In 2006 Ericsson Nikola Tesla operated within the planned track record – operations were stable showing a tendency toward moderate growth. It was a significant year in terms of the company’s repositioning toward system integration, multimedia solutions and new products and services portfolio. The margins were as expected, somewhat lower than in 2005 as a result of a strong market competition, and the company's investment into strategic projects, new customers and employees' competence development. Owing to the increased business volumes in all major markets, to the highest operational standards and to the high-quality work and innovative solutions of employees the company achieved outstanding business results.

 

Compared to 2005, the slight increase in top line in money terms could only be accomplished by about 20 % increase in real volumes. The performance of Ericsson Nikola Tesla in 2006 was characterized by the following results:

 

• a 1 % increase in sales revenue: 1,634.1 MRHK compared to 1,624.5 MHRK in 2005;
• a 1 % increase of orders booked: 1,623.6 MRHK compared to 1,608 MHRK in 2005;
• gross margin of 17.5 % compared to 19.9 % in 2005;
• great attention paid to the implementation of a cost-efficiency program, so that sales, general and administrative costs were additionally reduced from 7.0 % to 6.7 % of sales revenue;
• profit before financial cost and income tax expense (EBIT) is slightly lower than 2005 and amounts to 266.3 MHRK (compared to 268.6 MRHK in 2005);
• profit before tax is 264.5 MRHK, compared to 268.4 MHRK in 2005;
• positive cash flow from business: 217.6 MHRK, compared to 46.8 MHRK in 2005;
• stable and motivational company culture, a fact confirmed by the annual employees survey (Dialog), carried out for the eighth year in a row;
• Customers’ satisfaction shown in our business accomplishments and the annual customers’ satisfaction survey.

The stated performance is based mainly on an extended customer base, stronger collaboration with old customers and partners, and on new responsibilities obtained from Ericsson. Also, the company made use of new business models in order to offer to customers best solutions required for their business growth.

 

The company made a successful turn in its operations and increased the share of services (both in fixed and mobile telephony) in total sales from 42 % to 48 %. It means that almost a half of the sales revenues are achieved by selling various services.

 

The cash flow from operations is very good and it is a solid base for future growth and business expansion.

On corporate level Ericsson Nikola Tesla has the responsibility for several dozen countries in Europe, Central Asia and Middle East. In total sales 2006 the domestic market participates with 30 %, export to internal Ericsson market with 22 % and export to other countries with 48 %. Major foreign markets in 2006 were Croatia, Sweden, Belarus, Bosnia and Herzegovina, Kazakhstan, Russia and Montenegro.

 

Ericsson Nikola Tesla’s sales in Croatia increased by 1.4 percent compared to 2005, totaling 482.6 MHRK. In fixed and mobile systems, including the mobile Internet, the company continued its successful collaboration with its strategic partners Vipnet, T-HT, and Tele2. Together with Vipnet the company introduced the broadband Internet access as a prerequisite for further 3G network evolution and started a HSDPA network. For the operator T-HT we modernized their fixed network and built up a network for large-scale introduction of broadband services and increased Internet subscriptions/ users (IP, ADSL-EDA). With the third Croatian mobile operator, Tele2, the company signed a contract for a delivery of equipment and total communication solution for UMTS network and also a contract for the provision of mobile network maintenance services, the first of the kind in Central Europe.
With Vodatel Croatia, the major Internet services provider, the company concluded a contract for building up a TriplePlay infrastructure.
In the enterprise systems sales segment the company concluded contracts with large business users (Ministries of the Republic of Croatia, Electric Power Industry (HEP), Financial agency (FINA), Croatia Railways, Oil Industry INA, etc.). It has to be stressed that Ericsson Nikola Tesla put into operation the integrated national primary health care project, entirely developed at the company. With this project the company proved itself to be a provider of sophisticated and complex ICT system integration solutions.

 

In export markets (excluding the internal Ericsson market), total sales in 2006 amounted to 793.7 MRHK.
The sales of fixed, mobile and enterprise systems in the Commonwealth of Independent Countries, CIS, were good as usual, totaling 548.4 MHRK (a 2,8 % increase). Major contracts were signed in Belarus with the mobile operator JV MDC Velcom and the fixed network operator Beltelekom and in Kazakhstan with the fixed network operator TeleKrona. In Russia as well a number of contracts were concluded for the modernization and extension of fixed and enterprise communication systems.

 

In Bosnia and Herzegovina and Montenegro Ericsson Nikola Tesla achieved export sales of 233.2 MHRK. As it was the year of election campaigns in both countries and 3G licenses are not issued yet, the investment rate slowed down and sales revenues of Ericsson Nikola Tesla decreased, compared to 2005, by 14.7 %. Major contracts relating to the modernization and extension of mobile and fixed systems were concluded with the operators BH Telekom, HT Mostar/HT Mobilne komunikacije, Telekom Srpske, T-Com Montenegro and T-Mobile Montenegro. It has to be emphasized that a considerable share of contracts with BH Telecom, the major operator in BH, are relating to multimedia and system integration.

 

Services to internal Ericsson market (provided through sales of knowledge of our experts in R&D and in Global Service Delivery Center (GSDC), and also by providing total customer solutions and services) account for an increasing share in the overall business performance of the company. For that reason the recruitment trend continued in 2006. The export sales to internal Ericsson market in 2006 totaled 357.8 MRHK, a 20.7 % increase compared to 2005.

The company will endeavor to strengthen its position in domestic and export markets with a proactive, consultancy-based selling method and with a broadened product and services portfolio. While doing so the company will focus on global technology trends and its own innovativeness as a competitive asset and a prerequisite for further growth.

 

All relevant analyses attribute to the global telecommunication segment a high growth potential, primarily in mobile communications segment. Over the last two years the users worldwide increased sharply, the new technologies and communication services generated a considerable growth of the telecommunication traffic, especially the data traffic.

 

Visible is also the companies’ repositioning and global mergers in key business segments, resulting in their adjusted or new portfolios in areas with highest potential for business growth. In short, the growing market demands are accompanied by a growing market competition.

 

Relating to technology trends we expect further development and implementation of IP-based core network. Quite evident are the growing broadband access in mobile (HSPA) and fixed networks (xDSL), also a gradual transition to new generation networks enabling a large-scale introduction of broadband services and a significant growth of Internet subscriptions/users. In mobile communications the trend is towards Personal Broadband. A prerequisite for this concept are the revolutionary changes resulting in an increased transmission speed that should reach the hard-to-imagine 100 Mbps u 2012 by means of the “Super 3G“ technology. In this context 2007 will be a milestone. In tune with the mobile and fixed networks convergence trend we shall soon witness a large-scale use of the IMS subsystem and Mobile TV, TriplePlay services and similar.

 

Ericsson Nikola Tesla is strategically positioning itself in these new focus areas, building on its great experience, knowledge and innovativeness. The employees’ competence development is directed accordingly. The company still has to put great effort and common sense in its operations to achieve results in a business environment characterized by a strong competition, further price demands and a permanent necessity to offer to customers precisely what they need when they need it.

 

Communication Ericsson Nikola Tesla