Gary Pinkham - Vice President of Investor Relations Carl-Henric Svanberg - President and Chief Executive Officer Hans Vestberg - Chief Financial Officer

Peter Dionisio - Morgan Stanley Rod Hall - JPMorgan Phil Cusick - Bear Stearns Tim Boddy - Goldman Sachs Mark Sue - RBC Capital Markets Per Lindberg - Dresdner Mats Nystrom - SEB Enskilda Ed Snyder - Charter Equity Research Andrew Griffin - Merrill Lynch Jeffrey Schlesinger - UBS Richard Kramer - Arete Research Jan Dworski - Handelsbanken Alexandre Peterc - Exane BNP Paribas Kulbinder Garcha - CSFB

Thank you, operator, and hello everyone. Good afternoon. Andwelcome to our conference call today. With me here in Stockholm are our CEO,Carl-Henric Svanberg and Hans Vestberg, our Chief Financial Officer. Before we get started, I'd like to remind you that we willbe making forward-looking statements during the call today, and thesestatements are based on our current expectations and certain planningassumptions. The actual results may be different due to a number offactors, as there are risks and uncertainties associated with these planningassumptions. Therefore, we encourage you to use caution when considering suchforward-looking statements. With that out of the way, I'd like to hand over toCarl-Henric for comments about our results and plans going forward.Carl-Henric? Carl-Henric Svanberg: Well, good afternoon, everybody. Before I go into thepresentation where I will be quite brief because most of the numbers are known,and I will just make a couple of comments as we go through and then we goquickly to the Q&A. But let me first say that as you are aware, we announcedthis morning that Karl Sundström stepped down as CFO. Karl came to me a coupleof days ago and told me that he wanted to step down. I think we all feel it was-- he was disappointed with the quarter results; this was totally his owninitiative. We to the extent that we could have done better inforecasting or so on, we share that responsibility to all of us, and ultimatelyme. But anyway, I could just deal with Karl's decision there. He has done agreat job and been a great friend and colleague through the years I've beenhere in for 22 years in Ericsson. Replacing him is Hans Vestberg, who I think will do a greatjob in the position. Hans has a financial background. He has done 15 years withEricsson, of which 10 in financing controller jobs, nine of them in variousassignments in different countries around the world. And the last five years you know very well that hisachievements in Professional Services. And he's been there now for almost fiveyears and done a tremendous job and it was time to move on anyway. And we'renow in the selection process of a replacement there. Karl Sundström will -- he is very keen on making sure nowthat he hands over in a proper way to Hans, so he will be there and supportHans in all he's done and we can only thank Karl for the job that he has done. If we then go into the results. So let me start by the firstslide where we talk about the quarter in short. These are known numbers. So wecan just conclude that we fell short in Networks, and the rest of the chart isknown. So let's go to the next slide, talking about the businessdynamics. I talked it through, I think, quite well last week, so we just wantto make sure that we will come back to this one. The business dynamics arethere. There are swings between various regions, betweentechnologies in businesses, between rollouts and expansions and what have you.And one of the key learning’s we obviously have here is the importance ofunderstanding this for us all, both for us and for you, and we will do our bestin guiding you forward there. We will also think carefully about, and this will be one ofHans' initial tasks here, is to see if there are any early warnings or so onthat we can introduce so we can follow the critical high-margin expansions andupgrades even closer than we have done before. Let me also conclude that there is nothing -- I've got thosequestions from a couple of colleagues here to you. We have no words at allabout the information systems that we have and so on, and the information orwhatever we need is there to be found in the system. It's more what we havechosen to track and follow. So we are very comfortable with the reportingsystem, as such, that we have. Let me then go to the next slide when it comes to our strategyto gain scale. I won't elaborate too much on this one, but it is important forthe understanding of where we ended up in the quarter. We have, since theconsolidation started in the industry a couple of years ago when before thatconsolidation, we had a clear size advantage, scale advantage, especially inthe mobile networks and GSM and wideband CDMA. And this is very critical to usto protect our technology leadership and margins and so on. So in the turbulence that followed, and since we're also ina process where some of the players are becoming increasingly weaker, so thereis an increasing worry among operators on their vendor choices. And that hasled us into a number of discussions of swaps or break-ins, or whatever we callit. This was actually successful much faster than we anticipated. We probably got more of an 80% hit ratio in such discussionsthan the 30 that we expected. And we are now, in the latest external reports,we're back to the size advantage, scale advantage that we had a few years ago.And I think this has been very, very important to us. That also means that that as one part, but also the factthat there is so much now of rollouts of new networks going on in the world,and we have taken a larger market share. For example, you can go to India, asone example, but you can just as well go to Nigeria or many parts of Africa orother parts of Asia, we have won a larger share. So, for that reason, theshare, the proportion of rollout of new networks, well, it's always full bargainingand tougher competition that had lower margins. Then when we, at the same time in the quarter, and let's getback to that, but when we in the same time get hit by less upgrades andexpansions where the margins are considerably higher, that is of course wherewe get squeezed. But don't forget now, when we rollout more new networks thatwe are, in fact, building faster than before an installed base for many, manyyears of profitable development and expansion. And we will continue to see thissituation with a high proportion of new network buildouts for several quarters. And as a result of the reasons, I've just said, when itcomes to expansions and upgrades, there we had a special situation in Q3. It'snot that we think it's going to bounce back and be back to normal in Q4 or Q1. We will continue to see lesser than normal because of themergers that is going on or consolidation or cooperation, network-sharingdiscussions that goes on in the very fragmented European market. We think thatthe effects that we have, although those will go away, those particulardiscussions, but others may very well occur. If we then go into the particular Q3 comments. Again, on thesales side, we had less capacity upgrades and software sales. China was down,but that was expected, so there was nothing peculiar with that, but it's stilllumpy invoicing, whereas the buildout, as such, is going very steady. So it'smore the Chinese bureaucracy that plays us, that has its effect here. So thatwill continue to vary between quarters. Of course, also the U.S. dollarexchange rate has an effect here. And let me say also on the sales side that although we don'tdisclose that, but the sales and orders, as we track it month by month, we wereactually well on plan, even a bit ahead of plan in July and August. So in themiddle of September, we were still looking at least a normal third quarter. Thewhole slowdown came in September on the upgrades and software. And although, still our assumption is that this is for amore temporary character, and we talk about networks here, all these commentsare about networks, we are going to analyze quite carefully here so that thereisn't any underlying new trends or anything that we actually are spotting. Butit's only September. On the margin side, I think everybody has understood. Wehave both lower sales and we have also less software, and that's a prettysignificant, of course, bottom-line effect. We have the shortfall of upgradesand