ZURICH (AFX) - Swisscom AG's new CEO Carsten Schloter warned that margins will continue to fall in the former monopoly's core fixed line business, and that as a result the company will continue to cut headcount 'by a few percent' every year.
Speaking in an interview with NZZ am Sonntag, Schloter said: 'In our core business we have to live with lower margins because we are unable to compensate for sales erosion with cost cutting.'
He also said that opening up access to the last mile will 'increase pressure' on the basic line rental fee, which currently stands at 25.25 sfr per month.
The company is losing customers in its home market to cable operator Cablecom, owned by Liberty Media Inc, thanks to Cablecom's quadruple-play offering of television, internet, telephony, and mobile.
Schloter said that Swisscom plans to launch TV services in the second half of 2006, and that it is winning back some customers.
Regarding acquisitions, Schloter said Swisscom is on the lookout for smaller deals in new areas such as wireless LAN, both in Switzerland and abroad.
The company is barred by the government, which owns a majority stake, from acquiring 'grundversorger' -- telecom companies that are obliged by law to ensure a certain level of coverage.
As a result of this straightjacket, Schloter said that Swisscom's options are limited when it comes to acquiring other telecom companies, except for alternative mobile operators, for example.
But he said that a stumbling block to this might be the government's block on Swisscom from taking on too much debt, and that in any case valuations in the telecoms sector are prohibitively high at present.
'I think that there is a stock market bubble being created at present. If this bursts, then big acquisitions will become an issue for Swisscom again. But then the framework set down by the government could be too tight,' he said.
Schloter's predecessor, Jens Alder, stepped down after the Swiss government objected to plans to acquire Eircom PLC. The government plans to sell it remaining stake. Simon.Sturdee@afxnews.com SCS/hjp COPYRIGHT Copyright AFX News Limited 2005. All rights reserved. The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News. AFX News and AFX Financial News Logo are registered trademarks of AFX News Limited