establish leadership in targeted areas - progress - …© telefonaktiebolaget lm ericsson | capital...

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© Telefonaktiebolaget LM Ericsson | Capital Markets Day 2015 |

Establish leadership in targeted areas - progress

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Rima Qureshi

Introduction to Targeted areas

Head of Strategy

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strategic direction 2015 targeted areas

Establish leadership

in targeted areas 2 Expand business in

new areas 3

Radio, Core

& Transmission Telecom

Services

Future/

Emerging

Present/

Large

This slide contains forward-looking statements. Actual result may be materially different.

Excel in core business 1

IP Networks

TV & Media

OSS&BSS

Industry & Society

Cloud

IP Networks

TV & Media

OSS&BSS

Industry & Society

Cloud

Strategy &

objectives

Drive growth, win

leadership position

Key success-factors

Focus, leverage core

business and scale up

for critical mass

Market position Challenger or leader in

fragmented markets

Competition

ICT competition, mainly

in software and

professional services

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Strategic direction 2015 targeted areas



new areas 3

Radio, Core


Services

Future/

Emerging

Present/

Large


TV & Media

OSS&BSS

Industry & Society

Cloud

Radio, Core


Services Industry &

Society

› Energy & Utility

› Automotive, Intelligent Transport

Systems, Shipping

› Safety & Security

› TV SW Platforms

› Media Delivery

› Compression & Encoding

› Broadcast Playout, and other related

Services

TV & Media

› Operational Support Systems

› Business Support Systems

› Service Enablement

› Network Mgmt

› Transformational Services

OSS&BSS

› Operator Cloud Infrastructure

incl Mgmt

› Network Function

Virtualization

› Transformation Services Cloud

IP Networks

› IP Core, Edge, Metro incl Mobile Backhaul, Ethernet Access Devices

› Related Services

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Adjacency - fully leveraging Ericsson core business areas

Growth

potential

High degree of software

and professional services

Criteria for Targeted Areas

High degree

of recurrent revenues

II III IV

I

IP Networks

› E2e mobility

› Large installed

customer base in

Telco

› Leading systems

integrator

Cloud

› Leading portfolio

of network

applications

› Leading Telco IT

transformation

services

OSS&BSS

› Network mgmt

leadership

› OSS&BSS SW

leadership

› IT & Network

transformation

TV & Media

› Media processing

and delivery

› #1 in managed

services for Telco

› TV anywhere

platforms

Industry &

Society

› Telco grade

portfolio of HW &

SW solutions

› Transformation

services

capabilities

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Resource allocation

Incentives

Selling investments

R&D investments

Service delivery investments

M&A and Partnering

Cloud

& IP

Support

Solutions Radio Global

Services

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Investments across core, targeted and new areas

R&D

Mergers and

Acquisitions

Partnering and

Venture investments

Significant focus Selective focus Increasing focus

Excel in core

business

Majority of investments

to maintain leadership

and drive innovation

Consolidate and drive

synergies for industry &

technology leadership

Maintain leadership by

pursuing cutting edge

technology advances


in targeted areas

Increasing investments

for growth, win

leadership position

Strengthen offering and

boost market footprint

Strengthen position and

gain scale by expanding

scope of offering

Expand business in

new areas

Selectively expand in

long-term opportunities

Develop new platforms

and capabilities for

growth

Explore nascent

technology, skills and

business models


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Progress in targeted areas last 12 months


in targeted areas 2

Expand business in

new areas 3

Radio, Core


Services

Future/

Emerging

Present/

Large


TV & Media

OSS&BSS

Industry & Society

Cloud

Radio, Core


Services Industry &

Society › Maritime ICT cloud

› Smart metering solutions, Norway

› Connected bus stop - 3G, LTE or

WiFi small cell technology

› BBC playout services

› Multi-year broadcast services deal

with Channel 5

› AT&T TV platform

TV & Media

› Orange Polska OSS transformation

› T-Mobile billing solution

› Entel Digital Telco transformation

› Telkomsel's OSS transformation

OSS&BSS

› Launch of Hyperscale Data

Center System HDS 8000

› SK Telecom datacenter

partnership

Cloud

IP Networks

› Launch of new IP

Router 6000 series

› Launch of Virtual

Router

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acquisitions and partnerships last 12 months



