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

Hello, and welcome, everybody, to this fireside chat from the -- live from the Ericsson studio here in Kista in Sweden. This is the second round of fireside chats with market area heads that we do leading up to the Capital Markets Day later on the 10th of November. So today, we have 3 of our great market area heads present here on the chat. We have Chris Houghton, who heads up Northeast Asia. We have Nunzio Mirtillo, who heads up Southeast Asia, Oceania and India. And we have Fadi Pharaon, who heads up the market area Middle East and Africa. So just a few words about these regions or market areas then if we start with Northeast Asia. This is a high growth region. We saw 20% year-over-year growth in the second quarter and even 49% of growth in the third quarter here driven primarily by Mainland China, but also Japan and Taiwan, for example. And this area represents about 15% of group sales with SEK 8.8 billion of sales in the third quarter. Then we have Southeast Asia, Oceania and India, Nunzio's territory. We saw a slight decline here in sales in the second quarter due to some COVID impact in India, among other things, but a bounce back in the third quarter with 11% growth, FX-adjusted. And there we saw growth in Australia and Indonesia, not least. This area represents about 14% of the total group sales with a turnover in Q3 of SEK 7.8 billion. And then finally, we have Middle East and Africa, of course, hit by some macroeconomic uncertainty, partly in the wake of COVID, as well while in Africa, mainly, but in Middle East, we saw growth also in the third quarter. This area has a revenue of SEK 5.5 billion, which represents then 10% of group sales. And before we continue now, I would like to introduce also and welcome here, Peter Nyquist, who is the Head of Investor Relations. And Peter, would you like to tell us perhaps how this next hour will be run.

Yes. Thank you, Carl. It's very straightforward. We will start with the fireside chat, as Carl said, with Nunzio, Chris, and Fadi. After that, we will have a Q&A session. This will be done a little bit differently than a normal call. You need to post your question on the website, and please do that as we go. Yesterday's event, we had a little bit of problem with that. We received all the questions as we had closed the event. So please do that as we go. Focused, of course, questions on the market areas. Questions regarding just -- covering segments and the group, we will handle on the CMD here in -- on November 10. And finally, this fireside chat will be recorded, and we will post the event slightly after we close this event, together with yesterday's event that covered the North America, Europe and Latin American part. So with that said, we will move again to you Carl.

Thank you, Peter. Excellent. And we know the rules of the game here. And we'll turn to our market area heads in a second. I just wanted to introduce by saying that, obviously, 2020 was a year that probably nobody could have imagined really. We've had a pandemic that has impacted the world very heavily. At the same time, this has also demonstrated even further, I would say, how our sector, our industry, what role it plays to actually -- both when it comes to coping with the pandemic, but also when it comes to recovery post-pandemic, and we see, of course, 5G as a means of driving economic growth and recovery from that. We have about 85,000 people working from home since this pandemic started. And I said it yesterday, but I'd like to repeat how proud I am and we all are in the executive team about all the people who actually managed to serve customers and develop products and do all the other things in the company like never before, in spite of this challenging. So we have experienced so far rather limited impact of COVID. At the same time, this year was, of course, when 5G really took off. And there's a lot of excitement, of course, in our industry, in our company about the opportunity that 5G is bringing. But now I'd like to ask you, Nunzio, if we stay on the topic of COVID-19, then what are you observing in your market area when it comes to traffic patterns and so on influenced by COVID, short term, long term, CapEx, OpEx, redistribution, anything that you have seen. Nunzio?

Well, thank you, Carl. Obviously, I think this unprecedented pandemic situation has led to a wave of explosion of mobile data traffic. Some operators, they have experienced around 20% data traffic increase. And it is both -- is bidirectional, it is both download and upload. And we have also seen voice traffic going up actually. There are many proof points and things that we can describe. Obviously, the traffic pattern has changed completely because people is not commuting or is commuting much less. They are working from home. They are connected being at home. So we don't see anymore only one traffic peak, which we usually was during the evening, right, when people was commuting. Now we see the part time distributed in a different way of the traffic, and we have peaks also during the day. We have done also some study based on our consumer lab, and we have seen that global leverage is that people is connecting 1 hour more, on average per day, on mobile. This is kind of average. Then we have countries where you have limited availability of fiber or cable or ADSL. In that case, for example, India, people is using mobile network 2 hours more per day on average, which is obviously a lot. When it comes instead to why this traffic is increasing, it's kind of obvious, it's more usage of social networks, it's more use of kind of application for smart working or video streaming. Those applications kind of demanding more traffic, and it's also -- the partner is different is bidirectional, it's both download and upload. When it comes to CapEx and OpEx, I think we see 2 things. For example, one phenomenon is one on fixed wireless success. And we see a kind of worldwide end in wire in some countries as such or an increase of demand for fixed wireless access. That's obvious because you have areas where you have no fixed network connection. You need a reliable technology. And now with the latest 4G and 5G, obviously, you can get quite great quality with a fixed wireless success. We see an explosion. Actually, we also see that by now till 2025, fixed and wireless access will grow 8x, and will represent in 2025, around 25% of the total mobile network traffic, with around 160 million connections, which is obviously huge worldwide. CapEx, OpEx in the market area, we have seen a small decline in the revenue of our operators. This is obvious, especially in some countries, which are very much a tourist kind of based of economy. You see a decline in the roaming fee. We see a decline also in the selling of device and appliances or in some countries, it is difficult to recharge your prepaid sub. This is kind of implied, a small decline in revenue across several countries and several operations, but we have not seen a part of India, which you mentioned in H1, we have not seen a decline or a major decline in CapEx, actually. And if this trend will have an impact in the future, this has to be seen. And by the way, India, in H1, it was COVID that did hit that country in a dramatic way. And then we also had the discussions around AGR and Supreme Court, which now came to an end. So in H2, we see India going back to normal because, obviously, the traffic demand is huge. And operators, they have to cope with the demand and provide service with high-quality and with higher capacity than before. I mean this is what we see in the market area, Carl.

