Ericsson Pushes Into Services as Data Growth Quadruples

Ericsson AB (ERICB) is expanding beyond its roots in network hardware to sell more software and services, aiming to get more revenue from wireless carriers as data traffic quadruples over the next five years.

Ericsson, the largest maker of wireless networks, expects smartphone subscriptions to more than triple by 2018 to 4.5 billion worldwide from last year, according to a report released today. The surge in smartphones will cause the average data consumed per customer to increase fourfold to about 2 gigabytes in 2018, according to the report.

“The trends are very clear in this report: There will be more and more video and data traffic, and from our point of view we will do more of the things to help carriers with this,” Johan Wibergh, head of the Stockholm-based company’s networks operations, said in an interview.

Ericsson faces challenges from traditional rivals Nokia Siemens Networks and Alcatel-Lucent SA as well as Asian companies including Samsung Electronics Co. and Huawei Technologies Co. With so many vendors trying to sell networking gear to telephone companies, Ericsson has been expanding into products such as video systems -- areas where carriers are making upgrade investments.

Wibergh pointed to the acquisition of Microsoft Corp.’s Mediaroom, a Mountain View, California-based provider of technology used to deliver television over the Internet, as an example of the shifting strategy.

Mediaroom Deal

“Our acquisition of Mediaroom from Microsoft is another way to run TV over fixed and mobile networks,” Wibergh said. “We want to provide the infrastructure and also provide work in other areas to help carriers increase the effectiveness of their operations.”

Heavy competition and unpredictable spending trends across the globe have made Ericsson eager to find new growth markets beyond the wireless-infrastructure business.

Ericsson said in November that it was cutting 1,550 jobs in Sweden to make up for weak equipment spending from telecommunication operators.

Even though business has been challenging, the company hasn’t lost ground to rivals, Wibergh said.

“We are holding on to our market share,” he said. “We are still very much No. 1, and about equal to No. 2 and No. 3 combined.”

On a global level, demand for telecommunications gear remains mixed, Wibergh said.

“Our outlook depends on what part of the world you are in,” he said. “Sales activity is strong in North America, but Europe is still in a slower period, which we are hoping will get better. Areas in Asia, Korea and Japan are driving growth, but it is not an even picture.”

To contact the reporters on this story: Scott Moritz in New York at smoritz6@bloomberg.net; Adam Ewing in Stockholm at aewing5@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net; Kenneth Wong at kwong11@bloomberg.net

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