Despite revenues heading south this year, Ericsson is fully focused on making a success of its business in Japan, a country from which it thinks telcos in Europe have much to learn.
 
The vendor has had dealings in Japan since 1894 – when an Ericsson distributor travelled to the country – and today has over 14,000 staff there. Today, the country is the Sweden-based company’s second biggest market in terms of revenue but sales have been falling of late.
 
Year-on-year revenues fell 28 percent in the third quarter, but at Ericsson’s Business Innovation Forum in Tokyo this week, Jan Signell, head of the vendor’s North East Asia division, told European Communications that the reason for the fall is partly down to the cyclical nature of network deployments.
 
Ericsson’s major customer in Japan is the country’s third biggest operator, Softbank Mobile, which has been deploying the vendor’s LTE solution over the past year. With this project now nearing completion, Ericsson announced on Thursday that Softbank has also selected its VoLTE solution; however, it has yet to crack Japan’s big two – NTT Docomo and KDDI – on the scale it is working with Softbank.
 
This will be challenging, Signell says, because of strong local competition, but he believes Ericsson is well placed because Softbank’s LTE network was voted Japan’s best. This is “revolutionary” according to Signell with NTT DoCoMo now “concerned” that its market leadership is “not so clear-cut”.
 
Tailor-made technology
 
There are other challenges, as Ericsson CTO Ulf Ewaldsson highlights: “Operators want to have technology that is tailor-made for the Japanese market. This has hampered us – big customisation is difficult and we have been reluctant to do it. We’ve said no to lots of opportunities. Operators here are tough customers,” he told European Communications (read Ericsson CTO: 5G is about integrated wireless technologies, not just speeds).
 
But Signell says a trend is emerging whereby Japanese operators are moving away from these local standards that has led to Japanese telecoms being labelled a “Galapagos” market – after the archipelago in the Pacific Ocean famed for its endemic wildlife – and embracing a more global technology approach. “This is developing the right way from our point of view,” he said.
 
Ericsson’s chief strategist Doug Gilstrap added: “Japan is a critical country for us… it is a fascinating market as it has some unique enablers, such as operators that are happy to push video unlike their rivals elsewhere in the world.”
 
Ewaldsson says Japan’s operators remain focused on coverage: “This is more important here than anywhere else - there are more base stations in Japan than anywhere else.”
 
It has other areas that make it stand out compared to the rest of the world; at 76 percent, Japan has the highest smartphone penetration rate in the world, for example. At 95 percent, Japan has 3x the global average of mobile broadband penetration, while LTE penetration is the third highest in the world at 25 percent.
 
Consequently, the country is a “trial ground” for new technologies and services, according to the CTO.
 
One of the key new services for operators to focus will be transport, particularly in cities. According to new research unveiled by Ericsson’s Consumer Lab unit this week, smartphone users in Beijing, London, New York, Sao Paulo and Tokyo are most dissatisfied with traffic problems where they live.
 
To alleviate these issues, the same respondents said a personal navigator service that provides travel information for journeys – whether that’s on foot, on public transport or by car – would be of interest to them.
 
Crucially, almost half predict that mobile operators will be “instrumental” in bringing such a service to fruition and 58 percent think it will be available within three years.
 
This is part of a wider trend that Ericsson is forecasting; app demand will become “extreme” with users expecting apps that cater for services including shopping, eating out, healthcare and government to be 5x more available in three years’ time than they are today.
 
With a population of 37 million – many of them ageing and a falling birth rate – Tokyo is the world’s biggest city and viewed as a test case by Ericsson for the smart city of the future.
 
More growth in other parts of APAC
 
As such, it is crucial that Ericsson makes a success of its business in the country.
 
According to Martina Kurth, Gartner’s research director for global Carrier Operations and Strategies, APAC is a good region to concentrate on for growth, but Japan can be a difficult nut to crack.
 
“From an economic perspective, it doesn't look too good. There are higher growth markets in the APAC region [such as Malaysia and India]. On the other hand, Japan is a factory for innovation and new types of services and the maturity of the operators in Japan is very high, so it's a good point for Ericsson to be there and grow their business in Japan,” she said.
 
“It's very important to grow the customer base and not just rely on one customer. Maybe [Ericsson] should pursue an acquisition. The Japanese market is quite special in a way [whereby] doing business in Japan is very much based on relationships, not just technology. Ericsson’s biggest competitor in Japan, NEC, [working] with Netcracker, the software arm of NEC, is having much more business in Japan as they are linked to NEC, a Japanese company. 
 
“A good strategy forward for Ericsson would be to acquire a company which can open more doors to Japanese carriers. It’s important to be local, have as many local personnel as possible and to access partnerships at a local level.”

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