Ericsson gets multinational 5G core network win with Telenor

Swedish kit vendor Ericsson has got a nice lot of fresh 5G work from Swedish operator group Telenor.

The win is all about 5G core network transformation, featuring a nice lot of NFV goodness. Since the point of issuing press releases about deal wins is to generate a sense of commercial momentum, this is a pretty handy one for Ericsson as it implies an endorsement of its NFV offerings.

Since this still a relatively new, unfamiliar field, any show of commercial faith at this stage counts double. Furthermore the deal encompasses Telenor’s core networks in Sweden, Denmark and Norway, so in terms of publicity, Ericsson gets three for the price of one.

“Ericsson’s portfolio of VNF enables Telenor to become more agile while reducing costs through improved operations,” said Morten Karlsen Sørby, Telenor’s EVP and Acting Cluster Head for Scandinavia. “This transformational deal is an important step towards future-proofing our core network as we look towards 5G. It provides us with state-of-the-art virtual core applications that serve mobile and fixed access and extend the lifecycle of our legacy network.”

“Ericsson is a long-term partner to Telenor in Scandinavia, supporting the company across multiple engagements in fixed and mobile networks in the region,” said Arun Bansal, Ericsson’s Head of Europe & Latin America. “This deal strengthens that partnership by evolving Telenor’s existing network to the cloud, ensuring continued exceptional services to their customers. As we move together towards 5G it also opens up new opportunities in the IoT space.”

In other Ericsson news, the company has quietly launched a new division called Edge Gravity. As Light Reading reports, it seems to be a semi-autonomous unit within Ericsson that focuses on edge computing and “operates a global edge cloud network that links together a core network of data centers with the last-mile networks of more than 80 partners that include cable operators, telcos and mobile service providers.”

Telia finds cause for optimism in its latest numbers

Swedish operator group Telia has a spring in its step and decided to upwardly revise its outlook following better than expected Q3 earnings.

Adjusted EBITDA rose 1.8%, in the third quarter, with margin up slightly too. In his accompanying comments Telia CEO Johan Dennelind said the company’s cost reduction programme is going well and that he’s confident whatever financial objectives they set for the year will be achieved.

“We are clearly on track to deliver the net cost reduction of SEK 1.1 billion that we have set out as a priority for the year,” said Dennelind. “Our operational free cash flow continues to be strong, having generated SEK 10.2 billion over the last 12 months. Our adjusted EBITDA is growing in six out of seven countries, with Finland, Norway as well as our central units being the main drivers. The performance is a combination of strong execution of the cost ambition as well as delivering synergies and stronger propositions to customers from the acquisitions we have done in recent years.

“No doubt comparisons will continue to be tough in the fourth quarter, especially in Sweden. Still, given the performance so far, with adjusted EBITDA having grown by 4 percent excluding currency effects, we up our full year EBITDA guidance from ‘in line or slightly above the 2017 level’ to ‘slightly above the 2017 level’.”

Telia seems to be on a similar journey to its compatriot Ericsson, which also expressed cautious optimism when it announced its Q3 numbers yesterday. It’s early days but if vendors and operators continue to sound so chirpy we might be inclined to start drawing hasty conclusions about a 5G-fueled uptick in the telecoms cycle.

Telia Q3 2018

Europe approves merger of Tele2 and Com Hem, Kirkby will move to TDC

The merger of Swedish MNO Tele2 with Swedish cableco Com Hem has been approved but Tele2’s CEO Allison Kirkby isn’t hanging around.

Europe had a look at the merger, as it invariably does with any telecoms M&A on the continent, and concluded it raises no competition concerns. The resulting creation of a multiplay operator doesn’t take any players out of either the mobile or fixed markets and therefore there’s still enough competition to allow the EC to sleep soundly at night. It has also concluded a general investigation into the Swedish telecoms market with not further action required.

“We are nearing the closing of this merger and my ambition to create a leading integrated connectivity provider in the Baltic Sea region will soon be realized,” said Kirkby. “I am immensely proud of the Tele2 team’s efforts throughout this process, as well as our incredible achievements the past years.”

“I will leave a Tele2 that is stronger and better positioned to act as an integrated customer champion in an ever more digitalized world. Once the merger is closed, I feel confident that the Tele2 team, including its new colleagues from Com Hem, will continue to challenge the status quo and fearlessly liberate people to live a more connected life.”

