Telefonaktiebolaget Lm Ericsson Class A · OMXSTO:ERIC_A
Telefonaktiebolaget Lm Ericsson Class A — Ericsson — Investor Day (November 2017)
132 slides from Telefonaktiebolaget Lm Ericsson Class A's investor day presentation, Nov 7, 2017
Slide 1: Agenda
agenda 09.00 Strategic direction 12.30 Lunch 45 min Introduction – Peter Nyquist 13.15 Strategy execution First part CEO – Börje Ekholm First part CFO – Carl Mellander Business area Managed Services – Peter Laurin Q&A Third part CFO – Carl Mellander Second part CEO – Börje Ekholm 10.30 Break 30 min
Slide 2: Strategy implementation
Strategy implementation Capital markets day 2017 NOVEMBER 7-8, 2017 NEW YORK Ericsson Internal | 2017-10-06 | Page 1
Slide 3: Börje Ekholm, CEO
Börje Ekholm CEO Ericsson Internal | 2017-10-06 | Page 2
Slide 4: CEO initial assessment
CEO initial assessment High potential to improve company value creation Highly skilled workforce Competitive product platforms Lost technology leadership › Competent and highly engaged › Network performance still a key driver › Lost market share from 40% in LTE workforce across all teams of operator
Slide 5: Customers looking to drive value creation in three key areas
Customers looking to drive value creation in three key areas Relentless efficiency Digital experience New revenue streams › Virtualization and automation provide › New approaches using artificial › 5G enabling new use cases massive scale efficiencies intelligence, cloud, automation and › IoT extends
Slide 6: 5G expands the addressable market
5G expands the addressable market Offers new revenue streams Massive Machine Critical Machine Type Communication Type Communication INDUSTRIAL TRAFFIC SAFETY REMOTE SMART METER TRACKING FLEET APPLICATIONS & CONTROL MANUFACTURING MANAGEMENT Enhanced Mobile Broadband Fixed Wireless Access SMARTPHONES
Slide 7: Focused business strategy
Focused business strategy Enabling the full value of connectivity for service providers Networks Digital Services1 Managed Services2 Emerging Business3 Highly scalable, Digitalize service Long lasting cost Innovating new modular platforms providers through efficient performance sources of revenue fo
Slide 8: Addressing key customer priorities
addressing key customer priorities All portfolio areas are integral Enabling the full value of connectivity for service providers Relentless efficiency Digital experience New revenue streams Networks Digital Services Managed Services Emerging Business › Technology and cost › Radically enhanced › Opt
Slide 9: Near-term focus for profitability
Near-term focus for profitability Stabilizing and simplifying 2017 2018 2019 2020 Simplified structure Accelerated cost out – SEK 10 b. STABILIZE Portfolio review & SIMPLIFY Contract review Digital Services turnaround Invest in R&D for technology and cost leadership INVEST Selective market expansion
Slide 10: Strong progress in strategy execution
Strong progress in strategy execution Example activities Simplified New simplified organization launched structure Clear accountability split and strong governance Accelerated SEK 2 b. run rate reduction end of Q3 2017 (of SEK 10b. target) cost-out Close to 1 in 5 managerial positions elimin
Slide 11: Robust plan for topline development
Robust plan for Topline development SEK b. 200 RAN market1 Growing markets 2017 -8% but headwind 190 2018 -2% Media review 211 from shift to SW- 2019 -1% pending decision led business 2020 0% 2017 09 FX Review of Managed RAN market Digital Services Portfolio 2020 rolling 4Q Services, NRO and develop
Slide 12: Sales and income exposed to USD
sales and income exposed to USD Sales exposure 2016 Currency risks Other › USD to SEK movements has a direct impact on reported sales and income USD JPY 45% › USD to SEK weakened by -10% INR results in about a -5% negative impact on topline and -1 pp on operating margin1 CNY › Financial targets base
Slide 13: Long-term operating margin target
Long-term operating margin target › Focused business strategy set to deliver significantly >12% improved profitability at >12% operating margin › Key changes since March › Strengthened SEK (Q1 average SEK/USD 8.96 vs 8.20 >10% in financial targets) 6 › RAN equipment market estimated to decline by -8
Slide 14: Group financial targets
Group financial targets Profitability over growth SEK b. Q416-Q3171 20202 Comment › Top-line decline largely driven by focused strategy Sales 211 190-200 › Financial targets based on SEK/USD at 8.20 Gross › Supported by investments in technology leadership 30% 37-39% margin › Efficiencies in supply,
Slide 15: Financial review and targets
Financial review and targets Capital markets day 2017 NOVEMBER 7-8, 2017 NEW YORK Ericsson Internal | 2017-10-06 | Page 1
Slide 16: Carl Mellander, CFO
Carl Mellander CFO Ericsson Internal | 2017-10-06 | Page 2
Slide 17: Growth turning to decline in later years
Growth turning to decline In later years Reported Net sales 2014-2016 positively impacted by increasing USD/SEK Net sales 250 1. Organic growth from low level following telecom crisis Strong portfolio and supply readiness supported recovery 200 150 Moderate success in driving growth from acquisition
