1

Technology Management

A perspective from the Telecoms Industry

2

Agenda

• Brief profile of Ericsson• The Telecoms Market• Ericsson Vision• The importance of IP technology• 2G, 2.5G, 3G, 4G, WLAN, Broadband• Conclusions and Q&A

3

127 yearsof history

4

Ericsson history:127 years of leadership1878 Telegraph to telephone1923 Manual to automatic1968 Electro mechanics to computer control1981 Fixed to mobile1991 1G analog to 2G digital mobile technology1998 Converge telecom and data in fixed and mobile networks1999 Moving toward 3G and mobile Internet2001 First 3G WCDMA call on public network, operator Vodafone2002 World’s first live seamless handover WCDMA to GSM2003 3G roll-out starts globally

5

1880 19471878 1910 1986-96 2001 2002 2003

Ericsson drives telecommunication history

2004

6

RBS 3202 WCDMA radio base stations

7

Mini GSM

8

AXE board, 15 mm thick, handles 8 000 calls

9

Historical Telecoms Environment

• World’s most complexsystem

• Technology Innovation• Generations of Networks• Mass market• Global Standards• Global Interoperability

Technology

Lead through growth

Inside out perspective

10

A changing business environment

From To

Technology Consumer benefits

Lead through growth Financial return

Outside in perspective Inside out perspective

11

Convergence & consolidation

Diversification andnew business models

The convergedtelecom industry

Internet, IP &multi-services

Wireless & mobility

Dynamics of the telecom industry

12

Main factors creating thehyper-growth and crisisMarketInvestments

The hyper- growth of the late

1990’s & 2000

“Technology”Investments

• Failure in new businessmodels delaying new services

• Financing constraints(debts, cash,…)

• Network spending exceeds demand in several areas

• Increased competition & lower margins

• Hyper-growth gone/Macroeconomic instability

• Signs of subscriber growth maturity

NowSpectrum

Geographicalexpansion

Newcompetitors Internet

LH Optics

Digital Mobile

Good GDP development(US driver)

13

0

200

400

600

800

1000

1200

1400

1971

-02-

05

1973

-02-

05

1975

-02-

05

1977

-02-

05

1979

-02-

05

1981

-02-

05

1983

-02-

05

1985

-02-

05

1987

-02-

05

1989

-02-

05

1991

-02-

05

1993

-02-

05

1995

-02-

05

1997

-02-

05

1999

-02-

05

2001

-02-

05

The Nasdaq Telecommunication Index

Many strategies and decisions were made here (“Growth driven”)

“Profit driven”

• 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002

K-Club

14

Source: ITU and Morgan Stanley etc.

-30

-20

-10

0

10

20

30

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

e

Gro

wth

in %

Capex Grow th

OperatorRevenueGrow th

%

Capex Growth - Operator Revenue Growth

15

Communication as % of Household ConsumptionOECD Average

0

0,5

1

1,5

2

2,5

3

3,5

4

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

OECD Average

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Source: OECD

Household spending on telecommunications as % of budgetin real values (top and bottom OECD countries)

0

1

2

3

4

5

6

7

1995 1996 1997 1998 1999 2000

Korea

Finland

Netherlands

OECD Average

US

Mexico

JapanItalyItaly

Iceland

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From othervalue chains,new business models

Time

BUSD

1000

2000

Classical telecom services- GDP development/productivity- Users- Usage

Messaging

GamingNews, music, sports

Mobile enterprise

Positioning

m/e-commercePublic services

Advertisement

Telecom remains a long-term growth industry

3G

Broadband

Cameras

MigrationTDM/IP

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Worldwide Fixed & Mobile SubscriptionsForecast (01-08)

(Year -end)

Fixed Broadband(Cable, xDSL, Ethernet)

Fixed (POTS/ISDN)

Mobile

0

400

800

1200

1600

2000

2001 2002 2003 2004 2005 2006 2007 2008

No

of S

ubsc

riptio

ns (M

illio

ns)

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Latin America119 m., 22%

North America 170 m., 53%

Western Europe*316 m., 81%

Central Europe, Middle Eastand Africa

210 m., 14%

Asia Pacific444 m., 13%

Cellular subscriptionsRegion end Q4, 2003 (million)*Western Europe includes the EU countries + Norway and Switzerland

Global users 1340 m, 21%

Global penetration approximately 20%Estimated growth for two billion subscriptions in next five years

Japan (excl. PHS) 80 m., 63%

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The Ericsson Vision

We believe in an ’all communicating’ world. Voice, data,images and video, conveniently communicatedanywhere and anytime in the world, increasing bothquality-of-life, productivity and enabling a moreresource-efficient world.

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TodaySingle-service networks

Dat

a/IP

Net

work

s

PLM

N

PSTN

/ISD

N

CATV

Services/Apps

Access Transport & Switching NetworksClients

Servers

Backbone Network

CoreAccess

CoreAccess

FutureMulti-service networks/client-

server

Service Capabilities Service Control

Content Applications

CoreAccess

Unbundling Services from Networks...

introduction

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Strategic Inflection Points

TIME

Company 1 and 2 are relatively close in Phase A, but suddenly one gets it, andthe other doesn’t. At the Inflection Point, Valuations based upon performancediverge in Phase B.

Mar

ket C

ap

PHASE A

PHASE B

Inflection Point

Company 1

Company 2

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IBM DEC SperryUnivac

Wang

Chips

Computer

OS

Apps

Sales & Distribution

Intel Architecture Motorola RISC

Compaq Dell Pac'd Bell

HP IBM Etc.