Scandinavia seems to have left a strong impression on Kirkby, who has been poached by Danish telco TDC Group to be its new CEO. Right now TDC seems only to have made the announcement via a Danish press release, but we trust Google Translate enough to run with it. Kirkby will start her new gig in December, right after the merger closes.

The CEO of the merged company, which looks like it will be called Tele2, will be the current CEO of Com Hem, Anders Nilsson. “As one company, we will be able to offer a portfolio of truly integrated services, with significant benefits for Swedish individuals, households, businesses and our shareholders as a result,” he said.

“My main focus now is our preparations for a rapid and efficient integration, to the benefit of both our employees and customers. Together with the new Leadership Team, I will also make sure to draw from the strength, knowledge and spirit of both the Tele2 and Com Hem organizations, as well as the Tele2 Board of Directors. When closing comes, we will be ready to kick off the integration.”

The only other thing worth noting is that Kirkby had been one of the people thought likely to be in the running for the BT CEO job. The search continues.

Inside Ericsson

Ericsson invited me to hang out with them in Stockholm for a couple of days so I did and here’s what I got up to.

Towards the end of Ericsson’s Q1 quarterly earnings call, Head of Marketing Helena Norrman and I indulged in a spot of light banter, during which she reflected on how nice Stockholm is at that time of year. I responded that I haven’t been there for ages because Ericsson doesn’t seem to do press trips anymore, at which point Norrman called my bluff and invited me over. Before long the excellent Minako Nakatsuma Olofzon had sorted everything out and off I went.

The last time I was in Stockholm was for an Ericsson analyst day and the trip was so brief I didn’t really get to see much of the place. This time I decided to stay for three nights so I wouldn’t be in a hurry. I can definitely recommend the Haymarket by Scandic, which is a converted art deco department store in the Norrmalm district, which seems to be where a lot of the cool kids hang out. If you don’t believe me, check out the bar (which isn’t cheap).

Ericsson tour bar

My first meeting was with Helena, who have me the top line on Ericsson’s current situation, strategy, etc. The long and short of it is that Ericsson was spread too thin by the time the Hans Vestberg era came to an end. In its desperation to compensate for declining revenues in its core markets Ericsson had got carried away with diversification and entered into too many ill-advised deals.

New CEO Börje Ekholm noted all this and decided the first thing that needed doing was some pretty serious pruning, in the form of disposing of some of Ericsson’s more peripheral and/or under-performing businesses and a headcount reduction of around 20%, including a fair few senior execs. The new streamlined company now focuses its efforts on four main silos: networks, managed services, digital services and emerging business (which seems to include ‘others’ like Red Bee).

I wasn’t able to bring a video crew with me for this visit so I decided to record some video on my Samsung Galaxy S7 phone, using a selfie stick/tripod and some clip-on microphones. This was a bit of an experiment and to say it was an unconditional success would be a definite overstatement, but hopefully it added some value. Here’s me chatting to Helena – you will notice this was recorded just as the football World Cup was started, so you get to the benefit of hindsight from which to judge our expectations.

We then went on a tour of the Ericsson Studio, which is a kind of permanent manifestation of Ericsson’s Mobile World Congress stand in so much as it features a bunch of demonstrations of Ericsson’s latest cleverness. My guide was Jon Gamble and my camera operator was Minako, so I’ll let this video clip, in which I get virtually knocked off my bike, speak for the Studio.

Back to the meeting room and a chat with Peter Laurin, the head of the aforementioned managed services silo. I hadn’t realised how active Ericsson is in the field maintenance of networks, it apparently manages the field forces of most of the UK operators. But it looks like it has been a bit too active, because this division has been losing money and part of the turnaround strategy has been to exit some ill-advised contracts. Here’s Peter to tell you more.

My final interview of the day was with Håkan Andersson, Head of Technology Strategy, who took me through the current technological environment and what Ericsson’s strategy is for capitalising on it. As you would expect it’s all about the 5G and Andersson gave me a pretty deep dive, so before filming the clip below I had the temerity to muck about with his slide deck in order to distil it down to what I thought was the most interesting stuff. Thanks for putting up with my control freakery Håkan.

In the evening I had the pleasure of hanging out with Helena, Minako and Head of Corporate Comms Peter Olofsson. We jumped on a boat and went out to the first of a group of small islands known as the Archipelago, to have dinner in a restaurant with great views and an even better selection of aquavit called Fjäderholmarnas Krog & Magasin. Here we are on said boat having a cheeky beer to get things going – I had to help Minako with hers – followed by a cool view of Gamla Stan (the old town) from our returning boat.

