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Newsletter: Q2 2005

Top Stories

New digital music partnership with Napster

Ericsson has entered a global partnership with Napster, the biggest brand in digital music, to offer mobile operators the first fully-integrated digital music service (Press release).

GSM in the sky

Ericsson has introduced its new GSM on Aircraft system, which allows air passenger to use their mobile phones on board commercial aircraft (Press release)

Stronger TD-SCDMA presence in China

Ericsson is to establish a new R&D centre in Nanjing, China, for the development of TD-SCDMA product offerings (Press release), and has signed a strategic alliance agreement with ZTE to deliver TD-SCDMA solutions for China (Press release).

Internet payment solution chosen by MTG and MINDS International

Ericsson is to supply its Internet Payment eXchange (IPX) solution for content payment to Modern Times Group (MTG) for its mobile content service, ZooMobile. MTG is the largest free-to-air and pay-TV broadcaster in the Nordic and Baltic regions (Press release). IPX has also been chosen by MINDS International, an alliance of five European news agencies to support the launch of a new generation of mobile information services (Press release).

Viewpoint - Releasing the GSM capacity within

Every month, 25 million new subscribers connect to a GSM network, yet there are still several billion people living within GSM coverage areas who have no mobile subscription. What’s more, there is significant growth in voice traffic among existing subscribers.

How can mobile operators complement their 3G strategies to gain the radio network capacity they need in GSM service areas to serve the growing numbers of subscribers, and their higher levels of usage, cost-effectively ... and profitably?

GSM networks already serve over one billion users in more than 200 countries worldwide, and are anticipated to pass the two billion mark some time in 2008. GSM traffic growth for 2005 is expected to match the entire traffic volume for 2001. In many markets, fixed-to-mobile substitution is gathering pace, driven by a lack of fixed lines and the incentive of attractive mobile pricing models with flat rates and 'bucket' plans.

Worldwide, the volume of mobile voice traffic is expected to grow from its current level of just over 2.6 tera-minutes to more than 10 tera-minutes annually over the next five years. This increase in voice traffic will come both from new additions as well as from existing subscribers.

Today's global average monthly usage is 200 Minutes of Use (MoU). In markets such as the USA and parts of south-east Asia, where intense competition has driven the creation of highly attractive mobile pricing models, usage has soared to 800 MoU. Operators who have achieved such usage figures are highly profitable - demonstrating that, with the right approach, network expansion and capacity growth can be a very rewarding strategy.

Therefore, as mobile operators roll out their 3G networks, it makes sense for them to ensure they are making maximum use of their existing investments in GSM.

Traditionally, mobile operators have expanded capacity by adding more radio base station (RBS) sites - entailing additional capital and operating expenditure (CAPEX and OPEX).

Now, Ericsson's new Capacity Growth solutions address GSM operators' need to generate up to 400 per cent more capacity within their existing radio networks. The new advances in software and hardware included in the Capacity Growth solutions enable GSM operators to cater for higher usage and target even low-spending users in a way that is both cost-effective and profitable, while maintaining or enhancing call quality.

There are three main scenarios addressed by the Capacity Growth program: networks with limited spectrum; networks where spectrum is plentiful; and networks where the initial requirement is for wide-area coverage.

For operators with limited spectrum - and the potential for interference problems as traffic grows - there is Frequency Load Planning (FLP). FLP contains powerful algorithms that calculate the times at which different frequencies can be used to avoid interference. This feature is particularly attractive for 'peak sites' in the network which often handle 2.5 times as much traffic than other sites - because of local factors such as planning permission and population density - and are typically capacity bottlenecks. FLP requires no new sites and provides considerable CAPEX and OPEX savings.

For operators with plenty of spectrum, Ericsson Capacity Growth offers ways to configure very large radio cells that take maximum advantage of the spectrum resource and minimize the number of sites needed. Advanced software features enable several RBSs to be synchronized, to create a very large 'virtual' RBS with up to 128 transceiver units per cell. Ericsson also offers filter-combiner solutions with a channel spacing of only 400kHz - providing a 33 per cent improvement in spectrum efficiency. Furthermore, the Ericsson Base Station Controller (BSC) can handle up to 2,048 transceivers - providing hardware efficiency and boosting hand-over performance in dual-band networks through advanced hand-over algorithms handled within the BSC.

