Welcome all to Ericsson's 2022 Capital Market Day. My name is Peter Nyquist, and I will be the moderator at this event today. It's actually great being back in a in-person event and great being back in a Capital Market Day. The last one was in 2020, so almost three years ago. That was held in Kista, Stockholm. It was an only online, and we had broadcasted them from Kista, Stockholm. We were here in New York, I guess the last time in 2018. It's great being back. As you know, Capital Market Day is all about numbers and plans, how to achieve those numbers. This year's CMD is no exception. The common theme for these numbers is all that they symbolize the long-term opportunities that we have here in Ericsson.
They will shape the future of Ericsson. Today, we will talk about, or the team will talk about how to execute on these plans and how we do it and how we're gonna execute. Who will you meet here today? We will have the first block, as you see here. We'll start with Börje Ekholm, who will talk about our strategy execution. He will be followed by our CTO, Erik Ekudden, who will talk about the technology leadership and what really, what it actually really means. After that, we will actually welcome to, what you can call them newcomers, to Ericsson since the last Capital Market Day. It's George Mulhern, originally from Cradlepoint, but now heading up the Enterprise Wireless Solutions.
We will have Rory Read, who is originally from Vonage, but is today heading up the Global Communication Platform. George, who unfortunately cannot be here today, we have recorded him. We will show that. Rory will talk about the enterprise business. The last presenter in the first block will be Niklas Heuveldop, head of Ericsson North America. He will cover the customer view. We will end the first block with about a 20- minutes Q&A. We'll have a 50- minutes coffee break. We will start the second session around 11:05 A.M. Eastern Time. That will be with Fredrik Jejdling, who is head of Segment Networks, and he will lay out his strategy.
We have another newcomer, not a really newcomer for Ericsson, but for as new head of the new segment, Cloud Software and Services, Per Narvinger, who will lay out the strategy for his segments. We will end the second block with Carl Mellander, our CFO, who will wrap up the presentation by presenting the numbers supported by all plans that has been presented today. Around 12:20 P.M., we will have the second Q&A session here. Those who actually join online, I think there are 500 of those, we have about 60 people here in New York, can join the conference by ask question on the phone. You can find the details on our website, Ericsson.com. This session, again, will be recorded and, within approximately one hour after the event, it will be available on our website.
Again, we will also appreciate giving feedback, how we can improve this by the end of the event. You have that sort of survey options on your table. Before heading over to Börje, I would like to say the following about today's presentations. Today's presentation, we will be looking forward-looking statements. Such statements are based on our current expectations and are subject to risks and uncertainties that could materially affect our business and result. Please read our earnings report and our most recent annual report for a better understanding of these risks and uncertainties. Please see the last page in this presentation for further information about forward-looking statements.
Any forward-looking statement made during presentations speaks only as the date of this presentation. Ericsson expressly disclaim a duty to provide updates on these forward-looking statements and the estimates and assumptions associated with them. With that said, I would like to hand over to our CEO, Börje Ekholm.
Yeah. Let me get to the start. It's great to see you all here. My name is Börje Ekholm, CEO of Ericsson since 2017. A big thank you for joining us in person, but also online. I think this is probably the future. It's the hybrid event, hybrid working environment we have at Ericsson, and I'm convinced we're gonna see Capital Markets Day in this format as well. Really what I want to do today is to talk about where we are as a company, but more importantly, where we're heading in the future. We have established a leadership position in mobile networks, and we have really taken the important steps of building an enterprise presence.
Now we're actually shaping the industry landscape by becoming a platform company, leveraging the 5G as the most powerful innovation platform we've ever seen. We will not do this alone. We work with frontrunner customers, and together with them, we are driving a paradigm shift in the entire industry, and that is going to define the next stage of growth, and that's the excitement we want to discuss today at this Capital Markets Day. We're a company on the move. We're taking actions to continuously improve our operations to ensure that our people, our customers, and our partners around the world understand what's expected, what excellence looks like, and where we're heading as a company. More importantly, we fully understand that to be a true industry leader, market and technology leadership are not enough. We actually need to be an ethical leader as well.
It's all about how we run the company with the highest standards of integrity and ethics. My view is compliance is actually a competitive advantage. We've done a lot on that journey over the past couple of years, but we want to be honest, we have much more to do as well. After today, I hope you understand and share our excitement in the journey we see ahead. Before I dive in, I want to start by thanking the 100,000+ people at Ericsson for their hard work and commitment and passion they have shown over the last few years, turning around the company and putting us in the position we are in today. A big thank you to them. Let me shift gear a bit.
You've all been with me since 2017, and when I came in in 2017, we were in a tough spot. We were losing sales, losing competitiveness, we were losing market share, and more importantly, we were losing money, and we had a history of misconduct. We needed a fundamental reset of our company and of our business, and we took action. What did we do? We focused the portfolio. We took out significant costs. We increased investments for technology leadership, and we have actually regained technology leadership. The big shift was actually a shift from reducing non-R&D headcount by more than 20,000. To be correct, 23,000. At the same time, we were hiring 5,000 engineers into R&D, so a fundamental shift of our workforce in the company.
Strong execution led us back to competitive position or a competitive offering, which allowed us to actually regain footprint, regain sales. We regained technology leadership, and that allowed us to break even the company, but also to reach the goals for 2020 and 2022 that we set earlier than we expected. Today, we're a clear leader outside of China. As a matter of fact, around half of the traffic on 5G networks actually carried over our networks. Typically, industry consultants, when they look at the industry, they will rank us as a leader in 5G networks. Notably, 16 out of the 20 largest CSPs use Ericsson's 5G Core, and we've taken a strong position there as well. You will hear a lot more about technology from Erik, of course, but also Fredrik and Per.
I would say the key factor behind our turnaround was the focus on technology and focus on technology leadership, but that was not enough. As I started out saying, to be a true industry leader, it's technology leadership, market leadership, but also leadership in how we conduct the business. We needed to change the culture to make integrity and execution at the core. We saw too many instances of poor behavior, misconduct, and many people turning a blind eye. Building a culture of compliance and ethics has been, and still is, a top priority for me and the whole leadership team at the company. We started this journey in 2017, and we have done a number of things. At its foundation, there is a shift in culture and mindset, and that has to be for every one of our people.
It's to instill intelligent decision-making to make sure that we protect the company and our assets. It's also create ways to continuously speak up to improve our ways of working, but also about past misconduct. We have driven this through a program that we've been running at Ericsson called Ericsson on the Move. As a matter of fact, we started that just weeks before the world went into a lockdown, and when you're in 180 countries, a lockdown actually is meaningful. It was very hard, but we migrated online and been driving it since then. We also put in place a very strong compliance program with strong processes that permeate the company, and that, again, it has to reach out to 100,000+ people in 180 countries. That is a challenge. It requires effort.
We also increased our efforts on investigation and took remediation faster. I would also say there are many more things for us to still do. I think the most important question that we ask ourselves in the company, and actually that everyone should ask: Does the program work? Don't get into the fussiness of what it actually means, but ask yourself, "Does it work?" That's what we are asking ourselves to make sure that our program is fully institutionalized in the company. Our focus is to respond very fast and very consistent throughout the company on misconduct. We need to make sure the past doesn't repeat itself. We are committed to cleaning up the past, and we have cleanup to do. That's the best way to ensure it cannot happen again.
I am committed to getting this right, and I see actually the fundamental cultural reset that we as a company do will improve the way we operate, will lead to longer term efficiencies as well. It's a truly a competitive edge to have the right culture of ethics and integrity. We're also, under the leadership of our new Chief Legal Officer, Scott Dresser, we're completely revamping our approach to global risk management. We're putting in place a strong central oversight and a streamlined process, so we effectively identify material risks, but also mitigate them or eliminate them. We're also accelerating our efforts to simplify the way we work because we are convinced that will enhance governance, and it will strengthen accountability. It's again why compliance is a competitive edge.
We also continue to cooperate fully with the U.S. authorities, we take our obligations under the Deferred Prosecution Agreement seriously. You know that yesterday we announced an agreement with the DOJ and SEC to extend the term of the company's independent compliance monitor for one year until June of 2024. This extension is consistent with our commitment to continuous improvement of our ethics and compliance program. We have started the journey to change our culture, but our ambition is to be a leader in how we drive the business. To be that, the change has to be fully institutionalized. This, we believe, will need some extra time, and therefore, it's the right decision to extend the monitorship. With respect to the DPA breaches, we're in active discussions with the U.S. authorities to resolve these matters.
With respect to the investigation report about Iraq from 2019, we're continue to thoroughly investigate the allegations in cooperation with the authorities to understand whether or not the allegations can be substantiated. Now let me shift gear a bit. We are at the epicenter of an extraordinary powerful trend. Anything that can go wireless will go wireless. However, near term, there are some challenges and headwinds. As we indicated in last quarter, some of our customers, like in North America, are guiding for lower CapEx, followed a very fast build-out in the beginning of 2022. This is an adjustment we see that will start during the fourth quarter. We see similar patterns in other markets. At the same time, we have significant market share gains that results in growing sales, but that short term might dilute margins a bit.
We also see that some customers are doing inventory adjustments, and that's really following the easing of the supply chain. I think the fair outlook to say is that 2023 is a bit uncertain. Maybe you can call it choppy. There are those uncertainties. I would say that the general economy, the macroeconomic headwinds, and the general lower activity level in the economy also affects, to some extent, our enterprise segment. I think we stand in front of a massive uncertainty in 2023, and 2023 is therefore a bit difficult to predict, which is why we focus our attention on 2024 and longer term at this Capital Market Day.
The reason why we're so comfortable about the outlook, call it 12 to 18 months out, is that ultimately, the demand for wireless equipment and wireless networks, it's driven by growth in data traffic. That growth continues. Yes, the growth rate in % might taper off a bit, but the actual addition to growth or data traffic growth in the networks continues to grow. That's why we also know that yes, you can delay investment, but if you need to ensure quality to the enterprises or consumer of the network, you actually need to invest in the network to have that capacity. That's why we know it's only temporary, and we see it coming back 12 to 18 months out. If we look longer term, we're planning for a flat RAN market.
There is an underlying, very powerful shift going on, and that is that 5G is growing. Why is that important? We are stronger in 5G than we are in previous generations. That is, in a way, supporting further market share gains for us. As I said before, 50% of 5G traffic are carried over our networks. We are still in the early days of the 5G penetration. As a matter of fact, 80% of all base stations need still to be updated to 5G mid-band. We're starting to see new use cases to drive growth. We're also seeing the launch of 5G in new markets. Think about India, for example, where India probably will have the strongest digital infrastructure outside of China in just a few months.
It's a very large market growing very fast, and that's a market that we see also can actually balance other front-running markets. This is why we see the fundamentals of our industry to be very strong, and we believe we can thrive and create a lot of value over the next 12 to 18 months, but also beyond that. We see growth beyond the current forecast, and that will come out of new use cases that will leverage the 5G networks to drive traffic. Think about here Fixed Wireless Access. We're already seeing this rolled out in many parts of the world, but it will grow, and it will drive a lot of traffic on the network. Mission-critical. Think about public safety, rail, utilities, et cetera. That's a new use case that's also driving traffic. Beyond these pockets, we see other areas of growth.
Think about 5G for indoor. Think about 5G over satellites. Think about XR applications. I would say 5G is the first wireless technology that offers applications beyond consumer mobile broadband. It's a true platform for digitalizing society, and therefore it's gonna drive a lot of traffic on the network. Overall, we see the increased demand for broader consumer and enterprise applications will drive further demand actually on network performance. Which is why we see a substantial upside on the 5G investment cycle. The good thing is that we can capture that upside in the market with very limited additional R&D investments. Our strategy is really to extend leadership in mobile networks and establish the focused expansion into enterprises, and that positions us to fully leverage this development. We continue to focus and strengthen our mobile networks through our market-leading RAN and 5G Core portfolio.
Our strong R&D investments positions us well to further extend technology leadership for cost, performance, and sustainability. We're also committed to innovating and drive the world into an open network world. For example, we're the largest contributor to O-RAN. We drive the alignment between 3GPP and Open RAN. We invest heavily in Cloud RAN, and we do this to ensure long-term competitiveness, but also that we are competitive in all different market scenarios. In addition, you see that Cloud RAN, for example, has applicability in the enterprise segment, again, tying our networks part into our focused expansion into enterprises. Here, Erik, but also Fredrik and Per, will touch upon this later on during the presentations as well. Cloud Software and Services is a strategic business for us.
Our offerings in this area are fundamental to power today's mobile broadband services, but they're going to be even more important in the future for advanced services such as network slicing, enterprise SLRs, or SLAs, as well as XR. There are a number of key reasons for this segment as being a critical part of our end-to-end offering. I would also say it links into enterprises as well because it's a fundamental part to create the APIs that will be needed for the Global Network Platform, again, tying our business together. We are a leader in 5G Core. We've strengthened our position. We've won quite a lot, but we have not executed well. To be clear here, Per will go through this much more in detail, but we have turned around BSS. You know, that was a big problem in 2017.
At the same time, profitability in 5G Core has deteriorated, and that's one of the key areas for us to turn around. The key is we have a very strong market position across the offerings here. Being strategic is important. Making money is more important, and we know how to do that, and Per will come back to that in much more detail. Our mobile networks, that's an attractive business by itself. With 5G, we can also proliferate into enterprises in a completely new way. We see this as a multibillion-dollar, high-growth, high-margin opportunity. Our strategy is to address this building on the strength of our core mobile business. I remember this from 2018, the trains, right? They keep on coming. We can check the subway schedule.
With 5G, we're in the early stages of call it widespread enterprise digitalization. That's gonna create significant additional value for a new area such as mining, airports, ports, manufacturing. That's something Niklas will cover in greater detail as well. Our enterprise strategy focuses on execution in two fronts. The first front is Enterprise Wireless Solutions. That includes Wireless WAN from Cradlepoint, where we are a clear market leader today, and private networks that actually leverages our strong radio and core portfolio. This area will provide a recurring revenue base with a different business model than our core mobile network business. We continue to invest to develop a strong product portfolio in here and a dedicated enterprise go-to-market channel. George will go through this in more detail. The second front of our enterprise business is powered by our acquisition of Vonage.
With 5G, network becomes a platform for innovation. In 5G, performance is a premium that consumers and enterprises are willing to pay for, and we have started to do some emerging tests here. For example, together with SmarTone in Hong Kong on using specific quality of service offerings to test this market demand. We see to be very interesting results. We see with the new advanced features you get in 5G, call it speed, time bound latency, it could be network slicing, authentication. New differentiated performance services can be created but that requires a new model for monetization. This is where the network APIs and Global Network Platform come into play. Network APIs will put these capabilities of the network at the fingertips of the global developer community, who in turn will create new innovative use cases.
For example, this could be authentication without a password, or it could be low latency performance for XR experiences, or it could be speed for mobile gaming. These new use cases are based on a differentiated experience or performance in the network. They will offer operators, CSPs, additional revenue streams on top of their current subscription models. To develop those new type of APIs, the network APIs, a deep understanding of the network and the network functionality and what the network can do is required. That's actually the core capability of Ericsson. We also recognize that we can develop the APIs, but they are not of any use if you have, you know, developers sitting there who has to contract with 700 operators around the world to get some sort of application at the end. What we recognized was we needed two things.
We needed, one, a platform to expose the APIs. That's known as a CPaaS platform. We also needed access to developer community globally. With Vonage, we have the building blocks. CPaaS, a leading CPaaS platform, but also 1+ million developers around the world. We are now on the journey to give life to the notion that 5G is the biggest innovation platform the world has ever seen. We are excited to be leading that development. We are at the front runner here. We see that this can create a very attractive return for our shareholders. Equally important, it's actually going to give our customers, the operators, better monetization models to drive long-term investments in the network. Rory will talk much more about this vision in detail. We see an attractive future with a growing market potential.
With our entry into enterprises, our total TAM actually expanded from about $100 billion to $150 billion, and this will provide us with a strong growth tailwind going forward. We expect the TAM to really grow by about 7% per year to roughly $190 billion by 2025. We see the wireless networking market to be flattish. Prepackaged enterprise solutions are expected to grow significantly. Communication APIs, the current offerings, are forecasted to reach about half of the size of the RAN market by 2025. On top of this, that's where we get really excited. We expect new enterprise and consumer use cases to be created using 5G network APIs, paving the way for a market that's undefined today, but where we can lead. I'm really excited about this future.
