Operational frontrunners excel by focusing holistically on execution across five common principles: 1) Being experience-centric by measuring customer experience through key KPIs and linking incentives to customer satisfaction metrics. 2) Simplifying their business to reduce costs and complexity while increasing revenues by streamlining products, services and processes. 3) Being asset-smart by explicitly focusing on asset utilization and capital efficiency. 4) Gaining competitive advantages through collaboration by partnering for innovation and skills. 5) Leveraging scale and knowledge through organizational partnerships to realize synergies.

1. February 2016
OPERATIONAL
principles
Building sustainable profitability

2. CHANGING MARKETS 3
IDENTIFYING OPERATIONAL FRONTRUNNERS 4
PRINCIPLES FOR SUSTAINABLE PROFITABILITY 5
EXPERIENCE CENTRIC 6
SIMPLIFICATION 7
ASSET SMART 8
ORGANIZATIONAL LEVERAGE 9
COLLABORATION 10-11
CONTENTS
Five common principles
The operational principles indicate what enables growth.
These are summarized into five common principles, all
of which contribute to improving ROCE. Adopting
these principles leads to a holistic focus with emphasis
on execution.
Introduction
This report follows up on the previous research study
“Growth Codes”. In this study we wanted to know what
drives growth. We analyzed 270 operators and did an
in-depth study of the twenty operators that had the
most revenue growth. This research is described in the
Growth Codes report.
Changing markets
Excelling in saturated markets is a new game; operators
can no longer rely on market growth to increase service
revenues. We see an increase in mobile data traffic,
driven mainly by video, which calls for continued invest-
ments. At the same time, operators are confronted by
Next we wanted to know what enables growth, i.e.,
what makes your operations efficient? We did an in-
depth study of the thirteen operators that had the best
operational efficiency (i.e., ROCE). We turned this into
the operational principles, the enabler of growth.
* ROCE = Return On Capital Employed
the challenge of monetizing mobile data. Data will in-
crease massively, putting great pressure on networks, as
customers become less and less willing to pay for data.
Challenge in monetizing mobile data
Even though ARPU is decreasing in most markets, the
average mobile data ARPU is increasing. However, rev-
enue per exabyte is decreasing.This can be explained by
the challenges in monetizing data as well as increased
competition. In most markets it is predicted that LTE will
help mitigate the ARPU decline in the near term.
However, this still indicates difficulty in making mobile
data traffic profitable for operators. At the same time
as ARPU is declining, the demand for mobile data also
requires high capital intensity.
Transition to a
data economy
Mobile Data Traffic Revenue / EB ARPU Mobile Data
MobileDatatraffic(EB)
160
140
120
100
80
60
40
20
RevenueandARPUdevelopment
0
2019E2018E2017E2016E2015E201420132012
10
5
0
15
20
25
2 ERICSSON OPERATIONALCODES REPORT FEBRUARY 2016 ERICSSON OPERATIONALCODES REPORT FEBRUARY 2016 3
Mobile data traffic
has increased
more than
2011-2015
8x
14 000
12 000
10 000
8 000
6 000
4 000
2 000
DataTraffic(PB)/
Voice(MoUpersubscriptionspermonth)
0
2017E2016E2015E2014201320122011
Mobile Data TrafficVoice
Mobile data
traffic 2011-2017
CAGR
64%
Measure and manage
performance based on
experience-centric KPIs
Reduce complexity
to decrease cost and
enhance revenues
Collaboration
Working cleverly
with your assets
Gaining competitive
advantage by leveraging
partnerships
Realizing synergies
through scale benefits
and knowledge sharing
Organizational
leverage
Operational
Principles
Revenue per EB
will change
by 2019
-92%
Data traffic
will increase
during the
same period
24.5X
Experience
Centric
Simplification
Asset Smart