Finally, for operators that are building for coverage today, Capacity Growth for Expander provides a way to plan for future capacity growth. Initial coverage based on Expander provides long reach with a minimal number of sites. Ericsson Capacity Growth enables future traffic expansion of more than 2,000 per cent, without the need for new sites.

These radio network enhancements are backed by comprehensive solutions for core and transmission networks, as well as a range of professional services.

GSM still represents a huge growth opportunity. With the right partner and technology solutions, the world's GSM operators can build on their existing success and deliver more voice minutes to more subscribers than ever before - while protecting quality of service and enhancing profitability.

Ericsson hosted a telebriefing on Capacity Growth in June. For further details contact industry.analysts@ericsson.com

Mobile devices

As mobile services get ever more advanced and capable, it is vital that mobile devices are considered as part of the end-to-end service creation and development process. It is vital to the success of the kinds of services enabled by evolved 3G networks that mobile devices offer the required levels of interoperability and stability that operators and users need.

Ericsson Mobile Platforms offers complete, end-to-end interoperability-tested platforms across 2.5G and 3G. A common software platform for GSM/GPRS, EDGE and WCDMA devices ensures application portability, stability, security and state-of-the-art power consumption and size. This expertise is being tapped into by handset manufacturers and other industry players to ensure that services and applications offer the best user experience.

Ericsson Mobile Platforms reported a number of significant deals in the second quarter, including:
  • licence agreements with Sharp for Ericsson Mobile Platforms’ U250 and G250 WCDMA/GPRS and GPRS platforms (Press release)
  • an extended business relationship with Sun Microsystems to develop an integrated, multitasking Java technology-based solution (Press release)
  • the selection by Arima Communications Corporation of Ericsson Mobile Platforms' U250 platform for its global WCDMA/GPRS handsets (Press release)
  • a license agreement with Bellwave that extends co-operation on combining Ericsson's industry-leading U250 WCDMA/GPRS platform technology with Bellwave's innovative and feature rich products (Press release)
  • the choice by SAGEM of Ericsson's U100 dual-mode 3G/WCDMA platform for its new 3G/UMTS products (Press release).

Mobile networks

Operators going for growth around the world

A sign of the renewed confidence among mobile operators around the world is the large number of network expansion projects under way, especially in developing markets.

Last year saw the biggest ever increase in the number of mobile subscribers: 300 million new users in all. For many of these users, the mobile phone is their first - and only - means of communication. Yet two-thirds of the world's population still lacks telecommunications. That's why Ericsson has developed solutions for operators to help them deliver mobile communications to everyone at a reasonable price.

Key to the success of expanding mobile network infrastructure in such high-growth markets is minimizing total cost of ownership. That means delivering cost-effective coverage solutions that help ensure profitability even at low subscriber spending levels, which also enable future development in terms of capacity and service capability.

New network expansion contracts announced by Ericsson during the second quarter include:
  • a USD250 million managed capacity expansion contract with Indian operator Bharti to provide managed services and expand its GSM/GPRS network into rural India (Press release)
  • an exclusive contract with Mobitel to expand its GSM network in Sri Lanka, covering both core and radio access network equipment, including GSM 900, GPRS, EDGE, as well as turnkey network design, deployment and integration services (Press release)
  • a GSM/GPRS expansion contract with Orange Dominicana in the Dominican Republic, one of the fastest-growing markets in Central America and the Caribbean (Press release)
  • a USD150 million contract with Russia's largest mobile operator, OAO Mobile TeleSystems (MTS), to expand its GSM network capacity and coverage in six regions (Press release)
  • a multi-year frame agreement with Vietnamese mobile operator Viettel for the expansion of its GSM/GPRS network (Press release)
  • a managed services agreement with Warid Telecommunications Pvt. Limited (Warid Telecom) in Pakistan to build out and maintain its GSM/GPRS network in 20 cities (Press release).
  • a contract to supply leading Sub-Saharan operator Celtel with the Ericsson Mobile Softswitch to further enhance coverage and capacity in Tanzania and to meet the operator's need for rapid and cost-efficient growth (Press release).