Thank you, Nunzio. That's great to hear. And if we contrast that with what you see, Fadi, in Middle East and Africa, any differences or is it more or less the same pattern that you can observe?

Definitely some similarities, I would say, Carl, for [ for, we think ] we saw a very sharp increase in the mobile data traffic, but it varied from country to country. One cause for this variation could be very much the availability of advanced fixed broadband. But I would say that one rule is that in the Middle East side, for the mature telecom markets, we saw either stable or relatively, let's say, modest increases of the data traffic. We're talking from 0% to 15%, 20%. Contrasting that to the sub-Saharan market where we absolutely had data traffic soaring. We're talking about 30%, 50%, all the way sometimes to 100% in certain markets. Voice traffic, though, for the majority of the operators here has been going in the kind of a zigzag pattern. So dipping a little bit, increasing it a little bit on a month-to-month basis, but no real, let's say, dramatic changes either on the upside or on the downside. Also, as Nunzio mentioned, we saw some traffic patterns. One of them is the movement of the traffic from industrial commercial areas into residential areas and service providers had to accommodate that. The second one is the upload traffic. It actually increased 2:1 ratio compared to the download traffic, and that's very much because of all of the collaborative tools and just like we're doing right now, video. And the third, when we looked at what kind of applications were most popular, we saw a very big uptake in video platforms and video consumption, but I would say by far, it was the collaboration tools that went even more further ahead of that. In terms of the CapEx, I would say that the operators tried in the immediate weeks and months after the lockdown started to mitigate these traffic changes and invest to ensure that online gaming, online health, online work is actually being able to be conducted with a very hard experience. So that's where the focus of the investments was in the imminent phases. We saw some operators being a bit more cautious on the overall CapEx made, I would say, in parts of sub-Sahara Africa. But we also saw opportunities emerging up like fixed wireless access being a keen area of interest for many to open up a new revenue pool. What's probably very telling for our region and, in particular, on the Africa side, is the fact of the phenomenon of payment, touchless payment. So anything to do with mobile payment was incredibly popular. And the offering of fintech in this region, meaning you use your mobile phone as a wallet, really went up incredibly, both in terms of numbers of subscribers, but also in terms of usage from existing ones. We are very happy to see this. In Ericsson, we have quite a well-established installed base now with the world platform, and we are supporting our customers with, let's say, deep insights on how to deploy this even further.

Thanks, Fadi. It's clear from you -- both of your answers how essential telecom is for societies now during this time and how much change we have actually seen due to the pandemic. And of course, with 5G then, we will see, I mean, obviously, further enhanced capabilities in that technology compared to previous generations and so on. And this is on top of everyone's mind. So if we shift a little bit now to 5G, and I would like to ask you, Chris, when it comes to how operators are commercializing 5G what do you see? And you have some very early adopting markets in your region? What have you seen around that, Chris?

Yes. Well, thanks, Carl. I mean, so far, not so much change compared to 4G on the tariffs and how that's commercialized. I mean let's not forget, I think in Northeast Asia, we have massive coverage of 4G with very high capacity, high-performing network. So what's there already has been very, very good. So when it comes to 5G, particularly on the enhanced mobile broadband on a consumer play, first of all, no real big change in how that's commercialized. I would say that the operators have tried to pitch 5G a premium to 4G, no big price war. They want to avoid that type of thing. So we've seen prices being pitched a premium to 4G. We did see, of course, in Korea, when they first launched, there were some novel services. 360-degree baseball views and more interactive on baseball, which is the popular national sport there and also interaction with the boy bands, which we know, they're kind of national support in Korea as well for young people. So we saw those new services, but not as so dramatic yet. And let's not forget Korea is on NSA as well. In China, again, no real difference in the traffic we saw in the tariffs sort of a 4G, 5G bundling situation initially. I think, of course, as we get to the stand-alone phase of 5G, that's where I think we're going to see the real change. And as you know, China has very, very big ambition to connect its whole industrial base to 5G. And there, we're going to see, I think, huge developments there. And we haven't just haven't seen that yet because the rollouts happening now. And in Japan, we're really going to see the rollouts from now on all the way through 2021. So I think, as you see, Northeast Asia as we get to this enterprise play and that's where I think you're going to see these new tariffs because it's new revenue pools for the operators. But so far, it looks very similar to 4G.

