthe specialists,with and compared thethem peer group. fromourvaluation rate,withassistance discount p theindividual analyzed We actual amounts. forecasted and of comparison multi-year a plansby of pastbusiness theaccuracy assessed weretrospectively In addition, management. as Group well as statements fromlocal written based on as rates, growth the expected assumptions related toflows cash the underlying and dataand theinput we challenged In particular, appropriate. wereassumptions management’s and coherent es and software refer to the following: tothefollowing: refer andsoftware es lichkeiten der Revisionsst lichkeiten nd den Anforderungen des Anforderungen nd den dierten Geldflussrechnung für das dann dann fürdas Geldflussrechnung dierten tenspflichten in Übereinstimmung mit diesen mitdiesen inÜbereinstimmung tenspflichten timmung mit den International Financial Financial mitdenInternational timmung geführt. UnsereVerant will in gesondertes Prüfungsurteil zu diesen Sach- zudiesen Prüfungsurteil in gesondertes gesellschaften (derK gesellschaften e, die nach pflichtgemässenunserem Ermes- und wettbewerbsrechtliche Verfahren totheimpairmenttestand be expensed with theactual be expensed ed fortheimpairmenttest arameters underlying the arameters underlying ed sensitivity analyses analyses ed sensitivity wortlichkeitennach onzern) – bestehend –bestehend onzern) elle für die Prüfung der Prüfung elle fürdie Berufsstands sowie Berufsstands 1 3

147 Consolidated financial statements Statutory Auditor’s Report 148 Consolidated financial statements Statutory Auditor’s Report regul Swisscomprovides

Grundlage für unser Prüfungsurteil zu dienen. zudienen. unser Prüfungsurteil für Grundlage umals sind, geeignet und ausreichend Prüfungsnachweise erlangten von uns die dass sindderAuffassung, Wir Anforderungen erfüllt. wirunsere und haben (IESBA Code), dem CodeofEthicsforProfessi u Vorschriften gesetzlichen denschweizerischen mit einstimmung Über- in unabhängig demKonzern sindvon Wir beschrieben. weitergehend Berichts unseres Konzernrechnung" diesen Vorschriften undStandard Vorschriften diesen (PS)durch Prüfungsstandards den Schweizer (ISA)sowie Auditing on Standards Gesetz, denInternational mitdemschweizerischen Übereinstimmung in Prüfung unsere haben Wir Grundlagefür dasPrüfungsurteil Reporting Standards (IFRS) und und (IFRS) Standards Reporting Übereins in Jahr endende dasdann Cashflows für und Ertragslage dessen sowie 2017 Dezember 31. zum Konzerns des Finanzlage und Vermögens- der Bild entsprechendes Verhältnissen tatsächlichen den ein bis147) 96 (Seiten dieKonzernrechnung vermittelt Beurteilung Nach unserer Rechnungslegungsgrun endende Jahr sowie dem Anhang der dem Anhang sowie Jahr endende konsoli der und Eigenkapitalveränderungsrechnung konsolidierten der Gesamtergebnisrechnung, konsolidierten der 2017, zum 31.Dezember Bilanz aus derkonsolidierten der Konzernrechnung die Wir haben Prüfungsurteil Bericht zurPrüfungderKonzernrechnung AG, Ittigen(Bern) Swisscom An dieGeneralversammlung der Bericht derRevisionsstelle

requires management to apply significant judgment. significant requires managementtoapply proceedings such to related liabilities contingent of or disclosure ofprovisions recognition The abuse, civil law market claims may establishing also be brought verdict against Swisscom. final a of case In against Swisscom. Commission proceedings various Competition conducting is Federal (WEKO) the addition, In proceedings. outcome ofregulatory services isthe ofsuch pricing The providers. service other telecommunication Notes to the consolidated financ Notes totheconsolidated — refer tothefollowing: provi on For furtherinformation AuditKey Matter Provisions andcontingent liabilities forregulatory and compet

Besonders wichtige Prüfungssachverhalte Prüfungssachverhalte Besonders wichtige verhalten ab. hierzu Prüfungsurteils unseres Bildung der undbei Ganzes als Konzernrechnung der Prüfung mitunserer wurden imZusammenhang verhalte Sach- waren. Diese Zeitraums aktuellen des Konzernrechnung der Prüfung fürunsere sen ambedeutsamsten Sachverhalt solche sind wichtige Prüfungssachverhalte Besonders Personalvorsorgeverpflichtung comPlan regulatorische für Eventualverbindlichkeiten und Rückstellungen Goodwill Fastweb Aktivierungvon technischenAnlagen und Software Umsatzerfassung assets

dsätze – geprüft. –geprüft. dsätze ated access services to access services ated onal Accountants des International Ethics Standards Board for Accountants forAccountants Board Standards Ethics desInternational Accountants onal sions and contingent liabilities for regulatory and competition-law proceedings proceedings competition-law and forregulatory liabilities and contingent sions entspricht schweizerischendem Gesetz. s sindimAbsch Swisscom AG und ihrer Tochter AGundihrer Swisscom berücksichtigt, und wir und berücksichtigt, geben ke

Konzernrechnung einschliesslich einer Zusammenfassung bedeutsamer bedeutsamer Zusammenfassung einer einschliesslich Konzernrechnung sonstigen beruflichen Verhal beruflichen sonstigen ial statements, No.3.5–Prov ial statements, nitt "Verantwort Our response response Our statements of Swisscom’s ex written critically assessed and obtained additionally We liabilities. ofcontingent orthedisclosure such provisions of amount corresponding andthe provisions related intimeforrecognizing thepoint proceedings, legal from outflows ofcash resulting theprobability assessed we specialists, legal theassistanceofour With byprepared Group. Swisscom proceedings of thelegal thesummaries challenged we and discussed and departments, relevant with the were addressed proceedings legal where meetings thequarterly in we participated Specifically, law environment. competition- and totheregulatory related proceedings legal andrecognize assess toidentify, implemented controls effectiveness ofthe We testedtheoperating statements appropriately therisks involved. reflect financial consolidated notes tothe inthe liabilities oncontingent whether thedisclosures assessed We adequate. were assumptions whether theunderlying and was correctly data intothecalculations and external fed whether theinternal by assessing liabilities contingent and oftheprovisions We furthermoretestedthe amount proceedings. significant lichkeiten der Revisionsst lichkeiten nd den Anforderungen des Anforderungen nd den dierten Geldflussrechnung für das dann dann fürdas Geldflussrechnung dierten tenspflichten in Übereinstimmung mit diesen mitdiesen inÜbereinstimmung tenspflichten timmung mit den International Financial Financial mitdenInternational timmung geführt. UnsereVerant isions, contingent liabilities and contingent and contingent liabilities contingent isions, ition-law proceedings in gesondertes Prüfungsurteil zu diesen Sach- zudiesen Prüfungsurteil in gesondertes gesellschaften (derK gesellschaften e, die nach pflichtgemässenunserem Ermes- und wettbewerbsrechtliche Verfahren ternal legalcounselfor wortlichkeitennach onzern) – bestehend –bestehend onzern) elle für die Prüfung der Prüfung elle fürdie Berufsstands sowie Berufsstands 1 4

Grundlage für unser Prüfungsurteil zu dienen. zudienen. unser Prüfungsurteil für Grundlage umals sind, geeignet und ausreichend Prüfungsnachweise erlangten von uns die dass sindderAuffassung, Wir Anforderungen erfüllt. wirunsere und haben (IESBA Code), dem CodeofEthicsforProfessi u Vorschriften gesetzlichen denschweizerischen mit einstimmung Über- in unabhängig demKonzern sindvon Wir beschrieben. weitergehend Berichts unseres Konzernrechnung" diesen Vorschriften undStandard Vorschriften diesen (PS)durch Prüfungsstandards den Schweizer (ISA)sowie Auditing on Standards Gesetz, denInternational mitdemschweizerischen Übereinstimmung in Prüfung unsere haben Wir Grundlagefür dasPrüfungsurteil Reporting Standards (IFRS) und und (IFRS) Standards Reporting Übereins in Jahr endende dasdann Cashflows für und Ertragslage dessen sowie 2017 Dezember 31. zum Konzerns des Finanzlage und Vermögens- der Bild entsprechendes Verhältnissen tatsächlichen den ein bis147) 96 (Seiten dieKonzernrechnung vermittelt Beurteilung Nach unserer Rechnungslegungsgrun endende Jahr sowie dem Anhang der dem Anhang sowie Jahr endende konsoli der und Eigenkapitalveränderungsrechnung konsolidierten der Gesamtergebnisrechnung, konsolidierten der 2017, zum 31.Dezember Bilanz aus derkonsolidierten der Konzernrechnung die Wir haben Prüfungsurteil Bericht zurPrüfungderKonzernrechnung AG, Ittigen(Bern) Swisscom An dieGeneralversammlung der Bericht derRevisionsstelle

