2 Segment information

Reportable operating segments are determined on the basis of a management approach. Accordingly, external segment reporting reflects the Group’s internal financial reporting to the Chief Operating Decision Maker. Reporting is divided into the segments “Residential Customers”, “Small & Medium­-Sized Enterprises”, “Enterprise Customers”, “Wholesale”, and “Network & IT” which are grouped under Swisscom Switzerland, “Fastweb”, and “Other Operating Segments”. “Group Headquarters”, which includes non-allocated costs, is reported separately.

Group Headquarters does not charge any management fees to other segments for its financial management services, nor does the IT, Network & Innovation segment charge any network costs to other segments. Other intersegmental services are cross-charged at market rates. The results of the segments Residential Customers, Small & Medium-Sized Enterprises, Enterprise Customers and Wholesale correspond to a contribution margin before network costs. The results of the IT, Network & Innovation segment consist of operating expenses and depreciation and amortisation less the revenue from the rental and administration of buildings and capitalised costs and other income. The sum of the segment results of Swisscom Switzerland corresponds in aggregate to the operating result (EBIT) of Swisscom Switzerland. The segment results of Fastweb and Other Operating Segments correspond to the operating result (EBIT) of these units. The latter reflects the net revenues from external customers and other segments less segment expense and depreciation, amortisation and impairment losses on property, plant and equipment and intangible assets. Segment expense includes the costs of goods and services purchased, personnel expense and other operating costs less capitalised costs and other income.

Segment expense contains the ordinary employer contributions as pension costs. The difference between the statutory employer contributions and the pension cost in accordance with IAS 19 is disclosed in the column “Elimination”. For the first nine months of 2016, an expense of CHF 55 million is disclosed under “Elimination” as a pension cost reconciliation item in accordance with IAS 19 (CHF 54 million in the first nine months of 2015).

Unrealised gains and losses may arise as a result of recharging services and sales of assets between the segments. These are eliminated and are reported in the segment information in the column “Elimination”.

Net revenue and the results of the individual segments for the first nine months of 2016 are as shown below:

Net revenue and the results of the individual segments for the first nine months of 2015 are as shown below: