5G success drives Ericsson stock surge

Swedish telecom giant share price jumps 11.5 per cent in Friday trading

ERIC                                 

Ericsson saw its share price surge on Friday, after beating analyst expectations for the second quarter of 2020.

In the three months to the end of June, the Swedish telecoms firm reported sales of 55.6bn krona ($6.1bn, £4.8bn), surpassing the average analyst estimate of 54.8bn krona.

Its position as one of the foremost companies propelling the 5G revolution was largely responsible for this 2 per cent year-on-year growth.

When taking the reins in 2017, CEO Börje Ekholm hoped to reverse Ericsson’s declining fortunes and compete once and to properly compete with the likes of Cisco, Huawei, ZTE and Nokia. While the restructuring was painful, with the loss of thousands of jobs, the firm is set to thrive with the roll-out of the next generation of telecommunication.

Ericsson reported that it had won 99 5G commercial contracts in the second quarter, beating its Scandinavian rival Nokia’s 79. In April, the firm won more than 11 per cent of a $5.6bn 5G tender announced by China’s largest mobile operator.

In more recent months, Telefónica Deutschland chose Ericsson for its German core mobile network, while Canada’s first 5G network selected the company as the sole supplier for its 5G radio access and 5G core network.

The Swedish firm is also well positioned to capitalise on the recent blow inflicted to rival Huawei by the British government, which banned the Chinese tech firm over national security concerns. The UK is yet to choose a replacement; however, Ericsson is regularly mentioned as a leading candidate.

Success in 5G is widely expected to offset any disappointing results from Ericsson’s digital services business, which the company admitted will likely miss its target this year.

The firm maintained its forecast for 2020 and 2022. Referring to the uncertainty caused by the Covid-19 crisis, CEO Ekholm stated: “Some customers are accelerating their investments while others are temporarily cautious.”

Towards the end of Friday trading, Ericsson traded up 11.5 per cent at 97.74 krona, having begun 2020 at 84 krona.

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