Its gross margin has, however, slightly slipped according to its annual report published in Stockholm yesterday. "For the full year, operating expenses increased by five percent while sales grew by 15 percent reflecting our continuous focus on operational excellence," says the company.

Ericsson sold 112.6 billion kronor ($14.75 billion) worth of cellular mobile networks infrastructure in 2005, which represents 15 percent annual growth. It was driven by North America and Latin America, where the revenue surged by 82 percent and 33 percent respectively. Ericsson's growth, however, declined in the West European markets with sales shrinking by 4.3 percent in the Q4.

"We see a lot of tariff competition and consolidation in Europe right now. After consolidation, there's always a bit of a period when the acquiring company considers its situation and that tends to hold back investment a bit," Ericsson's CEO Carl-Henric Svanberg explained in a press conference yesterday.

In Asia, Ericsson has posted 10 percent annual growth in 2005 as opposed to eight percent growth in 2004. Svanberg said that he region shows great diversity in maturity of mobile communications, from very advanced mobile broadband services in densely populated areas to rural coverage for basic services. "The potential for further subscriber growth is huge and the majority of the world's next billion mobile subscribers are expected to come from this region."

Ericsson's gross margin slipped to 44.2 percent in 2005 from 45.6 percent in 2004. The company blamed to the increase of its lower-margined Managed Services business, where it totally operates the customers' networks. Currently it manages 53 million subscribers' network while its totally supplied infrastructure has connected 650 million mobile users.

In December Ericsson sealed a three billion dollars Managed Services deal for seven years from the "3 UK" mobile phone network. Ericsson has earned 24.9 billion kronor ($3.3 billion) in 2005 from Managed and Professional Services, which accounts for 18 percent of its annual net sales of that period.

Ericsson sales in the fixed networks segment remained flat with 4.6 billion kronor ($600 million) in 2005. In order to bolster this unit's business the Swedish giant took over the British technology icon Marconi in October 2005 for $2.1 billion.

"The acquisition of Marconi is a strategic move to strengthen our position, both in terms of our offering for the growing transmission segment and in the development of next generation networks," concludes Carl-Henric Svanberg.

This move is expected to increase Ericsson's competitive edge against its traditional rivals like German Siemens, French Alcatel and Canadian Nortel as the fixed telephone operators are rolling out broadband networks that handles anything from voice to video. Businesses from the newly acquired Marconi unit will be consolidated into Ericsson's books from the first quarter of 2006.