Docstoc

focus - PDF

Document Sample
focus - PDF Powered By Docstoc
					22



                                                                                                                                     TIME TO CUSTOMER




                                        How to save money while
i i · i n focus




                                        pleasing customers even more

                                        S
                                                in the data and telecommunica-          the same operator’s network somewhere else. Glob-
                                               tions market requires being able to deal with     al customers demand the same simple ordering
                                               rapid change. Ericsson’s customers – network      routines and delivery procedures, regardless of
                                               operators and businesses – are keenly aware of    where in the world the product will be put into
                                        this. That is why they demand so much of their           operation.
                                        suppliers: fast delivery, rapid development of new           The transition to direct ordering via the Internet
                                        solutions requested by users, quick response when a      enables substantial savings through rationalization.
                                        problem needs to be solved, and so on.                   Previously, orders were often sent from one order
                                            Ericsson has been working hard and conscien-         office to another within Ericsson before finally
                                        tiously over a period of years to reduce lead times at   reaching the unit that would complete the delivery.
                                        all levels. When the new organization was intro-         Most of these intermediary points in the old
                                        duced at year-end , the need for speed was           process can now be eliminated. Every step in the
                                        given additional emphasis. Over the past year,           process that does not add value for the customer
                                        major steps have been taken within the framework         will be removed.
                                        of ttc Global, an Ericsson-wide project led by the
                                        corporate function Supply & it that, among other             
                                        things, aims at reducing lead times.                     The methods developed by ttc Global were tested
          THE GOAL OF                       Shortening ttc, or Time to Customer, is the          successfully during  and  with deliveries of
          TTC Global is to sharply      overriding goal of the project, by reducing the time     radio base stations to Germany. This experience
          reduce lead times and to      from when the customer places an order until a           proved that the methods are sound. Customer
          simplify the entire supply    product has been delivered and is ready to be put        reactions were overwhelmingly positive. The sim-
          chain. The economic           into operation. The target for ttc Global is to          plified ordering routines pleased the customers and
          potential of such improve-    reduce lead times in the supply chain by  percent      earned them money, since deliveries of needed
          ment is substantial. We       or more. At the same time, using Internet technol-       capacity increases could be guaranteed in half the
          can reduce personnel          ogy, simpler and thereby faster ordering routines        time previously required.
          requirements in the supply    are being created for customers.                            Customers are also receiving better information
          chain by 25 percent,                                                                   than before. Web technology is being used to
          which in terms of money       -                                   simplify customer orders, and to allow the
          is at least 3 percent of      One of the most important means of achieving the         customer to track how orders are being processed
          sales for all products that   ttc Global goals is a transition from previous           within Ericsson’s organization.
          can be handled in this        delivery methods to what is called high-level deliv-
          way.                          erables. This means that products delivered to             
                                        customers should be as ready to use as possible. A       The new methods are now being used with more
          BJÖRN BOSTRÖM,                radio base station, for example, should have all         products throughout Ericsson. Wide application of
          SENIOR VICE PRESIDENT,        software installed and be ready to take into opera-      the ttc Global methods is being given the highest
          SUPPLY AND INFORMATION        tion. It should be delivered completely assembled        priority by executive management, not only
          TECHNOLOGY                    and ready for rapid installation, which entails sim-     because they improve and strengthen the
                                        ply connecting the necessary power and communi-          relationship with the customer, but also
                                        cations cables.                                          because of economic incentives. ttc
                                            The transition to high-level deliverables means      Global has shown that it is possible to
                                        that the customer can identify a suitable solution in    reduce personnel requirements in the
                                        Ericsson’s product portfolio based on current            supply chain by  percent. In monetary
                                        requirements and order a complete package via a          terms, this corresponds to at least  per-
                                        web-based application.                                   cent of invoiced sales for all products that
                                            The ttc Global management is aware that not          can be handled in this manner.
                                        all of Ericsson’s product portfolio can be ordered in       Vodafone Airtouch, which is one of
                                        this manner, but most products can be delivered          Ericsson’s largest customers in mobile
                                        using the simplified routines.                           systems, gave the Company the highest
                                            Because the operations of Ericsson’s customers       possible marks for its working methods
                                        are becoming more global, this method of delivery        last year when the operator decided that
                                        is much appreciated. What a mobile operator              this delivery model would be the stan-
                                        needs for a network in one part of the world is          dard for all its networks around the
                                        often exactly the same as what was purchased for         world.                                     •
                                                                                                   R250 PRO, the world’s first water- and shock-resistant
                                                                                                 mobile phone. Combined mobile phone and private radio.
                                                                                                                                          23
THE MILLENNIUM SHIFT AND IT




Millennium
shift renews
it structure

T
T
          for Ericsson’s
       millennium program were to uphold cus-
       tomer confidence, to protect shareholder
       investments and to secure the Company’s
internal working conditions.
   All three of these goals were achieved inasmuch
as Ericsson did not experience a single serious inci-
dent during the transition to the new millennium.
After the New Year, work resumed among Erics-
son’s customers without interruptions.
   Ericsson took the yk issue seriously. An exten-
sive program to handle the transition was started as                                                            PipeRider, modem for
                                                                                                                data communication over
early as . The program encompassed all Erics-                                                               cable-TV networks.
son companies and operations and was monitored
by executive management. The total cost of the
Millennium Program was sek , m.
   Ericsson made a great effort to eliminate and         introduction of esoe (Ericsson Standard Office
minimize all yk-related problems. All products          Environment), was speeded up by the Millenium
were tested to determine whether or not they are         Program.
yk-compliant. In certain cases, customers were              esoe means that an Ericsson employee is able to
offered upgrades. An extensive review was also           sit at any pc anywhere throughout the organization
conducted of mission-critical information systems        and immediately begin working with familiar soft-
and of all steps in the delivery chain from order to     ware in a familiar computing environment. This
installation.                                            increases internal efficiency and makes it easier to
                                                         relocate employees temporarily or permanently.
                                        Several major virus attacks during  also
To assist customers around the world, more than          confirmed the strength of the esoe concept.
, Ericsson employees were on duty on New             Thanks to central administration of virus protec-
Year’s Eve in more than  locations around the         tion and frequent updates, Ericsson has withstood
world. To coordinate their activities, a number of       all severe virus attacks to date without major dam-
new routines and systems were implemented and            age. By year-end , nearly  percent of all
tested, including a worldwide communications             Ericsson employees had esoe installed in their
system for the rapid collection of information.          pcs. The goal is to complete the implementation of
   At the millennium shift, the load on public           this standard environment during the year .
telephone systems was at times extremely high. In
some areas, subscribers experienced problems in            
making calls, but this was due entirely to over-         sap r/ has also been introduced as a standardized
loading of the networks. When traffic returned to        environment for many of Ericsson’s administrative
normal, service levels were also restored to nor-        routines. To date,  major installations have been
mal.                                                     completed throughout Ericsson.
                                                            During , a number of new intranet-based
                             systems for internal administration were taken into
As a result of the millennium shift, Ericsson’s inter-   operation. “Click to Buy” is one example of the
nal it infrastructure is more highly optimized,          increased efficiency made possible using intranet
more secure and more efficient than ever before. All     technology. This is a system for purchasing and
software used throughout Ericsson was reviewed.          ordering non-product related goods that will grad-
Many systems and applications were phased out            ually replace traditional methods, which are often
entirely, while others were upgraded. Work to            cumbersome and bureaucratic. For input goods, the
create uniform standards, including the continued        electronic transfer of information already exists. •
24




                                         A new Ericsson
i i · i n focus




                                         emerging

                                         T
                                                     ,  had ,
                                                   employees, more than half of whom
                                                   worked in a business area called Public
                                                   Telecommunications. It was built up
                                         around the axe switch and dominated Ericsson’s
                                         business totally. This was the unit that generated
                                         the profits that financed Ericsson’s bold new invest-
                                         ments in mobile telephony, business systems and
                                         component manufacturing.
                                            Ericsson’s customers were state-owned ptts, one
                                         in every country, that at regular intervals went to the
                                         market and requested tenders for new deliveries
                                         based on very detailed technical specifications devel-
                                         oped by the customer’s engineers. A typical tender
                                         occupied several meters of shelf space and took
                                         months for a team of skilled engineers to prepare.
          NEVER BEFORE HAS                  That was what the telecom world was like ten
          Ericsson worked so hard        years ago. Just about what it was like  years ago.
          to increase internal com-         Today, ten years later, it is history. Communica-
          petence and to change          tion in fixed telecom networks is still an important
          the way of thinking and        business for Ericsson, but it is no longer the motor in
          acting on the job. If we are   the Company’s operations. Instead, mobile telephony
          to succeed in the new          accounts for the lion’s share of revenues and totally
          telecom world, every           dominates the business. The ten years that have
          employee must under-           passed have entailed enormous changes in the Com-
          stand how it works and         pany. The ten years ahead will bring even greater
          what will be demanded of       changes.                                                  organization among the Company’s employees and
          our customers if they are         Restructuring is a word that Ericsson and other        to defining and disseminating knowledge of the new
          to succeed.                    companies in the industry will need to learn to live      division of roles and responsibilities in the Company.
                                         with. Tomorrow’s winners will be the companies
          BRITT REIGO,                   that are best at change and best in reallocating            
          SENIOR VICE PRESIDENT,         competence and resources.                                 At year-end , Ericsson had , employees.
          HUMAN RESOURCES AND               Daring structural initiatives, distinct and proac-     One year later this number had fallen to ,.
          ORGANIZATION                   tive management and smart working methods will            This relatively modest decline is the net result of
                                         unquestionably be needed to provide the flexibility       , persons leaving Ericsson during the year,
                                         the market demands. But above all, an open mind           while , joined the Company through acquisi-
                                         will be required of everyone working in the Com-          tions or strengthening of resources in strategic areas
                                         pany, meaning that the business culture must be           for the future. Mobility within Ericsson remains
                                         one that encourages change and seeks opportunities        high.
                                         in change. This is why one of the most important             This trend will continue in , as a result of
                                         aspects of Ericsson’s business strategy is the one        letters of intent that were signed in late , and
                                         that concerns the people within the Company.              through a continued realignment of work assign-
                                                                                                   ments. The sale of the Energy Systems business in
                                         • DEVELOP THE INTERNAL CULTURE, AWARENESS                 January  was a first step in Ericsson’s contin-
                                           AND COMPETENCE
                                                                                                   ued focus on core operations, meaning that ,
                                                                             persons begin working for a new employer.
                                                                                                      Several important company acquisitions during
                                         During , work to restructure Ericsson continued        greatly contributed to strengthening Erics-
                                         at an increasingly rapid pace. The organization that      son’s competence in the datacom and ip field. With
                                         was introduced in January  was polished and           the Company’s current strategic focus, additional
                                         further refined during the year. Great effort was         strengthening of resources in this and other central
                                         devoted to promoting understanding of the new             areas will be required. Ericsson is therefore contin-
                                                                                                                                                                  25
HUMAN RESOURCES




