Telefonaktiebolaget LM Ericsson (publ) (ERICB) Earnings Call Transcript & Summary

Hello, and welcome to Ericsson's conference call. [Operator Instructions] Stefan Jelvin will now open up the call. Please go ahead.

Thank you, Anas, and welcome, everyone, to today's call. It is the first in a series of calls where our business area head will present current topic, new contracts or other interesting news and development. The format is straightforward. We plan for a 45-minute session and more or less 50/50 between presentations and Q&A. Today is the first call in this series, and it is my pleasure to introduce Åsa Tamsons, the Head of Business Area Technologies & New Businesses. Åsa, please go ahead. The stage and screen are yours.

Thank you. Thank you, Stefan, and nice to meet you all. Thank you all for joining this session. So what I would like to do today is to share a quick business update on Business Area Technologies & New Businesses. I will go through our focus, the latest progress on the portfolio and businesses and priorities ahead. Let me start by setting context. I think you've seen this before, we are, as a company, we've come to place where we have both stability and profitability in our core business. Excuse me. Could someone -- could all of you go on mute, if you're not on mute because there is background noise. Thank you. But we're, of course, also investing now in growth in our core business. And we've seen, over the last year, stronger growth than I think we have done historically as a company for long, long time. We also continue to accelerate our growth efforts in new areas, so areas outside of our core business. And here, it's really the focus of the business area technologies and new business. Our mission is really to support the company in identifying, developing, accelerating new growth. But it's not any growth, it's really growth that are building on the strengths we have in 5G and IoT and the related underlying trends. And we are focused on making our primary customers, the service providers succeed in new value pools with us. We are -- as I have described before, we are using a lean product approach to validate and scale the idea. And if we look then at their current steps, they are centered on a couple of areas where we see big relevance of our technologies, but also strong fundamental and underlying growth. Those areas include global connectivity management, connected vehicles, industrial site connectivity and network and data insights. I've been speaking quite a lot about a disciplined and lean product approach to growth. And what does that mean? Well, it means that we follow what we call a 5i process. We start from initiation through ideation, incubation. And once we have a validated offering that we believe has the potential to scale, it can go into ignition, then further into incorporation. This is also how we have structured the portfolio. So we have a unit called Ericsson ONE, which is really the platform for identifying and generating ideas. And here, we are trying to focus on ideas that are in line with our strategy and that can help us and this is key to addressing big and growing markets in transformation, such as transportation, Industry 4.0, et cetera. Once -- and here, we really won't skip because the smaller investments stimulate ideas. For instance, we have a tool here called Idea Drop, where we, over the last 12 months, generated more than 1,000 ideas, yes, from our employees alone. We're also working with universities and customers and other partners to generate ideas. We're focusing ideas in areas where we want to make a dent. And in the next phase, we typically pressure test is there a problem. And here we try to limit investments as much as we can upfront to really validate is this a real problem or it's just a problem that we would love to solve. And that is -- here, we typically spend 4 to 8 weeks to do that, to do a rapid prototype and very limited investment. We then go into what we call incubation. And this is basically building an MVP and we do call the MVP in 2 phases: One is MVP that basically answers the question, can it be done? This is a phase of, say, 4 to 6 months where we typically have maximum $300,000 type of investment. And we want to validate, is it technically feasible to deliver this offering? Can it commercially operationally be done? And is it really delivering the value we would like to see with end-user and end customer? And then the other part is really to go into -- it is a developing product [indiscernible] can it not only deliver value in one case, but does it have the economics, the technical readiness and the commercial readiness and the market readiness to build its scale. So this is partly really about finding the product-market fit. Here, we have had quite a traction. And over the last year, we have a number of new incubation projects coming out and one that we are focusing on even more is the dedicated networks, as which I will talk about in a bit, that has now been established as clear incubation unit. Once we go through when we see that we have an offering that is ready to scale efficiently, commercially, technically and operationally, we move into what we call the acceleration unit. This is really where we have, into the ignition phases, can we sustain the growth in a sustainable way? And we do know that not all will scale. So the ambition is, of course, to scale away, at the moment, there is strong -- very strong traction in IoT. And we have communicated quite consistently over the last year that we'll continue, and we are doubling down on IoT because we see a lot of traction and a high return on the investments we're making there. Whereas we can also come to the conclusion that it didn't develop as we wanted or it developed well, but it's not for us. This is one of the conclusion we've come to when it comes to Edge Gravity where we did not see the progress in hitting the milestones as we wanted and would have expected. And hence, we have decided to exit the Edge Gravity business. We have looked at spin outs, and we also looked at selling it. But right now, we have concluded that a close down of the business is the best path forward for the business. And it's driven by the performance development, the milestone -- tracking milestone development, but we also have a market where the hyperscalers are moving aggressively