I hope you leave this saying there is no lack of opportunities in the markets we target. As mentioned earlier, 2023 is a bit hard to predict, so we focus on the 2024. Our plans gives us a clear path towards reaching the lower end of our long-term EBITDA target of 15%-18% by 2024. There are a few couple of actions that we're taking to get us there. First of all, we're accelerating cost improvements, and we aim to take out about SEK 9 billion, or aim to take out more than SEK 9 billion by the end of 2023. Remember, in 2017, we took out way more than SEK 10 billion by our focused execution.
We also see a large upside in addition to the just recently announced license agreement on IPR, and that's driven by a large number of today unlicensed actors in the market that we can license on the basis of having the two largest device vendors licensed now. We have over the last few years focused on regaining technology leadership. Now we can shift into improving productivity in R&D. That means that this will allow us to either develop more products in case there is demand or basically let that productivity gain flow to the bottom line if we don't see the market.
This in combination, what we're doing on the portfolio restructurings as well as commercial improvements, can offset the headwinds we see coming, for example, from inflation, but also changes in the business mix, making us very comfortable about reaching the targets for 2024. If you look at segments, you see actually that all segments contributes to our improvement. You will see and hear a lot more from Carl on both of these two areas, and he will go through them in much greater detail. Given the current uncertainty we live in, we believe it's prudent or we need to be prudent in our financial management and really maintain a strong balance sheet.
Our first priority is to invest in organic and inorganic opportunities to grow and strengthen our leadership in technology as well as in the market, and that can generate a good return potential. Just to be clear here, our near-term focus is clearly on making sure the integration of Cradlepoint and Vonage are successful. We will make smaller add-on acquisitions. Can be in technology, can be in when we have gaps in the go-to market. They are gonna be small compared to our cash flow. We also know the importance of distribution to shareholders, and we're committed to delivering a stable and strong dividend. Achieving our ambitions can really only be done if we run a sustainable and responsible business.
My priorities in becoming a world-class sustainable company include, in short, driving a culture of ethics and integrity and intelligent risk management decision-making that will run our companies in the right way and make sure that we clean up the past. We need to ensure that we have world-class talent in our positions, and that include actually health and safety of our people. That has to be at the forefront of what we do. We, for example, when COVID broke out in 2020, by always putting the health and safety of our people first, we were the first to cancel participation in Mobile World Congress. We also see to attract leading or the best talent in our company, we need to make a step change in gender diversity, and that clearly needs to happen over the coming few years.
I am, and the whole company is committed to driving execution to realize net zero by 2040. It's ambitious, it's demanding, but it's the right thing to do. For 140 years, when he founded the company 140 years ago, our founder believed that communication is a basic human need. I share that view. It's even more true today. I would say possibly the biggest divide we see in the world is between the connected and the unconnected, that divide will grow even bigger in the future. That's why we are committed to working to close the digital divide as much as we can, we are engaged in a number of initiatives, including our own Connect to Learn, also UNICEF's Giga initiative. To summarize, we are on a journey. We're On the Move.
We're transforming Ericsson into the leading Global Network Platform, preparing for exponential innovation. We expect some or plan for some near-term softness as operators sweat assets, we see investments coming back as capacity is needed, and we're confident in the long-term outlook of our mobile network business. We will continue to drive technology leadership for cost, performance, and sustainability. We're also laser-focused on turning around our Cloud Software and Services by 2023. The investments and growth we're gonna get from the enterprise segment will be very key for our long-term return to shareholders and our long-term growth and profitability. We will invest responsibly to make sure we are technology leaders. We will invest for market leadership as well, but also profitability. We're gonna run a cost-efficient business and capital-efficient business and manage our investments and balance sheet with a strong focus on shareholder returns.
A key, you've heard that many times today, we are gonna be committed to drive a culture of integrity and ethics that's gonna power our company for future success. That's gonna include openness. It will include strengthening of our governance positions. It will include improved risk management. This is how we will be resilient and profitably fulfill our purpose to create connections that make the unimaginable possible. I think these are truly exciting times at Ericsson, I'm really thrilled that you get the opportunity to hear from the rest of the leadership team today how confident we are in our outlook and how excited we are about the future. We are just at the beginning to define the future industry structure and our company. With that, Erik, I think it's your turn.
Thank you so much, Börje, and hello, everyone. We are now gonna dig a little bit deeper into technology, but look at it from the industry perspective. Where are we heading over the coming five to 10 years? I don't think there should be any doubt that we are continuing to pursue and be committed to technology leadership in the industry. What does that really mean, and what does it give us? I'll give you a few examples of that. The way we've decided to structure this now is really to look at the evolution from today over the coming five to 10 years, 5G Advanced, and 6G. Look at it over these three layers of mobile networks, the evolution in mobile networks, and our leadership in the mobile industry.
The enterprise opportunity, where 5G is really the new and changing capability that comes into the enterprises. I'll come back to the network API and the monetization part. This is really a journey about more innovation over the coming years. The industry, the mobile industry, is not in any way slowing down. We're continuing to innovate. It's much more about bringing the values of the network to applications, to enterprises, to developers, to allow for monetization of these network capabilities. I'm gonna start at the bottom layer here. I'm gonna start with the network itself. Of course, we are used now to 5G in many mature markets. That journey is basically twofold.
It's about the capability of the network handling the gigabytes per second and per month in a more efficient way, but it's also about automation, using AI in everything we do. Every product, every solution, every service is now going through an automation journey. I'll show a few examples of that. Long term, this is about the full open ecosystem, industry scale Open RAN, and Fredrik will come back to that, but it's also about fulfilling the vision of 6G. Ericsson's contribution to this, through our very strong commitment to research and open standardization and leadership in the industry in general, working with partners, is about providing limitless connectivity in the next era. Limitless meaning everywhere, of course, indoor, outdoor, satellite, all the things that Börje went through, but it's also about self-driving networks, the cognitive networks of the future.
Let's then come back a little bit to where we are today, the 5G cycle that we're in right now. There's no question most of our discussions with our customers, CTOs and CEOs, is about how can we build the capability in low bands, in mid band, and high band, because that's exactly where we are now. We have not built enough of 5G in the mid bands, and Börje touched upon that as well. There is another reason, another discussion that we're having as well, and that is very much about performance. How do we show performance? You know, there are independent studies, independent government measurements showing Ericsson at the leadership. Rather than showing you just some numbers, I've chosen now to go a little bit more techy. Bear with me. The next slide is gonna be lots of graphics.
What it is really an Asian big city comparing a traditional, a modern, but traditionally built 5G network with that of the latest technology from Ericsson, Massive MIMO technologies for 5G. On the right-hand side, you will see the city using Massive MIMO, 5G Massive MIMO, and on the left-hand side, you see a more classical build-out with 5G with four transmit and four receive branches. To the left, you see that these users in the city, they will experience in the uplink here maybe 1 Mb per second, maybe not even that. In some cases, you see it's a gray out area, so they have a very poor performance. Imagine that you are in a business video conference, you're on Teams or Zoom or something else. That's not a great experience.
If you're using Ericsson's Massive MIMO technology on the right-hand side, you get tens, if not 50-100 Mbps in the uplink. Undisturbed performance using the latest technology, of course, energy efficient, Fredrik will come back to that, it's providing the user experience that you need today. That's really what the best 5G network can offer. My point here is really that capacity, downlink performance, uplink performance, all these things starts to matter again. Differentiating network performance and having the best network performance is becoming more of a competitive advantage for our customers. Operators selecting Ericsson, they get this advantage of the best technology and the best user experience. Where are we on the journey to more immersive? I started to talk about video conferencing. Well, I think the next step is not difficult to predict.
We're talking about augmented reality, the thing that you see on the left-hand side. Wouldn't it be nice to walk down Madison Avenue and get some guidance knowing where the stop shops or the restaurants are? That's very soon gonna happen. We're gonna have this out and about, relatively simple, but still AR experiences powered by 5G. Over the coming five to 10 years, we actually see that this will take major steps. We talk about AR taking the lead maybe around 2025 in an outdoor environment. We talk about all-day XR around 2030. Maybe a billion devices in aggregate already by 2030, putting tremendous requirement on the network. High performance is gonna be a prerequisite.
We're talking about much more uplink performance, much higher capacity, latency that is bounded, all these capabilities that you get already with a 5G network today and can upgrade. Again, Ericsson's technology will be an advantage if you've selected to use the latest technology. Actually, this is very likely to be the next paradigm shift. Why should we just continue using smartphones five, 10 years out? Of course, wearables and combinations of these form factors will be the way to go. We know that this is not a near-term opportunity. We are planning for this more for the mid to long term. As I said, already within 12, 18 months, we will start to see some more iconic devices in the left scenario here with head-up displays and blending the information in your field of view.
That was a little bit about the performance and the needs. What about the automation journey? Here we are making the investments ensuring that our customers really can automate as much as possible. Today, energy efficiency and performance is the critical optimization. How can we lower energy consumption? You see one example here to the right, 14% energy saving with this augmented Massive MIMO sleep. 14%, is that a lot? It's actually a lot if you get that initially. If you know anything about AI and learning systems, this will just continue to improve over the coming years because the operational data that the network collects and the NOC is using will actually improve this over time. It will continue to get better and better.
You see across the infrastructure, across the services, we're applying leading domain knowledge from our operations of about 1 billion subscribers under management with all the network data we have in the nodes in the RAN and the core, and of course, this will just improve going forward. It is already delivering gains. We touched upon the importance of leading and driving. We're leading and driving research and standardization when it comes to 5G Advanced and 6G. Here you see examples of our contribution to open standardization in 3GPP to the left, O-RAN ALLIANCE building the Open RAN systems of the future, and also the open-source contribution. Our commitment is firm. We believe in collaboration, we believe in openness, but we also believe in leadership.
We believe that we have to invest to make sure that we can drive the industry together with our customers and partners, ensuring that the evolution is handling energy efficiency, the performance of these new applications, but also builds on the infrastructure that has already been built out. We wanna make sure that this becomes an evolution from now until 2030. Back then to the industry development. I already gave you the basics here of mobile broadband and the mobile network evolution. Now I'm adding this next layer, which is really the enterprise networking. That networking is not your classical, local, bespoke system. This is not a static system. This is a dynamic system that uses 4G and 5G wherever you are, and George will come back to that in the Wireless WAN and dedicated networks.
The next step in that journey is really prepackaged security and why not enterprise networking as a service. You shouldn't have to care about that local network. You're buying networks just like you buy cloud services as a service, and that's gonna happen over the coming five to 10 years. Fixed Wireless Access, mission-critical networks, and the best network for XR are just increasing needs on one and the same infrastructure that operators buy with Ericsson gear. You start to see the circle to the right here. We actually see that these trends, these changes industry, they help each other. While we see that networks needs to be built out first with mid-band to have the capability to serve both consumers and enterprises, it's also clear that these enterprise users, they will demand more than typical mobile broadband and consumers do.
It starts to create a virtual virtuous circle here when it comes to more demand on the network in terms of traffic and of course, also more in terms of demand of new capabilities. Börje was into that when it comes to demanding latency, demanding edge capabilities or any other thing that the network can offer. If we look at this from an end-to-end perspective, from devices to the left over the network, to the clouds to the right, this is really an investment that we now have made in 5G. Our R&D investment in 5G, in RAN, in Core, in OSS, BSS, and exposure that we can now leverage going into not just a mobile broadband, but the Fixed Wireless Access. 300 million Fixed Wireless Access connections by 2028.
Mission-critical, a fantastic opportunity where the same 5G technology, very little extra R&D is required to build complete mission-critical networks. A large part of the world's public safety networks are due for change-out, and they are selecting 5G as a technology platform to do that. To the right, you see the prepackaged solutions also very much. They are separate businesses, and they have separate R&D, but from our point of view, we can leverage the knowledge that we built up in our 5G R&D. We can leverage capabilities and components from the 5G systems into the enterprise space, and you will hear more about that from Fredrik and certainly from George as well. Industries are adopting the most advanced technologies.
Industries are taking this journey perhaps more rapidly now because they've seen the benefit of using the latest technology than we expected a few years back. For us, this is incremental opportunities capitalizing on already made R&D investments. Is this the whole story? No, it can't be, because this is still very much about the networks and all those use cases, firefighters on the mission-critical networks, the gamers on a 5G network, or the productivity tools, the Teams and the Zooms of the world running on the network, they are not happy with the network performance that they get today. We need to introduce what Börje showed earlier. We need to introduce new ways to reach into the network. For years, we've known how to build applications on devices through device APIs. We know how to build applications on the cloud with cloud APIs.
We're gonna leverage all of that knowledge. Developers and developer environments are there to now inspire the network APIs that we will build on top of all the world's networks as the operators find this the most easy or perhaps the most natural way to get the applications and the developers to use the capabilities that the network has already built in. You can think of that collaboration space where video needs to have high performance. You would reach in across the network APIs to demand high performance, and you would do that perhaps just during the business day or perhaps using one meeting, you would do it dynamically. That requires knowledge both of the networks themselves as well as the API layer, and the best starting point for that is actually the knowledge that developers already have in the CPaaS market.
It's about a $10 billion market. That learning from how to really use global capabilities, we wanna carry over now going forward. It comes together very much in terms of how the developers, how the applications the users want to consume network resources, much the same way as on the device side and the cloud side, but now opening up for the network capabilities, the latency, the higher bandwidth, the authentication, the security, all of those things. That, of course, is why it makes perfect sense for us to add the layer on top of the enterprise base here, where developers, users, applications are no longer satisfied with only hyperscaler or device APIs. They wanna reach into the network, initially with CPaaS, and over time, with a Global Network Platform. We know that this is a strategic development, so it will take some time.
We see the first proof points already now, this is gonna be a multi-year journey. Now you can start to really see that this is reinforcing capabilities. From the bottom, the capability on the network needs to be there with more differentiated services. It's no longer enough with mobile broadband. On the enterprise side, driving demand for these higher-performance services in your home, in your office, in your SME, but of course also out and about. Mission-critical, for example, with fire trucks and police cars and so forth, of course, already need more performance than the mobile broadband network. On top of that, the monetization with a Global Network Platform reinforcing the needs for investments in the infrastructure, but also the monetization that will flow through the stack down to the networks motivating the further investments.
With that, the key takeaways from this session, reinforcing what you heard already from Börje, is that our commitment stands firm when it comes to technology leadership, industry leadership in mobile networks. We believe that our technology and standardization investments will continue to position us at the forefront of the industry. We have all intention in the world. In fact, we are committed to continue to lead and drive in the industry with the investments that we are doing, but we are adapting, of course, our R&D in the base business to the flat outlook in the market. This is also a journey about high performance and automation and AI.
As we see this coming live in the network, we are more and more convinced that this is a business opportunity for us, but it's also a very necessary step as we get into even more complex deployment scenarios, even more complex network nodes. This is a core part of our investments. On top of this, new market capitalizing on the same, to a large extent, 5G R&D investments that we've already made, but it opens up towards completely new customers. Mission-critical with a public safety replacement that I mentioned, but of course, a whole space from dedicated networks to wireless wide area networks, all of those use cases that require dedicated local networks. This is a transition that is fitting our technology very well. For the first time in history, we have a technology that is capable enough to serve both consumers and enterprises.
That has not been the case before. This is a very new thing that I think we all experienced after not the least the last two to three years, that the technology is really, in many cases, superior even to your fixed access technology. That's a game changer. That's really changing why enterprises go in this direction. On top of this, very much about being at the forefront, but working together with our partners, both on the cloud and the device side, working together with our customers. Operators are the only entities, the only players in this ecosystem that can unlock this value. They sit on the assets in their networks.
The hundreds of networks out there that we are facilitating access to their network capabilities, exposing it through monetizable APIs to developers that are already there today, that will continue to grow because the new applications require more from the network than they have ever done before. This is really why we think that this virtuous circle is starting to play out already now. If you look at this over the coming years, this will just be a stronger and stronger force. I hope you're with me in this relatively complex industry development, but on the other hand, very naturally underpinned by technology development and our own investments and how we are working with partners and working with our own development. With that, I wanna thank you all.
Now we're gonna hand over to George, if I'm not wrong, and George will be on video. Is that correct, Peter?
Yes.
Okay. Thank you.