Notes to the consolidated financ Notes totheconsolidated — toco related obligation pension the on furtherinformation For related tocomPlan. obligat pension the of amount onthe impact significant thathasa judgement involve which assumptions, these determines Management situation. financial plan’s pension measures implementedin thepasttoimprove to relating experience otherthings, on,among based oftheemployer calculation The andemployee. employer IAS 19deficitbetween oftheremaining sharing of risk principle the include with also Swiss assumptions regulations,Swisscom’s rate.Inaccordance oftheconversion development theexpected and longevity accounts, savings ratesonoldage increases,theinterest pension and ofsalary rates expected rate, the discount assumptionsare assumptions. Themostsignificant based onanumberoffinanc resulting obligation benefit Thedefined ‘comPlan’. plan pension the independent by disability deathand ofoldage, therisks against Swisscom’s employees inS employees inSwitzerland and Italy.of majority The forits plans pension several Swisscom maintains AuditKey Matter Pension fund obligations comPlan

Besonders wichtige Prüfungssachverhalte Prüfungssachverhalte Besonders wichtige verhalten ab. hierzu Prüfungsurteils unseres Bildung der undbei Ganzes als Konzernrechnung der Prüfung mitunserer wurden imZusammenhang verhalte Sach- waren. Diese Zeitraums aktuellen des Konzernrechnung der Prüfung fürunsere sen ambedeutsamsten Sachverhalt solche sind wichtige Prüfungssachverhalte Besonders Personalvorsorgeverpflichtung comPlan regulatorische für Eventualverbindlichkeiten und Rückstellungen Goodwill Fastweb Aktivierungvon technischenAnlagen und Software Umsatzerfassung

dsätze – geprüft. –geprüft. dsätze fromthisplaniscalculated ’s share of the deficit is ’s shareofthedeficit witzerland are insured witzerland are ial and demographic ial anddemographic ion and cost recognised costrecognised ion and onal Accountants des International Ethics Standards Board for Accountants forAccountants Board Standards Ethics desInternational Accountants onal entspricht schweizerischendem Gesetz. s sindimAbsch Swisscom AG und ihrer Tochter AGundihrer Swisscom berücksichtigt, und wir und berücksichtigt, geben ke Konzernrechnung einschliesslich einer Zusammenfassung bedeutsamer bedeutsamer Zusammenfassung einer einschliesslich Konzernrechnung sonstigen beruflichen Verhal beruflichen sonstigen ial statements, No.4.3–Post ial statements, nitt "Verantwort Our response response Our deficit between employer and employee. We critically critically We employee. employerdeficit between and andthe rate the conversion of with development IAS19oftheexpected conformity specialists by our Supported by Swisscom. engaged oftheactuary independence and competence risk sharingfeatures.In of assumptionsyear the in second oftheconsideration accounting impacts resulting from the underlying the and methodology oftherisksharing application particularl We calculation. theactuarial tochallenge our own specialists used We basis. sample a thedataon and reconciled effectiv testing theoperating reportby expert actuary’s the underlying data personnel We assessedand completeness accuracy of the information. information. market of observable with therange parameters these compared year and with prior consistency and the theparameters todefine used methodology mandated by Swisscom.Indoi intheca used assumptions other Management’s we challenged Furthermore, assessments. and information empirical the remainingdeficitbasedonSwisscom specific determination rate andthe assessed theexpected deve mPlan refer to the following: mPlan refertothefollowing: lichkeiten der Revisionsst lichkeiten nd den Anforderungen des Anforderungen nd den dierten Geldflussrechnung für das dann dann fürdas Geldflussrechnung dierten tenspflichten in Übereinstimmung mit diesen mitdiesen inÜbereinstimmung tenspflichten timmung mit den International Financial Financial mitdenInternational timmung geführt. UnsereVerant -employment benefits benefits -employment in gesondertes Prüfungsurteil zu diesen Sach- zudiesen Prüfungsurteil in gesondertes gesellschaften (derK gesellschaften e, die nach pflichtgemässenunserem Ermes- und wettbewerbsrechtliche Verfahren addition, we the assessed addition, y audited the the audited y of the employer’s share of lculation of the actuary oftheactuary lculation allocation oft eness of internal controls ofinternal eness , we analysed in detail the in analysed , we lopment of the conversion oftheconversion lopment ng so, weng so, examinedthe wortlichkeitennach onzern) – bestehend –bestehend onzern) elle für die Prüfung der Prüfung elle fürdie Berufsstands sowie Berufsstands consistent consistent he remaining he remaining 1 5 149 Consolidated financial statements Statutory Auditor’s Report 150 Consolidated financial statements Statutory Auditor’s Report

Grundlage für unser Prüfungsurteil zu dienen. zudienen. unser Prüfungsurteil für Grundlage umals sind, geeignet und ausreichend Prüfungsnachweise erlangten von uns die dass sindderAuffassung, Wir Anforderungen erfüllt. wirunsere und haben (IESBA Code), dem CodeofEthicsforProfessi u Vorschriften gesetzlichen denschweizerischen mit einstimmung Über- in unabhängig demKonzern sindvon Wir beschrieben. weitergehend Berichts unseres Konzernrechnung" diesen Vorschriften undStandard Vorschriften diesen (PS)durch Prüfungsstandards den Schweizer (ISA)sowie Auditing on Standards Gesetz, denInternational mitdemschweizerischen Übereinstimmung in Prüfung unsere haben Wir Grundlagefür dasPrüfungsurteil Reporting Standards (IFRS) und und (IFRS) Standards Reporting Übereins in Jahr endende dasdann Cashflows für und Ertragslage dessen sowie 2017 Dezember 31. zum Konzerns des Finanzlage und Vermögens- der Bild entsprechendes Verhältnissen tatsächlichen den ein bis147) 96 (Seiten dieKonzernrechnung vermittelt Beurteilung Nach unserer Rechnungslegungsgrun endende Jahr sowie dem Anhang der dem Anhang sowie Jahr endende konsoli der und Eigenkapitalveränderungsrechnung konsolidierten der Gesamtergebnisrechnung, konsolidierten der 2017, zum 31.Dezember Bilanz aus derkonsolidierten der Konzernrechnung die Wir haben Prüfungsurteil Bericht zurPrüfungderKonzernrechnung AG, Ittigen(Bern) Swisscom An dieGeneralversammlung der Bericht derRevisionsstelle

— Conclude on the appropriateness Concludeontheappropriateness — theappropriateness Evaluate — re control of internal understanding Obtainan — — Identify and assess Identify — au the throughout skepticism professional maintain and judgment inaccordance As partofanaudit statements. financial oftheseconsolidated basis taken onthe they onablyreas individuallycould beexpeor intheaggregate, if, material areconsidered fromfraud orerrorand whencan arise misstatement itexists.Misstatements conducted in accordance withSw accordance in conducted a of ahighlevel is assurance Reasonable opinion. our includes material from whole arefree re aretoobtain Our objectives Auditor’s ResponsibilitiesAudit forthe ofthe Consolidated Fi todoso. but alternative has norealistic or operations, basis ofaccounting concern going asapplicab disclosing, concern, asagoing tocontinue ability stat financial theconsolidated In preparing misstatement, whether from material duetofraudorerror. statementsthatarefree financial of consolidated thepreparation enable to necessary is of Directorsdetermines Swi of with andtheprovisions IFRS accordance in and fairview preparation ofth BoardofDirectors is responsible forthe The Responsibility of the Board of Directors for the Consolidated F thisregard. toreportin havenothing we thatfact.We requiredtoreport are of thisotherinformation, materially misstated. If,based on financial with theconsolidated information in the annual report and, in doing so, consider whe so,consider and,indoing report annual inthe information financialstat withconsolidated ourauditofthe In connection we do formany not assuranceexpress of conclusion thereon. theconsolidated on opinion Our reports thereon. oftheCompany statements, thestand-alone financialstatements incl information all comprises BoardofDirectorsis resp The Other Information in theAnnual Report

