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Swisscom shares boom
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March 3, 2000: 10:42 a.m. ET
Bullish broker's report lifts stock as state dampens hopes of cutting stake
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LONDON (CNNfn) - The Swiss government said Friday that it had no plans to dilute its majority stake in Swisscom, the country's dominant phone operator, though the comments did little to halt the momentum of a stock that has leapt 27 percent in the past two sessions.
The shares were a further 12 percent ahead at 697 Swiss francs in mid-afternoon trade, buoyed by a bullish earnings outlook from CSFB Thursday that powered the stock up 13.5 percent that day. The CSFB report gave a year-end share price target of 1,122 Swiss francs.
However, Swisscom stock had fallen 17 percent this year before Thursday's jump, in sharp contrast to the gains of rival operators such as Deutsche Telekom (FDTE) and France Telecom (PFTE).
"The under-valuation just became so obvious," said George Ruzicka, sector analyst at Bank Vontobel in Zurich. "They are the cheapest in the sector."
Ruzicka, who has a "buy" rating on the stock, played down the impact of the speculation that there might be a new state share sale. He said the CSFB report contributed to the demand for stock, along with a realization among investors that intense fixed-line competition in the Swiss market would have a minimal impact on earnings as the firm concentrates on its cellular and data arms.
The government said it had no imminent plans to sell a second chunk of Swisscom shares after floating a 34.5 percent stake in 1998.Analysts have cited the continued controlling stake held by the government - which removes any immediate prospect of a takeover - as a reason why Swisscom shares have lagged buoyant European telecom stocks over the past six months.
However, analysts said that Swisscom's domestic strength and international expansion through the purchase of debitel, Germany's third-largest cellular operator, confirm its position as a prime takeover candidate if the government cuts its stake below 50 percent. Ruzicka said he expects this to happen within three to five years.
Swisscom announced last December that it might sell part of its Blue Window Internet business, which had 300,000 registered users at the end of 1999 and is valued by analysts at up to 2 billion Swiss francs. Swisscom's latest surge values the whole company at 5.9 billion francs.
Swisscom said Friday it had not finalized plans for a float of Blue Window and said it had no plans to sell a stake in its cellular business, which has 2 million subscribers. The purchase of debitel, which has extensive operations across Europe, increased Swisscom's total mobile user base to 10 million.
Swisscom earned a net profit of 1.56 billion Swiss francs ($938 million) on sales of 10.5 billion francs in 1998 and is due to release 1999 results on Mar. 22. 
-- from staff and wire reports
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