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Wall Street Breakfast

Swisscom AG (NYSE:SCM)

Interim 2007 Earnings Call

August 8, 2007, 3:00 AM ET

Executives

Bart Morselt - Head of IR

Carsten Schloter - CEO

Ueli Dietiker - Head of Group Finance and Controlling

Analysts

Andrew Lee - Citigroup

Panagiotis Spiliopoulos - Bank Vontobel

Hannes Wittig - JP Morgan

Maurice Patrick - Bear Stearns

Graeme Pearson - Lehman Brothers

Nicolas Didio - Exane BNP Paribas

Charlotte Perfect - UBS

Nicolas Cote-Colisson - HSBC

Jacques De Greling - Ixis Securities

Frederic Boulan - Morgan Stanley

Argiro Papadopoulou - Merrill Lynch

Roberta Ciaccia - Kepler Equities

Presentation

Bart Morselt - Head of Investor Relations

The title of this presentation, "more outlook/share,"actually refers back to the fact that from now on we think you will get more EBITDA for each Swisscom share held. And how that happens, we can have a look later on.

Page 2, the agenda structure for today; we've divided the presentation into two main blocks. Firstly, Carsten Schloter, we will put the first half year results in context of our three pillar strategy, talk about the capital structure in conjunction with the payout policy, and then discuss the new organizational structure before finishing with the updated outlook for the Group.

Secondly, Ueli Dietiker will present how we will consolidate Fastweb going forward, discuss our decision to delist and deregister our ADRs in the US before completing with the segmental results for the first half.

Thereafter the operator will take over to handle the Q&A session.

With that, I would now like to hand over to Carsten Schloter to start the presentation. Carsten?

Carsten Schloter - Chief Executive Officer

Thank you, Bart. Good morning ladies and gentlemen and also welcome from my side. Let me start by providing a quick overview of the main events in the first half of this year.

In monetary terms, the acquisition of Fastweb was our almost important action during the first half year. We have now started congregating Fastweb from 22nd May on and are looking forward to an intense cooperation. Last week Mario Rossi who used to be Swisscom's CFO has started as Fastweb's CFO in Milan.

Next for the Fastweb transaction; our capital structure has of course also been influenced by the repurchase of 25% stake in Swisscom Mobile that we completed with Vodafone as well as the sale of Antenna Hungária for just over 0.5 billion Swiss francs.

The sale of Antenna is not yet accounted for this in the interim results, but has, however, been booked in July of this year. I will come back to our capital structure in quite a bit more detail later on.

We have also announced a new payout policy earlier this year that boils down the Company paying half of its operating free cash flow of any given year in the following year. This payout policy is tied in with our capital structure, in that, potentially higher payments could be made to shareholders once our net debt EBITDA ratio stands below two times.

Also recently we have announced a new organizational structure that entirely flips the organization from a product-driven into a customer segmentation-driven structure. With the aim to deliver a customer all the service from a single source at lower cost. The operational trends for the first half year have been rather good, with especially the second quarter being strong. Despite too high costs for new businesses, Bluewin TV and Betty, Swisscom managed to deliver stable results for its core business. Finally, you will understand that Swisscom now updates its guidance for the year 2007 to include latest developments and the inclusion of Fastweb.

On slide 4 of our presentation, I would like to put the result in the context of the three pillars of our strategy. Maximize, Extend, Expand. As pointed out at several occasions, Swisscom, like all incumbents, is exposed to a certain level of erosion on its traditional business. This erosion is driven by several factors including regulation, price pressure and replacement of traditional products by new cannibalizing services. As our business is largely fixed cost driven, one can assume that such erosion of traditional business is basically impacting the EBITDA one-to-one.

In the first half, we have seen some 200 million in decline of traditional business representing a year-over-year revenue reduction of 4.2%. New revenues from broadband and mobile-data growth accounted for roughly 90 millions Swiss francs. As these revenues come on the back of existing platforms and investments, we have very good margins in this business.

In the pillar Extend, we developed new business such as IT and Solutions for corporate customers as well the IPTV for the residential segment. Here we believe a normalized EBITDA margin of around 10% is achievable, once the business is in stable waters. As can be seen from this slide, this is not yet the case with the EBITDA growth year-on-year being negative. This is solely a result from the high start-up cost of Bluewin TV, which has caused an EBITDA erosion year-on-year of around 44 million Swiss francs.

In the pillar, Expand, we're investing for growth in adjacencies; we witnessed a similar phenomenon. Here the start-up phases for especially Betty and broadband in Eastern Europe have caused negative EBITDA contribution. However, we will now stay to take the fruit from the purchase of Fastweb with revenues in the first six weeks of consolidation amounting to 281 million Swiss francs, which with a margin of nearly 30%, means absolute EBITDA of 79 million francs. This is now the first time that we see both from revenues and EBITDA, the growth curve becoming quite significantly positive with more to follow in the second half of the year. It is also worth noting that the results of Fastweb are in line with the expectations that we build our acquisition decision on and that we have built our acquisition business case on.

Let us now move to slide 5 for a discussion of where we stand from a capital structure perspective. As can be seen here, if you want to blame somebody for the complexity of the slide, you have to blame Bart Morselt. But as can be seen here, we ended 2006 with a net debt number of 4.4 billion Swiss francs after concluding the transaction with Vodafone. Dividends of 17 francs per share were paid in April, leading to a cash out of 900 million Swiss francs.

In grey font, we have printed the operating free cash flow elements for the first half of 2007. Operating free cash flow is our basis for the payout for shareholders and consists of EBITDA, CapEx, changes in net working capital and dividends paid to our shareholders. The operating free cash flow for the first half year stood at around 1 billion Swiss francs. Also in the first half we acquired Fastweb for a total consideration of 6.9 billions francs which includes 1.8 billion francs of net debt from Fastweb. This together brought us to a net debt of 11.4 billion for mid-year.

Now clearly, we will again generate operating free cash flow in the second half of the year. I can, for obvious reasons, not tell you how much each element of the operating free cash flow will exactly be, and therefore cannot be ultimately precise on the exact net debt number to be expected by yearend. However, please also bear in mind that we have sold Antenna Hungária, a transaction that will allow us to reduce our net debt position by around 0.5 billion francs. And therefore, taking everything into consideration, the likely range of net debt by yearend is some 10 billion to 10.5 billion Swiss francs, which means that we will be near our managerial goal to have a net debt that stands around two times EBITDA. The main reasons for this managerial goal being our current strong credit ratings which currently strand at A2 at Moody's and at A- for Standard & Poor's, both with a stable outlook. These ratings are beneficial in us accessing relatively cheap debt funding and that's the reason for this managerial goal of two times EBITDA considering our net debt.