Ericsson tour boat beers

Ericsson tour old town

The next day I met up with Peter Olofsson again to check out a really interesting exhibit that’s hidden away from the rest of the world in a back room of the police museum. The company was created by Lars Magnus Ericsson back in 1878 to bring telephones to the Swedes. Somehow they managed to preserve his original boardroom and transport it to darkest Östermalm, where now only people who know the secret Ericsson password get to see it. It’s like stepping into a time machine and a great reminder of the dizzying progress the telecoms industry has made over the past century or so.

Ericsson tour boardroom

A cab ride back to Ericsson Towers in Kista led to a chat with Matilda George, who runs Ericsson Garage. While this isn’t another piece of ill-advised diversification it is symbolic of need to not stand still either. The Garage is essentially an in-house incubator where Matilda and her colleagues get a free rein to hang out with startups, support them and maybe even get involved for the long term. It was especially pleased to see the array of bean bags, primary colours and foosball tables that everyone knows are essential to fostering a startup environment.

Ericsson tour garage

Following a spot of lunch in the impressively large and well-stocked Ericsson canteen I met with Mikael Halén, Director of Government and Industry Relations. I decided not to keep filming because I wasn’t sure how the experiment was going, but Mikael filled me in on how companies like Ericsson interact with governments and regulators as trusted technology advisers.

We walked through the pros and cons of the three main 5G spectrum bands, with 700 MHz being used mainly for coverage, mmWave for capacity and 3.5 GHz having a more general purpose role in dense environments. A big issue is spectrum harmonization, especially in the 3.5 GHz band, with big contiguous chunks of it needed to deliver the best capacity outcomes. In that context we also discussed the pros and cons of spectrum being licensed and concluded spectrum availability is one of the biggest factors affecting the speed of 5G rollout.

Next I met Gustav Brismark, Chief Intellectual Property Officer, who was carrying a patent the length of an entire hardback book that covered 5G NR. This seems to be a pretty big deal for Ericsson and, which takes pride in being the biggest contributor to mobile standards. We chatted about the standardization process and the need for FRAND licensing, to ensure major contributors to standards are not able to hold the rest of the industry to ransom.

My final meeting was with Thomas Norén, head of 5G Commercialization, who took me through some of the business cases for 5G. The grid in the photo below organises for key features of 5G according to how easy they are to both sell and deploy, with enhanced mobile broadband easy on both counts and critical machine type communications conversely tricky.

Ericsson tour Noren

Thomas was keen to emphasise some of the technological advantages the reckons Ericsson has over its competitors, with the ability to easily upgrade its latest kit to 5G uppermost among the competitive trump cards in its deck. I asked if that’s why Nokia CEO Rajeev Suri decided to brief against exactly such a feature and let’s just say Thomas made his disagreement perfectly clear.

I didn’t get to meet Börje Ekholm on that trip as he was off flying around the world doing all kinds of important CEO stuff like signing deals and hatching plans, presumably. More recently, however, a few telecoms hacks got to share a beer with him in London, which was fun. I couldn’t resist dangling the Nokia FUD carrot to him too and he diplomatically side-stepped the issue by noting they must be doing something right if their competitors publicly brief against them. You can hear more about those drinks on this podcast and here’s a photo of me hanging out with the main man.

Ericsson tour Ekholm

Public relations has become a lot more streamlined over the past decade or two and visits like these are increasingly rare. The vast majority of what I write is derived from some single written source such as a press release, but it’s good to put a human face on the companies we cover from time to time and maybe even introduce a spot of nuance to my coverage.

Ericsson is a big company, humbled by its reversals of recent years. Everyone I met reflected that humility and I get the impression Swedes are generally quite understated. But at the same time there’s a lot of pride and ambition on show and I think they’re looking forward to a time when they can be a bit less humble. There are signs of recovery now and it would be cool to go back to Stockholm and check in with them in a year or two, if only to visit another island in the archipelago and have a bit more aquavit.

Ericsson tour aquavit

Telia continues on the TV acquisition trail

Only a matter of days after Telia announced the purchase of GET and TDC Norway to bolster its convergence play, the Swedish telco has confirmed the acquisition of Bonnier Broadcasting.

