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Ericsson Denies $1.5B Korean Investment

Catherine Haslam
News Analysis
Catherine Haslam
7/13/2009
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Ericsson AB (Nasdaq: ERIC) has denied reports it is set to invest $1.5 billion in research and development (R&D) in South Korea during the next five years and increase its headcount in the country by more than 1,000 percent.

The reports surfaced following a meeting between South Korean President Lee Myung-bak and an Ericsson leadership team headed by CFO and CEO in waiting Hans Vestberg. (See Ericsson Names New CEO and Ericsson Cooperates on Green.)

The two sides met in Sweden and agreed on areas of collaboration to develop technologies that would create a green ecosystem in Korea. These include mobile broadband technologies, such as LTE and 4G solutions, and machine-to-machine applications.

However, the two sides appear to have come away with different views on the specifics of their cooperation.

In an official statement from the Presidential office, the Korean government states that Ericsson plans to invest 2 trillion Korean won (US$1.52 billion) during the next five years, and increase its headcount in South Korea from 80 to 1,000. But this has been denied outright by Ericsson.

"The information is not accurate," an Ericsson spokeswoman tells Light Reading Asia. "We have no specific plans on investment," she continues, instead saying that the meeting was a high-level discussion to identify common thinking and establish areas of cooperation, and that the meeting had been successful in achieving that goal.

Ericsson is, however, establishing a new center in South Korea for the development and testing of new applications for a green economy.

The Korean government states that the R&D center will be used for joint research with local companies, with Ericsson using Korea as a test-bed for green technology and fourth-generation wireless developments.

The spokeswoman confirmed that Ericsson is looking to identify synergies with Korean companies, such as those that are highly advanced in chipset development and robotics, but could be no more specific on the details at this stage.

The Korean government statement concludes that cooperation between Korean WiBro technology developers and Ericsson's LTE (Long Term Evolution) R&D team will help the two sides lead in the development of 4G wireless.

WiBro is Korea's version of WiMax that has been deployed by the country's two major mobile operators, KT Corp. and SK Telecom (Nasdaq: SKM). However, both have struggled to attract customers for their WiBro services. (See KT Tightens Purse Strings and WiMax Deployments Hit by Downturn.)

By contrast, the two carriers' HSPA (High-Speed Packet Access) networks have been much more successful, attracting more than 19 million subscribers, about 41 percent of the total mobile market, by the end of the first quarter 2009, according to Wireless Intelligence .

This has led to retrospective attempts to converge the technologies, such as the development of an integrated WiFi, WiBro, and HSPA handset by KT, as reported by the Korea Herald.

— Catherine Haslam, Asia Editor, Light Reading

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