Hello, everyone. I apologize that I couldn't be there in person with you, but I do appreciate the opportunity to share a bit about this new Ericsson Business Area, Enterprise Wireless Solutions. This will be a very brief overview, so I'm happy to take any follow-up calls which can be arranged through Peter. I do hope to meet you all in person in the not-too-distant future. Here's what I'd like to briefly cover: a bit about the why behind the formation Enterprise Wireless Solutions, a bit about the market opportunity that we see, and a summary of our offerings and the opportunity in this space, and then we'll wrap it up. It's clear and frankly, the evidence is building rapidly that 5G will play an increasingly important role in enterprise networking.
Our business area was formed to enable enterprises to take full advantage of the unique capabilities that 5G brings to help them accelerate their business transformation initiatives. The starting point in the formation of this new BA combines Ericsson's 5G leadership and private 5G offering with Cradlepoint's number one position in the Wireless WAN market. Our singular focus on the end customer will be the enterprise. They will be our design center and the sole focus of the solutions that we develop. The CSP will continue to be an important partner in reaching the enterprise, but not our only path to them. We have fielded a direct sales force that works hand-in-hand with a vast community of resellers.
We will continue to leverage and expand upon Cradlepoint's partner channel model, where we have relationships with the world's largest distributors and a broad set of thousands of focused resellers globally. Our enterprise customers are in the early stages of transforming their business. They realize they must become more agile, more digital, and more insight-driven than their competitors if they're going to win. It is gonna be a new enterprise, and to succeed, they will need a new network. The unique capabilities of 5G will be disruptive to both the wide area network and the local area network, enabling macro mobility, seamless connectivity for large-scale IoT deployments, and the ability to support time-sensitive applications on the LAN site, and do it with an agility never before possible because it's wireless. It will also create new challenges for IT security.
With the amount of IoT devices, at least 10 times the number of phones, tablets, et cetera, enterprise security needs to be adapted to 5G. Since the IoT devices cannot run endpoint agents, the network has to play a key role in securing and policing this new class of devices that roam between the enterprise LAN and public cellular networks. Our NetCloud Exchange program aims to solve these problems for our customers. We have released our first set of capabilities on this platform in 2022. We will continue to invest and grow our capabilities in this area. As the fastest-scaling mobile generation ever, 5G is driving the transition in enterprise networking towards secure and stable wireless solutions, resulting in a multi-billion-dollar market, the secure enterprise 5G market.
As you can see on this slide, the opportunity for Enterprise Wireless Solutions is at the intersection of SD-WAN, security, and 5G, and estimated to be a $10 billion market by 2024. It's happening now, and we are seeing acceleration in the business. You know, we talk about a single pane of glass because for us and the enterprise to realize the full potential of 5G, it must become fully integrated into the policies and security framework that IT uses to manage its existing infrastructure. We have that single pane of glass with NetCloud Manager, but we also live in an API world now, and we can do support integrations with other partners as well. The goal is to make this as simple and as scalable as we can for our enterprise customers. We are seeing continued strong growth of Cradlepoint since the acquisition by Ericsson.
In fact, some of our highest growth quarters in the history of the company. We're also just in the early stages of international expansion for the Cradlepoint business, a major growth opportunity ahead of us. We are seeing almost 70% year-over-year growth in our private networks offerings, indicating that there is indeed a growing demand among enterprises for these solutions. Our 5G solutions are being embraced by enterprises today. In our Wireless WAN business, our 5G sales are more than 10 times what they were in 2021. As I mentioned earlier, our private 5G sales are growing at almost 70% year-over-year. Our enterprise 5G solutions are already creating real value for our enterprise customers right now, today.
I don't have time to go through all these use cases. We can provide details to you on these and many more. The benefit of our enterprise solutions is already being proven. The combination of Ericsson network and 5G technology and solutions with Cradlepoint Wireless WAN and enterprise sales and channel expertise, and the programs we have provides the assets to vastly simplify and scale the consumption of these enterprise 5G solutions. As Börje mentioned, Ericsson is shaping the industry landscape and is moving from being just a networking company, leading the development of wireless technologies, to becoming a platform company. Leveraging 5G is one of the most powerful innovation platforms in decades. We will be simplifying 5G consumption in enterprises and building differentiation through convergence of five key growth vectors that are depicted in this next slide.
The two left columns are building on our private networking and Wireless WAN edge solutions. We are also investing in the two columns on the right for 5G-optimized security and SD-WAN solutions. Finally, in the center, the opportunity we have as Ericsson to work with our CSP partners to create a more programmable 5G network. We are pursuing new technologies to enable the usage of the CSP network to augment the enterprise network and enable macro-level mobility as well as visibility and governance that is desired by our enterprise customers, unlocking the value for customers and for our CSPs. Also, the 5G device ecosystem is starting to ramp up. With our strong collaboration with a broad set of device manufacturers as well as chipset vendors, we plan to continue to support the growth of wireless IoT devices to replace wired devices.
Our focus is on simplifying the consumption, management, and support of integrated secure 5G networks in the enterprise. All of this is built on the foundation of Ericsson's global leading 5G Core technology. As I mentioned earlier, for Enterprise Wireless Solutions, we will use and expand the successful Cradlepoint enterprise go-to-market program. It's a multi-channel program, including direct sales with large enterprises and a significant and industry-recognized channel program to reach enterprises of all sizes. We currently have strong relationships with the largest and most successful enterprise distributors in the world, who have global programs and access to tens of thousands of various resale partners. Cradlepoint brings over 3,000 channel partners to start, and we're adding 30 or more new partners every month. We also start with over 30,000 existing enterprise customers in our installed base.
Our goal is to be where the customer wants to buy, when they want to buy, and with a business model that addresses how they want to buy. Our business model, frankly, is a bit different than Ericsson's core business. We have a subscription model, which is not only how many enterprises want to buy today, but also improves our cash flow predictability and margins as a business. A Cradlepoint subscription package includes software and hardware, as well as support and warranty. Subscriptions are sold in one, three, and five-year packages with all the cash paid up front. Our average term is three years, and revenue is recognized across that three-year period. This provides us with a substantial deferred revenue position that flows through the P&L over time. It's a tremendous value for our customers as well.
All feature upgrades during their subscription period are provided at no additional charge. After the first subscription period ends, we provide renewals for the software support and warranty. These renewals are higher margin because there's no hardware included. As we grow and our renewals grow, our margins will continue to improve as our share of revenues from software will increase over time. The subscription model, together with the go-to-market model that was acquired through Cradlepoint, means we will evaluate Ericsson's enterprise businesses differently compared to Ericsson's core business, in turn impacting how we assess our value creation in the enterprise segment going forward. That wraps up what I wanted to share today. I look forward to talking with you more in the future, and thank you for your time today. Back to you in New York.
George can't be here in person. That was the first part of the enterprise story. Now let's move into the second part. Here is the second newcomer to Ericsson, been with the company for a couple of months now. Rory Read, heading up Vonage and also heading up the Global Communication Platform for Ericsson. Please, Rory.
Thanks, Peter. Hey, thank you everyone, it's great to be here today in New York and around the world. I'm gonna talk a little bit about our positive work that we've been doing in Vonage and how we're gonna fit into Ericsson's journey to become a platform company. This is a powerful and positive story, it's pretty exciting. Before I do it, I have to share just a little bit of personal news that occurred during the earlier presentation. My daughter was defending her PhD in engineering at The University of Edinburgh this morning, it went very well, she called me, congratulations on that. Pretty exciting news.
I've been here for about four and a half months, and during this time it's pretty exciting to spend time with Ericsson's customers, the CSPs, to understand their energy and passion around what we can do around APIs, to build a platform together to create this next generation of capability that's gonna unlock business capability around the world. It's gonna change the way companies engage with their customers, their team members, and drive new ways to monetize and drive the business. If we move to the next slide, I'll give you a little bit of an overview on Vonage so that you have a basis of the foundation, 'cause I'm new. I'm new to the team, and I'm new to you. We'll talk about the market opportunity. It's big, it's healthy, it's growing. Sure, there's macro wind pressure in the short term. It's putting pressure into every business.
The long term and midterm is up and to the right. There's clearly great opportunity. Börje said it at the beginning. You should leave this meeting today with an understanding that there's a big opportunity over the next three, five, seven, 10 years. To create the platform that uses the network, the powerful 5G capabilities to change the use cases and change the way applications and workflows are done, is gonna potentially change the world. I'll talk about that powerful combination, and then I'll give you a glimpse into where we're going on GCP. Let's go to the first slide. Vonage has been around for, what? 20 years. 20 years. Originally as a voice over IP company. It's about $1.4 billion in revenue, about 2,300 team members around the world.
Over this period, you can see us making a strategic pivot from about seven years ago with a series of acquisitions, small and medium acquisitions, around the CPaaS, UCaaS, and Contact Center as a Services space. These are the foundations that were able to us to move from this original Voice over IP company to over 80% of our revenues today are generated through cloud services. That's the foundation of where we wanna go to. If we go to the next slide, you can see that the market opportunity here is huge. This is a big market across Unified Communications as a Service. This is where you probably go into. In the U.S., you might go into, you know, a large pizza vendor, or you might go into a large coffee shop. They use our UCaaS capabilities to do at each of their stores.
This is a foundation. It's a good business. It's very profitable. Remember, there's about 450 million seats that are on metal today that still need about 10% or 15% have moved to the cloud. There's a huge opportunity. Contact center is also a big opportunity. That Contact Center as a Service, growing very well. Then on top of it, the CPaaS. The CPaaS are the APIs that get embedded into all of the workflows and applications across all industries around the planet. That's fundamentally changing how people introduce technology. Remember, I've been in the technology space 30, well, almost 40 years, and in that time I've seen many switches in terms of technology. In terms of this business, it's gonna be a $73 billion TAM by 2025. Look to the side of the chart.
You can see Omdia, Frost & Sullivan, and IDC all recognizing Vonage's technologies and capabilities as leadership. If we move to the next slide, this is a really important concept. I've been in the technology space a long time. Technology comes in waves, and it's built on top of each other. What we're seeing today and why this concept of Ericsson as a platform company is so powerful is that these sets of technology around mobility, the cloud, programmable APIs are all converging on an enabling technology, the powerful 5G networks. These technologies have been around for years, because of 5G, 4G, and now into 5G, these experience around multimodal communications to your handset is really possible, and it drives, and it's successful in every day. There's 6 billion smartphones across the planet. This is fundamental.
What we're going to see is a movement from the initial sets of APIs driving a set of transactions, notice of notifications, like your package is arriving or your plane is late. Why is that an important concept? What those application developers around the world with our strong ecosystem, they're able to use these APIs and embed them into their applications and then leverage the infrastructure of the CSPs, over 800 carriers around the world. We can deliver voice, video, messaging, any kind of communication to anyone basically on the planet. These notifications are now beginning to move into two-way conversations. You get a notification that your plane is late. You might get it this afternoon.
What's gonna happen is they're gonna move in a direction that you'll get a opportunity to hit a video, and you'll engage with an agent, and maybe you'll move to a different plane. You might get a video to show you exactly where to move from this terminal to the next terminal. You're gonna see this two-way communication. Where it's ultimately going is this idea of a ubiquitous 360-degree engagement across all vectors of engagement. Engagement around discovery of the product, commerce around the product, service, support. That 360-degree are gonna move the physical and digital experience together. Say I like this sport coat. I see it on the website at, I don't know, Nordstrom's. I go to the Nordstrom's website. My avatar tries it on. My avatar is better looking than me, and it looks good on him.
I think, "Geez, I should go to the store." I connect with the store. I tell them I'm gonna be in Tuesday. It's down over on Madison Avenue. I come over. They know me. They know what I bought. They know the experience. All of these experiences are gonna come together, and that's a powerful change. It's not a question of if, it's only a question of when. It's gonna be in every vertical, every industry, every company, and they're gonna drive it across their business. This is because of 5G capabilities that have opened up this opportunity, and it's gonna merge across communications as a, you know, UC, CC, and APIs. We have all the pieces together, just as Ericsson has put the pieces together to drive this platform discussion. Let's go to the next slide. This is that powerful combination.
We've got the global developer ecosystem. You know, many of our largest customers, like a huge rideshare, you're probably gonna use them later today, they started as a single developer coming to our website, and it's grown into a large managed account. We have a large enterprise customer base, 120,000 businesses around the world. This easy-to-use API platform is gonna be the foundation that we can bring to the CSPs across the planet. Those discussions that we're having right now with them over my first half, four and a half months have been nothing short of amazing. The strategic level of the discussion, their interest in this space, not only in Ericsson-based technology, but what we can do together is driving a truly different relationship with that set of customers, and they're the most important customers in this system.
You combine it with this 5G platform that is going to democratize this capability of low latency, improved performance, improved security, their R&D scale and size. It is incredible. 26,000 developers. I have never been. I have 40 years, IBM, Lenovo, AMD, Dell, Vonage, I have never been in a company where they had 40%-50% market share. That is pretty darn good, and that is a good base to work from. The technology prowess in this company, it is powerful, and this gives us the exposure. We are going to use this to drive our current business up. We are also going to introduce the opportunities to resell our CPaaS to these new routes through the CSP. We are going to use this to also introduce the opportunity to resell our UC and CC business. Highly profitable, great margins. Next slide.
It's this longer-term vision that I want you to get your heads around. We built, as I showed you in the beginning, an API-based infrastructure with the UC and CC capability on top of it. What you're gonna see is we're gonna begin to expose the network capabilities in partnerships with the CSPs to create a set of new APIs, and we're gonna leverage our existing CPaaS infrastructure to drive that forward, and that's a powerful concept. We're going to use the developer ecosystem that we've already created and expand it into a whole new set of capabilities, and we're gonna create a new set of use cases. If we go to the next slide.
You're gonna see opportunities to use this next set of capabilities in higher resolution, lower latency, better performance, higher security, ideas around network slicing, smart manufacturing, the idea of remote medical procedures. We have huge Teladoc relationships already with our video APIs and with our messaging APIs. There's where the opportunity is to open up a whole different set of revenue opportunities, holographic communications and smart driving. I can't wait for the opportunity. I kind of lift up the steering wheel and let the car drive itself. It will happen in our lifetime, no question, and it will be based on APIs and on network technology. That's only gonna introduce more TAM into the opportunity in front of us. The winners and losers aren't set here. The next three, five, seven years will determine who wins.
We're in a unique position where we can capture this because of the combination that you saw from Börje, from Erik, and George. We have the piece parts all coming together with a vision for the future. We can win today and improve our profitability and grow our current businesses, but we can also capture the future. That's the idea behind the 5G platform company, as well as the idea of adding enterprise into this powerful network juggernaut. Can we go to the final slide? What I wanted to leave you with, we're in the right place at the right time. This is happening. I've seen this across my career many times. As these technologies come together, the opportunities are here now, and we can capture it around this new and exciting set of 5G network-based APIs, as well as grow our existing business.
Our customer base is right. We've got an enterprise structure and business structure with 120,000 customers. We have the ecosystem around the developers and know how to develop that relationship. With the investment and the support from Ericsson, we have an opportunity while the industry is in a disrupted period. Many of our competitors are in a challenged state. Now is the time to put the pressure to them and go after them. We use these disruptions to go invest in the product to differentiate our future to capture that opportunity. Finally, we want leadership. This is a company with a history of leadership, and we wanna use that leadership to introduce this next generation set of APIs that will enable all new use cases.
This is an exciting time, a powerful time, and I can't wait to get at it. The first four and a half months have been a lot of fun, but wait till you see what comes next. I appreciate the time this morning. I can't tell you how excited am I about my youngest child, my daughter's PhD. Fabulous to be with here. Now I'll pass it to Niklas. I'm gonna pass it to Niklas now.
Thanks, Rory. Thank you, Rory. Well, great to be with you this morning in person in my hometown, and of course, all of you joining us online. Thank you for that. Funny detail, I guess my daughter also studies in Edinburgh, but she's just getting started and she doesn't call, she texts. Different generation, I guess. I have the great privilege this morning to walk you through the customer perspective on how they look at the market, the business fundamentals. I will try to walk you through some very specific examples on how frontrunners are starting to see some interesting new monetization opportunities, and then I'll try to bring that together in terms of an outlook, what does that then mean as they make their investment decisions going forward.
As I do that, I will also try to impress upon you why our customers are actually really excited about the story that George and Rory just laid out to you. Why does it matter? How do these capabilities actually matter also for our service provider customers and at the end of the day, how that will accelerate our networking business that Fredrik and Per will come back to. Here we go. Yes, 5G is being deployed a lot faster than 4G ever was. We're still two years ahead of schedule in terms of countries lighting up 5G. However, that is an important distinction, there is not a lot of countries that have reached a meaningful nationwide coverage in the medium to high bands, which is where you get to the more extreme performances.