We have also visualized on the bottom of this slide, the dependency of our payout policy on the capital structure, and I suggest that we go a little bit more deeply now into this payout policy on slide 6. As long as Swisscom end the year with net debt-to-EBITDA above two times, our payout policy is that we return around half of operating free cash flow to our shareholders. The instruments used are firstly dividends, amounting to at least what have been paid in the prior year and top up to 50% of operating free cash flow by using share buybacks.

Once the company achieves net debt-to-EBITDA falling below two times, then there is the option to pay more. Just for illustration purpose, if we assume that Swisscom at the end, beginning the year would have 1.8 net debt-to-EBITDA then there is the option to pay difference between two times and the 1.8, which means 0.2 EBITDA extra to shareholders. I repeat it's an option, as the company will also have to assess whether these funds could be invested even better elsewhere. If not, then the case for extra shareholders return is made.

With that let me now discuss, quickly, the new organizational structure as we are putting this in place with full launch to 2008, but the management structure being already in place since last week, since the 1st of August. As I pointed out in my introduction, Swisscom would like to be seen as platform competitor by being able to offer a one-stop shopping for a unique broad range of products and services that Swisscom can offer to its customers. In order for that to happen, we need to resolve the current product-oriented companies, such as Swisscom mobile and solutions into segments that can deliver all these products to customers at the same time and at lower cost. Therefore we have now developed the customer segmentation approach that at the same time ties in exactly with our strategy framework.

The main units in this set up within Swisscom will be residential, SME, and large account business, supplement with a very specific IT unit for corporate accounts. This unit will be focusing network capacity from system networks and IT that operates on networks and simultaneously develop these into single-all IP network. Partially inside and partially outside of Swisscom, the main operations will be Fastweb and Swisscom Participations. Of particular importance to you, will also be the external reporting structure going forward; also I cannot give definitive details about this yet. You can be assured that from 2008 the reporting structure would be reflective of the organizational structure shown here.

Ladies and gentlemen, let me now conclude this first half year result presentation from my side, and before handing over to Ueli Dietiker for more details, by presenting our full year guidance 2007 on slide eight. The top line outlook for the full year including Fastweb is expected to be 11.2 billion to 11.3 billion Swiss francs. This being a range has to do with both the uncertainties around development of the exchange rate euro to Swiss franc as well as with normal range of possible outcomes on this large-scale, well above 10 billion annual revenues.

Our total revenues, we expect Fastweb to deliver some 1.8 billion Swiss francs for the period following the 22nd of May and until the end of the year. Our outlook for EBITDA is 4.4 billion to 4.5 billion Swiss francs, which includes around 600 million for Fastweb. I will come back to this in more detail in a minute. We also think that our CapEx for 2007 will most likely land between 1.9 and 2 billion Swiss francs including some 500 million francs for Fastweb. Here it is perhaps good to understand that in the CapEx number included is an extra 100 million Swiss francs that Fastweb would spend on expanding its metric footprint to more than 50% of the Italian households.

On page 9, a few more words about the evolution of EBITDA and therefore this guidance. As you are aware we have recently worked hard to ensure that we align the definitions of EBITDA between Fastweb and ourselves. This slide shows we are starting based on our previous guidance on the last half. Swisscom had 3.9 billion Swiss francs as expectation for 2007, whereas as we first guided for nearly €60 million.

If you use an exchange rate of 1.66 francs per €1, the resulting total would have been 4.9 billion Swiss francs for the full year... for the full year under the assumption that Fastweb would have been counted from the 1st of January.

At Fastweb we have looked at several issues on the EBITDA definition, and we have concluded that the provision taken by the company for risk and doubtful debt for customers should newly also be reported above the EBITDA line. The impact on a full year basis is a correction to Fastweb's EBITDA of around 100 million Swiss francs. At the same time we have started capitalizing certain cost incurred at Swisscom relating to the installation of Bluewin TV. The cost have so far all been expanded which on general reporting standards, is not usual practice.

The effect on the overall picture is, however, negligible. Having now created EBITDA definitions that are the same between Fastweb and Swisscom, the next question is whether there are uptakes to be expected on standalone basis for each of the two companies.

Firstly with Fastweb, we do not see a need to reduce the expected EBITDA further. This, however, is under the assumption as already in the beginning of the year that a ruling on the reverse interconnect with Telecom Italia is signed last in 2007. And so ruling does not come in 2007 is going to have a negative impact on the EBITDA for Fastweb of up to €60 million compared to guidance. However, it will then only be a deferred decision.

Secondly, at Swisscom, we expect a number of smaller items that may have a marginally negative impact, however, this is not sure yet and therefore we have created a range of up to 100 million impact. The conclusion is that the combined guidance on a pro forma basis would lead to 4.7 billion francs to 4.8 billion francs on EBITDA, always assuming a full year consolidation. We are drawing from that the number... the actual result first before closing of the deal lead to an expected EBITDA range that will be reported for 2007 of 4.4 billion to 4.5 billion Swiss francs.

In conclusion, as Swisscom shareholders you can now expect at least 13% more EBITDA per share with more to follow in 2008.

With that I would like to hand over to Ueli Dietiker, our new CFO, to discuss the reminder of the presentation.

Ueli Dietiker - Head of Group Finance and Controlling

Thanks Carsten. Ladies and gentlemen, also warm welcome from my side. In the next minute I would like to discuss the mechanics of the Fastweb consolidation, the process for the New York Stock Exchange, [indiscernible], and financial half year '07 results for the group and the segment.

Let's now move to slide 11 to explain the consolidation mechanics for Fastweb. This slide may seem somewhat complicated, so let me firstly explain its effects. Quite comfortably indicated on the P&L items and how this P&L items impact the cash flow statement going forward. Logically we have shown Fastweb standalone, Swisscom standalone, and the consolidated group.

Let us now start at the Fastweb. Future profit before tax at Fastweb also consecutive PBT for cash flow purposes. Fastweb's future tax on the P&L, however, will not translate into a cash item. As the company has considerably tax loss carry-forward. Hence, Fastweb's future P&L net income will be lower than this cash earnings. This will apply until at least '10 and it is also under assumption that depreciation, CapEx are more or less in line going forward.

