The arrival of 5G promised a bright future for Ericsson and its rivals Nokia or Huawei. However, so far, the Swedish giant has not benefited much from this new technology, as it sells antennas and other equipment to telecom operators. Ericsson has been in turmoil for at least three years now. And its results for the third quarter, published this Tuesday morning, do not inspire optimism.
Sales, first and foremost, are plummeting. They have dropped by 10% in one year, to 68 billion crowns (almost 5.9 billion euros). This is a significant setback for the equipment supplier. The company states that sales of mobile equipment, particularly 5G, have decreased by no less than 16%… Ericsson is particularly suffering in North America – mainly in the United States, which is one of its main markets – where its revenue has collapsed by 60%. Börje Ekholm, the CEO of the group, laments « the adjustment of customer stocks, and a slower pace of [5G deployment]. »
Decrease in investments in 5G technology.
In general, operators, who are facing a challenging economic environment and inflation – especially the increase in energy costs – have been reducing their investments in the new generation of mobile communication for months. A small consolation: sales are doing fairly well in India and in certain countries that have adopted 5G early, according to Ericsson.
Especially, the Swedish equipment manufacturer recorded a massive loss of 30.5 billion crowns (2.6 billion euros) in the third quarter. This is due to a significant depreciation in the value of the American company Vonage, a cloud specialist that Ericsson acquired two years ago for 6.2 billion dollars. Despite Vonage’s difficulties, Ericsson still believes in the future of its subsidiary. They consider it strategic for growth in the business market.
Réduction des coûts
The 5G technology provides businesses with the opportunity to digitize their activities extensively, and according to Ericsson, Vonage is a crucial asset for the development of new services. This is the main objective of the « Open Gateway » project, in which Ericsson is participating and was presented on February 27th at the Mobile World Congress in Barcelona. The idea is to enable application developers to envision new online services by harnessing the power of the latest generation of mobile communication.
Ericsson will continue to face challenges in the coming months. Börje Ekholm expects to suffer from similar market trends in the fourth quarter. He warns that the uncertainty affecting their mobile network business will persist until 2024. In the meantime, the CEO wants to focus on what the company can control, mainly reducing costs. He claims that the actions already taken will result in savings of €1 billion (12 billion SEK) by the end of the year. In February, Ericsson announced its plan to lay off 8,500 employees.
« I cannot reword »