Ericsson says Vodafone's investment boost will make Europe 'fun'

By Paul Sandle

BARCELONA, Nov 20 (Reuters) - Network gear maker Ericsson (Xetra: ERCA.DE - news) said Vodafone's plan to ramp up spending on its network could prompt other network operators to follow, making Europe fertile ground for the Swedish company and its rivals.

"It would be fantastic if we could get to, let's say, half of the dynamics that we have experienced in the U.S. market," Chief Financial Officer Jan Frykhammar said at the Morgan Stanley Technology, Media and Telecoms conference.

"(Then) it will be fun to be a vendor and an investor in Europe. But we are not there yet."

Europe has fallen behind the United States and parts of Asia in rolling out fast mobile broadband for customers using smartphones and other devices, but Vodafone's move could mark an improvement in gear makers' prospects.

Vodafone said earlier this month it would spend 7 billion pounds ($11.3 billion) of the proceeds from the sale of its stake in Verizon Wireless to increase the speed and coverage of its networks.

The world's second-largest mobile operator is spending 3 billion pounds in Europe, 1.5 billion in its emerging markets and the rest on fixed-line assets, enterprise and its retail arm in what it calls Project Spring.

Vodafone's chief executive said in Barcelona on Wednesday that he was open to keeping network spending above traditional levels once its two-year booster programme has ended if it needs to respond to customer demand and competitors.

"Fundamentally if we have been able to win the right footprint when we modernise the networks in Europe, especially then with Vodafone, and we have done that using our multi-standard radio, then (Project Spring) is good for us," Ericsson's Frykhammar said, making the unusual move of commenting on a specific customer.

He said Vodafone's rivals may react by also ramping up spending but also cautioned that many European economies were still suffering, with consumers reluctant to increase spending on mobile services.

"But fundamentally, the leading operator in Europe deciding to invest in differentiation by means of quality performance, that cannot be bad," Frykhammar said.

Ericsson leads the world's network gear makers, followed by China's Huawei. NSN is also among its rivals.

In Ericsson's third quarter results it noted a significant pickup of business in Europe.

In contrast with Europe, Frykhammar said most of the superfast mobile broadband coverage roll-outs in the United States were done.

"Shorter term there is a shift from coverage to capacity in the U.S. which means the top line is becoming more uncertain. On the other hand, on the cost side, what we sell, we sell at higher margin," he said.

But he added there would be many other business opportunities in the United States in the next couple of years in areas such as small cells and new architectures.