Those of you that are into details, it's not a typo. We have separated here 75%+ , and the next category actually doesn't get to 75%. It's 10%-50%. There is only two countries that are kind of in between 50% and 75%. That's why we wanted to impress upon you that there is actually, to Börje's earlier point also, 80% of the 4G footprint out there is still to be upgraded to 5G. We have a couple of frontrunner markets, and then there is a lot more build to happen over the next coming years. I don't have to educate you on the headwinds that we're facing. They are the usual suspects. We have inflation, we have the energy crisis, primarily in Europe now, of course, very, very pressing. The geopolitical tension.
What I would like to discuss are the tailwinds and what and how that impacts the business fundamentals for our customers. We just did a consumer lab study that confirms that consumers put their mobile services above most other services and bills that they pay on a monthly basis. You do not compromise your mobile services. I mean, the smartphone is kind of your remote control of your life, and that comes very high up on your agenda. We see about 1 billion 5G subscribers by the end of this year. Börje talked about the data traffic growth. Yes, it's tampering off somewhere, but it's still at 30%-40% growth per year. That's 4x over the next coming five years. Significant data growth in the network still today.
Climate action, top of mind for everybody, not the least because our customers pay about $20 billion a year on their utility bills. There is also the exponential roadmap to climate change. All of our major customers are committed to net zero as well, and 5G is the way to get there faster, not just for our customers. Altogether, we actually only account for 1.4% of global CO2 emissions, but our technology can transform industries and have a much greater impact across the extended ecosystem. 15%-20% if you bring in 5G AI to transform industry. There is a massive opportunity for our industry to contribute to climate action. Börje mentioned it, Erik also talked about it.
We see the public sector, first responders, even the Department of Defense now getting intrigued by 5G because of the unique capabilities, because of the security, reliability and integrity that the 5G network offers. We see many public instances now considering 5G as opposed to bespoke niche technologies. We see them getting on mainstream 5G. FirstNet in the U.S., great example. Department of Defense working with 5G. There is a lot of examples where the public sector is now considering 5G for critical networks across the globe. Last but not least, digital divide. The pandemic exposed a pretty pressing reality even in the U.S., where we have a significant challenge with the digital divide. U.S. government has allocated $100 billion to broadband initiatives.
The European Commission, EUR 188 billion set aside to driving the closure of the digital divide. There is a lot of government commitments. Börje also referenced Digital India, which is probably gonna be the single largest and most aggressive plan out there to create a digital economy in India. Significant government investments and actions to make this happen. If I look at the business opportunities, and forgive me for organizing it into three buckets or growth vectors. We're trying to simplify it a little bit. You're probably all familiar with the term enhanced mobile broadband, fixed wireless, and then of course, I'll come back and talk a little bit about the enterprise opportunity, where we now see significant and encouraging first examples of success.
If I start with enhanced mobile broadband, most of our customers, if you talk to them, will tell you that customer experience, cost reductions, and of course growth, not to forget, are their top three priorities. If nothing else, in its most basic form, the sheer capacity and energy improvements, 10x in capacity, over 30% in energy efficiencies that 5G will give you, drives the investments for our frontrunner customers. On top of that, and we see that in a number of frontrunner markets. I've called out U.S., China, and South Korea on this slide here. We have consistently, over the last four quarters, observed 2.5%-5.5% in revenue growth. Frontrunners that have the nationwide coverage, that are offering a differentiated experience, are also seeing an uptake on their profits.
Now, it's early days, it's an early indication, but you will have to agree that that is an encouraging sign. Erik and Börje also talked about XR. XR is a really demanding use case for the networks. It puts extreme requirements on network performance. You will not have a great experience on an iconic XR device if the connectivity is best effort, choppy, intermittent. Those kind of use cases that we're playing around with and where we will see first iconic devices come into the market here already within the next 12 to 18 months, will put more extreme demands on the networks, which in turn will drive more data growth beyond the 4x I just talked about. I don't think it's unreasonable to assume that our customers will find a way to serve up these new devices with additional monetization opportunities. That's enhanced mobile broadband.
Fixed Wireless. Yep, we've talked about that for a while. There's probably 100 million subscribers out there. What's the excitement now? Well, with 5G, we see our customers now being able to offer speed tiers and differentiate. We see governments, like I just mentioned, seeing an opportunity to actually address the rural divide with an offering that is competitive on par with fiber and offers a great customer experience. 5G is the way to do it. Our customers in the U.S. have already seen 3 million 5G fixed wireless subscribers on their networks, and they expect to grow that to 11 million-13 million over the next coming years. Australia, 1 million subscribers. They have clear line of sight to getting to 3. India, I mentioned Digital India. One of our customers, Reliance India, will contribute in a big way.
They see a potential to get to 100 million subscribers in India. 40% of the 5G Fixed Wireless deployments in the last 12 months are by customers in emerging markets. It is their way to get to mobile broadband. 300 million subscribers worldwide by 2028. $68 million in incremental revenues, give or take 8% according to Strategy Analytics in terms of revenue impact for our customers on average globally. A significant opportunity. In the U.S. alone, over the last, in the last quarter, close to 95% of all net fixed broadband additions are 5G Fixed Wireless Access. Close to 100%. The growth is driven by 5G in how you expand broadband connectivity. Now, a little bit more complex story and slide. The enterprise and public sector.
We have spent five years as an industry trying to figure out how our technology can enable industry and public sector to transform processes and to transform their ways of working. We have worked across 25 countries, over 20 operator customers, and over 100 industry partners to get our head around that. Yes, there is a lot of proof of concepts, there's a lot of early experimentation, but there is also clear line of sight to the value that 5G can drive across multiple industry sectors. Couple of proof points. We already now in the last 12 months, have seen a 70% growth in our private networks business. Over 200 paying enterprise wireless customers. That is evidence that industry believes that there is true value, transformative value in 5G networks. There is good growth.
In emerging markets, it's even more significant. I'm gonna point you to a study that we did with Analysys Mason that talks about this specific opportunity of 5G in transforming industries in emerging markets. I won't spend a lot of time on that now. There is a significant opportunity also in emerging markets. We have paid a lot more attention to our front runners over the last five years. There is exciting opportunities also in emerging markets. Last but not least, this is where it gets interesting. Why do we continue talking about it? Why are those tens of billions of dollars not visible on our customers' P&L yet? It's the industrialization, the ecosystem that is lagging. It takes time for devices to proliferate, get in at the right price point.
The developer ecosystem that Rory talked about to get excited about these amazing 5G networking capabilities that this innovation platform will now offer. Until we can get those capabilities exposed to developers in an open, intuitive, programmable way, this will not take off. We have taken on a big responsibility as Ericsson in engaging the ecosystem and trying to drive that industrialization across the ecosystem so that we can replicate proof of concepts, scale them to industrial-grade solution, and then see this take off in a big way. I'll give you two examples, recent examples that I think give you an idea of why industry is excited and of course why I am very excited about this opportunity. This is a joint project with British Telecom and Belfast Harbour.
We haven't been working with them for a long time on this project, this is maybe eight different use cases that have gotten them really excited that generate significant value. Maintenance cost is a big deal when you this is a port operation, by working with asset condition monitoring across your various devices, you can detect micro vibrations, heat, other fingerprints that will indicate that a certain device needs maintenance, that you don't service devices when they don't need the maintenance, you also get to them before they break, which would be catastrophic in impacting the operation, of course. Installation, surveillance, CCTV cameras, 56% reduction in the cost of operating and maintaining those devices.
That's a big deal because CCTV devices, when you can plug them on a 5G network, you don't need to wait to run long fiber deployments to get the cameras installed. You can put them on your crew on the ground. This is a big-ticket item for Belfast Harbour. They are very excited about the fact that they can reduce the cost and increase the flexibility of deploying these devices. 50% reduced time spent on inspection by leveraging drones. You can imagine a port, there's a lot of big goods moving around that you need to keep an eye on. With drones and with 5G technology, you can keep an eye on them, and it reduces the time spent by 50%.
There is a bunch of other use cases, safety and sustainability-related, 14 that they have identified that then make for a significant triple bottom line impact. This is a use case we'll continue working on, and we hope also to be able to share some of the financial impact here over the next coming months. This is a great use case. We should probably talk about ourselves. This is an example that is very close to my heart. I was in our factory in Lewisville, Texas, only two weeks ago with one of our large customers, looking at how we have transformed our own operations by using our own technology.
I'm not gonna spend a lot of time on this slide, but reduced material handling by 65%, lead time reduction by 70%, unplanned downtime down by 50%. Productivity per employee up by 2.2x. We have reduced our energy footprint by 24%, water consumption by 75%. This is a reference case that the World Economic Forum has recognized as a lighthouse factory of the future. Another use case where we ourselves are experiencing the significant transformative impact of our own technologies. If I then shift gears, the market outlook, Börje referenced it. We are seeing a slowdown in North America coming off record investment levels now over the last two years. Europe holds steady over the next coming period. That's important. That's a very sizable market for us.
In India, we see significant acceleration with the recent wins. All in all, we have a flattish outlook for the next coming years, but there is a shift in the mix. We also see some of our front runners that have been building out at a very high pace as supply chain stabilizes globally, adjusting the inventory levels, just like we're doing, and Fredrik will talk about that. We're working in close collaboration with our customers to rebalance inventory levels in the supply chain across the next coming quarters. Underneath that, mobile data growth is healthy. Cost and energy efficiencies drive investments across the world. On top of that, we have exciting new monetization opportunities in the broadband case, in fixed wireless, and then in the industry and public sector transformation. In closing out, most of the 5G build still remains.
That's also true for the U.S. The business fundamentals are solid. Early successes in enhanced mobile broadband, fixed wireless enterprise, and again, in the outlook, a shift between North America and India, which holds us steady at the corporate level.
Great.
With that, Q&A.
If you stay here, Niklas, I will also welcome back on stage Rory, Börje, and Erik. We'll start, and I will try now, see if that works, alternate between the venue here as well as those online. Let's start here with the first question in the venue here in New York. Let's start with Andreas here on the front here. Please.
Good morning. Andreas Joelsson, Danske Bank. One question for Börje. You said that 2023 will be choppy. Can you explain how you see 2024 not also be choppy and uncertain? Secondly, for Rory, you mentioned the great opportunity in growth, but this is an industry maybe not known for its profitability. Can you explain how you will make this growth profitable and cash flow generative?
I can start with the outlook question then. The reason why we say it's, you know, you have always the opportunity for our customers to sweat assets in the short term. You can always, you know, wait a couple of months to buy new capacity. You can't wait forever because then you're actually the consumer experience or the end user experience, could be enterprise or consumers, will suffer. That's why when we look at this, we see a very fundamental trend of the growing traffic that's happening in the network. It's the users are consuming more and more data every day. Happens around the world. Varies a little bit by country, but it's kind of a very stable trend of growing data consumption.
Ultimately, that will require network investments, that's why we say 12 to 18 months out, we feel much more comfortable about the stability of the industry, that all of those choppiness will have been worked through. In addition, I would add that 5G, and Niklas touched on that also, gives you a cost advantage. I don't know if it was you as well. It gives you a clear production cost advantage. There is a need as data grows here to actually buy both capacity as well as 5G capacity. That's why we're very comfortable about the long-term outlook, but not the short term is more choppy.
Mm.
On the second question, when you look at our portfolio, when we were a public company just recently, we had driven our business to overall profitability. We'd managed the profitability at a one or two-point level so that we could continue to invest in the software to capture the growth opportunity. When we combine the total portfolio of Vonage, residential IP, UCaaS, CCaaS, contact center and API, it's overall accretive and profitable to the business. We're running a total portfolio, and I think what's happening is the market is moving toward this API drive. As we move and introduce these new next-generation use cases, they all have higher a margin levels. Today we're already profitable. We're also accretive to the business today in terms of enterprise. With the drive forward and that portfolio, I expect that to continue.
Thank you.
Thank you, Rory. I will try to see if it works here. I will move out online and Victor, can you see to that I'll get the first question from anyone in the online? I think the first question here will come from Aleksander Peterc from Société Générale. Hello, Alexander. Can you hear me all right? Hi, Alexandre. Hi. Welcome to New York.
Hi.
Hi. Please, your question.
Hi. Thank you. Thank you. Hi from London over here. Yeah, I just have two questions. One is, if you could be more precise on the impact of inventory adjustments you see now by customers in advanced markets.
I don't—
That looks to be like a big draft. If you could be a little bit more precise on how long this will last? Is it an H1 affair or all of 2022 that's going to be affected by that?
We can—
As soon as you—
Aleksander, can you say it's the cycle you're trying to—s orry. Inventory adjustment?
On inventory. Yes, exactly. Yes.
Yeah. Thanks.
I have a quick follow-up.
Okay.
We see, as I mentioned, for our customers that have been running at a very high investment rate for an extended period, they have been working with us on also, jointly managing the supply chain uncertainty by building extra inventory. As we now transition to a more stable supply chain environment, they will be adjusting the inventories. I think that is a matter of a couple of quarters to your question. I think by the first half, we will have balanced that out. By the end of the first half, we will have balanced that out. Underlying the build continues at, as I mentioned. This is more of a way for us to work with our customers and find a better balance in our respective supply chains.
Fredrik will talk about what we're doing, and this is of course us working with our customers now to make sure we get to the right supply chain end-to-end.
Thanks, Niklas.
Thank you very much.
Aleksander, you had a second question as well, right?
Yeah, just a quick follow-up. It was really on what happened in 5G n etwork Core profitability. I think you mentioned in the intro that that had deteriorated and that had pushed back the recovery in digital services. I'm just wondering what's happening here in competitive terms with Nokia in this space. I would expect you guys to charge what you need to be profitable here. What has changed in this business to make it unprofitable for you guys? Thanks.
Core?
I'm terribly sorry. I did not hear the question.
It's on the core side, right? Your question.
Maybe Per should take that later.
Well, ask Per maybe.
But —
We will have Per come up later, but.
Was it the core?
Question.
Then I think we should save it for Per.
We will save that question for Per later on, Aleksander.
Yeah, have him send an email. We'll answer it later.
Okay.
Yeah.
Was it?
Okay. Thank you.
It's okay. Thanks, Aleksander.
Alexander, you need to be on a better cell phone network.
Simon, please, take question.
We have a voice API.
Thank you very much.
I believe.
Simon Leopold with Raymond James.
Value.
I don't think there's much debate about the trends in North America or for that matter, the opportunities in India, but I would like you to dig into and unpack the rest of the world, in particular Europe. One of the aspects I think you alluded to that I'm struggling with is it seems as if increasing costs of power may cause European operators to spend less money is one argument, whereas I also hear there's motivation to upgrade because new equipment will consume less power. What are you assuming in your models for the next two years in terms of Europe and basically regions besides North America and India? Thanks.
I mean, You're absolutely right that Europe, you know, Europe will need 5G as well. It will be a consumer demand ultimately and enterprise demand that will drive that build-out. The reason you saw this in 4G, Europe got 4G as well. They got it later than other regions. That led to all jobs created in other regions. It's more a question of where job creation will be, the build-out will happen. That's why I'm again, much more comfortable when I look at Europe from a longer-term perspective. It will actually be building out 5G as well. It will happen. They are pressured right now, the European operators. They're pressured for a number of reasons. One is clearly energy. That's one thing. Also the whole industry structure.
I mean, the U.S., call it three and a half operators. India, I guess, is about three. If you look at China, you can argue it's maybe two or three, depending on how you look at it. Korea, two or three. When you look at some sizable markets, it's a consolidated market structure. We think, and I think, that needs to happen in Europe as well in order to reach, so call it return on capital employed that actually our customers need. I much rather have fewer customers and healthier. The way we look at Europe is actually that it will be, you know, I'm not gonna say time-wise, but over time, the networks will be out, be built out, and therefore it will be a quite sizable market for us. Short-term, it's a bit slower.
That's quite clearly the case. On the other hand, we've, again, market share in Europe, so we've strengthened our position. If you look at our numbers, we actually performed very well in Europe, even in an adverse environment. Europe, we're relatively, you know, positive on, but from more from our perspective as a network provider than we are from a political perspective about job creation, because that's where I think they suffer. If you look, you know, emerging markets and I think that's maybe it's the wrong label to put on 5G. As a matter of fact, the countries which are less fortunate in a way, they are the fastest to adopt this technology because it allow them to digitalize the country. Think India here. India, it's a massive opportunity. Digital India is gaining traction.
