Tough at the top

CommsMEA caught up with Ericsson CEO Hans Vestberg when he visited the UAE last month to speak at the Abu Dhabi Media Summit.

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Tough at the top
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By  George Bevir Published  April 8, 2010 Communications Middle East & Africa Logo

There’s a picture of Hans Vestberg on the internet that shows the CEO with blood dripping from his nose on to his chin, wide-eyed and staring into the distance.

Vestberg picked up the knock during a particularly hard-fought game of handball - a sport that could be described as high-speed catch with body contact - when an over eager opponent caught him with a sucker punch.

That incident took place seven years ago, and the injury has long since healed. But industry experts and analysts are in agreement that Vestberg’s off-court rivals are keen to give the recently-appointed CEO another bloody nose.

Ericsson is the leading telecom vendor, with current estimates of the Sweden-based firm’s share of the infrastructure market at just over 35% (helped by its acquisition of some of Nortel’s assets), according to research firm Dell’Oro. The main threat to its status is widely regarded as coming from China, and in particular, Huawei. Huawei’s market share remained flat during the last quarter of 2009, at 20%. But it amassed that share rapidly, from 8% at the start of 2008.

“People like Huawei and ZTE are coming in and offering pretty aggressive pricing,” says Chris Lewis, GVP International Telecom at analysis firm IDC.  “The higher level pricing that people have enjoyed for some years has been put under some pressure,” he says.

When asked how Ericsson will deal with the threat posed by Huawei and ZTE, Vestberg does not dwell on the subject for long. “It is something that we have been living with for some time, so it’s nothing new,” he says. “It is a tough market... it is very competitive and has been for some time. We will focus on what we are good at, which is to continue to be number one in technology, and to continue to combine our strengths, which are technology leadership, the services organisation and the footprint we have in 175 countries. Competition will always be there.”

The good news for vendors dealing with depressed levels of capital spending from operators, Lewis says, is that the underlying requirement for infrastructure still exists. “Operators still need to invest so they can buy the right networks to get the return in future; it is an ongoing requirement.”

And when operators do decide to get their cheque books out, Vestberg wants to make sure the cheques are made payable to Ericsson. One way he plans to keep Ericsson positioned ahead of the competition is to keep the firm close to its customers.

Dynamic times

Vestberg was appointed CEO in January, and one month later he had reorganised the regional grouping of the business, reducing 23 markets to 10. He also appointed the heads of Ericsson’s North America and China divisions to the vendor’s executive leadership team.

When CommsMEA caught up with him, he explained that the changes were the result of a renewed effort to put the customer first. “What I am trying to do is get a more dynamic leadership team, in these dynamic times,” he said.

The “dynamic times” include high spots such as an ever-increasing appetite for mobile data and managed services. But also a period when operators decided to cut back on capital spending. 

According to Vestberg there was a “softening” on the infrastructure business during the second half of last year. When Ericsson’s fourth quarter results were released, Vestberg said that operator investment behaviour varied between regions and countries. Central Europe, Middle East and Africa, were highlighted as “increasingly cautious with investments”, while other markets including China, India and the US showed “good development with major network build outs”.

 “North America was very strong. China was strong. India was strong up to Q4 when some hesitancy crept in when the 3G licence came up. Those are three really large and important markets,” he says.

“If you look at the portfolio, we have infrastructure, the service business and multimedia business, and they are also playing out differently in those environments; we have growth in services, growth in multimedia and the network was a little bit down.

Despite pegging US, China and India as key markets for Ericsson, Vestberg is keen to underline the importance of the Middle East. “Many important operators are based here,” he says. “It’s an advanced market, so for us it’s important to be here, with resources management and competence so we continue to invest in this region. We have been established here for a long time, 50 years now, and we will continue to be here.”

Connected world

Vestberg’s vision of the future for the telecoms market is a bright one, and it revolves around more and more people and devices being connected to the internet, and to each other. By 2020, he says, there will be 50 billion connections around the world.

“We should stop talking about how many subscribers we have out there, and we should start talking about how many connections we have in the network.”

He predicts that within ten years, three billion people will have a broadband connection, with the growth coming from mobile broadband, as it is easier to install.

“If the last decade was an important step for the telecommunications industry, we believe that the next decade is going to be equally or more important for communication,” he says.

To prove his point, Vestberg draws on his favourite analogy, comparing the growth in broadband with the evolution of electricity consumption. 

“When electricity came, the light bulb was the natural way electricity was consumed. Today, if you go home, how many things are connected to electricity? Everything. I think that in ten years, we’re going to see the same with mobile devices – not just mobiles - with hundreds of devicesthat will be wirelessly enabled.”

When looking 10 years into the future, Vestberg is supremely optimistic about the fortunes of the wireless sector. But when the conversation returns to the present day, he is a little cagier.

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