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China will become an even more important market for the Swedish telecom giant Ericsson, despite reduced spending from Chinese telecom operators, said a senior executive of the business giant yesterday.
"The China market is extremely important for Ericsson," said company Chairman Michael Treschow yesterday in Beijing.
Although Chinese telecom operators will cut their investments this year, Treschow believes his company will maintain its leading position in the market and gain from the development of new services.
Statistics from the Ministry of Information Industry indicate that Chinese telecom operators will spend 200 billion yuan (US$24 billion) this year on fixed assets investment, down from last year's figure of 203 billion yuan (US$24.5 billion).
China's largest mobile carrier, China Mobile Corp, will also cut its spending by 6 per cent from US$5.8 billion in 2002 to US$5.6 billion this year.
Treschow pointed out that Chinese mobile carriers will require better and more comprehensive service with 5 million new subscribers to their networks. "Although they may cut investment in network construction, they will have to spend more to cater for the growing market.
"I do not think they will allow their services to go down like the trend facing some European operators," he said.
The Ericsson executive added that his company will continue to invest in research and development in telephone systems, particularly second-generation (2G) and third-generation (3G) mobile systems and applications like multimedia messaging service (MMS).
He added that Ericsson will use its Chinese operation as a supply hub not only for Asia, but also for the global market.
Treschow said Ericsson, as the only telecom equipment provider to support both the two major 3G standards -- wideband code division multiple access (WCDMA) and CDMA 2000, will soon make preparations for China's launch of the 3G system.
The Ericsson chairman revealed that his company will conduct tests with Chinese mobile operators sometime this year on various 3G systems.
However, he believes that WCDMA is set to become the dominant 3G standard and take more market shares worldwide than GSM has through the 2G mobile system.
According to market researcher Frost & Sullivan, WCDMA will hold 86 per cent of the 3G market in terms of revenue by 2007.
Treschow believes that Ericsson will return to earning profits sometime this year.
He said the company will continue to slash costs to adjust to the market environment.
Ericsson announced in February that the global mobile communications market fell 20 per cent last year and will shrink another 10 per cent this year.
However, Treschow pointed out that as soon as Ericsson achieves a balance between revenues and costs, it will resume investing in research and development heavily.
"You have to have a balance, but you win through investment," the chairman said.
He believes Ericsson's partnership with Sony is excellent and their 50-50 joint venture Sony-Ericsson will prove successful.
"I hope we will start to generate profits this year."
The two companies said in January that they would inject 150 million euros (US$138 million) into the joint venture each in this quarter to improve the company's capital structure and help it expand business.
(China Daily March 26, 2003)
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