Slide 18: Eroded profitability
eroded profitability Expansion outside core contributed to deteriorating margins Strong focused strategy after telecom crisis delivered % Gross and Operating margin 1. superior gross margin and operating income 50 Technology leadership contributed to high gross margin 45 2020 GM% Gross and operating
Slide 19: Dividends larger than FCF in later years
Dividends larger than FCF in later years Cash position remains strong Free cash flow vs dividends 17 Cash position re-built through strong business 14 1 2 3 10 4 5 1. 6 performance and moderate dividends 4 9 FCF Div. 2. Several large acquisitions, negative free cash flow, increasing dividends and re
Slide 20: Key learnings
key learnings Keep focus on core business Limit scope expansions Free cash flow is critical Disciplined investments based Technology-driven on balanced business cases Clear accountability in the differentiation to reduce price with realistic estimates on business for P&L, capital and erosion and sec
Slide 21: Change in priorities for long term shareholder value
change in priorities for long term shareholder value From… …to… Focus on core – selective growth Growth through scope expansion based on technology leadership Growth prioritized over contract Balanced deal decisions for maximum profitability and risk shareholder value Services-led sales for Product-
Slide 22: Financial strategy execution to date
Financial Strategy execution to date › Gross cash improved from SEK 44 b. to 55 b. YoY Gross cash position › Funding secured at attractive terms – continued opportunistic approach › Reduced dividend › SEK 9 b. stronger than last year 2017 09 YTD › Increased steering on Free cash flow in addition to
Slide 23: Group financial targets
Group financial targets Profitability over growth SEK b. Q416-Q3171 20202 Comment › Top-line decline largely driven by focused strategy Sales 211 190-200 › Financial targets based on SEK/USD at 8.20 Gross › Supported by investments in technology leadership 30% 37-39% margin › Efficiencies in supply,
Slide 24: Financial targets breakdown, cost saving actions
Financial targets breakdown Cost saving actions Capital markets day 2017 NOVEMBER 7-8, 2017 NEW YORK Ericsson Internal | 2017-10-06 | Page 1
Slide 25: Carl Mellander, CFO
Carl Mellander CFO Ericsson Internal | 2017-10-06 | Page 2
Slide 26: Group financial targets
Group financial targets Profitability over growth SEK b. Q416-Q3171 20202 Comment › Top-line decline largely driven by focused strategy Sales 211 190-200 › Financial targets based on SEK/USD at 8.20 Gross › Supported by investments in technology leadership 30% 37-39% margin › Efficiencies in supply,
Slide 27: New Segments
New Segments Segment re-state will be published 8th December Old Segments New Segments Networks (old) Networks (new) MS Networks Managed Services MS IT IT & Cloud Digital Services Other Other (Media and Emerging Business) Ericsson Internal | 2017-10-06 | Page 4
Slide 28: New Segments
New Segments Segment re-state will be published 8th December Old Segments New Segments › All plans are for new segments Networks (old) – Accountable leaders Networks (new) – Organizational set-up – Business plans › IPR revenues split 82% Networks and MS Networks Managed 18% Digital Services Services
Slide 29: Reaching the 2020 target
Reaching the 2020 TARGet Networks Digital Services Managed Services Other Net sales Operating margin Net sales Operating margin Net sales Operating margin Net sales Operating margin SEK 128-134 b. 15-17% SEK 42-44 b. Low single digit SEK 20-22 b. 4-6% SEK 3-5 b. Breakeven › R&D ramp-up to drive › Im
Slide 30: Net Sales
Net Sales Per segment Summary SEK b. Illustrative + Selective market expansion 211 Networks - Little/no underlying market improvements - Focused Network rollout business + Growth in software sales Digital - Decline in legacy products Services - Reduction of low margin services and hardware business
Slide 31: Operating Margin
Operating Margin Improvement actions Illustrative › Scope review and contract exits Gross › SEK 10 b. cost program (70% CoS) >10% margin › Improvements driven by new strategy SG&A › SEK 10 b. cost program (30% G&A) R&D › Strengthen technology leadership 3% invest- › Drive gross margin improvements t
Slide 32: Gross Margin
Gross Margin Improvement actions Illustrative Scope review › Contract review and refocused offerings 37-39% and contract exits › Portfolio review SEK › Pro-active right-sizing based on market and 7 b. Right-sizing business development 30% › Service delivery efficiencies and automation SEK 10 b. cost
Slide 33: Cost structure development
Cost structure development % of NS % of NS Illustrative › Cost effective product portfolio and delivery › Service delivery efficiency (part of SEK 10 b. program) Cost of Cost of › Scope review and contract exits sales sales › Exiting non-core and underperforming business › Supply chain efficiencies
Slide 34: SEK 10 b program – what's new?