If we do the same for Swisscom standalone then the picture looks slightly different. Into the course basically Swisscom will have to pay similar taxes as what we chose in the P&L. It is a steady comparing differences but mechanically the P&L cash flow charges for tax should be similar.

Going to consolidate, there are a few extra effects coming in. We look at the very fiscal past severance [ph] income to arrive at a consolidated profit before tax. Then we will have to adjust the P&L for so-called PPA, or 'Purchase Price Allocation Effects.' It is the annual depreciation that needs to be done on the part of the goodwill that will be allocated to intangible assets, mainly to customer contract. This effect is difficult to forecast but you can find a non-binding indication of the effect in the footnote of the page. The important takeaway on this PPA is that it will be no cash effective, only visible on the P&L.

Secondly, we will have to withdraw from both P&L, cash flow statements the acquisition interest. Thirdly, we will have to withdraw a minorities effect of cost that's continuing at 18% growth on the P&L. However, as we will... not planning future dividend payments apart from the exceptional diffusion this October that minority defect will not impact the future cash flow statement. The result of this affect in case of minorities is that cash earning before tax can be expected to be marginally higher than the P&L profit before tax.

Finally, it's important to understand that the group combined tax issued come in below Swisscom standalone, average rate of 22%. Simply because of, for the foreseeable future there will be no significant tax payable. In conclusion, and this may also be seen by direct dilution versus accretion purposes. On the bottom of the slide we conveyed that the acquisition will more rapidly become cash flow accretive while on net income this may take a little bit longer. Before it would be important that you fully understand this mechanics in order to prevent mishaps when you start modeling the combinations, future P&L and cash flow.

On slide 12, I would like to take a look at the rational and process of delisting our shares from the New York Stock Exchange and deregister with SEC. In fact the case of other leading companies, all the Swiss companies there it is for the following reason: The low revenue in the US accounted for less than 3% as an annual average global priority. The relatively high administrative expense, the recent simplification of the deregistration process by the SEC and our clear commitment to continued high standard of corporate governance, transparency and reporting. To carryout the effective delisting act certifies almost the current ADR program in US is to be converted from level 3 to level 1. Under current account trading current holders of ADR will be able to retain their shares or exchange them for ordinary Swisscom AG shares in this way.

On September the 4th after the ADR program has been modified we will also apply for deregistration for securities in accordance with the US Securities Exchange Act using Form 15F. The deregistration will be effective 90 days later.

Now let's have a look at the group key financials in the first half of year '07 on page 13. This slide shows that all key figures went up. Top-line increased by 322 million and EBITDA by 229 million Swiss francs. The most important change in EBITDA year-over-year will be NOI on the next slide in more detail.

Depreciation and amortization in the first six months rose by 15.8% mainly due to Fastweb, 72 million and a key parameter of goodwill in the tangible assets, 39 million, which also implies that EBIT grew somewhat less than EBITDA percentage.

Despite having higher interest expense the repurchase of 25% stake in Swisscom Mobile from Vodafone and the acquisition of Fastweb. The next financial expense increased only by 50 million because of a gain from hedging activities related to Fastweb.

Dependent on the 25% Swisscom Mobile repurchase becomes ardent from the minorities decline. Here we saved 154 million in leads compared to the last year. The 8 million for the first half year '07 is largely the minorities charge for the 49% help by our partner PubliGroup in Swisscom directory.

Mainly as we said, the lower minority charges and the fact that we had provisions last year's impressive results is the net profit attributable to equity holders of Swisscom now being 24% higher than last year bottom line. Thanks for the lower number of outstanding shares from the payback program of last year EPS grew even high 75%.

Let's now go to the EBITDA analysis on our next slide. Comparing the operational results year-over-year shows a positive change of 229 million. A like-for-like comparison required several elements to be considered for only. First, a one-off charge of 180 million for the LRIC provisions. Secondly, a revision of 49 million for risk from projects and outsourcing business at system IT services, and so this well premium resulted from changed roaming contract. It explains to us an EBITA effect of 217 billion, this explains 95% of the total change of 229 million.

The operational EBITDA increase of 12 million were mainly driven by the following payments. First-time consolidation of Fastweb with an impact of 79 million. This contribution was over compensated by additional costs for Bluewin TV of 4 million and Betty TV for around 59 million.

A book gain from a real estate sale and cost sales after working explain most of the rest. In summary, group MCA went up by 13% but on a comparable base EBITDA ratio less change year-over-year, thanks to the first time consolidation of Fastweb.

And now some words on each of the segment let's start with Fixnet. Fixnet net revenue fell year-over-year by 6.7% to 2.2 billion. The decrease in revenue from traffic resulting from key competition lowering inter-segment revenue from reduced revenue with solutions was only partially be offset by increase in access revenue resulting from ongoing growth in BB lines, broadband lines. The decline of retail traffic revenues of 5.6% year-over-year is above all attributable to the pressure of competition with cable companies and the continuing migration of internet traffic to broadband line.

Our revenue from all fixed assets fell by 31.8% to total of 133 millions. The decrease is mainly due to a decrease in the volume of transit traffic with weak margins, as well as, price reductions in interconnection carrier. Access revenue rose by 3.1% to a total of 1.1 billion and now represents 55% of total revenues with external customer. The number of broadband lines increased by 22% to 1.5 billion lines of which 71% are retail customers. The number of analog and digital access lines decreased by 2% to 3.7 billion. Mainly as a result of the market entry of cable companies and substitution to mobile telephony. Decline in the third fourth of '07 was only 15,000 access line.

In spite additional cost for IPTV of 44 million, the EBITDA went up by 5% year-over-year. And EBITDA margin grew by 7% to 42%. This is, however, due to the LRIC provisions of henceforth 8 million [ph] booked in Q2 of last year.

The increase in CapEx is mainly due to development of the network infrastructure for VDSL technology.

Moving on to our mobile results on the next slide. Mobile top line increased by 1.9% to 2 billion. However, without the increase in revenue from acquisitions and the reduction in revenue resulting from retrospective adjustment of international roaming tariff in the previous year, there are slight... there was a slight decline in revenue.

The lower traffic and subscription prices resulting from new tariff models would not be fully offset by a higher number of subscriber and the growth from new data services.

The number of subscribers grew by net 307,000 to 4.8 million of which 60% are postpaid subscribers. At the end of June '07 the Liberty family and 1.9 million subscribers and the prepaid product Embrach mobile [ph] 317,000 customers.

