European Mobile Crisis Deepens

Ericsson Uncertainty Creates Unknowns for Wireless Europe

From ARM to Alcatel, European companies once led the wireless world in the development and implementation of all things mobile. But as some companies got bought and some went bust, Europe’s mobile lead evaporated. Large chunks of the wireless industry went West and other parts went East, leaving a big gap in the middle.

It would be hyperbolic to state that Europe is out of the mobile game. While the handset market has gone elsewhere, Ericsson and Nokia combine to take a significant stake on the global mobile infrastructure market. But now, stories of changes at Ericsson are creating uncertainty about the future of the venerable Swedish telecommunication company and Europe’s place in the global wireless market.

In July 2016, Hans Vestberg stepped down as Ericsson’s CEO. The company’s director of finance was named as interim CEO while the company looks for its new lead. It was an abrupt change, adding uncertainly for Ericsson at a time when industry competition is driving down profit margins.

As the search for a new CEO continues, the Swedish press is reporting that two of the largest owners in Ericsson, investment companies Investor and Industrivärden, are looking for strategic changes in the company. This includes a potential sale, though the meaning of this is vague. It’s not clear if there are potential suitors lined up or if there are thoughts of breaking up the company to unlock shareholder value.

Ericsson has close to 40,000 industry patents and is the largest holder of essential patents covering 2G, 3G and 4G standards. The company has a portfolio of intellectual property rights that would be attractive to networking companies looking to tie together fixed and wireless services. But an ownership shift to a different continent would be another blow to an industry with its mainstream roots in Europe.

Ericsson is working on a reorganisation of its Swedish workforce and the company is expected to shut down several manufacturing facilities in the country. The transfer of assembly work out of Europe isn’t unexpected and is part of a larger trend, but would represent a relocation of an important part of the wireless industry away from its roots.

The cellular industry is a trillion dollar global business and Europe can be credited with early organisational skills, which helped drive mobility into a conventional service. Although Europe had a vision, US and Asian companies were quick to recognise a second-mover advantage. Bit by bit, Europe lost its wireless lead as many blue-chip names were usurped. Heading into next-generation 5G technology, Europe’s contributions will continue to be vital, but a lack of ownership and implementation is another type of crisis its leadership will need to address.