Ericsson Reports Strong Development in Securing New Business
CEO COMMENTS
"In the changing industry environment we have leveraged our scale, technology leadership and global presence to advance our leading position in mobile systems as well as in services," says Carl-Henric Svanberg, President and CEO of Ericsson. "We have secured a large number of key contracts during the quarter, adding to our strong business momentum. With the Marconi assets as a cornerstone, we are also building a leading position in next-generation converged networks.
The ongoing consolidation in our industry is a natural process, driven by the need for critical mass in R&D, marketing and supply. As market leader our strategy based on organic growth and bolt-on acquisitions remains. With our scale advantage and an organization focused on innovation and operational excellence, we are well positioned to continue to win market share. Our ability to achieve a healthy balance between long-term growth and short-term profitability will be key to success.
The deployment of 3G/HSPA continues, led by North America and countries in Asia, Central and Eastern Europe, Middle East and Africa. HSPA capabilities enable Internet to go mobile and enhance the consumer experience of using high-speed data services. This will also open tremendous opportunities to people living in countries with limited wireline communications.
Telecommunication is an important driver for economic and social development. We have now reached some 2.5 b. mobile subscriptions in the world. Through an intense cost focus throughout the industry, there are continued opportunities for further penetration. The GSM technology has by far the majority of users and, through its superior economies of scale, strongly contributes to making our vision of 'communication for all' a reality," concludes Carl-Henric Svanberg.
MARKET AND BUSINESS HIGHLIGHTS
Long-term industry growth drivers remain solid. New technologies and richer services will continue to drive and accelerate traffic in the world's networks. The number of mobile subscriptions in the world is expected to pass three billion in 2007. The GSM/WCDMA track represents more than 80% of all mobile subscriptions around the world and the vast majority of the growth. New and more innovative solutions and more affordable handsets are expected to continue to expand the market.
Fixed and mobile broadband enable new user applications with rich content and interactivity, such as IPTV, chatting, gaming and music services. IPTV is expected to be a main driver of new traffic in converging networks when triple play becomes a reality. TV services are expected to grow strongly also in mobile networks, driven by users that want instant access to on-demand business, sports and news updates.
WCDMA/HSPA networks are key components in offering users richer services. Currently Ericsson is a supplier to more than 40 HSPA networks under deployment around the world, of which half are in commercial operation. The number of WCDMA subscriptions grew by approximately 13 million to more than 68 million during the quarter. Seven new WCDMA networks were commercially launched during the quarter, bringing the total to 100 WCDMA networks, of which Ericsson is a supplier to 55.
Services continues to be a key area as operators seek to lower operating costs and free up time for customer interaction and business development. We have a clear leadership through our early start and presently manage networks with 65 million subscribers and provide around-the-clock support to networks with 725 million subscribers. Through our economies of scale and proven expertise, we are able to offer our customers not only first-class operations but also considerable savings.
Regional overview
Western Europe sales were up by 26% compared to the same quarter last year. Growth is primarily driven by strong services sales and the added Marconi business. Mobile systems sales were flat. The strong tariff competition and falling roaming charges drive traffic growth and increase operators' need for network expansions as well as intensify their focus on total cost of ownership.
Central and Eastern Europe, Middle East and Africa sales grew by 24% compared to the same quarter last year. The activity level was especially high in Pakistan, Russia, Saudi Arabia and South Africa. The growth is primarily in GSM, but 3G sales are increasing and during the quarter several contracts for WCDMA/HSPA were received in the region.
Asia Pacific sales grew by 55% compared to the same quarter last year, primarily driven by strong growth in Australia, China, India, Indonesia and Japan. During the quarter, China showed strong increase year-over-year and there is a steady demand and rollout activity. Contracts are however large and completion and invoicing tend to fluctuate between quarters.
North America sales were down 42% year-over-year. Sales were down 17% when adjusted for the extra SEK 2 b. invoicing in the second quarter 2005 related to planned later deliveries. The ongoing HSPA build-out continues according to plan. The 2G build-out also continues, however, operators' reductions of excess inventory have short-term effects on our sales. The upcoming spectrum auctions presently affect the market but should stimulate new network rollouts.
Latin America sales declined by 14% compared to the same quarter last year. As expected, operators are investing less after two exceptionally strong rollout years. There is, however, in many markets a continued need for investments in quality and coverage. Planning for 3G has started, and in parallel further CDMA operators investigate the benefits of changing to GSM/WCDMA.
