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

[Interpreted] Welcome to Ericsson's Shareholder Dialogue 2021. My name is Peter Nyquist, and I am responsible for Investor Relations here at Ericsson, and I'm going to be your moderator today. The Annual General Meeting of Shareholders of Ericsson 2021 will, as a result of the COVID-19 pandemic, be carried out through postal voting with no physical presence of our -- all our shareholders. The aim of today's shareholders' dialogue is, therefore, to give you our shareholders an opportunity to listen to the representatives of the company and have an opportunity for you to ask questions before its time for the actual AGM 2021 before the deadline for postal voting, which is on the 29th of March. With me via Link, we have our Chairman of the Board, Ronnie Leten; President and CEO, Börje Ekholm; Chairman of the Remuneration Committee, Jon Fredrik Baksaas; and also lead auditor, Thomas Strömberg, of Deloitte. Before we proceed, I'd like to point out that today, we will be hearing presentations both in English and in Swedish. Therefore, there is interpretation provided into both languages. You can select the language you prefer from the top right-hand corner menu on your screen. So here's today's agenda. We're going to begin by listening to an address by the Chairman of the Board, Ronnie Leten, in English; continuing then with the President and CEO, Börje Ekholm, who will be giving a presentation in Swedish; followed by Jon Fredrik Baksaas, who's the Chairman of the Remuneration Committee, he's going to be giving a presentation in English; and then concluding the section with presentations by a speech by Thomas Strömberg, lead auditor of Deloitte; and then it's time for Q&A. The speeches by the CEO, Chairman of the Board and Chairman of the Remuneration Committee will be available on the website of the company after the meeting has concluded today, with both English and Swedish subtitles. 2020 clearly was an usual year with the pandemic, which has impacted each and every one of us in one way or another. Precisely 1 year ago, we organized our last physical event here at Ericsson, that was the Annual General Meeting of shareholders of last year. There was only a small number of people present, but we did manage to carry out the AGM in a responsible manner, nevertheless. After that, all our activities were transferred to the virtual forum regardless of whether it was contact with colleagues here at Ericsson, customer meetings, meetings with shareholders or other stakeholders. From my part, responsible for staying in touch with players and stakeholders in the financial markets, all activities were transferred to the digital arena. Most of us miss interacting with other people, and the dialogue is always more dynamic in a physical context. But all in all, I have to say that it has, nevertheless, worked well over the course of the past year. And we've managed to reach out over the past year to more shareholders, potential shareholders and analysts than we've ever managed to do before. And I would imagine that the future is going to be a combination of physical and digital meetings. Now it is my pleasure to welcome our Chairman of the Board, Ronnie Leten, to introduce today's shareholder dialogue.

Hello, Peter. How is Stockholm doing?

Stockholm is fine. How is Belgium doing?

I think we have a bit warmer weather than you guys.

I guess so. We have to wait a couple of months before we are on your level. Ronnie, on the topic, how the pandemic have changed our ways of working, could you -- before you start your speech, shortly just describe for our shareholders how the work for the Board has progressed during '20?

Yes. Thank you, Peter. Of course, like everybody of us, I think we are working from home because we have hardly traveled, and we have many people from all over the world coming to the Board meeting, so we have shifted to the virtual meeting. So the new normal coming from the face-to-face is to the virtual meetings. But I felt that the interaction, which you normally have with the physical meeting, now with virtual meeting, it's worked rather well, I must say. So people are adapting and getting used to the different Teams meetings, so I'm pretty happy with that.

Great.

So maybe I can start with my speech now and say, dear shareholders, welcome to this virtual event. And as Peter mentioned, the Board has decided that this year's shareholders' meeting will be performed through postal voting, and no physical meeting will be held. So I'm happy we have the opportunity now to meet you and having questions later on. 2020 was a year unlike any other. Ericsson has one of its best years ever and managed to complete its turnaround. Over the last 3 years, the company has restored profitability, increased market share and delivered organic growth, and we continue to see many growth opportunities. Börje, our CEO, will talk more about this shortly. But of course, the year was dominated by the pandemic and the massive impact it had on all of us and on the world, but I am being very impressed by the Ericsson employees in these challenging times. With their can-do attitude, they managed to deliver top services to our customers. I would also like to take this opportunity to thank Börje, the executive team and all employees, once again, for the fantastic job done in 2020. Tough job, guys. And a final note, I would also like to thank Roger Svensson, one of our employee representatives on the Board, who will leave after 10 years. Thank you, Roger, for your active contribution. And with this, I would like to hand over the word back to you, Peter.

