Just as it was reporting in its first quarter of 2021 that it was well-positioned to take advantage of continued market momentum for its 5G product portfolio and cost structure, Ericsson revealed it had been selected by O2 Slovakia as a commercial partner to modernise its 5G radio access network (RAN) infrastructures.
In the quarter ended 31 March 2021, Ericsson said its strategy, built on increased investments in research and development (R&D) for technology and cost leadership, continued to bear fruit, with organic annual sales growth of 10%, primarily driven by market share gains in its networks division. Adjusting for declining intellectual property rights (IPR) revenues, organic sales growth was 14%.
It reported an improvement in gross margin to 42.9% year-on-year and margin increases in all segments offset lower IPR licensing revenues. Earnings before interest and taxes margin increased to 10.7%, despite significant investments in its business and headwind from currency. Net sales were SEK49.8bn, flat compared with the first quarter of 2020, while net income for the first quarter grew by 39% on an annual basis to SEK3.2bn.
Network sales grew organically by 15% in the quarter, despite a decline in IPR licensing revenues. This, said Ericsson, reflected continued high activity levels in all market areas except the Middle East and Africa. Ericsson added that increased R&D investments had accelerated product development, evidenced by recently launched massive MIMO radios for 5G mid-band as well as its Cloud RAN (radio access network) portfolio.
Ericson expects the overall networks market to develop favourably during 2021. It also noted that its digital services line showed good momentum in contract awards, primarily in the cloud-native 5G core portfolio.
Commenting on the quarter, Ericsson president and CEO Börje Ekholm said the company was “well-positioned” to take advantage of the continued market momentum with a competitive 5G product portfolio and cost structure.
Börje Ekholm, Ericsson
“We are well-positioned with a resilient balance sheet and a solid competitive position based on our 5G portfolio, giving us the opportunity to further grow the company both organically and through acquisitions,” he said. “The ongoing global pandemic has fast-forwarded the digitisation of societies, placing a significant economic and social premium on high-quality network connectivity. A resilient global digital infrastructure is critical. We see positive signs of governments and enterprises increasingly recognising 5G as a preferred choice for connectivity with accelerating deployment.”
One such firm recognising the power of 5G is O2 Slovakia, for whom Ericsson has been appointed sole 5G RAN technology provider. As part of the contract, Ericsson will also modernise the communications service provider’s 2G, 3G and 4G RAN infrastructures with products and solutions from the Ericsson Radio System portfolio.
5G RAN technologies from this range are intended to enable O2 Slovakia to deliver improved mobile broadband (MBB) and enhanced mobile broadband (eMBB) customer experiences, as well as support new, high-capacity fixed wireless access business cases such as consumer TV services. The digital transformation technology is also seen as opening the ability to empower new services and use cases for industries and society.
“Through this contract, we will drive next-generation mobile experiences for our customers, meeting the growing demands of data traffic and enabling new services such as superior connectivity for households with fixed wireless access,” said O2 Slovakia CEO Igor Tóth. “In addition to rolling out 5G, modernisation of the 2G, 3G and 4G networks with Ericsson’s leading products and solutions will deliver major benefits in energy efficiency, enabling us to build a more sustainable digital future for Slovakia.”
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