The new mobile media channel

3G mobile networks are fast becoming the new channel for delivering a range of content and media, in addition to traditional telephony and data access, for millions of consumers. Both music and television are now being delivered to mobile handsets as the technical capability for this is developing rapidly.

In advanced markets, where mobile penetration rates are as high as 90 per cent and consumers are already using the most advanced services, the key challenge is to create differentiated service offerings and content, with innovative service models.

One key example of this is Ericsson's new global partnership deal with Napster, the biggest brand in mobile music, to offer mobile operators the first fully-integrated digital music service (Press release). The service will carry the universally known Napster brand, and combine elements of Napster's popular PC offering and Ericsson's personalized music service, currently used by more mobile operators than any other in the world. The business model accommodates mobile operator participation in all revenue streams.

A vital part of any mobile content and media service is the ability to charge consumers for the content they access. Ericsson's Internet Payment eXchange (IPX) is already able to simplify the purchase of mobile content for more than 360 million subscribers in 15 countries around the world. IPX is provided as a non-branded, white-label service.

The second quarter saw two strategic contract wins for IPX.

The largest free-to-air and pay-TV broadcaster in the Nordic and Baltic regions Modern Times Group (MTG) selected the IPX solution for its mobile content service, ZooMobile, which is being rolled out in Sweden and Norway (Press release). IPX enables MTG to charge for mobile content, regardless of which operator the consumer is using.

IPX was also selected by MINDS International - an alliance of five European news agencies – to support the launch of a new generation of information services for mobile communication (Press release). IPX will enable publishers to launch innovative mobile media services, such as picture news, alert messages for classified ads, competitions and voting. The services will initially be launched in the Netherlands and Scandinavia.

MMS milestone passed

Ericsson passed a significant milestone earlier this year, with the signing of its 100th operator contract in Multimedia Messaging Service (MMS) - almost twice the number of its nearest competitor. Ericsson offers complete, end-to-end messaging solutions, encompassing MMS, voicemail, video mail, e-mail, SMS and instant messaging.

3G development continues apace

2004 was a breakthrough year for 3G. WCDMA networks now serve some 28 million subscribers around the world - a figure that is growing by several million each month. There are now 3G networks across all of Western Europe, and Ericsson is currently building others around the world, including a nationwide WCDMA network for Cingular in the USA.

Now, new developments in 3G are opening the doors to even richer services for consumers, including 'triple play' telephony, broadband Internet and TV services.

During the quarter, Ericsson expanded its WCDMA portfolio into new and existing frequency bands in readiness for mass-market uptake of mobile triple play and increased interest in WCDMA from new markets (Press release). With the expanded portfolio, WCDMA will be available for new markets and operators will be able to secure higher-capacity networks and better coverage with lower operating expenditure.

In another breakthrough 3G development, Ericsson and 3 Scandinavia performed successful demonstrations of enhanced WCDMA uplink at 1.5Mbit/s, also known as HSUPA (High Speed Uplink Packet Access), being standardized in 3GPP release 6 (Press release). This is the first time that HSUPA, implemented in a live WCDMA system based on commercial products, has been demonstrated over the air.

Ericsson also strengthened its 3G position in Taiwan by winning a contract with WCDMA operator VIBO Telecom. Ericsson has been chosen to deliver a turnkey solution for VIBO's core network (Press release).

Finnish operator Finnet selected Ericsson as sole supplier for its new 3G network, including High Speed Downlink Packet Access (HSDPA). Ericsson will also extend Finnet's existing GSM network (Press release).

Stronger TD-SCDMA presence in China

Ericsson is to establish a new R&D centre in Nanjing, China, for the development of TD-SCDMA product offerings (Press release), and has signed a strategic alliance agreement with ZTE to deliver TD-SCDMA solutions for China (Press release).

Fixed networks

Laying firm foundations for IP-based convergence

Fixed network operators are looking to consolidate their various legacy networks into a unified all-IP network, capable of delivering a range of user services, with telecom-grade quality of service, over several access types - always with the emphasis on cost-efficiency. The traditional quality, reliability and security of legacy circuit-switched telephony networks must be maintained.