Thank you, there, Ronnie. [Interpreted] We're now going to continue with a remark from our CEO, President, Börje Ekholm, who will tell us about this year and what has transpired.

[Interpreted] Hi, Peter. I have to remember the mute button before proceeding. Hope everything is well?

[Interpreted] Yes. Everything is fine here in the studio. Well, you are going to have a presentation, but before starting, perhaps you could tell us a bit about your job and how it has changed during the pandemic? Because in your everyday life, you have lots and lots of meetings with employees and also with customers. So what has the year been like for you?

[Interpreted] Well, it's been a very different year, just as with Ronnie, we've moved. We're working from home. We're working remotely, and that started already in March last year. Basically, all customer meeting is -- have been virtual meetings. We have had coffee breaks, [Foreign Language], and we have had meetings with all employees in different departments and units, and everything has happened virtually. And the most fun perhaps was that we also had virtual Christmas concerts back in December, and we have really used the time, taken the opportunity to experiment to find new solutions. And I have to say that it's worked surprisingly well. But at the same time, I have to say that I really miss this opportunity to meet with coworkers and customers to have those more informal contacts, so I do not think that we'll be able to replace physical meetings completely.

[Interpreted] That's my thought. Exactly. Now your presentation?

[Interpreted] Thank you, Peter. Dear shareholders, this meeting would not have been possible without the digital infrastructure that we have today. And as a matter of fact, in many countries across the world today, there is nothing but wireless connectivity. And we at Ericsson, we're very proud over being a supplier of this critical infrastructure that enables meeting places across the globe. In 2020, we reached the objectives that we set ourselves back in 2017. And thereby, we can say that we have completed our turnaround. We have executed. This was also the year where we saw 5G becoming a commercial reality, and we ended the year with 122 commercial 5G agreements and 79 deployed networks. When we launched our focused strategy in 2017, many said that's not the way to go, and they said our objectives were unrealistic. And many felt that we should focus instead on cutting costs, particularly within R&D. To build a strategy on building the gross margin while it was considered to be something that was unreasonable, but we were convinced that by setting the customer first and placing the customer and our coworkers in the center, that would also return a good return for you, the shareholders, with the customer in the center in focus. Well, it became obvious that competitive solutions with topnotch technology, that is our reason for existing. And instead of saving on R&D, we increased our efforts, and thereby, we strengthened our position. And to finance this, unfortunately, we had to decrease the number of coworkers in back offices supply chain with close to 25,000. But these efforts and investments in R&D, that was the right thing to do. Ericsson today is strong, leading within 5G, and that has also been confirmed through the Gartner's so-called Magic Quadrant where we are highlighted as one of the leaders, and nothing of this would have been possible without our remarkable coworkers. And I would like to say now thank you to all colleagues for amazing efforts. To have highly skilled committed coworkers is decisive for our long-term success. Since Fall 2019, we have worked with a global transformation project, Ericsson on the Move, to strengthen our culture. Around 90% of our leaders have, up until today, participated actively. And in 2021, we're going to intensify that work. And this was actually an initiative that started way back when we could meet physically. And in 2020, many of the workshops that we have had, well, we've continued virtually, and now this is going to be rolled out into the organization. And already today, we see very positive results with strengthened trend, motivation, commitment in the company where we're way above the industry average. So thanks to that focus of -- on customers and employees. We have actually turned the development of the company around. And even if Ericsson had a strong year 2020, it was a difficult year because of the ongoing pandemic. Throughout this year, Ericsson has focused on our employees and customers and partners, their health and safety. And with that priority, it was actually quite easy to make the decision to decide not to participate in Mobile World Congress in Barcelona last year. Instead, we have invested in developing digital events and then, for example, Ericsson UnBoxed. More than 85,000 of our coworkers have been working from home. And as a matter of fact, last year, we recruited close to 10,000 new employees, and most of them have not yet met their manager or their team physically. Ericsson on the Move has been an important part here as well in managing that situation. And here, we see that the true empathy and courageous decisions, we can accomplish a lot. In spite of the changes, we have been successful in executing on our strategy we have delivered to our customers and that, dear shareholders, that shows us what quality coworkers we have. And I'm convinced that we will never go back to exactly what we had before the pandemic. Digitalization is a driving force, and we can save a lot, travel by using digital tools and our coworkers that way, will not have to spend a lot of time commuting because they can work remotely to a greater extent. And just think about