It will be a formidable competitor on the world scene. You see other countries in Asia doing the same thing. Think Malaysia. You know, they're building out one 5G network. They will have one of the stronger digital infrastructures. You see that in country after country. You see it in Latin America as well, where you can use 5G in a way to jump a generation. We, you know, again, the near-term outlook, bit uncertain, but we're very comfortable about the 2024, 2025, 2026, and that we're gonna see the build-out happening in all of these regions.
Thanks, Börje. We will try again to move back online and hopefully with a build better connection here so we can hear the questions. The next questions is from Fredrik, I think. Can you hear us, Fredrik? Someone is from Handelsbanken. Can you hear us, Fredrik?
I can hear you loud and clear. Can you hear me?
Yes. Perfect. Please.
Super. I have a question on the enterprise and CPaaS opportunity. You talk about several sales channels. I'm thinking where do you see the main one? Is it the CSPs, the partner network directly to the customers? I think Vonage, you've had historically more direct to the customers, some larger, some smaller way of a more scalable approach, where you mentioned some finding their way through your website. You know, Cradlepoint, which has used resellers, but not that much CSPs, and they have Ericsson's, which is going through CSPs normally. In the sales process, what is your role if you take a larger project in terms of planning, budgeting, implementation, grading versus what the CSPs would be doing? Just a theoretical type of question.
That's very straightforward. Thank you for the question. From a CPaaS perspective, our Vonage CPaaS will be the largest component of the driver of revenue for the next several years. There's no question about that. That's where the base and the majority of the business will come from us selling to enterprises and businesses. No question about that. It's a high-growth space. It's gonna continue to grow. Where we're gonna see opportunities there, we'll continue to leverage our partner channels and our direct channels, obviously the developing ecosystem. That's why in the section where I talked about CPaaS reselling, I talked about our CPaaS revenue synergy concept and also UCCC. We see opportunities to leverage that and to create some better relationships with our carriers down underneath, the CSPs, to get better pricing, improve margin, and also allow us to grow it.
That's the foundation, particularly over the next three, four years. That will be the largest part of the drive. As you move into GCP and network-based APIs, you'll start to see the beginning of those even next year, early next year. You'll see us introduce those concepts that we're working together with Ericsson's R&D and with the CSPs. That will build out over a two, three, four-year period and introduce a new level of TAM. The base majority of our business will be from our traditional CPaaS business as the foundation, particularly over the next three, five years. We'll build on top of that additional TAM because of GCP, and that's how we're gonna drive the business. Erik, anything you wanna add? Nope? Oh, perfect.
Maybe comment on just Enterprise Wireless Solutions.
Sure. Sure.
There is, first of all, worth to remember that every Cradlepoint sales comes with a subscription.
SIM card, yeah.
With a SIM card. That's why it kind of goes together. It generates immediate revenues for the CSPs as well. The CSP is a very important channel for us. What we do, it's a win-win when we can go to market with our dedicated networks or Cradlepoint. We can actually use the CSP relationships as a win-win, where they generate revenues and we do. They are a key partner of ours there.
Thanks, Börje. I will now take the two coming questions here in New York. We'll start with Frank here. Please, Frank.
Yes. Frank from DNB here. A question about the cost reductions, the SEK 9 billion that you are planning. Could you give us some more color on, you know, the timing aspects here through 2023, whether or not you're already started executing perhaps on that, whether it will be more back-end loaded or front-end loaded, the linearity of it, basically. Also what kind of focus you will have when you did this presented the original cost reduction plan, as you mentioned, in 2017. It was very much skewed, you know, actually, R&D was prioritized and so on. If you could give some more details on where you will cost cut and so on, that would be great.
Yeah, s o this, you know, to break it down very simply, about two-thirds comes in cost of goods sold, so it's typically service delivery, et cetera. The other comes out of SG&A, so that's where we are saving. On R&D, we are, and Fredrik will talk much more about this and Per as well. Our key driver is to maintain technology leadership, where we are strong believers that's only by lead you can generate excess returns. That's the way we create excess returns in mobile network business but also in our enterprise side. We are always gonna push ahead. At the same time, we're starting. I think we made sure that we were gonna catch up. You can argue we sacrificed a bit short-term productivity in there.
What we're doing now is putting more emphasis on productivity, and we are seeing that we can gain productivity over time in R&D as well. The question is: how do we use that? Do we use that for products that can generate sales, or do we let it slip to the bottom line? That's the next level of question. You know, it depends on how the market shapes up and how the market opportunities look like. For us, you know, technology leadership, that's the key driver. That's not where we're here to save on per se. But of course, if productivity gives us that, we're gonna capture that as well. We feel very good about the cost reduction potential.
You know, we're saying it's gonna have full effect by year-end of next year. There are a number of things going on when you do these things. We know from experience, you know, you start to take out some costs. It can be consultants, ARPs, et cetera. That works relatively fast. It takes a bit longer with some other parts. I'm not gonna give you an exact guidance over the year, but you can understand if you look at the last time that it's a bit more tilted towards the back end than the front end because the really big savings typically don't come out until you take the structural costs out.
Yep. Thanks, Frank. We'll move to Terrence over here before break.
Thank you very much, Peter. It's Terrence here from Morgan Stanley. Just a question around the improved customer experience and whether that is translating into greater pricing power for Ericsson, please? Perhaps can you share with us any details about the contracts that have been recently renewed? How many are coming with higher prices or greater volumes? That would be really interesting.
I can try to answer that. That's a very good question. What we do see, and that was kind of the point I was trying to make, is that greater customer experience is good business for our customers. It drives upgrades to the most advanced network technologies that we offer. When we upgrade and when we put out new technology, and Fredrik will talk more about the technology leadership aspect of it, we see opportunities to improve pricing in the market.
That's why, what you need to focus on here, and that's what Niklas said, is actually the ability to introduce new products that allow you to solve the problems and then price at a different level. We do that continuously in the business, and that's why you see us, even if in a very high inflation environment, we've been able to offset that to a very high degree.
Thanks, Terrence. Thanks, Rory. Thanks, Niklas, Börje, and Erik. We have now 50- minutes break. I will recommend you to be back here 11:50 A.M. New York time. For you online as well, it's 11:15 A.M. New York time. We will start the second block with Fredrik, Per, and Carl.
Great. Thank you all. Thank you for coming to the second session. We're gonna have now Fredrik Jejdling, heading up Networks, who's gonna start with the strategy update on Networks. We're gonna have Per Narvinger talking about Cloud Software and Services. We're gonna end the session with Carl Mellander, our CFO. Coming back to a Q&A session, a little bit longer this time than the previous one. With that said, I would like to give the word to Fredrik. Please, Fredrik.
Thank you, Peter. Welcome back, everybody, from the coffee break, and welcome back, all of you, online as well. Great to see you again after a few years on only virtual communication. Let me start by saying over the past five years, we've been delivering towards a strategy presented here exactly more or less five years back, not far away from exactly this point. It was in this building, 2017, five years back, we embarked on a strategy towards building market share and building profitability by increasing our market share. Today, I will talk more about bringing forward the success, how we build on that success, and how we can extend our leadership in an evolving market.
We have to understand there are certain parameters externally that are impacting the way we can do our business in a good way going forward as well. It being architecture question, it being geopolitics, it being supply chain. All of these questions, all these environmental factors we need to relate to be able to continue winning also in the future. This is what this session is about. This is the agenda. We talk a little bit about our ambition here and coming back then to the market share ambition. Our strategy, again, we bring in some additional components, understanding that what took us here may not take us to the place we need to be, let's say, five years out in time.
We get back into the money part and the value creation of what we see we can do going forward in terms of generating continued good EBIT profit with improved capital efficiency over time in Networks. If we start, yeah, we're just gonna recap. This will only be a minute or so, then we'll look ahead. If we go back five years, what we actually said, and I would say most of these parameters we have overachieved on based upon our own assessment of the market share capabilities and the profitability achievements. Now, it's also come with a higher level of R&D investment. We started back in 2017, looking at the strategy and investing for in technology and cost leadership.
Cost leadership for our customers, the best production cost, we are utilizing our best technology, offering that and providing that. Those investment are also gross margin conducive for ourselves. That's allowed us to grow the gross margin as a company. We wanted to take that profit improvement and selectively increase market share, and then work with our customers, secure their 5G leadership in their respective markets. Long story short, we managed to get our market share up from 33% up to 39% over these five years, and we more than double our profitability from SEK 15 billion to SEK 38 billion. Looking ahead, fundamentals of this strategy will remain. Quickly looking at the market, one sort of cool fact is actually that in the fastest growing generation of all mobility generations, Ericsson carries 50% of the world traffic in five years out of China.
If that's because customer sees us as providing the best TCO, the best cost per gigabyte, and if that's the definition of a technology leadership, which in essence only it is when the customer choose us, then I believe we've done something good in the market. By all sort of external benchmark, we are also a performance leader. As I said before, that approach is great, but it's only a starting point when we look ahead. There are other value levers, other climbing S-curves that we need to invest in or work with in order to increase the value of networks going forward. Again, take into consideration some of the external factors that are impacting us in the market today.
We have at the bottom left-hand side here, where we talk about investing in technology leadership for the benefit of our customers, providing a better cost picture, gross margin conducive investment for us. That will continue. If we're not ahead of the curve in technology, our customers will not pick us. It's as simple and as difficult as that. We need to do that in an increased inflation situation, with increased cost in the system, with the supply chain disturbances, et cetera. We need to secure that we can increase speed, productivity, utilize our resources in R&D, our supply chain in a better way or an improved way.
Never compromise our lead into 6G, which obviously is the next generation of mobility, where we look at networks being more built to be more resilience, critical infrastructure, open, sustainable, and intelligent. It's not enough to be in the bottom left-hand corner. We also need to secure focus on productivity and continued investment in leading in the future. If we add those levers to those three value levers, value steps, we think in a stable market, we have the opportunity with the deals we've been taking, as well as the continued investment in technological leadership, we think we can continue growing our market share by, let's say, one point per annum, from 39% today that we spoke about before. Forecasts show a flat global RAN market, and we don't really know exactly how that's gonna pan out.
We take the Dell'Oro numbers for that. We see, as discussed before, a near-term growth in the Indian market, some emerging markets, and a little bit more normalizing levels in the North American market. If market comes higher than that, we have enough investments to be able to capitalize and take that market share should it come and be added on top of the growth that we see going forward in the market or the flat growth. Long-term upsides also in Fixed Wireless Access, mission-critical enterprise connectivity. Point is, we're dimensioning our R&D and our systems to manage a 0% of flat market with increasing market share, but with the opportunity also to pursue any potential upside opportunity on top of that.
In the next section, I will discuss then the strategic priorities for how we're gonna get into that, to capture that market share, and also later on then the related financials. Our strategy then, and, again, bringing with us what was good over the past five years and making some additional adjustments to secure competitiveness out in time here. The first one might sound a little obvious, honestly, that you make your customer successful. It's a fundamental part to really understand that because in the early phases of a new technology launch, a new generation, what happens then is that customers typically build to spectrum requirements, and there's a requirement from government, the spectrum authorities to build a certain volume.
Beyond that, if we wanna get beyond 20% up to 100% mid-band coverage, we need to secure that we fundamentally understand what the customers want out of networks. There are three things that we believe is important here. Number one is that we continue investing for a strong cost leadership. The cost per gigabit per second needs to be the lowest if you invest with Ericsson Networks. That doesn't mean that our equipment is not advanced. It takes very advanced equipment to actually deliver that. The second point we wanna do is to secure sustainability leadership for a couple of reasons. Number one is the energy prices, the energy consumption needs to reduce on the base of that, but also the longer-term perspective of a net zero requirements across our customers. Second priority is to continue investing in technology leadership for two reasons.
Number one, secure that 1% market growth that we think we can achieve, also securing that we can do it in a more gross margin, gross income accretive way, so that the growth that comes in in terms of the customer growth up to 39% to 43%, 44%, that we can do it with improved profitability over time. The third part is fundamentally and to deal with the current challenges across cost, inflation, supply chain challenges, we need to secure that we can maximize the productivity throughout the whole production chain, from development to supply manufacturing and out to the site, through digitalization, through the different means of developing, cloud-native development methodologies, et cetera.
That's the summary of the three strategic priorities that we believe is important to strengthen and continue delivering healthy gross profits from EB profits from networks with improved capital deployed. If you then look at making our customers successful, as I said, there are three steps to that. Number one is really customers who choose us to tackle the data growth. You see on the left-hand side here, I think sometimes a word says more than or a picture says more than 1,000 words. If you look at the left-hand side, that's typically what a site kind of unfortunately looks like after four generations of build-out. It looks pretty messy, doesn't it?
With our latest technology, we can actually facilitate the factor 10 capacity per site growth and reduce at the same time the total power consumption or energy consumption, size and weight obviously, by over 30%. We do this better than any competitors. The way we design and architect our products, the way we build our own chipsets allows us to do this with a smaller footprint, smaller size than our competitors can do. That's again why we ended up leading the 5G race compared to our competitors. I decided actually. You know, this is so small, so you probably even haven't noticed it up on stage.
If you look up on the right-hand side there on the graph, you see a little radio hidden behind the antenna dome, that is our latest then Massive MIMO radio. It looks like this. We are all radio freaks in Ericsson. We love this kind of gear. This one actually, if you compare five years back, this is about 20% of the weight. It has twice the output power, half the power consumption, and carries about three times more bandwidth. This is what technology does in development.
You know, when you go home and fly home today, when you put your carry-on luggage up on the sort of shelf up there, that's as much as this one weighs. Just so you see that this is the kind of thing technology can do, and it weighs as much as a carry-on bag or a laptop today. Remember that once you remember discuss Ericsson's technology advantage, so you have something to refer to. All right. The next step is, as I said, is looking at the net zero and, you know, all companies have a net zero target out in time. We also have one to 2040. We wanted to make it a bit more tangible and divide it into milestone and near-term achievements that are measurable.
We said that by 2025, we need to make the installed grid for a customer comparing 2020 to 2025, reduced site power consumption by 40%. That's a massive step towards 2040 toward the net zero. In the supply chain, we also need to make sure that we reduce our supply chain emissions by up to 36% by 2025. That makes me accountable for that. That's only a couple of years, two and a half, three years out in time. It makes me accountable with a tangible target that's now framed in our, in our software and hardware roadmaps. Lastly, as I said, we need to make sure that we can take the network that the customers have installed in and make sure they can extend that network into revenue-generating use cases in the most cost-efficient way.
We picked up three cases here. The first one is Fixed Wireless Access. It represents about another 3%, 3.5% on top of existing revenue in enhanced mobile broadband. It's an incremental revenue on top of an existing investment that is possible for our customers to turn on. Second one would be critical broadband and mission-critical networks, and that is about another 1%-2%. An example here in the U.S. would be FirstNet, for example, that AT&T built. Lastly, this is important. We have on the right-hand side, you can see our latest indoor enterprise solutions. It's a small little dot. It's. Let's see if I got it. It's a lot smaller than that Wi-Fi antenna up there, by the way.
It's actually powered and fueled by a Cloud RAN application, so it can be run on any type of service. You don't need a dedicated hardware in the enterprise. We believe it's the most cost-efficient way of building enterprise 5G coverage or network connectivity. That's something that we then sell through our enterprise channels. If we then look at investing in technology, performance and cost leadership, that is obviously underpinning then that growth in market share per year. Here we got, let's say, three avenues that we're focusing on. We already talked about the left-hand side here that we're taking up, you know, factor 10 in capacity, 30% energy, and weight down 50%. We're not stopping with that. Our customers want more, and we need to meet our customers' expectations and requirements.
What we see within the next three years, we think we can continue not tenfold in the capacity, we're still within the same technology, but double within 5G. We can reduce energy by 40% more, and we can reduce weight with an equivalent number, 40%. Point is, we need to continue staying ahead of the innovation curve, otherwise we will not be relevant for our customers. Again, this is how we can continue to capture market share. We also work on the very long term. We look at 2027 and beyond, and then we're talking about completely different concepts around intent-based, AI-driven networks, self-healing networks, and actually boundless network pool cells, meaning actually the capacity travels around in cities where people actually needs it. We'll have to come back to that later on, but that's our research what future networks have.
