Shares in Telefonaktiebolaget LM Ericsson on Tuesday fell on Tuesday after the Swedish telecoms giant said it expects the slowdown in the global mobile networks industry will continue impacting its sales in 2024.
The Stockholm phone company blamed a global slump in investment in the buildout of mobile communications infrastructure for a 10% drop in its full-year revenues, as it warned that headwinds in the market will likely continue into this year.
Shares in Ericsson
ERIC.B,
ERIC,
dipped 2% on Tuesday having lost 2% of their value over the past 12 months.
Ericsson said its customers’ reluctance to invest in upgrading existing mobile infrastructure saw sales from its networks segment drop 23% in the fourth quarter, leading to a 17% decline in its fourth quarter revenues to SEK71.9 billion ($6.9 billion).
The company’s slower sales saw its full-year earnings before interest, tax, depreciation and amortization (EBITDA) drop 27% year-on-year to SEK21.4 billion, in results that fell short of 13 analysts’ expectations it would generate EBITDA worth SEK25.7 billion, FactSet data shows
The Swedish multinational, which was first established in 1876, said it now expects these challenging conditions will continue into 2024, as customers continue to take a cautious approach in all markets outside of China.
The company warned spending on the buildout of infrastructure in India is also starting to normalize following a boom in investment driven by the rollout of 5G that had previously bolstered its balance sheet.
Ericsson, however, said it believes current levels of investment in mobile infrastructure are unsustainably low for many operators, as the company said it remains confident investment levels will recover in line with growing demand from data traffic and 5G.
Nonetheless, the company said the timing of this recovery ultimately remains in the hands of its customers, as it said it is now preparing itself to profit on any uptick in investment, while also seeking to boost its margins by increasing efficiency and slashing costs.
“While the actions we have taken to improve performance are paying off, we are not satisfied with our profitability and there is more work to do,” Ericsson CEO Börje Ekholm said.
Ericsson’s results follow AT&T’s
T,
decision to award the Swedish company a $14 billion contract to build out its OpenRAN networks in the U.S. in what was considered to be a major blow to its Finnish rival Nokia
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Earlier his week, Barclays’ analysts downgraded both Ericsson and Nokia, as they warned investment is likely to stay subdued in all regions outside of China over the next three years.
