Ericsson reported fourth quarter and full-year 2023 earnings today, which weren’t great. It was a rough year for both Ericsson and Nokia as operators began tapering their 5G spends. However, Ericsson ended 2023 on a high note with its news that AT&T selected it for a $14 billion open RAN contract. Nevertheless, Ericsson executives indicated 2024 would suffer from the slowdown in spending on 5G.
In the fourth quarter Ericsson reported that sales declined to $6.85 billion (SEC 71.9 billion), a drop of 16% compared to the same quarter in 2022, driven by a 23% decline in it networks business.
For the full year, sales declined to $25.09 billion (SEC 263.4), a drop of 3% from the previous year.
Ericsson CEO Borje Ekholm acknowledged that 2023 dealt the company “headwinds and a very weak mobile networks market.” And although the company conducted layoffs in 2023, he said, “While the actions we have taken to improve performance are paying off, we are not satisfied with our profitability and there is more work to do.”
Just yesterday, the analyst group Dell’Oro said the RAN market is now in a downward trajectory. Following growth of about 40% between 2017 and 2021, RAN revenues stabilized in 2022, and are on target to decline sharply in 2023, said Dell’Oro. Market conditions are expected to remain challenging in 2024 as the Indian RAN market pulls back.
According to Dell’Oro’s Mobile RAN 5-Year January 2024 Forecast Report, worldwide RAN revenues are projected to decline at a 1% compound annual growth rate over the next five years.
Ekholm said that in 2024, “We expect the market outside China to further decline, with similar uncertainties as experienced in 2023.” And he further piled on, saying that even in India the investment pace is slowing.
Ericsson CFO Carl Mellander said, “When it comes to India we really saw the peak in the third quarter, and the volumes came down in the fourth quarter.” He said there was “incredible speed” in 5G builds in India in 2023, but this year the market will come down quite a lot compared to where it’s been.
On the bright side, the new contract with AT&T will start to ramp up in the second half of 2024. Ericsson doesn’t expect any material revenue from the contract in the first half of 2024.
Related to AT&T, Ekholm said Ericsson will be helping AT&T put new energy-saving features, multi-band radios and standardized sites into place. He indicated that its work with AT&T could potentially cause other global operators to also want to work with Ericsson on open RAN. “I think it’s a model for the future and can create a big potential for us,” he said.
Vonage
Ericsson took a $2.92 billion impairment from its Vonage business in the third quarter.
Ericsson acquired the New Jersey-based cloud communications provider Vonage Holdings in 2022 for about $6.2 billion.
Even though Vonage brings network application programming interface (API) capabilities, and Ericsson had to take the impairment charge on Vonage, the company still sees network APIs as a hopeful technology for the future.
Ekholm said today, “The real strategic area that we’re actually working on is to develop the network market for APIs. And with the ability to expose the capabilities of the network in a new way. That is where we’re 100% focused while trying to maintain the existing business.”
5G
Eckholm said, “For the world to really benefit from 5G, we need to migrate to 5G standalone. If you look across the world there are very few 5G standalone networks built out. Really where it’s a frontrunner is China. In China you start to see enterprise applications coming on top of the 5G network that we’re not seeing in the rest of the world yet.”
He said it’s in the hands of the operators as to when they make the decision to fully build out their 5G SA networks.
In personnel news, Ericsson’s CFO Mellander is departing from the company after 25 years. Lars Sandstrom has been named as its next CFO, effective April 1.