The year 2022 will not have been, to say the least, easy for Ericsson. The Swedish telecommunications equipment giant released its financial year results on Friday. But these proved disappointing. Ericsson notably saw its net income fall by 17% in one year, to 19.1 billion crowns (1.7 billion euros). In the fourth quarter it even collapsed by 39%, to 6.2 billion crowns (560 million euros).
This is due, in particular, to an allocation of 220 million dollars facing likely fines from American courts in a corruption case in Iraq. The markets did not appreciate, knowing what analysts were expecting, according to the agency Bloomberg, with a profit of about 7.6 billion crowns. Ericsson shares fell more than 9% in the morning before gradually recovering in the afternoon.
The sharp 17% increase in the group’s turnover, which last year stood at 271 billion crowns (more than 24 billion euros), obviously did not reassure investors. Börje Ekholm, the CEO of the group, a great rival of the Finnish Nokia and the Chinese Huawei, has not tried to minimize its difficulties. “The short-term outlook remains uncertain”he said. According to him, the group needs to make their way through the middle of “headwinds” at the macroeconomic level. “We expect business growth to be a bit slower than in 2022”He added.
A difficult economic context
One of the biggest obstacles to Ericsson’s business is related to that of its main customers, namely the telecommunications operators. Many are hit hard by inflation and rising energy prices. In such a context, Ericsson expects some operators to reduce their investments, particularly in terms of 5G equipment.
In the long term, however, Börje Ekholm is confident. According to him, Ericsson is well positioned to take advantage of the implementation of the new generation of mobile communications. He hopes, in particular, that companies will take advantage of this technology to accelerate their digitization and thus increase their competitiveness.
The financial year 2023 promises to be eventful
To get out of this bad period, Ericsson recently launched a major cost savings plan amounting to 810 million euros. The group believes it will take effect from the second quarter of this year. Börje Ekholm also returned to the embezzlement of the group in Iraq between 2011 and 2019. Ericsson suspects in particular that his troops paid bribes to the Islamic State to evade customs, which led to him finding himself in the crosshairs of justice American. “We continue to thoroughly investigate the facts in full cooperation with (the United States judiciary), to determine if the allegations are founded”said the CEO.
The manager explained that the provision made by Ericsson corresponds to a “sufficiently reliable estimate” the financial penalty to which the group is exposed. We already know that 2023 will not be a long, calm river for this European telecommunications infrastructure champion.