SEK 10 B program – what’s new? Cost & efficiency program SEK 10 b. program (Nov 2014 – Mar 2017) (Mar 2017 – mid 2018) Achievements What’s new? Reduced OPEX by net SEK 3 b. Profitability over growth (incl. Modems exit and FX headwind) Selling and R&D expenses out of scope to protect Total headcount
Slide 35: SEK 10 b cost-out target for mid-2018
SEK 10 b Cost-out target for MID-2018 Our commitment Reporting 20% 30% Target 50% 70% 30% SEK b. 10 7.2 G&A Support functions 2.0 employee spend CoS IT, indirect spend and supply Cost-out target In execution Executed to date Service Delivery Quarterly progress reporting The following changes are not
Slide 36: SEK 10 b program – key activities
SEK 10 b program – key activities Key activities Achievements to date Support › Management positions reduced by 18% functions › Simplify organizational structure › 30% reduction identified in zero-based employee spend › Zero-based planning for support functions planning in functions reviewed › Strea
Slide 37: Short to mid term planning assumptions
Short to mid term Planning assumptions New planning assumption Planning assumption from Q317 earnings report. 2017 and Q4 2018 Market outlook RAN equipment market -8% FY17 (in line with external RAN equipment market -2% FY18 sources) (in line with external sources) Net sales Q4 QoQ sales growth lowe
Slide 38: Networks
Networks Capital markets day 2017 NOVEMBER 7-8, 2017 NEW YORK Ericsson Internal | 2017-10-06 | Page 1
Slide 39: Fredrik Jejdling
Fredrik Jejdling Executive Vice President & Head of Networks Ericsson Internal | 2017-10-06 | Page 2
Slide 40: Key takeaways
Key takeawaYs › RAN market in decline - expected to decline medium term and flatten out by 2020 Challenging › Our market share has declined starting point › Our profitability has been impacted by lack of competitiveness and price pressure › Invest in R&D for Technology and cost leadership Strategic
Slide 41: New segment Networks overview
NEW segment Networks Overview ~134B1 Radio Access Networks ~55% Net sales SEK Transport Solutions ~5% 13-14%2 ~5% IPR Site Solutions Operating margin ~5% Network Rollout Customer >250 Customers & Tuning Support >12K ~30% R&D engineers 1Unaudited and preliminary Managed Services 2Unaudited and prelim
Slide 42: Our Strategy & Execution
Our Strategy & Execution
Slide 43: Market situation
Market situation 70% YoY traffic growth Expansion opportunities e.g. IoT, fixed wireless, mission critical communication, 5G Spectrum allocations more than doubling for LTE/5G 50% of world population have no access to LTE Flat service provider revenues - challenges to monetize data RAN equipment mar
Slide 44: Customer focus
Customer focus We make our customers uniquely competitive through our highly scalable modular platforms offering lowest cost per byte with the best user experience Our customer promise We deliver made to order solutions in less than half the time of industry standards through innovation, speed and s
Slide 45: Strategic priorities
Strategic priorities Invest in technology and cost leadership Increased R&D investments to accelerate key radio platforms, products and serviceability Rapid product introduction, Service delivery efficiency and streamlining Improve competitiveness for selective market expansion Differentiation throu
Slide 46: Strategy execution work streams
Strategy execution WORK STREAMS Invest in technology and › World class R&D cost leadership › Competitive product portfolio › Supply excellence Improve competitiveness for › Service delivery excellence selective market expansion Selective market expansion and installed base monetization Commercial an
Slide 47: Execution progress
Execution Progress Ambition 2020 Progress Q3 2017 Development lead time reduction 15% of target World class R&D Capability build up ~1,2001 Competitive Ericsson Radio System 100%2 55% YTD product portfolio Supply Supply cost reduction 30% 10% YTD excellence Service delivery Service delivery cost red
Slide 48: Cost and technology differentiation
Cost and technology differentiation TCO – cost per byte Smooth evolution – capacity growth Enable new business performance 4G Foundation and serviceability 5G Industrial IoT Mission Critical IoT Distributed Cloud - Network Slicing 5G Ready Radio - Massive MIMO Gigabit LTE Cat-M1 & NB-IoT/Massive IoT
Slide 49: Market
Market Europe LTE roll out continue North America 5G industrial experimentation and trials 5G on everyone's agenda Enhanced MBB in focus and fixed wireless being explored China & North East Asia Strong 5G focus driven by Industrial Internet Olympics becoming showcases South America Recover from chal