into the edge space and working closely with the CSPs. So also the competition in this area has increased. With that said, we are not giving up on the edge. So we are investing as a company even more in the exposure and orchestration part to be able to expose network capabilities at the edge, both with CSPs and hyperscalers, and that's where Jan Karlsson, you probably would hear it from his presentation and [indiscernible] that's an area we are investing intensively in, and that will support both our dedicated networks and IoT offering. That decision to exit Edge Gravity, we already started, but I think it's also a proof point of a disciplined model. We need to be able to also exit and close businesses that are not performing or developing as we would like to see. With that said, a lot of the focus -- we're talking a lot about the how. But if we look about where we focus going forward, we focus increasingly in offering opportunities as segments where we see an opportunity to create value for enterprises. And as you know, most enterprises and most industries have been on a transformation journey now for quite some time. And they're now going into the next journey where, I would say, connectivity and the connected platform is becoming of increasingly importance to deliver on the goals and challenges they have. To really make that happen, there are a couple of important things that are important. One is, when it comes to the business consideration, the company is really looking for how can we transform our business. How can we quicker than ever optimize supply chain or operations the way we price what we offer by being more data-driven and support real time decisions. But many are also seeing a big need to step backs in the contribution of listing sustainability targets and reduce the CO2 emissions. And here, the interesting part is that typically investing in digital infrastructure and digitize the business is a key enabler for all these 3 goals. It helps to accelerate the transformation, it helps to become more data-driven on optimized operation, and in many cases, it also reduces energy -- improve the energy efficiency and improve the CO2 footprint. But when it comes to that digital infrastructure, there are number of technology considerations. So one is what is the platform that can help digitize the -- several of the different moves of the digitization journey. Two is how they secure your infrastructure, but also your products and services if they had a threat, both when it comes to product, services and the people. And then thirdly, flexibility. Many are looking for global solutions, better scale, but they also want flexibility. And if you look at this parameter, this is where cellular connectivity typically comes in as a sweet spot. Because cellular connectivity and especially with the new generation 5G, they are unrivaled when it comes to being one platform that can support nearly a multitude of cases, being more secured than any other connectivity form and also allows enough flexibility. And I think we can go back to that, but it is interesting now when we have a lot of conversations with industrial leaders during the COVID-19 crisis that many have realized that this infrastructure is not only important to meet that flexibility and it's -- the demand for hyper -- increased customization and personalization and because they're flexing them out for customers, but it's also critical in times like this when you have both demand and supply shock to be able to remain resilient. So this is, I think, if anything, the need for this technology shift and invest in that -- the digital infrastructure is becoming more important than ever. And that is really guiding where we are investing our -- where we are investing for growth. And if we look at where our growth is focused right now, it's really on -- it is in the enterprise value, to [ throw some light ] , as well. It is because of the relevance and the trends and the moves they have described. And we see that as a big opportunity for us to build stand-alone profitable businesses that gives us a viable entry to the enterprise segment's service business and together, web businesses. But it also help us secure sustainable demand for Ericsson's core business by driving use of such as mobile 5G networks and network investments. For instance, there's so much more upside to capture when it comes to drive cellular adoption in the new enterprise segments that are not enjoying flexible mobile and secure connectivity app including industrial sites, offices. I think if you think even more about the situation where now we're working from home, but also, there's a huge opportunity to make our technology easier to access and consume such as in the cellular IoT space. And we believe we can increase that share from 10% to 30% when it comes to cellular share of the IoT connectivity market. So how will we go address that? Well, we focus on our service provider, and that is our primary go-to-market channel. It will remain that way. We are focusing on enabling new revenues for the CSPs. And as you will see a lot of our new businesses are linked and based on strength when it comes to connectivity and related technologies. And that also provides; a, higher synergies, higher success rates, but also higher return on investments we make. We are focusing though on scalable solutions. So solution that can scale, typically software-based with limited in-house system integration needs. And we will continue build a single-structure approach I described where we're delivering that through end-to-end unit setup. And that has a number of benefits. It gives the speed and autonomy that you need at the beginning to grow a new business, but it also to secure the transparency of the spend, of the return. And indicates, we need to ramp down or exit as we now decided with Edge Gravity. It gives us that speed also for those type of decision versus if it's too fragmented and integrated. We will also look at inorganic growth as part of this to continue strengthening our product portfolio and secure time to market of the offerings we are betting on. I mentioned 1 new unit. Ericsson's dedicated network is a newly formed unit, where we have been in the space before, and we had the advanced industry unit with Industry Connect at some early incubation. We also have a private networks portfolio [ formerly in venue ], now we are combining all of that into 1 unit, where we manage the business for local networks -- local private networks in 1 unit. It's really focused on, I would say, 2 things. One is to help accelerate the enterprise digitization journey with 4G and 5G and -- but also to modernize a lot of the private communication systems that are out there, which is a big opportunity that is having also the strong growth and grow demand. Here, we really want to support operators and their channel partners because they typically work with our sites. So I know we quite often get questions, how would service providers be successful in addressing this opportunity as well. Typically in the enterprise digitization journey, there is several players out there. And most of the operators are either having -- a few big ones have their own SIM but many are working already with leading asset players to go after this business. And here, we see an opportunity then to both support industrial campuses but also manufacturing. But you could think about all the utilities, oil and gas, sands as well as mine. Here, we are leveraging and releasing a lot of their subproducts and operations. And we also support dedicated R&D to make sure that we accelerate the development of the specific features that are -- and move that in this environment, but also make sure we have the form factor to improve the offering, the packaging, delivery and operations so it can actually add value and enable scale in this new environment. And thirdly, we are focusing on further developing the ecosystem, including the solution partners to further enhance the value, make sure not only the system can be installed but used with high value-adds. And I will get back to this a bit more later in the presentation. If we then, though, go into a summary. So based on that, the focus we have right now in the portfolio is doubling down on IoT and industrial site connectivity, as I mentioned before. And we have our global connectivity management. There we have the -- our dedicated -- it's global IoT platform, which helps manage connected assets for thousands of companies across hundred markets in the world right now. It's been scaling and growing quickly. We'll get back to the progress of that in a bit. But here, we really want to use a core technology. Our relationship with this is to bring simplicity in connecting devices and unlock the insights from the devices and operations across different companies in many, many markets. Here, we have an underlying trend of prediction going from 1 billion connected cellular devices to 5 billion over the coming 5 years. So here we see a strong trend -- strong growth trend. Another area is connected vehicles, which is, of course, one of the things that can be connected on the platform, but we see a big value of, you could say, connectivity enablement services on top of connectivity management. Here, there is a need for managed connectivity, but also the service innovation and to augment the value of connected vehicle services. There are also a lot of network near capabilities that are required, and we see an increasing demand of how to optimize the data that goes back and from the car. We're working with leading OEMs to basically predict that they will have 1 terabyte of uplink data per car in a month. To be able to manage that, you need more of them, connectivity management, connectivity coverage. It's important to optimize what data to store, what's in the car, what's the process in the car, in the cloud or at the edge. So here, we are working closely with leading OEMs to develop the relevant services, and we are focused on the networking effort. Industrial site connectivity is really to help unlock the value from Industry 4.0 by making sure that these industrial sites are connected with secure and mobile connectivity that enable them to take the next step when it comes to flexible productions and advanced operations. Here it's a portfolio, both stand-alone and hybrid deployments. And it's our dedicated networks unit who is -- that I described who is -- that is focused on capturing -- accelerate and capture that value. And then we are continuing to explore data network insights because we believe that we lost the base on many network near insights, but there will be opportunity to earn a profit from them. Many players in the space, we believe, our sweet spot is focused on where the network insights deliver value in context with other data. Here we have, as you know, just before our platform Emodo, it focuses on advertising, but we also see application for that platform in several other areas that we are exploring right now. And then at the bottom, you see the results of one of the other incubation areas that have developed over the last year, and that is the Ericsson Security Manager, which is an add-on offering that is now being bundled, both with global connectivity management, the dedicated networks, but also with our 5G core in a core portfolio. And it really addresses some of the needs to optimize and predict the security management to be able to protect both -- all the nodes, but also billions of devices that are being connected on the network, and we see quite exciting commercial traction there at the moment. Just to clarify, we talked quite often about our go-to-market. It is indeed through the service providers. You see here to the left, Ericsson, we are selling through and with the service provider. But of course, we're able to make them successful to target enterprises and OEMs, we are also working closely in terms of relationships and having strong partnership with enterprises and OEMs. So we can develop the right solution, drive value-added services, but also get the packaging and commercialization right for the service providers in order to be successful. We also are, of course, working with the device-app industry and SI players because in all the areas that I have described, they are extremely important to be able to deliver the value efficiently and at scale and to make sure that our solutions are both recommended, referred and used in the market. And typically, it depends a little bit by offering but typically then we sell to the service providers. And in many cases, we -- the way we generate revenues, we get the revenue share out of the value that is delivered to the enterprise. That is