Ericsson's approach to achieving this IP-based convergence is a step-wise migration based on IMS (IP Multimedia Subsystem), taking into account each operator's situation in terms of legacy networks, business plans, market situation and regulatory framework.

Ericsson is helping operators to bring Internet Telephony to the mass market - including residential and enterprise customers - with scalable, telecom-grade IP telephony solution based on standardized IMS architecture. Internet Telephony is the carrier-grade version of Voice over IP (VoIP), without the inconvenience of unreliable audio or need for extra customer premises equipment. Over time, as standards and radio bearers are optimized, similar IMS-based services for mobile access will also be offered.

The last quarter saw several significant developments in operators’ migration to IP- and IMS-based converged networks, including:
  • the selection by ONI, one of Portugal's leading telecommunications operators, of Ericsson's telephony softswitch solution to upgrade its fixed-core network. Ericsson will also provide managed services for the network (Press release)
  • a contract with TeliaSonera International Carrier for the delivery of Ericsson's Telephony Softswitch, which will enable the operator to offer advanced voice, data, and multimedia services over an all-IP platform (Press release)
  • the choice by iiNet Limited - a leading Australian and New Zealand Internet Service Provider (ISP) - of Ericsson's Ethernet DSL Access (EDA) IP Multi-Service Access Network (MSAN) solution, to provide telephony over IP services to its broadband customers across Australia. This is Ericsson's first customer delivery of EDA IP MSAN (Press release)
  • the selection by TDC of Ericsson's IMS solution to offer fixed network customers various services, including IP telephony and IP Centrex for business users (Press release)
  • a contract with America Movil (AMX) - one of the largest telecommunications operators in Latin America - for a total upgrade of its fixed network to the Ericsson Telephony Softswitch solution in El Salvador. This project will allow AMX to evolve its current network to a Next Generation Network (NGN) (Press release)
  • the choice of Ericsson by UK-based broadband operator ntl as its IP-DSLAM (DSL Access Multiplexer) supplier to trial ADSL2+ DSL services, in order to explore the broadband capability of its on-net copper access network (Press release)
  • the selection by Tellas - the leading wireline alternative operator in Greece - of Ericsson as solution supplier and System Integrator for its Video Call Service for fixed subscribers. This is the first such service launch in Greece and one of the very few in Europe today (Press release).

Telecom services

Enabling operators to focus on business development

As competition in end-user services grows more intense, operators are increasingly looking to focus on their core business of service development and developing their relationships with end-customers. They are also looking to reduce the cost of their operations. Managed services, where partners take over the day-to-day operation of the operator's network, are an increasingly popular way of achieving these aims.

Ericsson’s services portfolio includes state-of-the-art expertise in consulting, systems integration, managed services, network deployment and integration, education and support services. Our technology leadership, business understanding and extensive experience of managing telecom grade, carrier class projects and multi vendor networks, makes Ericsson the market leader in telecom services.

Ericsson's managed service offering includes day-to-day network operations, as well as efficient network build-out, on-demand capacity and the hosting of applications and content management. The company has publicly announced 48 managed services contracts with operators worldwide since 2002, and is now managing networks that together serve more than 43 million subscribers.

The second quarter saw some significant new developments in the managed services business, including:
  • the finalization of due diligence and execution of a managed services contract with 3 Italy, worth an estimated SEK15 billion over five years - making it one of the largest managed services contracts ever signed in the telecom industry (Press release)
  • a new two-year contract with Vivo - Brazil's largest mobile operator - for the management of its field operations at more than 2,000 sites (Press release). Vivo also awarded Ericsson a contract to expand and enhance its access transmission network using Ericsson's MINI-LINK microwave transmission solution (Press release)
  • a USD130 million contract with the Instituto Costarricense de Electricidad (ICE) in Costa Rica to deploy, operate, optimize and maintain a national GSM/GPRS 1800MHz mobile network - the largest managed services deal announced in central America (Press release)
  • an 18-month contract with Maxis Communications Berhad, Malaysia's largest mobile operator, to operate Maxis' 3G network (Press release). Maxis has also selected Ericsson's push e-mail solution, Ericsson Mobile Organizer, and video telephony solution as the platforms for two of its first 3G service offerings (Press release).

