Listening to telecom market forces

Why are cellphone companies having their networks managed by Ericsson?

The life of the operator is getting more and more complex. In the old days, it was rolling out a phone line to a house. Today, it encompasses full-blown multimedia. In such a complex life, you want to make sure that management focuses its attention on what is really key for the operation.

Ten years ago, we outsourced our own manufacturing. That was, of course, a very long discussion. Should we do all of our manufacturing? Isn’t that what we do for a living? Today, we have 20,000 [research and development] engineers and we have so many things to focus on, so it’s just great that we have outsourced that part.

So you don’t do your own manufacturing?

Twenty-five percent of our manufacturing is done by Ericsson, but 75 percent is outsourced. . . . China, Brazil, India, Eastern Europe.

During the recession, does telecom remain relatively strong because people travel less and use phone and Internet services more?

You can see some of those aspects. You can see that even when people get unemployed, the phone is the last thing they try to cut back on. Even in Iceland, of all places, which was so hard hit, you haven’t seen much change in the traffic patterns. And video-conferencing has grown quite dramatically in Iceland after the crisis.

Still, Ericsson is laying off workers.

We’re in the middle of a layoff that goes on over two years, about 10,000 people of a total workforce of 80,000. But at the same time, we’re continuously expanding in other areas. So in spite of doing these 10,000 layoffs, the total number of employees are actually increasing year-by-year.

The reason for the cutting is a planned reduction that should go four or five years, because we are transferring from old telecommunication technology to an IP (Internet protocol) technology world.

Will 4G data services from cellphone providers become a substitute for land-based broadband services?

Absolutely. Think about it. Four billion people have their own mobile phone. There aren’t more than a billion people that have access to a fixed phone. Three billion people will never get the Internet in any other way than through a mobile network. We’re getting so used to our mobile connections that if I want to Google, if I want to find data, I obviously want to Google when I need the data, not when I happen to sit by a fixed line. I want it now. I want to do it where I am at any given time, not when I’m at a hotspot or I’m connected to a wire. So mobility is growing very fast. And 4G that Verizon, for example, is rolling out is better than any fixed line you can find.

These days, I’m getting about 9 megabits at home. Will 4G be better than that?

It’s going to be over a hundred.

Maybe in theory. But in practice will people get that speed?

It’ll be clearly higher than nine.

Sales are way down at Sony Ericsson, your cellphone joint venture with Japan’s Sony Corp. What’s wrong?

What is happening to Sony Ericsson is what’s happening to the whole handset market. You see a huge decline in consumer demand.

But isn’t the demand for cellular services still strong?

They continue to call, but they don’t need to change their phones necessarily. The typical mobile subscriber today changes his phone every second year. Of course, he can change it every second and a half year, or every third year.

So the alliance with Sony is going to continue?

It’s a great alliance. It’s been good for us. We have made $4 billion of profit with them.