the case for the IoT platform, for CVC platform, but it also differs a little bit by offerings. But a quick summary on where we are when it comes to the business. We continue to stay committed to drive growth, both in sales, but also improving the margin of the emerging business segment. We are determined to continue accelerating our growth, but we've also taken a disciplined approach to growth. And hence, we will proactively make sure that we manage and optimize to make sure we put that capital where we see most traction and potential for the future and hence the decision to invest more in some areas, like IoT and dedicated networks and exit Edge Gravity. To give a few highlights of the progress, we have, at the moment, more than 55 million subscriptions of the platform with a subscriber growth well above 100% consistently over the last year, and that is continuing and well above, I can tell, it's been in the range between 100% and 200% growth quite consistently. We also see a strong growth of enterprises that are being onboarded on platform. And we have, in total, 5,700 enterprises last time I checked and it's growing constantly with more than 30% and sometimes way above that. And we're now present in 100 countries. And I think it's also quite exciting to share that we are right now market leading when it comes to our eSIM management capabilities. We have more than 3.5 million connected devices or things. It's everything from cars to custom machines and other things that are connected through eSIM and managed with eSIM with localization that is you can get the same service experience as you are locally in the network in a country versus the classic roaming model. This is a huge value to the enterprise. We have, at the moment, a big market lead, which is also confirmed by the demand pick up, but also things that we see from several of the segments, especially high-value segments in the automotive and industrial IoTs that are looking for industrial-grade connectivity. And as you can see, we have more than 4.5 million cars connected on our CVC platform. If you look at it also under 2 platforms combined, it's of course even a high number. So how is this being used? Well, there's a very diverse set of cases and partners. And I think the exciting part is actually scaling on the platform so the model works. One example is how we together with Sprint and Hitachi Vantara launched its Smart Video Analytics application -- or offering on the Curiosity platform, which is powered by our global connectivity platform. And I think it's a great example of cases we see increasingly because it's more than asset trackers and smart cities being connected right now with increasingly broadband cases, real-time surveillance, real-time video analytics that is used for security cases for smart city optimization, et cetera. And we see tremendously growth in that area. We also have exciting cases that are trying to address important, I would say, economic and social problems. One is Global Tracker, a product that together with Magenta in Austria is trying to attack the case of food waste. There's so much food that is being wasted because the refrigerated containers are getting disconnected or is not getting the energy that are needed. But with our solution, we have a global solution where they can predict and track before they run or even before their failure to reduce the food waste globally. Brighter is another Arkessa's product case that now quickly getting -- going global. Several launches in Southeast Asia, including Singapore and Middle East, but also in Europe where they're changing the life of diabetes patients, making not only a habit but basically automate the care of diabetes patients, which is literally changing the world for literally many types of -- many people globally. And then we have the Ambra Solutions, another example of mines. Now I could go on and on and on, there are so many cases here. I want to talk this quickly before we open up for questions. I wanted to share some of the specific progress, first on our IoT platform and then on the dedicated network side. We'll start to -- with IoT Accelerator, our global connectivity platform, we're quite often getting the question, how is that differentiating from the competition? And how is that really tracking? I shared the progress with you. And I think if anything, we have, besides the lot of the commercial traction, which is really driven by a number of advantages, we now have a very strong global footprint and a unified integration. We also are one of the few ones to have the, as I mentioned, eSIM capability, but it's eSIM capability with global reach and scale. We also are trying to address important pain points that enterprises are experiencing. So typically for an enterprise on board and get cellular global connectivity to work, they typically need to engage with one or several operators, and they also typically need to have several contracts, and they need to have roaming agreements. Through the eSIM solution, we can remove roaming and secure a consistent SLA and network parity globally. Number two, with a new function, which we call the reseller application, we are actually able to provide one global contract to enterprises through one [indiscernible] a platform with pre-negotiated data levels. And finally, and very importantly, the enterprise also gets full visibility and the control of IoT devices so they can manage their business regardless of how it goes across operator borders or cellular type of implementations. I think the way -- the area where we really focus on is a couple of things. I think the [ beside working ] with several of the operators, there is 1 core network. So we basically can deploy and manage these millions of connected assets globally with a consistent user experience. Thanks to that one global core network that is shared. And this means a couple of things. It also makes it easier for us to launch globally consistent services. It also -- by having that dedicated core, we can secure that service experience is always delivered. What is exciting here is we also tried our 5G testbed and it's not in the lab itself. We tried it out in -- live in the market in Asia. So this is really progressing quite excitingly. At the moment, we have a headwind when it comes to the capability versus competition. But it also means that when you have