17,000 jobs to go at Ericsson

The mobile phone industry was left reeling today after one of the biggest firms, Ericsson, announced 17,000 job losses.

The news comes shortly after Nokia predicted that phone sales would be 20 million lower than the expected figure of 440 million.

It means plans for the next generation of mobile phones with full internet access (3G) may not get off the ground for years.

Shares of all mobile phone firms came under pressure after Ericsson's news. The Swedish giant saw prices plunge by almost 25 per cent.

The financial problems are hitting the industry shortly after it invested billions with the Government for 3G licences.

Christian Maher, a telecoms analyst for Investic Securities, said the news from Ericsson was very worrying for the future of the industry.

"The operators are clearly continuing to cut their capital expenditure budgets and this is a reflection of lower growth," he said.

Experts fear companies are no longer investing capital in new technology at a time when third generation phones should be taking off.

The alert came as handset maker Ericsson announced losses of £248 million in the last four months. It has warned it will not make a profit until next year.

The company could not rule out the loss of some of the 1,000 jobs based in the South-East. Poor sales have crippled the entire mobiles market.

Sales of phones dipped for the first time last year by six per cent. As the number of people owning mobiles reaches saturation point, companies have found it hard to keep sales increasing.

The roll-out of third generation phones is also being hampered in areas such as London by the lack of space to build the large masts needed to connect consumers to the network.

Only last week, the world's biggest mobile manufacturer, Nokia said that sales of mobile phones by all manufacturers would not be as strong as hoped.

Nokia recorded a drop in pre-tax profits of 11.5 per cent although this was not as bad as experts had feared.

There has been a spate of job losses not only in the handset industry but also within the companieswho set up mobile phone networks.

Last year Ericsson cut a fifth of its workforce and sold off assets worth £1.8 billion in an attempt to balance its books. It has already announced 3,000 job losses this year and is expected to axe 7,000 more by December, with the remaining 10,000 being axed next year.

The group employs just over 1,000 staff in Guildford Brighton and Burgess Hill, West Sussex. A spokeswoman today said she could not comment on where and exactly when the job cuts would occur.

President and chief executive Kurt Hellstrom said he hoped the Swedish group would return to profit "at some point" in 2003.

But the mobile systems market is now expected to be down by more than 10 per cent this year, compared with previous estimates of zero to 10 per cent.

City & Business