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28 Provisions


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

Other
 

Total
Balance at 31 December 2014   29   646   106   146   927
Additions to provisions   70     208   23   301
Present-value adjustments     35     2   37
Release of unused provisions   (3)   (86)     (7)   (96)
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
Additions to provisions   50   5   26   68   149
Present-value adjustments     56     2   58
Release of unused provisions   (30)   (105)     (11)   (146)
Use of provisions   (29)   (7)   (186)   (16)   (238)
Balance at 31 December 2016   79   542   150   191   962
Thereof current provisions   74     10   98   182
Thereof non-current provisions   5   542   140   93   780

Provisions for employee reduction programme

In the fourth quarter of 2016, Swisscom recognised a provision for personnel reduction costs of CHF 50 million. Swisscom operates in a highly competitive market characterised by radical transformations, fierce rivalry and pricing pressures. Swisscom has set itself the goal of reducing its cost basis from 2015 through to 2020 by over CHF 300 million. This is to be achieved through organisational changes, job reductions, optimisation of processes and the migration to All-IP technology. Resources will thus be freed up in order to continue to invest in infrastructure, new fields of activity and to exploit opportunities resulting from digitalisation. The measures planned will result in the elimination of positions in Switzerland and in employees participating in the social plan.

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 1.18% (prior year: 1.48%). The effect of using different interest rates amounted to CHF 47 million (prior year: CHF 24 million). In 2016, the cost index used for computing the dismantling costs was lowered, the impact of which aggregated CHF 103 million. In 2016, as a result of reassessments, adjustments totalling CHF 49 million (prior year: CHF 55 million) were recorded under property, plant and equipment and CHF 4 million (prior year: CHF 7 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 51 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 74 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. The determination of the prices for access services during 2013 to 2016 is still pending. 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 is found to have 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. Claims under civil law against Swisscom were asserted which might prevail in the event that a legally enforceable finding as to market abuse is reached. Any applicable payments will depend upon the date on which legally-binding decrees and decisions are issued.

In 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 has appealed against the ruling to the Federal Administrative Court. In September 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. As a result of the decision, Swisscom recognised a 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 as no suspensive effect was granted.

On the basis of legal opinions, provisions for regulatory and competition-law proceedings were raised and then released in the third and fourth quarters of 2015 which are presented on a net basis for procedural reasons.

Other provisions

Other provisions include provisions for environmental, contractual and tax risks. The non-current portion of the provisions will most likely be settled in 2017 and 2018.