Sweden's no to Chinese Huawei regarding 5G expansion in Sweden could have consequences for the Swedish telecom giant Ericsson's business in China.
A procurement is currently underway in China for a 5G expansion, but how Ericsson is in that deal is still unclear.
In any case, it is clear that Ericsson has so far sold for 2.5 billion less in the second quarter of this year compared with the same time last year.
- We have previously flagged the risks that we will lose significant market shares in China due to the Swedish PTS (Swedish Post and Telecom Agency) decision not to allow Chinese suppliers in the Swedish 5G network.
That risk remains high.
We see a sharp decline already in the second quarter, says Börje Ekholm.
TT: How do you think Swedish courts and authorities have acted on this issue?
- National security must be decided by Sweden, we have full respect for that.
But we as a Swedish company have de facto 99 percent of sales outside Sweden, so for us it is extremely important that free trade is also taken into account in decisions like this, says Ekholm.
"One of the biggest deals ever"
The rollout of 5G is underway around the world and Ericsson has now secured a heavy contract worth 8.3 billion dollars with American Verizon, equivalent to 72 billion kronor.
Verizon, with Swedish CEO Hans Vestberg who previously steered Ericsson, is one of the absolute heaviest players in the American market.
- It is one of the largest deals we have ever signed.
We will expand their 5G network in the USA.
They are very early in expanding 5G networks and this means that we will be one of their larger partners, says Börje Ekholm.
Ericsson has also signed a number of other agreements and will, among other things, expand the network in Malaysia.
The company sees strong demand for 5G in Asia.
The stock is plummeting
Börje Ekholm is satisfied, despite the fact that the result was slightly lower than the analysts' expectations, which according to Refinitiv's compilation were SEK 6.0 billion.
The reaction to the stock market is all the more negative.
The fall in the share has increased during the morning and at 10 o'clock it is down almost ten percent, which means that the share is heading for its worst trading day since March 2020.
- If we look at the company, we have good momentum in the business.
We have seen good growth in the quarter, we have grown 8 percent organically, despite the fact that we have had a sharp setback in China but also lower revenues from our patent operations, says Börje Ekholm.
Ericsson's sales during the quarter amounted to SEK 54.9 billion, compared with SEK 55.6 billion a year earlier.
The average forecast for sales was SEK 57.1 billion, according to Refinitiv.