New tariff models and further price adjustments for termination at the of '07 led to an ARPU decrease of 5% to 6% [ph], the AMPU decreased due to the launch of new product and more favorable earnings from under 22 minutes to under 29 minutes.

Revenues from connectivity base and value added services rose year-over-year by 14.9% to 370 million as a result of increased use and the launch of new data services. The number of SMS messages increased by 8%. Other revenue increased by 27% to 173 million it is mainly attributable to revenue from Swapcom and Minick, two subsidiaries acquired in '06.

EBITDA grew by 23 million year-over-year to a total of 960 million and corrected for the positive roaming effect of 12 million in Q1. And our '06 EBITDA even lost better. This solid operating performance itself was from an ongoing excellent churn management which handled postpaid churn at very low levels.

And now some words about segment solutions on page 17. Net revenue developed year-over-year to 586 million thanks to a strong Q2 '07. Revenue from voice and data connectivity services decreased by 9.8% to 249 million as a result of the continued keen competition, substitution of traditional by more modern technology. The business field communication and collaboration saw a rise in revenue of 50 million partially thanks to the acquisition of business activities from Siemens Enterprise Network at the end of February '06 and the increased number of projects.

The rise in revenue in the business process optimization division as a result of new customer interaction management product and an increase in value of value added services. A number of major outsourcing contracts were signed in '06. In the first half '07 generated a near doubling of revenues to 30 million Swiss francs. The decrease in other revenue of 20% to 54 million came partially... principally from lower revenue due to the declining number of rental agreements for PBC [ph].

Segment expenses fell by 4.4% to 542 million and this is primarily due to revenue related lower purchasing volumes from other segments and cost savings. EBITDA went up 40% to 53 million, thanks to a strong second quarter contribution of 35 million, mainly coming from cost savings.

And finally the number of FTE went up due to a sales unit transfer for mobile solution.

As a result of the successfully concluded acquisition process with the Swisscom stake of 82% we now consolidate the Italian company in our account from May 22nd, '07 onwards. Fastweb itself reported last Friday their first half year results as follows: top line went up by 23.5% to €740 million. EBITDA of €224 million increased by 75%, partially thanks to one-off effects of €443 million [ph] mostly explained by the arbitration case with Telecom Italia. As the effects on TI case was booked prior to May 22nd, this effect has not been consolidated into results on Swisscom's account for the period from May 22nd until 30 June.

The underlying operational results for Fastweb excluding the external effect of €180 million and represents a growth of 41% year-over-year. CapEx for the first six months '07 amounts to €249 million which is 4.6% higher year-over-year.

Yesterday our Board of Directors approve the amalgamation of Fastweb to further expand their network in Italy with the following objectives. Targeting 164 new local exchange and 1.4 million additional potential customer. Expanding current direct footprint from 24% to 50% of total 22 million Italian households and to 77% including broadband. As a consequence of this network expansion, CapEx in Fastweb in '07 increased by €60 million.

Let's now finalize today's presentation with the two remaining segments. In the segment other, this comprises Swisscom IT Services, Swisscom Broadcast, Antenna Hungária, Accarda Group, Hospitality Services, Swisscom Airbites and Betty. We saw net revenue increase year over the year by 11% to €706 million. The increase in revenue at Swisscom IT Services of 26% to €206 million can be attributed mainly to higher revenue from IT outsourcing. The increase in revenue at Hospitality Services of €50 million to €40 million is on one hand attributable to the increase in use of Internet connection services in hotels and conference centers by business customers. On the other hand, to an extension of business in the USA following acquisition of Core Communications in June '06. Despite provisions open for IT Services of €49 million in 2006, EBITDA fell by 44% to €22 million and debit by €45 million to minus of €120 million exclusively due to the cost for Betty TV is €9 million and the payment of goodwill and intangible assets of €39 million.

The Corporate segment includes Group Headquarter divisions, shared services for Group companies, the real estate company Swisscom Immobilien and the employment company

Worklink. Net revenue decreased by 3% as a result of fewer transactions between Group Headquarter divisions at Swisscom Group companies. EBITDA increase is mainly thanks to gains from the sale of a real estate and cost savings by Swisscom Immobilien. Also, we had lower cost for restructuring this half year than last year. The CapEx decline can be attributed to a group-wide project run by Swisscom Immobilien in the previous year to restructure workplaces.

All in all, I believe this is a decent set of results and a good outlook for the full year '07. At this point, I would now like to hand over to the operator to answer our questions.

Question And Answer

Operator

Thank you to Ueli Dietiker and to Carsten Schloter. [Operator Instructions]. First question coming from Citigroup Andrew Lee.

Andrew Lee - Citigroup

Yes, good morning guys. Two questions, one on fixed. Could you give some details to the competition you are seeing from the cable operators at the moment and how you see the competitive climate developing into the second half of the year? Just as a sub question to that, could you explain your IPTV take up and whether that's due to difficulties in roll out or the competitive climate in TV? And secondly, in Solutions, could you just give us a little more detail on the cost efficiencies you have achieved and whether you view the second quarter margin of greater than 10%, around 14%, as sustainable going forward? Thanks.

Carsten Schloter - Chief Executive Officer

On the first question, condition to what public cable operators. First on the telephony side, especially Cablecom has launched several very aggressive offerings on telephony over the past six months where a flat fee on telephony but also free telephony for the first year of subscription. Despite the very aggressive offerings, we have seen a stabilization or a slow reduction of line losses through cable operators and we think this is linked mainly to two elements. First, a price sensitivity that historically has been not so high and returned and second, quite some significant image problems that the cable operators, especially Cablecom, has in Switzerland since he started reducing the number of his MNO channels by the end of the year. We don't expect this competition to substantially change over the course of the second half of this year.

Concerning our IPTV take up, which actually is around 5000 net customers a month, this is clearly an artificially low figure. We as slowing down, we have completely seized in fact marketing activities for the promotion of our IPTV because of the level of our installation costs, on which we are actually working. But we are not yet where we should to start again marketing aggressively this product, which means that this figure of 5000 net is at the low end and that with full marketing and commercialization activities, the normalized figure could be easily 2 times higher, if not 2.5 times higher and what we actually have as net adds a month.

On Solution and their cost efficiency, Ueli will give some indication for the second half of this year.

Ueli Dietiker - Head of Group Finance and Controlling

For the second half of this year, the non-COGS will be flat compared with the first half of this year, and of course we will also, like in the first half, will have lower intercompany cost that depends on a lower LRIC prices as well as these lower space for rooms, we really restructured the workplaces last year and had lower rentals in the first year. That will continue also in the second half.

