Ericsson sees signs of stabilising market as it beats forecasts

By Supantha Mukherjee

STOCKHOLM (Reuters) -Sweden’s Ericsson (BS:ERICAs) on Tuesday said the telecom equipment market is showing signs of improvement after reporting core earnings and sales above expectations, helped by a rebound in demand for 5G gear in North America.

A fall in demand from North American mobile operators in the last two years had hit companies including Ericsson and Nokia (HE:NOKIA), who had to look for growth in developing markets such as India, often at the cost of sacrificing profits.

“We see signs that the overall market is stabilising with North America, as an early adopter market, returning to growth,” CEO Borje Ekholm said in a statement.

Research firm Dell’Oro estimates that the global network equipment market would decline between 8% and 10% in 2024.

Net sales declined by 4% to 61.8 billion Swedish crowns ($5.92 billion) but beat estimates of 61.6 billion. Sales in North America increased more than 50% to 20.4 billion crowns.

“North America is recovering from very low levels, with last year Q3 was our lowest quarter, so growth in percentage points become very large, but it is also a very strong quarter,” CFO Lars Sandström said in an interview.

“When it comes to other markets, Europe is flat, and the rest are declining, so we are still in a challenging market,” he said.

Sales in Europe and Latin America were down 2%, while other markets were down in double digit terms.

India, which was a bright spot last year, has slowed significantly. But the company has now got new contracts from Vodafone (NASDAQ:VOD) Idea and Bharti Airtel.

Changes in the geographic mix have led to a jump in adjusted gross margin to 46.3% from 39.2%.

Ericsson’s adjusted core earnings, excluding impairments, stood at 7.33 billion crowns compared with 3.9 billion crowns reported a year earlier and beat a 5.75 billion crown mean forecast in an LSEG poll of analysts.

($1 = 10.4353 Swedish crowns)