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CEO of Ericsson Börje Ekholm (Per Myrehed).
Shares in Ericsson soared more than 10% on Friday, after the Swedish telecoms company reported higher-than-expected second-quarter earnings, fueled by an increase in 5G network sales and software revenue.
The back story.
Ericsson has made a recovery under Börje Ekholm, who took over as CEO in 2017 with a mandate to stabilize the business amid declining markets, intense competition, and a restructuring that involved thousands of job cuts.
Telecommunications has been one of the few industries protected from the impact of the pandemic, experiencing an increase in demand as more people have been working from home, benefiting companies like Ericsson..
Ericsson’s shares rose 9.56% in European trading mid-morning.
The Stockholm-listed company further strengthened its position within 5G during the second quarter, saying it had won 99 commercial 5G contracts, compared to Finland’s rival Nokia.,
Ericsson said he is 79. Ericsson raised its global forecast for 5G mobile subscriptions to 190 million by the end of this year.
In April, it won more than 11% of a $ 5.6 billion 5G tender announced by China Mobile,
the largest operator in the country, while in June Telefónica Deutschland chose Ericsson for its German central mobile network. More recently, it announced that Canada’s first 5G network, Rogers Communications,
It had chosen it as the sole provider for its 5G radio access network and its 5G core network.
Read:UK plans to ban Huawei 5G technology by 2027
What’s new. Second-quarter sales at Ericsson increased 2% year-over-year to SEK 55.6 billion ($ 6.1 billion).
“Our investment in technology has resulted in a good quarter despite the difficult environment,” said Carl Mellander, chief financial officer at Ericsson. Barron’s in a phone interview “We have created tremendous growth in 5G volumes in China and North Asia and we expect this momentum to continue.”
Sales in Ericsson’s network business increased 4% in the second quarter, mainly due to the award of contracts in China, where the company is a partner of the top three service providers.
Mellender expects US investments of 5G in North America, where it already has a significant market share, to increase in the second half of the year now that the T-Mobile-Sprint merger has been completed and its rivals, including AT&T and Verizon.,
continue building your 5G networks.
Ericsson kept his forecast for 2020 and 2022, but said his digital services business, which includes cloud-based services, is likely to miss its target this year. “The response journey for digital services is ongoing and we are confident that the business is improving,” said Mellander.
Looking to the future. Management is positive about the longer-term outlook and is confident that 5G technology will continue to drive the company’s growth in all key markets. However, Mellander noted that while some clients are accelerating their investments, others, including those in Latin America and Africa, where companies have cut capital expenditures as a result of the macroeconomy, are temporarily cautious.
Ericsson is well positioned to take advantage of the Trump administration’s efforts to block China’s Huawei technologies from Western 5G networks, including in Europe and the United Kingdom, which on Tuesday ordered all Huawei kits to be removed from the network. 5G mobile phone in the country, following sanctions from the United States.
“Ending this uncertainty will be good for the industry. We are ready and able to accept any contract and order from our clients in Europe and the UK, ”said Mellander.
Liberum analysts said Ericsson had reported a strong set of results, despite an impact on the previously marked gross margin in China, due to the initial costs of deploying 5G in that market. “Sales in North America are expected to strengthen at H2’20 [second half of the year] after the completion of the Sprint-T Mobile merger, while Chinese 5G launches are also expected to remain at a high level, “analysts wrote in a research note.
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