LM Ericsson Telephone's CEO Discusses Q4 2011 Results - Earnings Call Transcript

LM Ericsson Telephone Company ( ERIC)

Q4 2011 Earnings Call

January 25, 2012 8:00 AM ET

Executives

Åse Lindskog – VP, Head-Industry, IR

Hans Vestberg – President and CEO

Johan Wibergh – EVP and Head of Business Unit Networks

Magnus Mandersson – EVP and Head of Business Unit Global Services

Per Borgklint – SVP and Head of Business Unit Multimedia

Jan Frykhammar – EVP, CFO and Head of Group Function Finance

Analysts

Kulbinder Garcha – Credit Suisse

Edward Snyder – Charter Equity

Alexandre Peterc – Exane BNP Paribas

Sandeep Deshpande – JP Morgan

Mark Sue – RBC Capital Markets

Francois Meunier – Morgan Stanley

Simon Shepherd – Goldman Sachs

Matthew Hoffman – Cowen & Company

Richard Kramer – Arete Research

Presentation

Operator

Welcome to the Ericsson Analyst and Media Conference Call for their fourth quarter reports. To view visual aids for this call, please log on to www.ericsson.com/press or www.ericsson.com/investors. (Operator Instructions)

As a reminder, a replay will be available one hour after today’s call. Åse Lindskog will now open the call.

Åse Lindskog

Thank you, operator, and hello, everyone. You are all very welcome to our call today where we will comment on our fourth quarter and full-year earnings report. So with me here today I have Hans Vestberg, President and CEO of Ericsson; Jan Frykhammar, Chief Financial Officer; Johan Wibergh, head of our business unit Networks; and Magnus Mandersson, head of business unit Global Services. And for the first time in our quarterly call, Per Borgklint, Head then of the business unit Multimedia.

So to start with, I have to make the usual reminder that we during the call today will be making forward-looking statements, and these statements are based on our current expectations and certain planning assumptions which are subject to risk and uncertainties. The actual results may differ materially due to factors mentioned in today’s press release and discussed in this conference call. We encourage to you read about these risks and uncertainties in our earnings report as well as in our annual report.

And so with this introduction, then, I would like to hand over the call to Hans Vestberg.

Hans Vestberg

Thank you, Ase. Okay, I will start to briefly go through the 2011. Some of you probably attended a press conference, but we will repeat as we know many are joining only for this call. So if you take 2011, it was definitely the year of Mobile Broadband where we had modest subscriber grow. We had over one million Mobile Broadband subscriptions, which was in line, we estimate that which was fairly in line with what we thought the orders were as well with new devices.

If we look at the Roam business in 2011, we grew 90% if comparing units and adjusted for currency. That’s probably one of the years that we had grown the most if we go back in history, ending at some SEK227 billion almost.

Networks grew 17%. I will come back to that. Had a profile of a very, very strong first half-year, and then declined towards the second half and the fourth quarter, Global Services, the opposite, slower first half and then a stronger second half and especially fourth quarter.

If we adjust for currency, we actually had all regions growing in the full year. We also had the clear strategy of gaining market share that we already end of 2010 started to communicate. We wanted to regain the market share in Europe, in the modernization work. We have done so and – but it also comes with a business mix shift that will talk about that impact or numbers. We end also 2011 with a good and a strong financial position.

If I may just go through a little bit what are the main topics with our customers, our main topics in this quarter has been, firstly, I would say, the effect of the economic uncertainty. As I said in the third quarter report as well as in the Capital Markets Day, we could not exclude that short-term operators will be more cautious on investments. What we now see, they have been cautious on investment, and it’s not strange given what is happening all around us. That means that budget cycle is a little bit longer, project decision takes a little bit longer than normal. And we normally have by yearend more investments coming from operators. We saw less of that this year.

So it is a little bit more cautious, but the impact on the fourth quarter still was not that much. It’s more a feeling about the cautiousness when it comes to the macroeconomics. That we of course have discussed a lot.

Then the three others are the ones that we have been discussing before, mobile broadband, peer pricing in order to monetize the mobile broadband is on top of agenda. And that leads to both our ability to support that with our technology but also in the OSS/BSS transformations. And finally, we discussed quite a lot about operation efficiency given the circumstances, and Magnus will come back to how the year ended on managed services, but we clearly see an interest there.

If we then take the fourth quarter, as I said before, and Johan will come back to it, networks slowed down in the fourth quarter, with the same comments as we had in the third quarter and the second quarter, on the Capital Markets Day. North America, three factors impacted North America: consolidation, high level of investment for a while that comes down, which is strange, and then the shift from CDMA to LTE. And Russia as well came down in the fourth quarter.

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