Ericsson today announced that it will retain its revenue target despite Huawei ban and the recent 5G network deals.

Currently, Ericsson rival Huawei is facing a complete ban in the United Kingdom. Huawei will not be able to supply network to telecom operators such as Vodafone, BT and Three for their 5G business.

Ericsson is likely to benefit from the possible removal of the existing telecom network supplied by Huawei. But the revenue guidance of Ericsson does not reflect the possible blocking of Huawei from mobile networks.

Ericsson recently said it currently has 41 live 5G networks in 24 countries. Ericsson’s live networks are part of the 95 commercial 5G agreements or contracts the company has with unique operators globally, of which 55 are publicly announced 5G deals.

“We remain positive on the longer-term outlook. Some customers are accelerating their investments while others are temporarily cautious. With current visibility we maintain the group targets for 2020 and 2022,” Ericsson CEO Borje Ekholm said.

Ericsson in Q2

Ericsson reported sales of SEK 55.6 billion in the second quarter of 2020 as compared with SEK 54.8 billion in Q2 2019.

Gross margin excluding restructuring charges improved to 38.2 percent from 36.7 percent, including the earlier communicated inventory write-down related to Mainland China (SEK -0.9 billion, which equals to -1.6 percentage points).

Operating income excluding restructuring charges improved to SEK 4.5 billion (8.2 percent operating margin) from SEK 3.9 b. (7.0 percent operating margin) driven by improvements in segment Digital Services.

Networks sales increased 4 percent. Networks operating margin excluding restructuring charges was 14.1 percent (15.0 percent) impacted by strategic contracts and the inventory write-down, partly compensated by operational leverage and a favorable business mix.

Net income was SEK 2.6 billion (1.8) billion, Ericsson said.

The Covid-19 pandemic had a limited impact on operating income and cash flow in the quarter, said Borje Ekholm, president and CEO of Ericsson.

Ericsson’s networks sales grew 4 percent organically and the gross margin was 40.5 percent (41.4 percent), absorbing a larger share of contracts including 5G volumes in China.

The Chinese 5G contracts are expected to be profitable over the life cycle, but had a negative contribution to gross margin in Q2. The strengthened market position in Mainland China is strategically important as this market is expected to be a driver of critical requirements and provide us with important scale.

Baburajan K