On January 29, Ericsson released its annual results (pdf). Driven by operator demand for 5G equipment, the equipment manufacturer saw its turnover increase by 2%.
Huawei’s various exclusions from 5G infrastructures in Europe and around the world have benefited other players. This is particularly the case with Ericsson, for whom 2020 was a source of growth. Its sales exceeded 22 billion euros, of which more than 70% (16.35 billion euros) come from the supply of new generation network equipment. Thus, Ericsson already supplies 79 active 5G networks worldwide, and has 127 commercial contracts.
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The European Commission perseveres in its standoff against Apple
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However, other activities such as sales of services are on the decline, although they represent only 5.8 billion euros in turnover. Thus, digital services fell by 6% and managed services by 12%.
“We are confident in the long-term value of our patent portfolio, especially a strong position in 5G. We will seek to maximize the net present value of this line, established for many years through investments in research and development ”, details Börje Ekholm, CEO of Ericsson. His company closes 2020 with net income of 1.7 billion euros.
Nonetheless, 2021 could be revealing. Several threats hover over the equipment manufacturer. The first is the news of upcoming contracts. “We are approaching major contract renewals, which could have a negative impact on profits for 2021 and 2022”, adds the CEO. Some operators could turn to other providers, in particular by following a less exclusive trend that is Open RAN. Nokia has felt the tide in particular and has been offering open interfaces since July 2020. A trend initiated by Rakuten in Japan, which now brings its know-how to other operators, particularly in Singapore.
The other threat could come from China. Indeed, Ericsson recorded a growth in its sales in North-East Asia, which represents 3.3 billion euros of its turnover. However, the Middle Kingdom warned: if Europe banned Huawei, it would limit exports from Nokia and Ericsson. And we can say that the supplier is not helped, since his own country decided in October to exclude Huawei and ZTE from 5G networks. “Swedish regulator’s decision to exclude Chinese suppliers from 5G networks may create exposure for our operations in China”, explains Börje Ekholm. Also, the country’s influence could disrupt Ericsson’s expansions in Asian countries.
If the supplier can look forward to a good year 2020, he must be prepared to see his activities in Asia disrupted, and to give in to the call of Open RAN.
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