expansions. We have also more rollouts on new networks. So all of this,basically, brings us to the conclusion that it's more of a changed business mixrather than a shift in underlying margins in the different businesses. If we then go to the -- we've done another analysis to justhelp you a bit, in comparing Q3 with Q2 and looking at Networks only. And therewe can see how we -- sales was down SEK5 billion, whereas we would have normalseasonality somewhere SEK2 billion to SEK3 billion. And the operating incomewas down SEK4 billion. And this is obviously because of lower sales. Everybodyunderstands that. The part there that is software is of significant importancebecause it's almost full drop through to the bottom-line. But then in theremaining sales, the total sales for Networks in the quarter, that is a mix shiftalso within that with further less expansions and upgrades and more networkrollouts and building new networks. There is another comment that is not as significant herethat we didn't mention last time, and we don't want to add too many things toexplaining here, but I think it is important that we do understand that thereis an ongoing shift also from old circuit switching to packet core. And this means that as we do in every such technology shift,it means that we are basically moving from sort of expansion or upgrade mode toa new rollout because instead of just adding to an installed base of circuitswitches, expanding and so on, we are now rolling out a new network or packetcore, and then, of course, that's a chance for everybody to be there and fightfor the new footprint. So that is an additional comment that I think is importantto make, and I'm sure you recall it from other colleagues in our industry thathave reported the same phenomenon. If we go to the financial highlights, I won't spend too muchtime there. Remember when you look at the gross margin, 38.2% for last year,that last year that was affected by the restructuring charge. So the trailingmargin was some 5% higher, so you don't make the wrong comparison there. If we then go to the next page, we look at the operatingincome. That is well known to you. The cash flow of minus SEK1.6 is affected bylesser earnings, basically. And we will have -- throughout the year we willhave an effect on cash flow basically for the shortfall in earnings. That givesus a net cash position of SEK11.5. And the earnings per share is obviously thenalready known to you. If we look at the comments around Mobile Networks, I think Ishould also be quite brief here, but the shortfall, as such, in sales is verymuch around U.S. and countries in Western Europe, primarily U.K. and Italy.China, I mentioned about, the mix I mentioned about. What I think is encouraging and here is the good growth intransmission, optical and radio transmission, which is actually right nowprobably the fastest-growing business we have within Networks, and which wasalso the rationale for acquiring Marconi. If we look then at Professional Services, we had anoperating margin of 15%. We said in the earnings call, analysts' call, aquarter ago and later updates, we have said that we may see a pressure on theoperating margin because the number of managed services contracts that arebeing started up in the quarter, still with 50% growth for managed services, weare maintaining the operating margin here as a result of better performance,better than expected performance in basically every area except these newcontracts. If we look at Multimedia, there I would just -- we arearound flattish there or breakeven on operating margin, although we had stronggrowth, 31%. Here I just want to remind you, and we will come back at a bettertime and talk more about it, but the bulk of the business is coming from EMP,Tandberg, Service Delivery Platforms, the company that was called Drutt that weacquired, Charging. This is the majority of sales. It is growing nicely and isat healthy margins. Then, in addition to that, we have the new businessdevelopment areas, IPTV, messaging, IMS and so on. These are areas with limitedsales, but fairly substantial R&D activity going on. As I said, we'll comeback and talk more about it. Multimedia is in an early phase. We should beaware that sales and margins will vary going forward. If we then go to the regional update, I said most of it, Ithink, last time. So little to say here except that APAC that we are used tosee grow very strongly is the effect of the strong decline in China, which isan invoicing phenomena. Western Europe's growth is primarily -- it’s all fromManaged Services Networks. Mobile Networks is down in Western Europe. And whenit comes to North America, the catch-up there is basically because we aremeeting slower numbers for last year. The planning assumptions for Q4 remain. We are not goinginto an era of predicting sales or margins for quarters to come. But followingthe profit warning, we wanted to give you a range so we have something to holdonto, and there is nothing that have changed this range. If we then go to the next one, which is the outlook for themarket, no change for 2007, obviously almost done. And we are looking forwardto see external analysts to conclude where they believe that the market hasended up. Early expectations for 2008 is that the current marketconditions will prevail. And what do we mean by that? Well, we do mean that ifwe take how we see -- how we now foresee the whole 2007 to play out, this isnot about Ericsson. This is about the market. This is also a year when we've hadsome disruptions and effects from merger talks and so on. And we expect a similaryear in 2008, similar growth conditions, but also could very well have similardisruptions. So that's a little bit how we see 2008 going forward or 2008. So then if we finish off with a quick comment on our focusgoing forward now, in view of what we have learned. Well, obviously we will putfocus on improving the analysis of trends and underlying trends and so on, sowe make sure that we do capture anything that is going on. We will also look into our forecasting abilities. Is it sothat we can earlier spot if we have any shortfalls on upgrades and software,for example? Of course we will do that. We will also carefully analyze the Q3result, as such. We want to make sure that in this shortfall of sales andmargins that there is nothing, no underlying trend that we are missing here,and carefully analyze also the sales growth in the fact that it came so harshlyin September. So it's no indication of something new there. The only thingwe can conclude so far is that our conclusions have not changed from the day ofthe profit warning till today. But we will do more analysis and come backthere. Cash conversion is an obvious area of focus. We willcontinue to see Asia and CEMA in being the strongest-growing regions. And theseare regions with turnkey and turnkey is a competitive advantage to us. So we will grow with that. But obviously, as we've saidbefore, we will focus very hard on seeing whichever way we can do to improveour cash conversion in the terms and conditions, both for the operators and forour suppliers, but also in our way of processing the projects. But Q3 must be a reminder of the full importance ofoperational excellence. We will continue to address all processes in theCompany, whether it's R&D, whether it's supply, whether it's sales, whetherit's services, and I think also information here. We must also draw conclusionsif we are accurate in the way we inform and if we can be faster. All of this boils down to also with all the market share wehave grown. What we want to do is to leverage our leading position, capitalizeon this restored scale advantage and work hard to build a stronger and evenbetter company. So that is my comments. And I think we will, from there, wewill go to Q&A. And I have Hans Vestberg here. I should say that withregards to Hans, Hans is part of our Executive Team now since 4 or 5 years. He has also been part of the core team of a handful ofpeople that initially analyze a situation and then, of course, we broaden it toinclude lots of people. So we capture every underlying trend and thought, whichmeans that Hans knows as much as me about the whole situation, although he isonly a few days in thinking about this whole new job and was basicallyannounced this morning. Please?

