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‘10 years ago we were a hardware company, now we’re providing broadcast services,’ Ericsson CEO on ‘dramatic’ change in business

Swedish telecom company Ericsson has changed ‘dramatically’ to pull back from the brink in the early noughties and reposition itself in the market, according to CEO Hans Vestberg.

Change: Hans Vestberg spoke at Ericsson's summit in Sweden

Vestberg spoke to The Drum at the Ericsson Executive Media Summit in Sweden and said the business had moved from 75 per cent of turnover coming from hardware services 10 years ago to the same number now coming from software and services.

According to Vestberg, Ericsson has focused on building network services capable of coping with increasing pressure amid the technological boom, and the company’s customers and revenue streams are diversifying.

“We’re a company that has a certain outside perception of what we are, but actually we’ve transformed quite dramatically,” he said. “Ten years ago, we were very much known for hardware and making mobile phones – 75 per cent of our turnover was hardware.

“If you look at us now, we’re a software service company and 75 per cent of turnover comes from software and services. We don’t have handsets left anymore, we sold them to Sony in our joint venture.

“Currently, 50 per cent of all phone traffic in the world is going through our equipment. We’ve developed that in the last 10 years and the two core pillars of the company right now are the mobile infrastructure and telecoms services.”

He added: “We’ve started doing broadcast services as well and we manage services for broadcasters. We have started buying equipment that can handle everything from ingestion of the data to the playout, everything from compression, IPTV – that’s really what Ericsson is all about today. We are sort of an ICT company supporting transformation into the digital world.

“In the last four or five years we’ve seen IT and TV media coming together with telecoms. With all the transition that is needed in IT to handle all this data and these new devices, there needs to be a big shift in IT. So we have invested in the company and acquired companies in building systems, operating systems, that can handle multiple devices, multiple channels, all of that.

“The majority of our revenue is coming from operators, but more and more of it comes from TV and media companies that are using mobility broadband and the cloud.”

As part of its move to broaden media and broadcast services, Ericsson acquired content marketing agency Red Bee Media – which began life as BBC Broadcast Limited - in May this year, although the BBC this week announced it will end its creative services contract with the agency when it runs out next year.

However, a statement from Ericsson said: “Red Bee Media is an integral part of Ericsson’s overall broadcast and media services and we have ambitious plans to grow our TV and media business in the UK and internationally.

“As a result of Ericsson acquiring Red Bee Media, Ericsson has a creative services contract to supply multi-platform promotions to the BBC until the end of 2015. What has happened is that the BBC has now informed us that it does not plan to renew the contract once it expires. Ericsson does however continue to deliver a wide range of other broadcast and media services within a frame services agreement to the BBC.”

Vestberg added that the company, founded in 1876, had adapted considerably to meet the changing market and said settling for the “status quo” is not an option for technology and telecoms businesses.

“Right now, we have 42 to 43 per cent of our revenue coming from services, and that has come from five to 10 per cent before, so we’ve had a dramatic ramp up in our service revenues,” he said. “More and more of our business is software and that accounts for 23 per cent. The rest is hardware, so you see already here we have had a dramatic change in 10 years. It a big change and transition of the company.

“In the 1990s we were number one in the world on fixed networks, and today we don’t even sell fixed access,” he said. “We have constantly adapted to meet our customers’ demands.”

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