Ericsson's Ekholm Trumpets 5G Role But Still Lacks Plan
BARCELONA -- Mobile World Congress 2017 -- Ericsson this morning made plenty of noise about the slowly emerging 5G standard but admitted it was still working on developing a new strategic plan that would position the company for growth in the increasingly lackluster market for network equipment and services.
During a press briefing on the opening day of this year's Mobile World Congress, new CEO Börje Ekholm said the Swedish vendor continued to weigh its options in the face of "massive disruption."
"We will need to change and we are working on a strategy -- looking at options and evaluating where to invest and how," he told reporters and analysts. "We need to make sure we are relevant in the future but we will certainly build on our strengths in mobility and ability to manage complex projects."
The update may have come as a disappointment to observers hoping Ekholm would have had more to say about Ericsson's future strategic direction after spending several weeks in the hot seat at the equipment vendor. (See Loss-Making Ericsson Still Short on Vision.)
Ericsson AB (Nasdaq: ERIC) was last year hit by some major earnings disappointments that culminated with the departure of erstwhile CEO Hans Vestberg in the summer. The company has blamed a downturn in the market for mobile broadband equipment for its recent woes, but it is struggling to reduce the size of its bloated workforce and appears to have lost out to low-cost rivals from Asia, and particularly China's Huawei Technologies Co. Ltd.
Shares in Ericsson have lost more than a quarter of their value over the last year, although the stock price has risen by about 9% since the start of the year, when Ekholm took charge.
Unsurprisingly, Ekholm has attached considerable importance to the 5G opportunity, telling analysts today that it was no longer a "buzzword" but a fast-developing ecosystem that would be worth as much as $1.2 trillion in the next ten years.
"Already today we have more than 30 MoUs [memorandums of understanding] with operators around the world -- more than anyone else -- to work on 5G," he said.
Ekholm also said that Ericsson's expertise in virtualization and the digital transformation of operational and business support systems would be central to its future 5G product portfolio. "It is clear that 5G will not be built like 4G," he told reporters. "The functionality will be cloud-based and even networks will be cloud-based in the future."
Nevertheless, doubts must persist that 5G will fuel a sales boom at Ericsson given the lack of a clear business case for 5G technology as well as the investments operators are already making in more advanced 4G and cloud-based networks. (See 4.5G Sets High Bar for 5G.)
Several analysts have now questioned whether there will be much need for 5G networks in the 2020 timeframe -- when the technology is first expected to appear -- while even Ericsson's rival Nokia Corp. (NYSE: NOK) has acknowledged that 5G will mainly be an "adjunct to 4G" for a long time to come. (See Don't Count on 5G for a Capex Boost.)
Invited to speak at Ericsson's event, Neville Ray, the chief technology officer of US mobile operator T-Mobile US Inc. , said that many of the technologies being introduced in the 4G era, such as carrier aggregation and more advanced MIMO, would underpin 5G. "It is with 4G that we build the foundations necessary for a 5G future," he said. "That technology is far from dead and the investment opportunities that exist are phenomenal because 5G is not real today."
The comments could be interpreted as a sign that T-Mobile does not expect a huge network overhaul to be necessary when a standardized version of 5G finally turns up.
Even so, Ray was quick to give his blessing to 5G as a technology that operators will ultimately need to cope with new types of service.
"Don't take anything I've said as indicating that we are not excited about 5G," he said. "Look at the fixed space and the capabilities developing already with virtual reality, augmented reality, artificial intelligence -- that is why we'll need 5G."
Quizzed about imminent plans by rival US operator Verizon Wireless to launch a fixed wireless access form of 5G technology, Ray was relatively dismissive.
"Verizon is calling it wireless fiber but it is fixed broadband displacement and while that is a valuable business case it is not one that excites me," he said. "I think that is a use case on the fringe… and if that is all we are doing with 5G we should be packing our bags and going home."
— Iain Morris, , News Editor, Light Reading