We're ready for the first question, operator.

(Operator Instructions) We will take our first question fromPeter Dionisio of Morgan Stanley. Please go ahead. Peter Dionisio - Morgan Stanley: Thank you. Just the first question is, if you could justgive us your views with respect to the network overcapacity of wireless telcosin Western Europe. The reason for the question is that is it possible that thecapacity upgrades in Europe will take quite some time to return, even if weexclude the impact of M&A among telcos and the network sharing discussionsthat you have pointed out? Carl-Henric Svanberg: Well, the -- I wouldn't say that there is an overcapacity. Iwould rather say that it's fairly loaded networks. So there is no suchconclusion to draw. What is more important to understand, that if you'resitting on a network with 10,000 base stations and maybe 5 million subscribers,and you have another network with 10,000 base stations and 5 million subscribers,the only thing that you can be sure of is fairly fully utilized is the radiocapacity, if you trimmed your network reasonably right. But the big gains of putting the two networks together, thatdoesn't lie there. It lies that you share the towers, the batteries, thesupply, power supply, the antennas, the land sites and everything, which is 85%of the cost of the site. So when you put them together, you will need the capacityfrom the both networks anyway. So there is no reason to see that in a sharednetwork that there is a lesser need for radio capacity. But what happens is inthe time of such a discussion, obviously expansions are being put on holdbecause you don't know when you're going to put the networks together, whichsites that's going to survive and which are going to move and so on. So -- and the same thing when a new owner starts to discussa takeover of another company, you typically put such expansions on holdbecause you can always wait a bit. So it is more of a delay and that's whywe're saying that we will expect it to gradually come back. But we would alsoconclude with 40, 50 operators that I don't think we've seen the last mergertalks. Peter Dionisio - Morgan Stanley: Okay. And just a quick follow-up, Carl-Henric. When you lookat your cost base, are there items there that you think you could cut or adjustto help your margins, while you have this current revenue mix? Carl-Henric Svanberg: Well, this is what we call our operational excellence workand that just have to continue. And we have done that very, very effectively,actually during the years. Of course, this is a reminder to push even harderand even further, although at the end of the day it is a bit of a mix inrevenue. Its base stations, more base stations than the networksbeing rolled out in an initial phase at a lower pricing and less setupexpansions. But it doesn't mean that you need a smaller staff because of that. So whatever we can do, we should have done anyway. But it'scertainly a signal for pushing even harder. Peter Dionisio - Morgan Stanley: Thank you.