Besonders wichtige Prüfungssachverhalte Prüfungssachverhalte Besonders wichtige Aktivierungvon technischenAnlagen und Software Umsatzerfassung verhalten ab. hierzu Prüfungsurteils unseres Bildung der undbei Ganzes als Konzernrechnung der Prüfung mitunserer wurden imZusammenhang verhalte Sach- waren. Diese Zeitraums aktuellen des Konzernrechnung der Prüfung fürunsere sen ambedeutsamsten Sachverhalt solche sind wichtige Prüfungssachverhalte Besonders Personalvorsorgeverpflichtung comPlan regulatorische für Eventualverbindlichkeiten und Rückstellungen Goodwill Fastweb and related disclosures made. made. disclosures and related control. internal Group’s circumstances in the appropriate control. of internal or theoverride misrepresentations, omissions, intentional forgery, fromfraud misstatement resulting andappropria that issufficient perf designand to fraudorerror, events or conditions may cause the Group to cease to continue a tocontinue cease to Group the maycause events orconditions future However, report. auditor’s our of date tothe up obtained audit evidence onthe based are conclusions st financial in theconsolidated attention drawwe to are required exists, uncertainty material doubt that may castsignificant obta evidence audit the on based

dsätze – geprüft. –geprüft. dsätze the risks of material misstatement ofthe therisksofmaterial misstatement misstatement, whether due to fraud or error, and to issue an auditor’s report that report misstatement, whetheranauditor’s orerror,andtoissue duetofraud uded intheannua onsible for the other information in the annual report. The other information information other The report. annual the in other information forthe onsible asonable assurance about whether the consolidated financ whether theconsolidated about assurance asonable statements or our onal Accountants des International Ethics Standards Board for Accountants forAccountants Board Standards Ethics desInternational Accountants onal financial statements does not cover the other information not covertheother does statements financial entspricht schweizerischendem Gesetz. s sindimAbsch the work wework hav the with Swiss law, ISAsandSwis iss law, ISAs and Swiss Auditing Standards will detectamaterial Auditing Standards always ISAsandSwississ law, of accounting policies used and and used policies accounting of te to provide a basis forouro te toprovide atements or, if such disclosures areinadequate,our opinion.Our tomodifyatements or,ifsuchdisclosures unless theBoardofDirectors unless Swisscom AG und ihrer Tochter AGundihrer Swisscom berücksichtigt, und wir und berücksichtigt, geben ke on the Group’s ability to conti ability on theGroup’s Konzernrechnung einschliesslich einer Zusammenfassung bedeutsamer bedeutsamer Zusammenfassung einer einschliesslich Konzernrechnung sonstigen beruflichen Verhal beruflichen sonstigen orm audit procedures responsive to those risks, and obtain audit evidence evidence audit risks, andobtain tothose responsive procedures orm audit , but not for the purpose ofex , butnotforthepurpose ined, whether uncert amaterial ined, of the Board of Directors’ use of the going concern basis of accounting and, ofaccounting basis concern ofthegoing use of Directors’ of theBoard is higher than for one resulting from error, as fraud may involve collusion, collusion, involve asfraudmay fromerror, resulting thanforone is higher ements, the Board of Directors is responsible for assessing the Group’s Group’s the forassessing responsible Directorsis ements, theBoardof l report, but does not include the consolidated financial financial theconsolidated doesnotinclude l report,but knowledge obt knowledge nitt "Verantwort levant tothea e performed, we thatthereisa misstatement material conclude e performed, ements, our responsibility is to read the other other is toreadthe ements, ourresponsibility le, mattersrelatedtogoi e consolidated financial statements that give atrue thatgive statements financial e consolidated ther the other info other ther the cted to influence the economic decisions ofusers decisions economic the cted toinfluence ssurance, but is not a guarantee that an audit anaudit that isnotaguarantee ssurance, but ained intheaudit,orot ss law, and for such internal control asss law, the andforsuchinternal Board lichkeiten der Revisionsst lichkeiten pinion. The risk of not detecting a material amaterial detecting not riskof The pinion. either intends to liquidate the Group or to cease to or theGroup toliquidate eitherintends udit in order to design audit procedures that are that procedures audit to design inorder udit s Auditing Standards, we exercise professional professional exercise we Standards, s Auditing consolidated financial statements, whether due statements, financial consolidated nue as a going concern. If wenue asagoingconcern.Ifconcludethat nd den Anforderungen des Anforderungen nd den , the remuneration report and our auditor’s auditor’s andour report , theremuneration dierten Geldflussrechnung für das dann dann fürdas Geldflussrechnung dierten dit. Wealso: tenspflichten in Übereinstimmung mit diesen mitdiesen inÜbereinstimmung tenspflichten in our auditor’s report to the relateddisclosures in ourauditor’sreporttothe timmung mit den International Financial Financial mitdenInternational timmung geführt. UnsereVerant nancial Statements Statements nancial the reasonableness of accounting estimates estimates ofaccounting the reasonableness pressing an opinion on the effectiveness of the of effectiveness onthe opinion an pressing inancial Statements Statements inancial in gesondertes Prüfungsurteil zu diesen Sach- zudiesen Prüfungsurteil in gesondertes gesellschaften (derK gesellschaften ainty exists related to events or conditions orconditions relatedtoevents exists ainty s a going concern. concern. s agoing e, die nach pflichtgemässenunserem Ermes- und wettbewerbsrechtliche Verfahren rmation is materially inconsistent inconsistent materially is rmation ng concern and using the using and ng concern herwise appears to be be appearsto herwise wortlichkeitennach onzern) – bestehend –bestehend onzern) ial statements as a statementsas ial elle für die Prüfung der Prüfung elle fürdie in the annual reportand intheannual Berufsstands sowie Berufsstands 1 6

Grundlage für unser Prüfungsurteil zu dienen. zudienen. unser Prüfungsurteil für Grundlage umals sind, geeignet und ausreichend Prüfungsnachweise erlangten von uns die dass sindderAuffassung, Wir Anforderungen erfüllt. wirunsere und haben (IESBA Code), dem CodeofEthicsforProfessi u Vorschriften gesetzlichen denschweizerischen mit einstimmung Über- in unabhängig demKonzern sindvon Wir beschrieben. weitergehend Berichts unseres Konzernrechnung" diesen Vorschriften undStandard Vorschriften diesen (PS)durch Prüfungsstandards den Schweizer (ISA)sowie Auditing on Standards Gesetz, denInternational mitdemschweizerischen Übereinstimmung in Prüfung unsere haben Wir Grundlagefür dasPrüfungsurteil und (IFRS) Standards Reporting Übereins in Jahr endende dasdann Cashflows für und Ertragslage dessen sowie 2017 Dezember 31. zum Konzerns des Finanzlage und Vermögens- der Bild entsprechendes Verhältnissen tatsächlichen den ein bis147) 96 (Seiten dieKonzernrechnung vermittelt Beurteilung Nach unserer Rechnungslegungsgrun endende Jahr sowie dem Anhang der dem Anhang sowie Jahr endende konsoli der und Eigenkapitalveränderungsrechnung konsolidierten der Gesamtergebnisrechnung, konsolidierten der 2017, zum 31.Dezember Bilanz aus derkonsolidierten der Konzernrechnung die Wir haben Prüfungsurteil Bericht zurPrüfungderKonzernrechnung AG, Ittigen(Bern) Swisscom An dieGeneralversammlung der Bericht derRevisionsstelle

you beapproved. to statements submitted financial thattheconsolidated recommend We theBoardofDirectors. of according totheinstructions w system exists, control internal Swiss andthe 3 CO para. 1item 728a article with In accordance Report onOtherLegalandRegulatoryRequirements thefi regarding evidence audit appropriate sufficient Obtain — oft structureandcontent presentation, theoverall Evaluate — We also provide the Board ofDir theBoard alsoprovide We we ouraudit. that during identify control internal oftheauditandsignificantfin planned scopeandtiming other matters, the with among We communicate regarding, committee the Board of Directorsoritsrelevant relevant ethical requirements regarding independence, andtoco independence, regarding requirements ethical relevant reasonably be expected to outweigh the public interestbenefits thepublic tooutweigh expected be reasonably that amattershouldnotbeco when thematteror about disclosure public precludes regulation m audit thekey therefore and are were intheauditofcons matters thatofmostsignificance with theBoardofDirectorsorit thematterscommunicated From matters thatmay reasonablybe Gümligen-Berne, 6 February 2018 2018 6February Gümligen-Berne, A Licensed Audit Expert Expert Audit Licensed Stocker Hanspeter KPMG AG

uditor in Charge Charge uditor in (“KPMG International”), aSwiss legal entity. rightsAll reserv KPMG AGis a subsidiary KPMG of Holding AG, which is a member o KPMG AG, Hofgut, PO Box 112, CH-3073 Gümligen-Berne