                                                                                                                                   The Bluetooth Headset contains a
                                                                                                                                   wireless earpiece and microphone
                                                                                                                                   for mobile phones.


uing to pursue an acquisition strategy that seeks to               fill vacancies in existing operations, but instead
identify small and medium-size companies with                      actively seek the most talented people, offer
key expertise that supplements the already high                    employment, and thus secure the skills the compa-
level of skills within Ericsson.                                   ny needs. An international working group is now
   Individual recruitment of highly skilled new                    working to develop guidelines for implementing
employees is also a high priority for Ericsson. Dur-               this policy.
ing , a completely new policy was established                      To support the new recruitment model, Ericsson
for new recruitment by which we will not recruit to                is also working actively to become more visible and
NUMBER OF EMPLOYEES BY GEOGRAPHIC REGION

                                                            1999                        1998                        1994
                                                 Number of                   Number of                   Number of
                                                 employees       percent     employees       percent     employees       percent
Europe, Middle East, Africa                           70,900     68               74,900     72              59,300     78
USA and Canada                                        12,200     12                9,800       9               6,200       8
Latin America                                          8,200       8               7,800       8               4,500       6
Asia Pacific                                          12,000     12               11,200     11                6,100       8

Total                                               103,300                     103,700                      76,100

Of which Sweden                                       43,500     42               44,600     43              36,600     48
Of which EU                                           65,700     64               70,000     67              17,700     23


During 1999, the number of Ericsson employees declined slightly. The markets in which the number of employees increased the most
are primarily markets, such as the U.S. and Brazil, in which companies were acquired during the year. In Sweden, the number of
employees continued to decline as a consequence of operations being sold to other companies.
26



                                                                                                                                                                                    HUMAN RESOURCES
i i · i n focus




                                              better represented at leading universities and col-                                               EMPLOYEES BY LEVEL OF EDUCATION

                                              leges around the world. The Company has long had
                                              excellent relations with the academic world, which
                                                                                                                                                                                                  43 %
                                              will now be cultivated in order to make Ericsson                                                          9%
                                              even more known as an excellent and exciting
                                              employer.
                                                
                                              Ericsson’s global presence in more than  coun-                                                      27 %
                                              tries gives the Company a very broad base for
                                                                                                                                                                                                21 %
                                              recruitment, while allowing new employees to be
                                              offered an opportunity to work internationally. An                                                            Mandatory school       Specialized school
                                              excellent start for an international career at Erics-                                                         Higher secondary
                                                                                                                                                            education
                                                                                                                                                                                   University degree
                                                                                                                                                                                   or higher
                                              son is the new global trainee program that was
                                              started during .                                                                              The level of education of Ericsson employees has increased
                                                 This is a two-year program consisting of three                                                 throughout the 1990s. Today, 49 percent of all Ericsson employ-
                                              six-month job training periods interspersed with                                                  ees have an academic degree, which is an increase of five per-
                                              theoretical studies. One job-training period is spent                                             centage points over the past two years. The average level of
                                                                                                                                                education is highest in growth markets in Asia and Eastern
                                              with an Ericsson customer, while the theory units                                                 Europe, as well as in parts of Latin America. In several countries,
                                              are arranged in cooperation with leading universi-                                                more than 75 percent of all employees have an academic degree.
                                              ties worldwide. The program is very international
                                              with study units arranged in different parts of the
                                              world and in the composition of the trainee group.
                                                 Several thousand persons applied for the  places                                             the Company’s largest investment in skills
                                              in the first program. Six women and eleven men                                                    enhancement to date. Through the Competence
                                              from nine different countries were selected. All had                                              Shift, as the program is called, the intention is that
                                              high grades from university, and most had two                                                     all of the Company’s , employees will gain
                                              degrees. The trainee program is actively supported at                                             an increased understanding of how the new telecom
                                              the highest level in the Company. The steering com-                                               world functions. The Competence Shift focuses on
                                              mittee for the program includes three of the fourteen                                             explaining new technology, new business logic and
                                              members of the executive management team.                                                         the new market situation that Ericsson is facing.
                                                                                                                                                The idea is that awareness of the forces driving
                                                                                                                          development will make it easier to understand and
                                              During the spring of , Ericsson’s executive                                                   accept the Company’s business and product strate-
                                              management began planning for what would be                                                       gies.
          Chatboard, keyboard to facilitate                                                                                                         An internal development program this compre-
          the writing of SMS messages
          and e-mail.                                                                                                                           hensive would not be possible without the very
                                              EMPLOYEES BY AGE GROUP                                                                            technology that the Competence Shift is designed
                                                                                                                                                to explain. A new web site on Ericsson’s intranet
                                              14,000                                                                                            provides the base for the entire program. Here
                                                                                                                                                employees can start by playing an entertaining
                                              12,000                                                                                            diagnostic game that reveals the gaps in their
                                                                                                                                                knowledge. These gaps can then be filled through
                                              10,000                                                                                            various interactive courses.
                                                                                                                                                    In addition to the centrally initiated Compe-
                                               8,000
                                                                                                                                                tence Shift, a number of similar activities were
                                                                                                                                                started throughout Ericsson in . The gsm
                                               6,000
                                                                                                                                                Systems business unit provided training in data
                                               4,000
                                                                                                                                                communications for , employees during the
                                                                                                                                                year. The Knowledge Step, as the program is called,
                                               2,000                                                                                            is now being extended to many other companies
                                                                                                                                                and units within Ericsson.
                                                  0
                                                         9          4        9        4        9        4        9        4        9        4
                                                                                                                                                    For customer account managers, Ericsson Busi-
                                                       –1        –2       –2       –3       –3       –4       –4       –5       –5       –6
                                                               20       25       30       35       40       45       50       55       60       ness Academy developed an intensive course called
                                                                                                                                                Inside the ip tornado, which describes the business
                                                            Sweden (total: 43,500)                      Rest of the world (total: 59,800)       logic in Silicon Valley. During , at least 
                                              The average age of Ericsson employees is gradually declining.                                     persons will participate in this training.
                                              More than half of all employees are 35 or younger. The lowest                                         There are also various local initiatives in the
                                              average ages are found in growth countries, such as China and                                     area based on needs in respective Ericsson markets.
                                              Brazil, where it is 32. The average age in Sweden is 39.
                                                                                                                                                                                                     •
                                                                                                                                              27
CORPORATE CITIZENSHIP




Good reputation in society
increasingly important

M
M
                 around the world
               have realized the importance of being
               perceived as a respectable and responsi-
               ble citizen in society. They have under-
stood that a good reputation also has a commercial                       A1018, mobile phone
                                                                               for the low-price
value. It is easy to appreciate that public authorities                  segment. Available in
and organizations are more favorably disposed to                           five different colors.
companies that contribute to improving society and
make their resources available in emergency situa-        Ericsson’s local company worked together with the
tions. Not quite as self-evident – but no less impor-     local mobile operator Turkcell to ensure that
tant – is that today’s consumers increasingly expect      mobile communication in the affected area contin-
that the companies whose products they purchase           ued to function. Ericsson employees in Turkey
should be companies that distinguish themselves           donated money, gave blood and provided other
from others and through their actions win the cus-        assistance during rescue efforts.
tomer’s confidence. It is becoming increasingly nat-         When floods struck Vietnam in November,
ural for today’s consumers to prefer doing business       Ericsson’s local office provided emergency assis-
with “good” companies rather than with “bad” ones.        tance in a number of ways. Ericsson volunteer
                                                          workers, mobile phones and other resources were
                                             placed at the disposal of the authorities during the
Ever since the Company was founded more than              reconstruction work.
 years ago, Ericsson has taken pride in being             In Canada, Ericsson quickly provided a mobile
ethical in its actions and practicing fair business       base station on wheels to assist rescue personnel and
methods. This is a part of the business culture that      the families of victims following a major air crash.
Lars Magnus Ericsson established and something
that has contributed to creating a positive image of                                                    THROUGH      public service
Ericsson as a company.                                    Obviously, catastrophes make headlines, but there          activities, Ericsson
   Through the years, this image has been strength-       are many countries in the world that face major            companies around the
ened by activities that have been conducted in various    challenges every day. These challenges range from          world are strengthening
parts of the world to demonstrate Ericsson’s social       helping people to find food, work or housing to            our positive image. This is
responsibility in the countries in which it is active.    teaching them to read and write.                           very important in a market
With the support of local management, Ericsson                In order to support and reward innovative efforts in   where people increasingly
employees in many countries have participated in          this area, Ericsson founded the erica Award (Erics-        let their hearts dictate
different social projects. Such work not only strength-   son Internet Community Award). This award, which           business and purchasing
ens Ericsson’s positive image, but also contributes to    is also sponsored by other companies, is given to non-     decisions.
strengthening the team spirit within the Company.         profit organizations that use Internet technology to
   These often spontaneous expressions of solidarity      help others. In , a total of usd , was           LARS A. STÅLBERG,

are very valuable, but more is required. The realiza-     awarded. The prize was shared by three winners: the        SENIOR VICE PRESIDENT,

tion that it is essential to coordinate and develop       National Library for the Blind in Great Britain, Med-      COMMUNICATIONS

such activities, resulted in a comprehensive review       ical Training Worldwide in Novato, California and
being conducted in  of Ericsson’s role in soci-       Kids HealthLINK in San Francisco, California.
ety. A special group was established within Erics-
son’s marketing function that was charged with             
further developing Ericsson’s activities in this area.    Ericsson will continue to provide humanitarian
                                                          assistance in the form of communications systems. In
                                       this way, the Company will play a leading role in
Experiences during  confirm that humanitari-          helping to reduce human suffering in conjunction
an assistance in the form of communications sys-          with catastrophes. The message to the world is clear:
tems in conjunction with natural catastrophes and         Ericsson is a company that takes responsibility, that
similar situations is the area in which Ericsson can      really makes a difference. It is a company which is
provide the greatest benefit. During the preceding        characterized by high ethical standards and which is
year, significant efforts were made in several situa-     a respectable and responsible employer that takes a
tions around the world.                                   long-term view of environmental issues and has been
   Following the major earthquake in Turkey,              doing so for some time. It is a company that cares. •
28
i i · i n focus




