Ericsson Expects Slowdown in Global Mobile Networks Industry to Continue

Telefonaktiebolaget LM Ericsson, the Swedish telecoms giant, announced on Tuesday that it foresees the ongoing slowdown in the global mobile networks industry to have a continued impact on its sales until 2024. This prediction comes as the company reported a 10% decline in its full-year revenues, attributing the drop to a slump in global investment in mobile communications infrastructure. Ericsson further cautioned that market headwinds are expected to persist throughout the year.

As a result of these developments, shares in Ericsson (ERIC.B, -0.39% ERIC, -0.85%) experienced a 2% decrease on Tuesday, having already lost 2% of their value over the past 12 months.

Ericsson pointed out that its customers’ hesitance to invest in upgrading existing mobile infrastructure resulted in a significant 23% decrease in sales from its networks segment during the fourth quarter. Consequently, the company’s fourth quarter revenues experienced a 17% decline to SEK71.9 billion ($6.9 billion).

Additionally, Ericsson’s full-year earnings before interest, tax, depreciation, and amortization (EBITDA) dropped by 27% compared to the previous year, amounting to SEK21.4 billion. These figures fell below the expectations of 13 analysts, who had predicted an EBITDA worth SEK25.7 billion, according to FactSet data.

Having been established back in 1876, the Swedish multinational acknowledges that these challenging conditions are not expected to subside anytime soon. The company anticipates that customers will continue to adopt a cautious approach in all markets outside of China throughout the next four years.

5G Investment Normalizes in India, but Ericsson Remains Optimistic

Ericsson, a prominent player in the mobile infrastructure industry, has acknowledged that spending on infrastructure buildout in India is beginning to normalize. This comes after a period of rapid investment driven by the rollout of 5G, which had significantly boosted the company’s balance sheet.

Despite the normalization trend, Ericsson firmly believes that current levels of investment in mobile infrastructure are unsustainably low for many operators. The company remains confident that investment levels will eventually recover, aligning with the increasing demand for data traffic and 5G technology.

However, Ericsson acknowledges that the timing of this investment recovery is ultimately determined by its customers. In response, the company is actively preparing itself to seize opportunities resulting from an uptick in investment. Simultaneously, it aims to enhance its margins by improving operational efficiency and implementing cost-saving measures.

While Ericsson’s efforts to improve performance have shown positive results, the company’s CEO, Börje Ekholm, states that there is still work to be done in terms of profitability. Ericsson is determined to further enhance its financial standing.

In recent news, Ericsson secured a significant victory over Nokia when AT&T awarded them a $14 billion contract to build out OpenRAN networks in the United States. This decision was seen as a major blow to Nokia.

Market analysts from Barclays have downgraded their ratings for both Ericsson and Nokia. They predict that investments outside of China will remain subdued over the next three years.

Despite short-term challenges and uncertainties, Ericsson remains optimistic about the future of the mobile infrastructure industry. The company is strategically positioning itself to capitalize on potential opportunities while anticipating the recovery of investment levels worldwide.