Telecom Lead Europe: Ericsson’s income in Q1 2012 was
down 4 percent. Presenting details of Ericsson strategies, business and
region-wise income details.
In the quarter, Ericsson announced acquisition of BelAir
and added WiFi capabilities to the portfolio. By acquiring Technicolor’s
Broadcast Services Division, it strengthened position in media and broadcasting
services, targeting a leadership position in Europe.
By divesting Sony Ericsson, Ericsson has left the
consumer part of the handset business to focus on enabling connectivity for all
devices, handsets and beyond.
Last year, Ericsson gained market share in its core
businesses and continued to build a strong LTE position where we have more than
60 percent market share.
Organic and FX adjusted sales growth was -18 percent
y-o-y. q-o-q sales were also impacted by seasonality. Sales in CDMA continued
to decline and decreased -40 percent y-o-y. Demand for HSPA and LTE was good in
the quarter, following the increased focus on network performance, especially
in North America.
India was still impacted by the uncertain regulatory
environment and declined Y-o-y and Russia continued its slower development from
The number of people covered by commercial LTE networks
from Ericsson is 215 million. In total, 325 million people are covered by LTE.
Operating margin was negatively impacted y-o-y by the
underlying business mix with more coverage than capacity projects and the European network
modernization projects as well as lower volumes. Profitability was negatively impacted
q-o-q by lower volumes, however, this was partly offset by mobile broadband capacity investments.
The impact on profitability from the network
modernization projects in Europe is a result of the strategic decision in 2010
to increase market share in Europe. Efficiency activities are ongoing to
mitigate these effects.
Organic and FX adjusted sales growth was 14 percent
y-o-y. The increase was especially good in Professional Services, mainly driven
by consulting and systems integration. This growth is due to a number of
reasons; the impact from growing data usage on our customers’ business, network
and IT environments and increased operator focus on service quality.
Operators’ transformation in the voice, IP and OSS/BSS
domains in order to reduce OPEX are also driving growth. Also this quarter,
Network Rollout sales increased y-o-y, driven by high volumes of network
modernization in Europe and coverage projects in other regions. Managed
Services continued its good momentum, reflecting the 23 new contracts signed in
Organic and FX adjusted sales was 12 percent y-o-y,
driven by good development in TV and multimedia brokering (IPX). The integration of Telcordia
is proceeding as planned. OSS was flat and BSS had a slow quarter, mainly related to a
weaker development in India.
Number of subscribers served by our charging and billing
solutions were 1.7 billion at end of period.
In North America, strong HSPA capacity sales and
build-out of 4G/LTE coverage more than offset the major decline in CDMA sales.
In 2011, the networks business had a strong H1, while sales for mobile
infrastructure equipment slowed down in H2 after the initial period with high
spending. Services sales increased Y-o-y driven by market share gains and a
high level of project executions. Smartphone penetration is now more than 50
percent in the US market.
In Latin America, the y-o-y increase was driven by
services, both network rollout and system integration in OSS/BSS. Sales in Networks showed some
growth y-o-y due to investments in mobile broadband coverage, but also enhancements in 2G.
Support Solutions increased due to consolidation of Telcordia.
In Northern Europe and Central Asia, sales of Networks
showed a major decrease Y-o-y mainly due to continued slower investments in Russia. LTE
rollouts and network modernization projects continued in the Nordics. Global Services
increased y-o-y, mainly related to new managed services contracts. The q-o-q decline in Global
Services is due to slower rollouts in Russia.
In Western and Central Europe, networks sales were
impacted by cautious operator spending, partly offset by network modernization projects. New
managed services business is driving the y-o-y growth in Global Services.
In Mediterranean region, networks sales decreased y-o-y
due to cautious operator spending. Network modernization projects continued to be deployed.
Global Services sales showed good development y-o-y, fueled by managed services contracts
in Italy and systems integration in Spain.
In Middle East, y-o-y growth was mainly driven by strong
sales in Saudi Arabia while business was slower in Turkey. Political unrest is still impacting
the region and operators are cautious with infrastructure investments. Services grew strongly,
especially in managed services and systems integration as operators are looking into network
performance quality and operational efficiencies.
ERICSSON FIRST QUARTER REPORT 2012
In sub-Saharan Africa, mobile penetration continued to
grow and compared to other regions, build out of voice services (2G) is still the main driver
of infrastructure projects. However, in some markets the deployment of mobile broadband has
begun. Sales were down Y-o-y despite growth in Networks.
In India, regulatory uncertainty continued with Supreme
Court ruling to revoke 122 2G licenses. In Q111, Networks sales were positively impacted by
initial 3G rollouts. Operators have a strong focus on cost competitiveness, which has resulted
in high interest in reducing their operating expenses. This has generated a growing managed
services business. Strong Q-o-q growth in Support Solutions due to Telcordia
In China and North East Asia, the y-o-y increase is
mainly related to continued data trafficgrowth in the region, especially in Japan and Korea.
China had a Y-o-y sales decline, primarily a result of good GSM deployments in H111. The q-o-q sales
decline is due to seasonality. The product mix is changing towards relatively more LTE
coverage deployments in some key markets. The increase in Global Services y-o-y is mainly
due to network rollout activities in China, Japan and Korea.
In South East Asia and Oceania, networks sales were
positively impacted Y-o-y by National Broadband Network (NBN) LTE deployment in Australia. In
Bangladesh and Thailand, operators are planning for 3G spectrum progresses. Global
Services showed good growth y-o-y, also due to the NBN LTE deployment.