                                       Solid growth for mobile systems
                                       and new fixed network solutions

                                       E
                                                ’    the leading               
                                                supplier in the new telecom world demands      During the year, Ericsson signed the first commer-
                                                that the Company should be able to offer a     cial contract for a g system with ntt DoCoMo in
                                                broad portfolio of network solutions and       Japan. Ericsson will supply radio base stations and
                                       continue to focus strongly on the ip and datacom        terminals for ntt’s network, which when it is
                                       market. Achievements during  show that the          taken into commercial operation next year, will be
                                       prospects for achieving this goal are favorable.        the world’s first g network. Additional contracts
                                           Ericsson’s Network Operators/Service Providers      were signed during the year covering commercial
                                       business segment experienced an eventful year in        and test systems. Test systems for wcdma and
                                       . A dramatic increase in traffic was noted in all   edge are now in operation with more than 
                                       telecommunications networks. Very rapid growth          operators, which means that Ericsson is far ahead of
                                       in mobile telephony and continued strong growth         its main competitors in this area.
                                       of Internet traffic combined to generate exponential        Planning for g systems is underway all over the
                                       growth in network traffic.                              world. Many operators have applied for g licenses,
                                           In mobile networks, the number of subscribers       and Ericsson is discussing deliveries with most of
                                       increased by  percent during the year, while traf-    them. However, license allocation is not expected
                                       fic increased even more. More than  million new       to gain momentum until sometime in , which
                                       users were connected to the Internet during .       means that the rest of the world will be somewhat
                                       The result was that network capacity had to be          behind Japan when g is taken into commercial
          DURING 1999 our mobile       increased during the year at a much faster rate than    operation.
          systems operations grew      anyone had expected.
          by more than 40 percent.         For this business segment, these trends con-          
          We took the lead in all      tributed to extremely strong growth, strengthen-        In anticipation of g systems, gprs has attracted
          areas of the mobile Inter-   ing the segment’s position as Ericsson’s largest,       considerable interest during the year. This is a part
          net and we developed and     with  percent of net sales.                           of the gsm system that makes it possible to signifi-
          sold systems that help our       Net sales amounted to sek , m.                cantly increase data capacity using packet-
          customers to migrate their   (,) in , which was an increase of  per-     switching techniques in gsm networks. Ericsson
          existing investments         cent. With an operating margin of  percent, the       signed a large number of gprs contracts during
          forward into the new         business segment is also Ericsson’s most profitable.    the year, thereby winning half of all business as
          telecom world and its                                                                measured by the operator’s subscriber base.
          network architecture.                                                 Ericsson is also leading the way with respect to
                                       One of the reasons why Ericsson is the world leader     the g standard, edge. BellSouth and Rogers
          MATS DAHLIN,                 in mobile systems is that Ericsson is the only com-     Cantel have placed orders for such systems, which
          EXECUTIVE VICE PRESIDENT,    pany able to offer mobile systems according to all      are expected to be taken into operation by .
          BUSINESS SEGMENT             existing standards. This has applied to first- and
          NETWORK OPERATORS            second-generation systems and is now also true for       
          AND SERVICE PROVIDERS.       third-generation systems.                               Technologies that allow wireless access to the Inter-
                                          Ericsson has long been one of the principal          net received considerable attention during the year.
                                       drivers behind the development of third-genera-         The business segment is working hard to further
                                       tion (g) mobile communications. With the               strengthen Ericsson’s offering with respect to these
                                       announcement in March  of an agreement              technologies, which include operating systems,
                                       with the American company, Qualcomm, Ericsson
                                                                                               BUSINESS SEGMENT NETWORK OPERATORS
                                       further strengthened its position in mobile             AND SERVICE PROVIDERS 1999
                                       systems. As part of the agreement, Ericsson
                                       acquired Qualcomm’s infrastructure operations,                                                         Change
                                       thus allowing the Company to expand its product                                      1999     1998    (percent)
                                       portfolio with cdmaOne, previously known as             Orders booked, SEK b.        151.8    127.6         19
                                       cdma is-.                                             Net sales, SEK b.            149.9    123.2         22
                                          When the itu, at the end of , announced its
                                                                                               Operating margin, SEK b.      19.6     15.3
                                       decision on g, it became clear that Ericsson will be
                                       able to supply systems for each of the three most       Operating margin, percent      13       12
                                       important standards.                                    Number of employees         64,695   68,645         –6
                                                                                                                                                       29
BUSINESS SEGMENT NETWORK OPERATORS AND SERVICE PROVIDERS



communications platforms and content. Ericsson is        telecommunications to a new generation of net-
active on a broad front in this area.                    works that will handle circuit-switched and
    Content is being developed in cooperation with       ip/atm-based packet-switched traffic. During
a large number of companies and operators. Erics-        , bt in Great Britain, kpn in the Netherlands,
son’s demonstration systems for g in various parts      Telia in Denmark and Telefónica in Spain chose
of the world are a valuable asset in illustrating the    engine for modernizing their networks. An order
opportunities provided by the new technology.            from Diginet, which intends to use engine for an
    In order to further promote the development of       extensive Latin American ip network with wireless
applications for g and other technologies, Ericsson     access, confirms that this is a solution that also fits
took an ownership stake in companies such as             newly established operators.
oz.com and Saraïde during the year. Although                engine’s success was the result of strategic
these investments might seem to be somewhat              marketing activities to reposition Ericsson as a
peripheral to Ericsson’s core business, Ericsson         supplier of networks for data and telecommunica-
intends to take an active part in driving a market       tions. This was made possible by restructuring the
for the mobile Internet and to support new ip-           Wireline Systems business unit to become a suppli-
based solutions that generate more network traffic.      er of total solutions and services.
                                                            The positive results achieved by engine are not
                             the only examples that confirm that Ericsson is one of
With a market share of over  percent, Ericsson         the key players in the ip and datacom market. In the
dominates the market for mobile systems. Ericsson        area of ip-based voice telephony, called VoIP (Voice
is also one of the leading suppliers of infrastructure   over ip), Ericsson is now the world leader after having
for fixed communications. The axe system, the            signed several important contracts during .
sales of which exceed those of any other switching          Ericsson’s systematic investments in ip commu-
system, is the foundation of Ericsson’s success in       nication also resulted in the establishment of the
each of these markets. During , more axe             Datacom and ip Services business unit in Boston in
lines were sold than ever before, bringing the total     the U.S.
installed base up to  million fixed lines. This is
the world’s largest installed base for fixed telecom-     
munications and a major source of future revenues.       The concerted effort to further strengthen Ericsson’s
Several of Ericsson’s operator customers are now         expertise in ip technology made during the past few
beginning the work of upgrading their networks to        year was accelerated significantly during . Sever-
the next-generation network architecture. This           al important acquisitions and partnerships were
architecture will handle data and multimedia com-        announced during the year. Consequently, Ericsson
munications in fixed and wireless networks.              now has a complete product portfolio for tomorrow’s
                                                         data and telecom networks. Today, Ericsson has a
                                   unique capacity to offer total solutions for all types
During , Ericsson’s engine concept achieved          of wireless and fixed networks.
considerable success. This is a solution for the             In order to strengthen Ericsson’s offering to the
migration of circuit-switched networks for fixed         segment’s customer groups, Ericsson Services was




                                                                                                                   RBS 2401, complete picobase
                                                                                                                   station for installation indoors.
30



