Goodwill and other intangible assets

In CHF million



Acquisition costs                            
Balance at 31 December 2011   6,227   1,167   1,544   1,095   268   473   10,774
Additions     88   167       626   881
Disposals     (107)   (60)   (7)     (12)   (186)
Reclassifications     69   46       (109)   6
Additions from acquisition of subsidiaries   3   3     9       15
Foreign-currency translation adjustments   (20)   (2)   (4)   (8)   (2)     (36)
Balance at 31 December 2012   6,210   1,218   1,693   1,089   266   978   11,454
Additions     127   196       220   543
Disposals     (349)   (143)   (21)     (55)   (568)
Reclassifications     137   52       (188)   1
Additions from acquisition of subsidiaries   159   2     51   7   6   225
Foreign-currency translation adjustments   38   2   15   18   5   1   79
Balance at 31 December 2013   6,407   1,137   1,813   1,137   278   962   11,734
Accumulated amortisation and impairment losses                            
Balance at 31 December 2011   1,563   769   1,044   583   123   149   4,231
Amortisation     175   260   125   26   60   646
Disposals     (107)   (60)   (7)     (12)   (186)
Reclassifications     2   2         4
Foreign-currency translation adjustments   (15)   (1)   (3)   (4)   (1)     (24)
Balance at 31 December 2012   1,548   838   1,243   697   148   197   4,671
Amortisation     202   230   130   28   88   678
Impairment losses   23   1   1       2   27
Disposals     (347)   (142)   (21)     (49)   (559)
Foreign-currency translation adjustments   27   2   11   11   3   1   55
Balance at 31 December 2013   1,598   696   1,343   817   179   239   4,872
Net carrying amount                            
Net carrying amount at 31 December 2013   4,809   441   470   320   99   723   6,862
Net carrying amount at 31 December 2012   4,662   380   450   392   118   781   6,783
Net carrying amount at 31 December 2011   4,664   398   500   512   145   324   6,543

As of 31 December 2013, other intangible assets included advance payments and uncompleted development projects of CHF 190 million (prior year: CHF 223 million). Apart from goodwill, there are no intangible assets with indefinite useful lives. As of 31 December 2013, accumulated impairment losses on goodwill of CHF 1,598 million were recorded. Goodwill arising from investments in associates is classified as part of the investments in associates.

Auctioning of mobile phone frequencies

The GSM and UMTS licences of Swisscom Switzerland expire at the end of 2013 and 2016, respectively. In November 2010, the Federal Communication Committee (ComCom) delegated to the Federal Office for Communication (Bakom) the task of granting all currently available licenses as well as those which have or will become available at the end of 2013 and 2016, respectively. In the first quarter of 2012, as part of the licence granting process, all mobile phone frequencies were auctioned off with a uniform duration ending in 2028. Swisscom successfully participated in the auction and acquired thereby mobile phone frequencies for a total value of CHF 360 million which were recognised as other intangible assets. Settlement was made in the third quarter of 2012.

Goodwill impairment testing

Goodwill is allocated to the cash-generating units of Swisscom according to their business activities. Goodwill acquired in a business combination is allocated to each cash-generating unit expected to benefit from the synergies of the business combination. The allocation of the goodwill to the cash-generating units is as follows:

In CHF million   31.12.2013   31.12.2012
Residential Customers   2,630   2,495
Small and Medium-Sized Enterprises   656   656
Corporate Business   734   734
Wholesale   45   45
Cash-generating units of Swisscom Switzerland   4,065   3,930
Fastweb   604   594
Other cash-generating units   140   138
Total goodwill   4,809   4,662

Goodwill was tested for impairment in the fourth quarter of 2013 after the business planning had been completed. The recoverable amount of a cash-generating unit is determined based on its value in use, using the discounted cash flow (DCF) method. The projected cash flows are estimated on the basis of the business plans approved by management in general covering a three-year period. A planning horizon of five years is used for the impairment test of Fastweb. For the free cash flows extending beyond the detailed planning period, a terminal value was computed by capitalising the normalised cash flows using a constant growth rate. The growth rates applied are those customarily assumed for the country or market. The key assumptions underlying the calculations are as follows:

