Swisscom has agreed to repurchase a 25% stake in Swisscom Mobile from British mobile phone company Vodafone for 4.25 billion Swiss francs ($3.48 billion), in a long-awaited deal.
The debt-financed purchase, which is more costly than analyst expectations of around 3.5-3.75 billion francs, will boost Swisscom's annual profit by around 180 million francs starting in 2007, Swisscom said in a statement on Tuesday.
The purchase price includes and net cash amounting to 200 million francs, Swisscom said. "The transaction will be fully debt financed and is expected to be completed on 20 December 2006."
Vodafone acquired the 25% holding in Swisscom Mobile in March 2001 for 4.5 billion francs.
Swisscom said it would cease dividend payments to Vodafone, resulting in an increase in net income and equity free cash flow annually from 2007 of around 180 million francs net, after deduction of financing costs.
The Swiss government owns around 58% of Swisscom.
Swisscom faces increasing competition, including from cable operator Cablecom, and falling prices, making it difficult for the cash-rich, state-controlled company to grow in its home market.