what that can mean for the environment and also quality of life. Ericsson, well, we want to lead these developments. Offices will not disappear because we still have that need, as I've said, to meet physically. But I'm also convinced that the ffice of the future will be something completely different. Based on internal surveys, we believe that most coworkers, they will spend maybe half of their time in the office, and that is something we're planning for, but that will also mean that offices will become different with more shared spaces where you can collaborate and meet. And I think this is a very exciting future that lies ahead. We had a good financial year 2020. Organic growth was 5.1%. Gross margin ended up at 40.3% and the operating margin at 12%. Our free cash flow before mergers and acquisitions amounted to SEK 22.3 billion. And that, as a matter of fact, is the strongest ever in the company history. And by now having a return on capital that is greater than the cost of capital, we can, in the future, focus more on growth. Our strategy stands firm, and we see good opportunities for growth in what we refer to as the enterprise segment, which is why we have extended our strategy with investments in enterprise applications. Just as 4G gave that opportunity to digitize the consumers market. I'm thinking about Uber, Netflix and Swish, well, in the same way, 5G will be revolutionary for the enterprise market. Thanks to 5G and its characteristics, companies will be able to opt for wireless connections as a primary connection, and that creates opportunities for innovation. This year, we took a strategic step into the enterprise market by acquiring Cradlepoint. This is a company with solutions for wireless connections of stationary and mobile facilities. Cradlepoint as a win-win with our customers because Cradlepoint's solutions means new revenue streams for mobile network operators. 5G will mean an enormous transformation, and it's not the future anymore. Just look at the number of speed tests that were done. This is Q2 2019. And compare that with what we see here, which is Q3 2020, an amazing increase. We estimate that end of 2020, there were about 220 million 5G subscriptions globally, and that's up from 12 million the year before. But Ericsson leads the development. Well, of course, that is something we're very proud over, and we see that, not at least in our patents portfolio, where we have more than 57,000 granted patents. We're the world leaders. And according to independent evaluators, this is the strongest portfolio. And to get paid from other parties that use the patents, well, that is necessary to be able to continue to invest in R&D, and it's also prerequisite for the industry open standards. But this also means that we will have to act forcefully if someone violates these conditions. Here, I would also like to mention the global standard. Thanks to the global standard, we can now travel with -- well, basically to anywhere in the world with just a phone. But what is even more important, as a matter of fact, is that the global standard means that the price for communicating has come down to such an extent that we, today, have more than 8 billion subscribers or connections. And as a matter of fact, more people today use their phone every day than brush their teeth. In 2021, we will see a continued extensive rollout of 5G. And alongside, there will be many innovations on top of the networks. And I have a word of warning. Let's not focus too hard on identifying what is usually called the killer app of 5G. There's a striking analogy to 4G. When 4G was launched, we didn't know that e-commerce and streaming would become such important application, and that's basically all social media would transfer across to wireless connectivity. And it's the same thing with 5G. We do not know what's ahead. But we are entirely certain that 5G will create the prerequisites for forceful innovation of entirely new applications impossible for us to imagine today, and I remain very concerned over the development we see in Europe, where we are lagging more and more behind both China and the U.S. Of course, Europe will have access to all these new applications, however, those applications will be created where the networks are located first, hence, future job creation is at stake, future job creation in Europe. If we have a look at 4G, we see that Europe is lagging by about 2 to 3 years compared to North America and China. And today, we see very few digital champions in Europe. They can be found in the U.S. and in China. So it is absolutely essential that we do not repeat the mistake we made with 4G in Europe and that we can find ways to speed up the rollout of 5G. To me, this is one of the major political issues of our times. But back to Ericsson. In line with our strategy, putting the needs of the customer at the core, we continue to invest in technology across the entire board and throughout our operations. During the year, we saw progress in all our business areas with the strengthening of marketing -- our market positions in all those areas where we choose to compete. Last year, I promised that I would be back on stage this year and show you some of our most recent products. But here, I think I would like rather because I cannot meet you physically, and I'm in a completely different location than Stockholm, I thought I'd ask Peter Nyquist, who can show us the new AIR 6419, which is a new component in our Massive MIMO portfolio. Peter, I know that you're strong, but why don't you show us that you're able to lift it? Look at that. Straight arms, and it only weighs 20 kilos. In fact, it's a reduced weight by 45% compared to previous generation. I don't even see you breaking a sweat, Peter.

