Telefonaktiebolaget LM Ericsson Class A · OMXSTO:ERIC_A
Telefonaktiebolaget LM Ericsson Class A — Ericsson — Investor Day (2014)
39 slides from Telefonaktiebolaget LM Ericsson Class A's investor day presentation, 2014
Slide 1: Telecom Services
TELECOM SERVICES Head of Global Services, Magnus Mandersson W
Slide 2: Strategic Direction 2014
W STRATEGIC DIRECTION 2014 Future/ = i 0 TO Segment Global Services , includes Telecom Services Networks fosapse as well as targeted areas TV & Media Radio, Core man & Transmission Telecom eee Services Irgusty,e @ Excel in core business Establish leadership Expand business in in targeted areas new a
Slide 3: The Services Journey
W THE SERVICES JOURNEY Technology Technology & Leadership Services Leadership 2003 2013 Leading ICT People 8,000 64,000 services provider in Global Delivery 1% 33% the Networked Society Managed Subs 50 million > 1 billion Growing demand for services Subscriptions 1.4b 6.6 b 5 . Yahoo Facebook Instag
Slide 4: Professional Services Evolution
\ PROFESSIONAL SERVICES EVOLUTION 4 Industry & Society a Jaa in Services Pau areas ~ Operator IT —_o Managed Services Net sales tripled in 10 years as new services were added a BBEi {| — Nan F —_— Net sal Systems Integration | a_i eel _ _ ig |T Managed Services (SEK b.) ze | se Managed Services Netw
Slide 5: Telecom Services Market
W TELECOM SERVICES MARKET USD b. Market share 2013 295-309 258-272 Ericsson 243-257 Operator internal Pea services spend -" Local providers Key providers CAGR 2013-2017 _| cee Current addressed market (Operator external services spend) 5% Consulting, Systems Integration & Customer Support Soy, a Man
Slide 6: Global Services Strategy
GLOBAL SERVICES STRATEGY Os Ea @ & Build and leverage =) Industry & Society, Broadcast & Media Services Grow and scale Consulting, Systems Integration, IT Managed Services “y Extend and excel in core business Network Design & Optimization, Network Rollout, Customer Support, Network Managed Services
Slide 7: Network Rollout
W NETWORK ROLLOUT Network Rollout » Lower-margin business » Network market share prioritized over NRO profitability in certain modernization projects DESIGN INTEGRATE ao oS » On track towards break-even result » Implementing sustainable improvements >300k sites annually Project fulfillment Sustainab
Slide 8: Network Related Services
W NETWORK RELATED SERVICES Network Design & Optimization » Large, growing installed base Customer Support » Strong growth with healthy margins SUPPORT OPTIMIZE » Demand driven by MBB success & & » Voice- to app-optimization increases scope >2.5M sites Terminal RF RAN Core Internet / IMS GSM, CDMA, i
Slide 9: Managed Services
MANAGED SE Evolving and growing Customer needs evolving continuously: MANAGED » Field Operations, Network Operations, CUS eile Eeeulanee Optimization > Focus on network performance and customer experience > IT Managed Services MANAGED Service Performance Market leadership MANAGED > 300 contracts Net
Slide 10: IT Services for Operators
W IT SERVICES FOR OPERATORS Need for business transformation Services-driven business Large, growing market Solid market position Large-scale capabilities * 16,000 employees, 1,500 projects/year Expansion potential * Managed Services, adjacent industries ca) (Gl) £& Multi-vendor transformation acros
Slide 11: Moving into New Markets
MOVING INTO NEW MARKETS Broadcast & Media Services Industry & Society » Media industry changing due to » Adjacent industries seek ICT ICT transformation transformation > #1 position established » New business line established » Based on technology, experience » Based on existing offering » Managed S
Slide 12: Global Experience and Scale
W GLOBAL EXPERIENCE AND SCALE » Global Service Centers for global delivery » Combined global and local resources » 65,000 professionals and 20,000 sourced > Pioneering in large-scale service delivery — Centralize for scale — Standardize for efficient and predictable delivery - Automate for speed and
Slide 13: Global Services Direction
GLOBAL SERVICES DIRECTION W Preferred ICT services partner
Slide 14: Radio, Core & Transmission
RADIO, CORE & TRANSMISSION Head of Networks, Johan Wibergh W
Slide 15: Networks following the plan
Networks following the plan WW
Slide 16: Networks Following the Plan
— /Q Ee I Fs NETWORKS FOLLOWING THE PLAN Z Investor Day 2012 NETWORKS PRIORITIES 2 Y >» Mobile leadership position strengthened Pl cera, }~CONCLUDING REMARKS zZ Samal FOCUS GOING FORWARD Investor Day 2013 > Cloud, Sustainable double-digit margin Demonstrate the voice to data growth potential (| Main
Slide 17: Concluding Remarks
CONCLUDING REMARKS FOCUS GOING FORWARD W 2014 Follow-up VI MV V V VI 5 last quarters’ Networks margin 210% Frontrunners grow faster than peers Small Cell portfolio now complete, 60 Radio Dot trials requested New SW model introduced New Segment structure to address opportunity
Slide 18: Segment Networks financial situation and outlook
Segment Networks financial situation and outlook WW
Slide 19: Margin Journey Continues