new areas 3

Radio, Core


Services

Future/

Emerging

Present/

Large


IP Networks

TV & Media

OSS&BSS

Industry & Society

Cloud

› Partnership

Verizon forum,

LTE-Unlicensed

› Partnership

LG-Uplus,

5G/IOT

Radio, Core


Services

› Partnerships with Vermeer and Ditch

Witch on fiber roll-out

Industry & Society › Acquisition of Ambient

› Acquisition of Envivio

TV & Media

› Acquisition of Sunrise Technologies

› Partnership with Pegasystems

› Acquisition of Timeless MIND

OSS&BSS

› Partnership with Intel on

datacenter equipment

Cloud

M&A strategy remains - strengthen competitive assets and accelerate profitable growth

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Radio, Core

& Transmission Industry &

Society

TV & Media

OSS&BSS

Cloud

Telecom

Services

acquisitions and partnerships last 12 months



new areas 3

Radio, Core


Services

Future/

Emerging

Present/

Large


TV & Media

OSS&BSS

Industry & Society

Cloud

IP Networks

Partnership with Cisco

IP Networks

TV & Media

OSS&BSS

Industry & Society

Cloud

Radio, Core


Services

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accelerated innovation & growth

Mobile

Fixed

Applications

Cloud core

Datacenters

Access/Mobility Service provider

Core Devices/IoT Enterprise

IT/Cloud

IP transport & optical

Management & control

Service provider

IT Cloud

End to end portfolio

- Across all domains

Industry leadership

- Scale & services capability

Future networks – agile, autonomous & secure

+

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• Understand

opportunity

• Outline

roadmaps,

investments

Extensive Interaction Continues to Gain Momentum

Partnership

discussion

initiated

October 2014

Partnership

announced

November 9,

2015

• Ericsson to resell of Cisco's

networking products

• Comprehensive systems

integration and managed services

for service providers

• Joint cloud and 5G architecture

customer engagements

• Intended cross patent licensing

agreement

• Highly-optimized backhaul solutions

• Seamless indoor/outdoor access

• Integrated network management

solutions

• Cloud and data centers

• Internet of Things (IoT) platforms

• Comprehensive systems

integration, managed services, and

technical support for enterprise

Future

Today


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Per Borgklint

Targeted area: TV & Media

Head of Support Solutions

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CAPITALS

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minimum 30 pt


Enabling the future of television

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Agenda

Industry trends

Market outlook

Strategy execution

Strategy going forward

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The media experience will change more in the next 5 years than it has in the last 60 years

>50% >50% of time

on demand

>50% of time

on command

of time smartphone users spend on mobile screens

TV: FROM BOX TO

EXPERIENCE THE CONVERGED

MEDIA EXPERIENCE PERSONALIZATION

AND TARGETING

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itv

TV4 GROUP sky

hulu NETFLIX

Ericsson focus – Content management to distribution

Global TV delivery industry

Content production Playout

Service provisioning Distribution

Content

management

Public funding

Advertising Subscriptions

Content providers

Broadcasters

TV operators

Devices consumption

Aggregators

OTT

TV & MEDIA INDUSTRY overview

BBC

CANAL+ ten comcast DIRECTV AT&T TELUS swisscom

LG Apple

SONY Metro Goldwyn

Mayer endemol

MTV HBO

ESPN

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Ericsson highly relevant and well positioned in growing TV & Media market

70% of all mobile data traffic

will be from video by 2021

growing by 55% annually

Fragmented, transforming

and fast growing market

without clear leader

Telecom operators and Pay

TV operators are merging

Opportunity for leadership

position in large market

Mobility, video delivery and

experience will be key

Increased focus on TV &

Media among customers

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CAGR 2014-2018: 10-12%

TV and Media Market drivers

Market drivers and Industry trends USD b.