                                                BUSINESS SEGMENT NETWORK OPERATORS AND SERVICE PROVIDERS
i i · i n focus




                  established as a new business unit during the year.      Systems will continue, and the workforce will be
                  With a strong portfolio of services, Ericsson’s posi-    adapted to order volumes and new technology.
                  tion as a total supplier, systems integrator and            The implemented structural measures, together
                  partner is strengthened.                                 with satisfactory sales and new solutions, generated
                                                                           earnings that exceeded expectations and
                                                  contributed positively to Ericsson’s profitability.
                  Several of the business segment’s mature products           The dominant share of reductions within the
                  continued to show favorable margins during .         business segment during  took place through
                  Mobitex is one such product, which during            outsourcing. For example, , employees began
                  underwent somewhat of a renaissance. Increased           working for new employers when production units
                  demand for wireless data communication in the            in Visby, Katrineholm, Östersund, Longuenesse
                  U.S. more than doubled the number of subscribers         and Madrid were transferred to external partners.
                  of one of Ericsson’s customers during the year.             In Norrköping,  employees were transferred
                  Ericsson received new orders for equipment for the       to the staffing company Proffice. A similar solution
                  Mobitex network, which for the time being is the         for affected personnel in the Stockholm area was
                  country’s only nation-wide network for wireless          arranged through the establishment of Framtidsfo-
                  data communication.                                      rum, which is helping about , employees in
                     lmds, Ericsson’s system for wireless broadband        the business segment to find new career paths.
                  access, optimized for high-speed ip traffic, has         Those who have not succeeded within one year will
                  attracted major interest in the market. Ericsson         be offered employment with Manpower, another
                  signed its first contracts and the system is now         staffing company.
                  being used in trials by the American operator
                  nextlink. Ericsson is mainly targeting the enter-         
                  prise market, but in the long-term lmds can enjoy        The New and Special Business Operations business
                  wider application, as new licenses are issued and        unit includes operations that Ericsson is preparing
                  new operators surface. The system is based on            to phase out of its product portfolio and operations
                  Ericsson’s successful mini-link system, which            that are completely new and have not yet resulted
                  currently holds a -percent market share.               in finished commercial products.
                     Ericsson also offers cdpd, a first packet-               One example is the Private Radio Systems Unit,
                  switched technology for tdma that provides for           which was sold in the beginning of  to the
                  services at twice the speed of existing networks. A      U.S. company, Com-Net Critical Communications.
                  number of important contracts were signed during            The business unit also includes units of a purely
                  the year with at&t and others.                           entrepreneurial character, often organized as inno-
                     During , isdn made a strong comeback.             vation cells, which are groups formed around ideas
                  Ericsson’s customers have a large installed base of      that are considered to be worth developing. For
                  copper networks offering conventional narrowband         instance, E-box, Ericsson’s product for remotely
                  services that are an excellent source of add-on sales.   controlling household equipment via the telephone
                  The strong growth in Internet traffic increased          network, was developed by such a group.             •
                  interest among operators for investing in greater
                  capacity in the existing copper network. Ericsson
                  products easily allow these operators to increase
                  bandwidth at the desired rate, first with isdn and
                  possibly later with adsl.
                     Ericsson’s wdm technology substantially
                  increases capacity in wireline transportation net-
                  works while maintaining a high transmission secu-
                  rity level. Contracts were signed with Telefónica in
                  Spain and U.S.-based aol during the year.
                   
                  The business segment’s internal work during 
                  was characterized by continued restructuring of
                  operations. This applied primarily to the Wireline
                  Systems business unit, which during the past year
                  sharply reduced the number of employees. During
                  the s, the number of employees in the compa-
                  nies currently included in this business unit was
                  reduced by more than  percent and totaled some
                  , persons at year-end .
                     During , the restructuring of Wireline
                                                                           MacroDens, power module for supplying current to PC circuit cards and
                                                                           similar components.
                                                                                                                                              31
OTHER OPERATIONS




Components                                               Microwave Systems

E
E                                                        E
                                                         E
           (now Ericsson                           can look
         Microelectronics) reported net sales of                 back on a period of rapid growth, which is
         sek , m. (,) in . Operations                expected to continue with the new business
         consist of the Energy Systems, Microelec-               opportunities provided by the company’s
tronics and Electronic Distribution business units.      two main product areas: defense systems and
    Energy Systems had an extremely good year. One       microwave communications. The company’s sales
of the high points was a contract with Telefónica del    amounted to sek , m.
Peru that gave Energy Systems total responsibility for      Continued rapid growth of traffic in fixed and
supplying power to their some , customer instal-     wireless networks serves to promote the company’s
lations. Through a general agreement with Siemens,       primary civil product, which is the mini-link
Energy Systems became a strategic supplier to the        microwave link. During , more than ,
German manufacturer of telecom systems. Ericsson         such units were produced. Over the past several
strengthened its position as a world leader in power     years, Ericsson’s mini-link has dominated the
modules, delivering its  millionth module from the     world market for microwave links.
pkf family, a unique record in the industry.
                                                            -
                                  A new application area was added with the intro-
Microelectronics showed very strong growth dur-          duction of mini-link bas
ing the year. Thanks to an increased focus on appli-     in the beginning of .
cations for broadband and mobile telephony, large        This is a system for broad-
volumes of components could be delivered, particu-       band access via a micro-
larly in mobile telephony.                               wave link. The market
    Significant investments were made during the         potential is expected to be
year to increase manufacturing capacity for integrat-    substantial.
ed circuits in Kista. An important partnership              Another important part
agreement was signed with Chartered Semiconduc-          of civil operations at Erics-                             Erieye, system for airborne
tor for joint development and production of inte-        son Microwave Systems is the development of base          surveillance. Shown mounted on
grated circuits for next-generation radio technology.    stations for wcdma. Ericsson received its first           the Brazilian Embraer EMB145.

    Demand for power transistors for radio base          wcdma contract from ntt DoCoMo in Japan at
stations continued to show strong growth, both           the beginning of the year.
from internal and external customers.
    Continued upgrading to digital lines, a trend that       
is driven by increasing Internet use, resulted in a      Ericsson’s focus in defense systems is on sensors and
doubling of deliveries of line circuits for network      information technology. This is a direction that is
terminals installed as customer premises equipment.      favored by trends in a market that is generally
    Volume production of radio modules for the           characterized by increasing demands for advanced
Bluetooth standard was started during the year.          technology systems. Sensors, such as control and
Demand for these chips is strong among various           communications systems, are an area of top priority
application developers both within Ericsson and          for many countries’ military forces.
externally. Microelectronics is currently the leader        During , Ericsson Microwave Systems
in developing and supplying Bluetooth modules.           received an additional foreign contract for the air-
    The Electronic Distribution business unit contin-    borne surveillance radar, Erieye, from the Greek Air
ued to grow geographically and in terms of sales.        Force, which ordered four such systems. The Swedish
New offices were opened in Germany and the U.K.          Armed Forces, in which Erieye is already operational,
In addition to successful projects for customers, such   commissioned Ericsson to continue developing the
as Electrolux and Lego, a new generation of Erics-       next generation of airborne radar. The so-called aesa
son’s Internet catalogue was developed, enabling         technology, on which this radar is based, represents a
customers to pay for purchases with a credit card.       major advance in radar technology.
                                                            The Arthur artillery localization radar system
                                     was delivered to the Swedish and Norwegian
Effective February , , Microelectronics’ activi-    defense forces during . Additional contracts for
ties will be carried out at Ericsson Microelectronics    these systems were signed with two other countries
ab and its foreign operations. An agreement was          during the year. The South African order of the jas
reached in January covering the sale of the energy        Gripen aircraft was another important event for
system operations to Emerson Electric Co. in the U.S.    Ericsson Microwave Systems and the associated
Microelectronics now also includes power modules. •      company, Ericsson saab Avionics.                      •
32
i i · i n focus




                   HPR-08, a small FM radio
                     that can be connected
                          to a mobile phone




                                              A year of innovative concepts

                                          N
                                                               Ericsson launched          respects from Ericsson’s other markets. In particu-
                                                           so many new products for the consumer       lar, the brand plays an essential role. During ,
                                                           market as it did during . Some        Ericsson continued to invest heavily in various
                                                           new mobile phones were introduced, of       activities to strengthen the Company’s brand.
                                              which several were based on an entirely new gener-           Although global advertising campaigns, spon-
                                              ation of technical platforms. However, delay in the      sorship events and intensive tv advertising are
                                              process of increasing volume production of the new       costly, these measures are now beginning to produce
                                              phones, caused products in the lower price seg-          results. In the prominent international study of
                                              ments to dominate sales during the year, thus            brand awareness, conducted over the past ten years
          PROFITS WERE a                      sharply reducing profitability for the business seg-     by the distinguished research firm Interbrand,
          disappointment in 1999,             ment.                                                    Ericsson ranked th in the world in . This
          but an upturn was noted                 Ericsson’s business segment Consumer Products        ranking provided a strong incentive for continuing
          in the fourth quarter. With         is still mainly focused on the sales of mobile phones.   systematic work to build the Ericsson brand.
          our new product portfolio           During , however, a special business unit for            A strong brand is extremely important for Erics-
          we will recapture our               Home Communications was established that initial-        son at this point in time. Advances in technology
          market position and can             ly will offer consumers cordless phones for the home     are making it increasingly easy for manufacurers in
          hope to improve margins.            and Ericsson’s PipeRider, a modem for ip communi-        China and Southeast Asia to begin competing with
                                              cation via the cable-tv network.                         Ericsson, Motorola and Nokia, the current market
          JOHAN SIBERG, EXECUTIVE                 Net sales for the business segment amounted to       leaders in mobile phones.
          VICE PRESIDENT,                     sek , m. in , an increase of  percent
          BUSINESS SEGMENT                    compared with the preceding year. The segment             
          CONSUMER PRODUCTS                   thus accounted for  percent of Ericsson’s total net    To provide a foundation for future product develop-
                                              sales.                                                   ment, Ericsson is constantly conducting careful
          NEW HEAD    of Business                 In terms of volume,  was a record year, with     studies of the market and consumers. At the Com-
          Segment Consumer Prod-               million phones sold compared with  million in       pany’s Consumer Lab in Lund, Sweden, mobile
          ucts as of February 15,             .                                                    phone users’ behavior and preferences are analyzed
          2000, is Jan Wäreby,                    Because the low-price segment accounted for a        in detail. These market studies and analyses show
          previously head of                  larger share of sales, the sales increase in sek was     that there are different types of users.
          Market Area Europe,                 not as strong. This, plus the high costs for technical      Based on these observations, the product portfo-
          Middle East and Africa.             renewal of the product portfolio incurred during         lio is now being adapted to the customer segments
                                              the year, resulted in an operating margin for the        that Ericsson has chosen to target. For younger
                                              business segment of only  percent compared with         users and users who often purchase a mobile phone
                                               percent in . However, a clear trend reversal       with prepaid calling time, the a and t
                                              was noted in the fourth quarter, during which sales      phones were launched during . The former is a
                                              of the t and other new models contributed posi-        true volume product, which accounted for a very
                                              tively to profitability.                                 large proportion of Ericsson’s sales during the year.
                                                  The consumer market is different in many                For more professional users in job categories in
                                                                                                                                                       33
BUSINESS SEGMENT CONSUMER PRODUCTS