Besonders wichtige Prüfungssachverhalte Prüfungssachverhalte Besonders wichtige verhalten ab. hierzu Prüfungsurteils unseres Bildung der undbei Ganzes als Konzernrechnung der Prüfung mitunserer wurden imZusammenhang verhalte Sach- waren. Diese Zeitraums aktuellen des Konzernrechnung der Prüfung fürunsere sen ambedeutsamsten Sachverhalt solche sind wichtige Prüfungssachverhalte Besonders Personalvorsorgeverpflichtung comPlan regulatorische für Eventualverbindlichkeiten und Rückstellungen Goodwill Fastweb Aktivierungvon technischenAnlagen und Software Umsatzerfassung activities within the Group to express an opinion on the consolidated financial statements. We are statements.We financial consolidated onthe anopinion toexpress theGroup within activities fairpresentation. thatachieves events inamanner and transactions theunderlying represent statements financial consolidated whether the and the disclosures, responsible for the direction, s thedirection, for responsible for our audit opinion. opinion. for ouraudit

dsätze – geprüft. –geprüft. dsätze mmunicated in our report because the adverse consequences of doing so would so ofdoing consequences adverse the because ourreport in mmunicated onal Accountants des International Ethics Standards Board for Accountants forAccountants Board Standards Ethics desInternational Accountants onal thoughttobearonourindepende hich has been des entspricht schweizerischendem Gesetz. s sindimAbsch ectors oritsrelevantcommitte atters. We describematt these upervision and performance of t of performance and upervision Swisscom AG und ihrer Tochter AGundihrer Swisscom berücksichtigt, und wir und berücksichtigt, geben ke Konzernrechnung einschliesslich einer Zusammenfassung bedeutsamer bedeutsamer Zusammenfassung einer einschliesslich Konzernrechnung sonstigen beruflichen Verhal beruflichen sonstigen ed.

f the KPMG network of independent firms affiliated with KPMG In affiliated firms independent network of KPMG the f nitt "Verantwort igned forthe Daniel Haas Haas Daniel Licensed Audit Expert Expert Audit Licensed

dings, including any signif any including dings, olidated financial statements of the current period ofthecurrentperiod statements financial olidated preparation of consolidated financial statements statements financial ofconsolidated preparation e with a statement that we have complied with wehave complied with astatementthat e of such communication. , in extremely rare circumstances, we determine circumstances, , inextremelyrare lichkeiten der Revisionsst lichkeiten nancial informationofthe entitiesorbusiness nancial including statements, financial he consolidated ers in our auditor’s report, unless law or unlesslaw report, auditor’s ers inour s relevant committee, we determine those those determine we committee, s relevant Auditing Standard 890 Standard Auditing mmunicate withmmunicate themallre nd den Anforderungen des Anforderungen nd den dierten Geldflussrechnung für das dann dann fürdas Geldflussrechnung dierten tenspflichten in Übereinstimmung mit diesen mitdiesen inÜbereinstimmung tenspflichten timmung mit den International Financial Financial mitdenInternational timmung geführt. UnsereVerant nce, and where applicable, related safeguards. safeguards. related where applicable, nce, and he Groupaudit.Weremainsolely responsible in gesondertes Prüfungsurteil zu diesen Sach- zudiesen Prüfungsurteil in gesondertes gesellschaften (derK gesellschaften e, die nach pflichtgemässenunserem Ermes- und wettbewerbsrechtliche Verfahren icant deficiencies in icant deficiencies , we confirm that an , we that confirm wortlichkeitennach onzern) – bestehend –bestehend onzern) elle für die Prüfung der Prüfung elle fürdie ternational Cooperative Berufsstands sowie Berufsstands lationships and other and lationships 1 7 151 Consolidated financial statements Statutory Auditor’s Report 152 Financial statements of ­Swisscom Ltd Income statement Total operating income Other income Net revenue from thesaleofgoods andservices million CHF In statement Income Financial statements of Net income Income taxexpense Income before taxes Income from participations Financial income Financial expense Operating income Total operating expenses Other operating expense Personnel expense

S ­ wisscom Ltd

(171) (129) 2017 197 205 105 140 260 231 (92) (79) 89 29 (8)

2,682 2,697 2,567 (170) (135) 2016 140 125 295 229 (15) (92) (78) 66

Non-current interest-bearingNon-current liabilities Total current liabilities Provisions Accrued expense anddeferred income Other current liabilities Trade payables Derivative financialinstruments Current interest-bearing liabilities equity and Liabilities Total assets Total assets non-current Participations Derivative financialinstruments Financial assets Total current assets Accrued income anddeferred expense Total liabilitiesandequity Total equity Treasury shares Voluntary retained earnings Legal capitalreserves/capital surplusreserves Share capital Total liabilities Total liabilities non-current Provisions liabilities Other non-current Derivative financialinstruments Other current receivables Trade receivables Derivative financialinstruments Current financialassets Cash andcashequivalents Assets million CHF In Balance sheet Accrued dividendsreceivable from subsidiaries

Note 3.1 3.1 3.2 3.2 2.2 3.2 3.2 3.2 3.1 3.3

31.12.2017 14,504 14,091 14,504 5,313 9,191 6,847 2,344 7,973 6,045 5,240 6,782 2,211 413 110 290 21 73 52 11 52 11 70 39 – 2 7 4 – – 2 8 5

31.12.2016 15,779 12,880 15,779 6,255 9,524 7,503 2,021 2,899 6,183 7,403 1,868 7,884 4,967 2,500 100 180 21 52 12 84 10 84 48 29 17 86 (1) 4 5 6 7 9

153 Financial statements of ­Swisscom Ltd Balance sheet 154 Financial statements of ­Swisscom Ltd Notes to the financial statements subject tosubject approval the by shareholders of release. material No post-balance-sheet occurred events up to this date. TheAnnual Financial Statements are As of 31 of As 2017, December the share capital comprised 51,801,943registered sharesa par of value CHF of per 1 1.3 as in the previous year. > domicile and form legal ame, > 1.1 eneral information 1 Notes to the financial statements The Board of Directors of of The Board Directors of 1.5 250,exceeded as in the prior year. employees full-time of umber The average number employees of of 1.4 provides that the Confederation shall hold the the majority of share capital and voting rights of shares of at 31As 2017, December the Swiss Confederation (Confederation), as majority shareholder, held 51% the of issued > 1.2 > ­

Enterprises Act (TEA) ( Enterprises (TEA) Act Swisscom Ltd is alimited-liability company established under aspecial pursuant statute to the Telecommunication P S C

wisscom (canton Ltd, Ittigen Berne) of arent company the of ompany identification number (UID) CHF-102.753.938 G A N N S S ignificant shareholders hare capital hare pproval and release of Annual Financial Statements Financial Annual of release and pproval S ­ wisscom Ltd which is unchanged from the prior year. TheTelecommunications Enterprises (TEA) Act German S ­ ­S wisscom Ltd approved the present Annual Financial Statements on 6 wisscom Group : “Telekommunikationsunternehmungs : ­S wisscom Ltd during the financial year,expressed full-timeas equivalents, S ­ wisscom Ltd Annual in its General Meeting held to be on 4April 2018. ­g esetz”) of 30 April 1997. April 30 of esetz”)

S ­ F wisscom Ltd. ebruary

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Annual Financial Statements of general meetingsthe of subsidiary companies approve the payment the of dividend prior to the approval the of from subsidiary companies are accrued in the financialstatementsof Participations are accounted for at acquisition less valuation cost allowances, as required. Dividend distributions 2.2 should taken be into account in this respect. eral to create and release for the hidden ensuring purposeof reserves the sustainable development the of company Significant financialstatement policies reporting which by not areprescribed law below. described are possibility The 2.1 policies accounting significant of ummary 2 Other non-current liabilities Other non-current Other current liabilities Trade payables million CHF In iabilities 3.2 Financial assets Other current receivables Trade receivables million CHF In assets financial and eceivables 3.1 positions statement income and balanceisclosures on sheet 3 loss, respectively. In the asubsequent event of disposal, the resultant gain or loss is taken to income as financial income or financial At the time acquisition, of treasury shares are recorded at purchase from asshareholders’ cost adeduction equity. 2.4 are dealt on ajoint with basis (collective valuation approach regard with to valuation units). which apply to the underlying transaction. Gains and losses arising from the underlying and hedging transactions conditions for recognition as ahedging transaction, are measured using the same valuation principles as those at market price. Movements in market values are recorded in the income which the Derivatives statement. meet financialDerivative instrumentswhich are deployed to hedge foreign currencies and rates,interest are measured 2.3 Statements. A list participations of heldor indirectly directly by Trade payables and liabilities other

S D R T D P Gen L reasury shares shares reasury articipations and recording of dividend distributions by subsidiary companies subsidiary by distributions dividend of recording and articipations erivative financial instruments and hedging transactions (hedge accounting) (hedge transactions hedging and instruments financial erivative