3. principles for
sustainable
profitability
Operational frontrunners have a holistic focus with emphasis on execution. It is not what they
do but rather how they do it. Planning, execution and follow-up of core operational activities are
consistently in focus and are continuously being improved.
*The size of the circle indicates the impact of principle on the ROCE levers
Revenue
Operational frontrunners partner to foster innovation,
get access to critical skills and reduce time to market.
They simplify to improve customer experience, time to
market and efficiency.
Cost
Operational frontrunners reduce complexity and increase
automation. They leverage scale and operational know-
how to realize synergies and excel in “make” or “buy”
decisions.
Capital employed
Operational frontrunners put explicit focus on asset
utilization and capital efficiency.
Increase Revenues
“Asset Smart”“Collaboration” “Organizational
leverage”
“Simplification”
Reduce Cost
Improve capital efficiency
“Experience
centric”
4 ERICSSON OPERATIONALCODES REPORT FEBRUARY 2016 ERICSSON OPERATIONALCODES REPORT FEBRUARY 2016 5
Revenue growth Data-centric Profitability Capital efficiency
Growth
markets
Limited
growth
markets
High ROCE
Outperforms market peers
>25%
non-voice revenues
5%
or higher
High ROCE
Outperforms market peers
>25%
non-voice revenues
Stable
or positive
identifying
operational
frontrunners
A group of operators, identified as 13 operational frontrunners, is growing data-centric and delivers
high ROCE. Operational frontrunners grow faster and have shown higher revenue growth in
2013 and 2014. Operational frontrunners had a CAGR of 7.9 percent between 2011-2014, which is
2.6% higher than other operators.
Operational Challenges
Customers demand a wider range of services, which
increases complexity. Together with the decline in
ARPU, this impacts operators’ EBIT margins. They
need to invest in order to satisfy customer demands.
Mobile data requires high capital intensity. Since 2011,
we have seen an increase in ROCE for the operational
frontrunners while other operators have seen a steady
decline. Note that there is no surprise in the fact that
operators that were selected according to ROCE display
higher ROCE.The interesting point is that the gap to their
peers is increasing. In times of declining ARPUs, other
operators have seen a slight decrease in profitability.
During the same period, operational frontrunners have
increased their EBIT margin by 3 percentage points.
10%
24%25%
12%
24%
14%
19%
15%
30%
25%
20%
15%
10%
5%
0%
OperatorROCE
2014201320122011
Others
Other
Operators
-4pp
Operational
Champions
+5pp
Operational Champions
Operational frontrunners grow 1.5x times faster
Operational frontrunners are 1.6x more profitable
Operational frontrunners are 1.1x more capital efficient
Operational frontrunners deliver 2.4x higher ROCE
›
›
›
›

