5G helps Ericsson swing to profit in Q1

Ericsson swung back to a 2.4 billion kronor ($254.3 million) net profit for the first quarter of 2019, partly as a result of the growth opportunities being afforded by 5G.

Total sales increased 13% year-on-year to 48.9 billion kronor, driven by growth in North America due to the market’s early lead in the deployment of 5G.

Ericsson CEO Börje Ekholm commented that the company has to date announced an industry-leading 18 commercial 5G deals.

Meanwhile Ericsson managed to improve its gross margin to 38.5% from 35.9% due to improvements in its networks and managed services segments.

But while network equipment sales grew 10% year-on-year during the quarter quarter, managed services revenue fell 5% over the same period as a result of scheduled contract exits.

“As previously communicated, we continue to take strategic contracts and incur costs for 5G field trials and, in addition, by end of 2019 we expect large-scale deployments of 5G to commence in parts of Asia,” Ekholm said.

“Combined, this will gradually impact short-term margins but strengthen our position in the long term. The impact of strategic contracts and 5G field trials was limited in Q1. The 5G market is gaining momentum and we are well positioned to capture opportunities.”

Meanwhile Ekholm revealed it is now in the early stages of negotiating a settlement to close an investigation by both the US Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) into allegations the company was involved in a bribery scheme in certain EMEA markets.