"In the changing industry environment we have leveraged our scale, technology leadership and global presence to advance our leading position in mobile systems as well as in services," says Carl-Henric Svanberg, President and CEO of Ericsson. "We have secured a large number of key contracts during the quarter, adding to our strong business momentum. With the Marconi assets as a cornerstone, we are also building a leading position in next-generation converged networks.
The ongoing consolidation in our industry is a natural process, driven by the need for critical mass in R&D, marketing and supply. As market leader our strategy based on organic growth and bolt-on acquisitions remains. With our scale advantage and an organization focused on innovation and operational excellence, we are well positioned to continue to win market share. Our ability to achieve a healthy balance between long-term growth and short-term profitability will be key to success.
The deployment of 3G/HSPA continues, led by North America and countries in Asia, Central and Eastern Europe, Middle East and Africa. HSPA capabilities enable Internet to go mobile and enhance the consumer experience of using high-speed data services. This will also open tremendous opportunities to people living in countries with limited wireline communications.
Telecommunication is an important driver for economic and social development. We have now reached some 2.5 b. mobile subscriptions in the world. Through an intense cost focus throughout the industry, there are continued opportunities for further penetration. The GSM technology has by far the majority of users and, through its superior economies of scale, strongly contributes to making our vision of 'communication for all' a reality," concludes Carl-Henric Svanberg.
MARKET AND BUSINESS HIGHLIGHTS
Long-term industry growth drivers remain solid. New technologies and richer services will continue to drive and accelerate traffic in the world's networks. The number of mobile subscriptions in the world is expected to pass three billion in 2007. The GSM/WCDMA track represents more than 80% of all mobile subscriptions around the world and the vast majority of the growth. New and more innovative solutions and more affordable handsets are expected to continue to expand the market.
Fixed and mobile broadband enable new user applications with rich content and interactivity, such as IPTV, chatting, gaming and music services. IPTV is expected to be a main driver of new traffic in converging networks when triple play becomes a reality. TV services are expected to grow strongly also in mobile networks, driven by users that want instant access to on-demand business, sports and news updates.
WCDMA/HSPA networks are key components in offering users richer services. Currently Ericsson is a supplier to more than 40 HSPA networks under deployment around the world, of which half are in commercial operation. The number of WCDMA subscriptions grew by approximately 13 million to more than 68 million during the quarter. Seven new WCDMA networks were commercially launched during the quarter, bringing the total to 100 WCDMA networks, of which Ericsson is a supplier to 55.
Services continues to be a key area as operators seek to lower operating costs and free up time for customer interaction and business development. We have a clear leadership through our early start and presently manage networks with 65 million subscribers and provide around-the-clock support to networks with 725 million subscribers. Through our economies of scale and proven expertise, we are able to offer our customers not only first-class operations but also considerable savings.
Regional overview
Western Europe sales were up by 26% compared to the same quarter last year. Growth is primarily driven by strong services sales and the added Marconi business. Mobile systems sales were flat. The strong tariff competition and falling roaming charges drive traffic growth and increase operators' need for network expansions as well as intensify their focus on total cost of ownership.
Central and Eastern Europe, Middle East and Africa sales grew by 24% compared to the same quarter last year. The activity level was especially high in Pakistan, Russia, Saudi Arabia and South Africa. The growth is primarily in GSM, but 3G sales are increasing and during the quarter several contracts for WCDMA/HSPA were received in the region.
Asia Pacific sales grew by 55% compared to the same quarter last year, primarily driven by strong growth in Australia, China, India, Indonesia and Japan. During the quarter, China showed strong increase year-over-year and there is a steady demand and rollout activity. Contracts are however large and completion and invoicing tend to fluctuate between quarters.
North America sales were down 42% year-over-year. Sales were down 17% when adjusted for the extra SEK 2 b. invoicing in the second quarter 2005 related to planned later deliveries. The ongoing HSPA build-out continues according to plan. The 2G build-out also continues, however, operators' reductions of excess inventory have short-term effects on our sales. The upcoming spectrum auctions presently affect the market but should stimulate new network rollouts.
Latin America sales declined by 14% compared to the same quarter last year. As expected, operators are investing less after two exceptionally strong rollout years. There is, however, in many markets a continued need for investments in quality and coverage. Planning for 3G has started, and in parallel further CDMA operators investigate the benefits of changing to GSM/WCDMA.
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