Ericsson CEO waxes lyrical on potential of 5G SA, AI

• Ericsson has reported unremarkable second-quarter results 
• Margins are improving mainly because of cost-cutting measures
• The Swedish vendor is still desperately seeking growth opportunities
• CEO Börje Ekholm is clinging to hopes associated with 5G standalone and AI 

If one thing was clear from the second-quarter earnings conference call comments made by Ericsson CEO Börje Ekholm on Tuesday morning, it’s that he is desperate for new sparks of 5G and AI life in the mobile network technology industry because, right now, the sector is flatlining. 

The Swedish vendor’s second-quarter numbers were largely unremarkable – once the negative impact of currency exchange rate changes are discounted, its ‘organic’ revenues for the three months to the end of June inched up by 2% to 56.1bn Swedish krona (SEK) ($5.82bn), while gross margin increased to 47.5% compared with 43.1%. Once again, it was the North American market that propped up the company’s sales, with a 10% year-on-year increase in organic revenues to SEK19.8bn ($2.05bn), while sales dipped in all other regions. 

The vendor’s biggest division – its Networks ‘segment’ – managed a 3% year-on-year increase in organic sales to SEK35.7bn ($3.7bn), but there’s not a lot of movement in the radio access network (RAN) market right now, as industry analysts have predicted. The Enterprise division, which is supposed to be the long-term provider of sales growth for Ericsson, is still very small – its second-quarter revenues stood at just SEK5.5bn ($570m) and even once currency exchange changes are taken into account, its sales shrank year on year by 6%.  

You can see the full details of the company’s financial performance in this announcement. 

What’s clearly concerning for Ekholm (pictured above) and his team is that the only real joy the company is getting right now is from better margins that are the result, mainly, of cost-cutting measures (which are to be continued). 

Ekholm noted that the RAN equipment sector, while stable currently, isn’t offering any prospects of exciting near-term growth. For longer-term growth the industry needs “new monetisation opportunities” and those can come in part from the ongoing modest growth in 5G-enabled fixed wireless access (FWA) deployments, from 5G standalone (SA) deployments that enable mobile network operators to offer “differentiated solutions” and from network APIs (but that market, while creating a buzz, is not generating meaningful revenues for anyone yet). 

Ekholm also sees AI as an opportunity to shake things up, not only in delivering greater operating efficiencies but in enabling network automation and new industry revenue opportunities. 

The CEO got particularly animated during the early Tuesday morning earnings conference call about the potential of 5G SA and AI.   

Ekholm noted that 5G SA deployments are still few and far between – only a quarter of mobile operators have any kind of 5G SA deployment in place right now, with the most notable being in the US, India and China. 

“Two things need to happen,” for greater 5G SA uptake, stated the CEO. “One is mid-band [spectrum] coverage… there’s still very low build out coverage in, for example, Europe, where it’s probably less than half the population covered… Europe is clearly behind on that“ compared with the US, China and India. 

“The second is that [network operators] need to upgrade their mobile core [platforms]... Those two things will have to happen to take full advantage of the capabilities of the [5G] network,” noted Ekholm, who said the arrival of new devices, such as AI glasses, that require ultra low latency connections and “very high uplink performance” is starting to drive interest. “We’re also seeing a lot of network slicing opportunities,” he added, to deliver dedicated network resources to, for example, police forces, sports and entertainment stadiums “to guarantee uplink streams… consumers are willing to pay for these things. So I’m rather encouraged by the service innovation that’s starting to happen on 5G SA and… that’s going to drive the need for more radio coverage [for] mid-band and for core [systems],” noted Ekholm. 

With AI, Ericsson is already using it for coding and “other parts of internal operations to drive efficiency… We see some benefits now.  And it’s going to impact how the network is operated – think of fully autonomous, intent-based networks that will require AI as a fundamental component. That’s one of the reasons why we invested in an AI factory,” noted the CEO, referencing the consortium-based investment in a Swedish AI Factory that was announced in late May. At the time, Ericsson noted that it planned to “leverage its data science expertise to develop and deploy state-of-the-art AI models – improving performance and efficiency and enhancing customer experience. By harnessing the power of AI, Ericsson will enable new business models and use cases.”

Ekholm noted that the facility, which will house two Nvidia DGX SuperPODs featuring Nvidia’s latest-generation Grace Blackwell GB300 systems, will enable Ericsson to test and develop “future networks… you will need to be able to create dynamic slices [and] that will require fully autonomous networks”.

In addition, the growing use of AI “will be a driver of traffic, because… applications will need to move to the edge. And when the applications move to the edge, they will need wireless connectivity, and that’s why we’re working with a number of the device vendors on how the demands on the network” will evolve. Ekholm believes the new devices, such as AI glasses, will need dynamic network slice options that will be enabled by a combination of 5G SA core platforms, next-generation RAN deployments, edge computing and network APIs. 

“We’re still very early in AI, in [understanding] how applications are going to start running, but I think it’s going to be a key driver of our business going forward, both on traffic, on the way we operate networks, and the way we run Ericsson,” stated Ekholm. 

He’ll be hoping that an AI-enabled revolution comes sooner rather than later. 

- Ray Le Maistre, Editorial Director, TelecomTV