Svanberg: no more big mergers

Swedish telecoms giant Ericsson will in the future focus more on buying up small companies to access new technologies, but will not seek to buy large companies or merge with its competitors, Carl-Henric Svanberg, Ericssion’s chief executive, said on Monday.

Svanberg, addressing a press conference at the company’s annual general meeting, warned of growing competition from Chinese telecom companies.

“If we had done deals and entered partnerships like the one between our competitors Lucent and Alcatel, we would have had lower growth last year that we had on our own.”

Analysts have long speculated that Ericsson could merge with competitors such as Lucent, Motorola or Nokia. The question was particuarly high on the agenda during the crisis years of the early 2000s, during which analysts talked frequently of the need for structural rationalization of the telecoms sector.

High profits in recent years have caused merger speculation to resurface (the company made a profit of 33.5 billion in 2005).

“It is not a given that it would be better if we, for example, started a partnership with Lucent. It is easy to forget how troublesome an integration process can be, with customers who want to retain “their technology”, and blending together two corporate cultures,” said Svanberg.

Ericsson is already going through just such a process, following its 17 billion kronor purchase of British company Marconi last year.

“We are still going through that process, and it is going according to plan. We did it primarily to complement our technology,” Svanberg said.

Ericsson took on 7,500 staff through the deal, some of which will remain at the company, others of which will be shed. Svanberg insists that there will be no more deals of this size.

“We are not going to do deals that are larger than this. We are naturally open for smaller deals to access technology, thereby relieving the pressure on our own research and development operations,” he said.

Svanberg argued that Ericsson’s most serious challengers were not its traditional competitors, but upstarts from countries such as China.

“They have got some orders, are ambitious, are investing heavily and are going to be strong competitors in the future.”

TT/The Local