Doubling operating revenue is the goal for Ericsson’s new European president

By:
Geralyn Samia
Published on:

Arun Bansal sat down with James Pearce at the home of Premier League champions Chelsea to discuss how 5G, IoT and a new strategy will fire up Ericsson back to the top

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I sit down with Arun Bansal in the executive suite of Stamford Bridge, home to English football – or soccer in some parts of the world – champions Chelsea FC and I’m struck by some of the similarities between his company, Ericsson, and the football club. Both have a history of success but have gone through less successful patches. Both have gone through numerous management changes to try and keep that success going. But the major difference is, for Chelsea, it has worked.

Bansal recently saw his job title change during another series of management reshuffles after the Swedish vendor sacked his former boss, Hans Vestberg, in July 2016. The reason? Ericsson has been hit by falling revenues. In came long-term board member Börje Ekholm as its new president and CEO and, with him, changes to the management team and to Ericsson’s strategy.

Bansal, who has spent more than two decades at the Swedish vendor, moved from his role as SVP and head of the business unit: radio, to become president of Europe and Latin America, a job he started in May. His brief? To implement Ekholm’s new strategy across those markets.

“We defined our new strategy to refocus on our core, on regaining our technology leadership, in three areas: network, cloud infrastructure, and OSS and BSS,” he explains. “We are looking at strategic options for our media assets.”

Back to basics 

The strategy is to go “back to basics” – focussing on what the company builds on its long-standing reputation, as well as positioning itself as a key driver in new technology such as the internet of things and 5G – while assessing what to do with all of the other sectors it had tried to enter.

Bansal explains that the drive is to return to high-margin businesses, which means ditching those lower-margin operations. “We’re also not going to do standalone services business, [or] low margin services business, like fibre deployment, like field maintenance which offer low margins.”

His task has only really just begun, but it could be about to get even harder. At its Q2 results in July, Ekholm promised to accelerate plans to reduce costs in order to return Ericsson to profitability. It made an operating loss of 1.2 billion kronor ($145 million), compared with 2.8 billion kronor profit in the same quarter a year ago. For Ericsson, that could mean further redundancies and a reduction in its real-estate footprint as it looks to save 10 billion kronor ($1.2 billion) in its latest round of cuts.

“That work is ongoing – my role is now to make sure we implement that strategy with our customers,” adds Bansal. “We also have to look at the business side. We’re forecasting a decline of 2% to 6% in Europe, so we’re adjusting the cost base necessary to align with the business forecast. That combination of strategy implementation and the investment in technology will help us to double our operating income by 2019.”

His markets are particularly tough. Although no geographical area saw particularly good results for the firm – southeast Asia, Oceania and India were all flat, while Africa saw heavy losses – Europe and Latin America both declined by 11%. This was blamed on “continued reduced mobile broadband investments”.

What surprises me is Bansal’s composure over the challenges that Ericsson is facing. When I ask him what the key opportunities are that it must seize to make a success of its strategy, he points to 5G.

“For us, 5G is part of our core strategy. We want to be the first vendor out with 5G – it is our ambition to be the technology leader when it comes to 5G. That’s why we’ve been winning partners, such as the Vodafone contract in London where they are going to swap out the existing vendor. That shows that we’re ahead of our competition in 5G.”

The use cases for 5G will vary greatly, depending on what market it is being deployed in, he adds. “The use case for 5G will be different depending on the different continents. While Europe might drive 5G for industrial internet and mobile broadband, the US is looking at fixed wireless use cases. Asia is driving 5G for different sports in the build-up to the next Olympics coming in.” 

Meanwhile, 5G deployments have been accelerated, too. Originally, most of the industry didn’t expect to see real commercial 5G in action until 2020, but mobile standards organisation 3GPP revised its schedule in order to meet demand from all sides – enterprise, operators and vendors. 

Will this help Ericsson? “The standards for 5G have accelerated by a year now and that will drive quicker deployments. It is extremely important for us to be at the forefront with the technology, with the use cases, with helping our operator partners to understand how they can make money on 5G,” Bansal says.

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Operator partnerships 

To that end, Ericsson has been forming a number of partnerships with operators to test new 5G technology and show off what it is capable of. At last February’s Mobile World Congress in Barcelona, it teamed with Telefónica to demonstrate remote driving over a 5G network. It has also forged partnerships with Orange, Telia and TIM – and those are just a handful of its European partners.

But, in the words of Nat King Cole, there may be trouble ahead. The GSMA and some of those very same operators have warned European regulators that they risk delaying 5G deployments if there isn’t a major overhaul of rules around spectrum. For Ericsson and Bansal, that could see a slower roll-out of its 5G solutions – a real threat to his ambitions to double operating income by 2019.

“We absolutely want Europe to be at the forefront of 5G deployments,” he says. “The GSMA warning was based on the spectrum policy, which is not very clear in Europe, and of course, enough spectrum needs to be allocated for deployments. If you look at the US, spectrum is allocated for longer durations; it is done just once. “Of course Europe needs to evolve spectrum policy for 5G to be successful. Remember, Europe is the same size as the US in terms of the number of subscribers, but the US has just four operators, while Europe has 150 operators.”

That means 150 operators for Bansal to potentially work with, but if Europe does deploy 5G after the US and Asia, it could also be down to those use cases Bansal mentioned earlier. “We shouldn’t be too harsh on Europe when it comes to the deployment of 5G. There are different use cases,” he explains.

“The US is focussed on fixed wireless access, which is not so dependent on low latency. The standards for that will be finalised next year and immediately after that we will have infrastructure and the devices to support that. Compare that with Europe, where it will be driven by industrial use cases which need low latencies. The low-latency applications of the technology will only come in 2019 – that’s the major difference.”

The internet of things (IoT) is another incoming technology that Ericsson hopes to capitalise on. Ericsson forecasts that the number of devices that will be connected will hit 29 billion in 2022 – and 18 billion of these will be related to IoT.

Ericsson sees its role in two parts. The first is very much in line with its traditional business, enabling operators to build the networks that will support smart cities and the internet of things across the globe. “Our play in smart cities is to refocus on operators and move our focus away from industry and society partners. So what we are looking to do is to partner with existing operators to enable them to work with cities, municipalities, governments and so on in order to develop smart city projects.”

It will also continue to supply these solutions to companies though – that’s why I met Bansal at Stamford Bridge. Ericsson was announcing a deal that will see it serve as the connectivity solutions partner for Chelsea for the next two years.

“Our research indicates that people want to use their digital devices wherever they go – and the urge to connect is even greater at a Chelsea FC home game. Through this partnership, we will ensure the connectivity at Stamford Bridge matches the quality of the football and look forward to exploring further options that will enable Chelsea FC to take the digital experience to the next level,” he says. 

“Our ambition is to showcase our in-stadium technology. That’s our only driver. What can connectivity provide? So we can excite partners about what 5G, when it eventually comes, can provide stadiums and clubs from a technology point of view.”

Bansal will be hoping that, like Chelsea, Ericsson can put the chaos behind it and once again return to the top of vendor league: 5G, IoT and smart telecoms will be the key signings to fire it there.