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China not convinced with Ericsson's 5G

Ericsson has reported today Friday the 16th of July the second-quarter core earnings. Among other losses and below market estimates, the most clear to the human eye is the strong sales of 5G equipment in most markets was offset by a decline in sales in mainland China.

China not convinced with Ericsson's 5Gfoto: Mateusz via Unsplash
Matilda Andersson
created at: Fri Jul 16 2021| updated at:Fri Sep 24 2021
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Ericsson has reported today Friday the 16th of July the second-quarter core earnings. Among other losses and below market estimates, the most clear to the human eye is the strong sales of 5G equipment in most markets was offset by a decline in sales in mainland China.

Total sales for the telecom equipment maker, a rival of China's Huawei Technologies Co Ltd  and Finland's Nokia, fell for the first time in three years to 54.9 billion Swedish crowns presenting a variation of 0.7 billion crowns compared with the same quarter from the previous year, and missing the 57.20 billion crowns expected by financial analysts.

While organic sales grew 8%, sales in mainland China declined by 2.5 billion crowns. The result of the new 5G tenders in China did not come out in the quarter as expected, so the sales did not materialise as planned, Ericsson finance chief Carl Mellander told Reuters. 

The draft contract terms for the implementation of the second phase of the 5G deployment in China is expected to be announced before the end of this month, presenting already some changes adapted to the new reality regarding sales. While both Ericsson and Nokia have benefited from the ban on Huawei in several countries, the exclusion of the Chinese company in Sweden is expected to lead to a fall in revenue for the Swedish company in China.

Ericsson warned already that the governmental measure of excluding Chinese vendors from Swedish 5G networks might impact its business in the Asian countries, from where it generates just under 10% of its revenue. On the other side, China and the central capitalistic doctrine of favouring Chinese companies over international companies, such as the case weChat over Facebook or even the ban of international companies, makes the life harder for Ericsson. 

Overall, the company's quarterly adjusted operating earnings rose to 5.8 billion Swedish crowns from 4.5 billion a year ago, missing the mean forecast of 6.01 billion crowns, according to Refinitiv estimates.

Ericsson's results also got a boost in royalty income due to settlement of a patent fight with Samsung Electronics and the company said it was in renewal negotiations with other firms.

source 

Reuters

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