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28 Provisions


In CHF million
 
Termination
benefits
  Dismantlement
and restoration
costs
  Regulatory
and competition
law procedures
 

Other
 

Total
Balance at 31 December 2013   45   481   118   155   799
Additions to provisions   8   162   3   44   217
Present-value adjustments     13   2   1   16
Release of unused provisions   (9)   (6)     (30)   (45)
Use of provisions   (16)   (4)   (17)   (24)   (61)
Additions from business combinations   1       1   2
Foreign currency translation adjustments         (1)   (1)
Balance at 31 December 2014   29   646   106   146   927
Additions to provisions   70     208   23   301
Present-value adjustments     11     2   13
Release of unused provisions   (3)   (62)     (7)   (72)
Use of provisions   (8)   (2)   (4)   (14)   (28)
Additions from business combinations         2   2
Disposals from sales of subsidiaries         (2)   (2)
Foreign currency translation adjustments         (2)   (2)
Balance at 31 December 2015   88   593   310   148   1,139
Thereof current provisions   86     186   79   351
Thereof non-current provisions   2   593   124   69   788

Provisions for employee reduction programme

In the fourth quarter of 2015, Swisscom recognised a provision for personnel reduction costs of CHF 70 million. Swisscom operates in a market characterized by intense competition and fierce pricing dynamics. For this reason, Swisscom has set itself the goal of reducing its cost basis. This is to be achieved through organisational changes, job reductions, optimization of processes and the migration to All-IP technology. In addition, business change will impact the pattern of employment opportunities of Swisscom: job positions in traditional businesses will in part be lost and will be replaced by positions created in new, innovative areas. Swisscom assumes that some 700 employees in Switzerland will participate in the social plan as a result of the reductions primarily in support areas. The associated costs are estimated at CHF 70 million.

Provisions for dismantling and restoration costs

The provisions for dismantling and restoration costs relate to the dismantling of telecommunication installations and transmitter stations and the restoration to its original state of the land owned by third parties on which they are located. The provisions are computed by reference to estimates of future anticipated dismantling costs and are discounted using an average interest rate of 1.48% (prior year: 1.69%). The effect of using different interest rates amounted to CHF 24 million (prior year: CHF 151 million). In 2015, as a result of reassessments, adjustments totalling CHF 55 million (prior year: CHF 157 million) were recorded under property, plant and equipment and CHF 7 million (prior year: CHF 1 million) which was recognised in the income statement. The non-current portion of the provisions is expected to be settled after 2020.

The level of provisions is determined to a substantial degree by the level of estimated future dismantling and restoration costs as well as the timing of the dismantling. An increase of estimated costs by 10% would result in an increase of CHF 56 million in the amount of the provision. A shift in the timing of dismantling by a further ten years would lead to a reduction in the provision by CHF 60 million.

Provisions for regulatory and competition-law proceedings

­In accordance with the revised Telecommunications Act, Swisscom provides interconnection services and other access services to other telecommunication service providers in Switzerland. In previous years, several telecommunication service providers demanded from the Federal Communications Commission (ComCom) a reduction in the prices charged to them by Swisscom. In addition, the Federal Competition Commission (Weko) is conducting various proceedings against Swisscom. In accordance with the Federal Anti-Trust Law, Weko may impose penalties against Swisscom in the event that the competition law has been violated. The level of the penalty is dependent on the duration and severity as well as the nature of the violation. It may be as much as 10% of the revenues which have been generated by the company in question in the last three business years on the relevant markets in Switzerland. In the event that a legally enforceable finding as to market abuse is reached, claims under civil law may be asserted against Swisscom. Any applicable payments will depend upon the date on which legally-binding decrees and decisions are issued.

With its decision of 5 November 2009, Weko levied a penalty totalling CHF 220 million on Swisscom for abuse of a market-dominant position in the case of ADSL services during the period through to the end of 2007. Swisscom appealed on 7 December 2009 against the ruling to the Federal Administrative Court. On 6 October 2015, the Federal Administrative Court in principle upheld the Weko decision and reduced the penalty imposed on Swisscom by Weko from CHF 220 million to CHF 186 million. Following the decision, Swisscom recognised provision of CHF 186 million in the third quarter of 2015. Swisscom does not consider the penalty to be justified and has lodged an appeal to the Federal Court. At the beginning of 2016, Swisscom paid the penalty of CHF 186 million imposed by Weko.

On the basis of legal opinions, provisions for regulatory and anti-trust-law proceedings were recognised and released in the third and fourth quarters of 2015, whereby these are presented on a net basis on procedural grounds.

Other provisions

Other provisions include provisions for environmental, contractual and tax risks. The non-current portion of the provisions will most likely be settled between 2016 and 2018.