But when the bottom dropped out of the market, share prices dropped as well, and then one could see that the licenses had cost too much. Far too much. Hellström recounts: “I wonder what Europe’s politicians were thinking. Mobile telephony was the only area where Europe had taken the lead. No other industry had created as many highly qualified jobs and generated so much tax revenue. They just thought it would go on like that.”
From mid-2001 to mid-2002, telecom operators’ investments swung from an annual increase of 25 percent to cutbacks of 25 percent.
To put it differently, they almost halved their purchases from vendors, including Ericsson.
This meant the introduction of 3G was an uphill struggle. The IT crisis in 2000 had not affected the mobile industry, but the European 3G auctions were catastrophic.
Uddenfeldt recalls: “This affected all the system suppliers. What is interesting in this context is that even though this was a major telecom crisis, it did not really have any effect on the numbers of new subscribers nor on sales of telephones. These were, after all, products that consumers wanted. That is why the crisis did not affect Nokia particularly severely.”
And even if networks were not extended when the crisis was at its worst, the need to do so grew as the numbers of new subscribers rose sharply.
The wholly positive image the media had once given of Ericsson now turned to indignation and witch-hunting. After the profit warning in March 2001, the tabloid Expressen led the pack: “WANTED: Kurt Roland Hellström / 586,000 Ericsson shareholders demand an answer”. This was accompanied by a classic mug shot in full face and profile.
“But [state-owned] Swedish Television was worst,” says Hellström. “There was never any attempt to balance their assessments. It was out and out harassment.”
The issue at hand, however, was not how to cozy up to the mass media but how to save Sweden’s largest company. “You don’t need to be Albert Einstein to work out that if half your revenue disappears, you need to make drastic changes,” Hellström says.
Part of the problem was that there was nobody at Ericsson with experience of a crisis of this magnitude. Leinar says: “None of us in the executive or the trade unions had enough knowledge or experience of major cutbacks. We put our ignorant heads together and to begin with the results were not particularly good.”
Back in 1976, Ericsson had toned down the magnificent celebrations planned for its first centenary to a minimum. Instead it planned to celebrate with a lavish 125th anniversary in 2001. But this did not amount to much either. Festivities and champagne seemed inappropriate while people were being made redundant and the management team was implementing major cutbacks. A book on the company history had already been printed in large quantities; they were destroyed.
And to top it all, the head of Communications, Roland Klein, HR head Britt Reigo and several of the most important members of their staff were now stranded at the head office in London.
“Most of them did not want to be stuck there,” says Jan Hedlund. “And it was the heads of HR and communications that were really needed for the work in Stockholm. Putting them in London was as illogical as you could get.”
“When the crisis erupted, it became obvious that we should have been in Stockholm,” says Helena Norrman, later head of internal communications. “It was in Sweden that most things were happening. I asked to be moved home but Britt just refused.”
Author: Svenolof Karlsson & Anders Lugn