Bringing the networked society life to Bringing the ERICSSON ANNUAL REPORT 2012 networked society to life ANNUAL REPORT 2012 Bringing the networked Society to life With everything connected, our world changes. We are developing communications technology that will embrace entire societies, empowering and advancing the individuals and businesses within them. See page 8 for further information on market trends. Our mission is “Innovating to empower people, business and society.” See page 12 for further information on Ericsson strategy. 2012 was a year of growth in Global Services and Support Solutions. Hans Vestberg, President and CEO MORE INFORMATION The Annual Report describes Ericsson’s We issue a separate Sustainability and financial and operational performance during Corporate Responsibility Report. 2012. A Corporate Governance Report is www.ericsson.com/thecompany/ attached to the Annual Report. sustainability_corporateresponsibility Find our Annual Report online: There is further information on sustainability www.ericsson.com/annualreport2012 and corporate responsibility on page 22 and pages 41–42. Our BusinessOur Contents Results Annual Report 2012 LETTER FROM THE Our business CEO This is Ericsson 2 Group overview 4 Letter from the CEO 6 PAGE 6 Market trends 8 Our competitive assets 10 Our people 11 Strategy and customers 12 CHANGING Our portfolio 14 LIVES Regional development 18 CORPORATE GOVERNANCE Our performance 20 Sustainability and Corporate Responsibility 22 Five-year summary 24 PAGE 23 Letter from the Chairman 25 Results Shaping Board of Directors’ report* 26 the cities of Consolidated financial statements* 47 the future Notes to the consolidated financial statements* 52 Parent Company financial statements* 101 Notes to the Parent Company financial statements* 107 PAGE 46 Risk factors* 121 SHAREHOLDERS Auditors’ report 128 Forward-looking statements 129 Mobile broadband Corporate Governance is transforming viewing habits Corporate Governance Report 2012 130 Remuneration report 158 PAGE 157 Shareholders Share information 162 EMPOWERING Shareholder information 169 INFORMATION OTHER Business Other information Glossary 167 PAGE 166 Financial terminology 168 * Chapters covered by the Auditors’ report. Ericsson | Annual Report 2012 1 OUR BUSINESS THIS IS ERICSSON We are a world-leading provider of communications networks, telecom services and support solutions. Communication is changing the way we live Our research and solutions development has and work. When one person connects his or made mobile communications and broadband her world changes. With everything connected, possible. When you make a call or browse the our world changes. Ericsson plays a key role internet on your handset, tablet or mobile PC, in this evolution, using innovation to empower you will likely use one of our solutions. people, business and society. We are enabling Our offering comprises services, software the networked society with efficient real-time and infrastructure, mainly for telecom operators. solutions that allow us all to study, work and live > 40% of the world’s mobile traffic runs through our lives more freely, in sustainable societies. networks that are supplied by us Since the establishment of the Company > We provide solutions and services to in 1876, we are a leader in telecommunication all major telecom operators in the world and are now expanding our role into an ICT > The networks we manage for operators (Information and Communications Technology) serve about 950 million subscribers solutions provider. > We have more than 33,000 granted patents, comprising one of the industry’s strongest patent portfolios. 2012 in review JANUARY FEBRUARY APRIL JUNE Ericsson strengthens Ericsson complements SOFTBANK MOBILE signs At a briefing for journalists in San its focus on IPR licensing, the heterogeneous network 4G/LTE contract with Francisco, Ericsson’s President and CEO to get a fair return on offering with telecom grade Ericsson in Japan. The Hans Vestberg discusses how the rapid R&D investments in Wi-Fi through acquisition network will cover three increases in subscribers and data patents development. of Wi-Fi company BelAir major cities in the country, usage impact the entire ICT industry. Any company that Networks, enabling operators together accounting for 70% Network quality, user experience, provides wireless to further improve the mobile of the data and voice traffic. billing and charging models connectivity will likely broadband user experience. Ericsson has deployed LTE and services offerings all need a license from us. networks on five continents. need to be adapted. JANUARY FEBRUARY MARCH APRIL MAY JUNE JANUARY MARCH MAY Ericsson signs a deal to Ericsson widens the scope Ericsson’s efficient AIR radio base connect the entire vessel of managed services to include station is selected by T-Mobile as the fleet of the world’s largest such services for broadcasters first operator in the USA to launch this shipping company, Maersk by announcing the acquisition technology, which enables improvement Line, using our capabilities of the Broadcast Services of existing coverage and quick launch of to enable machine-to- Division of Technicolor. LTE in 2013. The contract also includes machine communication. consulting and systems integration and rollout services. 