By Dominic Chopping
STOCKHOLM–Ericsson expects challenges in the mobile-network industry to continue this year as customers remain cautious about spending and as the investment pace normalizes in its key Indian market.
The Swedish telecommunications-equipment company said sales in its key networks unit fell 23% in the fourth quarter, with sales momentum in India slowing, while North America had a 50% drop in sales.
Ericsson saw a shift in its business mix through 2023 from higher-margin 5G work in early-mover markets like North America to lower-margin developing markets such as India. This helped keep sales levels propped up but has held margins back.
The rapid phase of 5G deployments in India is now moderating, with sales in the country growing by 14% on year, but declining by almost 40% compared with the third quarter.
“A reduction in capex investments in India was expected in the beginning of 2024 but occurred earlier than anticipated,” Ericsson said in a statement.
Ericsson reported a net profit attributable to shareholders of 3.39 billion Swedish kronor ($324 million) compared with SEK6.07 billion a year earlier, as sales fell 16% to SEK71.88 billion.
Analysts polled by FactSet had expected a net profit of SEK3.29 billion on sales of SEK76.64 billion.
The earnings before interest, tax and amortization margin excluding restructuring charges stood at 11.4%, beating company guidance of around 10%.
The company expects the overall network market to shrink in 2024 and the near-term outlook remains uncertain, mainly due to the decline in India as well as generally cautious customer investments.
However, Ericsson expects to gain market share in North America toward the latter part of 2024 thanks to its recent contract win from AT&T. Ericsson last month won a deal valued at up to $14 billion to supply network gear to the U.S. operator.
“In our view, the current investment levels are unsustainably low for many operators,” Chief Executive Borje Ekholm said. “We are therefore confident that a market recovery should materialize. However, the timing of market recovery is ultimately in the hands of our customers.”
Separately, Ericsson announced the appointment of Lars Sandstrom as its new chief financial officer, replacing Carl Mellander, who said last year that he would be stepping down after more than 25 years at the company.
Sandstrom is currently CFO at Swedish medical technology company Getinge and will join Ericsson on April 1. He has previously held several senior positions at Volvo, Scania and Swedish Orphan Biovitrum.
Write to Dominic Chopping at dominic.chopping@wsj.com
