Ericsson CEO Says Cloud Capability Key to Capturing 5G Market

By Niclas Rolander and Caroline Hyde (Bloomberg) -- Ericsson AB is betting on cloud technology to capture as much as possible of the $1.2 trillion market it expects fifth-generation mobile broadband services to spur, Chief Executive Officer Borje Ekholm said.

“5G is really starting to happen,” Ekholm said in an interview with Bloomberg TV at the Mobile World Congress in Barcelona. “What we’re starting to see is operators positioning their 4G networks and starting to evolve into 5G.”

5G services aren’t expected to be commercially available until 2020. In the meantime, Ericsson has signed development agreements with more than 30 carriers, and some, like Verizon Communications Inc. and its closest rival AT&T Inc., are preparing for trials of the new technology. Verizon said last week it will work with equipment partners including Ericsson and Samsung Electronics Co. to test faster 5G mobile broadband service in 11 markets in the first half of this year.

Ericsson, which has suffered from reduced spending by carriers as fourth-generation networks are largely completed in many of its largest markets, said 5G represents an “incredible opportunity” that will be worth a total of $1.2 trillion by 2026. After a troubled 2016, in which Ericsson ousted its CEO Hans Vestberg and blindsided investors with a massive profit warning, sentiment is turning more positive to the former wireless network-equipment market leader.

“Our industry, and actually all industries, are experiencing massive disruption,” Ekholm said at a media briefing Monday. “We will need to change, and as we have said, we at Ericsson are working on our strategy.”

Since Ekholm started as CEO six weeks ago, Ericsson shares have gained 11 percent, boosted by positive analyst comments, a successful bond sale and speculation about a possible Cisco Systems Inc. takeover. Investors are also looking to Ekholm to save enough to propel the company back to profit growth while still keeping step with investments to capitalize on 5G.

The former Investor AB boss said cloud technologies will be crucial for the future of the Swedish company that has suffered a slump in investments by carriers and fierce competition from Chinese rivals Huawei Technologies Co. and ZTE Corp. Ekholm said that so-called operations and business support systems -- software used by carriers to manage their networks -- represent a key strength for Stockholm-based Ericsson.

“We even believe that the network will be in the cloud in the future,” Ekholm said. “That’s why our strength in the virtualization of networks as well as OSS and BSS offerings are central to our future product portfolio.”

Fifth-generation networks provide more bandwidth for data and allow easier connections between machines, from traffic lights and cars to thermostats and fridges. Cloud-based services let users access computing power and data on server farms far away, rather than on their own devices such as personal computers or smartphones.