Slide 50: Summary
Summary
Slide 51: Financial ambition
Financial ambition New segment Networks R&D investments: Illustrative › Accelerate key radio platforms, products and serviceability › Rapid product introduction, service delivery efficiency and streamlining Cost of sales efficiencies: › Release and ramp-up new generations of radio platforms › Improv
Slide 52: Key takeaways
Key takeawaYs › RAN market in decline - expected to decline medium term and flatten out by 2020 Challenging › Our market share has declined starting point › Our profitability has been impacted by lack of competitiveness and price pressure › Invest in R&D for Technology and cost leadership Strategic
Slide 53: Digital Services
Digital Services Capital markets day 2017 NOVEMBER 7-8, 2017 NEW YORK Ericsson Internal | 2017-10-06 | Page 1
Slide 54: Ulf Ewaldsson
ULF Ewaldsson SVP & Head of Business Area Digital Services Ericsson Internal | 2017-10-06 | Page 2
Slide 55: Key takeaways
Key Takeaways Our customers’ priorities 1 Digital engagements, automated operations, programmable networks Digital engagements, automated operations, programmable networks Strategy and Strategy and Ambition ambition 2 To be the leading software company in telecom To be the leading software company i
Slide 56: Key takeaways
Key Takeaways Our customers’ priorities 1 Digital engagements, automated operations, programmable networks Digital engagements, automated operations, programmable networks Strategy and Strategy and Ambition ambition 2 To be the leading software company in telecom To be the leading software company i
Slide 57: Service provider needs
Service provider needs • Need for cost out Automated operations • Demand for speed Reduced TCO • Cater for legacy while transforming to 5G • Evolve network for future needs & use cases Programmable networks • Extend service provider capabilities into enterprises New offerings, faster TTM • Customer
Slide 58: Digital engagement
Digital engagement T-Mobile USA Kyivstar, Ukraine – Part of Veon – multi-country T-Mobile Czech Republic Tier 1 European Carrier Group – multi-country Entel – Chile and Peru Nextel Brazil VNPT, Vietnam Major South/Central American Carrier– multi- Tier 1 Carrier UAE country Zain KSA Viva Dominican Re
Slide 59: Automated operations and programmable networks
Automated operations and programmable networks Swisscom 32 Vodafone – multi-country 34 Telefónica – multi-country Telefónica – multi-country Softbank NTT DoCoMo 22 Telstra Vodafone Hutchison 4 Australia Service providers virtualizing core networks and aiming to automate their operations Ericsson Int
Slide 60: Ericsson Digital Services software & services
Ericsson Digital Services Digital engagement Automated operations Programmable networks Software & Services Communication BSS OSS Packet Core Services ADM and (~20%) (~20%) (~25%) (~15%) Consulting NFV and Cloud Infrastructure (~10%) (~10%) GTM Products / components Solutions as a Service Product Ma
Slide 61: Integral to Ericsson and the 5G network
Integral to Ericsson & the 5G network Devices Clouds OTT Applications Management & Monetization Network Slices Mobile Access, Mobility, Network applications Fixed Cloud Infrastructure Transport Communication BSS OSS Packet Core Solution Areas Services ADM and Consulting NFV and Cloud Infrastructure
Slide 62: Key takeaways
Key Takeaways Our customers’ priorities 1 Digital engagements, automated operations, programmable networks Digital engagements, automated operations, programmable networks Strategy and Strategy and Ambition ambition 2 To be the leading software company in telecom To be the leading software company i
Slide 63: Our ambition
Our ambition 1. Become the telecom industry’s leading software company Digitalize service 2. Lead transformation of service providers to providers through cloud-native architecture programmable networks, 3. Software-led approach with industrialized automated operations and service delivery digital e
Slide 64: Digital services – strategy shift
Digital services - Strategy shift Previous strategy: New focused strategy: Service-led, separate products & services, Software-led, industrialized services, topline driven profitability focused › Service-led › Software-led Go to market › Service providers + industries & societies › Service providers
Slide 65: Key takeaways
