16,7% Revenue Growth for Ericsson Nikola Tesla

“In 2016 Ericsson Nikola Tesla Group continued with a series of its successful business years. Sales revenue increased by 16.7% year-over-year due to strong revenue growth in CIS market and continued growth of revenue in Ericsson market“, Gordana Kovačević, President of Ericsson Nikola Tesla, said at the press conference. In 2016 the company had 1.6 billion kuna revenue, growth by 16.7% compared to 2015, gross margin was 11,9% and net profit 110,7 million kuna.

Operating profit increased by 24.3% year-over-year while net profit increased by 21.2% year-over-year. Gross margin continues to be under pressure due to business mix, continuous price pressure and challenging projects on export markets. In export markets (the Ericsson market excluded) sales revenue amounted to MHRK 450.4 (2015: MHRK 249.4), 80.6% increase year-over-year.

2016 will be remembered by signing of important contracts in export markets with three new customers of beCloud in Belarus, Ucom in Armenia and the Ministry of Healthcare in Kazakhstan. All three are very demanding projects regarding LTE technology and healthcare informatization. Furthermore, their Research and Development Center, Global and Regional Expert Centers for Services and Customer Solutions Centers received new responsibilities within the global corporation.

“In line with that, we continued to hire, employing 318 experts in 2016. We remain the largest Research and Development center in Croatia, currently employing more than 1200 people, while Ericsson Nikola Tesla Group has almost 3000 employees. We have kept our position of the largest Croatian ICT exporter, and the largest exporter of knowledge“, said Kovačević.

In Southeast Europe markets, sales revenue decreased due to negative economic trends and political turmoil, which slowed down operators’ investments. Competition and pervasive trends of consolidation and centralization of sourcing processes by global customers/operators are main challenges on domestic market.

“We are pleased to have kept strong position and customers’ trust in Croatia and the region, above all by working with our traditional partners, such as Vipnet, Hrvatski Telekom, HT Mostar, BH Telecom, Crnogorski Telekom and Ipko“, explained Kovačević.

Daughter company, Ericsson Nikola Tesla Servisi d.o.o., records solid business results. In the last two years, the company went through demanding transformation processes, whilst implementing complex network build and maintenance projects for Hrvatski Telekom. In the domestic market sales revenue amounted to MHRK 268.8 (2015: MHRK 293.5), which is a decrease by 8.4% year-over-year.

Cooperation with strategic partner Vipnet was continued on the modernization of radio access network and transport telecom network as well as on the increase of the capacity of 3G and 4G technologies. In Q1, the first Radio Dot system was successfully integrated into Vipnet’s commercial network, thus increasing the service quality and end-user experience, to the level which is globally considered to be one of the best.

The testing of new functionalities, contributing to increased quality and new services for end users in various areas of core and access network, is ongoing.

Business cooperation with Hrvatski Telekom (HT) was expanded in the segment of fixed telecommunication network modernization by delivering solutions for IP access network and transport network.

Activities in the area of Managed Services, that is, the build and maintenance services of telecommunications infrastructure have been intensified. Preparation activities related to identification and realization of future HT Group (HT, Iskon, Optima) projects have been completed.

With the mobile operator Tele 2 we worked on software support improvements, core network modernization as well as transport network upgrade in the microwave and fiber optic segment. Furthermore, we provided support and maintenance services for the entire telecommunication network. Business volume decrease year-over-year as a result of another vendor selection for telecom network modernization.

In the segment of ICT solutions for Industry & Society, there is a continuation of numerous activities in the healthcare informatization and joint information system for land registry and cadaster. In Q4, a strategically important contract was signed with the Ministry of Interior of the Republic of Croatia, regarding the delivery of the state border control system.

In the markets of Southeast Europe (Bosnia and Herzegovina, Montenegro and Kosovo) sales revenue amounted to MHRK 149.3 (2015: MHRK 176.7), 15.5% decrease year-over-year. Slow economic development and political uncertainty have affected the level and the dynamics of operators' investments.

In Bosnia and Herzegovina, ENT continued providing technical support for BH Telecom mobile and fixed network maintenance. With the operator, HT Mostar, they worked on fixed and mobile network modernization, with an emphasis on broadband Internet access. In Q4, with HT Mostar, further 3G network expansion was agreed, which will enable better coverage and network capacity.

In Montenegro, a frame agreement was signed with Crnogorski Telekom regarding a new investment cycle in radio access network and mobile core network until the end of 2018. Within the agreement, at the end of 2016, the state of the art technology LTE Advanced 3CA (Three-Carrier Aggregation) was commissioned.

In cooperation with Belarussian company beCloud, LTE technology was commissioned in all regional centers of the Republic of Belarus. The plan is to cover all densely-populated cities with LTE by the end of 2017.

In the capital city of Armenia, Yerevan, in cooperation with the operator Ucom, an advanced LTE network based on Ericsson multi-standard radio equipment and Antenna Integrated Radio (AIR) system was commissioned.

The implementation of strategically important contract on the healthcare system informatization of the Republic of Kazakhstan is ongoing. This contract will enable the Ministry of Healthcare of the Republic of Kazakhstan and related healthcare institutions to introduce international standards and to support key reforms of healthcare sector. Within the contract, National Electronic Health Record System and Business Intelligence System will be designed.

In the Ericsson market, sales revenue amounted to MHRK 872.4 (2015: MHRK 821.4), an increase by 6.2% year-over-year. In Ericsson Nikola Tesla Research & Development Center (R&D) the jobs related to application and platform software development for radio systems within the Radio Development Unit have been expanded. Respectively, hiring and competence development of new experts is ongoing. Activities within the development units Mobile Core, User Data Management and Cloud are ongoing as planned, said ENT president Gordana Kovačević.

Research projects related to virtualization and Big Data processing continue. A significant focus is placed on developing network function virtualization, with the aim of enabling new solutions on Cloud platform. Ericsson Nikola Tesla’s new innovation cycle was supported.

At the end of 2016, Ericsson Garage Croatia was officially opened, acting as an incubator for innovations in the areas related to our current research and sales segments. It was designed to respond to a wide range of projects - from spontaneous ideas to big concepts.