Swedish telecommunications group Ericsson unveiled Friday a contract worth $8.3 billion to provide US operator Verizon with equipment for its 5G network, Ericsson’s biggest single contract ever.
Ericsson also reported that its second quarter net profit had jumped by 51 percent, but noted a sharp decline in sales in China after rival Huawei was barred from selling its equipment in Sweden. “It is prudent to forecast a materially lower market share in Mainland China for Networks and Digital Services as the earlier decision to exclude Chinese vendors from the Swedish 5G networks might influence market share awards,” Ericsson chief executive Borje Ekholm was quoted as saying. Shares in Ericsson fell by more than seven percent in early trading on the Stockholm stock exchange on the news.
In the United States, the group “signed another five-year contract, this one amounting to $8.3 billion, with a leading customer. This is the single largest deal in the history of Ericsson,” the earnings statement said. “We are gaining footprint in other markets” than China, Ekholm stressed. Ericsson is battling Huawei and Finnish neighbour Nokia, among others, for fifth-generation (5G) contracts, and China and the US are huge markets for their equipment. In June however, a Swedish court struck down an appeal from Huawei against a ban in the country on security grounds, and Ericsson was bracing for Chinese retaliation. After the UK in the summer of 2020, Sweden became the second country in Europe and the first in the EU to explicitly ban the Chinese groups Huawei and ZTE from almost all of the network infrastructure needed to run its 5G network. Meanwhile, Ericsson posted a net profit of 3.9 billion kronor (381 million euros, $450 million) for the second quarter of 2021, a jump of 51 percent from the same period in 2020 that was seriously affected by the coronavirus pandemic.
Ericsson’s sales slipped however by one percent to 54.9 billion kronor owing notably to a drop of 2.5 billion kronor in China.