HELSINKI, Finland-Michael Treschow, chairman of Stockholm-based vendor Ericsson, forecasted “challenging months ahead” for the world’s leading telecom equipment suppliers, a battle that he contended will leave only the “strongest standing” and the survival of the few.
“It is very likely that a number of mobile equipment suppliers will collapse. Those who need to consolidate, and don’t, will suffer. In this vein, Ericsson is in a healthy position. Consolidation for the group is not a priority,” he said.
“Consolidation is inevitable, and all current players will not be in a standing position when it finishes. It is obvious that our company strategists too are considering what that can mean for Ericsson,” he said.
According to Treschow, what he called the “strong players in the market” would be advised not to “remain on the sidelines of such a process.”
Despite recent losses, Treschow said Ericsson has already introduced consolidation measures to stem negative cash flow and rejuvenate the group’s profit-making position. The company, he said, would fight to retain its status as a leading global supplier of base stations and fixed-line subscriber and Internet network equipment.
The global telecom industry has suffered from weak demand as telecom operators, many burdened by heavy debts accumulated in the purchase of expensive third-generation (3G) licenses, postponed investment in new networks. This setback has impacted all the major vendors, including Motorola, Nokia, Lucent, Nortel, Alcatel, Siemens and Ericsson.
Ericsson has still to generate a net profit after seven consecutive loss-making financial quarters. To add momentum to static growth in its profit margins, the company is about to raise US$3.25 billion in a rights issue. The timing of the issue has yet to be determined.
