Hellström had ended up as CEO at the critical moment when the IT bubble had reached its full extent. A climax of a sort came on December 8, 1999, when Ericsson and Microsoft held a well attended press conference in Stockholm to announce that they were going to set up a joint company.

Microsoft had already begun to collaborate with many of the major figures in the telecommunications industry, among them British Telecom, Deutsche Telekom, DoCoMo and AT&T, as well as with Qualcomm, whose business was based on CDMA technology. But collaboration with Ericsson was going to be something special, judging from Swedish newspaper Dagens Industri’s report, which for instance had the following quote from Microsoft’s then vice president Steve Ballmer:

“This alliance is very, very, very important for Microsoft. We have had discussions with all the major players in the industry but Ericsson is our dream partner ... The US has admittedly fallen behind in mobile telephony. What is needed now to get the market going properly is for users to have access to the internet via mobile terminals. Wireless access to e-mail is central. And Microsoft’s and Ericsson’s joint company is going to develop the technology to enable it ... Both our companies share a vision of what our customers want. And that is definitely not PCs. They want to be able to communicate whenever they like, wherever they are and using whichever network they can.”

However, in reality this cooperation was not nearly as extensive as the media implied. Hellström explains: “We set up a small joint company [with a staff of about 50] to supply and market mobile e-mail solutions. We viewed this as a pilot project. The cooperation did not amount to much, one reason almost certainly being that both Microsoft and Ericsson are fairly difficult companies to cooperate with. But the media exaggerated it all, which pushed stock prices up and also led to reactions on the board. The owners complained about not being informed. My response was that we considered this to be pretty marginal.”

Jan Uddenfeldt adds: “Microsoft and Ericsson are two large companies with somewhat different agendas. We felt we could never make Microsoft really understand how we were thinking. They were so set on using their usual 

solution.” 

FRATERNAL CONFLICT

In the midst of all the fuss about Ballmer’s visit to Stockholm, another soap opera was being played out in the media. The largely completed merger between Telia and Telenor was to be aborted.

We have already seen how efforts to initiate cooperation between the Nordic telecom agencies collapsed in the early 1990s. In October 1997, Ameritech, originally one of the ‘baby Bells’, acquired a majority holding in TeleDanmark. This affected the balance between the Nordic operators and prompted talks between Telia and its Norwegian counterpart Telenor.

The first attempt to merge failed in 1998 but the head of the Telia group, Lars Berg continued to meet his opposite number at Telenor, Tormod Hermansen, for further discussions. These meetings were secret although Hermansen informed his owners about them. Berg said nothing to his owners until November, when he met the newly appointed minister of trade, Björn Rosengren. As a result he was fired.

In January 1999, new merger proposals were published; in June the Swedish Riksdag and the Norwegian Storting approved them; on September 23 the governments reached agreement; in October the merger was endorsed by the EU. The new company was to be registered in Sweden, and Telia’s newly appointed CEO, Jan-Åke Kark, who also had a background with Ericsson, was to be the chairman of its board, while Hermansen was appointed CEO of Telia-Telenor.

On September 23, however, Rosengren was heard to make a remark after a television interview when he believed the cameras and microphones had been switched off. “Norway is the last of the Soviet Republics. So incredibly nationalistic, everything is political.” This had the impact of a declaration of war, and the media then presented one hair-raising statement after another from Sweden’s neighbor. For example the Norwegian newspaper Verdens Gang accused Kark of not being able to name the queen of Norway.

On December 9, 1999, a decision had to be made about where Telia-Telenor’s head office for mobile telephony was to be located. The Swedes on the board voted for Kista, the Norwegians for Fornebu outside Oslo. Chairman Kark’s casting vote went to Kista. A week later, the Swedish and Norwegian governments arranged separate press conferences at which they announced that the merger would not go ahead.

Author: Svenolof Karlsson & Anders Lugn

© Telefonaktiebolaget LM Ericsson and Centre for Business History

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