BUSINESS SEGMENT CONSUMER PRODUCTS 1999                   pany was started for telephone production. Expansion
                                               Change     of production in Brazil continued.
                             1999     1998    (percent)      In addition to expanding its own production
                                                          capacity, the business segment continued to out-
Orders booked, SEK b.         47.6     44.9          6
                                                          source production to external partners. Together
Net sales, SEK b.             46.4     45.2          3    with Ericsson’s own production increases, this means
Operating margin, SEK b.       0.3      3.2               that the Company is well prepared to meet the
Operating margin, percent       1        7                increase in volume expected in .
Number of employees         16,446   14,193         16
                                                           
                                                          Several new accessories for Ericsson mobile phones
which the phone is subjected to rough treatment,          were launched during the year. The accessories
the r pro was launched as the world’s first            market is increasingly important, since it often
water-, dust- and shockproof mobile phone. This           offers greater margins than volume phone sales.
phone is designed for gsm pro, which means that           Several of the new accessories were entirely new
it can also be used as a private radio terminal.          innovations – and the result of creative thinking on
    The t and t world models are phones that          the part of the Company’s product developers.
target consumers who want high quality and are               Chatboard is a small keyboard which is connect-
prepared to pay for intelligent functions. Ericsson’s     ed to the mobile phone to facilitate entry of sms
mc was the first wap product on the market. It         messages and which can even be used to send
is a handheld computer, which via a built-in              e-mail. An fm radio that also functions as a hands-
infrared port for communication with a mobile             free headset was another popular new product, as
phone, allows wireless access to the Internet and         was the mp player shown at Telecom  in Geneva.
e-mail. It also includes software for word process-          During the autumn, the first Blue-
ing, image transmission and other functions.              tooth product, a cordless handsfree
    For the demanding Japanese market, Ericsson           headset, was also shown. Bluetooth is
produced a variation on the t for ntt DoCoMo.           a technology for wireless transmission
This phone, which was sold in limited test quanti-        over short distances that was devel-
ties, was very well received in the market.               oped by Ericsson but released to the
                                                          public domain. Development is being
                                        continued by Ericsson, Com, ibm,
The telephone that was most in the spotlight dur-         Intel, Lucent, Motorola, Nokia, and
ing  was the t. When it was first shown in          Toshiba. Close to , companies
January, it generated considerable attention due to       have adopted the technology and are
its extremely light weight, modern design and             developing Bluetooth products.
                                                                                                                  HS210, cordless display phone
advanced functions. The market’s reception was            Ericsson Components is one of the manufacturers         for home communications.
very positive, and expectations were high that the        that is already producing Bluetooth chips for inte-     Provides direct access to the
t would sell extremely well.                            gration into these future products.                     Internet and e-mail using
                                                                                                                  Bluetooth technology and
    It was not until the autumn, however, that the                                                                a small base station.
tremendous demand for the t could be satisfied           
by greater volumes. This was due to component             The partnership between Ericsson and Microsoft
shortages that affected the entire industry, as well      that was announced in December will have a
as delays in trimming in production. The t is           significant impact on the business segment’s con-
based on a completely new technical platform,             tinued product development. With this partner-
which includes a new processor, a new radio sub-          ship, that relates to the mobile Internet, Ericsson
system and an innovative new battery technology           gains access to Microsoft’s Mobile Explorer for its
that Ericsson was first to bring to market.               more advanced telephones.
    During the latter part of the year, the situation        The agreement with Microsoft does not affect
improved, and production of the t is gradually          collaboration through the Symbian consortium, in
being stepped up. The technical difficulties in the       which Ericsson is working with Matsushita,
transition to the new technical platform have been        Motorola, Nokia and Psion to further refine the
overcome, suggesting that forthcoming models              epoc operating system for wireless terminals.
based on the same platform will be significantly          During , Ericsson introduced the epoc-based
easier to industrialize.                                  mc, as well as the r, which will begin to be
                                                          sold in full scale during .
                                            The partnership for the networked home of the
To meet sharply increasing volumes, Ericsson signifi-     future, which was announced by Ericsson and Elec-
cantly increased its production capacity during .     trolux during the autumn, is based in large part on
                                                                                                                  T10, dual-band phone with
A new production plant in Malaysia was taken into         forthcoming products from the business segment          vibrating alert. Available in five
operation, and in China a second joint-venture com-       Consumer Products.                                  •   different colors.
34
i i · i n focus




                                      Focus on ip-telephony services
                                      and mobile enterprise solutions

                                      B
                                                   the development of              In , continued emphasis will be put on the
                                                tomorrow’s multimedia communications.           development of sales channels, the launching of ip
                                                Business users already account for most         switches and on increased growth for the business
                                                broadband traffic and are the driving force     consulting operations that provides business solu-
                                      behind new Internet and intranet applications,            tions for the Internet.
                                      such as e-commerce and e-mail.                               Development work was refocused on ip applica-
                                         Companies are becoming more aware that their           tions and mobile Internet solutions. Investments
                                      customers are increasingly mobile. The mobile             were increased in developing tomorrow’s wireless
                                      Internet will allow them to create completely new         business networks, an area where Ericsson will offer
                                      channels for communicating with customers and             high-capacity networks for data transmission based
                                      offering personalized services. Increasingly, employ-     on the HiperLAN standard.
                                      ees are also being given access to network services
                                      and information, even when out of the office.                
                                         These trends are the primary drivers in developing     Another important component in the segment’s
                                      new applications that will generate most of the traffic   focus on the future are efforts to establish and
                                      and content in next-generation mobile networks.           expand business consulting activities. The goal is
                                                                                                that Ericsson should be the leader in providing
                                                                               companies with business solutions and services for
                                      Ericsson’s business segment Enterprise Solutions is       the mobile Internet. During , the Ericsson
          A MULTI-YEAR contract       of great strategic importance in responding to these      Business Consulting business unit was formed
          with the Metropolitan       trends.                                                   through a merger of internal consulting and service
          Police shows that              The business segment’s sales for comparable            operations from parts of Ericsson Data, which was
          Ericsson is a long-term     units increased  percent in  to sek , m.,      recently dissolved. Several new business consultants
          strategic partner for       which corresponded to  percent of Ericsson’s total       were also recruited.
          companies who want          sales. Several different improvement programs dur-           Approximately , of the business unit’s
          assistance with operating   ing the year contributed actively to improving earn-      , employees work as business consultants, it
          and developing their        ings, which nonetheless remain at a low level, due        and telecom consultants and wap consultants in 
          operations and their        to continued heavy investment in future growth            markets. Other employees of the business segment
          communications solutions    areas. The number of employees increased as a result      work with the operations and maintenance of Erics-
          in a world that will be     of company acquisitions and organic growth in new         son’s it activities.
          characterized by mobility   areas such as business consulting, while the work-           In business solutions for the mobile Internet,
          and the Internet.           force was reduced by more than  percent in tradi-       Ericsson is focusing on the banking and finance,
                                      tional operations, primarily business switches. The       transport, travel, media and entertainment seg-
          HAIJO PIETERSMA,            business segment had , employees at year-end.         ments. These efforts, plus Ericsson’s wap expertise,
          EXECUTIVE VICE PRESIDENT,      To strengthen Ericsson’s position as a supplier of     have strengthened customer confidence in Ericsson
          BUSINESS SEGMENT            tomorrow’s business systems, while improving the          as a partner in developing new business concepts
          ENTERPRISE SOLUTIONS        segment’s profitability, operations were consolid-        combined with new systems solutions. Bank trans-
                                      ated in .                                             actions over the Internet, wap solutions for wireless




                                                                                                                          WebSwitch 2000, IP-based
                                                                                                                          business switch for small
                                                                                                                          companies. Developed by
                                                                                                                          EricssonWebCom Inc.,
                                                                                                                          formerly TouchWave Inc.
                                                                                                                                              35
BUSINESS SEGMENT ENTERPRISE SOLUTIONS



BUSINESS SEGMENT
ENTERPRISE SOLUTIONS 1999

                                              Change
                            1999     1998    (percent)
Orders booked, SEK b.        18.0     14.6          23
Net sales, SEK b.            17.3     14.6          19
Operating margin, SEK b.      0.1      0.1
Operating margin, percent      0         0
Number of employees         9,615    9,966          –4




banking services and wireless e-commerce are
examples of concepts developed during the year.
   As companies focus more on core operations,
they are outsourcing operation, maintenance and
development of their communication networks to
external partners. Ericsson Business Consulting can
offer customers an opportunity to migrate existing
systems to new mobile solutions. A five-year
contract, signed in , to maintain and supply
Britain’s Metropolitan Police network marked a
breakthrough in this area.
    
