At a time when Ericsson, a global communications service provider, is seeing weakness in other major markets, its sales in India rose five times year-on-year to 7 billion Swedish crowns ($679 million) in the January-March quarter, according to the company’s earnings.
The reason for the strong India growth can be attributed to sales of telecom equipment owing to the 5G rollout. In other markets like the US, the telecom operators lowered the pace of 5G network deployment and already have higher inventory of network equipment, which affected the sales of Ericsson from these regions.
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“We saw strong growth in India where we continue to roll out 5G at pace…the current demand for data and the end-user experience will make India a leading 5G nation and the leading nation for digitalisation,” said Börje Ekholm, president and CEO, Ericsson, during the January-March quarter earnings call on Tuesday.
“It is worth noticing the incredible speed of 5G rollout in India. And for us, India now is the second-largest market,” said CFO Carl Mellander, who has been with Ericsson for 25 years and will step down from his position at the end of the January-March quarter of 2024.
India accounts for an 11% market share for Ericsson at the end of the January-March quarter, higher than 2% a year ago and 6% q-o-q. Currently, the US is the biggest market for Ericsson with a 37% market share.
In India, the company is supplying network equipment such as 5G Radio Access Network (RAN) to telecom operators Reliance Jio and Bharti Airtel. With regard to the 5G network rollout, the company is also ramping up its production with its contract manufacturing partner Jabil in Pune.
“We are advancing when it comes to local production or assembly in India and we are building out that together with our partner. The speed of rollout is incredible,” Mellander said.
“The 5G network rollout in India will peak around the end of this year. But, of course, it will continue at a high level later also,” Mellander added.
In the January-March quarter, Ericsson’s total sales rose 14% y-o-y to 62.6 billion Swedish crowns ($6.1 billion). In the combined Southeast Asia, Oceania and India, Ericsson’s revenue grew 138% y-o-y to 13.9 billion Swedish crowns ($1.35 billion). In all other markets such as North America, Northeast Asia, Europe and Latin America, and West Asia and Africa, the company’s revenue fell 30-48% y-o-y.
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Owing to lower capital expenditure by telecom operators in major markets except India, Ericsson’s earnings before interest and taxes (Ebit) fell 36% y-o-y to 3 billion Swedish crowns ($290 million).
“Significant growth from large roll-out projects did not fully offset the sales impact from early 5G markets,” Ekholm said.
Ericsson’s gross margin for the quarter fell to 38.6% from 42.3% year ago.
“We continue to see a choppy environment during 2023 with poor visibility. In Q2 (April-June), we expect operators to remain cautious with capex investments and continue to adjust inventories,” Ekholm added.
The company expects recovery in its overall operations in 2024 with growth expectations in the mobile networks market, the turnaround of cloud software and services segment, enhanced research and development productivity, increased intellectual property rights (IPR) revenues, and cost reductions.