India boosts Ericsson's quarterly profit as US dials down

FILE PHOTO: Ericsson logo is seen at its headquarters in Stockholm, Sweden June 14, 2018. REUTERS/Olof Swahnberg/File Photo

Sweden’s Ericsson on Tuesday reported first-quarter core earnings that beat expectations, supported by stronger sales of 5G equipment in countries such as India, but sales in more established markets fell and eroded margins.

The company has cut costs to mitigate lower spending by telecom operator customers in several regions and expects the slower pace of deployment to continue until the third quarter.

After announcing plans to layoff 8,500 employees in February, it expects to save another 2 billion crowns ($193 million) in costs.

The restructuring charges may be around 7 billion crowns for the full year, more than half of which will be booked in the current quarter, it said in a statement.

The sales growth in the quarter was mainly from fiercely price competitive markets such as India rather than high-margin markets like the U.S.

Ericcson’s reported gross margin for the quarter fell to 38.6% from 42.3%.

“India is strong and a good example where our sales are up five times,” Chief Financial Officer Carl Mellander said in an interview. India is the second largest market for Ericsson after the U.S., he said.

Mellander will step down from his role at the end of the first quarter of 2024.

Net sales rose 14% to 62.6 billion crowns, beating estimates of 60.43 billion.

While India boosted equipment sales, analysts said the net growth was chiefly driven by the $6.2 billion aquisition of cloud communication firm Vonage that Ericcson closed last year.

“Looking at the networks business in isolation, sales actually declined slightly as a number of operators dialled down capex and inventories,” Danske Bank Credit Research analyst Mads Lindegaard Rosendal said.

The company’s quarterly adjusted operating earnings, excluding restructuring, fell to 4 billion Swedish crowns from 4.8 billion crowns a year earlier, beating analysts’ mean forecast of 3.28 billion, according to Refinitiv data.

($1 = 10.3438 Swedish crowns)


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