Underpinning everything that we do in terms of technology and what we can do for our customers is actually our investment then in Ericsson Silicon. If anything, this is our secret sauce. This is, the software they put on top of this allows us to do the things we do with size, weight, power, efficiency. This is a U.S.-led investment. We base our investments here. We draw our capabilities largely from Austin in Texas, where it's a big pool of these type of silicon capabilities. We set up a center around two to three years back in Austin to be able to get the capability within our own company. We're actually moving further and further down in the value chain to secure that capability and increase our resilience. We don't think it's so smart to outsource our competitive edge.
If you look at the latest chip set we do, they look about like this. They got about 13 billion transistors on it, and we are securing in our roadmaps that we always have the latest access to 7 nm, 5 nm, and 3 nm into our roadmap. Again, to be ahead of the curve and innovations. Now comes another topic here. Our customers, we discussed significant or several times, the architecture and evolution into openness. What is it and what is Ericsson's position around that? Well, let's start where we are today. Our current integrated architecture, based on 3GPP standards, delivers the best end-to-end performance, energy efficiency, and cost in the industry. There's no doubt about that. In addition, compared to newer technologies coming in, alternative technologies, it actually covers everything back from 2G, 3G, 4G, and up to 5G across common software and hardware.
This will continue to be the dominant choice for CSPs into 5G and beyond here, as demonstrated in India, where we closed out together with some competitors, the Indian market on 5G with integrated solutions. Having said that, we look ahead and we actually see that there is a revolution going on also the way we build networks, and that is the cloud. It actually allows us to build networks in a completely different way, and it can allow us to scale networks into enterprise applications where our big macro network haven't been cost-efficient before. If we're gonna be serious about building 5G indoor, replacing Wi-Fi with 5G over time, we need to build these type of solutions. It also allows us to drive and develop software in a completely different way, in a faster way, more effective way, utilizing cloud-native development technologies.
Thirdly, a bit to the points here made by Rory before, it allows us to expose functionalities in the cloud to enterprises that are typically all around the cloud, and those could be the network functionalities that we build APIs on top, for example. This is a fundamental development for us. It's a disaggregation between hardware and software, allowing us to put this piece of software on any type of hardware in any type of cloud. If you look ahead a little bit and think what it's going to end up, and, as a matter of fact, we see in the future that both these architecture will coexist. This is important. The customer has the choice in the future, and we will invest for technology leadership in both these tracks.
We intend to compete with the best products, the best hardware and software. They will be based over time on open high-performance interfaces, including the lower layer split. Again, we are actively, like Erik was talking about, we're actively defining how those interfaces will look like, whether that's in O-RAN ALLIANCE or in 3GPP. Our ambition is to provide the best solution in any disaggregated environment with the best hardware and software, utilizing end-to-end, building end-to-end system performance, utilizing automation, AI software extensions, and continuous development and support, utilizing then the SM architecture on top. We prepare for the networks to go into an open standard. We intend to compete and win in that environment as well. We then take the last part here. That is our productivity and capital efficiency.
If we look at R&D, we focus on a 10% year-on-year output over cost efficiency gain or productivity gain. We can do that because we start working much more with cloud-native development methodologies that allows us to utilize a different system, different development platform, different testing platforms. On the basis of it allows also ourselves to build a much better developer experience for the actual user, and that's probably the most important part here. 10% year-over-year, and to Börje's point before, if there is a market demand, we will build better, newer products, hardware, software to drive the market and the net sales. If there's no market demand, we'll take that saving and that productivity gain to the bottom line. Supply, we looked at Niklas' example before on the Texas factory. We're digitizing and industrializing our supply flows end-to-end.
We are also coming from a period of a higher level of inventory resilience because we wanted to deliver to our customers. Now we need to build a smart resilience on the back of an easing supply situation, supply chain situation across the world. We build what we call smart resilience. Still being able to deliver our customers, that's priority number one, but do it with lesser inventory over time. We do that with demand shaping and sensing with our customers. Network development, i.e., from the time it goes to the factory until it hangs up on the sites, that lead time we wanna reduce by 50% in industry. There's some archaic processes here that we still work with end-to-end, and our way of digitalizing, automating those processes and the early pilots we do show very promising result in reducing customer lead time.
This is then our heightened focus on productivity and capital efficiency. If we tie it all up here to the in the end here, what that means from a value creation perspective, and hopefully you step out of this meeting that Networks is gonna continue building, or delivering good EBIT profit and with an improved capital efficiency over time. We see here that we have the EBITDA margin bridge that Börje and Carl will discuss later, Börje showed. Of course, Networks side is contribution up to the 15%-18% range. As we indicated and guided for in Q3 here, we have a range, somewhat in the range of 16%-18% for the full year. That's old news. That's what we talked about a couple of months back.
We see the cost inflation business mix headwinds that we talked about before as well as here. We are proactive in dealing with it in the categories of commercial mitigation. We secure that when we get a new product into the market, that we price that at a higher pricing point than we earlier might have intended. We secure that price erosion is limited in the contracts. We also take deals, like new deals in new market, that are conducive and profitable adds actually to our EBIT EBITDA margin bridge. That's category number one or the AB there.
Category C, as Börje was talking about the SEK 9 billion here before, where of course networks carry a substantial part, two-thirds of it being in cost of goods sold, delivery, supply resources, etcetera, where we see opportunities, as discussed before, to improve. That together with operational leverage, including IPR, takes us back into a flat-ish EBT or EBITDA margin delivery with an improved capital employed over time. Key takeaways. Three simple key takeaways. Make our customer successful, building the most cost-efficient network for the customers, allowing them to get to the sustainability track net zero as fast as possible, faster than any one of our competitors. Thirdly, build and extend use cases and deliver use cases, Fixed Wireless Access, etcetera, in the most cost-efficient way.
We continue investing in technology leadership through our silicon investment. We drive the open architectures. Finally, we work with improving productivity and capital efficiency. All these three levers will again allow us to deliver a solid EBITDA profit with improved capital employed. Big thank you, guys. With that, I'll ask Per Narvinger to come up.
Thank you. Okay, my name is Per Narvinger. I'm heading up the Segment Cloud Software and Services. You heard from Fredrik on Segment Networks. This segment actually has a lot of similarities. We also in Cloud Software and Services, we build on technology leadership and of course an end-to-end understanding of advanced mobile networks. There are also important differences. First of all, this is a pure software and services business. There is not any hardware substantial in the mix of the business any longer. Another very important difference, of course, is this business is unprofitable. Today, I will explain why and what we're doing about it. It is a multidimensional challenge, I will walk you through it step by step.
I want to leave you with a clear picture of the actions that we are now taking to return to profitability for this unit. I also want to start by, of course, outlining the market that we are facing, and of course, how we have now decided to engage with the market in this new structure. In our market, the market is really for Cloud Software and Services. It's driven by two technology shifts. It's the shift to 5G, but also the shift to cloud-native technologies. We actually are then engaging with our customers in three different domains. You see them here in the middle of the chart.
If we look at the total of the segment, we have an addressable market that we are forecasted to show a low single-digit CAGR over the period 2022-2026. There are pockets of double-digit growth, and that is of course then driven by the 5G technology shift, and in particular then in 5G packet core. We provide then network managed services for a customer. We are a leader in that domain. We have business and operation support systems where we have leading solutions, and we are the leader in providing Core Networks to our customers. You see overall a flattish or single-digit CAGR in these different domains. I want to stress then that we will not be solving our challenges by growth. We are then taking actions that are in our hands.
The first, very basic, action we have taken is that we are embracing the market. We are now making sure that we are organized, so we can meet the market with solutions. You could say that, in the past, we were organized by commodity. Now instead, we make sure then that we meet our customers with solutions in the new setup. By creating this segment, Cloud Software and Services, from combining the two former segments, Digital Services and Managed Services, it's possible for us to capture synergies and create a simplified accountability structure that helps us both in SG&A and on R&D side. At the same time, it will actually increase customer value. We will get a stronger go-to-market and a more holistic portfolio management structure.
Even if this segment now contains what our customer needs, I also want to be clear that these three different domains we have, they are very different in characteristics. They come with different challenges. That's why I'm saying it's a multidimensional challenge we have in the unit. Starting with network managed services, where we basically operate networks for our customers. Networks are becoming more complex. We need to do even more in automation. This is a 100% services business. Of course, we rely on automation, we rely on AI software, but when we deliver, it's a services business. We have in the middle here what we call business and operation support systems, traditionally also referred to as BSS and OSS.
Here we have actually also taken the part where we have managed services for IT and also ADM business. ADM being when we actually then develop and operate solution for our customers in their customer environments. When we put that together then with our OSS and our BSS portfolio, we get a very good capability to deliver to our customers. It is a service-dominated business. It's crucial to have software blocks or software products underneath that are cutting-edge, but you really need the services to tie it all together. Quite often you also have third parties in the mix. That's one type of domain we have. Moving to the third one, and that is then Core Networks. This is very much a software product business.
You can't really succeed without having the best software products, and they all need to be cutting-edge. Of course, there are product customizations on top. There are also, of course, services when we roll out, and there are more advanced services that you can sell later on, but it is really a product business. Within this segment, we have three domains with quite different characteristics. I would maybe summarize this as it's a cutting-edge software and services business, and we are running it on IT hardware. That's important to keep in mind because it's not straightforward software development, it's very advanced software that you run on IT hardware. Looking at these three domains, we can see that we have now technology leadership. We have the right go-to-market.
We actually have a strong market position, but our financial performance is not reflective of that market position. We have made good progress in two of the domains, Network Managed Services and BSS and OSS, but they are now offset by negative development in the area of Core Networks. Which is of course, is not satisfactory, and we are taking actions. We are taking actions in all three domains, and I will walk you through the three domains. I'll then start with Core Networks, which is actually the more complex one and the more a challenge right now. For Core Networks, it's important then again that there are two technology shifts ongoing in parallel. Of course, we have the transition then from 4G to 5G.
Of course, the goal being to get to 5G Standalone, there is the intermediate step with 5G non-standalone. Under that or in parallel with that, we have the cloudification of our networks. In this business, we come from a native paradigm. We used to provide purpose-built hardware with software integrated. We went to virtualization, where you decouple then the hardware and the software, and now we move to a service-based architecture, a cloud-native architecture. If you have several technology steps or ongoing technology shifts ongoing at the same time, it's very crucial to decide when to go for what solution and how you transition. With Ericsson Dual-Mode Core, we have been supporting 4G and 5G for our customers, and Ericsson Dual-Mode Core is cloud-native.
It's fair to say that we took two steps in one. We went directly to cloud-native, and that is, of course, that was a strong step, but it has also left us with some challenges. First of all, we then underestimated the effort ongoing cloud-native. That meant we had to invest more R&D to get the solutions to the market. It also meant that if you're then having a challenge to deliver on time, sometimes you get compromises on quality, and then you need to upgrade more frequently, deliver more updates. At the same time, you don't have the serviceability there, meaning we have had continued high deployment cost of our 5G Core. The 5G market unfolded for the core site in 2021.
We had a great offering, a strong offering with our Dual-Mode Core. We got the opportunity to grab market share. We did so successfully. It also means that if you have underlying challenges for deployment, it doesn't help you if you have sales growth. It's actually not, we did not benefit from that market share that we successfully got. We are also a software business. If you compare to having hardware and software, you typically, if you're a pure software business, you have more flexibility. It's so that we have ended up with too many configurations, too many variants in our portfolio. We have a high degree of subscale software business in our portfolio.
You can see that as an untapped potential, because if we had sold that as customizations or high-value services, it would have been fine. That was not how the market worked out for us. Those are our challenges in this area. We are now taking actions. We will avoid subscale software in our product development. We will, of course, now we have a great position on the 5G market. We will now leverage that and accelerate in automation to make sure then that we lower our deployment and maintenance efforts. You can see that our 5G Core is like our flagship. It's paving the wave for the cloudification or going to cloud-native in the Core Networks. We will now apply those learnings to the rest of the portfolio.
In parts of the portfolio, the technology steps are smaller. We will have a more incremental implementation of cloud-native for already deployed solutions. Thirdly, we will apply a more stringent profitability discipline. Make sure then that we have different commercial terms when a standard software product offerings or if it's uniquely customized. That sums up then the core network area. As you see, Dual-Mode Core is live, so we are strong on the market. It's up and running. We need to fix the deployment costs. The other two domains then, moving on. In business and operation support systems, we have had major improvements in this area. Here, the improvements are about taking them to the next level.
As I said, by combining ADM, Managed Services, IT, R&D, and Service Delivery in one unit, it gives us an opportunity to streamline the portfolio, and we get a stronger go-to-market with a combined OSS and BSS offering. If you have both software and services in the same unit, it also gives you the opportunity to balance between how much is R&D and how much in services. Depending on how many customers you have, you can then pick the suitable mix. With this setup, we will be able to have more reusable software, make sure that the software that we build here can be reused for many customers or otherwise do with the services. This is probably the area that benefits the most from the setup of this new segment.
Again, here we will apply a stringent profitability discipline to make sure then that when we sell high-value services, they are also appreciated by our customers and that we get paid accordingly. For network managed services, the third domain here and the smaller of the three, here we have also had a fantastic journey on improving by having more automation and of course, moving to fully data-driven operations. We will simply continue on that journey and of course, make sure that we continue to transform our contract base to fully data-driven operations. These two journeys are then quite different from we have on the core network side. Let me then try to summarize the actions we are taking in this segment.
We will get cost out by realizing synergies, and we are in the middle of that process. I'll just give you to give you a flavor for the magnitude. We of course, have set now the more senior management levels. We have then, when we look at positions, we have decreased the number of senior leaders with 30%. Obviously, when you get further down in the in the job pyramid, you will not see the magnitude or the same magnitude. It shows if you can remove a management layer, and you can get, you will get a more agile organization, and we will of course, simplify our operations. We will continue to invest in technology leadership, definitely in cloud-native, AI, machine learning and automation.
That is also what will help us to profitability. As I said, we will have then a more stringent profitability discipline to ensure we have a scalable software business. With that, we will then contribute to Ericsson's overall profitability target for 2024. For this segment, we will of course, continue to take gradual improvement towards long-term sustainable profitability for the segment. Moving in over to the EBITA bridge here, you can see the contribution from Cloud Software and Services in the overall for Ericsson Group. We guided on EBIT level in the Q3 report. If we then remove the amortization, you can see the first bucket is the significant improvement we get, the second green bar here, what we get from cost efficiencies and synergies.
That is then by having a more mature service delivery, and also having segment synergies that generates these improvements. Those are actions that are within our own hands. The second bucket here, stringent profitability discipline, is of by avoiding a subscale business, and making sure that we are not having solutions that are not scalable. You also see that we are in the period, have a favorable business mix towards 2024. Of course, we will also get operational leverage from what is done on group level, not the least on IPR. In this chart, you see then that the green goes well above the blue, meaning we get the profitability. That's also why we said that on full year 2023, we will reach profitability for this unit.
It is in our own hands, that is then on EBITA level. Actually, there's very little amortization in this business, so it's not very different from EBIT. Trying then to sum up, and the key takeaways for this segment. It is a multidimensional challenge. We have now introduced a simplified accountability and organizational structure, that actually aligns well with how our customers want to buy from us. We have gotten a great position in 5G on the market, now we will then leverage that leader position that we have and then accelerate in automation to make sure we lower our deployment efforts. Finally then avoid subscale business, having a more stringent profitability discipline. By doing so, we will then reach a long-term sustainable profitability for this segment.
We have identified what needs to be done to reach profitability. Execution has started, and we are confident that reaching profitability is in our own hands. That is the summary of the segment. Thank you very much. With that, I think I invite Carl Mellander, our CFO, on stage.
Thank you. Hello. Fantastic. Really brilliant to be here and see all of you in the room as well as everyone on the webcast, of course. It's fantastic to be able to gather again. Over the next 20, 30- minutes, I'm particularly keen to give you three takeaways. One is that we have built a strong financial foundation over the last couple of years with strongly improved free cash flow and return on invested capital now up to 30%-35%. Secondly, that we are going to show you, and we have showed you during the day already, the path to our long-term target of 15%-18% EBITA, and how we will enter the lower end of that range already in two years in 2024.
