WCA July 2010

Purchase of a Nortel stake will mean a stronger presence for Ericsson in the Korean market Ericsson AB, the world’s largest maker of wireless networks, has bought a controlling interest in a South Korean joint venture from Nortel Networks Corp for $242 million in cash. As reported by Dow Jones Newswires, on 21 st April Ericsson said that it had acquired a 50% plus-one-share stake in LG-Nortel, the Canadian telecom equipment maker’s joint venture with LG Electronics Inc, the world’s third-largest maker of mobile phones. LG-Nortel develops large-scale sys- tems for telecom providers in South Korea. It is to be renamed LG-Ericsson and continue to have its headquarters in Seoul. The Swedish equipment vendor said it expects the purchase, which is subject to regulatory approval, to significantly expand its footprint in the Republic of Korea. “Korea is one of the largest telecom markets with advanced end-user demand for new services,” Ericsson president and chief executive Hans Vestberg said. “The collaboration with LG Electronics will enhance our position for future tech- nology shifts.” Dow Jones’s Jung-Ah Lee and Dominic Chopping reported that the joint venture last year had 1,300 employees and sales of $650 million. Ericsson said it expects to see a positive earnings effect from the transaction within a year of closing. Nortel, at one time the biggest maker of telecommunications equipment in North America, has been auctioning its assets since filing for bankruptcy protection in Canada and the US in January 2009. Elsewhere in telecom . . . ✆ of Singapore, has found that bad customer service costs the country $374 million a year. Also according to its recent report, Singaporeans are more likely than Malaysians, Filipinos and Thais to switch their allegiance when service is poor. Karen Ng of the Business Times [11 th April] noted that the report, intended to identify the key factors that influence consumer attitudes in the four markets, cites telecoms, financial services, and utilities as the industries with the Genesys Telecommunications,

Cisco saw an immediate surge in video conferencing after the volcano eruption in Iceland

The video conferencing sector has seen a number of acquisitions recently and, analysts say, is a key growth area as companies seek to cut the costs of business travel. Cisco Systems (San Jose, California) said the industry got a boost from the disruption to business travel across Europe caused by the Icelandic volcano, responsible for the worst air travel chaos since the 11 th September 2001 terrorist attacks in New York. “The only evidence is anecdotal, but you will not get a demo room in any of the Cisco facilities,” Fredrik Halvorsen, former Tandberg CEO and head of the Cisco Systems TelePresence Technology Group, told Reuters on 19 th April. “We have seen a huge spike in usage.” As befits something called Eyjafjallajökull, the volcano was productive of major havoc. Mr Halvorsen spoke on the fifth day of no-fly rulings enforced across much of northern Europe, blanketed by a dense cloud of ash that precluded jet aviation. On the same day, Cisco closed its $3.3 billion acquisition of Oslo-based Tandberg, announced last October – and became the biggest maker of video conferencing equipment anywhere. Cisco is already the world’s biggest network equipment maker. Also on 19 th April, the Norwegian tech start-up Videoworks opened for business, set to begin supplying a range of high-definition conferencing systems based on technology from Sony. One of the company’s founders came from a top sales position at Tandberg. Videoworks chief executive Even Zimmer told Reuters that the volcano would make business people think about the benefits of video conferencing. “The timing is very good,” he said. “The market’s growing and the consequences of the ash cloud won’t be forgotten very soon.” On a smaller scale, the Swiss peripheral-device maker Logitech International SA has acquired privately held video conferencing company LifeSize Communications (Austin, Texas). As noted by the Reuters reporters Richard Solem and Paul Sandle, Polycom (Pleasanton, California) is attracting interest as the only major public video conferencing company without a deal in the works.

Worldwide enterprise network services spending is forecast to grow 2% in revenue in 2010, but Gartner analysts said this masks ongoing declines in mature markets as well as an essentially flat North American market. “Longer term, the global enterprise network services market is expected to grow modestly, largely on the back of growth in Internet services such as hosting,” Peter Kjeldsen, research director at Gartner (Stamford, Connecticut), said on 12 th April. Mr Kjeldsen added “Ethernet services will also grow significantly, albeit at the expense of both legacy services and MPLS [multiprotocol label switching].”

The global telecom market, which shrank 3.4% in 2009, is forecast to grow 5.1% this year Telecom spending worldwide is on pace to reach just under $2 trillion in 2010, for a 5.1% increase from 2009, according to Gartner Inc. The information technology research firm expects the mobile device share of the telecom market to increase from 11% to 14% between 2010 and 2014. Over that period the service share is seen as dropping from 80% to 77% while the infrastructure share remains stable at 9% of the total market.

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Wire & Cable ASIA – July/August 2010