Addressable Market

11 12

• Media experience and delivery efficiency drive investments

Products

• Industry looking for IP transformation partners

Systems Integration,

Consulting and Support

• Outsourcing of broadcast and media services

Broadcast and Media Services

14

20-22

0

5

10

15

20

25

2012 2013 2014 2018

CISCO, Arris, ALU, Huawei, Harmonic,

Accenture, Arqiva, Encompass

Competition

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Ericsson to integrate AT&T TV Platform

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MediaFirst TV Platform Delivers Next Generation TV Experience for telus

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BBC awards multi-year playout services deal

to Ericsson

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video compression

leadership with Envivio

acquisition

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Good progress on Strategy execution

Strengthen leadership position in IPTV

platforms building on existing footprint

Excel in video transformation through our

professional and managed services capabilities

STRATEGY

Establish a differentiated position in video

processing and video centric networks

Leverage our global reach, services and


ACHIEVEMENTS LAST 12 MONTHS

MediaFirst TV Platform has general availability

Telus to implement MediaFirst TV Platform

Agreement with AT&T signed

7 year playout services deal signed with BBC

Multi-year services deal with Channel 5

ITV’s main linear playout service until 2024

Prime integrator for over 50+ transformations

15 Media hubs worldwide

Total of 6 Emmys

Acquisition of Envivio

Announcement of CloudDVR with Swisscom

Telstra CDN as a Service

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Proven Strategy remains

WANTED POSITION


The leader in the

IP transformation

of TV & Media

Strengthen leadership position in IPTV

platforms building on existing footprint

Excel in video transformation through our

professional and managed services capabilities

Establish a differentiated position in video

processing and video centric networks

Leverage our global reach, services and


STRATEGY

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Key takeaways

Addresses essential need of current Telco customers and

takes Ericsson into cable, satellite and broadcast

Ericsson executing to be the partner of choice for the IP

transformation of media

TV & Media is a large and growing market -

great opportunity for Ericsson

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Anders Lindblad

Cloud and IP

Head of Business Unit Cloud and IP

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VoLTE

IMS

IP ON ALL LAYERS

4G / 5G / WiFi / Fiber

PSTN, xDSL, 2G, 3G,

Operators affected by two major shifts

VNF VNF VNF

HW Virtualization “NFV” Network Virtualization

“SDN”

IP

TRANSPORT

NETWORK

CONTROL &

NETWORK

FUNCTION

VIRTUALIZATION

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Next Generation Network Build with SDN, NFV and cloud technology

SDN NFV

CLOUD Separation of HW and SW

Separation of control

and data planes

IT resource utilization

Leverage hw evolution

Web/Mobile applications

Time-to-market for

new services

Software principles

for management/control

Elasticity/Scalability

Operational efficiency

Challenges

Security

IT Governance

Workload optimization

Centralization

Challenges

Management complexity

Multi-vendor openness

Performance Migration

Challenges

Legacy compatibility

Getting started, use cases

OPEN

DAYLIGHT ETSI

openstack

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Targeted area: IP

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Agenda

Strategy recap and progress

Market outlook and industry trends


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› New family of products to complete the portfolio

– Router 6000

› Backhaul integrated with radio

– Ericsson Virtual Router

› New data centers and virtualization

– First contract secured for Router 6000

› Investment in common management and our

own operating system (IPOS)

› Good traction for fixed IP applications on SSR

8000

› IP transformation services

› 50% increase in IP certification

› Significant increase in deep SDN engagements

Execution according to 2014 Strategy

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› Ericsson IP strategy is on track

› We have taken the opportunity to enhance our IP strategy through partnership

› This partnership will accelerate our ambitions to lead in the Networked Society

Accelerating our Ip strategy

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Agenda




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Our offering By Ip e2e solutions

AGGREGATION

ROUTER

Fixed

Broadband

Enterprise

Broadband

Mobile

Broadband

IP/MPLS IP/MPLS IP/MPLS

2.6 BUSD

ACCESS ROUTER

OLT/CCAP

Data Center

IP Core Solution

Mobile Backhaul Solution

Fixed/cable broadband access solution

Business VPN Solution

BNG

MSER

EPG

TCU

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Included: IP edge, Metro aggregation, IP core, EAD, Systems integration, Consulting

and support


IP market and outlook

2018 2014 2013 2012

USD b. 2 - 4%

CAGR 2014-2018

17 1818

21› Traffic increase – performance

– Backhaul optimization

– Network simplification

› Service innovation - personalization

› Programmable network - agility

› Efficient service delivery

Market drivers

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Agenda




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Leverage radio and services capabilities