Key Takeaways Our customers’ priorities 1 Digital engagements, automated operations, programmable networks Digital engagements, automated operations, programmable networks Strategy and Strategy and Ambition ambition 2 To be the leading software company in telecom To be the leading software company i
Slide 66: Turnaround priorities
Turnaround priorities Stability Profitability Growth 2017 – 2018 2018 – 2019 • Fix product roadmaps • Lower topline due to strategy shift • Address challenging contracts • Improved gross margins • Cost reductions initiated • Scale software part of the business • Increase level of pre-integration Eri
Slide 67: Turnaround approach
Turnaround approach Fix Exit non-strategic Improve Secure critical projects contracts backlog “new” business + + + Operationally and Identify contracts not Project/order backlog New orders per new financially challenged aligned with focused based on old strategy focused strategy Targeted turnaround
Slide 68: Financial ambition
Financial ambition Optimize service delivery Illustrative Target 2020 1. Increased off-shoring Sales SEK 42-44 b. 2. Improved project performance Low single digit op marg.2 3. Automation & Pre-integration 2017 09 rolling 4Q Reduce Opex 1. SG&A optimization 2020 2. Shift from legacy to new portfolio
Slide 69: Optimizing service delivery
Optimizing service delivery Product development Service delivery Customer projects Example: VoLTE Fast Commercial Launch Off-shore • Pre-integrated solution 2016 On-shore R&D • Integrated to Mobile and Packet Core • Easy expansion of subs Scoping Scoping Product Development Service Delivery Customer
Slide 70: Digital catalog for focused portfolio
digital catalog for focused portfolio STOREFRONT Flagship products Revenue Manager – “Boost revenue with digital BSS” Expert Analytics – “Automate your network” 5G Core – “Prepare your core network” VoLTE – “Evolve communication services” NFVi – “Build your Cloud and NFV infrastructure” ADM – “Trans
Slide 71: Turnaround governance
Turnaround governance DEVELOP SELL DELIVER Products on time Software-led sales Operational performance and with quality Key product releases on track Portfolio shift Service delivery efficiency Recurrent revenues Improve product quality Accelerate software deployment Critical project turnaround Tech
Slide 72: Progress examples
Progress examples DEVELOP SELL DELIVER Key product releases on track Recurrent revenues Service delivery efficiency Flagship products released on time Recurring % of software sales Run-rate spend for service delivery Product Releases in Q3-Q4 2017 Revenue Manager RM 17B RM 18A Expert Analytics EEA 1
Slide 73: Key takeaways
Key Takeaways Our customers’ priorities 1 Digital engagements, automated operations, programmable networks Digital engagements, automated operations, programmable networks Strategy and Strategy and Ambition ambition 2 To be the leading software company in telecom To be the leading software company i
Slide 74: Managed Services
Managed Services Capital markets day 2017 NOVEMBER 7-8, 2017 NEW YORK Ericsson Internal | 2017-10-06 | Page 1
Slide 75: Peter Laurin
Peter Laurin SVP & Head of Managed Services Ericsson Internal | 2017-10-06 | Page 2
Slide 76: Key takeaways
Key takeaways Strategic fit An integral part of Ericsson’s total offering that helps our customers 1 to become more efficient and improve their performance Turnaround The ongoing contract review, new stricter sales directives and 2 service delivery efficiency program will lead to a profitable bu
Slide 77: Business area Managed Services
Business area Managed Services SEK ~25 b Net Sales1 >24,000 Employees >100 Countries Networks Managed Services IT Managed Services Network Design & Optimization Field Services Network Operations Centers Applications and Optimizing networks, services Data Center Operations and user experience 12017 0
Slide 78: Strategic fit for Ericsson
Strategic fit for ericsson Enhanced Integral part of Ericsson’s current and future portfolio (5G, IoT, Cloud) portfolio Customer Delivering improved network performance and cost savings in close partnership relationship Recurrent High predictability with long-term contracts (3–7 years) and high rene
Slide 79: Our journey and challenge
Our journey and Challenge Previous Strategy • Growth focus >1 billion • Broad portfolio offered in most markets subscribers • Developing capabilities in all geographies France Telecom (multi-country) Liberty Global (multi-country) Bharti Sprint Airtel mega deal Telenor Vodafone Optimi Myanmar expans
Slide 80: Strategic priorities
Strategic priorities 1 Refocus offerings and business 2 Contract review Profitability over growth 3 Execute cost-efficiency initiatives 4 Build world leadership in automation and analytics Ericsson Internal | 2017-10-06 | Page 7
