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November 28, 2005

Swisscom boss may quit after government bans takeovers

Jens Alder may quit as chief executive of Swisscom AG after the government stuck to its opposition to foreign takeovers, wrecking the company's plans to buy Eircom Group Plc and bid for TDC AS, the Danish incumbent carrier.

By CBR Staff Writer

With a 66.1% stake in the company, the government can outvote the majority of the board, which is looking for acquisitions abroad as a way of offsetting falling sales at home.

The company’s shares were down 2.64% at CHF 406 ($309.6) as the news puzzled the market. Last week, the Swiss government revealed plans to sell off its majority stake as part of an effort to give the state-controlled carrier greater operating flexibility.

Swisscom refused to confirm that a board meeting was held yesterday to consider the government’s policy. The cabinet will stick to its guns, Dieter Leutwyler, a spokesperson for the finance ministry, told Reuters when asked if a compromise between Swisscom AG’s management and the government was possible.

The justification for the government’s policy is that it could take over a year to privatize the company and overseas takeovers would be too risky for the government. They would prefer to see the money used for dividend.

Cautious politicians would still have memories of how Deutsche Telecom AG and France Telecom SA piled up huge debts through overseas acquisitions and in the case of France, the government had to take part in a bail-out of the company.

Alder’s rumored resignation has not troubled the politicians. Disagreement between owners and management isn’t anything unusual. If the management steps down, it has to be replaced, justice minister Christoph Blocher told weekly SonntagsZeitung.

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