Success in markets such as India and China is key to troubled Swedish telecom gear maker Ericsson's global recovery, chief executive Borje Ekholm, told Romit Guha in Barcelona recently in his first interaction with the Indian media.Ekholm, who became CEO in January, said the Indian market is tough but pushes the company to boost efficiency, besides developing more products and features that could prove useful in other markets. The CEO is drawing up a five-year plan to revive the company that's been struggling financially with `self-inflicted' wounds and market conditions.
Edited excerpts:
You are in the hot seat now. It's been just over a month. What are your priorities for Ericsson?
2016 was a tough year. It was partly market conditions, but partly of course our own, internal self-inflicted wounds. With that, we still ended the year on a strong financial footing because we had a good cash flow, but unsatisfactory profitability level. We should take a step back, look at our strategy and our plans, and the way we could adjust that. And that's the process we're in.
We can't really talk about priorities, but there are a couple of things that could still qualitatively lay the foundation for the prioritisation.One is our strength in connectivity and mobility. There is also a path to 5G. 5G itself is one technology, of course, but it's also how we migrate from current technology to 5G.We are likely to see LTE (4G) exist for a very long period of time. 5G will be on top of an LTE network over the longer term.
Our success will only come out of having successful customers. We must focus on where we must invest. Trends like automation, digitalisation and virtualisation are happening.
What are you more focussed on? Growing revenue or being profitable?
Profitable. Profitability is the only way to control your own investments. We need to go through the steps... first you have profitability, then we get stability in our company and then we can grow.
Where does India fit in Ericsson's global scheme of things?
If you think broadly about business, population size is a very important factor. Then of course it depends on your skill levels. And where could it (population) be more important than in communications. So, I think markets like India are really important long term for us.
India is a very competitive market in terms of pricing. That conflicts with your focus on profitability.
It may conflict, but it may also allow you to be more cost-efficient by being in the Indian market. You get scale and you can get cost benefits in other markets. I will be in India in the next few weeks, and that underlines how important India is to us. We will have some customer meetings. We have a large employee base in India, about 22,000.
Does it hurt not to have the Reliance Jio account?
Without getting into the account details, for us to have a significant market share in markets like India or China is really important, and what we see is that a lot of innovation happens in those markets. You come out with new products, new features that may well gain traction outside. And so, for us, it is one of the priority markets to be present in. And I know it's tough.
Where do you see the market going in 2017 compared with 2016?
We have predicted a -2 to -6% growth in 2017 (for the mobile infrastructure market in dollar terms). So, I don't think we should expect any relief in that sense.
Can you elaborate on the "self-inflicted wounds" that you mentioned?
When you look at a company operating in 180 companies, with more than 100,000 employees, you create complexities internally.I think we need to simplify the way we operate, create clearer business and customer focus. These are basic things in a company, but we lost our footing a little bit there. We must be more agile.
One radical step you took in January was to reduce the dividend. How do you identify with the term "Mr Fix-it" in a positive way as some have labelled you?
I came into a difficult period in the company. I want to make sure that Ericsson is well-positioned five-10 years on. And I am putting in place a plan that takes us there. Like for instance, we need a strong balance sheet, so we fixed the dividend. We also raised a bond now, so we're taking those steps to have a balance sheet to head on that path.
Typical prescriptions for recovery are asset sales, focus back on core operations, reducing headcount. Are you considering these options?
Of course they have to be (considered). You have to look at all alternatives. I believe in a company that combines service and product offerings which are a bit different from other industries.
What are the non-core assets that Ericsson may consider selling?
We are doing the strategic review.
Through this difficult period for Ericsson, customers would surely have been nervous. Did you lose any customers?
When there are periods of change, it creates questions among customers and I get questions about where are you going, are you going to be around, etc. I address those, but I don't feel they are worried.But they are raising questions, which I think is fair.
Will Ericsson stand as an independent company five years from now?
Yes, I am very confident about that.We are very strong in connectivity and mobility and we have a number of other assets in the company that we will allow us to be really strong.
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