Ericsson Q1 Results Shows Strong Growth in Mobile Broadband Networks

Telecom equipment and solutions major Ericsson announced that its 3G business in India affected margins negatively during Q1 of 2011.
Ericsson supplied 3G equipment  to most operators in India including Reliance, Vodafone, Bharti Airtel and Aircel.

3G volumes in India were high, which affected margins negatively. However, India sales increased 38 percent year-over-year and 11 percent sequentially. Growth was driven by 3G deployments also comparing to low level investments during first half of 2010 awaiting 3G licenses, according to a press release from Ericsson .

According to the company’s predictions, India will have 350 mn broadband subscribers by 2015, almost three times the DoT’s estimate of 100 mn broadband subscribers by 2014.  While Ericsson excelled in field trials for LTE all over the world, as well as under lab conditions at its office in Delhi, the company is hopeful of rolling out TD-LTE  in India later this year, when BWA is rolled out.

Ericsson’s sales for the first quarter were up 17 percent year-over-year and down -16 percent sequentially. Operating income, excluding joint ventures, increased 39 percent in the quarter.

During 2010, Ericsson continued to gain market shares in 3G and at least maintained market shares in 4G/LTE of more than 50 percent. While GSM will continue to exist for many years, Ericsson says it will see the bulk of investments shifting to 3G/WCDMA and 4G/LTE.

The increase in group sales was driven by segment Networks where revenues grew 35 percent year-over-year with an EBITA margin of 20 percent. The strong demand for mobile broadband resulted in five out of ten regions showing growth year-over-year. Countries with especially strong growth were the US, India, Japan, Korea and Russia. China had continued good momentum for 2G.

Group sales in the quarter increased by 17 percent year-over-year driven by continued strong demand for mobile broadband and especially for the multi-standard radio base station RBS 6000,” said Hans Vestberg, president and CEO of Ericsson.

Global mobile penetration is 79 percent and total mobile subscriptions have reached 5.5 billion. According to Ericsson, India and China accounted for about 48 percent of the estimated 190 million net additions during the first quarter, adding around 65 and 30 million respectively. Indonesia and Vietnam were third and fourth countries in terms of net additions. India has now passed 800 million subscriptions and the US has passed 300 million subscriptions.

Sales in the first quarter were not impacted by the devastating earthquake and tsunami in Japan. While the company’s global supply chain of components is partly dependent on Japan and delays in delivery of certain products are predicted, Ericsson has taken a number of actions to limit the impact on customers.

These activities include finding and integrating alternative components in its products as well as increasing volumes with second source suppliers. Effects will also depend on Japan’s overall recovery but Ericsson’s best estimate is that it will be able to deliver the majority of these volumes before end of third quarter 2011.

The company’s R&D expenses increased by 10 percent year-over-year. The increase is a result of the planned higher investments in radio, such as TD-LTE and IP as well as the acquired LG-Ericsson operations.

By Team
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