2 Ericsson | Annual Report 2012 Our SEGMENTS Our REGIONS BusinessOur Today, we are more than 110,000 people We secure an efficient go-to-market setup serving customers in more than 180 countries. through ten regions. We strive for profitable % To best reflect our business, we report four growth through solid regional competence of the world’s40 mobile business segments: and strong customer relationships, backed traffic runs through by our global knowledge. Ericsson-supplied networks. Networks In our ten regions, we work together with Networks provides the infrastructure that is our customers to develop innovative and the basis for all mobile communication. We scalable solutions that help operators grow deliver superior-performance and cost-efficient their revenues and reduce their costs. networks to ensure the best user experience. Once a successful case is proven, we can roll out the same practice all over the world, Global Services sharing common processes, methods and Results With 60,000 services professionals globally, tools. This ensures quality and efficiency. we deliver managed services, consulting and Solutions and services often go hand-in- systems integration, customer support, network hand as networks become more complex and design and optimization and network rollout. often include products from several suppliers. Operators look for long-term services Support Solutions partnerships with companies such as Ericsson For more information on our Support Solutions is the new name for former for support in every aspect of their business. segments please go to page 36 segment Multimedia and it signposts a change We serve our customers through regional of direction. The segment focuses on software competence organized into six engagement for operations support systems and business practices: Mobile Broadband; Communication support systems (OSS and BSS), TV and media Services; Fixed Broadband and Convergence; management, and m-commerce. Managed Services; Operations and Business Support Systems; and Television CORPORATE GOVERNANCE Joint venture ST-Ericsson and Media Management. ST-Ericsson offers modems and ModAps (integrated modem and application processor platforms) for handset and tablet manufacturers. JULY SEPTEMBER NOVEMBER MTN Nigeria boosts its ability to Ericsson partners in the Ericsson holds its annual Investor Day, focusing on profitable growth and how serve subscribers and their growing Social Good Summit 2012 the company is transforming into a leading ICT solutions provider in telecoms. data needs by becoming the first in New York, discussing how SHAREHOLDERS African operator to deploy Ericsson’s mobile broadband can be NOVEMBER scalable SSR 8020 platform for used to help tackle global The new Ericsson Mobility Report is launched, stating wireless IP core networks. This is challenges such as poverty that “Traffic in mobile networks continues to grow at one of 39 SSR contracts that and climate change. an impressive rate worldwide, driven by uptake of Ericsson Ericsson won in 2012. smart devices and apps.” This is a recurrent report Mobility on network traffic and market trends, based on data Report ON THE PULSE OF THE NETWORKED SO traffic measurements in live networks globally and CIETY on internal forecasts. November 2012 JULY AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER OTHER INFORMATION OTHER AUGUST OCTOBER DECEMBER Italian operator FASTWEB signs Ericsson is selected to Ericsson announces that Volvo a seven-year IT managed services implement a new LTE network Car Group will use Ericsson’s contract with Ericsson. It includes for Vivo, a subsidiary of Connected Vehicle Cloud to data center consolidation and Telefônica, helping meet user allow drivers, passengers and transformation, as well as managed demand for connectivity and their cars to connect to services operations for its IT infrastructure. mobile broadband services in available in the cloud. Drivers Ericsson extends the scope of Brazil. Ericsson has an LTE and passengers can access managed services from telecoms market share of more than applications for information, to data centers. 50% in Latin America. navigation and entertainment from a screen in the car. THIS IS ERICSSON Ericsson | Annual Report 2012