Interesting. I will continue to follow this extremely closely, of course, in that region as well. And if we turn to you, Fadi, in the Middle East, of course, we have seen accelerated 5G deployments now and not least leading up to some of the massive key events coming up like World Expo 2020, but also, of course, the FIFA World Cup 2022. So how are operators there getting ready to commercialize 5G?

Yes. I mean, definitely, like Chris was mentioning, we see 5G as opening really world of opportunities for our customers here. But it's going to occur in multiple stages. And right now, we are in stage 1, where the main service focus, let's say, will be enhanced mobile broadband and fixed wireless access. And stage 2 would be a focus on industrial use cases, private networks, but that one still is at early stage. We can see that here in the Gulf and the Middle East, the operators have been investing quite a lot in 5G Massive MIMO, so that they sure they build the infrastructure with good coverage and performance, preempting the uptake of the 5G services. In terms of consumers, we count today, 10-plus 5G-enabled smartphones. There are a few customer premises equipment for fixed broadband in the market. But of course, what everybody is looking at and waiting is the launch of the latest iPhone 12, which is looked upon as triggering a wider 5G adoption. When it comes to the offerings in the market. We've seen that the operators have focused on gaming packages, for instance, which is natural when you're riding along the trend of cloud gaming. And in terms of pricing, we did see actually premium being charged compared on the higher traffic years for 4G, anything between 10% premium, up to 40% premium. And coming back to the events that you mentioned, the World Expo 2020, the World Cup 2022, those have really a positive impact on introducing the power of 5G to the broader masses. Because we will see more immersive applications that will enhance the experience for the shows, sports or gaming, whether you are sitting in there amongst the crowd, watching the event or thousands of miles away. So we are very proud to have our technology to be amongst the delivery for such events. All in all, the big opportunity, I would say, is in the industry and enterprise space, and there's a lot of work ongoing right now to make sure that we unlock that potential with collaboration amongst, say, industry-specific ecosystem player. And when we combine 5G with cloud and AI, and we try to understand how can this digitization help productivity in the countries that we work with, this is where we will see a real advancement of the adoption.

Great. And if we stay on this topic and drill a bit further, Fadi, then given what you and Chris now talk about how operators commercialize 5G what -- how would you describe the biggest challenges and opportunities for operators in your region right now?

Sure. I mean look, I would say -- if I start with the challenges, the common ones, the 3 main ones would be monetizing the network investment, driving efficiencies and delivering a differentiated customer experience. Of course, the impact of the pandemic and the global economy has led to consumers and enterprise spending patterns going down. So those needs are accentuated even more. But we are partnering with our customers to support them on these matters. So if I take, for instance, the example of how do you optimize your investment. We will work today with a program, which we call the Smart CapEx approach. We support our customers to achieve the highest return on investment in the shortest possible time by advising them on what technology to invest in, where to invest down to which site and when to invest based on the traffic usage that we are predicting and the smartphone penetration. To give you an example on efficiency, I mean, this is a [Audio Gap] will band triple band products. They consume less energy, less footprint, all the way to more AI, machine learning on how we can manage and operate the networks and hence, reduce OpEx. And finally, in terms of differentiated services, we mentioned a couple of times fixed wireless access because today, you can also see where you have more availability within your network, and you can use that to offer services to the households. So those are the challenges. In terms of the opportunities, I mentioned the 5G answer when it comes to the Middle East, I would like to spend a couple of seconds on the prospects of Africa. If we look at our mobility report there, we see that the number of mobile broadband connections in Africa is going to be growing really rapidly. Today, we see 1.1 billion mobile broadband connections by end of 2024, which represent 80% of the total number of mobile connections on the continent. This is going up, by the way, from 45%. And on 4G LTE, this increases even more rapid. We are seeing it rise from almost 100 million connections by end of 2019, tripling up the penetration to [ 335 ] by end 2024. So smartphone affordability, I would say, is the key for success in sub-Sahara Africa. And we are seeing now operators introducing, let's say, sub USD 40, USD 30 cost for smartphone or very innovatively offering smartphone for a few cents per day that you would actually pay for with your mobile wallet.

Yes. Thanks, Fadi. It sounds like a good opportunity there as well. And then Nunzio, what would you say, challenges, opportunities, which are the main ones in your region for our customers?