The same goes also for the free cash flow target where we are, as you know, targeting 9%-12% free cash flow before M&A as percentage of sales, also by 2024. The third key takeaway that I want to leave you with is that we are clarifying now the capital allocation priorities in our group, which we hope will be helpful and clarify how we think around those things with investment, of course, in the business, but also emphasizing shareholder distributions and bolt-on M&A, all for, of course, maximized value creation in our business. If David you help me with the slides here. These are the three key takeaways, and I will go through it in more or less in this order.
First of all, quick recap on what we have been up to since the last CMD in 2020, how we have executed on strategy and how that's visible in the financial results. We look again at the financial or the long-term targets for the group and how we intend to reach them. Finally, we'll talk about capital allocation. If we take the next one, this is then the house, value creation house that we discussed in the last CMD back in 2020, where you see the foundation, of course, is the business performance as such and growing the free cash flow, which will enable value creating investments and in R&D, in market expansion, but also in M&A.
I think it's fair to say that we have executed according to this model since then. You know, in R&D, and we'll get back to that, but to mention some examples, what we have done on the Ericsson Silicon side, Fredrik talked about that. Cloud RAN as well. 5G Core, Per talked about this. That has enabled us to grow the market share to 39%, excluding China in the RAN market now. Of course, on the M&A side, the recent major acquisition of Vonage, major transformational step for us and entering into the enterprise space and on the way to building Ericsson as a platform company. You heard from both Börje and Erik on Rory on how that is going to be value creating for us.
If we look at the numbers, and I think the strategy execution has really been visible in the financials. I picked a few slides here to illustrate that. First of all, if you look at the green line here, this is return on invested capital. We can see how that has developed since 2017, and we are now up to levels around 30%-35% return on invested capital. It means we have structurally improved our capital returns. This on an EBIT level of around 12%, which says quite a lot around the capital efficiency of our company now. That stronger capital efficiency, of course, has also generated a stronger cash flow. You see this is the purple line here, also developing nicely.
you know, we are down a bit on free cash flow, the last couple of quarters. I think the reasons are well known to you, to most of you. It's of course the lower IPR revenues, and it's the fact that we have invested in our working capital in inventory specifically to meet customer delivery deadlines. Going forward, though, IPR is back on track, I would say, with the recent, recently announced deal and more to come. We'll get into that in a minute as well. When it comes to working capital, of course, that's really front and center for us in Ericsson. We'll talk about that as well.
At the same time, we've managed to, through the cash generation, we have managed to improve or increase the dividend consistently since 2017 then, for a better shareholder distribution. At the same time, we have built resilience in our company. You can see at one example or one proof point of that is the rating development, where we are now investment grade rated by two out of three agencies. We think this is important, and we intend to maintain that status. I often get a question, actually, in meeting some of you and other people: What was the secret sauce? What was the one most important ingredient in the turnaround of Ericsson? I always reply, and I fundamentally believe this, it's the R&D investment. It's the quest to technology leadership globally.
That is really what made the turnaround possible for Ericsson. You can see here on the left graph how R&D investments have developed over time. The big point here is really the right-hand side of the graph, where you can see how market share has developed and how gross margins have developed as well in our company. We see a very strong correlation between the two. With that view in the rear mirror, what lies ahead now? You heard Börje talk about our business strategy. It's really, of course, leadership in mobile networks, that's quite clear. Expand into the enterprise space and create, as Erik was mentioning, the virtuous circle between the two.
Also being first in critical innovations and being able to capture opportunities. That's, in essence, a business strategy. Of course, I'd like here to combine that with three items which have to do with the value creation that comes out of the business strategy. Of course, one, it's around performing in the business again and delivering an ever-growing free cash flow. Very tough cost and capital efficiency. Also thirdly then, capital allocation, closely linked to our strategic thinking as well. From that, if we then look at the long-term targets that we have talked about, and we can jump into the next one here. I think many of you recognize this slide. It's around our long-term targets on sales to outgrow the market.
The EBITDA 15%-18%, it's very familiar by now to you. The free cash flow, 9%-12% of sales. Also the sustainability target, which is very close to our hearts as well, of course, with net zero in our own operations by 2030 and across the value chain by 2040. As you're so well aware now, we have chosen EBITDA as the key P&L metric because we think it's the most relevant metric in the P&L to judge our performance in the business, given some of the recent acquisitions. I'm going to step out maybe a little bit now of the key presentation here to bring up a more practical thing, and that is about amortizations, i.e. the delta between EBIT and EBITDA.
Amortizations. I want to mention this here when I have the opportunity because I think it's very important, and I hope that you all will model this correctly going forward. The amortizations we are looking at now and expecting are about SEK 3 billion per year going forward or SEK 750 million per quarter. Now in the fourth quarter, we expect a bit elevated level because we have concluded the PPA, the purchase price allocation for the Vonage transaction, so it's going to be almost SEK 1 billion of amortizations in the fourth quarter. I would be very happy if everyone here takes note of that and we get that right in the modeling. Now I step back into the presentation here.
Now if we look at 2024 and how are we going to reach where we want to be, we can start with top line. Look at growth on the next slide here. Starting on the enterprise side, and we've heard a lot about enterprise today already. Basically it's to accelerate growth, of course, in what George talked about, that's the Enterprise Wireless Solutions, execute on the business plan with Vonage, including the build-up of the Global Network Platform. This is what Rory addressed earlier also. When it comes to Cloud Software and Services, Per discussed this. This is about profitability, not so much about top line at this stage. It's more stable, as you can see, stable top-line development in that segment. Thirdly, Networks.
Fredrik made a case very well here around going for profitable growth and market share gain driven by 5G investments globally, of course, and based on the technology leadership. We expect the market to be rather flat. We have said that today, and Börje repeated that. But our ambition is then to grow 1 percentage point over the market per year. So that is top line. Now we move into the profit bridge. We start here with the baseline. It's around 13% EBITDA. This is the rolling four-quarter number, adjusted for some one-offs. From this level, we do see now a credible path to entering into the range 15%-18% by 2024 already. How do we reach this target there?
We can look at and break down these various components. The first one is red, as you see. It's inflation. Obviously, we are estimating inflation to be there and to remain there during 2023 and 2024. That will impact, of course, our business. To offset this, we are attacking cost in a hard way. Börje mentioned the SEK 9 billion in gross cost reduction. I'll drill a bit more into it, and there were some questions here before, so we can look at that more in detail. The higher IPR revenues. We have signed now with one of the large players, as you saw, Apple last week, and that will put us in a good position to continue on that path.
Finally, in this other bucket, we have combined a number of factors. We have, of course, a changing market or business mix. We have the large 5G rollouts that we have talked about also in earnings reports, some of which negatively and temporarily might impact the gross margin. On the other hand, of course, we have a lot of other profit improvement that we spent quite some time talking about here today, which will counter this, and we have improved profitability in all the segments. We have operational leverage from growth and so on. In total, we expect these major factors to bring us up to the 15%-18% EBITDA target by 2024, and obviously beyond that, within that range after 2024 for the more long term.
I'll drill down now into a couple of these building blocks, starting with cost. Here again, you see the SEK 9 billion. It's split between SG&A and COGS. About 30% is selling, general, and admin, and 70% is in cost of goods sold. There was a question on timing here. I think Börje answered it very well. I mean, what we are saying here is that by the end of 2023, we will have the full run rate effect of this cost saving, it will be happening throughout the year. We are saying that we estimate the restructuring cost associated with this cost-out effort now to be around 1% of net sales in 2023 as well.
What is it actually we will do? You see some of the bullets here. We will accelerate efficiency gains, not least in service delivery, which is a big machinery in Ericsson, of course. We're working on automating, we're working on digitalizing workflows, et cetera, to take out costs from service delivery. It's all equally true for supply chain. I think Fredrik mentioned that as well. We are streamlining operations through our company, through what we call business areas, market areas, group functions, and that has a lot to do with the simplification also. To take out, improve our processes, improve ways of working, take out any waste of that.
Also things like, reducing the global real estate footprint, decrease some of the IT spend, and so on, and overhead costs. Finally, I also wanted to make another point here, which is that, we model, of course, for continued inflation, we model for higher cost and so on. It's also true now, and this is a positive, that the supply chain situation is easing. We see that on the component side. We see positive signs of freight costs, et cetera, logistics costs actually coming down. That's, that's a positive, also. Next up, IPR. I would say, I mean, IPR revenues are really a testament to the great innovations that the Ericsson teams create.
Now we have more than 60,000 granted patents in our company, and we have been on the journey of licensing out our technology now for more than 20 years. With the portfolio of patents we have now in 5G, and the multi-year contracts that we have signed now, both Samsung and Apple for 5G technologies, Well, that gives us confidence actually to continue this transition into 5G licensing. In the top graph here, you can see some of the important contracts that we have signed over time. You can also see where we're hinting we will end up in terms of revenue.
An interesting fact, actually, we have licensed a little bit more than half of the 5G smartphone market so far, which indicates potential going forward. A bit more than half, if you calculate the units shipped. In the bottom graph here, this also gives us confidence, and you can see how this market is expected to develop with the 5G handsets being a big driver for growth in the licensing piece here. We also see an increasing number of cellular devices in areas like consumer electronics, IoT, automotive, et cetera. This gives us confident about the IPR portfolio and revenue going forward.
As you could see or deduce from the Apple press release, we estimate that the revenues for, from IPR in our company for the full year 2022 will be between SEK 9.9 billion and SEK 10.4 billion in 2022. Of course, we believe we are in a good position now to grow that amount going forward substantially. These are some of the activities that we undertake in order to move ourselves up the profitability curve. To summarize this part, we can look at the segments bridge here. How does this come out in the segments if you look at the totality of the company? Starting with networks here, we talk about changing business mix on the one hand, but that's compensated by market share gains and commercial activities, as we heard.
We have, of course, the inflation to handle. We talked about that already, how we counter that with cost efficiency in supply and service delivery on the network side. Of course, IPR helps as well, the segment here. On Cloud Software and Services, it's all about, of course, improving profitability. I think Per was very transparent in what we do and where we are at the moment on this. It's about avoiding subscale software, for example. It's about automation. It's about taking cost out. Finally, on enterprise, of course, here we will continue to invest for the long term growth. That's quite clear. We're going, of course, for the higher value offerings, the high margin parts of offerings here.
We will also continue with portfolio optimization. I just wanted to make a reference to the IoT divestment that we also announced a week or so ago, I think, which is an example of that type of activity as well. Okay. That concludes the EBITDA part. Now I wanted to drill a bit more into working capital and free cash flow. Of course, my very good friends in Ericsson and my personal favorites. I think working capital to start there, of course, it's really high priority, top priority for us in Ericsson because it's, of course, a way to secure consistent free cash flow in the business.
If you look at this graph, we come from back in 17%, 18% around, yeah, 15%-16% working capital of net sales. We've moved that down structurally to around 10%. As you see, fairly stable over the last couple of years. Again, just to reiterate, and the uptick that you see towards the end, of course, it's really mainly attributed to the inventory buffering that we have done. Remember, this was a tactical decision to make sure that we can meet customer demands and actually deliver in a challenging component situation. Of course, now that the supply chains starts to ease up, this will reverse back again, of course, and help cash flow generation going forward.
We said also in the third quarter report that, given some of these large rollout contracts that we have won and which are starting now, we will see an elevated working capital level going forward in the near term or mid-term. Those are, of course, also very positive for our company in terms of scale wins. What is it we do around working capital? I mean, this is not a short-term campaign. This is a way of working and living in our company and some of the things we do to improve this further. Of course, we work a lot on inventory reduction, lead time reductions, and so on. Coming out of this situation now, will certainly help our free cash flow generation.
We also work on accounts payable, of course. This is around vacancies with suppliers, for example. Further enhancement of our credit risk management is important also and good efficient ways of working in cash collection. I mean, the ambition here is to continue to structurally reduce the working capital. Of course, as you know, individual quarters can vary depending on business mix, et cetera. For us, it's about structurally improving our efficiency also when it comes to capital. I wanna make one more point on this one, and it's that now that the enterprise side becomes a larger and larger part of Ericsson as a whole, the positive cash flow profile of that business will help the group as well to improve here. Welcome, Rory Read, and welcome, George Mulhern.
You're actually gonna contribute quite well. That's great. Moving from working capital to free cash flow. Again, I believe we have actually fundamentally changed the margin profile in our company, but also the capital efficiency, and we've seen the result of that. Underlying cash flow performance has been strong since 2020. On this slide, we separated out changes in net operating assets or call it working capital from the free cash flow just to see how that plays out. What it shows is really that the underlying cash generation capability of our company is strong. Sometimes we have a need to invest in working capital. This year has been one of those times, we talked about it before, you see it in the blue bar.
The - 10% here is really mainly related to that inventory buffering that I was talking about. That, as mentioned, will of course, reverse. Okay, that was the section around the long-term targets and how we intend to reach those. Now the final section from me is then around capital allocation and capital structure. If you start a bit with capital structure. This remains rather the same. It's about balance sheet resilience. The idea with our capital structure is really to provide, of course, support for our strategy execution, but also flexibility to act on opportunities with discipline. Thirdly, to ensure that we also minimize risk for financial pressure or downturn.
The foundation, of course, is high generation of free cash flow and good return on invested capital. You can see here to the right that we are in line with the capital objectives that we have on free cash flow, net cash and the credit rating as described before. Capital allocation, Börje already showed this one. I would say, of course, the capital allocation strategy is very tightly linked to our whole strategy and to how we think around value creation as well. We focus really on three things. It's to improve free cash flow and target this 9%-12% range that we talked about, and we intend to do that and get back there by 2024.
It's also to deploy capital wisely for maximum value creation while at the same time safeguarding the balance sheet strength in our company. What do we mean with that? We mean that we will of course continue to invest in our business, and we have seen very strong link, as I showed you before, also between investments in the company, in the R&D, technology leadership and the returns that we get out of that. We also feel that shareholder distribution is key to us. It's very important. We have now built up a strong financial position. We will continue to do so, we think that puts us in a position to offer stable to progressive dividend over time.
As everyone knows, this is of course an AGM decision at the end of the day. This is how we in company management think about this. Final comment here on this. I wanna repeat. When it comes to M&A, we have incredible focus on making the Vonage acquisition successful, of course, Cradlepoint as well. Vonage is the latest one and the larger one. We intend to be cautious on M&A, do the right thing, of course. We're probably looking more at smaller bolt-on acquisitions and not any large new acquisitions for now. Okay. I will round off with the same three key takeaways. I hope you heard them as we went along here in the presentation.
It's really, one, we have built a strong financial foundation, return on invested capital, 30%-35%, strong free cash flow generation. Second, we have a path to reaching our EBITDA margin target and the free cash flow margin target as well by 2024. Third, we have clarified the capital allocation priorities now with organic investments in our business, with focus also on shareholder distribution, as well as bolt-on M&A, all for maximum value creation for company and for our stakeholders. This completes the picture here when it comes to financial strategy.
Before handing back to Peter, I just wanted to say now that it's actually the holiday season is around the corner, I just wanted to take the opportunity to thank everyone here for, all the engagement and interactions during the year, and I hope you get a good, e-holiday season with, family and friends, et cetera. With that, I hand back to Peter. Thank you. Thank you.
Thank you, Carl. You need to stay on stage, Carl. I would like to invite also, Per and Fredrik and Börje, please as well back on stage for the Q&A session here. We have around 500 people online as well, so I will try to alternate between the venue here in New York as well as the questions online. I'll start here in New York. Simon was first out here, so you will be first out for the question.
Thank you very much. Simon Leopold with Raymond James. I wanna get some clarification on the IPR outlook. Given where you stand today, so not assuming new deals, can we assume that the 2023 IPR contribution is sort of back to normal in that SEK 10+ billion ? I wanna understand what you're baking in and whether there was some fixed payment in 2022 to account for or anything like that.
No, I think you can assume that. Now in 2022, we'll be around SEK 10 billion. SEK 9.9 billion-SEK 10.4 billion. That's really the guidance. Now of course, as we have the Apple deal done, it's really pegging us up for additional licensing agreements with other unlicensed parties. This is what we will work on, of course, during next year. The idea here is to increase the revenue beyond that level.
Thanks.
Thanks, Simon. I'll actually take the second question here as well, in New York. I see Frank here, please.
Please, Frank.
Yes, hi. A little bit on India. Both you and your main competitor have talked up the scale of this, the new contracts being won on the business in India, the implications for, you know, working capital needs, as you mentioned, Carl—
Mm-hmm.