Andrew Lee - Citigroup

Thanks very much.

Operator

Next question Bank Vontobel, Panagiotis Spiliopoulos.

Panagiotis Spiliopoulos - Bank Vontobel

Yes, good morning gentleman.

Carsten Schloter - Chief Executive Officer

Good morning.

Panagiotis Spiliopoulos - Bank Vontobel

Two questions. Number one, can you give us updates on the VDSL roll out? How much money have you spent now and what is the outlook for the reminder of the year in 2008? And then next question will be on Betty TV, do you expect to incur more costs in the future? I saw some impairments of 39 million. So what is to be expected going forward? What is the strategy on Betty TV now?

Carsten Schloter - Chief Executive Officer

Our target for VDSL roll out is still the same, meaning for VDSL 750. We target 50% penetration by the end of this year and for VDSL as based for Bluewin TV, we target 65% by the end of this year. And concerning the money that has been spent up to now, the CapEx that has been spent up to now...

Ueli Dietiker - Head of Group Finance and Controlling

The overall CapEx at Fixnet were about €450 million in the first half. Part of that is for VDSL and by the end of the year, we assume that we'll be in the region of €800 million for CapEx in Fixnet and also here a part is for the VDSL roll out.

Carsten Schloter - Chief Executive Officer

But what one can add is you may have noted in our guidance an increase in CapEx. This increase in CapEx is mainly related to VDSL and to the fact that compared to our initial expectations; first, we need a little more cost, meaning street cabinets in order to reach the same level of penetration. And second, the average cost per street cabinet is slightly higher than our initial expectation. So if you see an increase in CapEx in our guidance, it's almost wholly attributable to the VDSL roll out and a slight change in assumptions. Concerning Betty TV and what are the expected costs on the second half of the year, I'll hand over to Ueli.

Ueli Dietiker - Head of Group Finance and Controlling

In the first half of the year, we wrote down all devices we acquired. We acquired about 300,000 remote controls, but we will not have this cost charge in the second half of the year and in max, we can add about 10 to 20 million maximum.

Panagiotis Spiliopoulos - Bank Vontobel

Okay, thanks.

Operator

Next question from JP Morgan, Hannes Wittig.

Hannes Wittig - JP Morgan

Yes, thank you. Good morning. I have two questions. One is related to the treasury shares, the 500 million Swiss francs, whether you have made any progress towards a decision, whether these will be brought to the market or not. Secondly, I think you have meanwhile met the Italian regulator, should engage in some discussions there regarding the potential network separation and what it might mean for Fastweb, so maybe you could share some sort of estimate how that might affect the way Fastweb will operate in the future and how you would want to influence the process in Italy, so that it will be an outcome that is acceptable for Fastweb?

Carsten Schloter - Chief Executive Officer

Now, first on treasury share we haven't taken a decision yet, and the subject is still pending. On the second topic, I mean, in general I must say we are very skeptical concerning this project of network separation because network separation is quite a complex matter. We have a lot of detailed regulation that have to happen. And in the context of Italy where there is no natural infrastructure competition due to cable, it's an even more complex topic and you don't have a precedent in Europe where you have a regulated network separation in a county where you have a de facto infrastructure monopoly like it's in Italy. So, I think from a regulation perspective it's a very difficult manner concerning the requirements of Telecom Italia, to say they would agree to a network separation. If any kind of retail regulation is released our position is clear as well as the rest of the industry of the alternative operators in Italy, this would be unacceptable to release the retail regulation of Telecom Italia. And therefore personally I see little probability of this subject going significantly forward in the next 12, 18 months. I see little probability.

Hannes Wittig - JP Morgan

All right.

Operator

Thank you. Next question Bear Stearns, Maurice Patrick.

Maurice Patrick - Bear Stearns

Yeah, hi, there. Three questions please. First of all, you talk about Bluewin TV having a 10% margin when you reached stable waters; when would that be? The second question relates to IPTV, you have talked about ceasing the marketing activities because of the cost. I think you said at the first quarter it was 1,400 Swiss francs per subscriber, what was it in the second quarter, please? And just the final question I would ask you is could you talk us to the decision making process on buybacks versus placements. I mean, you've talked about the 50% operating free cash flow sort of buybacks and actually dividends. Do you got the potential placement. Can you just talk about the mechanics of the likelihood of seeing either happening in the next two years? Thank you.

Carsten Schloter - Chief Executive Officer

No. On Bluewin TV margin, it fully depends on the evolution of this installation costs. And I mean, our target ideally would be to have an installation cost that is two times yearly revenues. As long as we only capitalize a small part of this inflation cost, as exactly the case, the amount that's capitalized is 700 Swiss francs out of a total amount of roughly 1,400 Swiss francs. Taking in the different elements into consideration, in the whole case it's going to take a couple of years, even if we achieved this target of inflation cost, even due to strong growth in this business, it is going to take couple a years to get the whole of the business to this contribution margin. Now, concerning the cost, they have only went marginally down, we have 1,400 Swiss francs. In the first quarter, it was a little more than 1,300 Swiss francs, in the second quarter.

I mean the main affect is really the installation and in this respect, the launch in Italy of the new Fastweb box, will be for us a very important thing because up to now in Switzerland it has not been possible to use the wireless functionality to bring installation costs down. Fastweb will be launching in September; a new set-top box, including a wireless MIMO bridge, and it seems the transmission of TV signal over this wireless MIMO bridge is extremely stable. So, if we see this experience turning positive, this could be a way forward to optimize quite substantially our installation costs in Switzerland. On the other hand, we're working on the structure of our offer. So, that from certain point of time in the second half of the year on, we will not be offering the installation anymore to everybody for a flat fee of 90 Swiss francs which will enable us to compensate part of the installation costs through revenues. Concerning buybacks versus placement, it's mainly related to the capital structure. I mean our general thinking would be, what is the chance in a steady, more consolidated and maturating market in Europe to make further development news, and therefore the need of further strategic flexibility, if we think that the probability is low than we would rather leave that where it is and payout the differential between our 50% of operating free cash flow and the two times EBITDA ratio in terms of share buybacks to our shareholders. This would be the general thinking, we would be dependent on probability of having value creating opportunities in an environment in Europe which over time won't become more positive for these type of opportunities.

Ueli Dietiker - Head of Group Finance and Controlling

And we also want that dividend payment is flat or increasing, will never or not decrease.

