Thursday, April 21, 2005

Ericsson Predicts 2 Billion Mobile Subscriber Worldwide by Year End

Ericsson estimated that net mobile subscriber additions worldwide were close to 100 million in the first quarter of 2005. At the end of the quarter worldwide mobile subscription penetration is 28% with a total of more than 1.8 billion subscriptions, of which almost 1.4 billion are GSM. The strong subscriber growth continues and the global number of subscriptions could pass 2 billion already by year-end.

Ericsson reported Q1 2005 net sales of SEK 31.5, up 12% over Q1 2004, but down 20% from Q4 2004 due to seasonality. The company described the year-over-year improvement as encouraging but the comparison is also somewhat favorable due to a somewhat slower start last year. Currency exchange effects negatively impacted sales in the quarter by 5%, compared to currency exchange rates one year ago. In constant currencies sales for the quarter grew by 17%.

Gross margin was 48.5% compared to 44.7% last year, a reflection of a favorable product mix as well as continuous focus on cost reductions.

Western Europe sales grew 26% year-over-year. Italy and Spain continued to show strong development and the region as a whole is benefiting from ongoing 3G deployments and GSM capacity enhancements.

Central Europe, Middle East and Africa sales for Ericsson grew 20% year-over-year with particularly good development in Africa and Eastern European markets such as Turkey and Ukraine. The growing demand for EDGE and WCDMA continues to stimulate the positive development in the region.

Asia Pacific sales for Ericsson were up by 4% year-over-year. Strong development in important markets such as India, Indonesia, Bangladesh and Pakistan contributed to the sales growth. The development in China has been somewhat slower in the first quarter but should pick up going forward. Operators are evaluating different 3G technologies and performing large-scale trials with WCDMA as the natural choice for the dominating GSM technology. A Chinese telecom reform is expected mid year 2005 and should trigger the issuing of 3G licenses.

North America sales for Ericsson continue to be affected by the temporary slow down in capital expenditure due to operator consolidation and sales declined by 24% year-over-year. Sales should start to pick up as the 3G roll out starts later this year. During the quarter Ericsson also announced a contract to provide WCDMA equipment and telecom services to the U.S. Navy MUOS program.

Latin America continues to show a positive development and Eriksson's sales grew by 24% year-over-year through strong GSM sales. Brazil and Mexico in particular contributed to the year over year growth.

During the quarter, five new WCDMA networks were commercially launched, bringing the total to 61. Ericsson is a supplier to 36 of these networks. WCDMA subscriptions grew from approximately 16 million to more than 21 million during the quarter. The number of CDMA2000 1xEV-DO subscriptions has now reached 12 million.

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