• Ericsson has reported its first quarter of growth for two years
• CEO Börje Ekholm says there are broad signs of improved telco spending in North America
• He believes there is growing interest in ‘programmable networks’
• But there is also concern about the potential impact of US import tariffs

For the first time in two years, Ericsson has reported year-on-year revenue growth thanks to a broad rebound in mobile network operator spending in North America, with CEO Börje Ekholm suggesting during the company’s earnings webcast on Friday morning that this augurs well for prospects elsewhere in the coming years. 

The vendor reported fourth-quarter 2024 sales of 72.9bn Swedish krona (SEK) ($6.7bn), representing a like-for-like growth rate of 2%. And thanks to cost cutting, broader efficiency measures and a greater proportion of software product sales, Ericsson’s fourth-quarter margins improved, with the adjusted EBIT (earnings before interest and tax) margin hitting 13.1%, up from 10.3% a year earlier. The company’s board has also proposed an improved dividend payment to shareholders. 

But the company’s margins didn’t meet financial analyst expectations, so its share price took a near 9% hit to SEK88.84 on the Stockholm exchange.    

The relatively positive news for Ericsson, though, is that the worst of the radio access network (RAN) equipment sector’s decline, which has weighed heavily on the Swedish vendor and rival Nokia for the past year or two, appears to be over. “We are seeing a change in sentiment,” noted the CEO. “We’re starting to see some very positive indications, and we have further reasons to believe that the overall market is starting to stabilise,” he added. That doesn’t mean it’s getting a lot better, just that it isn’t getting worse.

And currently, that stabilisation appears to be mainly underpinned by increased mobile operator network investments in North America, where revenues were up by more than 50% year on year in the fourth quarter (albeit from a low base). As a result of that boost, Ericsson’s Networks division recorded a 5% year-on-year increase in like-for-like revenues to SEK46.8bn ($4.3bn).

Ekholm was at pains to note that the uptick in North America is not just due to the impact of Ericsson’s major five-year, $14bn Open RAN deal with AT&T, which was announced in late 2023 and is now starting to feed through into deployments and revenues. 

“We’re seeing a broader-based recovery in North America. It’s not only one contract,” he stated, referring to the AT&T deal. North America is a “front-runner” market, added Ekholm. The US was “the first to really deploy 5G, then the other markets came… it gives us the comfort that the market outlook is stabilising. 

“And we see Europe coming back to a bit of growth – it’s going to be a bit choppy, as it always varies by quarter, but at least it's getting more positive. We see Asia in the same way.”

The vendor’s CFO, Lars Sandström, explained during the earnings webcast that “we are still in a downward trend outside of the US and Europe,” adding that Africa is being affected by political uncertainty, while the market in Latin America is currently highly competitive, “so it’s hard to see” when things might turn around in those regions for Ericsson.   

So things might not be as bad as they were, but overall the radio access networks (RAN) market doesn’t look like one that will generate a major boost in Ericsson’s sales any time soon, despite Ekholm’s suggestion that there is a still a great deal of 5G investment yet to come, that telcos will need to invest further in their networks to account for shifting traffic trends caused by the growing use of AI applications, and that there is “growing interest” in the “programmable network” systems (Open RAN-enabled) that the vendor sold to AT&T and, in Europe, to Spain’s MásOrange (in a deal announced last October).  

Research house Dell’Oro Group has recently shared its outlook for the global RAN equipment market and describes the sector as “improving” but “underwhelming”. In 2022, the sector was worth more than $40bn, but in 2024 that value dropped below $35bn, the research firm noted in a blog, which was followed up by a press release, noting that the long-term trajectory for the sector “looks flat”. 

Ericsson has long realised that its future growth won’t come from mobile network equipment, which is why it has been so focused in recent years on developing a broader story and portfolio for the enterprise sector, not only with wireless network technology but also its Global Communications Platform (API) strategy built on the $6.2bn acquisition of Vonage. That’s not reaping positive results currently, though, as the vendor’s Enterprise division reported a 9% year-on-year slump in fourth-quarter revenues to just SEK6.1bn ($558m), despite an increase in enterprise wireless solutions. 

Full year Global Communications Platform (Vonage) revenues came in at SEK14.8bn ($1.35bn), down 10% compared with 2023’s total: That number will need to head in the other direction this year to settle investor nerves, especially as the value of the Vonage acquisition has already been subject to significant write downs. Certainly, there will be high hopes at Ericsson that the network API joint venture formed by the vendor and a dozen telco partners, which was recently christened Aduna, will help generate new business opportunities, though that venture has yet to be legally incorporated. 

Ekholm and his team will be looking for better news from that division and hoping that global politics and the potential threat of US import tariffs don’t impact its sales and business opportunities now that Donald Trump is in the White House. 

CFO Sandström noted that Ericsson has some production facilities in the US, as well as Europe, India, Asia Pacific and Latin America, so has some flexibility in terms of where its wireless products are made, and allowing it the “opportunity to work with the supply chain, depending on what kind of decisions we see ahead of us. Having said that, of course, tariffs could have an impact going into 2025, but we’re all waiting a little bit to see what is going to happen there, but we are working on that continuously.” 

Ekholm added: “I think the whole world is moving from a cost-optimised supply chain to [one focused on] resilience – you need to factor resilience into the supply chain. And that’s why we built up the US factory. We’ll all have to see how this will look in reality, and then adjust as much as possible.” 

- Ray Le Maistre, Editorial Director, TelecomTV