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5G network demand buoys Ericsson earnings

5G network demand buoys Ericsson earnings

As the coronavirus slams the brakes on industries globally, telecom is one of the few industries that has seen a surge in demand

Credit: Reuters

Ericsson has reported quarterly core earnings ahead of market estimates as demand for 5G network equipment stayed strong even as the coronavirus outbreak wreaked havoc in its main markets, China and the United States.

As the coronavirus slams the brakes on industries globally, telecom is one of the few industries that has seen a surge in demand with more people working remotely, benefiting companies such as Ericsson.

"There is near-term uncertainty around sales volumes due to Covid-19 and the macroeconomic situation, but with current visibility we have no reason to change our financial targets for 2020 and 2022," CEO Borje Ekholm said in a statement.

Spending in the US will likely be stronger this year as a combined Sprint/T-Mobile boosts up spending to use its mid-band spectrum while bigger rivals AT&T and Verizon invest in building their own 5G network.

Despite the regional shutdowns and economic uncertainty linked to the pandemic, 5G capital expenditure was a resilient investment area and telecom workers are generally viewed as essential, BofA analysts wrote in a research note.

The company's first-quarter adjusted quarterly operating earnings rose to 4.6 billion Swedish crowns (US$455.16 million) from a year earlier, beating the mean forecast of 4.13 billion crowns, according to a Refinitiv poll of analysts.

Total revenue for the telecom equipment maker, a rival of China's Huawei Technologies Co Ltd and Finland's Nokia , rose 2 per cent to 49.8 billion crowns but fell short of the 52.09 billion seen by analysts.

Gross margin increased to 39.8 per cent in quarter from 38.4 per cent in the year-earlier quarter. Ekholm said gross margin in its Networks business rose to 44.6 per cent reflecting the strong business fundamentals with high activity across multiple regions.

(Reporting by Supantha Mukherjee in Bengaluru and Helena Soderpalm in Stockholm; editing by Niklas Pollard)


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