dedicated -- it's only your data traffic flows. So it's not competing with, if you say, the regular consumer business, which is extremely important when it comes to several of the more high-value industrial-grade cases. We are also here working increasingly with several partners and upgrading our own capabilities to enable it both real-time analytics at even higher degree, and we're making it easier with an API-first approach to place to quickly plug into the platform and develop upon it. And I think the Curiosity and Hitachi Vantara cases are one excellent examples. If we then move to dedicated network and manage -- I described before, that there are 2 big drivers for these type of networks. One is the upgrade of those already have private communication infrastructure. And this is an existing market. It is -- that has been there for quite some time, where they now want to upgrade. They want to upgrade to make sure they get the support for data and video, where many of the legacy systems cannot support it. They want to make sure they can work with real-time remote expertise and others to augment the worker capabilities and also scale expertise. And they also realized they're sitting on a lot of unnecessarily complexity and high cost with the legacy systems. On one hand, that's an existing market in transition with a real upgrade need. That's one part of the market where -- that we are tackling and addressing. The other part is really linked to the industry digitization that I talked about earlier in the presentation, which is really about how can you advance operation, how can you advance operation through automation, improved productivity and quality. But it's also about how can you improve the workers' safety; and how can you improve the; environment for the workers; and how can you also contribute with a more efficient energy savings as well as a better CO2 footprint. And finally, many of us see this as a way to start generate completely new revenues and new business model. For instance, we are deploying a system in a mine in Norway, which allows Volvo to deliver their autonomous drive as a service. I want to talk. So why are then -- you could ask yourself so why are the industries really investing in stand-alone dedicated networks. Well, you could see there are a number of reasons, as I explained, both to modernize the existing networks, but it's also to drive the digital transformation. Here, we see different cases and you could say different grades of how both complex, different system needs are, but also how many deployments you actually have and the size of those sites. One example here is, if you look at oil and gas, mines, ports, airport, utilities, they typically have the sites in the numbers of hundreds, but -- and Europe lists number hundreds per country, between 10 and 100, depends on which area you look, or which country you look. And typically, you have -- not always, but quite often larger areas. Whereas when it comes to many of the warehouses, the smaller enterprises, the manufacturing sites, we're talking about typically smaller areas and a large number. I think in total, we have 10 million factories in the world, just as an example, and if you compare that to the consumer side where we typically have about 2 to 3, 4 networks per country, that's millions of consumers. Here, we're talking about millions of systems that each can manage perhaps a number of people, but I think, importantly, also a lot of devices, machines, et cetera. And I think, as you can see here, besides modernization, it's also to provide connectivity to the sites that are not connected at all today, where it can provide security to people in the mines. So you can also mitigate the risk of outside attacks to secure on-prem networks. But finally, you can also see that to say the high-performance connectivity that really can provide full control of facilities, both on operations, but also when it comes to securing the actual facility. We are working with a number of thought leaders in this space across segments. I would say overall, the automotive side is really in the lead. There've been high adopters of autonomous-guided vehicles. They have a high degree of automation compared to many other industries. So it's no -- I would say there's -- it's not by coincidence. So we see many of those players being the early adopters of cellular connectivity in 5G. Here, we are working with several of the leaders. And here is just a couple of examples, there are more. We are working with Mercedes Benz, in their model factory in Germany, which is basically becoming a model factory for the fully autonomous and flexible plant in the future for automotive. Today, we cover with our solution 22,000 square meters, and this is -- this factory that they're going to use as the model for all the factories in the world going forward. Similar case with BMW, where we are connecting the industrial campus together with Deutsche Telekom in Germany and they have similar additions. We're also working with several of them on some of the ultrareliable, low-latency capabilities that are not fully commercial yet, but will come out and Audi is one of those examples, and this is so important. We start to -- because they understand the value of the cases, but also simulate device readiness ahead of -- when the technology is ready for full market commercialization. We're also working with many other leading industrial players. Atlas Copco in Belgium. They are connected with Industry Connect and technology is used to both remotely monitor some of their facilities to reduce the [indiscernible] but also for asset tracking optimization. And ABB Power Grids is in large scale using Industry Connect and expanding that at the moment, where they're using our connectivity to increase worker productivity and also connect some of the tools they have that has been completely linked to cables before and that they can now cut them a lot. But we're also deploying our own [indiscernible] here. So we are, of course, going 5G and cellular first in our factories. We have connected our factory in China, in Estonia. And I think most recently, we have a full 5G-enabled factory in the U.S. in the new factory opening up this year in Dallas. I think with that, I'm going to round up and make sure we have also time for questions. I hope you were able to follow the presentation.