Telia has been gearing towards the convergence business model for years, with content as a notable prong, though the acquisition work this week brings the promise closer to reality. The new business will be a separate entity within Telia, with a comprehensive ethics and compliance framework already in place to maintain editorial independence.

“The debate which has been taking place ahead of today’s announcement shows that Telia Company has several important roles to play in the Swedish society,” Telia said in a statement. “It is a role that the company takes most seriously and one that, as we move forward, will continue to be handled responsibly. Telia Company therefore welcomes shareholders and other affected parties within politics and society to take part in constructive dialogue around these issues.”

While the convergence business model is a logical one, there are some concerns in Sweden about the takeover, mainly surrounding government influence in broadcasting. The acquisition will have to be handled carefully, somewhat explaining Telia’s compulsion to explicitly state there will be no changes within the organization once it is brought into the telcos family.

The Swedish government is currently the largest shareholder in the Telia business, controlling a 37% stake, and already controls the largest traditional broadcaster in the country, SVT. Should the government have direct/in-direct influence over two of the major broadcasters in the country, some might question whether this is a sensible decision. With a general election scheduled for Sunday 9 September 2018 in the country, the timing of the deal could make this a much more politically sensitive position.

Although some might suggest this is a paranoid distraction, you only have to look across to other countries with far more ‘proactive’ governments, to understand why some critics are sensitive to the idea.

Ericsson raises a few more kroner by flogging its Swedish field services business

The Ericsson economy drive continues with the sale of its field service operations in Sweden to Transmeta Group.

We’re supposed to be getting towards the end of the great Ericsson cost-cutting drive, with headcount down around 20% and a bunch of moody deals scrapped, but there’s apparently still some pruning to be done. Managed Services is the Ericsson silo that has been in greatest need of sorting out and this divestment would appear to be a symptom of that.

“Ericsson Local Services is a market leader in field service operations in Sweden with a skilled workforce of approximately 700 employees across the country,” said Per Narvinger, Head of a bunch of stuff at Ericsson. “They deliver very good support to our customers, and we believe Transtema has an excellent opportunity to continue to develop the field service operations while also executing on existing customer commitments.”

If it’s so great, Per, then why are you flogging it, mate? The answer seems to be a general strategic move to get out of the standalone field service game, as opposed to offering managed services to existing customers of its networking gear. It’s not clear how many other such deals Ericsson has in place, but this could potentially be the first of a bunch of divestments. You can read further analysis on Ericsson’s cost-cutting efforts at Light Reading here.

Tele2 claims eSIM first in partnership with Microsoft

Sweden’s mobile operator Tele2 announced it will collaborate with Microsoft to enable eSIM on Windows 10 based devices.

A Mobile Plans application will be preloaded on Windows 10 devices coming with embedded SIM, eSIM, chips, e.g. laptops or tablets. When activated, users can take their devices out of Wi-Fi or fixed internet environment and remain connected through Tele2’s mobile network.

eSIM, has been controversial when it comes to mobile operator acceptance. This is chiefly down to the fear that the operators feel they will lose control over and the direct relations with their customers as they do now with the physical SIM cards. By definition, eSIM users can switch operators remotely without visiting a retail shop. In this particular case though, because Tele2 is the first operator to offer eSIM service in Sweden, the concern for churn is mitigated, at least until its competitors follow suit.

This deal can bring multiple benefits. For Tele2, this opens a new revenue stream to mobile broadband, in addition to enhancing its reputation as an innovator. However, we believe the offer in its current form is more a symbolic move than substantial business opportunity.

To start with, consumer PC usage is declining, and not many models are being shipped with eSIM capability. (A quick search for eSIM enabled devices on the homepage of Sweden’s leading electronics store Elgiganten does not return many results.) When PCs are being used, they are mainly in indoor environment where more often than not there is already either a Wi-Fi or a fixed connection in place, and, ironically, where cellular coverage is normally inferior.

In outdoor uses cases, which predominantly are for tablets (and much larger number of smartphones), iOS and Android tablets outsell Windows based tablets (Microsoft’s Surface series and a few 2-1 models primarily made by Lenovo) by a big margin, making the addressable market for this deal very limited.

However this will be a useful test for Tele2 to gauge consumer use patterns, before it expands into the more mainstream iOS and Android segments. Maybe more importantly, it will also serve as a testbed of the technology for the more lucrative corporate market, where PCs are still widely used, without frustrating the corporate IT departments with immature products.

