Underlying business fundamentals remaining strong in North America, driven by consolidation in the US operator market pending spectrum auctions, and increased demand for 5G overall have contributed to a strong third quarter for Ericsson.
In the three-month period ended 30 September 2020, the Swedish comms tech firm posted overall revenues of SEK 57.5bn ($6.5bn), inching up 1% on a yearly basis and 3% quarterly.
Adjusted for comparable units and currency increased by 7% on an annual basis, mainly driven by 5G sales in Mainland China. Q3 2020 saw the company turn around a SEK 4.2bn operating loss into operating income of SEK 8.6bn ($980m) profit. Net income rose from a loss of SEK 6.9bn to a net profit of SEK 5.6bn ($790m).
Networks reported sales increased by 6% year-on-year, with an increase of 13% adjusted for comparable units and currency. Operating margin excluding restructuring charges was 22.7%, compared with 18.4% a year before. The company attributed the growth as reflecting high activity levels in North East Asia and North America.
Underlying business fundamentals were said to have remained strong in North America, driven by consolidation in the US operator market, pending spectrum auctions and increased demand for 5G. In addition, Ericsson said that 5G contracts in Mainland China were found to have developed according to plan, contributing positively to profits in Q3, and were expected to improve further. “Amid the continuing global Covid-19 pandemic and with more than 80% of our people working from home, we keep on executing on our focused strategy,” said Ericsson president and CEO Börje Ekholm.
“We continue to win footprint in several markets leveraging our competitive 5G portfolio. The gross margin improved in all segments in the third quarter and reached 43.2% (37.8%), the highest since 2006. In the quarter we announced our plans to acquire Cradlepoint, which will strengthen our ability to grow in the 5G enterprise market alongside our existing dedicated networks and IoT portfolio.
“Cradlepoint will drive revenues for our customers as wireless WAN gains further penetration. Our cloud-native 5G core portfolio shows very positive momentum with a high win-ratio and a significant number of new customer contracts. We are selectively increasing R&D investments to accelerate our growth portfolio to capture market opportunities.”
And one of these opportunities has already presented itself with Nordic operator Telia, which will see next generation 5G networks deployed across Sweden and Estonia by 2025.
The deployment is designed to empower Telia to drive sustainable national digital economies in Sweden and Estonia as the sole infrastructure provider for its seven million customers in the countries. Ericsson added that the transformational power of 5G will change the lives of consumer and business customers for the better, as well as empowering the region to drive the digital economy and build a sustainable future.
Telia and Ericsson have already worked on 5G development in the region, partnering as far back as 2016 on tests and trials. Th most recent project was on a 5G-powered self-driving electrical bus launched a few weeks ago in Stockholm and they are already deploying 5G across Norway in a driverless ferry trial, where Ericsson is also Telia’s exclusive technology partner.
In 2020, they launched commercial 5G in Norway and Sweden. The new deal will modernise the existing 4G networks across Sweden and Estonia to establish 5G across a network of 10,000 cellular sites in an area of more than 500,000 sq km.
“Our networks have never been more important to life and livelihoods and they are the foundation of a thriving digital economy, with innovation, sustainability and security at their core,” said Telia CEO Allison Kirkby.
“With this agreement, we have the foundation in place to develop the most trusted and reliable 5G networks in the Nordics and the Baltics. It is also the start of a multiyear investment in our networks, ramping up fully in 2021.”