The telecoms sector is currently seeing new client demand for convergent services, continued rapid technological change and increasing regulation.

The Swisscom TIME strategy is driving a powerful process of change that will make us n integrated and highly efficient provider of convergent services.

Movement in the communications world

As a Swiss company, Swisscom is active in a rapidly changing sector. The main drivers of change include:

• The continually changing requirements of our residential customers are prompting new-style services: more content, better applications with simpler, technology-independent network access and devices that enable all types of information to be managed more efficiently. These changing needs represent new business opportunities for the company. For customers they offer substantial added value, but on the other hand they also reduce the sustainable value of our traditional voice and data transmission services.
• Ongoing process optimisation by our business customers is also accelerating the pace of change in terms of demand and offerings: the integration of fixed-network with mobile communications, integration of IT services with traditional telecoms services, demand for internationally standardised offerings, and the growing importance of managed services are all expressions of this change. As with residential customers, the traditional transmission business is increasingly becoming a commodity- but at the same time new business opportunities are opening up in these areas.
• Technologies are changing rapidly. Technological integration and standardisation are paving the way for convergent products and services. While technological change is giving rise to new business opportunities, it is also breaking down the traditional value chain and opening up the market to new, innovative providers.

The key challenge for Swisscom now is to identify ways of helping to shape these trends and grasp the associated opportunities. Thanks to our uniquely broad base in Switzerland, excellent level customer loyalty by international comparisons and a high level of technological skills, Swisscom is well placed to anticipate changing customer needs sooner than its national and international competitors, and in so doing gain market share.

TIME strategy

The corporate strategy announced in spring 2006 targets the following three objectives:

• Strengthen Swisscom's competitive position and expand the value chain in the core business in Switzerland,
• Harness additional major potential for efficiency,
• Identify and define growth options outside the current core business in Switzerland or abroad, based on a clear industrial/strategic logic.

The measures to implement this strategy have been divided into three pillars:

Pillar 1: Maximise performance in the home market.

• Thanks to internationally leading (convergent) products and services and excellent customer care throughout Switzerland, we aim to harness new sources of revenue and further expand our already high customer loyalty. Residential customers want unified access to their centrally-stored data - from different types of devices (Triple Screen instead of Triple Play). They expect simplicity and support when dealing with the growing number of technological options, for example in the context of the "digital living room". This added value encourages customers to pay for these new products and services and prevents convergence being downgraded to price cutting. We will be offering our business customers new products and services that seamlessly integrate fixed network and mobile communications.
• The measures defined - for instance, combining the fixed network and mobile network in a single "all-IP network", setting up shared service centres for administrative applications and eliminating duplication in sales - will allow us to achieve substantial cost reductions over the next few years.

Pillar 2: Extend activities with business customers through organic or acquisition initiatives in the following three dimensions:

• We will follow our customers through international expansion or partnerships and offer them our solutions beyond the borders of Switzerland.
• We will gradually expand into other vertical markets where there is clear industrial logic.
• We will achieve additional economies of scale through important new outsourcing transactions.

Pillar 3: Expand by using our core competences in closely related business areas.

• We will apply our competences in other European markets which have not yet reached the level of the Swiss market and are therefore still growing, or in segments of the home market where Swisscom is not yet Number 1.
• We will utilise our expertise in markets that, with increasing digitalisation and broadband applications, are subject to the same pace of change as the telecommunications sector, e.g. areas such as content distribution, telemedicine, advertising and payment services.

While Pillar 1 ("Maximise") is primarily aimed at optimising our current core business, Pillars 2 ("Extend") and 3 ("Expand") are clearly focused on growth.

Summary

Swisscom's strategy pursues the following three main objectives:

• Strengthen competitive position and expand the value chain in the core business in Switzerland.
• Harness additional major potential for efficiency.
• Identify and define growth options outside the current core business in Switzerland or abroad, based on a clear industrial/strategic logic.

This opens up significant new business opportunities that will distinguish Swisscom from the competition, generate growth and, from 2009, should offset the decline in the traditional core business (voice communications and access services).

Rigorous pursuit of this strategy based on the above three objectives will allow you, as shareholders, to share in our sustainable corporate success and in Swisscom's successful future.

Swisscom: "In Time to TIME"

Yours sincerely

Carsten Schloter, CEO