Swisscom AG: Risk Reward Now Skewed to the Downside

Research evidence excerpt

Swisscom AG: Risk Reward Now Skewed to the Downside

IdeaM

Key Charts

Exhibit 1: Swisscom is the most expensive name in the space Exhibit 2: We see the current valuation implying a long term

on a FCFE yield basis DPS growth rate of ~3%

FCFE Yield - 2027 DDM Implied Price Target Given Long-Term Dividend Growth Rate

16% 1,000

14% 900

12%

10% 600

8% 500

6% 300

4% 200

2%

-

0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0%

Telefonica British NOS Deutsche OTE Orange KPN Telenor Vodafone Elisa Tele2 Telia Swisscom LT Dividend Growth Rate

Telecom Telekom Company

DDM Price Target Current Share Price

Source: Factset, Company data, Morgan Stanley Research

Source: Morgan Stanley Research estimates

Exhibit 3: Swisscom is seeing top-line decline in Switzerland Exhibit 4: And Swisscom's sector-beating margins suggest

owing to competitive pressures further opex savings could become more difficult to achieve

Switzerland Customer numbers quarterly change

Telco Sector 2026 EBITDAaL margins

2Q24 3Q24 4Q24 1Q25 2Q25 3Q25 4Q25 1Q26 50%

Wireless 45%

B2C 40%

Wireline 35% Switzerland Wireless 30%

B2B

25%

Wireline

20%

Source: Company data, Morgan Stanley Research. Green = increase in customer numbers. Red =

decrease. No colour = no change.

EBITDAaL margin Sector Average

Source: Company data, Morgan Stanley Research estimates

Exhibit 5: We see growth priced in for Italy, with synergy gains Exhibit 6: And a very high implied EV/EBITDAaL in Italy

fully reflected in consensus expectations EV ex leases / EBITDAaL (2026)

Swisscom Italy consensus vs synergies 12

160 10

140 8

80 0

2026 2027 2028 2029 Source: Morgan Stanley Research estimates

Annual synergies less integration costs Consensus EBITDAaL YoY increase Difference

Source: VA consensus, Company data, Morgan Stanley Research