After a few years of buoyant sales buying by telecom companies slowed last year
23 January 2024 - 16:15
by Supantha Mukherjee and Olivier Sorgho
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Stockholm — Ericsson said it expects a further decline in 5G gear demand from mobile operators this year including in key growth market India, after beating fourth-quarter operating profit expectations on Tuesday helped by software sales.
Telecoms equipment suppliers are expecting a challenging 2024 as 5G equipment sales — a key source of revenue — are slowing in North America, while India, a high growth market, is also set for a slowdown.
“We expect the current market uncertainties to prevail into 2024 with a further decline of the RAN (Radio Access Network) market outside China as our customers remain cautious and the investment pace is normalising in India,” CEO Börje Ekholm said.
After a few years of high demand for 5G equipment, buying by telecom providers slowed last year, prompting firms such as Ericsson and Nokia to lay off thousands of employees to save costs.
The company could look at further cost cuts this year and that could include lay-offs, CFO Carl Mellander said.
He said that the company has not yet identified a specific number of headcount or billions set to be taken out.
Operating profit (Ebit) excluding restructuring charges fell to 7.37-billion crowns from 8.08 billion a year earlier, but topped the 6.92-billion expected by analysts in an LSEG poll, while net sales fell 16% in the quarter and missed estimates.
Ericsson’s share price was down 0.3% in midmorning on Tuesday after falling as much as 4.2% after results were posted.
Jefferies analysts acknowledged the sales “weakness” as operators spend less, but underlined a “healthy improvement” in margins. He said they expect profitability to continue improving with cost cuts.
Ericsson’s Ebit margin excluding restructuring charges rose to 10.3% from 9.4%, due mostly to higher-margin software sales and lower sales of 5G equipment in lower-margin markets such as India.
Ericsson should start seeing a boost in the second half of 2024 from its $14bn deal with AT&T, which it won over rival Nokia and which involves building a telecoms network with a new cost-cutting technology called Open-RAN.
“There is a land grab right now in Open-RAN ... but it is a nascent technology yet to be proven,” analyst Paolo Pescatore at PP Foresight told Reuters.
He said that Ericsson’s results were “disappointing” and that “lots of work needs to be done to get Ericsson back on track”.
The company appointed Lars Sandstrom on Tuesday as CFO, replacing long-time company veteran Carl Mellander.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Ericsson warns of fall in demand for 5G gear
After a few years of buoyant sales buying by telecom companies slowed last year
Stockholm — Ericsson said it expects a further decline in 5G gear demand from mobile operators this year including in key growth market India, after beating fourth-quarter operating profit expectations on Tuesday helped by software sales.
Telecoms equipment suppliers are expecting a challenging 2024 as 5G equipment sales — a key source of revenue — are slowing in North America, while India, a high growth market, is also set for a slowdown.
“We expect the current market uncertainties to prevail into 2024 with a further decline of the RAN (Radio Access Network) market outside China as our customers remain cautious and the investment pace is normalising in India,” CEO Börje Ekholm said.
After a few years of high demand for 5G equipment, buying by telecom providers slowed last year, prompting firms such as Ericsson and Nokia to lay off thousands of employees to save costs.
The company could look at further cost cuts this year and that could include lay-offs, CFO Carl Mellander said.
He said that the company has not yet identified a specific number of headcount or billions set to be taken out.
Operating profit (Ebit) excluding restructuring charges fell to 7.37-billion crowns from 8.08 billion a year earlier, but topped the 6.92-billion expected by analysts in an LSEG poll, while net sales fell 16% in the quarter and missed estimates.
Ericsson’s share price was down 0.3% in midmorning on Tuesday after falling as much as 4.2% after results were posted.
Jefferies analysts acknowledged the sales “weakness” as operators spend less, but underlined a “healthy improvement” in margins. He said they expect profitability to continue improving with cost cuts.
Ericsson’s Ebit margin excluding restructuring charges rose to 10.3% from 9.4%, due mostly to higher-margin software sales and lower sales of 5G equipment in lower-margin markets such as India.
Ericsson should start seeing a boost in the second half of 2024 from its $14bn deal with AT&T, which it won over rival Nokia and which involves building a telecoms network with a new cost-cutting technology called Open-RAN.
“There is a land grab right now in Open-RAN ... but it is a nascent technology yet to be proven,” analyst Paolo Pescatore at PP Foresight told Reuters.
He said that Ericsson’s results were “disappointing” and that “lots of work needs to be done to get Ericsson back on track”.
The company appointed Lars Sandstrom on Tuesday as CFO, replacing long-time company veteran Carl Mellander.
Reuters
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Most Read
Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.