4. Asset Smart
Collaboration
Simplification
Experience
Centric
Organizational
leverage
Operational
Principles
SIMPLIFICATION
As the market develops, complexity is added from all sides, all the time.The operators
that will win are those that manage to reduce complexity so they can focus on their
core operations and differentiators. The customers will also appreciate simplification.
›
›
›
›
European operator has enabled simplified
offerings as a competitive advantage on
the market
Asia-Pacific operator has developed
an award-winning solution to provide
customer support through social media
Asia-Pacific operator consolidate and
modernize its BSS as part of a company-
wide, customer-centric transformation
North American operator has centralized
back-office operations and automated
finance processes to reap major cost
savings
Streamline portfolio
Facilitate customer
interaction
Consolidate & modernize
support systems
Automate key processes
Capital
Employed
Capital
Employed
Capital
Employed
Capital
Employed
Cost
Cost
Cost
Cost
Revenue
Revenue
Revenue
Revenue
Operational
champions
simplify their
business to
reduce costs, but
also to increase
revenues and
capital efficiency
Handle complex demands
To be successful in this challenging environment, managing complexity is on top of operators’ agenda
Complex demand from customers and complex products, services and offerings all need to managed
in operators operations, spanning from network & engineering to marketing & sales
Simplifying product and customer portfolios provides operators with opportunities to reduce cost and
increase revenues
›
›
›
four levers of simplification
Automate key processes and
standardize non-critical
activities to improve efficiency
Streamline portfolio to
improve transparency and
reduce resource intensity
Consolidate & modernize
support systems to support
rapidly changing market needs
Facilitate customer
interaction across all touch
points to improve experience
Asset Smart
Collaboration
Simplification
Experience
Centric
Organizational
leverage
Operational
Principles
Experience
centric
Your customers’ experience is not measured in the usual metrics such as up time
or EBIT; it is simply “can I do what I want to do right now?” Understanding your
customer’s “what”, “when” and “how” will help you enhance their experience and
make you experience centric.
›
›
South American operator has introduced
App Coverage to better measure and
manage customer experience
Asia-Pacific operator has linked the
short-term incentive plan for its
employees to the NPS results
Experience-centric KPIs
Action-oriented approach
Capital
Employed
CostRevenue
Capital
Employed
CostRevenue
Operational
champions apply
an experience-
centric approach
to increase their
revenues
MEASUREMENTS IMPACT THE ENTIRE ORGANIZATION…
Understanding how customer experience is delivered
Great customer perception is based
upon underlying network delivery
›
The process starts
with measuring
customer experience
through key KPIs
such as NPS and
App Coverage…
…and the results form
the baseline for devel-
oping OSS and BSS
systems to improve
product development
and CRM…
…as well as the
optimization of
network infra-
structure, capacity
planning and roll
out strategy…
…before finally end-
ing up on C suite
level where strategic
choices are made
based on customer
experience
Excellent network delivery is based
upon network enablement
›
This makes it important to measure
onall levels and understand the
relation in between them
› Network Element
Service Indicators
Network Element
Quality
Network Operation
Service Indicators
Perception
Delivery
Enablement
Quality of experience
Indicators
Network Performance
Indicators
Customer
Service Indicators
6 ERICSSON OPERATIONALCODES REPORT FEBRUARY 2016 ERICSSON OPERATIONALCODES REPORT FEBRUARY 2016 7

5. Asset Smart
Collaboration
Simplification
Experience
Centric
Organizational
leverage
Operational
Principles
ASSET SMART
Working cleverly with assets, regardless of their size, maximizes the revenues they
generate. It is about finding the right role in the ecosystem and grabbing a spot on
the sliding scale of “asset smart”.
›
›
›
Asia-Pacific operator own all infrastructure,
sublets space and has an extensive
wholesale business to maximize revenues
from their assets
South American operator sold off tower
assets and entered network sharing
agreements thus enabling quicker and
more cost-efficient roll-out of 4G
European operator entered national
roaming agreement with competitor while
building out their own network in strategic
locations to offer complete coverage
Maximize revenues by
filling the pipe
Operational
champions
leverage assets
to improve
profitability and
capital efficiency
Reduce cost and free up
capital by sharing
Minimize investments by
utilizing others’ assets
Capital
Employed
Capital
Employed
Capital
Employed
Cost
Cost
Cost
Revenue
Revenue
Revenue
COMMON
PITFALLS
Under-utilized assets
seeing superior network as a
competitive lever, failing to maximize
revenue from investment
SUCCESS
FACTORS
Align asset strategy
with overall company strategy
Clear rationale
behind owning or renting/leasing
infrastructure
Poor business case
investing when alternative more cost or
capital efficient solutions are at hand
8 ERICSSON OPERATIONALCODES REPORT FEBRUARY 2016 ERICSSON OPERATIONALCODES REPORT FEBRUARY 2016 9
Asset Smart
Collaboration
Simplification
Experience
Centric
Organizational
leverage
Operational
Principles
Organizational
leverage
Create organizational leverage to improve ROCE by leveraging all the abilities of the
company, sharing the knowledge that it has amassed and sharing the resources
from which it arises.
›
›
›
›
European operator utilizing shared service
center with plans to centralize NOC to cover
several geographies in the region
European operator merged its mobile
and fixed-line businesses in a bid to
target the converged services market
North American operator has strong
focus on attracting and retaining talent
enabling a committed workforce with
single digit turnover
North American operator has enabled
HQ as a strong hub for support, allowing
effective dissemination of expertise to
regions
Centralization and
shared services
Consolidation
Attract and retain the
right people
Knowledge sharing
Capital
Employed
Capital
Employed
Capital
Employed
Capital
Employed
Cost
Cost
Cost
Cost
Revenue
Revenue
Revenue
Revenue
Operational
champions
leverage
organizational
capabilities to
increase
profitability by
reducing costs
Attracting and retaining talent a top priority…
Q. What actions can provide the most positive impact on your operating model?
45
Improve
understanding of
market, customers
and competitors
42
Shorten
time-to-market
for new products
and services
39
Improve big
data & analytics
capabilities
36
Increase
collaboration
within the
business
21
Refine
organizational
structure
21
Increase focus
on performance
tracking and
measurement
21
Introduce more
robust processes for
allocating resources,
spending
3
Others
60
40
50
10
20
30
0
55
Acquire talent
with new forms
of expertise
DUAL APPROACH TO ORGANIZATIONAL EFFICIENCY
ExpertiseSynergies
Leverage scale and
realize synergies by
working cross-
functionally and
cross businesses
Build operational
know-how by sharing
knowledge across the
organization