Well, thank you, Carl. In my region, I think the fundamentals of the industry are very strong. So we still see, I mean, opportunities [ all over for us ] to grow, both on 4G and obviously on 5G. Then trends are very much the same as Fadi mentioned, right? If I look at challenges and opportunities, because they go together, right? The challenges might be transforming the opportunities are very much the same as you can cement in 3 buckets: operational efficiency, customer experience and the new revenue stream. So if you like, monetize on the 5G platform as long -- as well, apart from that. When it comes to operational efficiency, it's very much, Fadi, said the same, right, to use the CapEx in a smart way. I mean, in a way, the most precious asset of the operators is the spectrum, right? So if you have the spectrum, I mean, it's like you buy a sports car, a Ferrari or a Porsche, you cannot park the car somewhere and not use it. So you need to use the spectrum. And the best way to use the spectrum is to invest on new technology all the time. Being the 4G, the latest or obviously, 5G. With 5G, for example, you can reduce the production cost of the gigabit up to 10x compared to the old 4G technology. So if you don't do that, it's like you'd have your sport car parked, right? That's one. Then for us, it's obviously a great opportunity, I mean, to help, for example, operators in India, where traffic demand is growing to the maximum and they need to use a very, very competitive from a TCO point of view technology, but also the latest possible technology exactly for the same reason, to squeeze up the spectrum to the maximum possible capacity. And if you do that well, obviously, as an operator, then you gain a competitive advantage. Anyhow, you have different opportunities when it comes to revenue streams, depending on where you are. I mean, fixed and wireless access, this was mentioned. I did mention before, that's one. We see opportunity on IoT, both critical and mass IoT usage. And obviously, we see a tremendous opportunity with the 5G platform when it comes to the business and enterprise. I mean all governments are now supporting digitalization of the countries, including enterprises, because, obviously, everyone understands that the digitalization is maybe the main reason to go back to GDP growth after COVID. And when it comes to enterprises, we did a study with Arthur D. Little and we see a tremendous opportunity. We have been announcing that before. It's kind of USD 700 billion opportunity available for the operators to address in 2040, out of which, my market theory is around USD 40 billion. But consumers are also part of that. I mean, Fadi did mention it. We see gains. We see augmented reality and obviously, capacity and speed. I mean it's possible now that you play games because of the low latency on 5G. So you can do things that before, you could only do at home connected to a very powerful WiFi-based connection. Now you can do that on mobility as well. So a lot of challenges, but equally, a lot of opportunities.

[indiscernible] as well, yes. Thank you, Nunzio. And of course, what we are here to do is to help the customers overcome those challenges and capture the opportunities as well. And of course, that's our focus, to stay close to customers and offer the greatest technology, the greatest solutions. But reality is, of course, also that there is competition out there. And Chris, what would you say? How -- are there changes in the competitive landscape or the situation around that? What will you say?

Well, I have the pleasure to live -- to work in the kind of home countries of some of our biggest competitors, Huawei, ZTE, Samsung, all based in my region and also NEC producer there as well. So competition is tough. It always has been. And I think at the beginning of the cycle, I think what we find in the 5G, I mean, our customers in this part of the world, they want to make a long-term relationship. They're very explicit on those things and selecting a long-term partner. So the key thing -- I mean, of course, price is always there. It's always -- you have to be competitive on price. But I would say the beginning of 5G, beginning of this new technology cycle, is much more about the technology and the road map. There has to be a confidence that we can deliver, and that's been the real driving force there. I think probably later in the cycle, price becomes maybe more important when you see what everyone can do. But definitely, in the evaluations, we've been through its majority of the waiting has been on technology and road map and capability to deliver. And then the prices has come after that. So I think you can't price your way out of your road map. So we've seen that as well, obviously, with people who, at a low price, to try and stay in and it just doesn't work. And that's true for all markets. So I think this, TCO is key, of course, in there, but really around that initial technology. And I think that's why we've been successful, to be honest, in taking market share in Northeast Asia because I think we've got that capability. We have got a great road map, great technology, on time, and we have a competitive price with that as well.

Excellent. So technology of today, but also credibility when it comes to technology road map, that's what I hear. And Nunzio, would you agree, do you see something else around the competitive situation? Maybe India, Australia, for example?

Yes. I mean maybe India, right? If you take India, 3 or 4 years ago, India was a country, I think numbered 140 when it comes to mobile data consumption, now it's number 1, only in 3, 4 years, right? So imagine the dynamic in that country. There were 10 operators. Now there are 3 plus 1, it's Vodafone Idea, Jio, Bharti plus BSNL, which is a state-owned operator. And if you look at that country, obviously, it is cost driven, but not all. To Chris' point, I mean, cost driven is not good enough. I mean, you need to provide the best possible TCO. I mean you need to be competitive, but you need to also provide technology, so that you can provide actually the capacity and the speed and the liquidity that the market is requiring for. And that's why we like that market so much, because we believe that we are not only competitive, but we are also kind of leading on technology all the time. India is also interesting because 1 year back, all operators, in a way, they have increased their tariff fund by 15% to 33%. And without any disruption when it comes to subscriber acquisition because, obviously, it's a proof point that the value of what we provide as an industry is highly, highly regarded, right? So that was a good point. Australia, they have launched 5G. They are always on the cutting-edge of innovation. So the operators, they made possible to have 5G rollout live already in 2019, so that the country is kind of on a leading seat when it comes to digitalization, also including fixed and wireless access, everything that is high tech, I mean it goes to Australia quite immediately, which is also, I believe, one of the reasons why that country is so successful. Never, never give up on adopting new technology. The geopolitical, to Chris' point, I mean, I'm also kind of close to the home turf for our competitors from China. I could mention when it comes to geopolitical tension cases like India where we have seen it or Australia, right? But in a way, we as Ericsson, I think we simply ignore it or I ignore it. Because I know and we know that the only way for us to have a sustainable future, is to compete on our merit, right? So at the end, we have to provide the best possible TCO. I mean, we have to continue to lead on technology and win business on our own merit. That's the only thing we can do. I mean to stay successful in the future.