Thank you. We will now take our next question from Rod Hallof JPMorgan. Please go ahead. Rod Hall - JPMorgan: Yes, hi. Good afternoon. Just a couple of questions, one iswith regards to Marconi specifically. I wonder, if you could comment on whetherMarconi is still breakeven, and I would characterize that as includingamortization so if you could comment on that, I'd be interested in the answer? Secondly, on China, I wonder if you could talk about the --we know you've had the invoicing issues there that you highlighted nine daysago, but if you could also comment on whether there's any perception of marketshare loss in China, particularly in rural areas that would be of interest? And then finally, with regard to the Vodafone, Orangenetwork sharing situation, I wonder if you could talk about your expectedfuture footprint there whether you expect any changes in your existingfootprint if you put those two networks together in the U.K? Carl-Henric Svanberg: Well, let me take then one by one. Marconi, as you know, isnow broken up in many pieces, broadband products, so with broadband products inEricsson and soft switches for Microsoft and the services contracts are mergedand so on, and most of the structural costs are being -- have been taken away.All of this, we set -- the targets that we have set for where we want to bewith earnings and the restructurings and everything we wanted to do is all met. It is now in terms of a full Marconi consolidation that isno longer possible to do. But it also means that the Marconi products are onaverage, as profitable as Ericsson's products. And from there of course, wehave the intangible write-offs and so on. But this has really proven to be, nowthat we're sitting here today, a good deal and it's exciting to see the growthof these products now. When it comes to China, we have not -- I mean, we aretracking the market shares down for the decimal basically quarter-by-quarter.And so far, we haven't lost any market share in China. We may come out, as someindications show about 1% lower probably out of this year than we were lastyear, but this is almost impossible to say at this point in time. We -- in China, the Chinese vendors are growing quitesignificantly from almost nowhere to probably over 20% right now. The ones thatsuffer are the weaker players in the industry, but so far we have not suffered.We are in a good position in China. And, of course, now it's 2008 will be another GSM year.Whatever happens to TD-SCDMA, it won't have any meaningful impact on the marketas such. We are the only international bidder on TD-SCDMA. And it will be veryinteresting to see how that standard will evolve. That will continue to bebasically Chinese standard because there isn't spectrum available outside,outside China. When it comes to Vodafone and Orange, remember now only thatwhen we talk about the consolidation and the network sharing that goes on inthe U.K., they were the ones that started. That started in January, or itbecame official in January. But that led basically every operator to sit invarious discussions. So the hold-up situation we have is basically valid formost of the U.K. We -- I don't really have any comment to your questionthere. I think that's not something we should comment on. But whichever waythey end up is any such work will create business opportunities in integratingnetworks and maybe even running the networks and so on. So it'll be interestingto follow. Rod Hall - JPMorgan: And Carl-Henric if I could just follow-up on your commentson the fixed networking products, particularly in Europe, you've obviouslytalked about a willingness to sacrifice margins on the wireless side to get thefootprint because it's worth more in the future, which I think we'd all agreeon. The question is on fixed. Do you have a similar philosophywhen you think about this sort of optical builds that are going on aroundEurope now and maybe some of the other fixed investment that's going on? Carl-Henric Svanberg: We -- that has not -- it hasn't been a -- the strategicfocus on securing or restoring the scale advantage that we've had that has beena project for Mobile Systems. That has -- in fixed, we're working in the sameway there as we work with everything else, no particular strategy other thanthat it will be important to, overtime, build a stronger position. Andremember, though, that whereas you have a handful of players on the mobile infrastructurenetwork side, it's much more fragmented on the fixed side. Rod Hall - JPMorgan: Okay. Thank you.

Thank you. We will take our next question from Phil Cusickof Bear Stearns. Please go ahead. Phil Cusick - Bear Stearns: Hi, guys. Thanks for taking my question. I wonder, if wecould talk first about the commentary you made on the press conference earlierthis morning about the first quarter incomes of the network rollout mix andthings like that. You made a comment that sounded like it might be a littlebit -- fairly big in the first quarter as well, which I would sort of expect.But I'm wondering how long this will remain a fairly large part of the networksbusiness or when things start to normalize, is this a couple of quarters or arewe talking four to six quarters away before things normalize? Thanks. Carl-Henric Svanberg: Well, we must not forget that when the new rollout of newnetworks, when that has -- takes a bigger share and thereby dilutes margins,it's not coming with a loss. So in that sense, if that starts to shrink, itwill not help our profit but it will push our margins. And we just need tounderstand that effect. But that was more philosophical. But when we look at how it is, we will continue to see, Iwould say, for at least through quarter two, we will have effects of a higherproportion of new network rollouts. And, having said that, where we are in Q3and 4, of course, that depends on the business development. So we can makeprojections. But what we carry with us here is going to take us through atleast to quarter two. In Q1, it's -- we have a fairly substantial part there. Andas Q1 normally is -- normal seasonality is a bit slower and we may have -- andwe think we will still have probably somewhat lesser upgrades. We could have --Q1 could basically be a bit of a low point in this cycle, but it may be tooearly to say. Phil Cusick - Bear Stearns: I see. So we should think about 4Q not necessarily being alow point in the cycle. But as your commentary about sort of pulling back fromgoing after market share aggressively, how long is the pipeline that's in placein terms of swap-outs and things like that, I'm understanding that it's apositive margin, but a fairly low margin, is this a few quarters along, andwhere are we in the cycle of that easing off as well? Carl-Henric Svanberg: That is what I meant with through Q2. Phil Cusick - Bear Stearns: Okay. Thank you.