Enterprise communications

New stand-alone version of MX-ONE IP-PBX

Ericsson has launched a stand-alone version of its MX-ONE IP communications platform - a full-featured IP-PBX system for enterprises mobilizing their IT and communications infrastructure or deploying a converged voice and data network from day one (Press release).

Operators target enterprises with mobile e-mail

The enterprise segment has returned to the spotlight for mobile operators, as its potential for new revenue growth is recognized. By packaging a range of services that can be delivered over standard mobile devices - such as smartphones and feature phones - operators can engender 'phone-centric' behavior among enterprise users.

This expands the operator's role as a service provider and adds new revenue streams. Rather than have users with multiple devices, and multiple subscription charges - for fixed and mobile voice, e-mail and corporate access - the enterprise has all mobile services delivered through a single, well-managed device.

By integrating a range of easy-to-use, well-managed mobile voice and data services, these solutions will help operators increase average revenue per user (ARPU) and build loyalty in the all-important enterprise market.

One of the key services that enterprises are looking for today is mobile e-mail.

In the second quarter, Ericsson signed a number of mobile e-mail contracts with operators around the world:
  • Malaysia's leading mobile operator, Maxis, selected Ericsson Mobile Organizer and Ericsson's video telephony solution as the platforms for two of its first 3G service offerings (Press release)
  • Kuwaiti operator Wataniya Telecom chose EMO to provide complete push e-mail and other Personal Information Management (PIM) functions to standard smartphones (Press release).
  • Idea Cellular, a leading mobile operator in India, is to deploy EMO in eight Indian states (Press release).

Corporate news

Ericsson reports continued good development

Ericsson has reported yet another quarter of robust performance, reporting net sales of SEK38.4 billion for the first quarter (22 per cent up on the same period last year) and net income of SEK5.8 billion (compared with SEK5.0 billion a year earlier) (Press release).

Sony Ericsson gains momentum in the second quarter

For the quarter ended 30 June 2005, Sony Ericsson shipped 11.8 million units - a 14 per cent increase compared with last year's second quarter - and generated sales of 1,614 million euros, a year-on-year increase of seven per cent (Press release).

Ericsson makes offer for Norwegian network vendor AXXESSIT

Ericsson has made a voluntary cash offer to acquire 100 per cent of the outstanding shares of AXXESSIT ASA, a Norway-based supplier of integrated access devices and multi-service provisioning platforms for next-generation access and metro networks (Press release).

Ericsson sells its holding in Anoto Group

Ericsson has sold its shares in Anoto Group AB to Norden Technology AS. Ericsson previously owned 17.9 per cent of Anoto Group AB, which develops and licenses digital pen and paper technology (Press release).

Ericsson maps out converged broadband vision at VON Europe

At VON Europe 2005 in May, Ericsson mapped out how - by bringing together softswitches, IMS and high-performance broadband solutions - operators can differentiate their consumer services through bundling and fixed-mobile convergence (Press release).

CEO Carl-Henric Svanberg 'confident'

At Ericsson's recent Capital Markets Day in Stockholm, President and CEO Carl-Henric Svanberg expressed confidence in Ericsson's position, which he said would continue to strengthen thanks to the company's market position, size, customer focus, technology leadership and operational excellence (Press release).

Ericsson streamlines CDMA business

Ericsson is to streamline its Mobile Systems CDMA unit organization to improve efficiency. The move will see responsibilities transferred to other operations to take advantage of Ericsson's global organizational structure (Press release).

Ericsson acquires NetSpira Networks for mobile data

Ericsson has acquired NetSpira Networks, SL, a Spanish charging and control system vendor. The company's technology will be integrated into Ericsson's offering for mobile data allowing operators to provide easily understandable charging for services such as Java downloads, web access and MMS (Press release).

Ericsson to participate in the Volvo Ocean Race 2005 Challenge

Ericsson is entering the Volvo Ocean Race 2005 Challenge, the world's most challenging and competitive ocean sailing race (Press release).

