Ericsson’s 5G march hits wall in China, stocks fall
- The company no longer relies on obtaining 5G contracts in China
- Sales in mainland China fell by 2.5 billion kroner
- Share sink 8%
STOCKHOLM, July 16 (Reuters) – Ericsson (ERICb.ST) said on Friday it no longer relies on previously anticipated contract wins for 5G tenders in China as it is caught in the crossfire of a political battle between Beijing and the West, sending its shares down 8%.
Chinese rival Huawei Technologies Co Ltd (HWT.UL) has been banned from selling equipment in Sweden, where Ericsson is based, and some other Western countries.
Ericsson previously warned that the Swedish ban could impact its business in China, which is undertaking huge 5G development and where it generates just under 10% of its revenue. .
CFO Carl Mellander told Reuters on Friday that the expected second-quarter 5G tenders in China had not taken place, and the company said in a statement that sales there fell by 2.5 billion. Swedish crowns ($ 290 million).
When asked on an analyst call if Ericsson was going to get the money back, Managing Director Borje Ekholm replied, “No, he won’t be coming back.”
Mellander said in an interview that it was “prudent to forecast a significantly lower market share in China in the future.”
The initial contract awards for the second phase of the 5G deployment in China are expected to be announced before the end of this month, according to two sources familiar with the matter.
Ericsson’s austere outlook contrasted sharply with that of Nokia (NOKIA.HE), as well as Huawei, one of Ericsson’s main rivals in the race to upgrade global wireless systems to 5G.
The Finnish group said this week it would likely raise its outlook for the full year due to a stronger-than-expected second quarter. Read more
($ 1 = 8.6613 Swedish kronor)
Reporting by Supantha Mukherjee; edited by John Stonestreet
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