TIME TO CUSTOMER
How to save money while
i i · i n focus
pleasing customers even more
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.
THE MILLENNIUM SHIFT AND IT
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 yk 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 yk-related problems. All products Environment), was speeded up by the Millenium
were tested to determine whether or not they are Program.
yk-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. •
A new Ericsson
i i · i n focus
, 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
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-
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-
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.
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
will now be cultivated in order to make Ericsson 9%
even more known as an excellent and exciting
Ericsson’s global presence in more than coun- 27 %
tries gives the Company a very broad base for
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
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-
tence Shift, a number of similar activities were
started throughout Ericsson in . The gsm
Systems business unit provided training in data
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.
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.
Good reputation in society
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. •
i i · i n focus
Solid growth for mobile systems
and new fixed network solutions
’ 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
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.
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
Components Microwave Systems
(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. •
i i · i n focus
HPR-08, a small FM radio
that can be connected
to a mobile phone
A year of innovative concepts
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
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.
i i · i n focus
Focus on ip-telephony services
and mobile enterprise solutions
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
formerly TouchWave Inc.
BUSINESS SEGMENT ENTERPRISE SOLUTIONS
ENTERPRISE SOLUTIONS 1999
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
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. •
i i · i n focus
Strong year thanks to growth in
mobile systems and fixed networks
’ 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
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.
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
i i · i n focus
Netia Holdings SA – Nationwide TURKEY
network for IP services Turkcell – Expansion of GSM net-
work valued at SEK 8,510 m.
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.
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.
share for mobile tele-
phony in Latin America
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.
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.)
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.
TREASURY MANAGEMENT AND FINANCIAL RISKS
1999 characterized by
continued success for the U.S.
economy. During the year,
Asia recovered strongly after the crisis –
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-
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
important currencies, Ericsson is mainly exposed to
the development of the Swedish krona.
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
TO ACCOUNTS RECEIVABLE, ACCOUNTS PAYABLE
AND FUTURE CASH FLOWS, SEK BILLIONS
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.
GRD 1.2 The translation differences reported in equity dur-
ing the year are sek –. b., mainly as a result of
the devaluation in Brazil.
Other currencies 0.7
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
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
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-
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
TABLE 5 – NET RISK IN INTEREST-RATE
TABLE 6 – PAYMENT READINESS, SEK BILLIONS
DERIVATIVES, SEK MILLIONS
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.