—also previously, about the kind of the high spec level compared to the past that these operators are demanding on 5G, I mean, Massive MIMO and other, it's not basic equipment that they are ordering, I would suspect, given their ambitions. Given this, if you compare to kind of the level India has been at with regards to revenues in the rolling four quarters of leading up to the third quarter, what levels are we looking at for 2023, 2024? Could it be three, four times the magnitude of the perhaps a little bit depressed level that we've seen in terms of India revenues for you guys up until now?
Well, I can start on the first— first couple of questions. You know, India is a fundamental market for us, as Börje was talking about before. It allows us to access to scale market that Given that China is sort of not accessible for us anymore, it allows ourselves to build and scale another big market. It's also a market where 5G will be built faster than in many other markets. If you look at the grid in India, basically all of it, we've been talking about 20% in the world being built with Massive MIMO. In India, it's going close to 100% immediately. You're gonna see a very dense and effective 5G network that we're gonna learn a lot from.
Mm-hmm.
On the second or third point, I think, you're spot on exactly this one here—
Mm-hmm
—i s what goes out in hundreds of thousands of volumes in India. Contrary to when I was there ten years back or so, 12 years back, I have a history there, we built the latest technologies now goes out in India in scale. Before, it was the tail end of technology went out.
Mm-hmm.
As a matter of fact, if you're able, let's say, a provider as a vendor to provide a cost profile that is far better, this is a capacity factor 3G, 4G, 5G to compare to standard solutions.
Mm-hmm.
The Indian buyers, I would say, the Indian customers appreciate that as a matter of fact. The deals that we take are gross profit accretive to us, of course, otherwise we wouldn't take it.
In terms of the, the revenue levels in India potentially going forward compared to the past indicatively?
I don't really wanna comment on that, Börje. I don't know if you have any, suspect you didn't either. No, I don't think we—
No, I think it's, you know, we've, we haven't gone out with market shares, et cetera, and build plans. It depends on our customers, and I think they should communicate their own build plans.
Thanks, Börje. Thanks, Frank. Thanks.
It's a very sizable market. Let's put it that way. Talk it over.
I'll see. I have a— I have a question here online. As a reminder, if you have streaming on the webcast, please mute your webcast audio while asking a question so we can get the quality right here. I'll move then to online, and that is from Peter Kurt Nielsen at ABG. Peter Kurt, hi.
Yeah. Hi, Peter. Thank you very much, and thank you for the presentations. Very interesting. I have a question for Per, please, related to CSS. Please, if I may. Per, I guess your target for breakeven in 2023, by the sound of it's mainly sort of cost that the portfolio simplification, et cetera. How far will that take you? What beyond 2023, should we expect to start to see 5G Core revenues coming through in earnings? I guess the cautious outlook for next year CapEx spend will also perhaps slightly delay 5G Standalone. When do you expect to see 5G Core revenues materialize in earnings then, and to leverage upon that on the Digital Services margins?
Lastly, Can you give us any indications as to where do you expect sort of long-term margins for the business to be? Will they be in line with previous targets for Ericsson or has that view changed? Thank you very much.
Okay. Going back to the bridge, I showed there are a number of buckets where we're making improvements. As I said, when it comes to 5G Core, the key challenge is not the top line. The key challenge for us to make sure then that we get a more mature service delivery, because that is what helps our profitability. As I said, we will be contributing for the 2024 targets to the overall Ericsson Group. Of course, after that, this segment will have to continue to improve incrementally. We are not stopping at 2024. There is more that's gonna happen after 2024. Already then by the end of next year, by end of 2023, we re-reach break even, and then we will of course continue to improve.
You will see the 5G Core revenues come, but the key is we need to get the deployment efforts under control.
Okay. Thank you.
Thank you, Peter Kurt. We'll move back to New York City again. I'll take a question here, among the audience. Andreas here.
Do you have a question?
Thank you. A question on IPR.
Mm-hmm.
Definitely not an expert how that works, but You said that given now you have the Apple agreement, there will be others joining.
Mm-hmm.
Can you explain that process and to make us more comfortable that this will happen?
Yeah. Yeah, I can try. I mean, so,
You could say every deal that we make proves the strength of our 5G patent portfolio. I mean, we are happy with the deal that we have now. First, of course, with Samsung, now also with Apple, and it proves the point to all the actors in the whole ecosystem also that, you know, Ericsson's portfolio in the 5G era, if you like, is strong. Of course, now we will target other unlicensed parties there who are, of course, in need of securing that they have the right to use the technology for their handset sales or device sales. It builds confidence when we nail the big ones, Samsung first and Apple then. Of course, there are smaller players as well that we believe will follow suit.
Actually, we should say we also designed their own purpose, the way to structure—
Yeah.
—the negotiation. We wanted to take the first, the big ones first, and then we've been waiting to actually engage with the rest of the market.
Mm-hmm.
For that simple reason that then you establish a price level, right?
Exactly.
Thanks, Börje, Andreas. Next question here. I can stay in the audience here in New York. Any more questions? Yes, please.
Could you explain a little bit more how you've changed the licensing process or sorry, the deal signing process? In order to avoid the foul-ups that happened, it seems like there was a huge blind spot in engaging in the commercial terms that network services endorsed, but obviously it didn't play out as planned.
First of all, it's a wide portfolio. We talked about 5G Core, but of course we have voice solutions. We have mission-critical applications in the portfolio. It's a wide portfolio. I think we have changed now. I mean, we do of course, a proper analysis before we start all development for a particular business. I think we have now strengthened what is the return we should get and how quickly should we get that return. That is how we strengthen what we embark on and what we do not embark on.
Mm-hmm.
As I said, in the OSS and BSS area, we have flexibility that we have maybe made a bit difficult for us within the company by having it separate into different units, creating a lot of internal conversations. If you should be able to decide how much is done services and how much is R&D. Of course, when you bring it into one unit, it's always easier to have a more holistic view on both of what you should have in the portfolio and how you should price it when you go to market. So t hose are things that we are then changing or trying, or we have strengthened with internally in the unit.
Thanks.
Thanks. I'll move back online, to the audience there. Please again, mute your phone when webcast when asking questions to keep the quality. I think we have the next question from Aleksander Peterc from Société Générale. Hello, Aleksander.
Yes, hello. I hope the sound is a bit better now.
Yes.
Can you hear me all right?
Good. Better.
Excellent. Thank you very much. Thank you. I'd just like to know on the restructuring, the SEK 9 billion of costs that you're taking out, what will be exactly expensed in your P&L? How are you gonna phase that? Should we just book all of that in H1 because you need those benefits by the end of the next calendar year? And also, what is the proportion of cash costs within that? Thank you very much.
Yeah. The exact timing we will come back to. Of course, we are pushing ahead now with the cost out efforts. For some of those efforts, there is an associated restructuring cost. It could be of course when it comes to staff, but also items like real estate when we exit from lease contracts, for example, where there is sometimes a possibility, depending on how it's structured, to classify in the restructuring bucket. We might be looking at something already now in the fourth quarter, during the coming quarters, we will increase that over time as we take action and as we communicate the specifics of the cost out program. I think we have to come back on specifics there.
Okay, thanks.
Thanks, Alexander. We'll actually stay online and looking at the schedule here, I think I have next question from, I would guess here, Richard Kramer. Hi, Richard.
Hello, can you hear me okay?
Perfect.
Yeah.
Yes. Two questions for Börje, really. First, in the S-4 for Vonage, there was forecasts of Vonage, excluding the consumer business, growing to a $3.6 billion business in 2026, with an adjusted EBITA of less than $300 million. Are you still confident about tripling sales as was forecast in the S-4? If so, in this sort of software business, why would the margins stay so low? Wouldn't you expect much more leverage to above Ericsson group average margins? One other one I can't help but resist. You mentioned diversity in your opening remarks, we saw presentations really from an all-white Swedish male executive team, including the companies you bought.
What steps could you say that you're gonna take for the next years to increase the diversity of the top management team at Ericsson? Thanks.
Yes.
Yeah.
Rory takes the first.
Oh, Rory's there. Okay. Thank you.
H e's not Swedish either.
No, I'm not Swedish.
I know.
I'm American.
First, as I mentioned in the prepared remarks that I think that everyone's being impacted in the tactical timeframe around the reductions, you know, the macro level headwinds. We're still growing, and we'll continue to grow in a significant way. It's a bit down from previous years, but we believe that'll bounce back over the next, you know, maybe nine, 12, 15 months. It really is hard to predict exactly when it turns, but it's definitely gonna turn, and we're gonna continue to use that disruption to invest in our product to try and capture better growth. We're also gonna use some of the synergistic opportunities, particularly with the relationships with the carriers, with Ericsson to try and improve our profit, our cost perspective, which will then flow through to profit.
We'll also continue to move up stack in terms of differentiated features and functions, and I think that's an important component to all of the ideas around it. The market will continue to grow. It had been growing in that 25%-30% range. It's probably in the high teens right over this choppy period. I think it returns into the mid-20s or better within short order. That's depending on how the macro unfolds over the next two, three quarters. Then what we're doing is, again, leveraging the synergistic relationships that Ericsson has, invest in terms of product differentiation, and we wanna continue to grow our highest profit component—
Yeah.
—to drive that feature. I'm continue to be optimistic about the future and how we look at it going over time. There's definitely a blip here in terms of the overall market, but I think it returns to a healthier position within a relatively short period of time, maybe two, three, four quarters. Again, that's, we'll have to see how the chop goes. Again, I feel better about 2024 and 2025.
On gender diversity, yeah, you're right, or diversity in general. You're right. It's embarrassing, and I think it's not good enough. We need to do a lot better. What I also want to say, it actually takes some time. What we are doing is trying to build a much stronger, diverse executive base or management layers below, and that will have to come through, and we will start to see that coming through also in the, in the leadership team over time. I think it's, you know, this doesn't get solved overnight for us. It's in the business where it just will take some time. Am I happy with that? No, I'm not. I think we need to move faster, and we need to do it better.
Let's come back 12, 18 months, and then we ask the question again and say, "Have you made progress or not?" That should be the judge, really.
Yeah. One of the things I'll just add on that one is we've been working with MajBritt in terms of cross-pollination as part of the integration.
Mm-hmm.
It's quite interesting. One of the things that we've been doing, and we're very focused on it in the tech space, and we've seen an increase in our executive ranks and our representation across the portfolio. You know, MajBritt's view is continue to make sure that every slate has diverse representation, to make sure that we are feeding that system. To Börje's point, there's a huge opportunity to feed the system, and you're seeing that momentum. It'll translate into senior roles, and I think that you'll see that over the next 12, 18, 24 months. We're very focused on it too. In the tech space, it's a key component.
Yeah.
Better diversity, better decisions. It's just the way it works.
Maybe we should say what we do also. We do a couple of things, right? We have a, I think, a lot of things going. If you look at the most recent hires of engineers, it's about a third females.
Mm-hmm.
That's a fundamental change compared to where this was five, seven years ago. That doesn't mean it solves the balance immediately, but it kind of contributes. If we look at where we recruit, typically it's less than 20% females in the education space. We're trying to push that boundaries up. We're gonna do better, I mean, the ambition is to target gender diversity. If you look at the management team, actually almost half today lives in the U.S. Yes, we're a Swedish company, but as a matter of fact, George lives in Boise, Idaho, Rory here, I'm in the U.S., Niklas is in the U.S., Moti's in the U.S. as well.
You know, when you start to look at this, it's getting a bigger diversity than I think we've ever had in that sense. When we recruit to positions in the company, we require, and Rory referenced this, one female, one male as a final candidate. Over time, this is going to look very different. It's a painfully slow process t hat we're not happy with. We're focused on it, dedicating to make this look different over time, and we're measuring this internally to make sure it changes. Actu ally, everyone on the ET has targets related to this as well, actually.
Yeah.
Yeah. True.
It's actually very important topic.
To that point, just to add, the latest recruit with my leadership team have been 40% female, and we're about one-third in the total Networks leadership team.
Mm-hmm.
Thanks. Thanks, Richard. We will move back here to New York City again to see if we have any more questions in the audience.
I think they're getting hungry, Peter.
I think me too.
That's possible.
I guess we're all getting hungry, but not yet. I'll have one more question here, I see, online. Actually two, but let's move for the first one online. That is from a Kulbinder Garcha. Hello, Kulbinder. Do you hear me?
Hi. Yes. Can you hear me?
Yes. Clear and loud.
Great. I had a question just with respect to the market outlook. I understand that you guys are saying it's gonna be flat over the next few years. There was a comment around inventory levels, and there was comments around a significant level of uncertainty, I think is what, Börje Ekholm said at the beginning of the day. Are you guys bracing for a significant decline next year? I'm just trying to think how could that change this three-year outlook that you're giving because it just is so uncertain? How do you think about framing where the upside or downside in 2023 is? Thank you.
I think what we're trying to say is more that it's uncertainty, which makes it a bit difficult to predict. We know the guidance from some of our customers, right? That's public. It's going down. We also know we have very high growth in a number of markets where, you know, we're gaining footprint. It includes India. Exactly how this is gonna pan out, you know, that's what makes it hard to predict. We're very comfortable about the overall volume development, though. You know, how this will exactly look like, I think we're at an unprecedented time of uncertainty. We recognize that. We think when we provide the guidance or an indication where we're gonna be, we want to deliver on that.
So to tell you exactly how 2023 is gonna pan out, I think would not be right. It would not be responsible of me. That's why I don't wanna do that.
Yeah. Thanks, Börje. Before going back again online, I actually have a question from the chat from an Oleg Leonov . The divestment of IoT Accelerator, does that mean that Ericsson will focus on hardware and software products, but will leave development of the ecosystem around it to the CSPs?
I would not say that. What we recognize with IoT Accelerator is that, I mean, we've been struggling to make this into a profitable business. We recognized it needed to be combined to get the scale and to get the right access to the market. That's why we actually pursue the solution that can give that scale and solve our profitability issue, call it that. As you can see from the numbers, we've been losing to the tunes of SEK 1 billion a year on that one. We have not been able to turn that around. I think there is a big market still for IoT connectivity and the whole IoT solutions.
You know, that's something that's gonna get sold. Many competitors are there. Let's see how that's gonna, you know. I think Aeris will be one partner solving, one company solving these problems. I'd You know, we like to work with those partners to make sure there is an ecosystem around IoT connectivity. I mean, we have kind of proven we couldn't make it to work ourselves, so you better take the consequence of that.
Yeah, the other component that I hope we got from the Global Network Platform was we're definitely a software company for sure, but we're going to work on the ecosystem in partnership with the CSPs to create these next generation use cases that will be the GCP APIs that'll augment our cloud-based APIs. We see this as a platform play across Ericsson using 5G as that real fundamental foundation for innovation. We're definitely gonna drive the ecosystem together with them.
Yep.
Thanks, Rory. There is no question here in the audience, the last question will then go online, and that's Peter Kurt Nielsen at ABG. Peter Kurt, you have the last question for this CMD. Please.
Thank you, Peter. Thank you for letting me on again. Yeah. One for Fredrik, please. Fredrik, your ambition of growing your market share by a percentage point per year, I guess the footprint gains in India will take care of that in the near term. Sort of beyond India, do you the course globally where you see significant scope for adding to the market and for Ericsson to gain footprint, please? Thank you.
I don't think I got the full question there, but I'll try to answer the fragments I understood. You're right, we try to, on the basis both of India and other markets where we've taken market share, we've seen that combined with a very competitive portfolio that we year-over-year can continue growing with 1 percentage point a llowing ourselves to scale R&D in a better way, and quite frankly, learn a lot from the markets that we deploy the technology in..
Mm-hmm.
I didn't get the remaining part, but maybe that answered 80%.
Yeah, my question was just do you see any new potential emerging markets where Ericsson has the footprint gains left?
Any new emerging markets.
Any new emerging markets. You know, our product portfolio is global, our sales is global, so that we include both developed and emerging markets. It's also true that many of the newer markets are in the phase of rolling out 5G. For example, Malaysia, we spoke about that before. I mean, the early rollout phase on India, et cetera. You know, how the mix will be between, you know, emerging and developed countries, that's hard to predict as such.
Okay. Thank you.
Thank you, Peter Kurt.
Thank you.
By that, actually, we are done. I guess, we've all been waiting for the lunch, which will be served outside here. You have also the possibility to meet management during that period. With that, I would like to thank you all online as well, and all of you traveling here to New York City from Europe and the West Coast, as well as from New York City being here. Thank you all for today.
Very good.
Thank you.
Happy holidays.
Thank you. Thank you.