Very clear. Yes. Thanks, Nunzio. One interesting phenomenon at the moment, which is discussed quite a lot is ORAN. And if we stay with you, Nunzio, what is the dialogue with your customer when it comes to ORAN at the moment?

That's very interesting question, Carl. Thank you. It's a lot of discussions, obviously, a lot of -- especially in India again, right? I mean India is a huge country, numbers are massive. So operators, I mean, they need to explore all possible options. Short-term and long term. That's normal, I think. When it comes to Ericsson, I mean we are engaged and we participate to all alliances and those standards. We are part of 3GPP, a part of ONAP, ORAN, obviously. And why we do that? Because we want to contribute, and we are contributing to the main requirements of ORAN and obviously, leveraging on the foundation of 3GPP. And obviously, it is part of our strategy to provide openness. We have a proof point. We started on core a few years back. And we are now on the leading seat. We can provide a virtualized score. We can provide cloud-native core. And the operators, they can use whatever [ courtside ] they would like because of the openness principles. And so we believe that, obviously, we are doing the same on RAN. And actually, a few days back, we have launched our cloud RAN, which we believe is the best product portfolio, cloud RAN based. Why we have done it? I mean we have done it in line with our leading customers, right, with their time plan, so that we can provide them options. Options, right? And you can go with purpose-built networks or you can go with our cloud RAN based network for some applications. Depends on the applications you want to launch.

Yes, cool. And thanks, Nunzio. And Chris, what about Northeast Asia? I mean given where we are with 5G and the many early adopters on 5G in your markets, has ORAN come up as a key topic in your discussions with customers?

Yes. I think it didn't start in our region, to be honest. I think it's been -- the interest has picked up as it started elsewhere. But of course, I mean, the operators in my region they're interested in technology. So the latest technology that's out there, people are talking about, well, what is this, and they want to take a look at that. So yes, we've had lots of discussions around this, to be honest, and Nunzio gave a very good example of the situation. I don't need to add to that. I think what we see is that with the networks that are out there, what the consumer wants in Northeast Asia, we have very high-quality networks in some of the biggest cities and most densely populated places in the world. What our customers want to do is look at that technology and test it out and make sure it's robust before they deploy that. And I think that's the phase we're going in now. They're going to look at it. They're going to test it to death, and then they're going to see what they're going to do with this. So we're in that phase, really of the discussions and deployment around the ORAN.

Thanks, Chris. And I wanted to round off this part of the session here by asking you, other than what we have talked about or if you summarize, what are the key trends you see in the market currently? If we start with you, Nunzio?

Yes. I mean again, I mean, I think 4G, if I take my market, for example, I mean, 4G is now around 50% of the subscribers, they use 4G. And 4G will stay very strong. In 2025 around 65% of the subscriber in India, we'll be using 4G and 18% LTE, according to our mobility report. In the rest of the market area, which means Southeast Asia, Australia, altogether, it will be 63% 4G and around 21% 5G. So 4G, will stay very relevant. 5G, obviously, will be extremely important for the operators. I mean to be fast mover and to capture all the opportunities we have been talking about, both on the consumer and on the business side. Fixed wireless access, we see big opportunity in several countries. There will be a tremendous explosion. And when it comes to 5G as such on the business, I think we will see very soon examples of 5G-based new use case for smart manufacturing, for agriculture or for mining, for example. When it comes to the consumer, this was mentioned before. I mean it will be -- when the 5G platform will be there, I mean, it will be an explosion of new use cases, like based around augmented reality, virtual reality, latency, which is very low games and so on. Our job, as Ericsson, is not only to invest and making sure that we will always offer the best possible technology to optimize this issue but we are also willing with our leading customers to co-create use case together for the enterprise business or for the consumer business. So we are -- obviously, we want to be very close to them so that we can help them 360 degrees technology and also sharing all the best practice we learn around the world.

Thanks, Nunzio. We go to you, Fadi, big megatrends in the -- for the future now in Middle East and Africa. What would you what would you list?