MARGIN JOURNEY CONTINUES SUSTAINABLE DOUBLE DIGIT MARGIN REMAIN IN FOCUS W GETTING BACK TO DOUBLE DIGIT MARGIN 2 Estimated margin impact OM Q3 2012: 5% Key contributors - some examples > Monetize on footprint Commercial Excellence Operational Effectiveness Cost Adaptations Risks & uncertainties Doub
Slide 20: Market Outlook
MARKET OUTLOOK NETWORKS — KEY SEGMENTS W CAGR 2013-2017 Market share 2013 Key segments 25%* USD b. 69-75 Key segments 3-5%** _™ ° 61 + Virtualization & VoLTE drivers going forward 63 59 + Mobile switching decline levelling out IP&Transport Video traffic growth setting the scene 3-5% SDN a market in
Slide 21: Excel in core business
Excel in core business WW
Slide 22: Excel in Core Business
EXCEL IN CORE BUSINESS Mobile * Underlying market fundamentals remain market growth + Network performance brings financial performance to operators Maintain leadership position in radio & core networks with best Performance performing networks end-to-end leadership Continue to improve efficiency in
Slide 23: Market Growth Drivers: Smartphone & Traffic Uptake
= \ARKET GROWTH DRIVERS: ZS SMARTPHONE & TRAFFIC UPTAKE Smartphone Mobile traffic per active Total monthly subscriptions subscription per month smartphone traffic » More smartphone Tatal 64 A subscriptions billion BBE 17 EB » More traffic per smartphone 900 MB 2014 2020 2014 2020 2014 2020 PAs > Vid
Slide 24: Network Performance Brings Financial Performance
BNETWORK PERFORMANCE BRINGS FINANCIAL PERFORMANCE J.D. Power and Associates Reports: Global study of value of performance: “There is a “Wireless customers who experience faster and more direct transitive relationship between capital investment, consistent network speeds spend considerably more netwo
Slide 25: Our Performance Leadership
OUR PERFORMANCE LEADERSHIP World’s most competitive Radio Leader in Core Networks portfolio > #1 in MSS \ > #1 in EPC vu | hal BEB.I > #1 in UDM .e > #1 in VoLTE/IMS #1 in 2G, 3G & 4G and selected by the Supporting a majority of the world’s 10 largest LTE operators world’s first commercial VoLTE net
Slide 26: Radio Dot System
E) RADIO DOT SYSTEM > Unique portfolio > 15 trials ongoing, 60 trials requested >» Market potential remains W
Slide 27: Target Customers
rt) JARGET CUSTOMERS CELERATE GO TO MARKET W P Operaiors canada all players ‘g ir their specific | } | | rch nallenges and i increase the value of their one Tf 2 = |
Slide 28: Evolution Towards 2020
W 8 EVOLUTION TOWARDS 2020 Cj 1000x GOS SR x Mobile data xe Lower latency 10x-100x End-user data rates Ht}, Battery life for low power device: e®
Slide 29: Focus going forward
Focus going forward WW
Slide 30: Common Questions Addressed
COMMON QUESTIONS ADDRESSED s the mobile market a growth market? Will VoLTE happen globally? W
Slide 31: Focus Going Forward
FOCUS GOING FORWARD » Sustainable double digit margin through commercial excellence, operational efficiency and cost control » Global deployment of Ericsson SW model » Extend radio leadership and capture the indoor opportunity » Continue to demonstrate the App Coverage opportunity
Slide 32: Excel in Core Business - CFO
EXCEL IN CORE BUSINESS CFO, Jan Frykhammar W
Slide 33: Profit Improvement
PROFIT IMPROVEMENT ILLUSTRATIVE OPERATING INCOME, SEK b. Efficiency improvements W Build success in targeted areas Monetize footprint D 2013 actual Cost © Telefonaktiebolaget LM Ericsson | Capital Markets Day 2014 | Page 2 2017 Sales This slide contains forward-looking statements. Actual result may
Slide 34: Strong Core Sales
Strong Core sales Nortel Acquisition 37% Modernization contracts in Europe DEVELOPMENT W Samsung IPR agreement Capacity 3G and 4G 36% 1 billion subscribers managed by Ericsson Major coverage buildouts China LTE deployments start 1 2010 2011 Gross margin © Telefonaktiebolaget LM Ericsson | Capital Ma
Slide 35: Mobile Infrastructure
W MOBILE INFRASTRUCTURE Technology coverage Coverage (initial phase) > Break-in and green field >» Open bidding » More hardware and rollout services >» Dilutive to company gross margin Higher capital tied-up Network Rollout lag Network sales ~2-3 quarters WCDMA/HSPA 2013 2020 2013 2020 Page 4 This m
Slide 36: Excel in Core: Network Rollout
EXCEL IN CORE NETWORK ROLLOUT W Network rollou rollout - EED - >300k sites annually » Network rollout - NRO - lower margin business — Network market share prioritized over NRO-profitability in certain modernization projects - On track towards break even result - Implementing sustainable improvements
Slide 37: Business Model: Managed Services
BUSINESS MODEL MANAGED SERVICE A. Transition B. Transformation C. Optimization and upselling W Ericsson Managed Services global footprint Current contract mix ~25% ~75% \ ( iT Years Profitability 15 >100 1D: >300 Industrialize years countries subscribers contracts and evolve Optimize and shorten tra
Slide 38: Key Takeaways
KEY TAKEAWAYS © Telet Gross Margin Development jaktiebolaget LM Footprint son | Capital Markets Day 2014 | Page 7 > v v v W Gross margin improvement driven by business mix and SW share Additional opportunities in mobile infrastructure driven by continued 4G and 3G demand Strong global footprint in m
Slide 39: Ericsson
ERICSSON