INTERVIEW-Ericsson sees no slowdown in N.America
September 3, 1999 06:01 AM
By Salomon Bekele
STOCKHOLM, Sept 3 (Reuters) - Swedish telecoms group AB LM Ericsson, the world's third largest maker of mobile phones, expects no tapering off in the North American market where sales are going much faster than expected, an Ericsson executive said.
"So far this year we have delivered three to four times more than our plan before the year started and the development is absolutely not stopping," Bo Dimert, head of Ericsson's North American division, told Reuters late on Thursday.
In the first six months of the year the United States overtook China as Ericsson's largest market. Sales in North America rose 41 percent to 11.4 billion Swedish crowns ($1.40 billion), of which the United States accounted for about 11 billion.
This was 12 percent of the group's total sales of 92.4 billion crowns in the first six months of 1999.
Dimert said almost one-fourth of Americans were using mobile telephones and once this figure was surpassed sales would increase faster.
"When every fourth family member has a mobile phone it will be easy to buy just one more," Dimert said.
Shares in Ericsson fell sharply this week after news AT&T T , its largest U.S. customer, signed contracts with Ericsson rivals Lucent LU and Nortel CA:NT . Nortel had not been a supplier to Ericsson in the past.
AT&T said it expected to save $900 million over the next four years through the deal.
"I don't think this is anything dramatic. Nortel has given AT&T an economically favourable alternative... This is more likely a quite dramatic one-off measure as opposed to evidence that price pressure is increasing," Dimert said.
He said Ericsson had good possibilities to raise its market share within mobile infrastructure in North America from today's 18 to 20 percent level.
Ericsson acknowledged part of the reason it lost the AT&T contracts was problems supplying equipment earlier this year.
Dimert said no-one could have foreseen the strong growth of the U.S. market but Ericsson was working hard not to be surprised again.
Ericsson was now preparing for mobile phone use to increase to 40 percent of Americans, which would still be behind the 50 to 60 percent in the Nordic countries.
"It may well be the case that penetration increases by 10 percentage points to 35 percent next year and we must be ready."
Dimert noted two new GSM licenses, Ericsson's entry into the CDMA market, and the fact that many operators are following AT&T's revolutinary one-rate plan for mobile phone usage costs, when asked about Ericsson's U.S. growth prospects.
"GSM has not been available across the entire U.S. but in recent tenders Dallas and Chicago received licenses. These two areas were big blank spots on the U.S. GSM map," Dimert said.
Ericsson expects CDMA (Code Division Multiple Access) standard, commonly used in the United States, to account for 40 percent of all investments in mobile infrastructure next year.
Thanks to its purchase of Qualcomm's QCOM infrastructure earliler this year, Ericsson now has access to CDMA-standard equipment.
"There is a very high possibility that we will take a CDMA contract by year-end," Dimert said.
Ericsson shares were up three crowns at 267.5 crowns at 1035 GMT in a slightly positive market.
((Stockholm newsroom, +46-8-700 1016, fax +46-8-211601, stockholm.newsroom@reuters.com)) ($1=8.169 Swedish Crown)
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