Partnership Restructuring
According to industry sources on December 26, Ericsson-LG has recently started to implement a major restructuring with early retirement incentive programs and a reduction in sales personnel. The phenomenon is largely attributable to its failure to obtain an order from LGU+ to provide equipment for the construction of a 2.6GHz broadband LTE network nationwide, although the joint venture between Ericsson and LG Electronics was for LTE equipment supplies of LGU+ in the past.
In the face of a crisis where the company’s sales are likely to be cut in half in 2014, the management reached the conclusion that it is not possible to retain 950 people working in its carrier network business unit. In particular, its inability to secure a deal for LTE equipment when investment is nearly complete seems to aggravate the burden.
Ericsson-LG has provided base stations in Seoul and the metropolitan areas to LGU+, maintaining higher market share than Samsung Electronics or NSN. Nevertheless, Huawei’s entry in the market as a supplier in the same areas brought the joint venture a crisis.