What keeps telecoms operators up at night?

A delegation of top executives from Swedish equipment supplier Ericsson, including CEO Hans Vestberg, were in Santiago, Chile last week to announce a landmark multi-year agreement to expand the portfolio of OSS/BSS services with operator Entel.

BNamericas had an exclusive interview with the global head of Ericsson's radio unit and asked about the main areas in which operators are currently focusing their investments in the radio area. The answers were not surprising, but indicated a real awareness of how companies need to prepare their networks for the tsunami of data that will come with machine-to-machine communications. At the same time as investments get more costly, the operators need to get more out of their networks than ever before.

BNamericas: What are operators most concerned about with regard to their networks?

Bansal: Operators are interested in four things. Number one is carrier aggregation because spectrum is a very expensive resource, and the great thing about carrier aggregation is you can use licensed and unlicensed bands. Secondly, operators are keen to improve indoor coverage. Eight out of 10 subscribers today say they're unhappy with indoor performance.

Thirdly they're interested in building network capability to handle the Internet of Things (IoT) and how they can get better battery life out of sensors. Lastly, they're concerned with preparing their network architecture for 5G.

BNamericas: An Ericsson delegation including CEO Hans Vestberg had a roundtable with CEOs of Brazilian telecoms operators and providers. Did they raise any particular issues?

Bansal: All agreed that there's growing demand from the consumer and the general perception is the need to improve indoor coverage. Operators are looking to monetize enterprise services more. Traditionally they've focused aggressively on the consumer business and how they're looking at addressing IoT. In Chile we had discussions with Entel about how to better connect mines so they can use IoT to preempt things like water leakages, etc. These themes are as common in Latin America as in Asia or anywhere else.

BNamericas: Ericsson's results in the last few quarters have shown that the radio area of business is slowing down, at least in North America. As Latin America is still trying get to grips with 4G are things looking better there?

Bansal: Data traffic is growing globally. The number of mobile broadband subscriptions will grow from 2.7bn in 2015 to 7.3bn in 2020 and video traffic will be 60-70% of that. The issue in the industry right now is that operators aren't able to monetize it. Our strategy is to help operators monetize mobile broadband in terms of smart packaging, the right offering and also giving them solutions that lower the per-bit delivery cost.

Our 2014 forecasts are for the radio market to grow 2-3% per year until 2020. So it's not a high growth market, but it is not a declining market. The main growth will come from small cells and indoor deployment and then from 2018 onwards we'll see growth in Internet of Things deployments, which will provide additional revenue streams for operators.

BNamericas: What are the big growth markets?

Bansal: India is doing a lot of deployment on FDD and 3G. In China, Latin America and EMEA we're seeing lot of LTE and mobile deployment. Africa will go from 70mn to 700mn subscribers between now and 2020.

BNamericas: That's going to mean a lot of handsets.

Bansal: Every US$10 decrease in handset prices can enable 100mn people to afford that phone. In many emerging markets there are no handset subsidies so a US$10 decrease is a lot. LTE device prices are coming down and will soon be sub-US$100.

BNamericas: So small cells are the big driver for radio networks in the short term?

Bansal: Capacity is still growing so you need to sell more software. There is a transition in the radio business. We were selling 80% hardware and 20% software. Now it's going in the opposite direction and will be about 40% hardware and 60% software.