Letter from the Chair of the Compensation Committee

Dear Share­holders

On behalf of the Board of Directors and the Compensation Committee, I am pleased to present our Re­mu­ner­a­tion Report for the 2021 reporting year.

The year under review was shaped by the mea­sures taken to contain the Covid-19 pandemic and a slowly recovering economy. Over the past year, Swisscom was able to successfully assert itself in the saturated IT and telecoms markets, both of which are characterised by strong price and promotional pressure. It did so thanks to top-rated broad­band and mobile networks, innovative products and services that have already received multiple awards. On top of that, sim­pli­fi­ca­tion and a systematic digital trans­for­ma­tion were able to reduce the cost base and hone the company’s com­pet­i­tive edge. In order to ensure high network quality, Swisscom invested CHF 1.6 bil­lion in Switzer­land again last year in the main­te­nance and expansion of its networks. In Switzer­land, Swisscom saw growth in particular in the business customer market for IT services and in the residential cus­tomers market for home networking. Once again, Fastweb’s per­for­mance in the Italian market was impressive, with growth reported in terms of revenue, EBITDA and cus­tomers. Swisscom con­sol­i­dated its role as a pioneer in the area of climate protection with the goal of becoming climate-neutral across the entire value chain in Switzer­land by 2025.

With regard to the compensation of the Group Executive Board, the Compensation Committee reviewed the variable re­mu­ner­a­tion system and proposed adjustments to the Board of Directors. The changes approved by the Board of Directors now tie re­mu­ner­a­tion even more closely to strategy im­ple­men­ta­tion. They also weight long-term sustainable re­mu­ner­a­tion criteria more heavily. The variable per­for­mance-related salary component for members of the Group Executive Board will continue to be paid out in cash and blocked shares. As in the past, the Group’s financial per­for­mance indicators play a key role in determining overall target achieve­ment. A new minimum EBITDA requirement was added to supplement the re­mu­ner­a­tion criteria. The Board of Directors also fleshed out the business trans­for­ma­tion topics and added sustainability-related topics. With these changes, the re­mu­ner­a­tion system not only incorporates financial per­for­mance but also indicators relating to operating per­for­mance, cus­tomers, growth and sustainability. It now reflects our responsibility to make a significant contribution to society’s positive de­vel­op­ment and to protect the en­vi­ron­ment. Further details on our commitment can be found in the Sus­tain­abil­ity Report.

In addition to the excellent financial results, the year under review also saw exceptional per­for­mance in the areas of customer satisfaction and sustainability. In its overall evaluation, the Board of Directors weighed this against operating per­for­mance (network faults) that was not entirely satisfactory. This results in an overall target achieve­ment of 118% to 120% for the members of the Executive Committee, depending on their respective functions. As explained in this Re­mu­ner­a­tion Report, the total re­mu­ner­a­tion for the members of the Board of Directors for the 2021 reporting year is within the range approved by the 2020 Annual General Meeting. Likewise, the total re­mu­ner­a­tion paid to members of the Group Executive Board is within the range approved at the 2020 Annual General Meeting.

Like every year, you, dear shareholders, will have an op­por­tu­nity at the 2022 Annual General Meeting to cast your vote on Swisscom’s re­mu­ner­a­tion principles and the re­mu­ner­a­tion system as part of the consultative vote on the Re­mu­ner­a­tion Report. In addition, the maximum total re­mu­ner­a­tion paid to the Board of Directors and the Group Executive Board for the 2023 financial year will be put to a vote. The proposed amounts for the Board of Directors and the Group Executive Board remain unchanged over the prior year.

To meet up to our responsibilities, the Compensation Committee will conduct regular reviews of the re­mu­ner­a­tion strategy and system again in the coming year to ensure that our principles are aligned with the interests of shareholders and other stake­hold­ers and that per­for­mance is rewarded ap­pro­pri­ately and sustainably. We look forward to your con­tin­ued support and thank you for your trust.

Kind regards

Barbara Frei

Chair of the Compensation Committee