Ericsson predicts business growth in Middle East on faster-than-average rise of 5G

Ericsson, the Swedish telecommunications firm, expects growth in its Middle East business driven by anticipated take-up of 5G wireless technology by consumers and businesses, one of its regional directors said.

“5G is the core of our business strategy and we’ve increased our [5G-related] research and development funding quite significantly since our new CEO took over,” said Ekow Nelson, a managing director for Ericsson’s partnership with UAE telco Etisalat, and head of Ericsson Pakistan.

Globally, the past quarter was “one of the best we’ve had in the last three years or so – the company has turned around and that’s really because of the investment we’re making in 5G”, he added, in an interview with The National.

Ericsson swung to a quarterly operating profit of 4.9 billion Swedish kroner (Dh1.94bn) in the three months of this year from a 312 million kroner loss a year ago. Sales rose to 48.9bn kroner – beating analysts’ forecasts due to solid growth in the US – and the Stockholm-listed company’s shares rose more than 3 per cent to a four-year high when it reported the results in April.

In January 2017, a new chief executive, Börje Ekholm, took the helm as president and chief executive of Ericsson, and the company has since ramped up its investment in fifth generation (5G) technology, which is expected to transform telecoms and other industries in the decades ahead. In 2017, Ericsson spent around $4.5bn on 5G-related research and development.

5G is a high-frequency wireless network enabling data capacity of up to 10 gigabits per second, compared to 100 megabits per second for the current 4G - or LTE - network.

Today, the majority of internet-connected devices are connected via 2G and 3G technologies, and some through 4G, but 5G networks are expected to carry 35 per cent of mobile data traffic globally by 2024, with 1.9 billion 5G subscriptions predicted by the end of that year, according to Ericsson’s 2019 Mobility Report published last week.

Growth of 5G traffic is set to be more rapid in the Middle East and Africa than in other parts of the world – around eightfold by 2024 compared to five-fold globally, the report added.

This is largely due to the high appetite for video consumption in the region – the Middle East and North Africa has among the highest YouTube penetration rates in the world – as well as the evolution of traditional industries as part of economic diversification agendas.

In the UAE, Ericsson has a strategic partnership with UAE state telco Etisalat, whose operations cover 15 countries across Asia, the Middle East and Africa. The two companies signed an agreement in February to work to expand 5G coverage following Etisalat’s launch of a commercial 5G mobile network last year.

Mr Nelson told The National that high consumption of data in the Middle East is beginning to strain existing 4G networks and “it’s too expensive to continue to expand that 4G infrastructure. 5G takes the extra load because it’s designed to support 10 times as much speed as the existing networks.”

In the consumer space, there is demand for 5G to enhance mobile and fixed-line broadband capabilities. “As the availability of smart devices, wearables and the plethora of video-enabled devices grow, it will lead to more people watching video, and that increased volume requires the right network not just to manage the volume but also to provide the right experience, free of jitters and delays,” he said.

In the commercial space, there are opportunities for ports operators and oil and gas firms to enhance productivity by switching to 5G over Wi-Fi to operate machinery. And, as the development of artificial intelligence leads to the take-up of factory robots - as deployed by e-commerce giant Amazon - companies re-kitting their factories will look to a more advanced form of wireless connectivity for machines and other equipment.

“5G provides so many opportunities for transforming industries, and we are firmly wedded to our strategy of working with telecoms operators in the region to address those opportunities,” Mr Nelson said.

“We are investing in the associated technology around cloud and the Internet of Things, but 5G is really where most of our investment is going.”

Ericsson has recruited 3,000 5G software engineers globally in the last 18 months, he added.