Thank you. We will now take our next question from Tim Boddyof Goldman Sachs. Please go ahead. Tim Boddy - Goldman Sachs: Yes, thank you. I wanted to ask about the idea of thisbeing, if you like just a change in mix as opposed to a structural change inthe market dynamic. It just seems to me that there is -- hard to say it, it'sstructural. But I think what I've been surprised by and perhaps many ofus, is the extent to which your profitability is concentrated into a muchsmaller part of your business. And the part of your business whereprofitability is low is now growing much more quickly. So the only way we'll know that it isn't a structural changeis over time, as these emerging markets and network rollout contracts start toimprove in profitability. What sort of confidence level do you have that thebusiness you're writing today, at worse margins, will over time yield the kindof profitability that we're seeing today in isolated parts of the developedmarkets? Carl-Henric Svanberg: Well, it's -- I mean, there is no difference in -- betweenboxes and different regions. There are additions and upgrades in every regionand so on. So it will follow the same pattern. And basically every product linefollows the same pattern. It's the same thing when we go from the circuit switch intosoft switch. You go from being in an upgrade mode to being in a new rolloutmode. And so every product and every market goes through the same cycle. So Ithink we can be fairly confident that this development will happen. We have no indication at this point that we're seeing anystructural change. And it wouldn't come from that question. It's more if therewould be any form of slowdown in the market or nervousness or something. Wehave no such indication. We still just want to say that as it all came rathersudden in September, I think it's normal caution to make sure that we analyzethat well. Tim Boddy - Goldman Sachs: Thank you. And just briefly to follow-up, in terms of theshape of profitability in the business, have you seen any pressure fromcustomers resulting from the understanding of how profitable, for example, thesoftware upgrades now are? Carl-Henric Svanberg: Software is, by nature, basically R&D, and will alwayshave a high gross margin. I don't think necessarily that you can draw aconclusion that the company is making such incredible money on the softwareitself. It's the incremental effects that are important to understand here. Tim Boddy - Goldman Sachs: Okay. Thanks very much.

Thank you. Our next question today comes from Mark Sue ofRBC Capital Markets. Please go ahead. Mark Sue - RBC Capital Markets: Thank you. Carl-Henric, with everything going on, is there achange in your strategy and also a change in urgency as it relates to thewireline business, particularly in terms of collecting assets and creating somesynergy for that division and going after some of the telco opportunities forvideo? Carl-Henric Svanberg: No, there is no change in strategy at all. And in thatperspective, I must say, we had a very good Board meeting yesterday when wereviewed with the whole Non-Executive Board also the strategy and so on, makingsure that we understand where we are. It's in absolutely 100% support in whatwe're doing, the strategy we have. It's, from a longer perspective actually, more encouraginghow we are building footprint on the mobile side and how we have gatheredassets and developed our capabilities in new, exciting areas of the business. And the margin pressure that we get here is more the effectof the mix change and, of course, unfortunate shortfall in September. So, nochange in that perspective. Mark Sue - RBC Capital Markets: And then, I would imagine that you're still focused onnear-term execution while you get your house in order in the wireless side? Carl-Henric Svanberg: Absolutely. It's a good reminder to just keep pushing evenharder. Mark Sue - RBC Capital Markets: Okay. Thank you, and good luck, gentlemen.

Thank you. Per Lindberg of Dresdner Bank has our nextquestion. Per Lindberg - Dresdner: Thank you very much, Carl-Henric and Hans. Leaving aside nowthe aberration and the surprises in a few weeks of a year, i.e. the latter partof September isn't the overarching conclusion that you are building thefoundation for much bigger upgrade expansions in a few years' time, no matterwhen it exactly happens. And also, that the push-outs we currently see in WesternEurope and in North America, in part because of operators' organizationalturmoil, will also build the foundation for pent-up demand, no matter when itmay happen? Carl-Henric Svanberg: Well, that's at least a conclusion you can draw, especiallyif you take the positive sides of it. And those elements are there and we, onone -- just want to make sure that we don't miss anything in the shortfall inSeptember. That's one part of it. We will, we think, because of theconsolidation and so on going on, see effects actually also going into 2008 andprobably others will occur. And of all the traffic increases, and especiallythe dramatic acceleration on data, we don't think we'll have, in the aggregatedglobal numbers, will have any meaningful impact in 2008. So I think we're actually quite confident where things aregoing in the longer perspective. But we don't want to, especially what we'velearnt over the last couple of weeks, be too optimistic here about 2008. Per Lindberg - Dresdner: Understandably. A quick follow-up, then. Where would youcharacterize the European and American spending levels at the moment? I mean, I've just done a quick analysis and I see that itmust now be undercutting the trough level of 2002/2003 on an absolute scale,and even more so relative to operator sales, i.e. that operators now must be ator even beneath what could be deemed as maintenance spending, i.e. to keep thenetworks in shape, without adding anything to capacity, without adding anythingin terms of the functional enhancements. Carl-Henric Svanberg: Well, I think what you're seeing is -- I think everybody ischanging efficiency in every aspect they can. And I think the operators, tosome extent, are also struggling a bit with seeing how their business modelsshould be for new data services and so on. But I think we're also seeing -- we're seeing that consumers-- I mean, if you do any consumer research, you find that almost every consumerwill say that I will deal with most of our emails, I believe, within a year ortwo on wireless networks. So, I will do it on smartphones. I want to increase my musicdownload. I want to do this; I want to do that. So I think there is a growing-- and that's what we see in the networks. There is an acceleration of data,whether one has a model for it or not. And I think this will -- it will bring out the localexciting services and also profitable business for the operators, but we are ina learning phase. And in that learning phase, I guess, everybody wants to makesure to hold back and not expense too much too early. Per Lindberg - Dresdner: Thank you.