["No, I'm strong, " says Peter.]

[Interpreted] I'm glad to hear it.

[Interpreted] It wasn't too exhausting.

[Interpreted] It's not home gym equipment. It is to enable simpler installations. In fact, similarly, equally important, as the weight is the energy efficiency, this component reduces energy consumption by 20% compared to previous generations. And this is due to the investments we've made in our own silicon, which basically improves both performance and energy efficiency. So this is a major novelty. And it came only a few weeks ago, excellent work of the team who've put this together. Our core remains R&D, research and development. And over the past few years, we've increased our investments considerably in R&D by almost SEK 10 billion. And today, basically 1 in 4 employees in Ericsson works within R&D. In the autumn, we presented a new long-term profitability target, with an EBITDA margin of 15% to 18% and a free cash flow before M&A acquisitions of 9% to 12% of sales. At the same time, it's important to remember that we're keeping our targets for 2022, and that point in time is very important for our future development. We've also stated that 2021 is going to be a year of investment to strengthen Ericsson with a long-term focus, our margins will be adversely impacted amongst, by other things, renegotiated patent agreements, the acquisition of Cradlepoint and other investments we're making in our operations. These are not costs. They are rather investments to strengthen our long-term position. We're basically taking half a step backwards in order to be able to accelerate rapidly afterwards. One example is the fact that we continue to invest in increased market shares. This, in the short-term, hampers profitability, but it's building important scale for the future, giving good long-term profitability for the company. As you saw, and the targets and aims for operations, sustainability is an integrated part of our strategy, and we aim to be CO2-neutral by 2030. Sustainability is integrated in our operation. It can be clearly seen in our factory in the U.S. By using smart 5G solutions, we've managed to reduce energy consumption by 24%, water consumption indoors by 7 -- 5% and the factory is operated using 100% renewable energy. An equally important part of our sustainability efforts has to do with energy improvements of our products. By doing so, we're doing something good, beneficial for the environment, whilst at the same time, reducing the major cost item of our customers. And we saw clearly with our new radio, which is, in fact, 20% more energy-efficient than a previous generation. It's good for the environment and for our customers. But Ericsson's contributions go beyond that, in fact. As you know, our industry only represents 1.4% of greenhouse gas emissions globally. However, we have an impact to the tune of at least 15% of total emissions by using solutions based on our technology. This means that Ericsson's products and solutions carry a higher value than perhaps many are aware. Similarly to our sustainability efforts, decisive to our competitiveness, is the work we do in ethics and compliance. During the course of the year, we've continued our work for improvement, an important component is to strengthen the culture so that compliance is entirely integrated in our ways of working. Here, Ericsson on the Move has an important role to play, but we also invest in increasing the number of employees within in compliance and strengthening our processes. Last summer, the independent monitor was introduced to assess our progress to monitor this part of the agreement we concluded with U.S. authorities just over a year ago. I see this as an opportunity to truly ensure that we can achieve our highly set targets. In this context, it's also worth mentioning the preliminary investigations ongoing currently in Sweden and which are really investigating events, which the U.S. authorities have had a look at Ericsson, are cooperating fully with the investigations. I think that compliance is, therefore, an area which the executive team spends a lot of time, and we can simply never allow what happened previously to happen again. So esteemed shareholders, to sum up, you could say that 2020 was a year unlike any other. For Ericsson, it was also one of the best ever in our history, at the same time, it was a year entirely dominated by the pandemic. It has been a tough heavy year for many of our employees. They've made huge sacrifices working from home in societies that have been more or less in lockdown. During such conditions, being able to deliver in this manner in 2020 is simply world-class. I'm incredibly proud of all our people, and I can't wait to see them and meet them all again. I love them all. As far as Ericsson is concerned, I have great confidence in the future. Speeding up of digitalization, which means that our technology will have an ever more important and central role to play. We see how the development in the enterprise sector is speeding up through, amongst other things, the private network solutions, creating possibilities for industry-specific adaptations. One example is Atlas Copco, where we've installed a network, making it possible to operate wireless equipment and without impacting reliability in any way, achieving the flexibility you can get through a mobile connection. Epiroc, for example, has constructed a drilling machine of gigantic size, which is now used wirelessly by Atlas Copco. So this is a clear example of how our technology leadership can lead to innovation and cross-sectoral cooperation within the industry. This development, we will use to build and even stronger Ericsson. We will never give priority to short-term results, that's why we perceive '21 as a year of investment to lay the foundation for an even stronger long-term Ericsson. And with these words, I would like to thank all you shareholders for the confidence you've shown us over the past year and all our employees for extraordinary performances. Stay safe.

