Ericsson predicts ongoing telecoms uncertainty to persist into 2024

Ericsson on Tuesday said it expected the uncertainty impacting its mobile networks business to persist into 2024. The announcement comes after the company reported a decline in third-quarter revenue due to reduced demand for 5G equipment in North America.

Ericsson had previously pre-announced its results, revealing a $2.9 billion impairment charge related to its Vonage acquisition. The company anticipates that its results for the current quarter will be similar to those of the third quarter.

Chief Financial Officer Carl Mellander stated that they would not provide specific guidance for 2024 due to the uncertain timing of market recovery. The slowdown in spending by telecoms companies has had a notable impact on equipment manufacturers like Ericsson and Nokia.

In response to these challenges, Ericsson has increased its 2023 cost-saving target from 11 billion Swedish crowns ($1.01 billion) to 12 billion crowns. This includes the plan to lay off 8,500 employees, highlighting their commitment to cost-cutting measures when necessary.

Notably, Ericsson's organic sales in North America have seen a substantial decline of 60 per cent from the previous year, primarily because telecom customers adjusted their inventory and delayed the rollout of new equipment. North America's contribution to Ericsson's sales has decreased from 48 per cent to 23 per cent.

India, however, has provided a growth opportunity, with sales quadrupling to about 10 billion crowns. Nonetheless, this rapid expansion is expected to slow down in the coming year as some of the expected 2024 volumes were accelerated into 2023.

Despite the current uncertainties, Ericsson has observed signs of growth returning in the Middle East. CEO Borje Ekholm expressed confidence in the eventual market recovery, emphasising that while near-term dynamics remain uncertain, they believe in a positive outlook.

(With Reuters Inputs)