Thank you. We'll take our next question from Mats Nystrom ofSEB. Please go ahead. Mats Nystrom - SEB Enskilda: Yes, hello. A question on the U.S., if I may. Looking atT-Mobile, one of your key clients there, was there any meaningful sales toT-Mobile in Q3? And how do you see sales to T-Mobile developing next year, whenthey perhaps push the accelerator here on 3G build and 3G spend? Will that sales be characterized as well as new networkbuild, or will it have also an element of capacity expansion? Thank you. Carl-Henric Svanberg: Well, you are right there, that there is a gray zone, ofcourse, between what is a new network build and what is an expansion. Typically,you would find an expansion to be once you are there and you are establishedand you roll out large parts of the country, and you add another city. That'sfor us an expansion, still some of the work that goes on as part of the initialrollout contract. So it's a bit of a gray zone. We will not comment on specific operators and theirparticular plans and how we get involved there. But we can only conclude thatit is of course it's positive in the general sense that T-Mobile continues andaccelerates their build out. Mats Nystrom - SEB Enskilda: Okay. Thank you.

Thank you. Ed Snyder of Charter Equity Research has our nextquestion. Ed Snyder - Charter Equity Research: Are we going to have to see more consolidation with yourcompetitors before we see pricing improve? Besides Nokia, Siemens, there hasn'tbeen a lot of capacity taken off the market. And Lucent wasn't big in GSM, sothe merger with Alcatel didn't do much for pricing. And outside of that, we'venot seen any big suppliers exit. So why should we expect pricing, and even growth, to remainweak as long as the current roster of suppliers remains constant? Carl-Henric Svanberg: I don't think you could really conclude that it's constant.I think it's really come down to three major ones, if we include the Chinese asan important growing one on the mobile side and maybe three larger ones onnext-generation networks fixed side. There are obviously still other vendors there. And in thataspect I think you may be right, that there are some that are smaller and theyneed to find their way forward, and where they will make their bed somewhere,they will be less aggressive. But it's clearly, I think, in that sense, we've gone from aperiod a couple of years ago when there was a lot of under sub-criticalcompanies that fought for their survival into a somewhat better stability, Ithink. So I think we're on our way into a more stable environment. Of course, remember also that we need to understand what theChinese does here, because they're not always predictable. Ed Snyder - Charter Equity Research: When you say it's a more stable environment, are you sayingthat some of the smaller players are going to be exiting, or the fact that weare where we're going to be, and you just expect pricing to improve becausewe're not dealing with the same suite of people we were a year and a half ago? I'm trying to grasp what you mean by more stableenvironment. Carl-Henric Svanberg: But, we -- it is you that suggests that pricing willimprove. I'm just saying that I don't think that we have the same desperationout there in the market on some hands. I mean, if you remember, for a few yearsago, when vendors were bidding quite wildly on BS&L in India, for example,just as a way to, am I going to be in this country or not? I think it has become, I think, first tier players andsecond tier players today, and the competition that we are facing is not reallyany more with the second tier players, it's between the first tier. And that, Ithink over time should maybe create a more stable environment. But let us seehow we go along. It's not going backwards, anyway. Ed Snyder - Charter Equity Research: Thank you.

Thank you. We'll take our next question from Andrew Griffinof Merrill Lynch. Please go ahead. Andrew Griffin - Merrill Lynch: Good afternoon, gentlemen. With the benefit of hindsight,what should you have done, or what controls should have been in place, to seethis fall in network margins coming ahead of time? Thanks. Carl-Henric Svanberg: Well, that's one of those questions that we will not digfurther into and which is a prime question for Hans also to dig into. Butobviously, with 18 quarters of stable sales and with a very high degree ofstability and expansions and upgrades, of course we put most of our efforts andfocus on bringing the new business in and project where that was. We should obviously have had better traction of -- throughthe quarters, in where sales was -- how sales was developing and so on. We mustremember, though, that we can have, for example, we can very well have asoftware order that could be half a billion in the last couple of days, wherethe software is already in the competitors' -- in the operators' networks, andyou basically open up with keys something that is there and it can be deliveredin a couple of days. So it's actually -- even if you track it much better, youcan still have surprises in very late days, and that is why we come to theother conclusion that we draw, is that we have to talk more about the dynamicsof what actually can happen, and also what kind of conclusions we should drawfrom swings in quarters. But of course, we hope we will come wiser and strongerafter this. Andrew Griffin - Merrill Lynch: Yes. I guess I can appreciate you can get sideswiped, as itwere, by these late quarter revenues, but this is more than a one-quarterproblem. It's turned into a multi -- hopefully not too many quarters, but amulti-quarter problem. So I guess it's back to -- gets back to the structuralversus short-term thing that happened earlier. And maybe you can't answer this, given you're still lookinginto it, but in more of the structural side, the fact that so many of your customersseem to have stepped away from the upgrade business at roughly the same time,which seems to be what you're saying, is there anything that's come up in yourearly analysis to say, actually, here's something that we should have beentracking that we weren't? Carl-Henric Svanberg: That is what I meant. And I think the disappointment, or thediscussion rather than disappointment, in the quarter I guess is that weweren't able to see it before it happened, and how we could talk about it. Now, we do talk about it, so -- and I think we give pretty-- a better guidance that we will have such less -- not to the extent of Q3 aswe expected, but still we will have a bit slower on the upgrade side in Q4 andprobably into Q1 as well, plus the fact that other such situations could occur.So I think we made -- we need to make a difference here on why we weresurprised, and what the trends are. Andrew Griffin - Merrill Lynch: Okay. Thank you very much.

