Ericsson used its Annual General Meeting in Stockholm to tout 21 mobile operator deals for future 5G technology, while admitting that more work needs to be done on business units outside of its core networks division.
CEO Hans Vestberg (pictured) spoke of the company’s aim to extend its “technology leadership in the emerging 5G market,” with the world’s largest mobile network vendor talking up its work in this area so far. Although 5G standards aren’t likely to be defined until next year at the earliest (with commercial launches from 2020, according to the Swedish vendor), Ericsson has already announced projects with AT&T, China Mobile, SK Telecom, TeliaSonera, T-Mobile US and Verizon, among others.
The 21 deals stat is up slightly on the “almost 20” that Vestberg discussed with Mobile World Live in an interview at February’s Mobile World Congress. At the time Vestberg said the company is already deploying the third generation of its 5G testbed, supporting “enormous” speeds of up to 28 Gb/s. “Industries beyond consumers, such as automotive, utilities, public safety, can come in and see what you can do with 5G. That’s why these testbeds early on are very important when you are creating a standard.”
Away from networks (an area in which Ericsson states it wishes to “excel”), it has identified ‘targeted areas’ that comprise Cloud, IP networks, TV & Media, OSS/BSS, and Industry & Society. In these five sectors, the company aims to take what it calls “a leadership position.” In fact, it already claims to have achieved a number one position in OSS/BSS and in IPTV.
In 2015, sales in targeted areas grew 20 per cent year-on-year, accounting for 18 percent ($5.5 billion) of Ericsson’s total $30.3 billion sales in the year. Of that 18 per cent, more than half comes from OSS/BSS sales (see image, left).
While the company doesn’t break out the net income contribution from each of these five areas, Vestberg admitted that Ericsson needs to improve earnings from the units. “This will involve a stronger focus on software sales and recurring business as a complement to the already strong Professional Services business,” noted a company statement.
This new earnings focus comes after a number of acquisitions across the five markets during 2014 and 2015. In September last year it acquired Envivio (TV and Media). Other previous acquisitions have included Telcordia (OSS/BSS), Ambient (Industry and Society), Red Bee Media (TV and Media) and Azuki Systems (TV and Media).
Estimated market growth for ‘targeted areas’ is a compound annual growth rate (CAGR) of ten per cent (2014-2018), higher than the estimated CAGR of between one and three per cent in its Core business.
Ericsson is confident that 2016 will see the five targeted areas exceed 18 per cent of total company sales, with half of the company’s total sales growth between now and 2020 originating from these new areas.
“Ericsson believes that such growth would have a positive impact on Group operating margin as well as positive effects on earnings across all three reported segments, as sales from targeted areas include a higher portion of software and professional services business,” noted the firm in its Annual Report.
Interestingly, in addition to Ericsson’s strategy to excel in its core business and establish leadership in targeted areas, it also aims to “expand business in new areas.” No specific details are revealed in the report though.