skip to main content
Close Icon

In order to deliver a personalized, responsive service and to improve the site, we remember and store information about how you use it. This is done using simple text files called cookies which sit on your computer. By continuing to use this site and access its features, you are consenting to our use of cookies. To find out more about the way Informa uses cookies please go to our Cookie Policy page.

Global Search Configuration

Ovum view

Summary

In a somewhat expected move, on July 25th, Ericsson announced that Hans Vestberg, its CEO of seven years, will step down immediately and will be replaced temporarily by Jan Frykhammar, the company CFO. This comes after the announcement of quarterly financial results that missed expectations and the announcement of a major cost-cutting initiative, aiming to save US$1.5bn. It is a trying time for the Swedish vendor, which is also being investigated for corruption in Asia.

Will Ericsson's premium brand survive?

Ericsson has been perceived traditionally as the premium brand in the telecoms equipment infrastructure market, and this is one of the reasons it has been the dominant vendor for several years. Ovum's market share data indicates that Ericsson has been the top vendor in 3G and LTE deployments, winning billions worth of revenue in the past years. However, as new nationwide LTE contracts stagnate, every major vendor is subject to a three-to-four-year time window, when revenues are expected to plateau, only to increase again with 5G deployments. Optimistic market insiders may claim that SDN, NFV, and the migration to telco cloud will revive vendor revenues, but these technologies face the following problems:

  • Revenues from software-driven, hardware-agnostic technologies (SDN, NFV) will take time to develop as they require a fundamental transformation in both telco and vendor organizations.

  • Revenues from these technologies will be lower than revenues achieved with RAN contracts.

As such, all vendors are now facing a challenging environment in the context of their traditional box-shipping business. Other vendors have already reacted:

  • Nokia previously rationalized its Nokia-Siemens Networks product lines and has now acquired Alcatel-Lucent to increase its market footprint and grow its product portfolio. Both Nokia and Alcatel-Lucent underwent significant cost-cutting initiatives prior to the acquisition.

  • Huawei has expanded into adjacent areas that will provide growth before 5G deployments reach mass market: handsets, IT, and enterprise. Huawei is also operating in a country with lower R&D costs.

Although Ericsson has already implemented a strategy to broaden its portfolio through its partnership with Cisco, it is now forced to implement similar cost-cutting exercises to face the challenging environment. This is not entirely unexpected, but the Swedish vendor will have a hard time maintaining its "premium" brand while making its operations leaner, and will have to act swiftly to find a CEO that can execute on this daunting task.

Appendix

Further reading

Telecom Equipment Capex and Revenue Highlights: 1Q16, TE0006-001256 (July 2016)

"VimpelCom-Ericsson $1bn product and services deal signals IT transformation shift," IT0012-000173 (June 2016)

Author

Dimitris Mavrakis, Principal Analyst, Intelligent Networks

dimitris.mavrakis@ovum.com

Recommended Articles

  • Enterprise Decision Maker, Enterprise IT Strategy and Select...

    2017 Trends to Watch: Big Data

    By Tony Baer 21 Nov 2016

    The breakout use case for big data will be fast data. The Internet of Things (IoT) is increasing the urgency for enterprises to embrace real-time streaming analytics, as use cases from mobile devices and sensors become compelling to a wide range of industry sectors.

    Topics Big data and analytics IoT

  • Service Provider Technology, Enterprise Decision Maker

    IT services required to smooth the path to automation

    By Kris Szaniawski 17 Jan 2018

    Ovum expects telecoms-specific IT services to be the fastest-growing segment of the telecoms vendor services market, not just this year but also over the next five years, with a CAGR of approximately 7% over the period.

  • Service Provider Technology

    5G – Deployment and Commercial Considerations

    By Daryl Schoolar 24 Nov 2017

    In a few years, operators will start rolling out commercial, standards-based 5G networks. In doing so, these operators will face a variety of deployment scenarios based on spectrum and other various factors. The deployment decisions they make will impact what the network looks like and the types of services offered.

    Topics 5G

;

Have any questions? Speak to a Specialist

Europe, Middle East & Africa team - +44 (0) 207 017 7700


Asia-Pacific team - +61 (0)3 960 16700

US team - +1 646 957 8878

+44 (0) 207 551 9047 - Operational from 09.00 - 17.00 UK time

You can also contact your named/allocated Client Services Executive using their direct dial.
PR enquiries - Call us at +44 7770704398 or email us at pr@ovum.com

Contact marketing - 
marketingdepartment@ovum.com

Already an Ovum client? Login to the Knowledge Center now