Thank you very much, Åsa. And like you said, we got off to a little bit of a late start, we're sorry for that. We still have some time for questions. But before we start, I have a small request. And that is that you please focus your questions to Åsa's areas of responsibility. For broader company group questions, IR will be happy to help you at any point after this call. Thank you. And with that, Nass, could you please start Q&A session.

[Operator Instructions] Our first question comes from the line of Daniel Djurberg from Handelsbanken.

My first question would be on the closing of Edge Gravity, the former Ericsson UDN. Can you comment about the amount of write-down we will see on back of this? I guess you have some capitalized development costs for this or if it's already written down? And also if it was mainly changes in the market for edge compute or CDN market with more flexible pricing models from competitors that did hit you? Or if it was more about collaboration with Limelight so on, if you could comment a bit more?

Absolutely. So thank you. Good question. So first of all, if we start to -- start with your question on capitalization, there's no capitalization when it comes to the development, so there will not be anything of that. We are finalizing negotiation with some of the partners, and I think as we close that up in the coming weeks, we will know if there will be any write-downs, but we're not ready to give any indication on size of order of magnitude yet. But if it will happen, we most likely we'll come back with that in association with the Q2 report. But I cannot give an indication on any number yet. I think when it comes to kind of development, I would say, there are 3 things. I think the business model and idea was actually working. It's just that the scaling of the cases went a bit too slow. So I think we would have needed a much faster ramp-up of the new cases. I think also the CDN part took off, but we would need -- we probably would have needed to see even more scaling of other cases in parallel. So I think that is kind of -- that is kind of the short answer. I think that has happened in the same time as the edge computing markets evolved quite quickly, and we realize that this is still a bare metal as a service kind of offering, when you do rather play to your strength, move faster to orchestration and exposure. So we decide as a company to make that shift and do that sooner rather than later if you want to play to your strength versus the hyperscalers. So that's kind of, I think, the best -- the short answer I have there. I think it's also fair, I can also say that if you look at the cost, if you look at the cost, excluding restructuring, we're not foreseeing a big negative impact here. So that is already in line with the plan and the target that we communicated.

Okay.

Okay. One last question, if I may, before going into the queue, if I may, or...

Absolutely.

And that would be on your -- you're quite stringent with whether your go-to-market is with service providers, communication service providers, but we do see an evolvement of shared spectrum, CBRS, et cetera, and there might be a number of cases where you know enterprises would like to work with perhaps Microsoft Azure, or cloud with Google or Amazon or whatever and still want to work with you as well on both the dots, but also perhaps some platform, et cetera. Would you at that -- would you back out from those kind of businesses or...?

I would say right now, we're actually tackling it in a different way. We actually -- I would say even in cases where you could say it's not a CBRS spectrum, but also if you look at where the operators own the spectrum, many enterprises want to work with an ecosystem that is beyond, of course, Ericsson and the CSPs. So we are, if anything, expanding and working closer with both SI players, device players, app players, but also the hyperscalers. So here we are, and we are launching actually this week, one example of that, where we are working with CSPs and hyperscalers to improve both offering and reach of some of our solutions. So we will focus on doing that to make sure that CSPs can win together with us and the hyperscalers where all of us can play to our strengths. When it comes to the -- I guess the corner cases of where others have spectrum [indiscernible] we're not speculating at that now. We rather make sure we have the right offering -- right offerings and the right partnerships together with the CSPs to be relevant to the end users and that's where we focus. And then we'll make that decision market by market, if that comes or...

