Ericsson's 5G march hits a wall in China, shares fall

STOCKHOLM (Reuters) -Ericsson said on Friday it was no longer banking on previously anticipated contract wins for 5G tenders in China as it gets caught in the crossfire of a political battle between Beijing and the West, sending its shares down 8%.

FILE PHOTO: An Ericsson logo is pictured at Mobile World Congress (MWC) in Shanghai, China June 28, 2019. REUTERS/Aly Song

Chinese rival Huawei Technologies Co Ltd has been banned from selling equipment in Sweden, where Ericsson is based, and in some other western countries.

Ericsson had previously warned that Sweden’s ban might impact its business in China, which is undertaking a huge 5G build-out and where it generates just under 10% of its revenue..

Chief Financial Officer Carl Mellander told Reuters on Friday that 5G tenders expected during the second quarter in China did not take place, and the company said in a statement that sales there fell by 2.5 billion Swedish crowns ($290 million).

Asked on an analyst call if Ericsson expected to recoup that money, Chief Executive Borje Ekholm replied: “No, it’s not coming back.”

Mellander said in an interview that it was “prudent to forecast materially lower market share in China going forward.”

Initial contract allotments for the second phase of 5G deployment in China are expected to be announced before the end of this month, according to two sources familiar with the matter.

Ericsson’s dour outlook was in sharp contrast to Nokia, along with Huawei one of Ericsson’s main rivals in the race to upgrade global wireless systems to 5G.

The Finnish group said this week it would likely raise its full-year outlook due to a stronger-than-expected second quarter.

($1 = 8.6613 Swedish crowns)

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