Government says yes, then no to Swisscom expansion

Maybe it's time the Swiss government and its majority-owned telephone company, Swisscom, sit down and discuss what each expects from the other.

On Friday, the Swiss Finance Ministry said it would block any major attempts by Swisscom to expand abroad. That announcement clearly surprised Swisscom management after learning the day before that the very same ministry planned to reduce its 66 percent stake, preferably to zero, to give the Bern-based telecommunications service provider flexibility to expand abroad.

Why the Finance Ministry first suggested giving Swisscom greater freedom to expand internationally and then quickly backtracked is still unclear.

Maybe someone had a closer look at Swiss law.

The Swiss government is bound by law to retain at least 50 percent of Swisscom, in addition to one share. A change in the country's telecommunications legislation is required if government ownership dips below this level, and for the Swiss parliament to approve that change, a public referendum would likely have to take place first.

Swisscom is currently in the running to acquire Ireland's Eircom Group, and is also rumored to be considering a bid for Denmark's TDC.

The company's management responded late Friday with a terse statement saying the "instruction does not relieve the board of directors nor the executive board from their legal obligation to responsibly perform their duties in the best interests of the company and all shareholders."

Swisscom, which is Switzerland's largest mobile and fixed-line operator and the country's former monopoly telephone company, has been trying for several years to expand outside its home base in a move to generate new revenue streams -- so far without any luck.

The company has failed repeatedly to acquire attractive international assets, including neighboring Telekom Austria and Cesky Telecom in the Czech Republic.

Last year, Swisscom sold one of its few small foreign assets, a majority stake in German mobile phone reseller Debitel, after failing to turn the venture into a viable business.