2015 Annual Report

"Our ambition is to lead the market transformation as the new ict market evolves"

Hans Vestberg,

President and CEO

Ericsson in Brief

140 years

Ericsson has been at the forefront of communications technology despite ever-changing conditions and major technological disruptions.

Past 15 years

Hardware Arrow Software plus Services

Reflecting the ongoing transformation of the communications technology and services market, the business has evolved from being hardware-centric to becoming increasingly software and services-centric.



sales derive from software and services. The company mission is to lead this transformation through mobility.

Technology leadership



35 billion

Annual investments in R&D (SEK)

Services leadership

1 billion

subscribers served by Ericsson


Services Professionals

Scale and skills







Stock Market

The Ericsson share is listed on

  • Nasdaq Stockholm
  • Nasdaq New York
Net sales

246.9SEK billion

increase 18.9

Operating income

21.8SEK billion

increase 5.0

Cash flow

20.6SEK billion

increase 1.4

Business Structure

Strategic Structure

Strategic Direction

Excel in core business

Radio, Core and Transmission and Telecom Services

Establish leadership in targeted areas

IP Networks, Cloud, OSS and BSS, TV and Media and Industry and Society

Expand in new areas

with future possibilities and growth

Go to market

The solutions-based go-to-market approach is built on close cooperation between segments and regions. Ericsson has ten geographical regions, and one region Other, which vary in size and where the maturity of the operators and the markets differ.

The relationship between the regions and the segments is such that the segments develop the products and the regions cultivate relationship with its customers.

There are six engagement practices designed to develop solutions addressing typical customer needs. The engagement practices share their solutions to build business expertise and global scale and skill.

Research projects typically have at least a 10-year horizon, have a separate organization, and development is aligned with the segments. Shorter term development decisions are made within the segments.

Sales per region (2015)

Reporting Structure



123.7SEK billion  increase 6.2

Global Services

108.0SEK billion  increase 10.3

Support Solutions

15.0SEK billion   increase2.3

Operating Margin


10%  increase 2

Global Services

8%  increase 2

Support Solutions

10%   increase10

Towards the Networked Society

Our ambition is to lead the market transfor-mation to secure that we continue to be rele-vant to existing and new customers as the new ICT market evolves. Our core strategy remains unchanged and builds on a combination of excelling in our current core business and to establish leadership in targeted growth areas, combined with best-in-class margins and strong operating cash flow. In doing so, we will be able to create shareholder value at the same time as we generate value for our customers, employees and for society at large.

We are living in a truly remarkable time. The pace of change in society, in our industry and within Ericsson has never been faster. The transformation to the Networked Society, where anything that benefits from being con-nected will be connected, is pushed forward at speed with 5G, Internet of Things (IoT) and cloud as the key drivers.

With this introduction, let me continue by giving you some examples of strategic events in 2015 that reflect our ambitions and strategic direction.

Transforming the user experience

The year started with the Consumer Electronics Show (CES) in Las Vegas in January. Among the things that we showcased at CES, was how the Networked Society will redefine entertainment.

We also demonstrated how connectivity transforms the driving experience and how industries and cities can benefit from a society where everything that can be connec-ted will be connected. As an industry first we launched the LTE License Assisted Access that increases mobile data speeds on smart phones and other devices by using the com bination of licensed and unlicensed frequency bands.

January 6-9

Strengthening our offerings

Mobile World Congress (MWC) in Barcelona in February–March is the event where the entire global mobile industry comes together every year. MWC is an important platform for us to bring new products, services and solu-tions to market.

In 2015 we had seven import-ant launches, including the Ericsson HDS 8000 (Hyperscale Data center System) and the new Ericsson Radio System. HDS 8000 is the first product in the world to include Intel Rack Scale Architecture and is a result of a long-term rela-tionship between Intel and Ericsson. Ericsson Radio System is a completely new approach to building radio networks. I believe these recent launches clearly strengthen our offering and pave the way for the strategic direction.

March 2-5

Company Transformation

Ericsson has a structured talent planning process and runs leadership programs at all levels, which is crucial in securing Ericsson’s leading position. In June, when we gathered 250 top managers to our annual two day Lead-ership Summit, we focused on strategy and leadership. This also includes talent manage-ment or how to attract the best, to develop the best, and to establish a high-performing organi-zation of engaged employees. Reflecting the transformation, almost 15,000 employees joined Ericsson and close to 17,000 employees left the Company in 2015.

June 7-9

Responsible Leadership

In September I was part of a historic event, when world leaders from 193 countries gath-ered in New York City at the United Nations General Assembly to adopt 17 Sustainable Development Goals, with the ambition to end poverty, protect the planet and ensure prosper-ity for all by 2030.

At Ericsson, I am proud that my whole Global Leadership Team has adopted a goal and my personal goal is number 17, “Partnerships for the goals”. At Ericsson, sus-tainability and corporate responsibility are part of our business and one of the pillars in our strategy. We continue to lead the industry in working with providing solutions to sustainable development challenges, while integrating responsible business practices into our process to ensure we are a trusted partner to our stakeholders.

We are committed to continuous improvements against the triple bottom line principles of responsible financial and environmental performance and socio- economic development, and to being a responsible and relevant driver of positive change in the networked society. This includes activities such as connecting the unconnected as well as scaling up access to education, reducing energy and carbon dioxide emissions, and contributing to sustain-able urbanization, financial inclusion, gender equality, peace-building and humanitarian response.

September 11-15

Filling the gaps

The overall ambitions of our partnering and M&A activities are to expand market footprint, strengthen competitive assets, fill portfolio gaps, and, above all, strengthen the ability to create value and to accelerate profitable growth. After an intensive 2014, with import-ant acquisitions and partnerships primarily within targeted growth areas, we made fewer, but still important, acquisitions in 2015.

