Ericsson to invest $1 bn over 5 yrs in China

Doug Young and Godwin Chellam

SHANGHAI: Ericsson, the world's top telecoms equipment maker, will invest $1 billion in China over the next five years to grab a slice of billions of dollars in third-generation technology sales, executives said on Wednesday.

The Swedish firm foresaw China -- the world's largest telecommunications market -- granting long-awaited 3G licences in early 2006. That would propel the country past the United States to become its biggest market in about two years.

Greater China President Mats Olsson said Ericsson hoped to grab 35 percent of some $10 billion to $12 billion he expects China will spend on the new technology within three years of Beijing's awarding the licences.

That forecast was based on spending for the standard known as WCDMA -- now in use in Europe -- which is expected to account for the lion's share of 3G spending in China, he said.

According to Reuters calculations using that forecast, Ericsson expects to rake in over $1 billion in additional sales in each of the three years after the licences are issued.

"We believe that 3G licences will be issued early next year," Olsson said. "It's quite feasible to imagine us having a 35 percent market share. It is clearly still the market with the biggest potential."

Ericsson and global rivals, including Motorola Inc., Nokia and Siemens AG, are vying for market share in China, which houses more than 700 million fixed-line and mobile subscribers.

Indeed, China now accounts for 9 percent of the firm's global revenue -- versus 10 to 11 percent for the U.S.

Ericsson's China investment would go towards expanding manufacturing, research and development and services in the world's seventh-largest economy.

"That's an investment plan that was approved yesterday by the board," Olsson said.

For example, Ericsson has signed an agreement with the Shanghai Research Centre for Wireless Communications to develop next-generation telecoms technology.