6. 10 ERICSSON OPERATIONALCODES REPORT FEBRUARY 2016 ERICSSON OPERATIONALCODES REPORT FEBRUARY 2016 11
Asset Smart
Collaboration
Simplification
Experience
Centric
Organizational
leverage
Operational
Principles
Collaboration
›
›
›
Asia-Pacific operator has clearly defined
partnership program with select global
partners to foster innovation in products
and services
European operator partner to secure
competence and fill gaps in IT
Asia-Pacific operator partner with OTT
players to capitalize on the opportunity
to increase customer value, rather than
seeing them as a threat
Collaborate to foster
innovation
Partner to fill competence
gaps and reduce complexity
Join forces with third parties
to reduce time to market
Capital
Employed
Capital
Employed
Capital
Employed
Cost
Cost
Cost
Revenue
Revenue
Revenue
Operational
champions
collaborate to
improve profit
and capital
efficiency
Partnerships give access to new markets, new products and new services at a
lower cost. The right partnerships will result in a distinct competitive advantage.
Collaboration becomes key as pressure on resources mounts
Driven by an ever more connected world where devices are becoming less expensive, more powerful,
and having more and more application areas customer demand for new services and solutions is
continuously increasing
As a result, operators face increasing complexity and old legacy systems need to be modernized,
putting strain on the organization’s competence and resources as no one can do everything themselves
›
›
Make Buy
Out-tasking
Outsourcing
Partnership
Joint Venture
The starting point is a clear
make or buy strategy…
partnerships aim to
fulfill three purposes
In areas where the operators lack competence they acquire this through partnerships. By investing wholeheartedly
and with a long-term approach, they fully utilize the know-how of the partner who become an integral part of the
organizations vision and goals.
Innovation
Collaborate to
foster innovation
in the product or
services domain as
well as developing
new technologies
and smarter ways
of working
Competence
Partner to fill
competence
gaps and reduce
complexity,
creating more
value in the long
run
Speed
Join forces with
third parties
exploiting key
resources to reduce
time to market for
new product and
services
Common characteristics for successful partnerships
Many of the most efficient operators have a clear strategy for what they will do themselves and what they should
buy from partners. These decisions should be well thought through and be aligned with your overall strategy.
Fewer partners
to be able to dedicate resources and
get the most out of the relationship
Long-term
approach to overcome initial
hurdles and create sustainable value
Pursue a collaborative agenda
where partners are not only chosen
based on capabilities but also on
willingness to collaborate
Clear rationale
for the partnership aligned with
purpose and strategy
Mutually beneficial
partnerships with shared incentives
and joint performance management
Complementing strengths
in areas where you have a solid
footing rather than compensating
for weaknesses

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