DOS / Windows OS/2 MAC UNIX

MS Office Lotus SmartSuite

Corel Office

Retail Stores Superstores Dealers Mail Order

The PCInflection Point

1980 1995

Computer Industry TransformationComputer Industry Transformation

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IPInflection Point

1995 2005

ERICY MOT NOK LU ETC.

Appliances Access Transport

Chips

Hardware

System SW

Application SW

Sales & Distribution

Telecom Equipment Industry TransformationTelecom Equipment Industry Transformation

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Why IP ? Its about two thingsWhy IP ? Its about two things

New IP-based servicesfor increased

operator revenues(innovation & differentiation)

IP transport forreduced operator costs

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Drivers for 3G

• Higher capacity and speed• New services• More cost efficient – also for voice• Extension of 2G – full roaming

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3G is a reality todayWill spread to broader market in 2005

Commercial launch planned in major Europeancountries 2004

3G handsets on par with 2G– Battery and size improvements– 6-8 suppliers in near future

Ericsson delivers 3G solutions to 27 countries today– 13% of telecom systems sales are for 3G solutions

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The consumerMobile applications

Person-to-person

Voice

e-mail

Instant talk

Video calls

MMS

SMS

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The consumerMobile applications

Person-to-person

Voice

e-mail

Instant talk

Video calls

MMS

SMS

Person-to-content

Streaming

Positioning

Multi-mediadownload

MMS

SMS

Internet

30

100 k

Local Wide Area Coverage/mobility

Bit-rate

10 k

1 M

100 M

Fixed

WLL

10 M

Radio access alternatives for high bit ratesCoverage compared to bit rate

WLAN

3GBluetooth

Evolved 3G

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The Drivers

VOICE (A) VOICE (D) MULTIMEDIAWIRELESS

WORLD (WW)

Digital- Quality- Security- Reliability- Capacity- Roaming

Services- Mixed services- Capacity- Flexible billing- Personalisation

Integrated WW- Mixed networks(WAN,WLAN,DVB,etc.)- IPbased/connected- Ambientawareness- Ubiquity/flexibility- ‘Always connected’

1G 2G 3G B3G

CommunicationCommunication,Information

Communication,Infotainment

Context & ContentAware Communication

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What is eONE?

0 Manuals1 Personalization & 1 button access2 Seconds (maximum)3 Clicks (maximum)

Ease of use

The absolute key words are simplicity and end-user experience - it has to besimple to use, simple to configure, simple to understand

eONE approach to launching GPRS

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Air Interfaces

3.5G: enhancements to 3GB3G: integration of radio interfaces4G: new Air Interface in new Spectrum

1990 2000 2010

2G 3G

3.5G

B3G

4G

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3G, Beyond 3G, 4G

• Beyond 3G• 4G (Higher frequency)

– (OFDM, UWB, Smart Antennas)

• High Altitude Platform Station(HAPS)

SkyTower (USA)--uav--

WLAN3G

4G

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Conclusions

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Professional services

End-to-end solutions including systems, services, handsets andmobile platforms

Multi-service transport and transmission

networks

Broadbandmulti-service

networks

Mobile multi-service

networks

Ericsson is leading the telecom industry

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Our role in the handset industry

Sony EricssonEricsson mobileplatforms

Provides core handsettechnology to mobile phonemanufacturers in-line with theconsumer market trends andOperator’s and ServiceProviders ’ needs and plans.

Interoperability with networks

Provides complete handsets forricher consumer experiencesupporting operators andservice providers businessobjectives.

Multimedia integration

Core technology Complete handsets

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Largest portfolio of essential patents

• Ericsson holds the worlds largest 2G, 2,5Gand 3G essential IPR* portfolio

• More than 10,000 granted patents worldwide

• No. 2 in granted US telecom patents in 2002

* Intelectual Property Rights

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A changing business environment

• Technical Innovation• Standardisation• Interoperability• End-user

understanding• Professional Services-

led approach to End-to-End solutions

From To

Technology Consumer benefits

Lead through growth Financial return

Outside in perspectiveInside out perspective

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41

Current Wireless Landscape

Narrowband/Analog/Circuit Broadband/Digital/Packet

GSMTDMACDMA 1XRTT 1XRTTDO 1XRTTDV/3G/

CDMA2000

GPRS EDGE WCDMA/3G

1980s 1990s 2001 2002 2003 2004 2005

FCC Defines Broadband as 200KBPS in both directions

AMPS

Analog/Digital Divide Narrowband/Broad-band Divide

Circuit/Packet Divide

1G 2G 2.5G 2.75G 3G

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4G Techs to Watch

• OFDM = Orthogonal Frequency Division Multiplexing

• UWB = Ultra-Wide-Band RF

• Smart Antennas, Digital Beam Forming

• Edge Meshing and ad hoc Routing and Trunking of IP trafficwith Wideband RF routers

• Wide deployment of Last Mile 4G solutions

• Wide deployment of cheap personal portable wideband peer-to-peer 4G devices.

• Advances in signal processing, fuels cells, ambient power.

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44

Two main paths to mobile multi-services

2002/2003

cdmaOne

GSM

TDMA

CDMA2000 1X

2G First Step into 3G 3G

GSM/GPRSEDGE

PDC

64 - 144 Kb/s

3G Evolved

384 Kb/s - 2 Mb/s 384 Kb/s - 15Mb/s

Time2001/2002 2004+

≤ 28.8 kb/s

GSM/GPRS/EDGEWCDMA/WCDMA EV (HSDPA)

CDMA2000 1X/CDMA2000 1XEV