[Interpreted] Thank you, Börje, for a very inspiring speech and thoughts about 2020. We're going to continue with Jon Fredrik Baksaas from the Remuneration Committee.

[indiscernible] this opportunity to say a few words about executive remuneration at Ericsson. We have several agenda items at the shareholders' meeting. Addressing executive remuneration and the proposals are all included in the notice for the meeting. This year is the first year that the Board of Directors presents a remuneration report for adoption by the shareholders in accordance with the new rules. The report describes how the guidelines for remuneration to group management were implemented; total remuneration, including fixed and variable remuneration to Ericsson's President and CEO and the 2 executive Vice Presidents; the ongoing long-term variable compensation programs; and the Remuneration Committee's and the Board's evaluation of ongoing compensation programs for the executive team. As Ronnie and Börje have already mentioned, Ericsson has, during the year, continued to successfully execute on the focused business strategy introduced in 2017. The strategy has restored profitability and delivered organic growth, which has enabled the company to achieve its financial targets for 2020 at group level. The ambition for the company now is to continue to pursue selective disciplined and profitable growth to build a stronger Ericsson in the long term. For Ericsson to be successful, it is important that the company can attract, retain and motivate the right talent and can offer them competitive remuneration at a global level. Therefore, Ericsson's remuneration philosophy and practices are based on the principles of competitiveness, fairness, transparency and performance, with long-term value creation for shareholders as the overall purpose in order to successfully implement the company's strategy and sustainable long-term interests. It is our conclusion that the current guidelines for remuneration to group management provide a good framework for achieving the above-stated goal. Therefore, no changes are proposed to the guidelines this year. The current guidelines were approved by the Annual General Meeting of Shareholders in 2020 and are intended to apply until 2024. The remuneration committee and the Board of Directors believe that the long-term variable compensation is an important integral part of a well-balanced total remuneration package, thereby aligning the interests to the participants with those of the shareholders. The previous long-term variable compensation programs approved by the Annual General Meeting of Shareholders in 2018, '19 and '20, which all include a 1-year group operating income performance criteria enable to secure execution of the focused business strategy since its launched in 2017. As a result, the company has restored profitability, delivered organic growth, achieved its long-term 2020 financial targets and in turn, created shareholder value. Under Item 16 on the agenda, the Board of Directors, therefore, proposes a long-term variable compensation program 2021 for the executive team without material changes compared to the programs 2018, '19 and '20. The Board of Directors considers that a directed issue of Class C shares, followed by buyback and transfer of treasury stock, is the most efficient and flexible method to finance the program. Under Item 17 and 18 on the agenda, we propose that the shareholders approve the LTV program 2020 to be financed with treasury stock and the renewed shareholder approval for transfer of treasury stock over NASDAQ to cover costs under the ongoing programs 2018 and '19. I would like to take this opportunity to also touch upon Ericsson's approach to sustainability and responsible business practices, often referred to as ESG. Sustainability and responsible business practices are fundamental to Ericsson's strategy and corporate culture. We are constantly working in -- at incorporating this into our business practices, and Ericsson is transparent about its sustainability and corporate responsibility policies and practices, and the company strives for its ESG disclosures to always be on par with global best practices. As such, the progress in its ESG practices and message are transparently disclosed annually in the sustainability and corporate responsibility reports. In terms of linking ESG parameters to executive remuneration, the Board of Directors has the mandate to adjust the outcomes of the variable compensation programs for the executives upon review of group management performance against ESG-related targets. The Board of Directors is satisfied with the current approach of linking ESG to executive remuneration. With ESG becoming an ever more fundamental part of creating business value and a key focus area frequently discussed during our dialogues with our shareholders, we will continue closely to monitor global trends in this area for further consideration in the future. In closing, I also would like to thank the executive team and all our people across the global organization in implementation of the focused strategy and successfully achieving a turnaround, in particular, during these difficult times. Good luck also to this in the continuation. Thank you all.