High attention on sales execution

Complete IP portfolio

end to end approach

TOP 3

in IP networking for operators

Wanted position 2020


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Key takeaways

New solutions based on own and partner’s portfolio

Partnerships to capture industry growth and value creation

5G, Cloud and IoT lead to new network requirements

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Targeted area: Cloud

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Agenda

Recap & progress



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Operators’ Three CLOUD transformation journeys

Operator Telecom

Cloud Operator IT Cloud

Operator

Commercial Cloud

Telecom Network

Transformation

Commercial Cloud

Offerings

Internal IT

Transformation

Virtualized network

functions e.g. vEPC, vIMS

Virtualized IT functions for

internal use e.g. CRM, OSS/BSS

Cloud offerings sold as a service

(XaaS) e.g. public cloud for

enterprises

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› SK Telecom – Agreement to create an automated and TCO-efficient hyper scale cloud infrastructure

› NTT DoCoMo – Selected as solution partner for network virtualization and Cloud Manager

› Telstra – Jointly established Center of Excellence for programmable Networks

›Telefonica – Extended co-operation for network virtualization

Customer traction

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Ericsson cloud Innovation

› Launch of HDS 8000 – First lead customer signed, SK Telecom

– Winner of Leading Lights award for best new product

› Demonstrations with AT&T – E.g. joint demonstration of advanced container technology,

powered by Apcera, for more efficient application deployment at

OpenStack

› Ericsson Cloud Manager – “NFV Innovation of the year”

› Industry & Society offerings launched – Connected Vehicle Cloud

– Connected Maritime Cloud

– Connected Wine yard trial with Intel

http://www.google.se/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0CAcQjRxqFQoTCJGCi5Lx-8gCFctdFAodqtMEpg&url=http://www.astellia.com/en/awards&bvm=bv.106923889,d.d24&psig=AFQjCNF8OLMySHH2l35uN1v1lGmlr9UPLg&ust=1446902177231432

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Partners, Investments AND alliances

Cisco

intel

Cleversafe

guardtime

ABB

APCERA

sentilla

metratech

FABRIX

OPEN DAYLIGHT

OPNFV

tmforum

openstack

CLOUD FOUNDRY

IETF

ETSI

ONF

DMTF

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Agenda

Recap & progress



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Operator Cloud Market Outlook and drivers

2018 2012 2013 2014

20-25% CAGR 2014-2018

Operator only: Operator Telecom Cloud, Virtual Network Core Functions,

Operator Cloud Management, Operator IT & Commercial Cloud as well as related services.

› Operators need for growth

› Demand for service agility, programmability

and time to market

› Increasing traffic and business models from

Internet of Things (IoT)

› Need for governance and security

› Demand for SW defined infrastructure

45

6

15Market drivers

USD b.

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World Workloads shift to Cloud

Share of workload, %

Source: McKinsey and Ericsson study 2015

25-35

10-15

40-50

5-10

20

25-35

<5

20-30

5-10

10-20

Today 2025

Less critical workloads

More critical workloads

Service

providers

Private data

centers

Commodity

Cloud

Commercial

Cloud

Traditional

Legacy

Private Cloud

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Ericsson offerings in Cloud

IT Workloads

Hardware & Infrastructure

Commercial/

IOT workloads

Services Cloud Infrastructure Automation ~IaaS

Ma

nagem

ent

& C

ontr

ol

Data Center Central Office

HDS 8000 BSP

PNFs Physical

Network

Functions, i.e.

traditional core

nodes

EC

M

EN

M

VNFs Virtual NW functions

vEPC

vDSC vMSC

vIMS

vMSP

3PP

3PP

3PP

Cloud Execution Environment (CEE) SDN controller

Cloud Platform Automation ~PaaS

Apcera Services

Cloud Transformation Partner

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Agenda

Recap & progress



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#1 Operator Telecom Cloud (NFV)