I'll probably start with the fact, which we all see, and that is the need for digital ways of working that this pandemic has accelerated and in fact, more, let's say, open adoption of such digital tools and digital ways of working will frankly benefit the entire industry. Starting with the consumer and enterprise, who are now already formed advanced services and all the way into how we actually deliver our own technology and then manage it. And this fits very well from a timing perspective, because if I look across our region, we have many countries who are driving ambitious economic reforms and national visions whereby they want to transform their own economies, so they can play a bigger role in the fields of advanced technology and services. So this acceleration is really beneficial to support those visions. The second one is that I'm very passionate about what the Middle East and in particular, the Gulf countries are doing in terms of big deployments of 5G in the mid-band, preparing the networks for very big and large rollouts. So once we see the adoption starting enabled by the smartphones or moving forward by the private networks, they will get a really good service and very good coverage. And I think that will make all the difference in the speed of the uptake of future 5G services. And finally, the momentum that I described in Africa and sub-Sahara Africa, in particular, in terms of the uptake of mobile data, be it still on 3G and even more so now on 4G. It is going to continue for a few more years. And it comes with a real purpose because the more this ICT infrastructure is being deployed, the more actually you're supporting to bridge the digital divide, you're supporting education, health, innovation, entrepreneurship. So all of these elements are coming together to really boost an inclusive economical growth in Africa.

Thanks. Sounds very promising, Fadi. And what about you, Chris, trends in your markets currently?

Well, I think we've seen this very fast and wide deployment of 5G. I think on the mid-band, so you're going to see countries markets, populations covered very rapidly with 5G. And that's where the investment is going now. I mean the investment shifted markedly from 4G to 5G. We've seen that. I think at the same time as we have that, we'll also see this a lot of interest now and focus for the operators on moving into enterprise, finding new revenue pools. So a big focus there. Looking at new ways to do that. And I think we'll see more and more of that over the next few years. So the operators try and capture the enterprise business today using 5G. And then finally, I think it's the government interest in 5G and technology. We've seen that right across my region. Of course, China, had a very strong plan around this. And as part of their 5-year plan and their industrial base on 5G. I think we've seen other governments in the other markets take note of that. Of course, there's some geopolitical and local tensions around that, the spur of the moment, you've seen government taken a large interest in 5G, wanted to go faster rollouts and also promoting national champions. And I'm not just talking about Huawei and Samsung here, for example, 2 big companies already in this area. But if I look at Taiwan, Taiwan -- Taiwanese government is looking to get their own companies, Taiwanese companies, into the 5G space as well, and encouraging that type of thing. So I think it's a very, very hot topic, both on the private sector and the government sector as well.

There are some big trends right there. Thank you, Chris, Fadi and Nunzio for this part. We'll now go to Peter and see if there are any questions on the webcast here on the chat.

Yes. Thank you, Carl. I have seen some questions, a few of those. Some of them are quite long, so I will try to shorten them. But I guess, the first question comes from Fredrik Lithell at Danske. And it goes to all of you, actually, and it comes back to the pandemic and the possibility to conduct business. And the question is, how has the interaction with customer work? Have you been able to replace physical meetings with digitized meetings? And do you see this will impact customer meetings going forward? So how does that impact your meetings today with customers and going forward as well? So let's start with you, Chris, and then we'll take Fadi and then Nunzio.

Yes. Well, I guess, in my other part of the world, we were the first into the pandemic and also the first out of it. So to be honest, in China, it's back to normal. In Japan, it's -- and Korea, it's managed. So I mean, all the customers are back in the office. And a normal situation, of course, people wearing masks and taking all the other precautions, but it's business as usual. I think the difference is when it comes to global travel that we're facing with people, their flight into the studio in Kista or our colleagues from Kista flying out to visit in the market. Those types of meetings we've managed over video very successfully. And so we haven't seen an impact from the business interaction, to be honest. I'm doing a lot less traveling. So that's just one thing. Apart from that, no.

And I guess, Fadi?

Yes. I mean since probably mid-end of March, I mean, the lockdowns have hit different countries in our market area. And I've been not traveling since end of March until to date. The majority of all our offices are still closed, except for business-critical operations that are very few and apart. So basically, we have been very successful in keeping business continuity. And that goes across customer meetings over video, engagements over road -- road map, sorry, and portfolio development as well as deliveries. So this is the escalation that I spoke about earlier, how actually everybody, service providers, ourselves, have adopted a lot of new tools very, very quickly and it's been working, I would even may venture to say in a more productive manner, we can have much more and more frequent customer interactions today than in the past when there was a very busy schedule to manage multiple in our airline schedules and so forth. So now it's actually going very, very smoothly.

And then finally, Nunzio?