S ­ wisscom Ltd by its Board of Directors. wisscom Board Directors. Ltd of its by S ­ wisscom Ltd is included in 5.4 to Note the Consolidated Financial 31.12.2017 31.12.2017 6,045 39 2 2 7 8

from ereof

participations participations Th S ­ wisscom Ltd that provided the annual Thereof 5,934 11 to – 4 1 7

31.12.2016 31.12.2016 4,967 48 17 4 5 7

from ereof participations participations Th Thereof 4,855 10 17 to – 1 5

155 Financial statements of ­Swisscom Ltd Notes to the financial statements 156 Financial statements of ­Swisscom Ltd Notes to the financial statements

Of which non-current interest-bearing whichnon-current Of liabilities whichcurrentOf interest-bearing liabilities Total interest-bearing liabilities Other interest-bearing liabilitiesto third parties Interest-bearing liabilitiesto participations Private placements Debenture bonds Bank loans million CHF In liabilities Interest-bearing Balance at 31December 2017 Allocated for share-based compensation Purchases onthemarket Balance at 31December 2016 Allocated for share-based compensation Purchases onthemarket Balance at 31December 2015 shares reasury 3.3 Debenture 2015–2035 bondinCHF Debenture 2017–2033 bondinCHF Debenture 2016–2032 bondinCHF Debenture 2014–2029 bondinCHF Debenture 2016–2028 bondinCHF Debenture 2017–2027 bondinCHF Debenture 2016–2027 bondinCHF Debenture 2014–2026 bondinCHF Debenture 2015–2025 bondinEUR Debenture 2012–2024 bondinCHF Debenture 2015–2023 bondinCHF Debenture 2010–2022 bondinCHF Debenture 2014–2021 bondinEUR Debenture 2013–2020 bondinEUR Debenture 2009–2018 bondinCHF Debenture 2007–2017 bondinCHF million EUR or million CHF In bonds Debenture

T

in P currency ar value 1,385 150 150 300 160 200 350 200 200 500 250 500 500 500 500 –

rate nterest

i 31.12.2017 Nominal Number (8,090) (6,486) 1,514 7,200 8,000 1.88 2.00 3.25 1.00 0.75 0.13 1.50 0.38 0.38 0.38 1.50 1.75 1.75 0.25 2.63 624 – –

verage price currency

A 31.12.2017 in P ar value 8,993 6,782 1,425 2,211 1,556 6,106 i n CHF 468 468 468 520 520 520 500 500 600 150 300 160 200 200 200 500 500 250 500 500 736 95 – – –

million n CHF rate nterest

I i 31.12.2016 31.12.2016 Nominal 9,271 1,676 6,101 7,403 1,868 2.00 1.00 0.13 1.50 0.38 0.38 1.50 1.75 1.75 0.25 2.63 1.88 3.25 3.75 750 721 23 (4) (3) – 3 1 4 – – –

of Directors and Group Directors of Executive Board as well related as parties to them, as 31 of The following table discloses the number shares and unrestricted of restricted held the by 4.3 available. to secure commitments assets serve These arising from bank loans. 31 of As 2017, December financial totallingassets CHF 105 million (prior year: CHF 109 million) werefreely not 4.2 CHF liabilities third-party to secure given ollateral 31 of As 2017, December guarantee obligations for exist Group companies in favour third of totalling parties 4.1 information urther 4 None of the of None individuals required to make holds notification voting sharesexceeding 0.1%of the sharecapital. (CHF In 2017, 1,493 shares (CHF 0.7 million) were issued to the members and the of Board 2,121 Directors of shares 2 1 Total shares heldby theGroup themembersof Executive Board Dirk Wierzbitzki Heinz Herren Christian Petit Urs Lehner Marc Werner C. WernerHans Mario Rossi Urs Schaeppi(CEO) 2 1 Total shares heldby theBoard themembersof Directors of Hans Werder Renzo Simoni Theophil Schlatter Catherine Mühlemann Barbara Frei Frank Esser Alain Carrupt Valérie BersetBircher Roland Abt Hansueli Loosli Number Number esigned from theBoard ofDirectors asof3April2017. ted to theBoard ofDirectors asof3April2017. esigned from theGroup Executive Board asof21June2017. R Joined theGr R Elec

290 million (prior year: CHF 228 million).

0.9 million) to the members the of Group Executive Board. F S A C

hareholdings of the members of the Board of Directors and Group Executive Board Executive Group and Directors of Board the of members the of hareholdings ssets used to secure own commitments as well as assets subject to retention of title of to retention subject assets as well as commitments own to secure used ssets 1

oup Executive Board asof21June2017.

2

1

2

December 2016December and 2017: 31.12.2017 31.12.2017 ­ m 7,648 8,953 1,443 1,419 2,733 1,068 3,964 1,586 1,236 embers the of Board 160 115 213 234 213 784 205 750 478 – –

31.12.2016 31.12.2016 8,269 7,289 1,128 1,225 1,326 2,350 1,333 1,337 1,027 3,229 648 332 382 897 96 96 88 64 – –

157 Financial statements of ­Swisscom Ltd Notes to the financial statements 158 Financial statements of ­Swisscom Ltd Proposed appropriation of retained earnings

the available retained earnings CHF of 5,240 million as 31 of 2017 December appropriated be as follows: to the proposes AnnualThe Board Directors of General MeetingShareholders of held to on be 4 Proposal of the Board of Directors of retained earnings appropriation Proposed Net dividendpayable Less 35%withholdingtax Ordinary dividend,gross sharePer registered follows: In the event that the proposal is approved, adividend share per will paid be to shareholders on 10 1 22.00pershareOrdinary on51,801,319shares dividendofCHF Retained earningsavailable to theAnnual General Meeting Change intreasury shares Net income for theyear Balance carriedforward from prioryear Ordinary dividend Retained earningsfrom previous year earnings retained of Appropriation million CHF In Balance to becarriedforward

xcluding treasury shares. E

1

1

A pril 2018 that

A pril 2018 as 31.12.2017 (1,140) (1,140) 5,240 5,042 4,100 6,182 14.30 22.00 (7.70) 197 CHF 1

financial statements. statements. financial Directors determines is necessary to enable the preparation of financial statements tha statements financial of preparation the toenable isnecessary Directors determines ofincorpora articles company’s the lawand ofSwiss provisions with the inaccordance Board statements The of Directorspreparation ofthefinancial is responsible forthe Responsibility of the Board of Directors for the Financial Stat ourreport. in communicate statement the financial they could reasonably be expect be reasonably theycould exists. Misstatements canaris when it a materialmisstatement detect will always Standards with Swiss Auditing and Swiss law accordance in audit conducted thatan but isnotaguarantee ofassurance, level isahigh assurance Reasonable opinion. misstatement, whether thatincludes our from material report duetofraudorerror,and to issueanauditor’s re aretoobtain Our objectives Auditor’s ResponsibilitiesAudit for the of the Financial State todoso. but alternative has norealistic or operations, ofDirectors eithe theBoard unless of accounting basis concern conc going relatedto matters asapplicable, disclosing, concern, asagoing continue statem the financial In preparing misstatement, whether tofraudorerror. due Key audit matters are those mattersKey that,inourprofessionalj audit mattersarethose Federal the Audit of 1/2015 the circular Oversighton AuthorityAudit based Matters Key on Report opinion. thenen year forthe statement 2017, andtheincome 31 December thefinancial whichstatements of SwisscomWe haveaudited Ltd, Opinion Report ontheAuditofFinancialStatements (Berne) Ittigen Ltd, Swisscom of Meeting General the To Statutory Auditor’s Report

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour abasis toprovide appropriate and issufficient obtained wehave theauditevidence that believe We with theserequirements. accordance otherethic our wefulfilled have and profession audit ofthe Swiss and therequirements Weareind Statements sectionofourreport. oftheFinancial fortheAudit Responsibilities Auditor’s inthe are further described andstandards those provisions inaccordan our audit conducted We Basis forOpinions ofincorporation. articles the company’s and Swiss law st thefinancial In ouropinion policies. accounting ofsignificant asummary including s of the current per atements (pages 152atements (pages to 157) for e from fraud or error and are con errorandare e fromfraudor asonable assurance about whether about assurance asonable ents, the Board of Directors i ents, theBoardofDirectors ed to influence the economic dec theeconomic ed toinfluence ce withce lawSwissA Swiss and iod. Wehavedetermi ependent of the entity in accordance with ofSwiss lawprovisions the in accordance entity ependent ofthe s responsible for assessing the entity’s ability to ability theentity’s forassessing s responsible udgment, were of most significance in our audit of audit our in were significance ofmost udgment, the year ended 31Decemb year ended the ned that there are no key audit matterstoned thattherearenokey sidered material if, individually or intheaggregate, sidered materialif,individually tion, andforsuchinternal r intends to liquidate th liquidate to intends r ments ments isions of users taken on the basisofthese isions ofuserstakenonthe the financial statementswhole as a freeare comprise the balance sheetasat thebalance comprise ements ements ded, and notes to the financial statements, statements, financial notestothe ded, and uditing Standards. Ourre uditing Standards. ern and using the going thegoing and using ern e entity ortocease t arefreefrommaterial al responsibilities in in responsibilities al er 2017 comply with comply er 2017 control as the Board of astheBoard control sponsibilities under 1 159 Financial statements of ­Swisscom Ltd Statutory Auditor’s Report 160 Financial statements of ­Swisscom Ltd Statutory Auditor’s Report (“KPMG International”), a Swiss legal entity. All rights reserv KPMG AGis a subsidiary KPMG of H KPMG AG, Hofgut, PO Box 112, CH-3073 Gümligen-Berne the instructions ofthe the instructions company’s Werecommendthatthefina articlesofincorporation. We further confirm that the propos w system exists, control internal