[Interpreted] In 2020, we switched auditors from PwC to Deloitte. Thomas Strömberg is lead auditor, from Deloitte, and we're going to hear from Thomas now.

[Interpreted] Hello. I'm Thomas Strömberg, and I represent Deloitte, and I am the lead auditor for the audit of Ericsson. We've submitted our auditor's report for the financial year 2020, which you can find on pages 109 to 111 in the Annual Report. It is a so-called unqualified or clean audit report, and you can see in it that we recommend that the parent company and group income statement and balance sheet be adopted. We also recommend that the profit be appropriate in accordance with the propose in the statutory administration report with a payment of, but no dividend, to SEK 2 per share to each shareholder and that the members of the Board of Directors and the Managing Director be discharged from liability for the financial year 2020. The conclusions we've signed upon are based on the audit we performed on the Telefonaktiebolaget LM Ericsson AB parent company and in addition, the subsidiaries across the global Ericsson perform operations. As you can see from the auditor's report, we've studied certain areas. In particular, the key audit matters, they concern revenue recognition of significant and complex contracts. In addition, valuation of goodwill and the valuation of deferred tax assets. These can be found with more detail in the written auditor's report. We've also verified before the AGM that a corporate governance report has been established, and you can find it on Page 27 in the relevant document concerning the corporate governance report. We've also reviewed the company's report on sustainability and corporate responsibility, and that report can be found on Pages 34 and 35 in the sustainability document. Thank you for the attention.

[Interpreted] Thank you, Thomas, for that presentation, and that was the last of the presentations today.

[Interpreted] Now we're going to open up for questions from the shareholders. As I mentioned earlier, Ronnie Leten, Börje Ekholm, Jon Fredrik Baksaas and Thomas Strömberg are here to answer your questions. We also have our CFO, Carl Mellander; and Chief Legal Counsel, Xavier Dedullen, are also available, if necessary. [Operator Instructions] Now I thought I'd begin by asking you a question, Börje, before we line up for the other questions. This is something we hear about a lot when we meet shareholders in Sweden. When will 5G be available for everyone here in Sweden?

[Interpreted] I forgot the mute button. That's an important factor of success. Let's hope at least. That's a good question. Good one, Peter. When you've started speaking, I immediately started thinking, "Well, Börje, you can begin because you can -- Börje, yes, begin, that's what the word means in Swedish. I'm used to hearing that from when I grew up. Quite a lot of people are probably waiting around for general access globally to 5G. I would imagine, perhaps a little bit more in Europe than in other places because I mentioned the rollout, which is slower in Europe. But we also see that the frequencies have been allocated in Sweden. The networks are beginning to be expanded upon. So I think in a fairly near future, we will start to see 5G available in Sweden so that we can all start using it. But then we also need to remember that it's an important market, Sweden, because we have a lot of our R&D based here in Sweden. On the other hand, from the total revenue perspective, it's quite limited as far as Ericsson is concerned, and we're talking here maybe a single-digit percentages or so. So for us, it's important to see that the technology is rolled out so that we can learn and develop this with our engineers. But at the same time, we have to put a lot of more effort into speeding up the rollout generally in Europe.

[Interpreted] Thank you, Börje. I believe that we now have the question from the Swedish speaking audience. Alexandra, are we ready for that first question?

[Operator Instructions] [Interpreted] And we do have a question.

[Interpreted] This is [ Svare Linssen ] from [ Svare Linssen ] from [Foreign Language] from the Shareholders Association. I would like to say thank you, and I would like to start by beginning saying -- by beginning to say thank you to Ericsson for inviting to this dialogue and unlike the others that just invite written questions and commentations. So a big thank you from the Shareholders' Association for this dialogue. I have 2 questions. And Ronnie and Börje, you will have to decide amongst yourselves who's to answer. The first question, well, the CEO has already touched upon this, and it has to do with sustainability because the CEO talked about compliance and how to enhance and prioritize that work, which, of course, is something we welcome. And the first question or part question is, what do you think that can be done to -- well, ensure that there are not problems with bribery and corruption again, but maybe you've already answered that as a matter of fact? So my second question then is how do you collaborate with government agencies to lessen the effects of what has happened in the past. And I have another question as well, but I'll let you decide whether I should wait with the second question.

[Interpreted] Perhaps we can wait. And I think we'll hand over to Börje to answer that first question.

