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Study: Capital investment improves network performance, giving better returns

* Study demonstrates that investments in network quality do translate into
better financial returns for operators, not only from cost savings but also
from increased revenue
* Study shows network investments generate 5.5 percent increase in service
revenues and a 6.4 percent improvement of EBITDA margin in a case of a 10%
increase in capital expenditure for an operator in Brazil
* Decrease of 1 percentage point in overall churn leads to a 6.86 percent
increase in service revenues

A new study commissioned by Ericsson (NASDAQ:ERIC) shows that increased level
of investments in network quality and performance create sustainable
competitive advantages and improved financial returns for network operators.

The study, carried out by Dr. Raul Katz, President of Telecom Advisory
Services, and Director of Business Strategy Research, Columbia Business
School, explored the relationship between capital investments in mobile
telecom networks and the technical, commercial and financial performance of

Dr. Katz performed extensive statistical analysis, across a large set of
metrics, on three years of quarterly data from three different markets --
Brazil, Mexico and the United States.

A simulation model was constructed to estimate the effects of increased
capital expenditure on mobile operators' free cash flows, allowing operators
to assess the commercial and financial gains attributable to the increased

The study found that a 10 percent increase in capital expenditure for a
Brazilian operator resulted in increased market share, a significant boost to
ARPU and reduced churn. Given this enhanced commercial performance, the
operator should experience a 5.5 percent increase in service revenues, a 6.4
percentage point improvement in EBITDA margin, and a 6.7 percent increase in
free cash flow from operations.

The analysis of Mexico and the US shows the same robust relationships between
investments, performance and finances as in Brazil, but Dr. Katz also found
differences exist in the way the causality works under different market

Johan Haeger, Head of Tactical Marketing, Business Unit Networks at Ericsson
says; "The results from the quantitative study clearly demonstrate what our
'gut feeling' and discussions with leading operators has told us for quite
some time: that appropriately targeted capital expenditure leads to improved
network performance. This translates into better market performance which is
shown to boost financial returns.

"Previous extensive Consumer Lab research has found that network performance
is the principal driver of subscriber loyalty. Combining these results
clearly demonstrates the link between targeted capital expenditure, leading
to improved network performance, which drives subscriber loyalty that
translates into better market performance and financial returns."

As an example, a decrease of 1 percentage point in overall churn for a
Brazilian operator led to a 6.86 percent increase in service revenues two
quarters later. Improved financial returns are derived not only from cost
savings, but also from increased revenue.

The statistical results described in the study can be applied in scenario
analysis on individual operators. Such simulations reveal that an
investment-driven market strategy results in significant financial returns,
and also show that the approach provides sustainable competitive advantages
such as lower churn, higher market share and increased ARPU. These benefits
are largely created before the competition has time to respond.
NOTES TO EDITORSLink to the report

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Ericsson is the driving force behind the Networked Society - a world leader in
communications technology and services. Our long-term relationships with
every major telecom operator in the world allow people, businesses and
societies to fulfil their potential and create a more sustainable future.

Our services, software and infrastructure - especially in mobility, broadband
and the cloud

- are enabling the telecom industry and other sectors to do better business,
increase efficiency, improve the user experience and capture new

With more than 110,000 professionals and customers in 180 countries,

we combine global scale with technology and services leadership. We support
networks that connect more than 2.5 billion subscribers. Forty percent of the
world's mobile traffic is carried over Ericsson networks. And our investments
in research and development ensure that our solutions - and our customers -
stay in front.

Founded in 1876, Ericsson has its headquarters in Stockholm, Sweden. Net sales
in 2013 were SEK 227.4 billion (USD 34.9 billion). Ericsson is listed on
NASDAQ OMX stock exchange in Stockholm and the NASDAQ in New York.






Phone: +46 10 719 69 92

Ericsson Investor Relations
Phone: +46 10 719 00 00

Value Performace Report
Press release in PDF


This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Ericsson via Globenewswire


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