Thank you. Jeffrey Schlesinger of UBS has our next question. Jeffrey Schlesinger - UBS: Thank you. Probably onto the structural versus just anear-term change, and following up on Tim's question, he was interested in theemerging markets and the confidence there, that they too would evolve to thebusiness you've seen historically in developed markets. But the other question I have, it just doesn't appear clearto me or perhaps others, that the elasticity in the traffic in the developedmarkets is sufficient to drive growth in the industry, given the decliningcosts of technology and just the declining costs of digital technology ingeneral. What gives you the confidence that the elasticity issufficient to drive this equation, where you actually will get industry growthas opposed to just really stagnant growth where, yes, capacity increases arebeing made, but because of the efficiency of digital technology you don'treally see that in revenue growth? Then one other question, if I could, just on the order book.Can you give us a sense of book-to-bill in the quarter or over the nine monthsthrough the end of September? Thank you. Carl-Henric Svanberg: In fact, here, I'm sorry to say, but the connection in yourline was not really good enough. I will see if I make some comments, and seehow well I hit on where your questions were. Let me first say on emerging markets, there's no change inemerging markets. That is not affected here. And as I said before, the wholeprofitability development and so on in emerging markets is no different.Obviously, there is a higher degree of new network rollouts in emergingmarkets, but that doesn't take away the fact that there is also a lot ofupgrades and expansions also there. The other question, which you put on the price elasticityand so on, I guess you're sort of asking is how confident we can be that wehave this with lower and middle and higher margins during the phase of dealingwith the lifetime of a network. I don't think there is a change there. This is just the waybusiness is being done and we have no such signs. And this has been the picturefor as long as anyone remembers in Ericsson. Was that close enough to yourquestion? Jeffrey Schlesinger - UBS: It will work. One other, can you give us the book-to-bill overthe nine months, just what you've seen through the end of September? Carl-Henric Svanberg: We are not disclosing our book-to-bill number. Butobviously, as you understand, the books as such has a higher proportion rightnow, and that will fill the lesser expansion. Jeffrey Schlesinger - UBS: Thank you.

Thank you. Richard Kramer of Arete Research has our nextquestion. Please go ahead. Richard Kramer - Arete Research: Thanks very much. Two fairly simple questions. The firstone, this quarter we saw headcount up about 5%, by about 3,000 peoplesequentially, and somehow SG&A fell by about SEK1 billion. Can you help usunderstand that and more broadly whether, given the margin picture, we'reheading into 2008 and should expect Ericsson restructuring Mark 2 or a re-runof the 2003 through 2005 type program? And then secondly, just on the somewhat forgotten Multimediadivision, you've long pointed to this as the growth engine, but it's neverreally picked up in terms of profitability. At what point could we expectMultimedia to grow significant enough in terms of earnings to start offsettingsome of the decline that's clearly evident in the core business that you'vesaid is going to continue for a couple of quarters? Thanks. Carl-Henric Svanberg: Well, Richard, I'll let actually Hans talk about the growthin and freeze, because that's a services-driven growth, and I'll let him answeralso on the OpEx side. It will be a good warm-up question for him in this situation. When it comes to Multimedia, remember that the bulk of thatMultimedia business is healthy, a healthy business with strong growth, billing,charging and service delivery platforms and EMP and Tandberg and so on. Thathas healthy margins. They are -- we're doing fine there. What we are in the samedivision doing is the business development in new businesses, where we aredoing substantial investments in R&D, and that is bringing the totalitydown to a breakeven level. The question is very valid. And as we go along, and I thinkwe will provide you with more information and understanding, so that you cantrack it. It is an important business for us and, as I said, it's the mixturehere that may be a little bit hard to look through.

Okay. On the headcount, as Carl-Henric said, that's muchdriven of the high -- the increase of managed services deals in the quarter, ofcourse where we had transits there, or transforms or taking over employees fromour customers. If we talk about the OpEx and SG&A, we have in betweenQ2 and Q3 a seasonality as it goes downwards we have seen before, so that'snothing strange. If you compare it to last year, we had -- in last year we hadthe restructuring from Marconi in the OpEx as well, so that should not be adecrease. It was actually up. So I think it's fairly normal, the development onOpEx. Richard Kramer - Arete Research: And just as a quick follow-up, was the acquisition cost of2.444 in the quarter, was that pretty much the full payment for LHS, or isthere still some to come there when the deal closes?