Top 3 Cloud transformation partner for

operators

Top 3 in Operator IT & Operator

Commercial Cloud

Emerging leader in digital industrialization

for large enterprises

Wanted position 2020

Virtualize the core network applications

Leverage our services leadership

Enable world leading cloud platform


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Key takeaways

Ericsson is enabling a world leading cloud platform, in which we

utilize our services leadership

Cloud transformation opens up great business opportunities

for Ericsson


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Magnus Mandersson

Marie Fossum

Targeted area: Industry & Society

Executive Vice President

Head of Global Services

Vice President

Head of Utilities

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Connected devices

1900 2010 2000

10

30

50

15 years 26 billion connected

devices


people


places

20

40

Co

nn

ectio

ns (

bill

ion

)

2020

Our vision 50 billion connected

devices

Accelerating pace of change, Internet of Things transformation ongoing

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Utilities

Public safety

Transport

Vertical markets

Industry & Society

› Adjacent industries seek ICT

transformation

› New business line established 2014

› Based on existing offerings

› Proven customer track record

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Why verticaLS?

Concentrated market

Global replicability

Re-use of core capabilities

Disruption enabled by mobility

Proven track record

Global market presence

Comprehensive services portfolio

Leader in mobile technologies

Why ericsson?

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CAGR 2015 – 2018: 16 – 18%

Market outlook


Smart metering, Smart grid communication

Grid control

Asset & Critical infrastructure management

Customer and Revenue management

ICT infra for road / rail

Transport transactions

Traffic management

Connected vehicle, connected vessel

First responder networks (PS-LTE)

Disaster and Emergency management

Critical Infrastructure protection

Strategic government networks

Addressable Market

3235

BUSD

2014 2013

63

39

2015 2018

36%

8%

CAGR

’15-’18

I&S

Public Safety

Transport

Utilities

7%

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Big changes in the utilities arena

Introduction

of renewables

Deregulated

markets,

increased

competition

Financial

distress

Increased

customer

focus

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Customer solutions Demand for new products

and services

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CAPITALS

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minimum 30 pt


Smart grid

communication

Smart metering

Assets & Critical

infrastructure

management

Customer &

Revenue

management

offering areas in utilities

Grid control

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Our global utilities experience

>42 MILLION METERS

World’s largest

First 4G (LTE) NETWORK FOR A

UTILITY DEPLOYED

GRID EDGE NODE DEPLOYMENT

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© Telefonaktiebolaget LM Ericsson | Capital Markets Day 2015 | This slide contains forward-looking statements. Actual result may be materially different.

Key takeaways

Utilities Public safety Transport

› 3 vertical segments – large and fragmented markets

› Reusing our services capabilities and technology insights

› Established practice – strong market momentum

› Demand for ICT-driven transformation

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Magnus Mandersson

Jean-Philippe Poirault

Targeted area: OSS&BSS

Executive Vice President

Head of Global Services

Vice President

Head of Consulting & Systems Integration

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Legacy systems in parallel Unified OSS&BSS systems, and transformed business

IT COMPETENCE ORGANIZATION NETWORK

from Voice to networked society

IT transformation

Ma

rke

t Demand for

software and IT

services

2G Technology

Subscriptions 1.4 b

2G/3G/4G

7.2 b

Voice only Traffic

Su

pp

ort

so

lutio

ns

All operators need transform their businesses and replace legacy systems

2003 2014

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OSS&BSS Market and outlook


Addressable Market*

* Including OSS, BSS, Service Enablement, Domain Management,

Systems Integration, Outsourcing and Support

2018 2013 2012 2014

57

78

60

SW

Services CAGR

’14-’18

25%

75%

#1

Top 4

USD b.

Rank

Operations support systems

Business support systems

Service delivery platforms

Consulting

Systems integration

App. dev. & maintenance

IT managed services

Support services

Soft

ware

IT

Serv

ices

CAGR 2014 – 2018: 5 – 7%

62

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OSS&BSS Market drivers



new areas 3

Radio, Core


Services

Future/

Emerging

Present/

Large


Modems

IP Networks

TV & Media

Industry & Society

Cloud

OSS&BSS

WHY CUSTOMERS INVEST

› Digital transformation

– Enabling business innovation and ecosystems

› Customer experience management

– Real-time personalized experiences

› Operational and business efficiency

– Rapid service development and introduction

› Sunsetting and transformation of legacy systems

– Too costly and complex to maintain

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Digital transformation case

1.5 SEK b.

14%

9%

32%

16%

29%

App. dev.