Maurice Patrick - Bear Stearns

I mean, that's great. Can I just follow-up very quickly. In terms of the... so, if I understood correctly. So, you are saying the targeted installation costs will be two times yearly revenues, I am just saying currently you capitalize 700, and 700 is currently OpEx, is that right?

Ueli Dietiker - Head of Group Finance and Controlling

Yes.

Maurice Patrick - Bear Stearns

Okay, that's perfect. Thank you very much indeed.

Operator

Next question, Graeme Pearson, Lehman Brothers.

Graeme Pearson - Lehman Brothers

Good morning. I've got two questions please. Firstly, can you talk a bit about the management and centralization scheme that you've put in place, finally. Fastweb what's the timing and what metrics are they being accessed on? And secondly, just wondering whether you've been able to extract any synergies following the buyback of the... of Vodafone's 25% stake in your mobile business? Thank you.

Carsten Schloter - Chief Executive Officer

No. On the management incentive scheme, the previous management incentive scheme was related to dividends. We have decided to go for a new long-term incentive plan that's purely linked to a combination of cash flow performance and revenue performance. And the payout of the bonus is happening over three years time period which mean it has a long term component. But it's purely related to cash flow performance and revenue performance of the Company, of course, no longer to dividend. The second question, I'm not sure whether I got it right, you were asking about synergies in the context of the 25% buyback of Swisscom Mobile. You mean in terms of overall structure of the business.

Graeme Pearson - Lehman Brothers

Yes.

Carsten Schloter - Chief Executive Officer

Now the buyback of the Vodafone stake was clearly a condition precedent to flip around our organizational structure from a product oriented structure to a segment oriented structure. The first step that we did is that we merged the three companies Fixnet, Mobile, Solutions in virtually one company at the 1st of August. Legally it will be one company from the 1st of January, 2008. Now, this step has allowed us to take out one management level, but this is only the beginning of the implementation of the synergies because we expect on the network side, we expect on all the staff functions, human resource, financial. And we expect also on positions like marketing spending and so on through the synergies to come. We have roughly guided on this synergies on the announcements that we made on the 22nd of May on this new organization structure.

Ueli Dietiker - Head of Group Finance and Controlling

And it's also clear that this has a direct financial impact. We increased the net income year-over-year by 2.6%, partly increased Swisscom net income by 23.5%. That's because we saved a leakage of about €150 million dividend to minority.

Graeme Pearson - Lehman Brothers

Okay. Ueli, thanks.

Operator

[Operator Instructions]. Our next question from Nicolas Didio, Exane BNP Paribas.

Nicolas Didio - Exane BNP Paribas

Yes, good morning. Two questions, if I may. First on revenue guidance, restated from Fastweb, revenue guidance seems to be between 9.4 billion Swiss francs and 9.5. But these figures are not restated from Antenna Hungária and Accarda sale. What is the negative effect in your guidance from the deconsolidation on these two assets? And second question on mobile data, it was plus 10% in Q1 and plus 19% in Q2. I'd like to have a little bit more color about this good performance in Q2 and what are you expecting for this trend going forward? Thank you.

Carsten Schloter - Chief Executive Officer

I'll start with the first question Ueli. That deconsolidation of Antenna Hungária and Accarda means about 100 million lower revenues.

Nicolas Didio - Exane BNP Paribas

So restated from Fastweb and deconsolidation of Antenna Hungária and Accarda, the guidance should be at 9.5 to 9.6, so below 9.7 before or what is coming from this minus 100 Swiss francs?

Ueli Dietiker - Head of Group Finance and Controlling

Initial Swisscom guidance was about was 9.7 billion Swiss francs. Our guidance for Fastweb starting the 22nd of May and till at the end of '07 means about 1.8 billion Swiss francs. That means together we'll come to 11.5 billion Swiss francs. We have now about 100 million deconsolidation impact of Antenna Hungária and Accarda. That brings us to 11.4 billion. Our guidance is 11.2 to 11.3. We had also lower wholesale traffic, especially in Fixnet than we expected, but it's not... it's very... with very small margin. So when you calculate the same way around EBITDA, then you see that there is no change.

Carsten Schloter - Chief Executive Officer

Concerning the growth in data revenues, it's mainly due to increased focus of the management on the commercialization of data services, which was supported by the launch of a number of new products. For example, we have the data connectivity cards, we launched a number of new features, we launched SD cards, we launched integrated PC laptops, we launched a product also for Apple. So strong focus on commercialization of new data products. This has led to a strong increase compared to the first quarter. Another example of new product that has been launched in the second quarter is the new instant messaging terminal. All of these actions together contributed to the strong growth in new data revenues.

Nicolas Didio - Exane BNP Paribas

Okay, thank you.

Carsten Schloter - Chief Executive Officer

So we think we can sustain it.

Nicolas Didio - Exane BNP Paribas

Okay.

Operator

Thank you. Next question Charlotte Perfect, UBS.

Charlotte Perfect - UBS

Hi. Yes, a couple of my questions have been answered, but a couple more. Firstly, on unbundling, could you provide an update on the bundling situation? Firstly, have the alternates expressed an interest at taking the unbundling at the current pricing levels? And then secondly, have they expressed intentions to appeal for lower pricing? And could you provide an update on your expected timing for when lower pricing may materialize? And then secondly, I noticed in mobile, there were some tariff adjustments in the quarter. Have you seen a tick up in the competitor aggression in Q2 or has it been effectively more of the same? Thank you very much.

Carsten Schloter - Chief Executive Officer

Now, on unbundling, we have now a couple of contracts signed from potential unbundlers [ph] and this was on the cards, whether it's from co-location, where there is some lease line, but also on pure full access unbundling. But for the moment, there is only one competitor... I don't want to name him... that is active in really doing unbundling in our local exchanges. On the other front, there are only discussions, negotiations or signed contracts. We have already a complaint, a legal compliant about the pricing level of 31 Swiss francs. We don't... and also a legal compliant on the offering of the trim access [ph]. We don't expect a ruling on these legal complaints this year. It's going to... there is going to be a ruling in the first half of next year. We have substantially challenged our unbundling price of 31 Swiss francs, which or course is high compared to European average. But you must take into account that one should only compare these prices to countries where the prices are also regulated through LRIC, because in the country of interconnection when ULL is regulated along an LRIC price model, there is not a material price aggression because of the price of technology. But there is a material price increase because of the cost of constructions, because the main costs going into the calculation of this unbundling prices are construction prices. And just to give you one point of reference, construction prices in Switzerland are approximately 50% higher than in Germany. So there are some quite explainable differences that will turn out even after a final decision that we finally arrive on unbundling price and what might be European prices today.

