Just as it was reporting a strong second quarter, Ericsson has inked a multi-year, $8.3bn deal with Verizon to provide systems to accelerate the operator’s deployment of its next-generation 5G network in the US.
For the second quarter, ended 30 June 2021, Ericsson reported group organic sales growth up 8% annually, but total sales slipped slightly on an annual basis to $6.33bn. Gross margin excluding restructuring charges improved to 43.4% (38.2%) driven mainly by what the firm said was operational leverage in networks.
Its second quarter 2021 was negatively impacted by inventory write-down and initial 5G deployments in mainland China. Reported gross margin was 43.4%, up almost six percentage points from a year earlier. Reported net income was $440m, a rise of 50% compared with the end of the second quarter in 2020.
Ericsson president and CEO Börje Ekholm said the company was well positioned to take advantage of continued market momentum with its competitive 5G product portfolio and cost structure. However, he cautioned that it would be prudent to forecast a materially lower market share in mainland China for networks and digital services as the earlier decision to exclude Chinese suppliers from Sweden’s 5G networks might influence market share awards.
Noting its continued strong momentum in 5G core, Ekholm said Ericsson was ramping up R&D investments in the cloud-native 5G portfolio, a technology set that Verizon was buying into in what the two organisations called a landmark multi-year agreement that expands their longstanding partnership.
Under the partnership, Verizon will deploy Ericsson’s 5G MIMO C-band, low-band and mmWave systems with the aim of enhancing and expanding its 5G ultra wideband coverage, network performance and user experience. Technology provided includes Massive MIMO, Ericsson Spectrum Sharing and Ericsson Cloud RAN, complementing the Ericsson Radio System portfolio to support 5G services.
“This is a significant strategic partnership for both companies and what we’re most excited about is bringing the benefits of 5G to US consumers, enterprises and the public sector,” said Niklas Heuveldop, president and head of Ericsson North America. “We are looking forward to working with Verizon to leverage solutions like Cloud RAN and our Street Macro, adding depth and versatility to 5G network roll-outs across the US.”
Verizon CTO Kyle Malady added: “With this new agreement, we will be able to continue driving innovation and widespread adoption of 5G. We are pleased to continue this work through our longstanding relationship with Ericsson.”
Ericsson and Verizon first began work with 5G in 2019 in a trial of an over-the-air, dynamic spectrum sharing (DSS) 5G data call carried out in Ericsson’s lab in Richardson, Texas. Ericsson Spectrum Sharing technology saw use in dynamically sharing spectrum between 4G and 5G carriers based on traffic demand.
In 2020, Verizon was the first communications service provider to receive a commercial 5G mmWave Street Macro base station from Ericsson’s smart factory in Lewisville, Texas.
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