On 16 July, Swedish telecom giant Ericsson shares went down more than 8 percent as the company said it was no longer expecting to win 5G tenders in China, Reuters reports.
Ericsson has been caught in a geopolitical battle between Beijing and the West since the government of Sweden banned Huawei for 5G rollout in Sweden due to security concerns and Ericsson has previously warned that the company’s business in China could be affected by that. Following the ban, Ericsson’s second-quarter sales in China fell by SEK 2.5 billion and asked on an analyst call if the company expected to recoup that money, Chief Executive Borje Ekholm replied: “No, it’s not coming back.”
According to Reuters, the Swedish telecom giant currently generates just under 10 percent of its revenues in China and despite the country preparing for the next round of a massive 5G build-out, Chief Financial Officer Carl Mellander told Reuters that it was “prudent to forecast materially lower market share” in the future. Carl Mellander also said that tenders expected during the second quarter did not take place.
Reuters reports that according to two sources familiar with the matter, initial contract allotments are expected to be announced before the end of this month.
Ericsson has been in sharp contest with Finnish Nokia and Chinese Huawei in the race to upgrade global wireless systems to 5G and according to Nokia, whose shares went up 0.5 percent this week, the company would likely raise its full-year outlook due to a stronger-than-expected second quarter.
Ericsson on the other hand took a hit of about SEK 1 billion last year due to write-downs of product inventory in China and the company wrote down another SEK 300 million in the second quarter this year.
According to Ericsson, the company’s network sales are strong in most of its other markets and Ericsson has just signed its largest single deal with an $8.3 billion five-year 5G contract with Verizon. The drag from China however has meant that group revenues, at SEK 54.9 billion missed consensus analyst forecasts of 57.20 billion.
