Thursday, October 24, 2013

Ericsson's Q3: LTE Rollouts in U.S. Hit Peak as Europe and China Look for Growth

Ericsson reported Q3 2013 sales of SEK 53.0 billion, down -3% YoY, but up 3% YoY for comparable units and adjusted for foreign exchange.  Operating income, including joint ventures was SEK 4.2 (3.1) billion with an operating margin of 8.0% (5.7%). Net income was SEK 3.0 (2.2) billion.

"We are currently seeing sales coming under some pressure. In addition to FX, the major drivers for this development are the two large mobile broadband coverage projects, which peaked in North America in the first half of 2013. We also saw impact from reduced activity in Japan where we are getting closer to completion of a major project," said Hans Vestberg, President and CEO of Ericsson. "The 4G/LTE tenders in China continue and so far two of the major operators have made their choices. Despite having insignificant market share for 3G, Ericsson has been named technology partner for both these operators and we will now build on this initial footprint."

"The pace is picking up in the European market with continued WCDMA/LTE investments and a major investment announcement by one of the large operators. Ericsson now sees growth in several European markets and margins are also improving as the network modernization projects gradually come to an end and we engage more in new capacity and LTE business."

Some highlights:

  • In North America, sales for Networks continued to decline QoQ as a result of the two large mobile broadband coverage projects which peaked in first half of 2013.
  • In Western and Central Europe, sales grew YoY driven by network modernization in certain markets.
  • In Northern Europe and Central Asia, sales grew both YoY and QoQ. In Russia, there is slow recovery based on 3G investments, but also deployments of LTE. Operators showed an increased interest in OSS and BSS solutions. Managed Services business continued to show good development.
  • In Latin America, 3G network quality and initial LTE rollouts continued to dominate operator investments. Macroeconomic development in Brazil and Mexico slowed down and currency impacted business negatively.
  • In North East Asia , sales declined YoY. Japan continued to be negatively impacted by currency and reduced activity as a major project nears completion. GSM investments in China continued to structurally decline. 

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