Ericsson is largely holding steady in the face of the ongoing COVID-19 epidemic, with limited financial and operational impacts thus far — although company executives expressed concern about the possibility that 5G deployments could be delayed in Europe, and warned that the longer national lock-downs last, the more likely that their operations could be impacted.
Ericsson expects to see a softer than usual second quarter of 2020, but the company remains confident in the long-term outlook for telecom equipment.
“The current global uncertainty requires a humble attitude towards predicting the near-term future,” said Börje Ekholm, president and CEO of Ericsson. “We remain positive on the longer-term outlook, but the second quarter is likely to be a tad softer than normal due to timing of strategic contracts and uncertainty induced by COVID-19. Predicting when the restrictions to curb the pandemic will be lifted and how the recovery will look is impossible.”
“We are going through unprecedented times with COVID-19 which has impacted everyone around the world either directly or indirectly,” added Ekholm. He went on to say that Ericsson “delivered a solid result during the first quarter, with limited impact from the COVID-19 pandemic.”
For the first quarter, networks sales were up 2% year-over-year by the numbers, but Ericsson said that when adjusted for comparable units and currency, sales were actually down about 2%. Profits were down about 5% compared to the same period last year. Ekholm said that first-quarter sales saw some impacts due to fewer projects completions and limited access to some of its customers’ networks, although it also noted that in China, it was able to boost its contract share with a Chinese operator. Software sales saw a boost, the company said, and it sees “strong underlying customer moment” in its digital services segment. The vendor said that 85% of its workforce is working from home and that it is taking precautionary measures to keep its supply chain operational.
He said that Ericsson expects the telecom industry to “show resilience throughout the pandemic” and that while there is near-term uncertainty around sales because of the overall economic situation, Ericsson isn’t changing its financial targets for 2020 and 2022 at this point. Ekholm said that Ericsson’s first-quarter sales saw some impacts due to fewer projects completions and limited access to some of its customers’ networks. Ericsson has also won a number of 5G core contracts and expects those to begin generating material revenues beginning in 2021.
“COVID-19 and actions taken by governments to slow down the spread are making our service delivery and supply harder due to lockdowns and travel restrictions in many countries. In addition, while we have seen no material effects so far on our demand situation, it is prudent to believe that the slowdown in the general economy may lead some operators to delay investment programs,” Ekholm said. While Ekholm said that Ericsson expects the T-Mobile US/Sprint merger to drive “even stronger 5G momentum” this year, with U.S. 5G investments intensifying in the second half, he said that the merger will have a negative impact on the company’s managed services contract, starting in the second quarter. He also expressed concern about the impacts of COVID-19 on European 5G deployments.
“While we have been successful improving our position in Europe, we are concerned that 5G investments in Europe are delayed. This means that Europe may fall behind on a critical digital infrastructure for the future. The criticality of the digital infrastructure has been further evidenced during the pandemic. We believe governments should encourage 5G investments as a way to restart economies,” Ekholm said. He went on to say that “The massive disruption caused by COVID-19 has demonstrated the criticality of the network in today’s society and we are currently working closely with our customers to keep their networks running. During this period, our supply and service delivery has worked with limited interruption. … Our business continuity plans have safeguarded operations during Q1 and we will continue to work to further improve our resilience by for example increasing inventories of critical components. At the same time, the longer the lockdown in many countries continue, the more disruptions we will likely see, for example, of our supply chains.
“We are determined to come out of the Covid-19 situation in a stronger competitive position and our investments in R&D is a strategic cornerstone which we will not sacrifice,” Ekholm continued. We also continue investments in digital transformation which is expected to generate competitive advantages.”
According to the company’s slide presentation, it has 86 commercial 5G agreements and its solutions are being used in 29 live networks around the world.
