Managed Services Capital markets day 07 N O V E M B E R 7-8, 0 7 N E W Y O R K Ericsson Internal 07-0-06 Page
Peter Laurin SVP & Head of Managed Services Ericsson Internal 07-0-06 Page
Key takeaways Strategic fit An integral part of Ericsson s total offering that helps our customers to become more efficient and improve their performance Turnaround The ongoing contract review, new stricter sales directives and service delivery efficiency program will lead to a profitable business 3 Future We will manage the operational opportunities and complexities created by technologies like 5G with automation and analytics capabilities Ericsson Internal 07-0-06 Page 3
Business area Managed Services SEK ~5 b Net Sales >4,000 Employees >00 Countries Networks Managed Services IT Managed Services Network Design & Optimization Field Services Network Operations Centers Applications and Data Center Operations Optimizing networks, services and user experience 07 09 rolling 4Q. Unaudited and preliminary numbers External sources and Ericsson analysis Market growth CAGR -4% (06-00) Ericsson Internal 07-0-06 Page 4 This slide contains forward-looking statements, actual result may be materially different
Strategic fit for ericsson Enhanced portfolio Integral part of Ericsson s current and future portfolio (5G, IoT, Cloud) Customer relationship Delivering improved network performance and cost savings in close partnership Recurrent business High predictability with long-term contracts (3 7 years) and high renewal rate New business models Enabling new as-a-service business models for Ericsson solutions Ericsson Internal 07-0-06 Page 5
Our journey and Challenge Bharti Airtel 3 Italy IT MS Telia (multi-country) st global service center Vodafone sparepart management 3UK mega deal Sprint mega deal Optimi acquisition IT Managed Services established France Telecom (multi-country) 3 new global service centers Telenor Myanmar Deutsche Telecom (multi-country) > billion subscribers Liberty Global (multi-country) VEON IT MS T-Mobile IT MS Bharti Airtel expansion 008 000 Today Previous Strategy Growth focus Broad portfolio offered in most markets Developing capabilities in all geographies Business Reality Market leadership Strong delivery capabilities High customer satisfaction Challenged profitability Ericsson Internal 07-0-06 Page 6
Strategic priorities Refocus offerings and business 3 Contract review Execute cost-efficiency initiatives Profitability over growth 4 Build world leadership in automation and analytics Ericsson Internal 07-0-06 Page 7
Strategic Priorities Refocus offerings and business Limit certain markets and offer no stand-alone field services New stricter sales directives Contract review 4 contracts (total >300) to either exit, renegotiate or transform 3 Execute cost-efficiency initiatives Streamline delivery and G&A organizations Continuously improve delivery process and sourcing 4 Build world leadership in automation and analytics Increase focus on automation and analytics to enhance performance and cost-efficiency Ericsson Internal 07-0-06 Page 8
Contract review 4 contracts to be exited, renegotiated or transformed, ambition to complete by 09 4 Selection based on profitability and portfolio/market strategy 3 contracts addressed to date with SEK 0.4 b. annualized profit improvement 3 Total contracts Completed contracts Ericsson Internal 07-0-06 Page 9 Each contract negotiation is unique Customer relationship is key
Sales Development Illustrative Target SEK b. 0- Contract review Contract exits within the contract review program Limit certain markets and offerings SEK ~5 b. 07 09 rolling 4Q New business Operating Margin New stricter sales directives Focus on full-scope Network Managed Services Network Design & Optimization growth globally IT Managed Services focus on IT transformations Target range Contract review New business SEK 00 b. -3 Underlying growth in line with market Unaudited and preliminary numbers Ericsson Internal 07-0-06 Page 0 This slide contains forward-looking statements, actual result may be materially different
Financial ambition Illustrative Target Op marg 4-6% Contract review Addressing 4 contracts as part of ongoing review Strictly monitor performance of all contracts Op marg -4 to -6% Delivery efficiencies and automation Addressed inefficiencies in delivery organization Continuously improve delivery process and increase Operating automation Margin 07 09 rolling 4Q Contract review Delivery efficiencies G&A reductions 00 G&A reductions Streamlined G&A organization Part of SEK 0 b. cost program Unaudited and preliminary numbers, excluding restructuring charges and XO items Excluding restructuring Target of 4-6% operating margin by 00 with attractive return on capital Ericsson Internal 07-0-06 Page This slide contains forward-looking statements, actual result may be materially different
Summary 3 4 Refocus offerings and business Contract review Execute cost-efficiency initiatives Build world leadership in automation and analytics Profitability over growth Targets for 00 Operating margin 4-6% Net sales SEK 0- b. Attractive return on capital Excluding restructuring charges Ericsson Internal 07-0-06 Page This slide contains forward-looking statements, actual result may be materially different
COMPLEXITY The future of managed services Tomorrow 5G & SDN/NFV networks Critical / Massive IoT End-user-centric KPIs Increased complexity New opportunities Automation and analytics Today Legacy mobile and fixed networks Network-centric KPIs Smartphone-centric business Enhanced Analytics Robotic Process Automation Machine Learning Artificial Intelligence ALARMS Ericsson Internal 07-0-06 Page 3