Ericsson president feeling competitive strain

Von Chee Sing

Telefonaktiebolaget LM Ericsson?s president and CEO Carl-Henric Svanberg, spoke to Computerworld Hong Kong?s Chee Sing Chan and Telecom Asia?s Robert Clark on rising competition, the need for market consolidation and 3G?s enterprise play.

CWHK/TA: What?s your outlook on the market over the next three years? Are you expecting much consolidation among the communications vendors?

CHS: This is an industry that has always been growing as we have seen levels of communications rise and rise. Not only are we adding subscribers, but adding new services and driving greater traffic. These are the foundations for increased business for all involved.

But new technologies and services are also making life much more complicated. Combined with the recent market decline, there is increased pressure on all vendors. Today, there?s maybe eight or nine vendors all trying to sell and keep products alive. So there is an expectation of consolidation as has happened in other industries. But within the communications industry the expected synergies from consolidation may not appear due to the multiple platforms, systems and technologies that customers still have a need for support with.

The difficulty in doing this is maybe why you haven?t seen much consolidation yet. But you are seeing more cooperation, Siemens, Motorola and Huawei for example. As for the mega-mergers, I?m not sure whether we will see those happen soon -- it?s not as easy as in other industries.

CWHK/TA: With the rising number of richer services, costs of platforms are lower, open standards and more modular platforms appearing. How are you coping with the increased competition, especially with entrants like HP getting in on the act?

CHS: The pricing pressure we are facing now is no different than in any other industry. It?s only because volumes are going up, and prices are coming down as a result. The bigger number of users is making up for that, it?s a natural development and we expect this.

CWHK/TA: 3G has been so far a consumer play, contrary to previous beliefs that it would be enterprise or business driven. Is the enterprise play still expected to be significant?

CHS: As a general comment, if you look at the Internet/IT bubble, most of what we thought about the Internet was right in ideas but just wrong in timing. We just assumed things would happen within 12 to 18 months but in fact it took much longer than that. So it?s interesting when I see technologies being available for many years that are still not fully utilized by consumers or business. It?s a maturing process for 3G. It is a mirror to the rollout of GSM, there have been some delays, but we are comparing the current rollout to a very optimistic timeline set years ago. The business play will happen with offerings such as mobile office applications. It is still so early with 3G right now. We only have 10 million subscribers worldwide to date.

CWHK/TA: Is the lack of mobile and fixed-line integration proving a challenge to mobile data services growth, particularly in the enterprise/business sector?

CHS: Absolutely, this is something that is changing over the last year. Everyone agrees that the next generation network cores will be IP-based. They will be access-agnostic and you will be able to run wireless or fixed?line traffic over these networks -- there will be seamless services. That?s easy to say as everyone agrees that it should go that way and it will go that way. But the timing of this will vary among different markets. In some markets, the regulators want to keep fixed and mobile separate because it helps create competition. But in others you see mobile and fixed tariffs being the same -- and you can see convergence happening very quickly there.

CWHK/TA: What is your view on the situation of Nokia?s potential takeover of the Symbian OS consortium now that Nokia have in fact not taken a controlling stake? What would have been the implications had they assumed overall control?

CHS: I think one should be fair to Nokia and my assessment of the situation is that Nokia didn?t actually want to gain control and run the whole show with Symbian. They knew the strength of Symbian was that control of the platform was in the hand of a number of manufacturers. They just felt that when the Psion shares were made available, no one wanted them, so they said we will pick them up. That triggered the others to think this might be bad. Nokia insisted they would keep the OS a free and open alternative, but realistically when the other parties were faced with only a minority stake -- that scared people. Had that happened, there may have been a loss of support for Symbian as a platform due to the loss of independence.

CWHK/TA: Does having one dominant standard platform have any benefit?

CHS: I think there would be many, who would argue for that, say Microsoft, but there are too many that would rather see competition being promoted and so we?re unlikely to see that scenario. On the other hand if we had ten different platforms competing that would have a negative impact.

CWHK/TA: But is the OS that critical in this market, in the way it was for the desktop? Many would argue that it isn?t that critical?

CHS: I would say it probably is critical in many ways, it?s critical to create economies of scale rather than just become a minor concern. But I think it is also important that the industry is better supported by having fewer rather than more platforms. You have Symbian and Java, Linux and Microsoft all vying for influence. There can be a risk of fragmenting the market with too many platforms.