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CNBC Interview with Ericsson CEO, Börje Ekholm, from the World Economic Forum 2019

Following are excerpts from a CNBC interview with Ericsson CEO, Börje Ekholm, and CNBC's Steve Sedgwick and Geoff Cutmore.

SS: Börje, nice to see you, we-, we've been talking a lot about competing architectures, going forward, and now, of course, with the China/US dispute, the concerns over Huawei, do you have concerns that, actually, we're going to see two completely different architectures, going forward, in the technology space?

BE: It's a valid question to ask. Right? One of the big things, with mobile technology-, well, it's the fastest-scaling technology the world has ever seen, we have more than 8 billion subscriptions globally today. That's been accommodated because we have a global standard. So, for us to protect that model of a global standard is really important, that's what gives us the connectivity we have today. Of course, you get the discussion of-, there is a risk, but-, but I think, ultimately, the economics favour a global standard.

SS: But the-, the prospect of a Chinese-based standard and a western-based standard, which are completely separate, rather than everyone going forward in a more opensource type way, that is a real clear and present danger now, isn't it?

BE: It's a clear and present danger, but the economics will speak in favour of a global standard.

SS: Mm.

BE: That's what's going to bring device prices down, it's going to bring price of connectivity down, on a global basis. That will benefit everyone. So, I really do think, ultimately, we are going to see one standard.

GC: Clearly, there are concerns about the security aspect of building Huawei technology in to systems now in western countries, and does that represent a tremendous opportunity for you, or does it raise concerns about your own opportunities in China?

BE: You know, for us, we-, well, we need to focus on what we can impact, at the end of the day, and that's actually providing our customers with the best solutions. So-, so what we focus all our attention on, we invest in R&D to be leaders in 5G, we invest in R&D to provide the-, the cheapest connectivity, or call it dollar-per-gigabyte connectivity. If we do that, that's where we are going to win (?07.48.18).

GC: I understand why you're reluctant to get involved in-, in the debate, about the-, the whys and wherefores of whether Huawei technology is the right technology, but clearly this political problem could create problems for other companies in the sector. Are you seeing anything, at the moment, that you would-, that-, that-, that is affecting you, affecting your sales, affecting your opportunity, that you would ascribe to the fallout surrounding Huawei?

BE: What you see right now is that all operators around the world start to say, 'Okay, what does this mean?' so it creates a little bit of uncertainty, or a lot of uncertainty. We haven't really seen anything in-, in our order books, but we see worried customers, and concerned customers, and I-, I think that-, that is never good for the invest-, investment climate either, so-, so how this is going to pan out, I don't know, that's why I still think it's a debate that can be had better by others, we focus on what we can do.

SS: And yet, I think perhaps we've been focusing on the negative side, for Ericsson and its customers, there is a very positive side, of course, for a western supplier of equipment, i.e. is Ericsson set to benefit from continued tension, as companies and countries have to roll out 5G?

BE: Yeah. You know, the-, the reality is, we need to win with the best solutions with customers.

SS: Mm.

BE: Ultimately, that's the only way for us to-, to stay in the game. If we cannot provide the best connectivity, the cheapest connectivity, to our customers, we're ultimately at risk-,

SS: Mm.

BE: Anyway, and that's why we can only focus on what we can do.

SS: Börje, I remember the 3G auctions, and the disaster that was, for the money left over to develop 3G, because the governments took all the pie. I saw mistakes made on 4G, as well. Do you have any hope, that governments, and municipalities, and-, and districts, globally, have learnt their lessons from failed 3 and 4G auctions?

BE: Mm. I think, um-, you know, if you look at the world, we see the US and China racing ahead in 5G, and, by the way, you see Switzerland, also very early, you see Australia early, you see Japan, Korea early. There I think they are realising that 5G is actually a critical national infrastructure. Where I'm more concerned is Europe. Europe has a lot more legislation, we have a lot more, um, uncertainty, and spectrum prices, for example, uh, which is, of course, hampering the investment climate, and-, and spectrum is just not available in the mid band, it will be available in 2020, 2021, in most countries. That's going to slow down 5G rollout in Europe. I think that runs the risk of threatening European competitiveness, not only in the telecom, but also in other industrial sectors, because it's the digital economy

GC: Can I-, can I just ask you, on-, on 5G, I mean, there is a-, a view, maybe by the uninformed, but that the cost to the service providers of-, of 5G, is going to be so high that actually, rollout will be quite slow-,

BE: Mm. Mm.

GC: Is that correct, that assessment?

BE: We actually see 5G as a very cost-competitive technology, because it is anchored in the 4G grid, so it's really the first mobile technology which benefits on the previous generation. So the rollout of 5G will be very incremental, so you take the 4G network, you add 5G, where you need capacity, and, ultimately, you are going to have a 5G network built, basically relatively inexpensively.

SS: So-,

BE: So-, so it's-, it's not-, it's not this dramatic investment, kind of, bump, that's going to come, for the operator, but it will benefit the operator with a strong 4G network.

SS: Börje, that's absolutely fascinating, because everyone's told me this huge leap that 5G represents, but I-, I think I'm ascertaining, from what you say, that actually, if we just have good 4G coverage, across Europe, in areas of the United Kingdom, for instance, where we haven't got it at the moment, actually, we're okay, you know, we're-, we're-, the capacity of good 4G isn't that much worse than-, than the initial 5G.

BE: No, the-, the-, the benefit of 5G-, I mean, there-, there are a couple of things going on, right? One is, you get better speed, you get probably ten times the speed-,

SS: Mm.

BE: That's one thing. But the most important thing, with 5G, is you get ten times lower latency, you can connect maybe 100 times the number of devices per-, per area, you can have battery lifetime of ten years, and so you don't need to charge it every night. That's where you have the big benefits of 5G, and that's why 5G is not-, it's-, one part is, of course, a consumer product, faster, better internet, but maybe the big application is actually the industrial internet, where you are going to see it enabling the Fourth Industrial Revolution, you're going to see factory automation in a whole new way, you're going to see smart cities, connected cities, in a very different way, we're going to see remote surgery done, etc. There are-, that's where you have the big benefits.

GC: Alright, very nice talking with you. Thank you so much for joining us-,

BE: Good seeing you.

GC: Here in Davos.

BE: Thank you.