Events

Industry events

19-21 September 2005
Mobile Video & TV, IIR, Berlin, Germany
 
Topic: Driving A TV Revolution: Changing consumer TV patterns and capitalizing on new opportunities
Speaker: Per Nordlöf, Director, Product Strategy & Portfolio Management, Ericsson

19-22 September 2005
VON Fall 2005, Boston, USA
Website
  Tuesday, 20 September, 2:00pm
  Topic: IMS beyond the hype
  Speaker: Cody Bowman, Director, Systems Integration

  Thursday, 22 September, 3:00pm
  Topic: Service delivery breakout session
  Speaker: Marc Leclerc, Service Layer Business Advocate

26-30 September 2005
3GSM World Congress, Singapore, Asia
  Wednesday, 28 September, 2:35pm
  Topic: Is Mobile Triple Play – Telephony, TV & Broadband Internet – the Killer Combination?
  Speaker: Mark Henderson, President & CEO Ericsson Canada

26 September, 2005
Mobile Entertainment Summit, San Francisco, USA
Topic: Mobile Video and Multimedia: Finally Here (Panel) 
Speaker: James Finn, Head of Business Development, Content and Applications, Ericsson
Website

27-29 September, 2005
CTIA WIRELESS IT & Entertainment 2005,
Moscone Center West, San Francisco, USA

Website
  Wednesday, 28 September, 1:00pm
  Topic: Device Decisions & Management (Panel)
  Speaker: Pankaj Asundi, CTO Enterprise Solutions and Sales, Ericsson 

3-6 October 2005
Broadband World Forum Europe, Madrid, Spain
 
3-6 October 2005
IMS Global Congress, Budapest, Hungary
Website

4-6 October 2005
The Messaging Industry Association (TMIA), Las Vegas, USA
Topic: Ericsson Consumer and Ericsson Enterprise Lab messaging study
Speaker: Anders Erlandsson, Solution Marketing Manager, Messaging and Media Suite, Ericsson

  Tuesday, 4 October, 10:00am
  Topic: 3G mobile broadband: accelerating the broadband business
  Speaker: Ulf Wahlberg, Vice President, Ericsson Research

  Wednesday, 5 October, 11:45am
  Topic: FTTx Technologies
  Chairperson: Björn Odenhammar, Director, Product Management Ethernet Access, Ericsson

  Wednesday, 5 October, 3:45pm
  Topic: Triple-play case studies and business models
  Chairperson: Karl Thedeén, Vice President, Wireline Networks, Ericsson 

5-6 October 2005
Wireless Connectivity Americas, Santa Clara, California

  Wednesday 5 October, 11:30am
  Topic: Connectivity technologies for cell phones: what does the customer want? 
  Panellist: Stefan Svedberg, Director, IMS Program, Ericsson
  Website 

11-14 October 2005
IMS World Forum, Amsterdam, Holland
Website

18-22 October 2005
PT ExpoComm, Beijing, China
Website

8-9 December 2005
3GSM Americas, Miami, USA
Website

Ericsson events

Strategy & Technology Summit, Shanghai, 7 September 2005

Latest white papers
For the latest Ericsson white papers, please click here

Telebriefings (preliminary calendar):
28 September 2005, Ericsson MX-ONE IP-PBX - enabling the mobile enterprise
28 October 2005, Ericsson as the advisor and integrator
9 November 2005, Transmission
14 December 2005, Service delivery
Date TBC, Competing and complementing technologies - how do they work?

Please note: these topics were correct at the time of sending this newsletter.

If you missed a telebriefing or would like further information, check out the archive where you can listen to the telebriefing.

To sign up for the industry analyst telebriefings and technology updates, please send an e-mail to industry.analysts@ericsson.com or refer to our website.

Contacts & further information

The next newsletter will be issued following the quarterly report on October 21, 2005. For further details regarding the quarterly reports, please check here.

If you would like further information about any of the stories above or would like to arrange a briefing, please send an e-mail to industry.analysts@ericsson.com or contact Eva Sparr, Rob Elston for North America, or Pia Långström for Asia Pacific or Pia Sörensen for Europe and the Middle East.