In accordance with article 728a para. 1 item 3 CO and the Swiss 3 COandthe para. 1item 728a article with In accordance andRegulatoryOther Legal Requirements Report on and assess Identify — au the throughout skepticism professional maintain and judgment inaccordance As partofanaudit

— Evaluate the appropriateness theappropriateness Evaluate — relevant tothea control of internal understanding Obtainan — matters that were ofthe statements matters thatofmostsignificanceintheauditfinancial wi thematterscommunicated From thoughttobearonourindepende matters thatmaybe reasonably co to and independence, regarding requirements ethical relevant ofDir theBoard alsoprovide We we ouraudit. that during identify control internal timi and scope planned with o theBoard communicate We and, ofaccounting basis concern ofthegoing use ofDirectors’ of theBoard appropriateness Concludeonthe — reasonably be expected to outweigh the public interest benefits of such communication. ofsuchcommunication. interestbenefits thepublic tooutweigh expected be reasonably matter should not be communicated in our report because the adverse consequences of doing so would so ofdoing consequences theadverse reportbecause inour notbecommunicated matter should when, aboutthematteror precludes publicdisclosure inextrem matters. thesemattersino keyaudit describe therefore the We Licensed Audit Expert Expert Audit Licensed Stocker Hanspeter KPMG AG Gümligen-Berne, 6 February 2018 2018 February 6 Gümligen-Berne, A uditor in Charge Charge in uditor error, design and perform audit procedures performaudit and error, design responsive tothose internal control. control. internal of effectiveness onthe opinion an ofexpressing forthepurpose not but circumstances, inthe appropriate control. internal of theoverride or misrepresentations, omissions, intentional t fromfraudishigher resulting riskofnotdetecting The forouropinion. abasis sufficient andappropriatetoprovide conditions cause may the entity toceasecontinueasagoingconcern. of ouraudi tothedate up obtained evidence ontheaudit based ouropini tomodify statementsin areinadequate, the financial or, if suchdisclosures drawattention we to are required exists, uncertainty material tocont ability ontheentity’s doubt that may castsignificant obta evidence ontheaudit based made. disclosures and related Board of Directors. Board of ng oftheauditandsignificantfin the risks of material misstatement ofthe therisksofmaterial misstatement olding AG, which isa member o hich has been des been has hich ectors oritsrelevantcommitte with Swiss law and Swiss Audi Swiss and law withSwiss ed appropriation of available earnings complies with Swiss law and the the with lawand Swiss complies earnings ofavailable ed appropriation f Directors or its relevant comm f Directorsoritsrelevant han for one resulting from error, as fraud may involve collusion, forgery, collusion, forgery, asfraudmayinvolve fromerror, resulting han forone of accounting policies used and and used policies of accounting th the Board of Directors or it ofDirectors th theBoard ined, whether ined, a material uncert ed. f the KPMG network of independent firms affiliated with KPMG International affiliated firms independent Cooperative network of KPMG the f igned for the preparation of financial statements according to according preparationoffinancialstatements igned forthe Daniel Haas Haas Daniel

Licensed Audit Expert Expert Audit Licensed dings, including any signif any including dings, e with a statement that we have complied with wehave complied with astatementthat e ur auditor’s report, unle ur auditor’s inue as a going concern. If we If inue asagoingconcern. concludethata ely rare circumstances, we a that determine rarecircumstances, ely udit in order to design audit procedures that are that procedures audit todesign inorder udit s relevant committee, we determine those those wedetermine committee, s relevant Auditing Standard 890 Standard Auditing ting Standards, we exercise professional professional we exercise Standards, ting ncial statements submitted to you be approved. you approved. be to submitted statements ncial financial statements, whether or duetofraud statements, financial mmunicate withmmunicate themallre dit. Wealso: in ourauditor’sreporttotherelateddisclosures ittee regarding, among other matters,the among ittee regarding, nce, and where applicable, related safeguards. safeguards. related where applicable, nce, and the reasonableness of accounting estimates estimates ofaccounting the reasonableness tor’s report.However, futureeventsor risks, and obtain audit evidence thatis evidence audit obtain risks, and ainty exists related to events or conditions orconditions relatedtoevents exists ainty current period and are are and current period ss lawor regulation ss icant deficiencies in icant deficiencies , we an confirm that on. Ourconclusionsare a material misstatement lationships and other and lationships 2 Further information

Glossary ______162

Swisscom Group five-year review ______167 162 Further information Glossary To bundles do so, it 4G/LTE frequencies to achieve the required capacity. In the near future, theoretical bandwidths 4G+/LTE Advanced: mobile broadband data up speeds of to 150 Mbps. 4G/LTE Term (Long Evolution): 4G/LTE is generation the fourth mobile of technology. At LTE present, enables terms Technical Glossary BPO (BusinessBPO Process Outsourcing): physical own network. its with connected a enablessector. It a telecommunications provider to make a data stream available to a specific end customer of rate. Thehigher the bandwidth, the more information units (bits) transmitted can be unit per time of (second). It Bandwidth: providers. service online voice other ­S ADSL (Asymmetric Digital Subscriber Line): Subscriber Digital (Asymmetric ADSL to date,exists are tests constantly being carried around out the world. 5G: upof to 450 Mbps will achieved be through bundling the further 4G/LTE of frequencies. Bitstream Access: Access: Bitstream defined or kbps Mbps. in bps, land are via provided IP: AllAll IP means that such all as services television, the Internet or fixed-line telephony use samethe IT network. copper telephone cable for broadband access to the data network. cables instead traditional of coppercables. and homes to of the refers businesses end-to-end connection using Home): to the FTTH (Fibre fibre-optic FTTH data transfer up rates of to 256 EDGE kbps. is currently available to the over of 99% Swiss population. is aradio modulation to used enhance technology data transmission speeds in EDGE GSM mobile networks. GSM Evolution): for Rates EDGE Data the generation of (Enhanced second is mobileEDGE of part telephony and entirely on copper. or partly Examples DSL of technologies: ADSL or VDSL. Line): DSL is Subscriber the (Digital DSL generic term for transmission technologies that use subscriber lines based interplay mobile of and fixed-line thattechnologies comprise or products both mobile and fixed-line services. Convergence: ability to exchange data any with on the partner network. Connectivity: for hardware that have not does aprecise location. data centres, along the with resources and databases, are distributed via the cloud. Thecloud is also synonymous evencandynamicallyand finishedbe platforms accessed software and accordingvia to need the The Internet. Cloud: wisscom is switching all existing communications to IP. network This means that allwithin Switzer IP services

t hird-party provider.hird-party This enables to acustomer the third-party provider that services to has provide it its not 5G is the next generation5G technology. is mobile of While the next network no international definitionstandardof a 5G Cloud computing is an approach in which infrastructure IT such as computing capacity, data storage, and Bandwidth to refers the transmission amedium, of capacity also known as the data transmission Connectivity is the generic to term or the theConnectivity connection Internet to used denote and IP services the The term “convergence” is generally in understood the telecommunications to mean the sector Bitstream Access denotes an upstream for third-party providers in product the telecommunication 4G+/LTE+ enables atheoretical bandwidth up of to Mbps using 300 the mobile phone network. ­ S wisscom’s ensuring network, own availability ahigher and better level security than of

BPO isBPO aspecial formentire outsourcing, of of A broadband data transmission that technology uses the existing business processes.