That was coming from LHS, that's correct. Richard Kramer - Arete Research: Okay. Thank you.

Thank you. Jan Dworski of Handelsbanken has our nextquestion. Please go ahead. Jan Dworski - Handelsbanken: Thank you. I have a detailed question on Western Europe andthe comments related to weaker mobile system sales. If we look at WesternEurope revenues within networks, it was only down a couple of percentage pointsbetween Q2 and Q3. Is that then weaker mobile offset by very strongtransmission sales between Q2 and Q3? Carl-Henric Svanberg: If you look at mobile, mobile network sales is down morethan 7%, actually. Fixed is up over 15%. And overall, Western Europe was muchdriven by managed services growth. Jan Dworski - Handelsbanken: And just maybe a second question, if I may. In terms of cashflow, and there's been a change now with Carl-Henric, but in terms of the cashconversion ratio, you previously said that you expected some improvement fromthe level last year. Can you make any comments in reference to that, how yousee the full year now? Carl-Henric Svanberg: Well, I think that in the situation now here with -- that wemake less profit, and that will travel through for the cash flow. But I thinkthis is a good chance for Hans now to get a feel for this and come back with anidea, depending on, of course, where the -- both the currency but also wherethe earnings shortfalls are, and where the growth mix is. Jan Dworski - Handelsbanken: Okay. Thank you.

Thank you. We'll take our next question from AlexandrePeterc of Exane BNP Paribas. Alexandre Peterc - Exane BNP Paribas: Yes. Thank you for taking my question. I would like to ask aquestion about the migration to packet core from circuit switched. Firstly, canyou maybe give us a little bit of background on this? Is this migrationaffecting equally 2G and 3G networks and mature and emerging markets, so wheredo you see more of that migration? Then, if I compare to what has happened in fixed, it seemsto me that the addressable market in soft switching will be smaller by an orderof magnitude versus the circuit switched market. Can you explain to us why youdon't exactly share this view and how things will be different in mobile versusfixed? And then finally, how about the stickiness of the customerbase in the packet core? Is that equally sticky as the circuit switched core,which obviously was extremely sticky as it was entirely proprietary? Thank youvery much. Carl-Henric Svanberg: Well, the migration here on -- from circuit switched topacket switch, or soft switch, is obviously very customer specific. It is not aphenomena in mature markets only. If you take China, for example, it is rapidlygoing into mobile soft switch. I would say that a large degree of the changeare basically happening as we speak. We have at least half of that behind us. On the other hand, there will continue to be legacy businesswith circuit switch for quite a while, because lots of switches will be outthere and will continue to be serviced, and at times even upgraded. It is true that -- so I am not sure you're saying that'sdifferent from what we are saying. It is clear that the aggregated sales numberfor the same capacity in soft switch is a lower number than circuit switch,because it's a more cost-efficient product. But what it does is that it also carries with it expectedinvestments in IMS and other related products. So we are actually not seeingthat necessarily that the overall impacts are maybe as big as someone sees. Butlet's see how that plays out. When it comes to the stickiness, I'd say that's another goodquestion. We -- I think there is no difference in that sense in stickiness of asoft switch or any other product that we have. The stickiness sometimes may beperceived as something where the customer simply has no choice, but anythingcan be swapped for a supplier that doesn't perform. On the other hand, if youare there and you perform, you will have the ongoing business if you'recompetitive. Alexandre Peterc - Exane BNP Paribas: Okay. Thank you very much.

Operator, one last question, please?

Thank you. Our final question today comes from KulbinderGarcha of Credit Suisse. Please go ahead. Kulbinder Garcha - CSFB: Thank you. Just a quick question on cash conversion. You'vepreviously guided that this should be, I'm not talking about the near term butlong term, 70%. Does that still stand, or is that no longer the case? And the next follow-up on that is that if network rolloutcontinues to rise in your revenue mix and presumably turnkey does as well,could 2008 show a limited cash conversion improvement even from this year, orwould you say this year's really the bottom for that? Carl-Henric Svanberg: Well, we are putting a lot of focus on cash conversion here,and of course we would expect 2008 to be a step in the right direction. It isdependant, to some extent, on how the growth scenario plays out there. Andagain, this is something that we will now let Hans dig into very, verycarefully. We have not changed our outlook for the long-term cashconversion. It should really be on those levels. We have also said that we willnot be on that level in 2008. That's not what we believe. But we certainlywould take a good step in that direction. So -- but let us come back and discuss it more when Hans hasalso had a chance to make up his point of view here. Kulbinder Garcha - CSFB: Thank you.

Operator?

Yes, sir?

Okay. We're ready to conclude the call.

Thank you. I'd like to turn the call back over to you forany additional or closing remarks.

Thank you, Operator. Before we finish for today, I'd like toinform you that our next management briefing is scheduled for November 20 inNew York City. Agenda and registration information will be available on ourwebsite shortly. If you have any additional questions, don't hesitate to giveSuzanne or myself a call. Thank you very much.

Ladies and gentlemen, that will conclude today's conferencecall. Thank you for your participation. You may now disconnect.