[Interpreted] Well, at least I can begin, [ Svare ]. Thank you, [ Svare ], for the question. And well, I guess we'll have to wait and see with the shareholders' meetings and different experiments and what happens, and I think that we'll try to find, even in the future, ways through which we can involve as many shareholders as possible. So this is a bit of an experiment, what we're doing. But then when it comes to rules and compliance and what we do, this is one of the major issues for us, and it is something we have to tackle. And to start at the end, how we collaborate with the government agencies involved. Well, we cooperate fully. We have preliminary investigations ongoing in Sweden. We work together with Swedish authorities, just as we have in the past, worked together with U.S. government agencies, and we really who want to be fully transparent in what we do, what we have, and we think that is the best possible way because it is about building a stronger company for the future, and that is what -- why we have decided to do this. And if we look at what we do, well, I have to say that there are some different components. The most important one, and that has to do with culture, that we have a culture where we have zero tolerance when it comes to corruption and that we comply with all rules fully. And that takes a bit of work, and this is something that the entire management team is working with. We're working with this on a continuous basis to have full commitment. And we work with, for example, Ericsson on the Move, but we also work with other opportunities and other components that we have. We have speak up, for example, that system within the organization, and it's about seeing what's going on. And in a company with some 100,000 employees, well, unfortunately, now and then, there will be someone breaking rule, which means that we have to have a proper culture, and we have to have a system where we can find those individuals quickly so that we can act immediately. And we're working with the company culture, and we're also investing a lot in building that function for compliance and to ensure that we strengthen that role internally, but we also include other functions within the company in this work because we need a much broader collaboration. You cannot say that compliance is just delegated to a specific function for compliance. This has to be integrated everywhere. And that is what we're doing in finance, legal and also supply sourcing, just to give a few examples. And it is about creating that system where we can find those who break a rule. And I have to say that this goes for the entire management team that when we see -- when we find someone who's cheating, for example, with the travel expenses, that really drives us crazy because we do not want to see that, and we have to act quickly when something is found, and this is something we're really investing in. Thank you.

[Interpreted] How about your second question then [ Svare ]? Yes, by all means.

[Interpreted] Thank you, Börje, first of all, for an excellent answer, I have to say. And then my second question, at last year's AGM, Ericsson was showing such optimism. Compared to many other companies, they are to pay a dividend in the spring already, for example, and they said that the problem for Ericsson was not having to apply for government support to -- temporarily for employees, rather they wanted to recruit more people. Many people felt that this was very almost provocative, but I think the outcome showed that you were right. And here, I'm wondering about the actual recruitment process. How have things gone over the past 12 months? Have you been able to recruit all the people you need? Did you perhaps have a benefit in any way from the fact that it was a pandemic where many other companies have been forced to lay off competent members of staff or employees and that you've been able to pick up and recruit them?

[Interpreted] I think, Börje, that's one for you.

[Interpreted] Thank you. I will go first again, as always. Yes, well, first of all, let me say that you can never say that you have a benefit from a pandemic. I have to say that, that is not the right approach, the right perspective. But what the pandemic has meant is that it accelerated ongoing processes of change in companies and in society, digitalization, in particular, I would say. And so this means that we have had a good demand situation over the course of the past year with good preconditions for digitalization because digitalization entails digital infrastructure. And when you look at recruitment, however, you have to bear in mind that we really do compete with other tech companies. And if you look at the tech industry as such, the development has been positive for everyone over the past year. So it's not a simple market for us to recruit it by any manner means. We need the type of skills and competence that many other global tech companies also look for and try to recruit. So I have to say that when you look at statistics for the year, we've recruited around 16,000 people. It's a little bit less than an ordinary year, but still a very large number of people. And out of those, I think 70%, 80% or so have been brought on board without having been to an office. It's been done entirely virtually. So this is one of our biggest issues, how to recruit in an environment and a situation where we basically don't meet people the way we used to. This means that it's a little bit harder, a little bit more difficult to recruit, basically, and build up our organizations. But I have to say that yet again, the company has come together. Colleagues have worked really hard to ensure that we can fill the needs and the gaps that we can recruit for the needs we've identified, but you have to be aware of the fact that it is difficult in some regions, in particular, and I'll mention those, where infrastructure is weaker. Recruiting in Africa, for example, doing that virtually is a little bit trickier than perhaps in Sweden, let's say. So this is a major challenge. You can also link this probably to the fact that a major issue for companies is how you secure corporate culture. When people never come into the office, they don't meet their new colleagues, they don't meet their manager. This is also something we're working on, and we're trying to adapt and we need to adopt our model for the future so that we can secure that we have the right and good culture in Ericsson because that's going to be the basis for our future successes.