For Microsoft, this is a good (re-)entry point to the mobile market, after its ill-fated venture into smartphones through the partnership, then acquisition, of Nokia’s mobile device business.

Tele2 points optimistically towards acquisitions

Swedish telco Tele2 has promised there is much to be optimistic about, directing investor attention towards acquisitions and away from the mixed bag of financial results for the first quarter of 2018.

Top-line figures were very positive for the business, demonstrating 5% growth year-on-year, though the encouraging performance wasn’t spread evenly across the group. The Swedish domestic market saw revenues decline by 3%, while Estonia and Germany were also down 8% and 14% respectively. Kazakhstan and Croatia showed very healthy growth, boosting numbers by 21% and 20%, while Lithuania and Latvia were also up year-on-year with 11% and 14% increases.

“The first quarter of 2018 marks the beginning of a year of major transformation for the Tele2 Group,” said CEO Allison Kirkby.

“Preparations for the two transformative transactions in Sweden and Netherlands are well underway. The regulatory approval processes are on track – we are in the pre-notification phase with

constructive dialogues with the EC, and look forward to filing the formal merger notifications during the second quarter.”

This seems to be the message here; ignore what happened over the last couple of months and look at our shiny new acquisitions. Doesn’t matter what the condition of the underlying business is, the telco way is to buy something and discuss synergies. In Sweden, Com Hem will aid Tele2 with its convergence strategy, while the proposed merger with T-Mobile in the Netherlands will help the pair deal with increased competition.

Kirkby has pointed towards an incredibly competitive market in Sweden as one of the main reasons for the struggle, though the introduction of Com Hem into the business will go some way in creating a more combative converged player in the market. The combination of the pair has been billed as a natural step for both companies combining the Tele2 mobile offering with the fixed and content proposition of Com Hem.

This is perhaps one of those examples where inorganic diversification would be a sensible step; we’ve seen the mess telcos can get themselves into when they try to do content on their own, so buying is probably better. The combined business will be the second largest mobile telephony and fixed broadband provider in Sweden and the market leader in digital TV; it’s the convergence dream.

Looking at the second transaction, if Com Hem is offensive the merger with T-Mobile is nothing but the opposite. Tele2 Netherlands and T-Mobile Netherlands will be merged as a single company owing to market pressure. Tele2 will hold a 25% share in the combined company and receive a cash payment of €190 million upon closing, but this is essentially the team admitting defeat; better have the cash and do away with the troublesome Dutch.

While we have pointed out the troubles in the Tele2 business, it isn’t in the worst place. The Com Hem acquisition will only be good news for the business, and exiting a troublesome market is not a bad idea right now. In the challenger markets in the Baltic states, it is in another very healthy position. As it stands, there are certainly telcos in a worse place.

Actility announces development of LoRa IoT ‘City Hub’ in Sweden

Low-power WAN specialist Actility has announced it’s working with Swedish fibre network operator Öresundskraft to develop a commercially neutral IoT connectivity platform.

The Open City Hub model involves the creation of an open access, commercially neutral network available to all companies or consumers in a given municipality. In this case the lucky recipient of a LoRa-powered IoT network will be Helsingborg, which looks set to be the first product of the StadshubbsAlliansen (City Hub Alliance) in Sweden.

“A Stadshubb is a regional LoRaWAN with an open and neutral wholesale business model for connectivity, which enables anyone who needs to communicate with LoRa sensors to do so easily, without having to build or operate their own infrastructure,” said Öresundskraft’s Bo Lindberg. “This significantly reduces the threshold for service providers and end users to establish IOT services and solutions, thus accelerating and simplifying digitalization in general and the development of the smart city in particular.”

“We’re very pleased to have been selected to partner Öresundskraft in the roll-out of this ground-breaking smart city infrastructure and innovative business model,” said Actility CEO Olivier Hersent. “An Open City Hub creates significant benefits for companies, residents and society in the region. It simplifies connectivity and enables key services, underpinned by secure LoRaWAN communication powered by ThingPark Wireless, delivering data to its owners’ cloud applications through a common horizontal infrastructure available to all on equal terms.”

This looks like a good win for Actility, not just for the work itself but as a case study of its approach to IoT connectivity platforms. The Swedes are famously good at collaborating over projects considered to be for the greater good so it’s hard to imagine a better place to try this sort of open wholesale model out.