Ericsson says it’s not banking on China 5G network contract wins

Ericsson Chief Financial Officer Carl Mellander said on Friday it was no longer banking on previously anticipated contract wins for 5G tenders in China as it gets caught in the crossfire of a political battle between Beijing and the West.
EricssonChina currently accounts for 3 percent of Ericsson’s total sales vs 9 percent earlier.

Chinese rival Huawei Technologies has been banned from selling equipment in Sweden, where Ericsson is based, and in some other western countries, Reuters reported.

Ericsson previously warned that Sweden’s ban might impact its business in China, which is undertaking a huge 5G build-out and where it generates just under 10 percent of its revenue.

Ericsson CFO Carl Mellander told Reuters on Friday that 5G tenders expected in the second quarter in China did not take place, and the company said in a statement that sales there fell by 2.5 billion Swedish crowns ($290 million).

Asked on an analyst call if Ericsson expected to recoup that money, Ericsson CEO Borje Ekholm replied: “No, it’s not coming back.”

Mellander said in an interview that it was “prudent to forecast materially lower market share in China going forward.”

Initial contract allotments for the second phase of 5G deployment in China are expected to be announced before the end of this month.

Ericsson said its sales in Q2 2021 was negatively impacted by inventory write-down and initial 5G deployments in Mainland China.

Ericsson generated 3 percent of its total sales from China in Q2 2021 as compared with 9 percent in Q2 2020. China was the top-two revenue generating nation for Ericsson. China has moved to fifth position in terms of sales generation for Ericsson.

The global RAN equipment market is estimated to grow by 10 percent in 2021, with Mainland China expected to grow by 11 percent North America by 12 percent and Europe by 9 percent, according to Dell’Oro Mobile RAN report, May 2021.

Ericsson’s outlook was in sharp contrast to Nokia, along with Huawei one of Ericsson’s main rivals in the race to upgrade global wireless systems to 5G.

Nokia, the Finnish group said this week it would likely raise its full-year outlook due to a stronger-than-expected second quarter.