Telecom's Nordic Track
Sweden is the world center of mobile telephony, with Ericsson as a driving force
STOCKHOLM -- Walk down any street or go to any restaurant here and you'll see people out in force talking on their mobile phones. Students, senior citizens and professionals alike are connected to anytime, anyplace communication. It's not just a perception -- Sweden has the highest concentration of mobile phones in the world.
A staggering 25 percent of Sweden's 8.8 million people have the devices, compared to 13 percent in the United States. Other leaders are Norway, Finland, Denmark and Australia. Sweden also holds the record for the most fixed-line telephones on earth -- 70 for every 100 people.
Telecommunications, just like herring, glass and Nobel prizes, is something for which Sweden is famous. A large part of its telecom culture can be traced to Ericsson, the giant telecom company based in the country's version of Silicon Valley -- Kista. Founded in 1896, the traditional telephone equipment company has become an international leader in cellular communications. Today, more than 40 percent of mobile telephone subscribers worldwide place calls over Ericsson networks.
Though only 2 percent of the world's population use these devices, it is the fastest growing segment of the telecommunications market. Between 1986 and 1995, the total number of cell phone users grew to 87 million, an increase of 45-50 percent annually. Total world subscribers are expected to reach 350 million by 2000.
Per Bengtsson, vice president of Ericsson Radio Systems AB, Kista, points to a chart of countries around the world showing wireless penetration. "Our business is to fill up this chart," Bengtsson said.
Mobile telephony has already affected the culture of Swedes, who are known to work hard during the long, dark winter, which lasts nine months, then go on traditional, six-week vacations in late summer. Mobile phones give them more flexibility, but also more accountability. At Ericsson, for example, executives give out a mobile phone number reachable day or night. "It is a tool which you cannot do without," said Bengtsson. "It has changed the way we work. We can do the same work at home, on a boat, wherever."
The United States and China are the company's biggest target markets. Bengtsson predicts 25 percent of the U. S. population will have cell phones in the next three years. China now represents 8 percent of Ericsson's worldwide market; the U.S. is the largest market at 11 percent. However, by next year, China is expected to overtake the U.S. Japan, with 9,000 new cellular subscribers every month, is another promising market. But Sweden, with Ericsson as the driver, is at the epicenter of the wireless explosion. Of course Ericsson's competitors -- most notably Nokia in Finland and Motorola -- will fight for control of the most profitable markets.
With 85,000 total employees, half of whom work in Sweden, Ericsson is the largest private employer in Stockholm. The company thrives on partnerships, especially one with the government-owned telephone monopoly, Telia. The alliance -- Telia as operator and Ericsson as supplier -- dominates telecom in Sweden. However, there are a growing number of smaller companies stepping up to the lucrative plate. "We never speak badly about our competitors because we partner with them," said Ingvar Bevenius, manager, Business Area Radio Communications. And partnerships are vital to international deals. In particular, a 1992 joint venture with Toshiba helped bring Ericsson to Japan. "We have perseverance -- we knocked on their door for a decade," said Bevenius.
Why Sweden became the world leader in wireless, according to many in the industry, can be traced to an early agreement by Nordic countries to use one technology standard. Swedes are shocked to hear that there are different standards used across the United States, especially in the case of personal communications services -- a new mobile phone technology. "A key point is to have one standard. Three U.S. standards are not to the benefit of the end user," said Bengtsson.
Prices in Sweden for mobile phones are lower than in the United States. Indeed, the government-owned Telia slashed prices for installing fixed-line phones for those under the age of 26. It seemed that Swedish Generation Xers, who are as transient as their American counterparts, chose mobile phones instead of paying to put a traditional phone in a new apartment. Houses that used to have one phone now have a mobile phone for each inhabitant.
Market deregulation, in order to promote competition between operators such as Telia, as well as equipment suppliers such as Ericsson, has also been important. Germany and Japan, for example, did not have telecom competition until they started offering digital cellular networks in the past few years.
Ericsson executives are not merely sitting back and watching the subscriptions flow in. In the past few years, the company's research and development budget has exceeded 20 percent of its sales.
One of the company's newest technologies, the GSM-DECT portable phone, is now in a trial with Telia and is expected to be launched in late 1997.
The new phone uses GSM -- the European digital mobile phone technology that allows roaming between countries. With a push of a button, the same phone can be switched over to digital enhanced cordless telecommunications, which is considered ideal for indoor use among employees at large companies. Many people all over the world now carry two phones: one that connects them to co-workers and another to the outside world. GSM-DECT, which is being tested by Sweden's Volvo, would put both capabilities into one phone. With the added promise of superior sound, the phone is expected to appeal to companies with employees who are often away from their desks, such as assembly line or production workers.
However, the phone will be expensive, and Ericsson is not sure how willing companies will be to pay. Pricing hasn't been set, but the devices will run more than a traditional digital phone, but less than two. Companies that now use the DECT system like the fact that they don't have to pay an external operator for calls within a building.
Ericsson executives are reticent to get specific about the future of the company or the fleeting world of telecom. However, said Lars Stalberg, senior vice president, "We expect mobility to be a dominating trend in telephony. We have no doubt it will be a feature no matter what else happens."
No doubt also that Ericsson will win big in the coming years of wireless saturation. Sales last year were up 44 percent to $14.4 million. "We have grown with the market," said Stalberg.
With such phenomenal growth, however, comes the problem of airwave scarcity.
"Everybody has underestimated the frequency needed for mobile services," said Curt Andersson, deputy director general of the Post and Telecom Agency, Sweden's regulatory authority. Sweden is involved in European Union discussions about how to re-assign spectrum to make more room.
The present government does not favor spectrum auctions, in contrast to the soap operas of Federal Communications Commission bidding wars in Washington, D.C.
"In the U.S. you rent airwaves. You just borrow them in Europe," said Andersson.