Slide 81: Strategic priorities
Strategic Priorities • 1 Refocus offerings Limit certain markets and offer no stand-alone field services and business • New stricter sales directives 2 Contract review • 42 contracts (total >300) to either exit, renegotiate or transform 3 • Streamline delivery and G&A organizations Execute cost-effi
Slide 82: Contract review
Contract review 42 › 42 contracts to be exited, renegotiated or transformed, ambition to complete by 2019 › Selection based on profitability and portfolio/market strategy › 13 contracts addressed to date with SEK 0.4 b. annualized 13 profit improvement Total contracts Completed contracts Each contra
Slide 83: Sales development
Sales Development Illustrative Target Contract review SEK b. 20-22 › Contract exits within the contract review program › Limit certain markets and offerings SEK New business Operating Margin ~25 b.1 › New stricter sales directives › Focus on full-scope Network Managed Services › Network Design & Opt
Slide 84: Financial ambition
Financial ambition Illustrative Target Contract review Op marg 4-6%2 › Addressing 42 contracts as part of ongoing review › Strictly monitor performance of all contracts Delivery efficiencies and automation › Addressed inefficiencies in delivery organization Op marg -4 to -6%1 › Continuously improve
Slide 85: Summary
Summary 1 Refocus offerings and business Profitability over growth 2 Contract review Targets for 2020 › Operating margin 4-6%1 3 Execute cost-efficiency initiatives › Net sales SEK 20-22 b. Attractive return on capital 4 Build world leadership in automation and analytics 2Excluding restructuring cha
Slide 86: The future of managed services
The future of managed services COMPLEXITY • Increased complexity Tomorrow • 5G & SDN/NFV networks • New opportunities • Critical / Massive IoT • End-user-centric KPIs • Automation and analytics Today • Legacy mobile and fixed networks • Network-centric KPIs Enhanced Robotic Process Machine Artificia
Slide 87: Cash flow and balance sheet, financial resilience
Cash flow and balance sheet Financial resilience Capital markets day 2017 NOVEMBER 7-8, 2017 NEW YORK Ericsson Internal | 2017-10-06 | Page 1
Slide 88: Carl Mellander, CFO
Carl Mellander CFO Ericsson Internal | 2017-10-06 | Page 2
Slide 89: Securing financial resilience
Securing Financial resilience Operational dimension Financial dimension Operating income Capital structure Free cash flow Ericsson Internal | 2017-10-06 | Page 3
Slide 90: Securing financial resilience
Securing Financial resilience Operational dimension Financial dimension Operating income Capital structure Free cash flow Ericsson Internal | 2017-10-06 | Page 4
Slide 91: Working capital efficiency
Working capital efficiency Working capital days 2016 and ambition Changing business mix and new portfolio reduce capital requirement Inventory Payable Sales outstanding Collection and credit management 69 < 65 Release cash through sourcing and supply chain management 95 < 90 Balance sheet accountabi
Slide 92: Free cash flow and usage of cash
Free Cash flow and usage of cash Cash flow and usage 2013 to Q3 2017 (SEK b.) Capex PP&E & development 69 › ~3% of net sales per annum 2013-2016 65 5 › Planning assumption going forward ~2% › Limited capitalization of development 36 46 expected Acquisitions and divestments 18 16 › M&A* on average SE
Slide 93: Securing financial resilience
Securing Financial resilience Operational dimension Financial dimension Operating income Capital structure Free cash flow Ericsson Internal | 2017-10-06 | Page 7
Slide 94: Debt maturity profile
Debt maturity profile Debt maturity profile (SEK b.) 8 Refinanced 2017 Well-diversified debt maturity profile 7 6 Successfully refinanced the EUR 2017 maturity in Q217 and 5 5 issued one additional EUR 500 m. bond at attractive terms Good access to the debt capital markets 1 0 2017 2018 2019 2020 20
Slide 95: Credit rating
Credit rating Credit rating history 2002-2017 Recent downgrade to BB+ and Ba2 by S&P and Moody's S&P Fitch Investment grade (Baa3/BBB-) Moody’s, respectively A1/A+ 12 A3/A- 10 Drivers for downgrades according to agencies: Baa2/BBB • Declining RAN market 8 • Earnings level Ba1/BB+ 6 • Timing of turna
Slide 96: EPS and dividend development
Eps and dividend development EPS and dividend (SEK/share) EPS Dividend Equity ratio 50% 52% 50% 49% 4.17 Dividend policy takes into account last year’s 3.72 3.57 3.40 3.70 earnings and balance sheet structure, as well 3.00 as coming years’ business plans and economic development 1.00 0.52 2013 2014