Okay. Daniel, are you happy with that?

I am very happy.

Our next question comes from the line of Peter Kurt Nielsen from ABG.

Also just a question relating to the latter part. Your comments about dedicated networks for industries and enterprises. And I guess as you touched upon the security element is, of course, one aspect, and I assume a fairly important one, given you're sort of getting into the core businesses of these operators . Considering sort of the global security discussions, et cetera, we're living with lately, is that the security element something that in addition to your product competitiveness? Do you feel that this is something that is working out to Ericsson's advantage at the moment? Is that something you're feeling in the marketplace when you're entering these discussions with your end customers and the service providers, please?

Well, I think there are different levels you can talk about security. But I think where we do have a strong advantage and that's really to being the market leader in 5G and cell technology. When it comes to the fact that 5G in itself is probably more secure net connectivity type and network that is available. 5G is much more secure than any previous standards and other connectivity types of the market. And a lot of -- I think what is quite important understanding a lot of that security is built into the standard. So I think Ericsson's big advantage here is clearly that we are leader in this technology that is by -- because the way it's been designed and the way it's been developed it has a much higher security level. Then I think there's some other thing alluding to, which is more related to trust. And yes, we are as a company focused on staying -- remaining across the partner with high, both, you could say, ethical, but also focus on our customers and trust, and that will continue. That will continue with the main -- our base business and with new business, and I think it's highly related to our brand overall. So that's something different than because the security of the technology itself.

Thank you. And we are approaching the hour. So with the late start, I'm afraid we are arriving at the last question. So Nass, if you could go ahead, please.

The last question comes from the line of David Mulholland from UBS.

I just wanted to come back to some of the first slides you presented in terms of the model in which you try and bring new businesses through and new ideas through. Can you give us any metrics on what success rates you have? How many opportunities make it through to incubation? How much then make it through into the acceleration? And what scale have you got so far, stuff that's actually turned in from initiation internally into something that's a kind of millions or hundreds of millions of SEK business for you?

Good. Thank you. I think it's a good question. Then of course, I think we're still [indiscernible] I think we're still early days to have really robust numbers. But if we look over the last 12 months, in the initiation, we're roughly -- we've been -- that has been growing from basically where we started 2 years ago, that was -- you could say in the 50s and then perhaps in the incubation phase you had 20. Now we are rather in the 1,000s in initiation phase. We probably are having numbers of the 100s in ideation, but we still have around 20 to 30 in incubation. And I think the big thing is not only how many that pass through, but it's actually the quality and the caliber as well as we've also been able to reduce the investment level per project quite dramatically. So we -- our starting point was where we -- I think we spent too much on products for too long. So I think that is hopefully giving an indication where we are at. But I think the big progress we're improving -- by the bigger volume and bigger discipline and higher velocity, we actually get into a better caliber and quality of the ideas they're going through to say just when we're doing it to the lower cost per idea.

Maybe just to follow up on that because, obviously, this is very much a kind of private equity type business model, try lots and hopefully a couple pay off.

Yes.

It's fine failing fast, but you're still spending money. So to make any of this pay off, you still need something to be successful. So do you have confidence you will get something through incubation then into acceleration and making it to that scale that can justify and pay off the -- [ thousands ] of projects that have had some level of investment in?

Yes. I think a fair and good question. Yes, I have confidence in that. And I think the big reason is we're still limiting the investment quite a lot in the -- you could say what we are in Ericsson. So that is the limited part of the funnel. So where we actually spend more are the ones where we calibrated and validated more. And I think there's one area where we see enormously strong growth, which has a lot of value, I would say, in and itself and that is really the IoT platform. So that's one that I see big hope for and then we're hopeful, but I see the true potential in it -- this delivering in line with expectations. The other part is dedicated networks together with 2 other confidential -- or you can say, opportunities that are fairly late in the incubation phase, they all 3 have the opportunity -- well, are in position to be able to move next stage. So I think we have a strong pipeline and much stronger than we've had for a long time.

Super. And with those final comments, we will conclude today's call with Åsa. Thank you very much, Åsa, and thank you very much, everyone dialing in. I hope you found the call productive and interesting. A week from now, June 3, we will have a session with Peter Laurin, the Head of Managed Service. So stay well until then, and goodbye for now.

Thank you, all. Thank you.

This now concludes our conference call. Thank you all for attending. You may now disconnect your lines.