e nables

i s s -

­ provider terms and “communication “information technology” technology”. denotes It aided communications). aided ­t transfer rates of the generation of second GPRS is mobile of part telephony Service): Radio Packet (General andGPRS increases the of is part and FTTB bandwidth than for FTTS Theuse G.fast of VDSL2. G.fast (pronounced “gee the for fast”): copperlines, latest dot technology G.fast, is capable providing of far more significantly FTTB. increaseand bandwidthsFTTS for while the existing coppercabling is usedfor the remaining VDSL2’s upcoming section. evolution will to G.fast l torefer innovative, hybrid broadband technologies (optical connection fibre and copper). Using technothese Curb): to the (Fibre Building)/FTTC to the (Fibre Street)/FTTB to the (Fibre FTTS satisfaction. ­willingness to to recommend other customers the indirectly. service such, is As it to used atool determine ISP An Provider): is a provider Internet-based of Service (Internet ISP services. television programmes and films)over an IP network. Television): to refers the digital Protocol IPTV broadcasting (Internet broadband of IPTV applications (for example, (VPN),are telephony virtual privatenetworks (Voice over IP) and (Fax fax over IP). Protocol): (Internet IP Inbound/Outbound Access): Packet HSPA (High Speed Housing: ­me the mobileof second generation. In addition to voice and data transmission, such enables it as services SMS network: communications) Mobile SystemGSM for (Global ­i Net Promoter Score (NPS): is NPS Score a key figure Promoter thatNet gives an indication of and customerdirectly satisfaction case, the corresponding business (the MVNO) has either alimited infrastructure or no network network MVNO denotes Operator): abusiness Network for model mobile communications. Virtual (Mobile MVNO In this for interconnecting computers, isusually network local a LAN A on Ethernet. based Network): Area (Local LAN Internet addresses, websites and web servers) and content provision. ICT (Information and Communication Technology): Communication and (Information ICT this is technology 42 Mbps. upgraded to HSPA+ (also referred to as HSPA Evolution). Themaximum transmission currently speed delivered by would possible be UMTS. with At locations where mobile Internet use is particularly concentrated, HSPA has been HSPA enables far more customers to use the same radio cell simultaneously, and at aconsistently high than speed, cations standard. Compared to UMTS, HSPA enables large volumes data of transmitted to be at faster speeds. nfrastructure at all.nfrastructure therefore It accesses the infrastructure other of mobile communication providers. ogies, fibre-optic cablesogies, fibre-optic are laid as possibleclose as to the building, or up to the basementFTTB, in casetheof echnology (informationechnology and data processing and the related hardware) and communication (technically technology ssages and phone calls to other countries and from abroad (international roaming). . Services include Internet(using. Services connection for example), DSL, hosting (registration and operation of Housing is defined infrastructure as server in a theof placement centre.data connection and network GSM mobile networks. GPRS enables GSM kbps. mobile 30 speedsof to 40 networks. (see Roaming) (see IP enables different types of services to be to integratedIP on a enablesservices of singletypes different network. Typical applications HSPA is an enhancement of the third generation HSPA third the generation isof an enhancement A term that current became in the 1980s, combining the GSM is global a digital mobile communication standard ­ S wisscom’s access strategy. FTTS, FTTB and FTTC with vectoring vectoring with and FTTC FTTB FTTS, the convergence information of Also referred to as an Internet of the UMTSof mobile communi c ­ ustomer ­ - 163 Further information Glossary 164 Further information Glossary fixed-line and mobile networks. Ultra-fast broadband: Ultra-fast broadband denotes broadband more speeds of than 50 the Mbps –on both digitisation. of course in the areastogether grow these TIME: megabytes. 1,000,000 Terabyte: end the information signal is demultiplexed first and then demodulated. utilisation. Thesignals are multiplexed once the user data have modulated been on acarrier signal. At the receiver ­t data packets according to their destination address, and them either or forwards them blocks accordingly Router: in Europe) as well as 850 MHz and MHz 1,900 networks. today are triband or quadband (which MHz MHz and and900 are commonly networks support 1,800 most used countries such as the USA or countries in America use South adifferentrange. mobilefrequency Most telephones involved operate on the bands. same frequency In Europe, all use the bands. same GSM frequency Other networks ­s IEEE denotes awireless, public local based on the PWLAN network Network): Area Local Wireless (Public PWLAN ple signals over asingle communications medium (line, cable or radio link), for example, means by classic of Multiplexing): Division TDM (Time store the data on the device. local Streaming: volumes the with aim creating of value. added data: PrimarilySmart to refers the processing and understanding large, of complex and rapidly changing data where the signal to is the base forwarded near station where the mobile phone is at that Thebase moment. exchange in Switzerland transmits to asecond the of right within it region afraction country, in the respective diately to the exchange in Switzerland where the mobile phone is registered. receipt On the of calling signal, the Information indicating and the country region where the mobile phone at is any located given time is sent imme mobile telephone asubscriber of outside Switzerland automatically the best-quality network. partner selects Roaming: b Petabyte: otherof companies in order to reach abroad range users of quickly and cost-efficiently. that they themselves on do not companiesthe basis operate. OTT services of offer proprietary the infrastructures Top): the (Over OTT to refers content providers distributed OTT over an infrastructure existing service by network to transmit data. Fibre-optic fibre: cables enableOptical optical data transmission, unlike coppercables, which signals use electrical ­n separated previously of reorganisation and dismantling the is convergence Network convergence: Network Routers come in different forms,from devices to large-scalesmall network devices elephony (using an ISDN or analogue line). Multiplexing combined are methods to achieve often even higher tation then forwards the signal to the mobile phone, and the call taken. can be Roaming only all works if countries yte etworks to form large, a such – convergent asetworks the network

s or 1,000,000,000 megabytes. 802.11 WiFi standard family. offers data typically transmission APWLAN of 5-10speeds Mbps. Acronym for Telecommunication, Information, Multimedia and Entertainment. to refers the It way in which A router is for adevice connecting or separating Therouter several analyses computer incoming networks. Unit measurement of for data is size. equivalent to approximately 1petabyte 1,000,000 terabytes, 1,000 Roaming enables subscribers mobile network to use their mobile phones when travelling abroad. The Unit measurement of data of size. is 1terabyte equivalent to approximately or gigabytes 1,000 Denotes theDenotes transmission audio of and signals video or the Internet to viathe without need anetwork Multiplexing is that a method allows the simultaneous transmission multi of S ­ wisscom fixed-line and mobile network. for the home. ( ­ routing).

g iga - - ­ Vectoring: Vectoring: PDAs, PDAs, l to used integrate communication attempt modern An of Communications: the wide variety Unified techno the Swiss population. m VDSL (Very High Speed Digital Subscriber Line): Subscriber Digital Speed High (Very VDSL UMTS complements GSM and Public copper lines,copper thereby achieving WiFi Calling: WiFi network. ­co mobile third-generation international an System): is Telecommunications UMTS Mobile UMTS (Universal provider. numbering plans and regulates the conditions governing choice and of number service of freedom portability basic licences. also It service provides access (unbundling, interconnection, leased lines, etc.), approves national c Commission): ComCom Communications is the decision-making (Federal ComCom for telecommuni authority competition. affect c ComCo combats harmfulcompetition. and cartels monitors market-dominant companies for signs anti- of against the harmful economic or social and cartels of impact other constraints on competition in order to foster ComCo (Competition Commission): the aim ComCo enforces which of Act, the is Federal Cartel to safeguard use this link, for example, to offer their customers broadband such fast services as Internet access. to providers other (TSP) telecoms as service an upstream at aprice regulated service the by government. TSPs can exchange to the customer’s via homeametallic connection pair cable. BSA up is by set (BSA): access RegulatedBitstream bitstream access is ahigh-speed link that travels the last mile from the local terms Other partners partners ­w A wireless local area network (WLAN) connects several computers Awireless connects (WLAN) area local Network): Area network Local (Wireless WLAN thereby significantly improves mobile phone from reception inside buildings. VoLTE LTE): (Voice over VoIP Protocol): is upVoIP usedto telephone set Internet (Voice over via connections the Internet. ogies. Different telecommunication such e-mail,services as messaging, unified telephony, mobile telephony, ompetitive conduct. It is It responsible conduct. ompetitive for monitoring mergers and also provides opinions on officialdecrees that ations. primary responsibilities Its include issuing concessions as for use the of spectrum well radio frequency as irelessly to acentral information printer system, or scanner. ission mmunications standard that combines mobile multimedia and voice services. instant messaging and presence functions are coordinated to improve the reachability of communication communication of reachability the improve to coordinated are functions presence and messaging instant speeds of up speeds of to 100 Thecurrent Mbps. form VDSL of is called VDSL2. working distributed on projects. Vectoring is in used atechnology conjunction eliminates It VDSL2. with WiFi Calling enables users to make calls via their and mobile network phone and the WLAN/WiFi LTE is, in effect, a pure data network. LTE a pureVoLTE network. data is, in effect, enablescalls phone be to made up to a twofold increaseup to atwofold in bandwidth. Wireless LAN inWireless Switzerland. LAN Today the covers UMTSaround network of 99% VDSL is currently DSL the technology, fastest allowing data trans A further development of GSM, GSM, development of further A

interference between pairs of of pairs between interference S ­ wisscom and is provided via the LTE data ­ ­ ­ ­