The acquisition in May  of the U.S. company,
TouchWave Inc., gave Enterprise Solutions access
to WebSwitch, which is an ip-based switch
that can handle conventional analog and ip-based
telephony for smaller companies.
   Products from this company, which was
renamed Ericsson WebCom, will play an important
role in the ip product portfolio, as well as for Erics-
son’s continued expansion in the U.S.
   WebSwitch received several prestigious
awards during the year at telecom shows in the
U.S. WebCom has already sold more than ,
switches to customers in the U.S. An important
aspect of Ericsson’s U.S. product strategy is expan-
sion of indirect sales channels for the Company’s                                                                  R320, WAP telephone with
                                                                                                                   built-in IR modem and
new ip-based products.                                                                                             calendar that can be
                                                                                                                   synchronized with PC or
                                                                                        PDA. Weighs less than
                                                                                                                   100 grams.
The business segment is not only developing in
new areas of operations. Sales of Ericsson’s business
switches also increased in , with more lines             Meanwhile, rationalization continues in tradi-
sold than ever of md (for large) and Business-         tional operations involving business switches. Two
Phone (for small and mid-size companies). Growth          of the segment’s research and development centers
in Europe, especially in the U.K. and Italy, was          were discontinued during the year, as were two
particularly strong.                                      product areas peripheral to core operations. Plants
   Ericsson sells call-center solutions that support      in Austria and China were transferred to external
customer service functions. Ericsson is the leader in     partners through outsourcing.
this segment, particularly in Europe. During ,           Restructuring will continue in  with strong
Ericsson launched a new generation of server-based        focus on continued expansion of the distributor
call centers.                                             network and on reducing costs for direct sales.
   With its large installed base in business commu-       Central to these efforts is an emphasis on profitabil-
nications – , large companies have purchased         ity and cost reductions and the need to increase
md – Ericsson’s business potential for tomor-          Ericsson’s presence in the market segment for small
row’s ip-based solutions is substantial.                  and mid-size companies.                              •
36
i i · i n focus




                                       Strong year thanks to growth in
                                       mobile systems and fixed networks

                                      E
                                             ’      during  was charac-
                                             terized by two strong market trends: continued exceptionally strong growth in
                                             the world’s mobile phone systems and increased investments in fixed communi-
                                             cation networks to satisfy requirements for increased capacity due to similarly
                                       exceptionally strong growth in the number of Internet subscribers. A review of
                                       important contracts announced during the year confirms these trends. As always
                                       with Ericsson, it must be emphasized that  percent of the Company’s sales repre-
                                       sent ongoing sales to existing customers that are not registered as new sales in the list
                                       below.



                                       ,    
                                       Ericsson’s sales in this market area    Important contracts announced in         ITALY

                                       increased 18 percent during the         1999:                                    Telespazio SpA – Infrastructure for
                                       year, but there were large variations                                            broadband access via satellite for
                                       between individual markets. The         CZECH REPUBLIC                           the Astrolink system.
                                       most rapid growth in relative terms     Cesky Mobil – Turnkey GSM/GPRS
          ERICSSON     strengthened    was in Belgium (+147 percent), but      system valued at SEK 1,630 m.            MOROCCO

          its overall position in      Spain was the market that increased                                              Medi Telecom – Turnkey GSM
          Europe during 1999,          most in real terms, from SEK 7.0 to     DENMARK                                  network valued at SEK 1,150 m.
          where growth                 13.0 b .                                Telia Danmark – Multiservice net-
          exceeded the market             Turkey (+117 percent) and the        work for voice and data                  NETHERLANDS

          average and was              U.K. (+15 percent) were two other       Telia Danmark – GSM Mobile Cen-          Telfort – GPRS system and GSM
          bolstered significantly      markets showing strong sales            trex, new mobile solution for business   expansion valued at more than
          by the continuing            growth. For the first time, Turkey                                               SEK 1,000 m.
          exceptionally strong         became one of Ericsson’s ten largest    ESTONIA                                  WISH – Infrastructure for Internet
          trend for mobile telephony   markets. In central and eastern         Eesti Mobiltelefon AS – Positioning      access valued at SEK 100 m.
          in the region.               Europe, the trend was also positive     system for GSM                           KPN International Network Ser-
                                       in 1999, while a downturn was noted                                              vices – ENGINE solution for integra-
          JAN WÄREBY,                  in Russia (–55 percent). Sales also     FINLAND                                  ted data and telecom
          EXECUTIVE VICE PRESIDENT,    declined in Denmark (–40 percent),      Telephone Company of Vaasa               WISH – Payment system for electro-
          EUROPE, MIDDLE EAST          Finland (–16 percent) and Norway        Province – GSM 1800 system               nic commerce based on Ericsson’s
          AND AFRICA                   (–12 percent).                                                                   Jalda technology
                                          The trend for mobile telephony is    GERMANY                                  KPN Telecom – AXE Transgate
          EFFECTIVE    February 15,    driving the positive development of     o.tel.o – Turnkey WDM system             switches
          Ragnar Bäck succeeded        Ericsson’s business in the market       (owned since April by Mannesmann)
          Jan Wäreby as manager        area. Several large networks were       Siemens – OEM supplier of power          NORWAY

          of the new Western Euro-     added during the year, while at the     systems, SEK 1,650 m.                    Telenor Mobil – Introduction of
          pe market area.              same time the growth in the number                                               wireless e-commerce solution deve-
          The manager of the           of subscribers was high in existing     GREECE                                   loped together with Ericsson, movie
          new Eastern Europe,          networks, which forced investment       Greek Air Force – Erieye airborne        tickets via mobile phones
          Middle East and Africa       in increased capacity.                  surveillance radar, four systems,        Telenor Mobil – Development of
          market area had not             As a result of development during    valued at SEK 4,900 m.                   WAP services
          been appointed at the        the year, Ericsson strengthened its
          time of printing.            overall position in the area and grew   ICELAND                                  POLAND

                                       faster than the market.                 Islandssimi hf – Multiservice voice      Polska Telefonia Cyfrowa – GSM
                                                                               and data network with IP over ATM        network expansion valued at more
                                                                                                                        than SEK 660 m.
                                                                                                                                                    37
 ERICSSON AROUND THE WORLD




                                                        Länder Ericsson has companies or kontor
                                            Countries in which där Ericsson har bolag eller offices
                                                          Länder utan Ericssonbolag represented
                                                  Countries in which Ericsson is not eller -kontor


Ericsson has had an international focus since the earliest days of its history. Today, the company is one of the most geographically diversified
enterprises in the world. With operations in more than 140 countries, Ericsson is unique in its industry and is one of the companies that is best
equipped to assist increasingly more global companies.



Ericsson has companies or offices in the following countries
Europe, Middle            Georgia                    Netherlands               Ukraine                    Pakistan                  Latin America
East and Africa           Germany                    Nigeria                   United Arab                Philippines               Argentina
Austria                   Ghana                      Norway                     Emirates                  Singapore                 Bolivia
Albania                   Greece                     Oman                      United Kingdom             Republic of               Brazil
Algeria                   Hungary                    Poland                    Uzbekistan                   Korea                   Chile
Bahrain                   Iran                       Portugal                  Yemen                      Sri Lanka                 Colombia
Belarus                   Ireland                    Romania                   Yugoslavia                 Taiwan                    Costa Rica
Belgium                   Iceland                    Russian                   Zimbabwe                   Thailand                  Ecuador
Bosnia-                   Israel                      Federation                                          Vietnam                   El Salvador
  Herzogovina             Italy                      Saudi Arabia              Asia and                                             Guatemala
Botswana                  Jordan                     Serbia                    Oceania                    North America             Honduras
Bulgaria                  Kazakhstan                 Slovakia                  Australia                  Canada                    Jamaica
Croatia                   Kyrgyzstan                 Slovenia                  Bangladesh                 United States             Mexico
Cyprus                    Latvia                     South Africa              China                                                Netherlands
Czech Republic            Lebanon                    Spain                     Hong Kong                                             Antilles
Denmark                   Libya                      Switzerland                 & Macao                                            Nicaragua
Egypt                     Lithuania                  Sweden                    India                                                Panama
Estonia                   Luxembourg                 Syria                     Indonesia                                            Paraguay
Ethiopia                  Macedonia                  Tajikistan                Japan                                                Peru
Finland                   Malta                      Tanzania                  Malaysia                                             Puerto Rico
France                    Moldavia                   Tunisia                   New Guinea                                           Uruguay
Gabon                     Morocco                    Turkey                    New Zealand                                          Venezuela
38
i i · i n focus
         fokus




                                         Netia Holdings SA – Nationwide          TURKEY

                                         network for IP services                 Turkcell – Expansion of GSM net-
                                                                                 work valued at SEK 8,510 m.
                                         PORTUGAL

                                         Interoute – Network for IP telephony    UKRAINE

                                                                                 Digital Cellular Communications –
                                         ROMANIA                                 TDMA expansion valued at
                                         Rom Telecom – Breakthrough AXE          SEK 250 m.
                                         order for fixed networks valued at      Ukrtelecom – SDH network valued
                                         SEK 830 m.                              at SEK 255 m.

                                         SLOVENIA                                UNITED ARAB EMIRATES

                                         Mobitel – GSM network expansions        Etisalet Telecommunications –
                                         valued at SEK 1,200 m.                  Access network based on ADSL

                                         SOUTH AFRICA                            UNITED KINGDOM

                                         MTN – World’s first GSM Pro net-        WCDMA system for testing by ope-
                                         work, including terminals, valued at    rators
                                         SEK 210 m.                              One2One – GPRS contract as part
                                                                                 of major infrastructure expansion
                                         SPAIN                                   valued at SEK 2,560 m.
                                         Interoute Telecommunicaciones           Vodafone – Joint development of
                                         SA – Nationwide system for IP tele-     3G and WCDMA
                                         phony valued at SEK 90 m.               Metropolitan Police Service – Five-
                                         Telefónica – Cenaxis, Ericsson’s        year management and development
                                         new network-based call-center           contract for all telecom services
                                         solution, valued at SEK 83 m.           valued at SEK 990 m.
                                         Telefónica – ENGINE solution for        One2One – Test system for GSM on
                                         integrated data and voice communi-      the Net with IP-based wireless multi-
                                         cations                                 media services
                                                                                 Virgin Radio – Joint development
                                         SWEDEN                                  and testing of radio broadcasting via   BT – ENGINE solution featuring
                                         Telia Mobile – Introduction of a new    3G mobile networks                      AXE/AXD301 hybrid switches for
                                         platform for real-time data communi-    Vodafone Airtouch Plc – Infrastruc-     multiservice network valued at
                                         cation via GSM                          ture for GPRS                           SEK 1,500 m.