I mean 2 sides, right? I mean, as Chris and Fadi, said, it worked out pretty well. My market area is still in lockdown. I mean obviously, we have our field engineers, they go in the ground and they do the activities like the solid networks and so on and big thank to all of them, including the labor side. From network quality point of view, quality of the network has rather increased rather than decrease during COVID, although the traffic has increased a lot. I think that is due to maybe we planned better, we are thinking more and also there is less mobility. When it comes to customer interactions, as Chris and Fadi said, it's no problem. It's also because we already know our customers, right? Although it's a bit boring, to be honest. So I really hope that we fix COVID and we go back to a new normal. At the same time, as Chris was saying, we are -- and Fadi, we are traveling much less. And so maybe we were traveling too much before. There is a need for -- to go back to a kind of face to face meeting as well. So far, no problems. We can connect more. We know customers. They know us. We are building on the trust that we have created before. If there are changes or new organization, new people coming, then I believe it will be a bit more difficult to kind of create the right chemistry and intimacy, right? So, so far, so good. But anyhow, let's hope we fix COVID, so that we can go back to a new normal.

I understand it's boring for the 3 of you, extremely sociable interpersonal people. So I understand that. But it seems like you're coming through really well with customers anyway.

Thanks, all. And I guess we all echo that. Let's fix COVID so we can continue the normality. The next question I have is from Dominik Olszewski from Morgan Stanley, and that's for you, Nunzio. And it's about India. And the question is, how does the company balance the large opportunity in India against the regulatory and competitive pressure you have in that country?

Yes. Kind of try to answer to the question earlier before, I think it goes hand-in-hand. Because today, if you take India, for example, until a few years back, it was a kind of cost driven only country. You needed to be kind of low-cost in deploying networks. And -- but the country as such was kind of behind, right? They were still using GSM where everyone else was on LTE. Now India has changed. Now India, they are on the cutting-edge of technology, and they need the newest possible technology and this is with our kind of strategy is exactly that, to make sure that we double down on technology, so that we lead the technology, not only to provide new feature as additional capacity or low latency, for example, for 5G, but also simultaneously reduce as much as we can, the cost per gigabit. So unitary price, I think, is less important today. What is really important is the TCO and how much can we decrease the unitary cost of the gigabit production. And this is very much to do with the strategy and -- the CapEx strategy and the road map you have and the less to do with unitary price. And in that line, we are working and cooperating with our customers. And proof point of that is that we have now, without mentioning any details, but we have increased our market share in the last 3 years, both on core and radio. So we have proven to be competitive. And we are also very interested in that market because it's a huge market with a lot of challenges, which are opportunities for the ones that wants to fix them.

Thanks, Nunzio. If we continue here, the next question is for you, Chris, and it's about Japan. It's from Achal Sultania from Crédit Suisse. And the question is, it seems like Japan has been slow so far on 5G. Any particular reasons causing it? And does that change as we go into 2021?

Yes, I think you'll see that change in 2021, very clearly. I mean, Japan is a massive iPhone market. One of the biggest iPhone markets in the world. So I think the operators -- let's not forget, they also have a fantastic 4G coverage, both indoor, outdoor, the loss of spectrum so they can actually manage mobile broadband requirements very well 4G. Now the 5G iPhone has been launched. So -- the plans are well on track now for Japan to roll out 5G in 2021. So in some ways, you can say, as Japan hit the sweet spot here, I think the aspect is probably be very small. So I don't think they missed the boat. I think they probably maybe just got it absolutely right.

Great. Thanks, Chris. We have another question here or a question for you, Fadi, and that is from Amit Harchandani from Citi, and that goes back to Africa that you've been covering. And is it regarding how 5G would develop? But more specific, is there risk growth in Africa with dilutive, actually your earnings?

So in terms of 5G in Africa, we have launched 2 small rollouts there with 2 customers. There is interest, which is increasing, in particular for fixed wireless access, where it would make business sense to deploy it. And in relation to the second part of the question, I think that this would be the same business that we would do in Africa, this is very similar around the world. It depends more on the type of the configuration of the network, in terms of the phase of the deployment that we are seeing. But overall, in the medium and long term, it would be in the similar levels.

Okay. Thanks, Fadi. And here's another kind of question from Sébastien Sztabowicz. It's about NEC, actually, one of our competitor. And the question literally, it seems that NEC could be part of the 5G rollouts in the U.K. Are you seeing NEC expanding into your own markets outside Japan? I guess, Chris, you know them from Japan, but have you seen NEC in that content? Nunzio?

No. No, I have not actually. So I am not experiencing -- we did not see NEC around so far.

Okay. Fadi, any?

No. We have not seen them in Middle East and Africa, at least not from a pure radio perspective. Sometimes on the transmission, but not on radio.

But I guess, Chris, you are aware of them from Japan?

Yes. They were -- they're in Japan supplier to DOCOMO, but we haven't seen them in other markets. And I think in the U.K., the announcement around the U.K. was, I think, tied to the Japan and new Kagame has signed in a trade deal post Brexit. So I think it was -- that's where the announcement came out in that mix, I would say.

Great. And here's another question for all of you actually. And it's from Alexander Duval from Goldman Sachs. You have talked about some readers needing to deal with more traffic during the lockdowns. How did you deliver on that extra capacity? Was it softer upgrades, what kind of business was it? And is it run and done? Or if there are more lockdowns coming up here, and that could sort of drive more upgrades and needs here during Q4? So if we start with Nunzio on this one.

