Sweden’s Ericsson on Tuesday reported first-quarter core earnings that beat expectations, supported by stronger sales of 5G equipment in countries such as India, but sales in more established markets fell and eroded margins.
“India is strong and a good example where our sales are up five times,” Chief Financial Officer Carl Mellander said in an interview. India is the second largest market for Ericsson after the US, he said.
While India boosted equipment sales, analysts said the net growth was chiefly driven by the $6.2 billion aquisition of cloud communication firm Vonage that Ericcson closed last year.
The company has cut costs to mitigate lower spending by telecom operator customers in several regions and expects the slower pace of deployment to continue until the third quarter.
The restructuring charges may be around 7 billion crowns for the full year, more than half of which will be booked in the current quarter, it said in a statement.
The sales growth in the quarter was mainly from fiercely price competitive markets such as India rather than high-margin markets like the US. Ericcson’s reported gross margin for the quarter fell to 38.6 per cent from 42 per cent.
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Net sales rose 14 per cent to 62.6 billion crowns, beating estimates of 60.43 billion. Its quarterly adjusted operating earnings, excluding restructuring, fell to 4 billion Swedish crowns from 4.8 billion crowns a year earlier, beating analysts’ mean forecast of 3.28 billion, according to Refinitiv data.
