Ericsson Hit By Global Mobile Networks Industry Slows Down

Shares in Swedish telecom giant Telefonaktiebolaget LM Ericsson dipped after the company announced its expectations of a continued slowdown in the global mobile networks industry impacting its sales throughout 2024. The company attributed a 10% drop in full-year revenues to a global decline in investment in mobile communications infrastructure buildout.

Ericsson’s shares, represented by ERIC.B and ERIC, declined 2% on Tuesday and had lost 2% of their value over the past 12 months. The company reported a 23% drop in sales from its networks segment in the fourth quarter, resulting in a 17% decline in fourth-quarter revenues to SEK71.9 billion ($6.9 billion).

Full-year earnings before interest, tax, depreciation, and amortisation (EBITDA) fell 27% year-on-year to SEK21.4 billion, falling short of analysts’ expectations. Ericsson anticipates the challenging conditions to persist in 2024 as customers remain cautious outside of China.

The company highlighted the normalisation of spending on infrastructure buildout in India after a 5G-driven investment boom. Despite current low investment levels, Ericsson expressed confidence in a recovery in line with growing demand from data traffic and 5G, emphasising that the timing depends on its customers.

While preparing for a potential uptick in investment, Ericsson aims to boost margins through increased efficiency and cost reduction. CEO Börje Ekholm acknowledged improvements but emphasised the need for further work to enhance profitability.

The announcement follows Ericsson securing a $14 billion contract from AT&T for building out OpenRAN networks in the U.S., a development considered a setback for its Finnish rival Nokia. However, Barclays’ analysts recently downgraded both Ericsson and Nokia, anticipating subdued investment outside of China for the next three years.