Ulf J. Johansson’s venture into GSM telephony ended up coinciding with the financial crisis. Money soon became a problem, he says. “The first of Nordic Tel’s stakeholders to give way was SAS. In the spring of 1991 the company returned its shares free of charge. The SEK 15 million that had been paid into Nordic Tel was written off as a loss. We were told the partnership had never had the support of the board.”

Custodia gave up as well. In the end, the project was rescued by Vodafone, which offered to raise its stake to 25 percent, and Nokia, which could contribute finance with the help of government export credits from Finland.

The mobile operator Europolitan was established on April 1, 1991, with its customer service center located in Karlskrona, partly as a result of lobbying by Rune Andersson, who came from Blekinge, and the local Social Democratic Party’s women’s section, both of whom saw an opportunity to get jobs for the city. This would have allowed Flemming Ørneholm, who had after all been employed to develop the company, to locate the head office in Lund, but he could see the benefit of concentrating resources and placed the head office, and the marketing and engineering divisions in Karlskrona as well.

Europolitan’s network opened on September 1, 1992, the same day as Comviq’s GSM network and two months before Televerket’s. Nokia supplied everything, which was uncomfortable both for ex-Ericsson employee Johansson and several of his colleagues who also had Ericsson backgrounds.

“In practice it was Tony Hagström who forced us to go to Nokia,” Johansson says. Televerket had invoked an agreement that gave it exclusive rights to solutions developed by Ellemtel, which of course it owned jointly with Ericsson. This did not apply to GSM technology but it did cover some AXE components in the central exchange, so Televerket was able to prevent Europolitan from buying equipment from Ericsson.

“Jorma Ollila had just taken over as CEO at Nokia. Europolitan was his first customer and it gave Nokia a chance to demonstrate its muscle in Ericsson’s home market. Nokia built Sweden’s best network and they could use us as a satisfied reference customer. We were the first in Sweden to launch SMS and voicemail services. Ever since I have kept in touch with Jorma and his executive team over the years,” Johansson says.

GLOBAL STANDARD

In practice GSM gave rise to a world standard, with greater acceptance than any earlier attempt. Uddenfeldt points to an important factor:

“GSM put an end to monopolies in every European country. It became obvious that each country should have at least two competing operators. In most markets the new operators were first in the field. This is what happened in Germany where Mannesmann obviously spurred development. And in Sweden it was the newcomers Europolitan and Comviq that were the pioneers.”

There was a sound commercial reason for Televerket not taking the lead. NMT worked well and was a cash cow for Televerket; there was no reason to urge customers to shift to a new system.

“GSM also meant that the manufacturers became stronger. In the old days of monopolies, the operators had had powerful technological departments but when the new operators did not develop their own, the old monopoly companies cut back or closed down theirs. As a result the real power in the industry lay with the manufacturers’ R&D departments and the ones that were really competent did best,” Uddenfeldt says.

“I would say that an important element in Ericsson’s success can also be found in our Viking heritage. The same thing happened when the major Swedish export companies set out into the world in the late 19th and early 20th centuries. This heritage is an important factor for our success. Most countries with dynamic engineering companies, like the US or Germany, are so large that their domestic markets have been enough for them to begin with. But in Sweden we knew that our own market was not enough.”

 

Author: Svenolof Karlsson & Anders Lugn

© Telefonaktiebolaget LM Ericsson and Centre for Business History

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