[Interpreted] Thank you. [ Svare ], are you happy with the answers that you were given?

[Interpreted] Yes. Thank you. I'm very happy. I say thank you. And I hope that next year, we'll be back to somewhat more normal circumstances.

[Interpreted] Well, we share that hope, all of us. Thank you. Let's see if we have more questions from the Swedish telephone conference. Right now, we do not have any additional questions. [Operator Instructions] Well, as a matter of fact, I now have received a written question from someone who is an employee and a shareholder, and it is about the environment in which we're working. It's from [ Johan Sergen ], and I'll read it. I feel that we now have densification when it comes to how workplaces are organized. But with the pandemic, it's very, very important to be able to keep a physical distance, maybe wear face masks as well. And this insight about the pandemic and other contagious diseases apart from COVID, have you now learned something so that we can reduce sick leave in the future and reduce costs that way? Börje, that is for you as well, I believe.

[Interpreted] Well, this is an excellent question as well and something that we have seen. And I think I mentioned that before, the digitalization is increasing, and that will enable many, many changes. For example, we see that -- well, it's obvious that we will change our offices, the physical environment, what the offices look like. We've made internal surveys, and we've been discussing with other tech companies, and we see that coworkers will spend maybe 50% of their time in the office. But they will go to the office in order to be able to collaborate, to start up projects and to be able to communicate, which means that we need to reorganize that physical environment. And I think that this will lead to rather big changes. For example, the way we see it, firstly -- well, in the past, our way of working was that we had office first. But in the future, I think it will be virtual and digital first. And there as well, we have to have offices that are attractive that you actually want to go to the office, and that is something we need to do. I think we'll have to have more collaborative spaces where people can meet and smaller parts that will be allocated for, well, typical workplaces. And I do believe that we'll see -- well, distance work, remote working will be an important component way to use the office where you can work remotely. Maybe it's even better to work remotely because you do not have to commute as a coworker, and that could be said that, that's a good thing. And we saw that also beginning of the pandemic that we had less people traveling on public transportation and then fewer people contributing to spreading the contagion. And then we said that it's better to have people work from home, and I think that will continue. And maybe that way we can contribute as well in society today to reduce contagion, but also to make things safer for our coworkers.

Thank you, Börje. We'll have questions from the English-speaking audience. Mark, do we have any questions queuing up in -- on your line?

[Operator Instructions] We have 1 question in the queue so far, that's from the line of Chris Housel.

Hello, Chris.

Yes. I'm wondering, is Ericsson becoming more of a software company than hardware now?

Thank you, Chris. [Interpreted] Börje, I think that's one for you.

[Interpreted] Do I answer in English or Swedish?

[Interpreted] We'll do it in Swedish, and there will be translation.

[Interpreted] Very well. Thank you, Chris, for that question. Yes. We see that Ericsson is moving more and more into software, but you need to bear in mind that already today, we are probably one of Northern Europe's biggest software companies, and many of our engineers are already today working with software development. So we really are, today, I would say, a software-driven company. But of course, we have a large component of hardware, but software will increase in the future. That's an actual result, and it is, in fact, part of our strategy. The marginal improvement potential we see in the future and that we've seen so far as well is that we have migrated more and more towards a software model.

I guess we lost him there. I think he's satisfied with that answer, Börje. Let's move, see if we have any further questions. [Interpreted] My apologies, I have to speak the right language as the moderator. Moving over to the Swedish line again. Alexandra, do we have any further questions from the Swedish line?

[Interpreted] At the moment, we do not have any more questions from the Swedish audience.

We don't seem to have any more questions from the English audience either, right?

Yes, no questions from the English audience currently at this time.

Okay. [Interpreted] Then I think that will end that Q&A session for today, and we say thank you to everyone who has participated on the web and over the phone. And today's presentations, you'll be able to find on the website a little bit later today. And just to conclude, you can still send in your postal vote leading up to the AGM. It is the 29th of March, the deadline, and everything will be published as soon as the compilation has been done on March 30. Then you'll find more information on the Ericsson website, ericsson.com. And with that being said, I say thank you to everyone. Thank you for participating and enjoy your weekend. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]