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Ericsson's profit lifted by demand for 5G network equipment, China drags

Ericsson profit beats as more countries roll out 5G
Ericsson profit beats as more countries roll out 5G   -   Copyright  Thomson Reuters 2022
By Reuters

By Supantha Mukherjee

STOCKHOLM -Sweden’s Ericsson on Tuesday reported fourth-quarter core earnings above market estimates, helped by higher sales of telecoms gear as more countries roll out 5G networks, offsetting a loss of market share in mainland China.

Once a big market for Ericsson, the loss of telecom contracts in China following Sweden’s ban on Huawei, which brought the contribution from the country to the low single digits.

“We have seen North America continue to grow very strongly and we grew there by 16% in the quarter in constant currency,” Chief Financial Officer Carl Mellander said.

While a resurgent Nokia has been increasing competition in several markets, Ericsson was also able to grow in Europe and Latin America .

The company’s quarterly adjusted operating earnings rose to 11.9 billion Swedish crowns ($1.28 billion) from 11 billion a year ago, beating the mean forecast of 10.30 billion, according to Refinitiv data.

Excluding restructuring charges, operating earnings rose to 12.3 billion crowns.

While Ericsson’s total quarterly revenue rose 2% to 71.3 billion crowns, beating estimates of 68.33 billion crowns, sales in mainland China declined by 1.8 billion crowns.

Mainland China will likely see a drop in revenue for at least one more quarter, Mellander said.

First-quarter earnings will also take a hit from Ericsson’s court battle with Apple over royalty payments for the use of 5G wireless patents in iPhones.

Ericsson expects first-quarter patent revenue to be 1 billion crowns to 1.5 billion, a fall from 2.4 billion crowns in the fourth quarter.

The company, which reported its highest ever quarterly cash flow, has been broadening its 5G portfolio through acquisitions, spending more than $7 billion in buying two companies.

“M&A is part of our policy arsenal for value creation… we can expect to see some more M&A activity,” Mellander said.

($1 = 9.2836 Swedish crowns)