Value-oriented business management

Key performance indicators for planning and managing business operations are revenue, operating income before depreciation and amortisation (EBITDA) and capital expenditure. The enterprise value/EBITDA ratio also permits comparisons of Swisscom’s enterprise value derived from the share price on the balance sheet date with that of similar companies (European telecommunications companies) as well as with the prior year. The members of the Board of Directors and Group Executive Board are paid a portion of their remuneration in the form of Swisscom shares, which are blocked for a period of three years. They are also subject to a minimum shareholding requirement. Variable remuneration based on financial and non-financial targets, the partial payment of remuneration in shares and the minimum shareholding requirement ensure that the financial interests of management are aligned with the interests of shareholders.

In CHF million, except where indicated   31.12.2017   31.12.2016
Enterprise value
Market capitalisation   26,859   23,627
Net debt   7,447   7,846
Defined benefit obligations   1,048   1,850
Equity-accounted investees and other non-current financial assets   (253)   (311)
Non-controlling interests   (11)   8
Enterprise value (EV)   35,090   33,020
Operating income before depreciation and amortisation (EBITDA)   4,295   4,293
Ratio enterprise value/EBITDA   8.2   7.7

Swisscom’s enterprise value increased by 6.3% or CHF 2.1 bil­lion to CHF 35.1 bil­lion in 2017. The rise in stock market capitalisation of 13.7% or CHF 3.2 bil­lion was partially offset by a reduction in net debt of CHF 0.4 bil­lion and in pension liabilities of CHF 0.8 bil­lion. With EBITDA remaining practically unchanged, the higher enterprise value resulted in an increase in the ratio of enterprise value to EBITDA to 8.2 (prior year: 7.7). Swisscom’s relative market valuation is therefore well above the average for comparable companies in Europe’s telecoms sector. The higher ratio is supported by the solid market position Swisscom has achieved thanks to a high level of investment and an attractive dividend policy, as well as the lower interest rates and lower corporate income tax rates in Switzerland as compared to other European countries.