Well, I think it has been a mix, right? It has been obviously software. Sometimes the software might be the bottlenecks. Sometimes you need to obviously install new radios or new technology. For example, 5G is obvious then you have to obviously install new radios. But sometimes it's also modernization of old radios. I mean with Massive MIMO introduction, for example, on 4G, where you can substantially increase the capacity in big city or in very dense urban areas. So it has been a mix. Nothing really super different during COVID rather than the spike. Because we had the traffic increase along in the last 5 to 10 years, has been increasing all the time. So we were used to that. We were obviously not used to working in a remote way. But also on that one, we did a good job because of our experience on managed services, which we do from our remote center and so on. So overall, I mean we did manage well. I think our operators did also a very good job. I mean, altogether, we have done a good job actually managing COVID. So we are not worried. Yes.

And Chris?

Very similar to Nunzio, to be honest. I mean, we did -- we had mobility in different places, to be honest. So we had to change some parameters, and those things sometimes operate as invested in. People weren't coming into the main cities anymore, they were maybe staying in their home for a few weeks, then those things were changed, but pretty seamless, to be honest, I would say.

And finally, Fadi?

Yes. I would say in the first weeks after the lockdowns, the teams of the customers and Ericsson worked very closely to address this predominantly from a software upgrades on the core and radio where needed. But whenever we did the studies, we were quite surprised that you didn't need that much. Actually, the networks were quite resilient. Even though the traffic increased quite a lot in different areas. So that really is a testament to how much the operators have been investing a bit ahead of the curve, and that served them well during this pandemic. And now moving forward, I think all of us in the industry need to watch out, what are the new traffic patterns. Is it really so that once COVID is resolved, if we may say so, we will go back to the old pattern? Or will we see companies offering more flexibility in terms of work from home? So these things are -- need to be studied, and this is how we will continue working together hand-in-hand to design the networks.

Great. Thanks, Fadi, for that answer and all of you. Here's another question, I think extended to the whole group. And it's from Louis here. And how do each of the regions see government intervention shape in the telecom industry in different countries? New national infrastructure, both fiber and 5G. So if we start with Chris here on this one.

I think the thing we've seen here, probably the great example of that was in Japan, where we've seen the new Prime Minister, before he was the minister that was pushing then for the operators to reduce their tariffs, and that's been a big thing in Japan that we've seen there. And at the same time, also pushing for 5G deployments and also national champions. And from a technology perspective, I think in my region, we're seeing all of the governments looking at China and wanted to make sure that they have very robust tech industries. So I think it's been more from -- less about national infrastructure, more about being part of this 5G boom in Asia and making sure that their own tech companies play a part in that, and they don't get subsumed between China and North America, then they want to make sure that they can be a part of that. That I would say is the biggest trend we've seen from a government intervention.

And Fadi?

I mean I would say, if we look at the MENA region, we have examples, as I mentioned before, of governments deploying 10 years, 15, 20 years, economic visions. And part of those vision is definitely to invest in advanced technology. Not only limited to 5G, but obviously to AI and cloud and ensure that, that contributes to the development of the society, raising the productivity of the enterprise and ultimately then driving a positive GDP. And it's not only limited to deployment of those networks. We've seen examples where governments have been very keen on seeing investments in terms of education of people, in terms of this new, let's say, technologies that I just mentioned. So adopting it and knowing how to work with it.

Yes. And then finally, Nunzio?

Yes. I think some very short summary is that I have never seen the government as close to our industry as today. I mean this is maybe also because of COVID. So the interest in our industry has increased in a substantial week. I think because COVID, because of 5G, because of geopolitical tension, I don't know, but they are all going in the same direction, which I think is good for all humanity. All kind of trying to influence and to push investments so that they can be faster in digitalizing their country. They understand it's a kind of -- it's the new platform for the GDP growth, right? So great -- then it's different country by country. India, obviously, they want to -- they are promoting kind of Digital India and Make in India. In Australia, they have been subsidizing the kind of rollout of broadband for all with fixed wireless access and then [indiscernible] and so on. It's different. Everyone is kind of trying to find a different medicine, but everyone is pushing hard, harder than ever.

Great. Thank you, Nunzio. We are getting closer to the hours. I think I will close the Q&A session here, very good questions and extremely good answers as well. By that, I would like to hand over the word to you again, Carl.

Thank you, Peter. And yes, all that is left to do now is really to thank you, first of all, Chris, Fadi and Nunzio, for this, but maybe even more important to all of you in the audience for attendance and time and your questions and so on. This was, as you know, then the second webcast we have done in this format. Yesterday, we had another one with North America and Europe and Latin America. And both of these will be -- or are already available for replay as well on the web. But I just wanted again to thank you then, and welcome you all to the Capital Markets Day, which will happen on November 10. So see you then. Thank you.

Thank you.

Thank you.