Interview: Ericsson's CDMA Chief
With various courts about to decide the fate of Ericsson AB (Nasdaq: ERIC)'s bid for Nortel Networks Ltd. 's key wireless assets, Unstrung grabbed a few minutes on the phone with Magnus Mandersson, who, if the deal is approved, will oversee Ericsson's CDMA business. (See Ericsson Wins Nortel Wireless Auction, Nortel Wireless Winner: It's Ericsson!, Ericsson Delivers Knockout Blow to NSN, and The Spoilers of War.)
For $1.13 billion, Ericsson will acquire a bigger customer footprint in North America, Long Term Evolution (LTE) access assets, and a CDMA business with rapidly declining revenues. Nortel's CDMA business generated about $2 billion in revenues in 2008, but this year it's on track to generate about $1.3 billion in sales. (See Ericsson: Why We Want Nortel's Wireless.)
Mandersson, currently head of Northern Europe for the Swedish vendor, will be based in Richardson, Texas, when he takes up his new position as president of CDMA operations.
Even though the CDMA business is shrinking, Mandersson sees opportunities in managed services and CDMA-to-LTE migration, as well as CDMA expansion and modernization deals.
Here's what he has to say:
Unstrung: Why is it a good time to get into the CDMA business now?
Magnus Mandersson: The main rationale is that, basically, we reinforce and expand our position in North America and help our customers to maintain their installed base of technology, which was a big question for them since Nortel has entered Chapter 11 [bankruptcy protection].
UN: How does it feel to be in charge of a shrinking business?
MM: [Laughs] We're seeing shrinking business going forward. We know it's a mature technology, and we know that customers three to four years from now will go down to a maintenance mode with CDMA. And they will also migrate to LTE. We now have relationships with all the North American customers, and that [has] a big value for us as a company.
There is still quite a lot of expansion to be done and updates to take place in North America.
We [also] see an opportunity in services… This gives us an opportunity to scale up our network management resources in the North American market for other customers; it will increase our capability to serve our customers in an economical way.
UN: Why does Ericsson need these Nortel assets?
MM: [We had] less market share [in North America] than other markets. And then, the migration path over to LTE is invaluable to us.
UN: Will you be pushing customers to migrate to LTE sooner rather than later?
MM: It's early days. First, [we'll] focus on sales and operations -- the traditional but boring things when you're running a mature business -- so we get cost efficiencies in place. The technology will live for a long time -- seven to ten years more at least.
Then, knowing how it has been with GSM in the past five years, there are still a lot of adaptations and developments to be done to serve these customers with great technologies, [such as] bringing much more spectral efficiency and power efficiency.
UN: Can you grow this business?
MM: We can keep up the volumes. Our intention is to increase the installed base.
UN: Are you happy with number of employees, about 2,100, that Ericsson will take on with the CDMA business?
MM: We believe this level we're taking over is good enough to operate on existing volumes.
UN: Who's your main competition in North America now? Huawei, for example, just opened an LTE lab in your new backyard of Richardson, Texas.
MM: We're seeing Huawei Technologies Co. Ltd. and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) all over the place on a global level. They will enter, one way or another, the North American market. [Smaller operators have already signed contracts with them.] Our intention is to have competitive product offerings to keep up our market share.
Our intention is to win expansion orders and modernization [contracts]. I'm sure Huawei will come in one way or another and challenge us.
— Michelle Donegan, European Editor, Unstrung