          IN THE U.S.,  people are
          talking about the Mobile        
          Millennium in view of the
          expected development for       The trend for Ericsson in the North     notable trend in this market during     UNITED STATES

          mobile data communi-           American market area, which inclu-      the year was the continued consoli-     BellSouth Cellular Corporation
          cations. During 1999, the      des Canada and the United States,       dation among network operators,         – Infrastructure for 14 U.S. markets
          number of mobile tele-         was very positive in 1999. The intro-   Internet companies and companies        valued at SEK 6,300 m.
          phone subscribers sky-         duction of new and simpler calling      in the media industry.                  America Online (AOL) – ERION
          rocketed, with an increase     charges resulted in strong growth for                                           Networker and WDM infrastructure
          of nearly 50 percent. At the   mobile telephony in the U.S. The        Important contracts announced in        SBC Wireless – Jambala open
          same time, the price of        number of mobile phone subscribers      1999:                                   service platform for TDMA networks
          Internet connections drop-     increased by nearly 50 percent                                                  in Chicago and Springfield, Illinois
          ped dramatically. Together,    during the year. As a result, sales     CANADA                                  NEXTLINK – Field trials of point-to-
          these two trends are dri-      and order booking for mobile sys-       Cescom – Five-year contract for         point microwave systems (MINI-
          ving the market towards        tems were extremely strong. Erics-      Voice over IP valued at SEK 118 M       LINK BAS)
          wireless Internet access.      son’s total sales in the U.S. increa-   Rogers Cantel – Development of          Sprint PCS – Seven-year contract
                                         sed 39 percent to nearly SEK 24 b.,     third-generation mobile network         for expansion of cdmaOne network
          BO DIMERT,                     thereby re-establishing the U.S. as     valued at SEK 2,800 m.                  Omnipoint Communications
          EXECUTIVE VICE PRESIDENT,      Ericsson’s largest single market.       BridgePoint Enterprises – Solu-         – Installation and first U.S. field trials
          NORTH AMERICA                  Sales in Canada increased by 2          tions for IP telephony and data         of GPRS
                                         percent. For the market area as a       networks valued at SEK 530 m.           Tritel Communications – Contract
                                         whole, the sales increase amounted                                              for TDMA (IS-136) infrastructure
                                         to a full 36 percent in 1999.Another                                            valued at SEK 2,310 m.
                                                                                                                                                                                 39
 ERICSSON AROUND THE WORLD




                       Market Area Western Europe                   Market Area North America
 Market Area Eastern Europe, Middle East and Africa                 Market Area Latin America
                           Market Area Asia Pacific



In conjunction with the release of its year-end financial report on 1999 operations, Ericsson announced that it is reorganizing the Europe, Africa and
Middle East market area, dividing it into two areas: Western Europe market area, which comprises the EU countries plus Norway and Switzerland, and
the Eastern Europe, Middle East and Africa market area.


                                                                                                                                                         ERICSSON’S MARKET
                                                                                                                                             share for mobile tele-
                                                                                                                                                         phony in Latin America
                                                                                                        CHILE
Thanks to very strong growth of sales               Important contracts announced in                                                                     exceeds 40 percent, but
in Mexico (+74 percent) and continu-                1999:                                               CTC Startel (Telefónica) – TDMA                  the Company also has a
ed solid development in Brazil –                                                                        network expansion.                               leading position in fixed
despite the strong devaluation at the               ARGENTINA                                           Entel PCS – GSM expansion                        telecommunications.
beginning of the year – the market                  Telecom and Telefónica – TDMA                                                                        During the more than 100
area as a whole showed favorable                    networks valued at SEK 3,300 m.                     MEXICO                                           years that Ericsson has
growth during 1999 (+19 percent).                                                                       Telcel – Prepaid services for Telcel’s           been active in this market,
The development in Central America                  BRAZIL                                              entire TDMA network                              a strong customer base
was also positive during the year.                  TIM (Telecom Italia Mobile) –                                                                        has been established in
   Brazil is Ericsson’s single largest              Expansion of TDMA networks.                         VENEZUELA                                        virtually every country.
market in the area and Ericsson’s                   TESS (Telia) – Expansion of TDMA                    Movinet – Expansion of TDMA
fourth largest market globally, with                networks.                                           network for 3G valued at                         BENGT FORSSBERG,

sales in 1999 of slightly more than                 Vesper S.A. (previously Mirror                      SEK 1,700 m.                                     EXECUTIVE VICE PRESIDENT,

SEK 14 b. (+20 percent).                            S.A.) – cdmaOne network for wire-                                                                    LATIN AMERICA

   Mobile systems and phones                        less access to the fixed network.                   SEVERAL COUNTRIES

account for the majority of growth in                                                                   Diginet Americas – Broadband
the area. Nonetheless, investments                                                                      network for wireless access covering
continue to be made in expansions                                                                       several Latin American countries
of the fixed telephone network,                                                                         valued at SEK 2,500 m.
particularly in Brazil and Mexico.
40



                                                                                                                              ERICSSON AROUND THE WORLD
i i · i n focus




                                       

                                      After the deep economic crisis in            Important contracts announced in              SmarTone Mobile Communica-
                                      1998, conditions stabilized in several       1999:                                         tions Ltd, Hong Kong – WCDMA
                                      countries during 1999. This resulted                                                       test system and GPRS infrastructure
                                      in modest, but nonetheless positive          AUSTRALIA                                     Guandong Mobile Communica-
                                      growth (+5 percent) of Ericsson’s            Enermet – GSM modules for rea-                tions Co. Ltd. – GSM expansion
                                      sales in the market area as a whole.         ding energy consumption at consu-             valued at SEK 650 m.
                                      There were significant differences           mer sites, SEK 160 m.                         China Unicom – GSM expansion in
                                      between countries, however.                  Queensland Ambulance – Mobitex                six provinces valued at more than
                                         China, which was Ericsson’s               system, SEK 45 m.                             SEK 1,000 m.
                                      largest market in 1998, declined                                                           Shandong MCC – Expansion of
                                      sharply. As a result of the restructu-       PHILIPPINES                                   GSM network valued at SEK 840 m.
                                      ring currently in progress among             Globe Telecom – GSM system                    Sichuan Mobile Communications
                                      Chinese operators and changes in             valued at SEK 355 m.                          Co. – GSM expansion valued at
          THE YEAR    was             market regulation, market activity                                                         SEK 835 m.
          characterized by very       tapered off significantly. For Erics-        JAPAN                                         SmarTone Mobile Communica-
          strong growth in Japan      son, the result was a 16-percent             Japanese Digital Phone Corp. –                tions Ltd., Hong Kong – WAP sys-
          and India, while sales in   decline in sales in both infrastructure      Expansion of PDC system valued at             tem
          China declined.             and mobile phones.                           SEK 1,470 m.
          The decline in China was       In Japan, on the other hand, Erics-       Japanese Digital TuKa Group –                 SRI LANKA

          due to a weakening of the   son’s sales increased by 78 percent,         Three-year general agreement for              Mobitel – Digitization of AMPS
          market, which Ericsson      while sales in India increased by 82         continued expansion and upgrading             network valued at SEK 160 m.
          considers to be             percent. Increases were also noted           valued at SEK 1,700 m.
          temporary, and by           in Australia (+24 percent) and New                                                         TAIWAN

          restructuring among         Zealand (+22 percent), while sales           CHINA                                         Chungwa Telecom of Taiwan
          Chinese operators. An       declines in Malaysia (–34 percent),          Inner Mongolia Post and Telecom               – Upgrading of AMPS network,
          upturn was noted during     Singapore (–29 percent) and in the           Administration – GSM system                   SEK 390 m.
          the fourth quarter.         Philippines (–17 percent) reflect            valued at SEK 345 m.                          Far EasTone Communications
                                      continuing economic uncertainty in           Liaoning Post and Telecommuni-                – GPRS system
          KJELL SÖRME,                these countries.                             cations Administration – Expan-
          EXECUTIVE VICE PRESIDENT,                                                sion of GSM network valued at SEK             THAILAND

          ASIA PACIFIC                                                             1,260 m.                                      Advanced Info Service Public
          (TOOK OVER THE POSITION                                                  China Telecom (Hong Kong) Ltd.                Company Ltd. – Expansion of GSM
          DURING THE YEAR)                                                         – GSM expansion in Guandong                   network valued at SEK 450 m.   •
                                                                                   valued at SEK 2,416 m.




                                      NET SALES PER MARKET AREAS (SEK m.)

                                                                                                                                                            Percent
                                                                                                                                 1999             1998      change
                                      Europe, Middle East and Africa *)                                                      115,065             97,456            18.1
                                      North America                                                                            25,175            18,560            35.6
                                      Latin America                                                                            30,263            25,537            18.5
                                      Asia Pacific                                                                             44,900            42,885             4.7

                                                                                                                             215,403            184,438            16.8

                                      *) of which Sweden                                                                        7,551             8,509           –11.3
                                      *) of which EU                                                                           80,345            71,094            13.0

                                      1998 figures restated according to the Market Area organization that was introduced on January 1, 1999.
                                                                                                                             41
TREASURY MANAGEMENT AND FINANCIAL RISKS




1999                     characterized by
                      continued success for the U.S.
                      economy. During the year,
Asia recovered strongly after the crisis –
                                                         
                                                        FINANCIAL EXPOSURE

                                                        With exports from Sweden amounting to approxi-
and Europe showed gradual signs of recovery. In         mately sek  b. (sek  b. in ) and sales in
Latin America the Brazilian economy strengthened        Sweden of sek  b. (sek  b. in ), Ericsson is
some after the substantial devaluation in the begin-    relatively heavily dependent on the development of
ning of the year.                                       exchange rates between the Swedish currency and
   Ericsson’s liquidity increased during the year       foreign currencies, as well as on economic condi-
with sek . b. and net, after deduction of short-     tions in Sweden. As opposed to the transaction
term interest-bearing liabilities, with sek . b.      exposure, and to some extent translation exposure,
This in spite of a number of strategic investments,     Ericsson does not have a policy to hedge the finan-
including the acquisitions of Torrent Networking        cial exposure.
Technologies Inc. (U.S.), Qualcomm Infrastructure
Division (U.S.), TouchWave Inc. (U.S.), Telebit a/s     TRANSACTION EXPOSURE