One of these acquisitions was Envivio, announced in September, which extends Ericsson’s position in the TV and Media market. The acquisition of Envivio was presented at the annual high pro-file media and entertainment conference IBC in Amsterdam, where we also announced the commercial availability of Ericsson MediaFirst and showcased new innovative transforma-tion solutions for the TV and media market.

September 25-27

Transforming our way of working

At Ericsson we are not only transforming the business, but also our way of working, and partnerships are part of this development. Prior to our annual Capital Markets Day in November, when we give an update on strate-gic progress, I was very excited to announce the strategic partnership with Cisco.

The part-nership will combine the best of both compa-nies: routing, data center, networking, cloud, mobility, management and control, and global services capabilities. Together with Cisco, a leader in IP-networking, we will offer end-to-end leadership across network architectures for 5G, cloud and IP, and the Internet of Things. extending our addressable market.

November 9-10

Generating value from our technology leadership

In December, we announced that Ericsson and Apple had agreed a seven-year global patent license agreement. Our IPR strategy has been successful and over the past five years we have more than tripled our IPR licensing revenues and we now have agree-ments with the majority of the global handset suppliers.

Ericsson’s IPR strategy is based on generating value from our investments in R&D. During 2015, we invested SEK 35 billion in R&D, which adds up to a total investment of SEK 169 billion over the past five years. Our technology leadership is demonstrated by more than 39,000 granted patents, one of the strongest patent portfolios in the industry.

December 21

Strategic focus in 2016

In 2015, Ericsson reported sales of SEK 247 billion, an increase of 8%, with an operating margin, excluding restructuring charges, of 11%. All three reporting business segments showed growth. As the result of a strong cash-flow from operating activities in Q4, we deliv-ered a full-year cash flow of SEK 21 billion, which exceeded the cash conversion target of more than 70%.

Our global cost and efficiency program is progressing according to plan and operating expenses for the second half of 2015 declined by almost 10%. Our performance remains top priority in 2016. There is room for further improvement, and to safeguard the process to generate fur-ther value, our focus in 2016 is:

1. Core business – While market conditions are challenging in certain parts of the world, we continue our work to capture business opportunities as more markets shift to 4G. At the same time, we will work to extend our technology leadership also in the emerging 5G market.

2. Targeted growth areas – After a period of investments we now also need to improve earnings. This will involve a stronger focus on software sales and recurring business.

3. Cost and efficiency – We are confident in our ability to reach the SEK 9 billion target in net annual savings during 2017 through the global cost and efficiency program. We are closely monitoring the market and business developments and we will take action to remain competitive across the entire business. The long-term fundamentals in the industry remain attractive and I look forward to another exciting year heading Ericsson with full focus on transformation, performance and value generation.

January 27

Global Presence 24/7

Ericsson is a global company, with customers in more than 180 countries. The Company has been preset in many countries, such as China, Brazil and India, for more than 100 years. The go-to-market organization is based on 10 geographical regions and one region Other.

North America 7%

Mobile Broadband investments were slow as operations focused on cash flow optimization in order to finance major acquisitions and spectrum auctions, investments stabilized during the second half of the year, driven by data traffic growth, ICT transformation, TV and Media and Professional services developed favorably.

Latin America -5%

Sales decreased YoY mainly due to lower activities in Brazil. Operator investments increased in local currency, but not enough to compensate for the deprecation towards the US dollar and currency restrictions in many parts of the region, Professional Services sales increased in many parts of the region. Professional Services sales increased mainly in OSS and BSS.

Central Europe 0%

Investments in mobile broadband were driven by the transition from 3G to 4G and capacity enhancements. At the same time, some important projects peaked. Sales were stable with a shift towards Professional Services and Support Solutions., as operations focus on network optimization, efficiency and new functionality.

Northern Europe -14%

Sales declined, primarily due to lower mobile broadband investments in Russia with sales of SEK 4.7 (6.7) billion. However, sales stabilized in the second half of the year, but at a lower level compared to the same period last year. Professional Services sales increased, driven by Managed Services and ICT transformation projects in the Nordics. TV and Media and OSS and BSS developed favorably, driving sales growth in Support Solutions.

Mediterranean 1%

Sales increased somewhat, driven by Managed Services. Investments in mobile broadband were driven by the transition from 3G to 4G and improvement of the quality and capacity of the network.

Middle East 7%

Sales increased, primarily in Global Services. In the first half of the year, Network sales growth was mainly driven by some major mobile broadband projects, which were completed in the second half of the year.

North East Asia 2%

Sales growth was driven by 4G deployments in Mainland China, partly offset by lower operator investments in Japan. Professional Services showed growth, supported by the acquisition of Sunrise Technologies.

India 74%

Sales growth was driven by increased operator investments in mobile broadband infrastructure and Professional Services. Increased focus on network quality and cost optimization continued to drive strong sales growth for Managed Services. Support Solutions sales showed significant growth, driven by OSS and BSS.

Sub-Saharan Africa 18%

Sales increased across all segments, driven by strong consumer demand for mobile broadband, despite a challenging regulatory environment and recent macro-economic development. Operators' focus on network quality and efficiency drove Professional Services sales growth.

South East Asia 21%

Sales increased, primarily driven by mobile broadband deployments across several markets. Professional Services sales developed favorably as operators focused on efficiency and network optimization. TV and Media showed a positive development during the year.

Other 33%

Sales increased, driven by the Apple global patent license agreement and currency, as a majority of the IPR contracts are in US dollars. Broadcast services showed good growth. IPR licensing revenues amounted to SEK 14.4 (9.9) billion.