Swisscom AG will repurchase a 25 per cent stake in Swisscom Mobile from Vodafone Group for 4.25 billion Swiss francs in a long-awaited deal to fortify its home market position.

The debt-financed purchase, which is more costly than analyst expectations of around 3.5 to 3.75 billion francs, will boost Swisscom's annual profit by around 180 million francs starting in 2007, Swisscom said in a statement yesterday.

The deal will enable the former monopoly Swisscom, which is still majority held by the government, to strengthen its domestic position after the government blocked foreign takeovers, while for Vodafone the proceeds will allow it to reduce debt.

Vodafone said it expected to record a gain on the sale of approximately £100 million for the year ending March 31, 2007. It said the deal would not materially affect its mobile revenue and profit margin outlooks for this financial year.

"The move is aimed at enabling Swisscom to improve its position in terms of realising its convergence strategy while at the same time raising shareholder payouts," Swisscom said in a statement. It added it would maintain its business partnership with Vodafone. Shares in both companies were barely changed in early trading, with Swisscom changing hands at 454 francs and Vodafone at 144 pence.

"The purchase price at 4.25 billion francs is about 0.6 billion francs higher than we thought," said analysts at J.P.Morgan in a note to investors.