Swedish kit vendor Ericsson reported a strong Q3 2020 on the back of 5G revenues from China.
When Ericsson won 5G business at all three Chinese MNOs, it revealed it would have to take an initial hit on the write-down of a bunch of inventory. We interpreted that as Ericsson having to offer some kit as a loss-leader in order to win the business, while the company insisted the deals would pay off in the long run.
Now it looks like it has only taken a quarter for that to happen, with Ericsson’s Q3 2020 numbers benefitting from Chinese 5G revenues, which accounted for half of its 7% year-on-year sales increase. As the 5G rollout continues in the world’s largest mobile market, that initial investment should continue to pay dividend. It also serves as a reminder that Huawei and ZTE should be fine for cash so long as the rollout continues, so long as they can continue to supply kit.
“Underlying business fundamentals remain strong in North America driven by consolidation in the US operator market, pending spectrum auctions, and increased demand for 5G,” said Ericsson CEO Börje Ekholm. “The 5G contracts in Mainland China have developed according to plan, contributing positively to profits in Q3 and are expected to improve further.
“Our business in Europe grew based on several footprint gains. While the pandemic has hurt revenues for several of our customers, and in some cases this has led to a reduction of capex, we have not seen any negative impact on our business, largely due to footprint gains. However, the pandemic negatively impacted our sales in Latin America and Africa.”
Footprint seems to mean market share in this case, which Ericsson remains very cagey about detailing. This was confirmed by our conversation with Ericsson’s Head of Networks, Fredrik Jejdling, who wouldn’t be drawn on specific market share gains. He did, however, point to the fact that revenues for the networks division grew by 13%, versus Dell’Oro’s estimate of overall RAN market growth of 8%, and encouraged us to do the maths.