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.


Kuwait MPs launch probe into Airbus deal

Updated 19 February 2020

Kuwait MPs launch probe into Airbus deal

  • The decision came after a debate on allegations that Airbus paid kickbacks to secure a deal 6 years ago
  • The parliament also asked the finance ministry to review recent aircraft deals involving state-owned Kuwait Airways

KUWAIT CITY: Kuwait's parliament on Wednesday formed a fact-finding panel to probe alleged kickbacks in a deal between the national carrier and Airbus, which last month paid massive fines to settle bribery scandals.
The parliament's decision came after a special debate on allegations that Airbus paid kickbacks to secure a 25-aircraft deal six years ago.
It also asked the Audit Bureau, the state accounting watchdog, to investigate the deal, which was reportedly worth billions of dollars, although exact figures were never released.
Kuwait Airway Co. in 2014 ordered 15 Airbus 320neo and 10 Airbus 350, with delivery beginning last year and continuing until 2021.
Opposition lawmaker Riyadh al-Adasani told the session that Kuwait was mentioned in a settlement struck by Airbus in a British court on January 31, along with the names of some Kuwaiti officials and citizens.
Under the settlement, Airbus agreed to pay 3.6 billion euros ($3.9 billion) in fines to Britain, France and the United States to settle corruption probes into some of its aircraft sales.
Days after the settlement, Sri Lanka ordered an investigation into a multi-billion dollar aircraft purchase from Airbus after the deal was named in the settlement.
The former chief of Sri Lankan Airlines, Kapila Chandrasena, was arrested on February 6 for allegedly receiving bribes relating to the deal.
Earlier this month, two senior officials of the Malaysia-based AirAsia stepped aside while authorities probe unusual payments at the carrier, as the fallout from the Airbus scandal reverberated across the industry.
Kuwait in recent years also initiated criminal investigations into two large military aircraft deals involving Airbus -- a $9 billion Eurofighter Typhoon warplanes deal and a contract for 30 Caracal military helicopters costing $1.2 billion.