Slide 97: Capital structure strategy
Capital structure strategy 2020 • Safeguard liquidity position and provide • Optimize the capital structure based on flexibility to invest in R&D and execution improved business performance • Several actions taken 2017 to preserve • Restore Investment grade rating capital and establish strong cash p
Slide 98: Financial ambition
Financial ambition Operational dimension Financial dimension 2017 Q3 Target2 Ambition 2017 Q3 rolling 4Q >10% (2020) Op margin1 2.9% Equity ratio >40% 43% >12% (>2020) >Pension Net cash SEK 24.1 b. liability Positive (<2020) Free cash flow SEK 9 b. Strong (>2020) Cash conversion3 >70% n/a Credit rat
Slide 99: CFO focus areas
CFO focus areas Secure resilience Improve visibility and accountability Drive focus on profit and cash Ericsson Internal | 2017-10-06 | Page 13
Slide 100: Media and emerging business
Media and emerging business Capital markets day 2017 NOVEMBER 7-8, 2017 NEW YORK Ericsson Internal | 2017-10-06 | Page 1
Slide 101: Börje Ekholm, CEO
Börje Ekholm CEO Ericsson Internal | 2017-10-06 | Page 2
Slide 102: Update on Media business review
Update on MEDIA Business review New segment Other Broadcast Emerging Media Solutions iconectiv Services Business Strategic priorities › Implement cost and capital efficiency improvements – good progress › Maintain current strong traction with existing and potential customers – continued positive fee
Slide 103: Emerging Business and iconectiv
Emerging Business and iconectiv New segment Other Broadcast Emerging Media Solutions Services Business iconectiv Example investment areas Internet of › Connectivity services and platforms to support service provider growth in IoT Things › Our Device Connection Platform now has 16 m. connections cove
Slide 104: Technology leadership innovation
Technology leadership innovation Capital markets day 2017 NOVEMBER 7-8, 2017 NEW YORK Ericsson Internal | 2017-10-06 | Page 1
Slide 105: Erik Ekudden, CTO
CRIK EXKUDDEN CTO
Slide 106: Technology waves bring disruption
Technology waves bring disruption But also enable new capabilities Cognitive Technologies Machine Learning Artificial Intelligence Automated Life Cycle Management Real-time data stream analytics and insight execution Automation XaaS Dev ops Global access Flexible spectrum agnostic mobility assignmen
Slide 107: Technology leadership focus
Technology Leadership focus Innovation in network platform and new business IoT platform with wide area access Application cloud technologies for global deployment with and cloud for industrial Internet 2-sided business models Technologies for new business 5G radio and core Management, control, secu
Slide 108: The network platform
The Network PlatFORM Increased relevance for other industries Mobility & Cloud & Analytics & Applications Connectivity Data Automation & Services Devices/IoT Enterprise IT Cloud 1000X 5X Mobile Data Volumes 10X Lower Latency Battery Life 10-100X 10-100X End-user Data Rates Connected Devices A horizo
Slide 109: Technologies for a new industry
TEchnologies for A new Industry Leading the industry with strong R&D 45 academia & research collaborations for 5G Building the foundation for a new industry to add 34 % growth potential in operators revenues by 2026 Contributions to 3GPP in 2016 were higher than any other company Leading and guiding
Slide 110: Ericsson UDN
ERICSSON UDN North East Asia Europe 65 CONTENT PROVIDERS 58 North America SERVICE South East Asia, PROVIDERS Oceania & India Latin America Middle East & Africa Ericsson Internal | 2017-10-06 | Page 7
Slide 111: 5G
5G Capital markets day 2017 NOVEMBER 7-8, 2017 NEW YORK Ericsson Internal | 2017-10-06 | Page 1
Slide 112: Nishant Batra
Nishant batra HEAD OF PRODUCT AREA NETWORK INFRASTRUCTURE Ericsson Internal | 2017-10-06 | Page 2
Slide 113: The G's: from voice to IoT
The G’s: from voice to iot 2G 3G 4G 5G Voice Browsing Media/Video Industrial IoT 1990 2000 2010 2020 Ericsson Internal | 2017-10-06 | Page 3
Slide 114: 5G expands the addressable market
5G expands the addressable market Offers new revenue streams Massive Machine Critical Machine Type Communication Type Communication INDUSTRIAL TRAFFIC SAFETY REMOTE SMART METER TRACKING FLEET APPLICATIONS & CONTROL MANUFACTURING MANAGEMENT Enhanced Mobile Broadband Fixed Wireless Access VR/AR 4K/8K
Slide 115: 5G expands the addressable market