2013 2012

Disclosures in %
growth rate
growth rate
Residential Customers 7.56 5.09 0 7.33 4.63 (1.0)
Small and Medium-Sized Enterprises 7.44 5.09 0 7.32 4.63 (1.1)
Corporate Business 7.78 5.09 0 7.47 4.63 (0.9)
Wholesale 7.35 5.09 0 7.31 4.63 (1.2)
Fastweb 10.90 8.00 1.0 10.34 7.60 1.0
Other cash-generating units 6.3–11.9 5.2–9.7 0–1.5 6.9–11.8 5.7–9.7 0–1.5

The application of pre- or post-tax discount rates (WACC pre-tax and WACC post-tax) results in the same value in use. The discount rates used take into consideration the specific risks relating to the cash-generating unit being considered. The projected cash flows and management assumptions are corroborated by external sources of information. The approach taken and assumptions made for the impairment tests of Swisscom Switzerland and Fastweb are presented below.

Swisscom Switzerland

The cash-generating units of Swisscom Switzerland are the operating segments Residential Customers, Small- and Medium-Sized Enterprises, Corporate Business and Wholesale. The impairment test of goodwill is conducted on these cash-generating units. The recoverable amount was determined based on the value in use using the discounted cash flow (DCF) method. The forecast of future cash flows is based upon the three-year business plan approved by management. For the free cash flows extending beyond the detailed planning period, a long-term growth of zero was assumed (prior year: -1.2% to -0.9%). The change from the prior year is a result of structural changes in the telecommunications sector leading to improved growth prospects. As of the measurement date, the recoverable amount at all cash-generating units, based on their value in use, was higher than the carrying amount relevant for the impairment test. Swisscom is of the opinion that none of the anticipated changes in key assumptions which can be reasonably expected would cause the carrying amount of the cash-generating units to exceed the recoverable amount.


The impairment test in Fastweb was undertaken in the fourth quarter of 2013. The recoverable amount was determined on the basis of the value in use using the discounted cash flow method. The basis for projecting future cash flows is the business plan prepared by management for the five years 2014 to 2018. This plan takes into consideration historical empirical values and management’s expectations regarding the future development of the relevant market. The impairment test took into account the following assumptions:

Assumptions   Description
Average annual growth in revenue during the detailed planning period   In the business plan, an average annual growth in revenue of 4.1% is expected for the detailed planning period up to 2018. In the prior year, an average annual growth in revenue of 3.6% had been expected for the detailed planning period 2013–2017.
Projected EBITDA margin (EBITDA as % of net revenue)   The projected EBITDA margin in 2018 is 41%. In the previous year, an EBITDA margin of 36% was assumed.
Projected capital expenditure rate (capex as % of net revenue)   In the period up to 2018, it is anticipated that capital expenditure in relation to net Revenue will decline to less than 17% (prior year: 16%) as a high Level of capital expenditure in the Network infrastructure has already been made.
Post-tax discount rate   The post-tax discount rate is 8.00% (prior year: 7.60%) and the related pre-tax discount rate is 10.90% (prior year: 10.34%). The discount rate is calculated using the Capital Asset Pricing Model (CAPM). This latter comprises the weighted cost of own equity and of external borrowing costs. The risk free interest rate on which the discount rate is based on, is derived from ten-year bonds issued by the German government with a Zero interest rate. A premium for the country risk of Italy is then added.
Long-term growth rate   The normalised free cash flows in the terminal value were capitalised with a constant growth rate of 1.0% as in the prior year. The growth rate employed corresponds to that customarily used for the Country and market based upon experience values as well as future projections and which are corroborated by external information sources. The growth rate employed does not exceed the long-term average growth rate customarily used for the country and market.

As of the date of the impairment test, no impairment of goodwill resulted. The recoverable amount exceeded the carrying amount by EUR 1,176 million (CHF 1,446 million). The following changes in material assumptions lead to a situation where the value in use equals the carrying amount:

    Assumptions   Sensitivity
Average annual growth rate through 2018 with the same EBITDA margin as in the business plan   4.1%   0.4%
Projected EBITDA margin 2018   41%   33%
Capital expenditure rate 2018   17%   23%
Post-tax discount rate   8.00%   10.53%
Long-term growth rate   1.0%   –2.5%