Skål! Ericsson toasts healthy set of Q4 2020 results thanks to global 5G rollout and a kneecapped competitor

Swedish comms giant cashes in where Huawei is on retreat

Swedish telecoms equipment manufacturer Ericsson will be raising a glass of aquavit to this week's Q4 2020 figures. Network sales were up 11 per cent unadjusted, driven by the ongoing rollout of 5G connectivity, as well as the ongoing malaise of rival Huawei.

Sales of kit to carriers reached 49.4 billion SEK (£4.3bn), up from 44.4 billion SEK (£3.8bn) from Q4 2019, driven largely by activity in developed markets – namely Europe, North America, and North East Asia (which includes China and Japan).

This offset weakness in Latin America, Africa, and the Middle East, which Ericsson attributed to macroeconomic factors caused by the pandemic. Unadjusted operating margins for the networking business hit 21.5 per cent, up from 14.5 per cent the previous year.

In the second half of 2020, Ericsson scored some major wins. Closer to home, Ericsson inked deals with O2 to supply RAN gear for several key urban markets, including Manchester, Liverpool, and Europe. This occurred independently of Huawei's ongoing woes as O2 was the sole UK carrier to avoid the Chinese firm's cheaper 5G kit – a savvy decision in retrospect.

The Swedish firm also landed contracts with other vendors that bet big on Huawei, including BT's mobile arm, EE. In October 2020, it was selected to provide 5G RAN gear for several urban markets, including London and Edinburgh. It scored similar coups with Three, while also working with Vodafone on future 5G tech, including 5G SA networks.

Across Europe, it was much the same. KPN selected Ericsson to provide its 5G core network, ousting the previous frontrunner, Huawei. Ericsson also landed 5G core contracts with O2 Germany.

In a statement, Börje Ekholm, president and CEO , expressed optimism for future growth in its networking business, driven by the ongoing impact of the pandemic.

"The pandemic has fast-forwarded the digitalization of societies, including remote working, by months if not years," he said. "A resilient digital infrastructure is critical. We see more signs that countries and enterprises see 5G as a key access technology, with increasing deployment speed in Australia, the Middle East, North East Asia and the US."

Ekholm also expressed concerns that Ericsson could face retribution in Asia due to the decision by the Swedish government to restrict Huawei from Sweden's 5G rollout.

"The Swedish telecom regulator's decision to exclude Chinese vendors from 5G networks may create exposure for our operations in China. Our business in 180 markets today has been built on free trade and open, competitive markets. This has also ensured the development of a single global standard for mobile communication. It is critical that responses to the geopolitical situation safeguard the extraordinary value associated with those operating standards for 5G and beyond."

Ericsson expects the global RAN market to grow by 3 per cent in 2021. On a regional basis, China's demand for new RAN kit is expected to grow by 4 per cent, compared to 2 per cent in North America, and 3 per cent in Europe.

Revenue for Q4 hit 69.6 billion SEK (£6.09bn) unadjusted. This is up 5 per cent year-on-year. Shares in Ericsson are up 8.5 per cent. ®

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