Ericsson hit by higher 5G costs and weaker US market

Ericsson CEO Borje Ekholm. The company’s position as a leader in 5G has not protected it from costs associated with the technology. (Reuters)
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Updated 25 January 2020

Ericsson hit by higher 5G costs and weaker US market

  • Ericsson’s adjusted quarterly operating earnings rose to 5.7 billion crowns ($600.2 million) from 2.6 billion a year earlier, but were down from 7.4 billion the previous quarter

STOCKHOLM: Sweden’s Ericsson reported a smaller-than-expected rise in fourth-quarter core earnings on Friday and said higher costs would spill over into 2020 as the telecoms equipment maker looks to exploit its leading position in super-fast 5G networks. Its shares fell more than 6 percent in early trading.
After a number of lean years, Ericsson has been boosted by the roll-out of 5G, particularly in the US.
But while 5G has helped sales, it has increased costs. Ericsson has also opted to take on strategically important clients to gain market share, betting a hit on margins in the short term will help to deliver longer-term profitability.
The company recently bought the antenna and filter business of German’s Kathrein to boost its 5G portfolio and said costs and investments related to the deal would weigh on margins through 2020.
Increased investments in digitalization and more spending on compliance — after a $1 billion payment to resolve probes by US authorities into corruption — are also expected to mean somewhat higher operating costs in 2020.
Nevertheless, CEO Borje Ekholm said Ericsson was on track to deliver on its 2020 targets of an adjusted operating margin of more than 10 percent and sales of 230 to 240 billion ($25.1 billion) Swedish krona.
Ericsson is fighting rivals Nokia and Huawei to take the lead in the roll out of 5G networks, which are expected to host critical functions from driverless vehicles to smart electric grids and military communications.
That has led the US to blacklist Huawei and launch a worldwide campaign to try to persuade allies to ban the Chinese firm from their 5G networks, alleging its equipment could be used by Beijing for spying — which Huawei denies.

BACKGROUND

While the US is an early 5G adopter, China is expected to start its roll out this year and Western Europe after that.

The UK is expected soon to make a final decision on whether to allow Huawei equipment in its 5G mobile networks, while Germany may also rule on the matter during the spring.
North America has been the biggest market for 5G so far, boosting Ericsson’s sales, but the company said demand slowed in the fourth quarter as the proposed merger between Sprint and T-Mobile hit their spending.
“It was a significant impact in a small part of the market which means the quarter came out negative in North America,” Ekholm said. “But in general demand is very strong there.”
By 2025, the GSMA telecoms industry lobby group estimates operators globally will have spent $1 trillion building up 5G networks, offering a huge jackpot for the leading suppliers.
Ericsson’s adjusted quarterly operating earnings rose to 5.7 billion crowns ($600.2 million) from 2.6 billion a year earlier, but were down from 7.4 billion the previous quarter.


MoU signed to facilitate investment in Saudi Arabia

Updated 21 February 2020

MoU signed to facilitate investment in Saudi Arabia

RIYADH: The Saudi Arabian General Investment Authority (SAGIA) and the Diriyah Gate Development Authority (DGDA) signed a memorandum of understanding (MoU) to step up cooperation, the Saudi Press Agency reported on Thursday.

Under the MoU, the two authorities will establish a joint working group to boost cooperation in several areas including facilitation provided to investors, conducting economic studies of the market, building partnerships with commercial and industrial bodies and local companies, launching businesses, promoting the ease of doing business, providing logistic support, participating in local and international exhibitions, forums and special visits and exchanging knowledge and information.

All this will predominantly be in aid of attracting local and foreign investors. 

“SAGIA believes in the importance of such cooperation that can unify and multiply the efforts in a way that sets the world’s attention on the Kingdom’s cultural and heritage treasures and investment opportunities,” said SAGIA Gov. Ibrahim Al-Omar.

“This is done through close cooperation with DGDA to highlight these opportunities and market them internationally and locally. This MoU is a step in the right direction to achieve the objectives and directives of both bodies.”

Jerry Inzerillo, CEO of the DGDA, said: “Cooperating with SAGIA is one of the most important international investment motors to attract local and international investments to the Kingdom. This comes at a time where developing the Kingdom’s investment infrastructure is found within the objectives of its Vision 2030.

“At DGDA, we aim at attracting the best technologies and regional and international investments to the Kingdom. This will contribute to the improvement of the local economy and promote our objectives seeking to turn Diriyah into the Kingdom’s gem and an international economic tourist destination,” he added.