Now concerning the competitive landscape in mobile, I mean of course constantly there are a number of moves because of our competitor, we see that especially over the last months we have achieved a substantial increase our market share on the prepaid side. And I mean the action that had taken on the market, I would call them as quite normal... call them normal or normal business, nothing specific in terms of new price plans, new pricing features and so on. Orange has launched some new pricing features on the roaming side. But it has only brought them in line with our roaming prices, so nothing I would say substantially aggressive. Going forward, I think the main action to watch is the evolution of the roaming prices. For sure over time, we expect an alignment of outbound roaming prices in Switzerland with the outbound roaming prices that are now regulated in the rest of Europe. This will come through normal market mechanism.

Charlotte Perfect - UBS

Could I push you a little bit on the timing there? I mean would we see... I mean obviously the rest of Europe is going for a step change in August September time, which, for you, it'd be more gradual or would you also go for a step change to bring them into line? Thank you.

Carsten Schloter - Chief Executive Officer

It's very difficult to say because it's a matter of competitive dynamics. Today, I would generally expect that until latest Q2 2008, Swiss prices will be aligned with European prices.

Charlotte Perfect - UBS

Okay, thank you.

Carsten Schloter - Chief Executive Officer

Q2 2008 latest.

Operator

Thank you. [Operator Instructions]. Thank you. Next question Colisson Cote, HSBC.

Nicolas Cote-Colisson - HSBC

Hi, Nicolas Cote-Colisson from HSBC. Sorry to insist on IPTV, but I am really not clear when you plan to start marketing your IPTV product again, because I presume you are not going to wait two years before you get the 500 Swiss franc installation cost. I have also another question regarding Fastweb. Well, do you have any plan to communicate any operational synergy numbers? And my last question is about the cost for delisting from the New York Exchange?

Carsten Schloter - Chief Executive Officer

Now on IPTV, clearly, our target is to able to restart marketing activities by the last quarter of this year. But it's really a matter of being in control of this cost. There is some work to be done. But our target would be to restart the conversation by less quarter of this year.

On synergies, without quantifying them precisely, I would just say the following. We have now refinanced the whole debt of Fastweb to lower conditions and original conditions of Fastweb. Maybe Ueli can give some indication on the benefits of this fast refinancing.

Ueli Dietiker - Head of Group Finance and Controlling

We will... we have 1.8 billion Swiss francs we refinanced there and we have lower interest rates. On a Group level, it's minimum 1%.

Carsten Schloter - Chief Executive Officer

On the purchasing side, we found out that both on Cisco and Alcatel, which are very important providers for us, Fastweb has materially better conditions than we have. And as we have best price clauses in our contract, we will be able to benefit very quickly from these prices from Alcatel and Cisco. So there are already a couple of things materializing actually, but we become over time more and more precise on those figures. As already mentioned on previous calls, what is also happening now, and we have our first result, is that we try to gain Swiss International acting customers to do the international activities in Italy will Fastweb. So there are a number of things running and over time, we can become more and more precise on this asset. The third question, I hand over to Ueli.

Ueli Dietiker - Head of Group Finance and Controlling

Yes. This delisting [ph] will bring us savings in high single-digit millions, especially... so clearly, we will not have to... also to do this 20-F, and so that is main of the reasons we did it, but at the same time we feel obliged to a high standard of reporting and corporate governance. So you can expect this same quality also in the future.

Nicolas Cote-Colisson - HSBC

Okay. Thank you.

Operator

Next question Jacques De Greling, Natixis Securities.

Jacques De Greling - Ixis Securities

Expected roaming decline price you're expecting going forward to Q2 2008. Can you quantify the impact on a full year basis on your revenues and EBITDA? Second question regarding the purchase price acquisition on Fastweb, you announced about 200 million Swiss franc of additional depreciation on a yearly basis. There was not any of that cost in the Q2 figures. Would you put the corresponding cost, which I believe is around 20 million, in the second half of the year? And last thing, one suggestion regarding the new segment reporting you're announcing. I hope you will maintain the publication of some global fixed and mobile aggregate regarding at least revenues and EBITDA because they are looked by the market as very different kind of assets. Thank you.

Carsten Schloter - Chief Executive Officer

Now on the first question [ph], two others I will hand over to Ueli. On the first question on the revenue side, the impact on a full year base, I repeat, on a full year base, will be around 80 million Swiss francs, 80 million Swiss francs to 90 million Swiss francs. On the EBITDA base, I mean it's the maximum equivalent, but it depends very much on how far we will be able to optimize our wholesale prices. And you may have noted that in terms of wholesale prices, we have done a substantial job over the last 24 months to continuously optimize our wholesale prices in terms of roaming, which is especially possible through the fact that we are owning, or if I can say so, we are owning 80% of outbound roaming traffic of Switzerland which puts us in an extremely strong position to negotiate our wholesale price. So revenue impact around 80 million Swiss francs to 90 million Swiss francs.

On the EBITDA side, it's going to be lower than this level, but depending on our possibilities to optimize our wholesale price overtime, and all this figures on a full year base.

Ueli Dietiker - Head of Group Finance and Controlling

And this purchase price allocation impact, we carry few indicative non-binding estimates of about 200 million Swiss francs. According to IFRS, we have time one year time really to allocate it. Our plan is to do it in second half of '07. And if it's done of course, then the amortization of these intangible assets will start 22nd of May. And so you can expect a pro rata inclusion of this 200 million in the year '07. But of course that's book keeping, nothing to do with a cash out.

Carsten Schloter - Chief Executive Officer

What is very important is that this is mainly the reason, mainly the reason, why we changed I think it was in May our payout policy to relate the payout policy to operating free cash flow in order that payouts to shareholders are not impacted by this dilution on net income. And then there was the third question?

Ueli Dietiker - Head of Group Finance and Controlling

The segment reporting, we are at the moment really analyzing the whole situation. Of course, we will... the main reported factor will be this customer... or along this customer organization. Of course, we will also give guidance to the market... t the analysts how to compute it. So especially revenue details will be released for both infrastructure and mobile and Fixnet, so you can calculate then your models. And in one or two quarters probably for the year '07, we will also give you comparable illustration of both segments reporting.

Operator

Are all your questions answered Mr. De Greling?

