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Imagination is the limit for Ericsson

Mobile News
June 27, 2012

The Swedish telecoms giant has an impressive legacy and a truly global reach, but it has been through some testing times of late. Jasper Jackson talks to UK MD Chris Houghton about the business and its future plans

When Swedish firm Ericsson was formed in 1876, it made a respectable £30 profit.

The company was set up by Lars Magnus Ericsson, aged just 30, who had spent his youth building telegraph equipment for the Swedish government.

The entrepreneur set up his own firm in Stockholm, Ericsson, repairing foreign-made telephones – and two years later began building and selling his own telephone equipment.

Fast-forward 136 years and that small business has grown into a global enterprise generating annual profits of more than £1.7 billion.

It employs more than 105,000 staff, of which just 17,000 are based in its homeland. Twenty-two thousand of these are in research and development (R&D), on which Ericsson spends around £2.5 billion.

It is, and has been for some time, the world’s largest manufacturer of network infrastructure equipment, ahead of main rival Huawei.

It provides telecommunication equipment for more than 1,000 networks in more than 180 countries and claims more than 40 per cent of the world’s mobile traffic passes through its networks.

And it’s still growing.

In 2011, the conglomerate’s market share increased by three per cent to 36 per cent year on year.

Ericsson UK managing director Chris Houghton (pictured) says the entrepreneurial roots of the firm’s founder remain core to the business and its continued evolution – and what keeps Ericsson as one of the most important elements of the global telecoms industry.

“When Lars Magnus Ericsson started the company, it was five people in a converted kitchen. We have that entrepreneurial background right there.

“We are a market leader in the infrastructure and services globally, but we are not prepared to sit back and admire our success. And that philosophy is why we have been around since 1876.”

International expansion

Parts of Ericsson’s growth came predominantly from an early focus on foreign markets – most notably the UK, in which the company remains heavily involved to this day.

“Sweden has never been the biggest market,” says Houghton. “Even in the late 1800s, UK and Ireland was the biggest market for us.”

In the UK, it provides equipment for both Vodafone and O2, which account for more than half of the UK’s mobile subscribers (around 40 million people).

The bulk of Ericsson’s business is now in services, which it says is now growing quicker than infrastructure sales, and accounts for 2,500 members of Ericsson’s UK workforce.

Its involvement in providing backhaul to carry mobile tra c from base stations means Ericsson touches all the UK’s operators in some way.

More than 50 per cent of the firm’s business in the UK is now in services, helping firms and organisations manage their networks.

For example, some of its customers are London borough councils whose communication networks are run in some part by Ericsson.

“The service business is a big business in the UK,” says Houghton. “We have more than 3,000 people working on it in the UK and over 1,600 people in Ireland.

“Globally, Ericsson manages networks used by 850 million people.”

Ericsson is now facing competition from China’s Huawei, its biggest rival with the second largest share of global network equipment sales.

Hands-off on handsets

While the two firms compete closely in the same market, their strategies have recently taken very different paths.

Huawei has launched its fi rst range of own-branded smartphone handsets and tablets as part if its plans to become a leading player in the global market.

As Huawei was announcing it would be a top three handset maker by 2015, Ericsson revealed it was selling its stake in Sony Ericsson to Sony for €1.05 billion – ending its 10-year joint venture with the company.

Ericsson western and central Europe president Anders Runevad said the decision to leave the handset business was because handset technology had advanced so much in the past 10 years.

When Ericsson’s expertise in radio had been useful to Sony Ericsson, handsets were all about voice calls. Ericsson’s radio expertise gave it an edge in getting voice calling right.

Smartphones are now personal computers and entertainment devices, so Ericsson’s expertise is less vital. Standardisation has also meant that Ericsson no longer needs to have such a hands-on role in handsets.

However, the company is still involved with handsets through chip-development arm ST-Ericsson, which makes LTE and HSDPA+ chipsets for firms including HTC and Nokia. It works closely with all manufacturers to ensure compatibility with handsets that will connect through its products.

Full article in Mobile News issue 515 (June 4, 2012).

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