(Denmark) and minority shares in Juniper (U.S.),        To limit currency risks as much as possible in con-
Saraïde (U.S.) and oz.com (Iceland). These invest-      junction with import and export activities, pur-
ments of approximately sek . b. were financed         chases and sales in foreign currencies are hedged by
primarily through a number of bond issues               currency forward contracts in cases that involve
amounting to sek . b. The bond issues in May,        firm commitments with customers and suppliers.
of sek  b., were the largest ever by a Nordic         In addition, estimated purchases and sales are
corporation. In addition, a number of liquidity         hedged for periods of up to  months, based on
strengthening activities were implemented, such as      assessments of stability in volumes, pricing and
the establishment of a pan-European securitization      other factors within Ericsson’s business segments.
program, which was utilized to sek  m., and          Outstanding bids are also hedged, normally with
factoring. During the year, all short- and long-term    currency options. Hedge periods agree with the
borrowing programs and long-term credit facilities      timing of the anticipated future cash flows. The
have been increased and updated.                        foreign exchange exposure is concentrated mainly
                                                        in the large production companies, notably the
                                                        Swedish units, since the foreign subsidiaries are
                                          invoiced in their local currencies. Table  shows the
Ericsson has a policy for managing financial risks      distribution of commercial net cash flows of major
established by the Board of Directors. Respons-         currencies for Ericsson’s companies in Sweden.
ibility for identifying and hedging financial risks
arising in the Group’s operations rests with the        TABLE 1 – NET CASH FLOWS OF CURRENCIES TO
individual Ericsson companies. Risks are normally       AND FROM SWEDEN (PERCENT)
hedged through Ericsson’s internal bank, Ericsson       Specification of currencies with net flows
Treasury Services, which in turn manages the Group      exceeding SEK 0.5 billion
exposure externally. The major part of the risks        Currency                                          1999       1998
assumed by the internal bank in this way are hedged
                                                        AUD                                                   6          4
in the financial market, but the bank also has the
                                                        CHF                                                   4          3
right to take positions in the financial market with-   EUR                                                  42         35
in the framework of the policy established by the       HKD                                                   2          8
Board of Directors. The risk mandate which              GBP                                                   4          5
amounts to sek  m., is based on a  percent          JPY                                                   7          4
change in each open foreign exchange position and a     USD                                                  37         34
change of one percentage point in interest rates.       Other                                                –2          7

Ericsson Treasury Services operates via treasury                                                            100        100
centers in Stockholm, Dublin, Singapore and Dal-        The table is based on statistical data pertaining to flows to and
las.                                                    from Ericsson’s companies in Sweden.
    Ericsson hedges financial risks by balancing
assets and liabilities with respect to currencies and
interest-rate periods and by using derivative instru-
ments.
42
i i · i n focus




                  The net currency exposure for the Swedish compa-
                                                                            CHART 1 – MONETARY NETS
                  nies is mainly in usd and Euro, with balance              AS OF DECEMBER 31, 1999, IN PERCENT
                  between the two respective currencies. This means         OF TOTAL FOREIGN MONETARY NET
                  that Ericsson has limited exposure to an isolated
                  eur/usd change. With the exception of a few less                          Other currencies     HKD
                                                                                                                         AUD
                  important currencies, Ericsson is mainly exposed to
                  the development of the Swedish krona.
                                                                                                                                      BRL
                      Based on the net currency flows to and from the
                  Swedish companies, a lasting change of the Swedish
                  krona against usd and Euro of  percent would           USD

                  have an effect on the consolidated net income of                                                                           CNY
                  approximately sek . b. and sek . b. respective-
                  ly. The net income effect for  of changes in
                  foreign currency exchange rates compared to last
                  year’s rates was approximately sek . b.

                  TABLE 2 – NET CURRENCY FORWARDS BALANCES                  MYR
                  AS OF DECEMBER 31, 1999, PERTAINING                                                                                 EUR
                                                                                  JPY
                  TO ACCOUNTS RECEIVABLE, ACCOUNTS PAYABLE
                  AND FUTURE CASH FLOWS, SEK BILLIONS
                                                                                              GBP
                                                                Sell (+)
                  Currency                                      Buy (–)
                                                                            Monetary nets in foreign companies, by functional currency, as
                  AUD                                              0.2      of December 31, 1999 (including associated companies and
                  CHF                                              1.5      companies with financial operations). SEK billions.
                  DKK                                              0.2
                  EUR                                             32.6
                  GBP                                              6.6
                  GRD                                              1.2      The translation differences reported in equity dur-
                  HKD                                             –0.2
                                                                            ing the year are sek –. b., mainly as a result of
                  JPY                                             –0.6
                  NOK                                             –0.2
                                                                            the devaluation in Brazil.
                  USD                                             34.2
                  Other currencies                                 0.7
                                                                            - 
                                                                  76.2
                                                                            Ericsson’s interest-rate risks are managed centrally.
                                                                            The focus during the year was short-term and bal-
                  Exposure arising from borrowing is limited, since         anced interest-rate periods for interest-bearing
                  most loans by foreign subsidiaries are denominated        assets and liabilities.
                  in local currencies. Currency balances in subsid-
                  iaries are monitored to secure minimum transaction        TABLE 3 – DISTRIBUTION OF FIXED AND FLOATING
                  exposure in Ericsson companies.                           INTEREST RATES, SEK BILLIONS

                                                                                                                               1999         1998
                  TRANSLATION EXPOSURE

                  Exposures in foreign subsidiaries are hedged within       Interest-bearing assets
                                                                            Short-term financial assets                        31.5         18.2
                  a framework established by Company management:
                                                                            Long-term financial assets, floating rate          10.8         11.4
                  • Monetary net in companies translated according
                      to the temporal method are hedged to  per-         Total interest-bearing assets                      42.3         29.6

                      cent.                                                 Interest-bearing liabilities
                  • Equity in companies translated according to the         Short-term financial liabilities                   12.0          6.6
                                                                            Pension liabilities                                 8.4          8.1
                      current method are hedged very selectively up to
                                                                            Long-term financial liabilities, fixed rate         0.7          2.3
                       percent of the total monetary net in such          Long-term financial liabilities, floating rate     23.7         10.5
                      subsidiaries. One percent of such monetary net
                      was hedged at year-end .                          Total interest-bearing liabilities                 44.8         27.5
                                                                                                                                       43
 TREASURY MANAGEMENT AND FINANCIAL RISKS



                                             
                                                  
Ericsson’s policy is to invest excess liquidity mainly               The ability and willingness among telecom vendors
in government papers, as well as in commercial                       to offer financing support has become an increas-
paper and corporate bonds with ratings of a/p or                   ingly important factor for customers’ when select-
higher. Ericsson Treasury Services has credit limits                 ing a supplier. Customer finance is a very powerful
for each issuer and counterparty. The exposure in                    means of competing. The granting of credits and
derivative instruments is valued at market daily                     the implied credit risk has continued to increase,
and is expressed as a liability to, or receivable from,              but without major losses during the year.
each counterparty. Netting contracts – so-called                        In total, the credit risk exposure amounts to
isda agreements – are in force for most of the                       sek . b., of which sek . b. is on the balance
counterparties, which substantially reduces coun-                    sheet while the remaining part relates to contin-
terparty risk. Counterpatry limits are reviewed                      gent liabilities.
continuously. No credit losses were incurred during                     Credit risks are continuously sold to financial
the year.                                                            institutions, when market conditions are appropri-
                                                                     ate.
TABLE 4 – ERICSSON TREASURY SERVICE’S
INVESTMENTS, DECEMBER 31, 1999, SEK BILLIONS
                                                                     
Treasury bills                                                 7.0
Treasury bonds                                                 2.1   Ericsson’s long-term objective is to have a payment
Mortage bonds                                                  0.1   readiness amounting to between  and  percent of
Commercial papers                                              2.1   sales in order to cope with rapid changes in liquidi-
Corporate bonds                                                0.8   ty requirements. Payment readiness is defined as
Cash, bank deposits                                            5.7   net liquidity – liquid funds less short-term borrow-
Total                                                        17.8    ing, plus long-term unutilized credit
                                                                     commitments.
TABLE 5 – NET RISK IN INTEREST-RATE
                                                                     TABLE 6 – PAYMENT READINESS, SEK BILLIONS
DERIVATIVES, SEK MILLIONS
                                                                                                                    1999       1998
Type of instrument
                                                                     Cash, bank deposits and
Forward-rate agreements (FRA)                                83.1
                                                                     short-term investments                          29.0       18.2
Interest-rate swap contracts                                212.8
                                                                     Confirmed long-term credit lines                 8.5        1.6
Interest-rate futures                                         3.3
                                                                     Short-term borrowing                           –10.5       –5.4
Total net risk in interest-rate derivatives                 152.3
                                                                     Short-term portion of long-term debt            –1.5       –1.1
Net risk in interest-rate derivatives expressed as the effect of a
                                                                     Payment readiness                                  25.5    13.3
change of one percentage point in interest rates as of December
31, 1999, SEK millions.                                              Percent of sales                                   11.8     7.2



                                                                     To ensure long-term payment readiness, Ericsson’s
                                                                     policy is that the greater part of its borrowing
                                                                     should be long-term or its needs should be covered
                                                                     through long-term credit commitments. Long-
                                                                     term borrowing should have an evenly distributed
                                                                     maturity structure, and very long maturities should
                                                                     be avoided in order to obtain flexibility.

                                                                     TABLE 7 – RATING

                                                                     Rating agency                          Long-term     Short-term

                                                                     Moody’s                                      A1            P-1
                                                                     Standard & Poor’s                            A+            A-1


                                                                     Ericsson’s current rating a /a+ is well in line with
                                                                     its peer group.

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:9
posted:11/6/2011
language:English
pages:22