May 19,2008 From http://www.totaltele.com/
May 19--Ericsson this week said it believes there is up to an US$83 billion potential in the field of managed and network services for operators, adding that it estimates its market share at around 10%.
According to Stefan Jelvin, director of strategic marketing global services at Ericsson's global services business unit, the company signed 12 managed services contracts in the first quarter of 2008, of which two were with TDC Mobile Nordic in Denmark and Mobily in Saudi Arabia.
Speaking during Ericsson's Capital Markets Day this week, it was clear that Jelvin and other Ericsson executives regard the TDC deal as something as a watershed, not least because it also represents a change of strategy at the Danish operator: TDC not only selected Ericsson as its network services partner over the next seven years for the buildout of its HSPA and EDGE network, but it also decided to abandon its previous two-vendor strategy, meaning Nokia Siemens Networks has been ousted as a supplier.
Jelvin said the fact that Ericsson had already supplied two-thirds of TDC's existing network compared with NSN's one-third gave it a complicit advantage in the bid for the deal, as NSN gear has been changed out for Ericsson kit.
But Mads Middelboe, CEO of TDC Mobile, said Ericsson prevailed in five key areas of evaluation.
"We wanted to lose the cost and complexity of the network," said Middelboe, adding that TDC felt a one-vendor approach would help reduce this complexity. "We wanted to transfer the running of the network to Ericsson so we could concentrate on our services," he said,
The deal worth 3.5 billion Danish crowns was awarded in February and involved the transfer of 220 TDC employees to Ericsson on 1 March.
"It's like getting married," said Middelboe, who noted that the "divorce" also had to be planned ahead of the start of the deal in case anything goes wrong in future.
Ericsson sees a flat market ahead when it comes to infrastructure rollouts and upgrades, but it believes managed and network services will continue to show strong growth, and said revenue from such services doubled in the last four to five years.
It added that operator customers are also increasingly asking the vendor to take on more "end-to-end" responsibilities.
'They are asking us to mitigate the risk," said Franck Bouetard, VP of product area systems integration in the global services business unit.
Jelvin also noted that the market for professional services is still extremely fragmented. He said Ericsson believes the majority of the market is taken up with companies of less than 2% market share.
Ericsson also said at its Capital Markets Day that it would spend $25 billion on R&D in the next five years, but expects to see an increase in IPR revenue to help compensate for increased costs. The vendor has made it clear that it will run its IPR increasingly more as a profit centre in future.
Analysts believe that increased IPR revenue halted the decline of Ericsson margins in Q1, when the gross margin, excluding restructuring costs, was 38.6%, down from 43% a year earlier.
Ericsson CEO Carl-Henric Svanberg said Ericsson is unhappy with the performance of its margins, which have been impacted by the lower dollar price and acquisitions, among other factors. But he stressed that the company is working on improving margins.
Svanberg also predicted there would be 6.5 billion mobile subscribers and 2 billion mobile broadband subscribers globally by 2013.
Editor: Haijing Qu
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