165 Further information Glossary 166 Further information Glossary Ex-post: Ex-post: the last mile is regulated (unbundling). regulated is mile last the the authority (suchthe authority as price) are known using to the parties the regulated services. conditions) approved must government a (authorisation by be authority obligation). conditions The approved by Ex-ante: shown no interest. cabinet (sub-loop unbundling, referred to as T-TAL in Switzerland), distribution in which neighbourhood the at unbundling and locations, unbundled 600 around at available currently land), Switzer TAL in as to referred LLU, or loop/ULL local the of (unbundling exchange the at unbundling unbundling: original Theprerequisite cost. for is ULL the presence amarket-dominant of provider. of There types are two theirwithout access own infrastructure to access customers at non-discriminatory directly conditions based on Unbundling: mile: Last are required to allow their interconnection atcost-based competitors prices anotherof provider. Under the terms the of Federal Telecommunications market-dominant Act, telecoms providers for decisions the by Federal Council, for the Environment, Federal Department Transport, Energy and Communications access point and the exchange local above). (access see network, In Switzerland, as in most ­ Interconnection: Interconnection: Hubbing: cables. providers access with to subscriber lines for the using purposeof the metallic entireof spectrum pair frequency service telecommunications alternative providing means unbundling with connection in Full access access: Full positions. is Throughout to used denote equivalent): (full-time FTE the number thisFTE full-time report, of equivalent (DETEC) and the Communications Federal Commission (ComCom). casting (radio and television), official and performs andregulatory tasks in these areas. It prepares the groundwork (OFCOM): Communications of OFCOM deals Office issues with Federal related to telecommunications and broad have unable been to agree (objection principle). negotiation).(primacy of In the adispute, event of the authorities only decide on the on which points the parties enable the logical the interaction of party services. Interconnection allows the customer one telecoms of services. provider to communicateparty the subscribers with affected providers establishto affected that the price In an ex-post regulation approach, must the agree parties all possible In an ex-ante regime, the particulars the of regulated offerings (commercial, technical and operating Hubbing denotes the trading telephone of with other traffic telecommunicationoperators. Also referred to as the loop, local the last mile denotes the subscriber the access line between Unbundling the of last mile (Unbundling enables ULL) Loop, the of Local fixed-line-network competitors Interconnection means linking telecoms uptwo providers of the systemsand services connected telecoms and componentsconnected and to provide accessservices to third- has been correctly determined. has correctly been (LRIC, see below).(LRIC, see ­ S aspects of the content contractual of aspects wisscom’s have competitors far so There is legal provision for the other countries, access to subscriber subscriber so as so to - -

Swisscom TV access lines in Switzerland access TV Swisscom lines in Switzerland access Mobile in Switzerland lines retail access Broadband lines in Switzerland access telephony Fixed period of end at data Operational employees full-time numberAverage of equivalent year of end at Full-time employees equivalent Employees period of end at debt Net assets intangible and plant and equipment in property, expenditure Capital activities operating from Cash flow year of end at ratio Equity year of end at Equity flows cash and sheet Balance shareEarnings per income Net (EBIT) income Operating revenue net asEBITDA %of 1 year of end at Full-time employees equivalent assets intangible and plant and equipment in property, expenditure Capital (EBITDA) and amortisation depreciation before income Operating revenue Net Informations Switzerland share payout/earningsRatio per share per dividend Ordinary Closing price lowest highest price Closing period of end at Closing price year of end at capitalisation Market period issued shares of of end Number at Swisscom share lines in Italy access Broadband in Switzerland lines wholesale access Broadband lines in access Switzerland fixed Unbundled (RGU) units generating Revenue Switzerland Operating income before depreciation and amortisation (EBITDA) and amortisation depreciation before income Operating revenue Net Net revenue and results indicated where except million, CHF In review five-year Swisscom Group

n accordance with the proposal of the Board of Directors to the Annual General Meeting. General Annual the to Directors of Board the of proposal the with n accordance I

in mil

lion of shares of lion in t in t in t in t in t in t in t in t housand housand housand housand housand housand housand housand number number number

CHF CHF CHF CHF CHF

% % %

,931 90.20 0.90 5

3 12,097 11,434 24,394 51.802 20,108 47 474.00 19,746 17,362 1,000 22.00 6,407 1,686 6,002 2,258 1,811 2,879 1,942 4,302 3,685 2,396 1,695 32.53 3 9,358 7,812 67.63 29.3 2013 37.6 21 256

8,272 62 ,890

1 51.802 21,125 522.50 12,373 11,703 20,433 467.50 587.50 27,067 6,540 5,486 22.00 1 8,120 4,413 2,072 2,436 1,706 2,778 2,322 9,586 3,788 3,565 1,165 1,751 32.70 67.27

26.2 2014 37.7 180 2

,098 8,965 ,822 6,056 1,637 21,546 503.00 580.50 51.802 1 12,543 2 11,678 471.10 2

2,409 22.00 4 8,042 3,461 1 2,012 26.27 2,201 6,625 2,629 5,242 1,362 1,958 9,764 83.75 1,331 3,702 24.8 35.1 2015 128 315

8.50 ,612

11,643 426.80 12,389 51.802 18,372 52 21,543 21,127 456.10 23,627 1,604 71.04 22.00 2,148 4,293 6 1,992 1,418 6,522 3,722 3,572 30.97 7,846 9,665 2,367 2,416 1,774 2,355 30.4 36.9 2016 364 128

,467 0,836 ,091

11,662 51.802 20,506 429.80 518.50 2 12,165 26,859 527.00 17,688 22.00 1 4 4,295 1,568 2,047 1,678 72.59 2,014 30.31 6,637 2,131 2,451 2,378 3,451 7,447 9,476 7,645 36.8 34.7 2017 107 435

1 167 Further information Swisscom Group five-year review 168 Further information Forward-looking statements a result newinformation, of future or otherwise. events Swisscom disclaims any intention or obligation to update and revise any forward-looking whether as statements, communication. this Readers are cautionedto undue not put reliance on forward-looking which statements, speak only the of date of detailedother in risk factors currency fluctuations,behaviour the otherof market participants,of governmental the actions regulators and which are beyond factors materially from in those expressed or implied theMany by statements. these risks of and uncertainties relate to Because these forward-looking are statements to subject risks and uncertainties, actual future results may differ our of certain strategic plans and objectives. include, limitation, without relating statements to our financial condition, resultsof operations and business and This Annual contains Report forward-looking In statements. this Annual such forward-looking Report, statements statements Forward-looking information on posted thewith U.S. Securities and Exchange Commission and in past and future filings, pressotherand releases, reports ­S wisscom Group Companies’ websites. ­ S wisscom’s ability to control or estimate precisely, such as future market conditions, S ­ wisscom’s and Fastweb’s past and future filings including and reports, those filed Publishing details

Key dates The Annual Report is published in English, French and German. > 7 February 2018 Publication of 2017 Annual Results and Further copies of the Annual Report can be ordered from Annual Report E-mail: [email protected] A ­Swisscom company brochure > 4 April 2018 is also available in English, French, Annual General Meeting in Fribourg German and Italian. www.swisscom.ch/inkuerze2017 > 6 April 2018 The Sustainability Report 2017 is published online Ex dividend date at www.swisscom.ch/cr-report2017

> 10 April 2018 General information Dividend payment Swisscom Ltd Head office > 2 May 2018 CH-3050 Berne 2018 First-Quarter Results Telephone: + 41 58 221 99 11

> 16 August 2018 Financial information 2018 Second-Quarter Results Swisscom Ltd Investor Relations > 1 November 2018 CH-3050 Berne 2018 Third-Quarter Results Telephone: + 41 58 221 99 11 E-mail: [email protected] > February 2019 Internet: www.swisscom.ch/investor Publication of 2018 Annual Results and Annual Report Social and environmental information Swisscom Ltd Group Communications & Responsibility Published and produced by CH-3050 Berne E-mail: [email protected] Swisscom Ltd, Berne Internet: www.swisscom.com/responsibility

Translation For the latest information, CLS Communication AG, Basel visit our website www.swisscom.ch Production MDD Management Digital Data AG, Lenzburg The online version of the S­ wisscom Annual Report is available at Printing German: www.swisscom.ch/bericht2017 Stämpfli AG, Berne English: www.swisscom.ch/report2017 French: www.swisscom.ch/rapport2017 Photographer Stefan Walter, Zurich Christian Grund, Zurich

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