Ericsson to invest $1 billion in China

Swedish telecommunications giant Ericsson will invest one billion dollars in China over the coming five years, betting on more demand for wireless services in the world's largest mobile phone market.

Ericsson will expand manufacturing capacity, establish more research and development centers and grow its service reach, Ericsson Greater China president Mats Olsson told a company-sponsored seminar in Shanghai.

The investment comes as the company positions itself on the next generation of wireless mobile networks and phones, know as 3G, that would allow for the downloading of video clips and games.

China is expected to issue 3G licenses in early 2006.

“Here in China there are probably eight vendors with ambitions to play a role in 3G,” Olsson said. “Our ambition is to maintain a level of around 35% market share across 3G (third generation).”

Company president and chief executive Carl-Henric Svanberg said the tough technological demands meant the market was thinning out the ranks.

“There are fewer players that really can do the necessary investments in third-generation technology so the number of suppliers coming from 2G to 3G is becoming fewer,” Svanberg said.

Ericsson currently has a 35% share in the existing GSM/GPRS market and is the largest supplier to China Mobile.

It has a 15% market share for China Unicom GSM (Global System for Mobiles) and a 15% CDMA (Code Division Multiple Access) market share, Olsson said in a presentation.

It also has a 20% share in China’s core router market, he added.

Olsson said that China was a key growth market and was adding five million mobile subscribers per month, which he expects to pick up as incomes grow outside of the current major subscriber market.

China had 334.82 million cellphone users at the end of 2004, representing 25.9% of its population.

China’s mobile penetration is only 28% nationwide, although in Beijing, Shanghai and Guangzhou the rate is around 80%.

In many parts of western China mobile users make up less than 20%, and that is where the company sees growth, Olsson said.

Ericsson reported second quarter net profit of 612 million euros (744 million dollars) for the three months to June, boosted by strong sales in North America and an overall global recovery of demand for telephone networks.