Swedish telecom gear maker Ericsson has said its sales in India fell almost 40 percent sequentially in the fourth quarter as the market moved to normal investment levels following an unprecedented rollout pace.
Sales, however, grew 14 percent from the year-ago period due to 5G contracts, the company said on January 23. The Indian telecom market is seeing aggressive 5G rollouts by private telecom operators.
A reduction in capex investments in India was expected at the beginning of 2024 but occurred earlier than anticipated, it said.
India, however, stood second amongst the top five countries in net sales, contributing 12% after the United States during the January-December 2023 period. In Q4, India cornered an 8% share among the top five markets for Ericsson but remained at the second spot.
“The mobile network industry remains challenging. We expect the current market uncertainties to prevail into 2024 with a further decline of the RAN market outside China as our customers remain cautious and the investment pace is normalizing in India,” Ericsson president and CEO Börje Ekholm said in the Q4 earnings statement. He said the new US contract would start to ramp up in the second half of 2024.
A radio access network (RAN) connects individual devices to other network parts through radio connections. It is a significant component of modern telecommunications, with different generations of mobile networking evolving from 1G through 5G.
Ericsson reports local sales under the market South East Asia, Oceania and India market. In South East Asia, Oceania and India, sales adjusted for comparable units and currency increased by 7 percent from the previous year, primarily driven by sales in India at 11.8 billion SEK in the quarter.
For the whole year, overall sales adjusted for comparable units and currency increased by 61 percent year-on-year in market area South East Asia, Oceania and India, driven by sales increase in India on the back of significant market share gains.
Network sales in market area South East Asia, Oceania and India for the year 2023 grew by 80 percent primarily as a result of 5G contracts in India, Ericsson said.
The RAN market in 2024 is expected to contract, mainly due to the decline in India following record build-out in 2023 and generally cautious customer capex investments, Ericsson, which follows the January-December financial year, said.
The demand from growing data traffic and 5G only being in the early stages of build-out would require additional network investments, Ekholm said.
“In our view, the current investment levels are unsustainably low for many operators. We are therefore confident that a market recovery should materialize,” he said.
The timing of the recovery, however, would be in the hands of customers. It was critical for the company to lead in technology while focusing on operational efficiency to be well positioned when the market recovers, Ekholm said.
“We concluded 2023 with a Q4 EBITA margin of 11.4% and a historic 5-year USD 14 billion contract. Despite headwinds and a very weak mobile networks market, we were able to generate a full-year EBITA of SEK 21.4 billion,” he said.
The measure the company took to improve performance were, “we are not satisfied with our profitability and there is more work to do”, he said.
“As we look to 2024, we expect the market outside China to further decline, with similar uncertainties as experienced in 2023.”
In this environment, the company would remain laser-focused on managing elements it can control, including operational efficiency and tight cost management, he said.
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