Jacques De Greling - Ixis Securities

Correct, thank you.

Operator

Thank you. Next question coming from Frederic Boulan, Morgan Stanley.

Frederic Boulan - Morgan Stanley

Hi, good morning. Two questions please. The first one on DSL. It looks like your share of DSL has been very strong... of DSL additions has been very strong in the second quarter. The wholesale lines barely grew at all, I mean on the 2000 lines. So do you think with VDSL coming, it will probably be even more difficult for other DSL ISPs to unbundle? So do think ComCom will be happy with that or are they really focusing on cable competition as a real competitor on broadband? Second question, just to come back on the use of treasuries. I thought the decision was really driven by your main shareholder. So, here it looks likes its more decision that you will take depending on whether you identified some external changes, so can you just again clarify exactly and confirm that if you don't find any or identify any external changes before the end of the year. You will not use the treasuries? Thanks a lot.

Carsten Schloter - Chief Executive Officer

On the... starting with the second topic the thing that is the most important to understand is that we committed ourselves towards our main shareholders to make next year 0.5 billion share buyback. Taking this into account, taking our ratings into account, we normally need 0.5 billion treasury shares in order to complete the overall financing of the Fastweb acquisition and to stay somewhere in the framework of what we discussed with the rating agencies and therefore to secure our advantageous interest rate. Now, of course, one can think about a netting of share buyback with the use of treasury shares, but this is depending on the number of factors, it's depending on the government, it's depending on market conditions overall, that's why no decision has been taken on this matter, yet. But clearly if we don't use the treasury shares we will destroy them on the next general assembly, clearly. On the first item --

Ueli Dietiker - Head of Group Finance and Controlling

We still have a very tough competition between the cable infrastructure and the ADSL, that is going on. I think we have here then an advantage with VDSL against this. But it's very tough competition. This really weak growth of wholesale customers we faced in Q2, we do not really know all the reasons perhaps just because the big ones are also preparing for ULL. We'll have to analyze it further on to see what the profits will be in the next months.

Frederic Boulan - Morgan Stanley

All right. Thanks a lot.

Operator

Thank you. Next question Argiro Papadopoulou, Merrill Lynch.

Argiro Papadopoulou - Merrill Lynch

Good morning, just one question, please. In regard to the one-off costs of the Fastweb and your treatment of those cost in Q2, please?

Ueli Dietiker - Head of Group Finance and Controlling

Okay. The extraordinary things, items in Q2 of Fastweb work is the 60 million TI arbitration and about 50 million to 60 million cost related to the sales process. For Swisscom, the triggering event was before our acquisition, so this revenue or this 60 million from TI and costs will be part of the purchase price allocation and are not in the P&L in Q2 of Swisscom.

Operator

Next question, Roberta Ciaccia, Kepler Equities.

Roberta Ciaccia - Kepler Equities

Yes. Good morning. I have couple of questions related, again, to the IP television. Firstly, I was wondering if you're experiencing any improvement in the functionality of the Microsoft platform, and in the event that this is not happening, if you are actually considering the possibility of utilizing Fastweb platform at some stage? And the second question is do you think we will be able to reach your IPTV content offering with Fastweb's content portfolio, and in this case, I am thinking specifically about the Sky contents or are there some issues related to right exploitation or something that would prevent from doing these? Thanks.

Carsten Schloter - Chief Executive Officer

Now on the second question. We are actually precisely investigating this matter, and precisely investigating whether it's possible to use the Sky content also for some parts of Italy... for some parts of Switzerland, sorry. This is under investigation I can't give you a definitive answer, if there might be some blocking elements from the right side. We initiated these talks very, very simply. On the first matter, yes, we are expensing improvements clearly concerning the stability of the Microsoft platform; nevertheless we are not yet there where we consider we should be for a mass market main stream product, which means there's still some work necessary. Given the implication those migration in platform would have for our existing customers, cost wise and so on, is too early to ask the fundamental question, but clearly we have to give ourselves a time horizon, let's say, until the end of the year until which a number of critical issues have to be fixed on the Microsoft platform in order to be sure that it's a good solution going forward.

Roberta Ciaccia - Kepler Equities

Okay. Thank you very much.

Operator

Next question, Maurice Patrick, Bear Stearns.

Maurice Patrick - Bear Stearns

Yes, so a quick follow-up guys. On the mobile data growth, can you just tell us the non SMS part of data? How much that grew by in the quarter year-on-year. I mean, Vodafone said it was 40% I think across them, across that group. Maybe you could quantify the growth in that and the second did I hear you correctly that you said you weren't sure if the Microsoft product was suitable as a mass market product?

Carsten Schloter - Chief Executive Officer

What I was saying is that for the moment we still have, on the second issue, we still have some stability issues and also some scalability issues which have to be overcome in order to be able to say that it's a clearly mass market, mainstream product that is able to scale in really high volumes. And this scale subject is not only a matter of technical platforms, it's also really a matter of stability because if stability is not there then the customer complains, that's too important than the cost is also important. So, scalability is a matter of architecture, one, but also stability of the platform, it's really both. We have made progress on this matter but there are still some issues to overcome before being able to say that clearly we have a platform and a product that's mass market and mainstream.

Ueli Dietiker - Head of Group Finance and Controlling

And the connectivity data and value added services grows year-over-year by about 15% in mobile to 370 million. And when you look at the SMS they grew by about 8%.

Maurice Patrick - Bear Stearns

And could we assume that the yield was pretty flat in the SMS?

Carsten Schloter - Chief Executive Officer

Sorry, once again, Maurice.

Ueli Dietiker - Head of Group Finance and Controlling

What was the question?

Maurice Patrick - Bear Stearns

Sorry. I am trying to just work out, the non-SMS part that's growing, so you said 15% data growth, SMS volumes up 8%. But in terms of getting the SMS revenues are the yields probably flat?

Carsten Schloter - Chief Executive Officer

The revenues on SMS are flat. The growth is entirely climbing out of new data business.

Maurice Patrick - Bear Stearns

Great. Perfect. Thank you.

Operator

Thank you. [Operator Instructions]. There are actually no questions on queue.

Carsten Schloter - Chief Executive Officer

Very good. Well then ladies and gentlemen, thank you very much for the interest and we do apologize, oh no, I should say, I do apologize for some of the slides that appear to be complicated but that's life. Should there be any follow-up questions then please feel free to give us a buzz, and we look forward to speaking to you soon again. Thank you and goodbye.

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