& main. Support

Systems

integration

Ericsson

software

Third-party

software

Tier 1 operator

KPI

3 months 3 days

2 weeks 5 minutes Substantial subscription changes

days 30 minutes Number portability

6-9 months 3 months

Price changes

New product

Before After

Sample end-user benefits

› Challenges:

– Not consumer-centric

– Legacy architecture and obsolete IT systems

– Functional gaps and slow time to market

› Solution:

– Full IT transformation

– Ericsson and third-party software

Deal

value:

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OSS&BSS resources

Software portfolio IT services

› 4,500+ OSS&BSS developers

› Software suites

› Improved market perception

Acquisitions: LHS, Telcordia, APCERA,

ConceptWave, Metratech, Envivio Acquisitions: Pride, inCode, TeleOSS, Telcocell,

Tridge, TimelessMind, Sunrise Technology

› 17,000+ CSI professionals

› 4 Global service centers

› IT Managed services

Go to market

› Dedicated ICT sales force › Reference solutions and architecture

› Business process transformation

› Integration Lab

Assets

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Global Scale and skill

GLOBAL SERVICE CENTER

REGIONAL DELIVERY

44%

56%

1,500 Consulting and systems

integration projects per year

17,000 IT professionals

900 OSS systems

in operation

>2.1 Served by Ericsson

Charging and Billing

billion subs

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Strategy AND execution

Strategy going forward Wanted position

Preferred ICT

transformation partner

› Extend #1 position in telecom

› Expand ICT professional services

› Establish strong position in verticals

Leverage combined software and services

strengths to assume prime integrator role

Expand software suite into cloud and analytics

Introduce new business models such as XaaS

Enabling operators to become consumer-

and application-centric


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Key takeaways


NETWORKS SERVICES SOFTWARE

› Global customer base

› Demand for transformation to become

consumer- and application-centric

› OSS&BSS market is large, and continues

to grow

› Ericsson has a market-leading position

› Our competitive advantage is our

combination of software and services across

business, IT and networks

› Ability to transform business processes

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Jan Frykhammar

Targeted areas summary

CFO

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7%

2014 Actual 2020

Efficiency

improvements

Monetize footprint

Profit improvement operating margin illustrative

Build success in

targeted areas

Cost Sales


3 building blocks driving towards continued yearly incremental improvements

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targeted areas share of group net sales

2015 09 rolling 4Q

Corebusiness

IP & Cloud

OSS & BSS

TV & Media

Industry &Society

2014 09 rolling 4Q

CoreBusiness

IP & Cloud

OSS & BSS

TV & Media

Industry &Society

SEK ~45 b. Net sales

contribution from

Targeted areas

SEK ~35 b. Net sales

contribution from

Targeted areas

Increased share of group net sales

15% 18%

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77%

Support Solutions

Core business

Targeted areas

Targeted areas Net sales share per segment

6%

Networks

Core business

Targeted areas

2015 09 rolling 4Q

23%

Global Services

Core business

Targeted areas

Potential to improve earnings in all segments driven by targeted areas

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Net sales per targeted area

IP and Cloud IP and Cloud

OSS & BSS

OSS & BSS

TV and Media

TV and Media

Industry and Society

Industry and Society

2014 09 rolling 4Q 2015 09 rolling 4Q

SEK ~35 b.

SEK ~45 b.

Growth in targeted areas >10%

%-share of total

targeted area sales

15%

16%

58%

11%

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Targeted areas

› Market growth: On average ~10% CAGR

› Ericsson objective: Establish leadership in

targeted areas

Net sales scenario based on market assumptions

2014 2020

Net Sales

Core Business

Targeted Areas

~50%

~50%


Core business

› Market growth: ~1-3% CAGR

› Ericsson objective: Excel in core business

Success in targeted areas essential to reach 2020 ambition

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KEY TAKEAWAYS

› Important building block for improved profitability

› Growth in targeted areas >10%*

› Increased share of group net sales

› Potential to improve earnings in all segments driven by

targeted areas

› Success in targeted areas essential to reach 2020 ambition

Financial performance

Targeted areas

This slide contains forward-looking statements. Actual result may be materially different. * YoY 2015 09 rolling 4Q

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establish leadership in targeted areas - progress - …© telefonaktiebolaget lm ericsson | capital...

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