5G expands the addressable market Offers new revenue streams Digitalization driven Massive Machine Critical Machine Type Communication Type Communication INDUSTRIAL TRAFFIC SAFETY REMOTE SMART METER TRACKING FLEET APPLICATIONS & CONTROL MANUFACTURING MANAGEMENT Enhanced Mobile Broadband Fixed Wirele
Slide 116: 5G high level time plan
5G HIGH LEVEL time plan 2017 2018 2019 2020 1H 2H 1H 2H 1H 2H 1H 2H 5G Trial networks 5G Service enablers 5G New architecture 5G Commercial - First movers Commercial for LTE Advanced Pro Commercial 5G Devices First mass roll-outs with Trial versions First versions (3GPP) (3GPP) large device eco syst
Slide 117: The architecture and 5G
The architecture and 5G Devices Public clouds OTT applications Management & Monetization Access, Mobility, Network applications Cloud infrastructure Transport Energy End to end performance security Ericsson Internal | 2017-10-06 | Page 7
Slide 118: The architecture and 5G
The architecture and 5G Devices Public clouds OTT applications Next generation Management & Monetization Network slices Distributed cloud Access, Mobility, New & Enhanced network applications 5G Access Cloud infrastructure Upgraded transport Energy End to end performance security Ericsson Internal |
Slide 119: Migration to 5G – key milestones
Migration to 5G – key milestones Existing use cases Evolved use cases New use cases Densification Establish robust 5G as main using 5G as 4G platform stream capacity layer Initial 5G 4G and 5G interconnectivity standalone deployments RBS 6000 2016 2020 RBS 2000/3000 Ericsson Internal | 2017-10-06 |
Slide 120: 5G spectrum and introduction
5G Spectrum and introduction 5G 4G High 3G Band 2G Spectrum combination example Medium Band Low Band 2017 2018 2019 2020 2021 2022 Ericsson Internal | 2017-10-06 | Page 10 This slide contains forward-looking statements, actual result may be materially different
Slide 121: 5G portfolio and deployment
5g portfolio and Deployment 5G ENABLED CORE NEW CAPABILITIES TRANSPORT ERICSSON RADIO ‒ Network slicing SYSTEM ‒ Distributed cloud Ericsson Internal | 2017-10-06 | Page 11
Slide 122: Ericsson 5G momentum
Ericsson 5g momentum 36 service provider MoUs 22 industry partners 45 university and institute collaborations Ericsson Internal | 2017-10-06 | Page 12 As of June 2017
Slide 123: Ericsson well positioned in 5G
Grow and enable Leader in new business standardization Ericsson well positioned in 5G 5G ready portfolio Industry, lead customer and e2e university collaborations Ericsson Internal | 2017-10-06 | Page 13
Slide 124: Closing
Closing Ericsson Internal | 2017-10-06 | Page 1
Slide 125: Börje Ekholm, CEO
Börje Ekholm CEO Ericsson Internal | 2017-10-06 | Page 2
Slide 126: Near-term focus on profitability
Near-term focus on profitability Example 2017 2018 2019 2020 focus areas Simplified structure Accelerated cost out – SEK 10 b. STABILIZE Portfolio review & SIMPLIFY Contract review Digital Services turnaround Invest in R&D for technology and cost leadership INVEST Selective market expansion in Netwo
Slide 127: Long-term operating margin target
long-term operating margin target Drivers to reach >12% operating margin >12% › 5G ramp-up and operators expanding into new revenue streams › Scaling the software-led business in >10% Digital Services 6 % › Automation and analytics offering new opportunities in Managed Services › Further improvement
Slide 128: Summary
Summary Focused business › Enabling the full value of connectivity for service providers strategy › Increasing R&D in Networks for technology and cost leadership › Turning around and shifting to software-led solutions in Digital Services › Contract review in Managed Services and investing in automat
Slide 129: Media and emerging business
Media and emerging business Capital markets day 2017 NOVEMBER 7-8, 2017 NEW YORK Ericsson Internal | 2017-10-06 | Page 1
Slide 130: Börje Ekholm, CEO
Börje Ekholm CEO Ericsson Internal | 2017-10-06 | Page 2
Slide 131: Update on Media business review
Update on MEDIA Business review New segment Other Broadcast Emerging Media Solutions iconectiv Services Business Strategic priorities › Implement cost and capital efficiency improvements – good progress › Maintain current strong traction with existing and potential customers – continued positive fee
Slide 132: Emerging Business and iconectiv
Emerging Business and iconectiv New segment Other Broadcast Emerging Media Solutions Services Business iconectiv Example investment areas Internet of › Connectivity services and platforms to support service provider growth in IoT Things › Our Device Connection Platform now has 16 m. connections cove