Ericsson's CEO on outsourcing rumors, sustainability and LTE - page 2

FierceWireless: On another topic, Ericsson has not made an investment into WiMAX. Considering the rapid pace of WiMAX deployments across the world, and the recent finalization of the technology's standard, do you think that was a good decision?

Svanberg: First of all, it's important to understand that WiMAX is a 3G technology. It's a similar technology like Wideband CDMA or HSPA--Wideband CDMA is a 3G technology, as such, and HSPA is an advanced version of it--but the HSPA technology that is the dominant technology in the world is basically the same thing as WiMAX. It's just the difference whether you do Time Division or Frequency Division. LTE is a 4G technology. That's another generation, and today's WiMAX is not competing in that sense with LTE. That WiMAX generation remains to be developed. When we took a decision not to do WiMAX, it's just that since the HSPA technology will be the dominant technology--everybody understands that, any projections from anybody including from the WiMAX camp realizes that the vast majority will be HSPA--means that for us it becomes a little bit odd to spend a lot of money developing one technology that makes up a bigger part of the world and then spend the same amount of money to just develop a similar technology once again that has no difference for any user. So for us it was just a business rational not to be involved in WiMAX.

FierceWireless: But there is money to be made in WiMAX.

Svanberg: For us, I don't think so. If we became a leading player in WiMAX, the sales of WiMAX for us would probably be 5 or 6 percent of the sales we have in the leading track (of HSPA), and I don't think we could find a way of getting a payoff in that. ... The volumes are simply too small. It will stay as a niche technology.

FierceWireless: What is the attitude toward network outsourcing in the U.S. market? Ericsson's Managed Services business has become a significant operation, with Vodafone UK and other major carriers outsourcing various network operations to the company; how do U.S. operators feel about this strategy?

Svanberg: We have today over 100 networks that we are running with 275 million subscribers in total. ... The reason why one would do it (outsource) is twofold: First of all, the work that we do out in the field with services and systems integration, that's a lot of people on the ground. And when we take over and run someone's operations, it will mean that we have overlaps between what we do and what that operator does, which means that we can offer to do that job more cost efficiently. Not because we know how better to run a network than they know--they've been doing it forever--but because of the synergies. The other part is because they can focus on what's important to them--business development, their consumers, new services, new initiatives there--it may not mean that they need to do every part in the operations. And these two reasons--the focus reason and the cost reason--are equally important. We do it equally much in emerging markets as we do in mature markets. The focus on managed services for operators has dramatically increased in recent times because now the cost reason is driving it.

FierceWireless: Is there an operations area that carriers, especially in the U.S., are interested in farming out?

Svanberg: These discussions mature very quickly with a greenfielder. A greenfielder would say, do it for me, I need to focus on my growth. An incumbent that has been doing this for 100 years, for him it's like carving in the body to think that you would do anything with anybody else; so that maturing time, to really fine tune and find out what you want, tends to take a longer time. Of course, the big ones here (in the U.S.) are big, long incumbents. So it's taken it's time. The fact that Sprint is looking at it is I guess makes sense because they're a little bit smaller than the two market leaders. They want to find other ways of compensating for lack of scale.

FierceWireless: Do you see the market's upgrade to LTE and 4G as a major opportunity to sell your "managed services?" Carriers are building a new network, after all.

Svanberg: They are building a new network, but they're building it on existing sites, to some extent. And so when you take over and run the networks, you're not just running radio sites, these are all radio interfaces, but it all goes into the same transmission and largely common core. So I haven't really come across that. ... It's more that you find that you want to make sure that you put the focus on where you want it to be.

It's like us: We outsourced manufacturing 10 years ago. Seventy-five percent of our manufacturing is outsourced today. For us, it's just a great thing, not to have to worry about that as well. Because in that whole cost rationalization that goes on--and volumes go up but equipment gets minimized--somebody has to worry about that, and for us one dimension less than that makes life easier.

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