Ericsson Sees Camera Phones As GPRS Trigger
By BUSTER KANTROW
STOCKHOLM -- The arrival of mobile phones that can take photographs should spur interest in new services and help justify European telecom operators' investments in new, faster networks, the head of Telefon AB LM Ericsson's (ERICY) core mobile networks unit said in an interview Thursday.
"I'm quite convinced that there needs to be something to jump-start it," Einar Lindquist said in an interview at Ericsson's office in the Stockholm suburb of Kista. "The photo phones will be a jump start. We've seen it in Japan, and it will happen here as well."
Phone makers, including market leader Nokia Corp. (NOK), plan to begin selling phones with built-in cameras in the middle of 2002. But the phones' high prices are expected to limit early interest.
The mobile telecom industry is counting heavily on new services such as e-mail over phones and picture messaging to stoke revenues as subscriber growth slows in key markets such as Western Europe. But the early response to the first wave of services, supported by a technology known as GPRS, or General Packet Radio Services, has been disappointing, with sales of GPRS-enabled phones and subscriptions below forecasts.
The early indifference is a concern for operators who have invested to upgrade their networks for GPRS and are paying billions of euros for networks supporting even faster, more sophisticated third-generation, or 3G, services.
And it is a particular concern for Ericsson, the world's largest manufacturer of equipment for mobile networks, which posted its first-ever loss in 2001, as sales slumped badly in the second half of the year.
Ericsson, like its rivals, is counting on 3G to help buoy its sales, beginning in the second half of this year after what it has warned is likely to be continued sluggish demand in the first six months.
Ericsson has projected that 3G will account for 10% of its sales of mobile systems equipment for 2002, but has forecast that its overall mobile systems revenue could fall by as much as 10% this year. Network sales account for around 85% of Ericsson's revenue.
Lindquist said Thursday that Ericsson still has seen no sign that European operators are ready to resume investments in their existing networks, after curtailing capital spending last year as both the economy and subscriber growth tailed off.
"The quality of networks today, basically everywhere, is not up to standard," Lindquist said. "Of course, operators are struggling with, 'How much do I invest in 2G, 2.5G or 3G? Where do I make my bet?' But I'll tell you, when the first one moves in any direction, everyone else will move at the same time."
He said the incumbent operators will feel pressure to resume spending as new 3G operators, such as those backed by Hutchison Whampoa Ltd. (H.HUW), launch their 3G networks later this year. The new operators could have a competitive advantage if current operators don't in the meantime improve their networks and meanwhile do delay the launch of their 3G networks, he said.
"There is certainly going to be a very interesting inflection point there," he said. The new operators "are not going to sit still."
Lindquist, who is in his early 40s, was appointed last fall after leading a turnaround in Ericsson's fixed-line unit. He is in charge of the unit selling equipment for GSM, the 2G technology that serves about 70% of the world's subscribers, and Wideband CDMA, the 3G standard that Ericsson expects to serve 80% to 85% of subscribers.
Ericsson claims a market share of 40% in both GSM and WCDMA. Asked if Ericsson's share of the 3G standard could grow, Lindquist said only, "It's not going to get less."
Lindquist's name has come up as a potential future Ericsson chief executive, but until recently, he has kept a low profile as he learned his new position and met with customers. Ericsson, meanwhile, has been the midst of a wide-ranging restructuring that included the elimination or outsourcing of some 20,000 jobs last year and spinoff of its mobile phone operations into a joint venture with Sony Corp. (SNE).
Lindquist, whose early tasks have included deciding which research and development projects to shelve, said it hasn't been any more difficult to take over amidst the market downturn than it would have been to start during the heady times that prevailed before.
"You need the same skill sets to play defense or offense," he said.
As to what's ahead, he said, "It's always difficult to say whether you have done enough, or whether you'll need to change again. But I think we have a good organization in place to support the market that we expect for the next 12 months." |
