Ericsson posts higher profits, boosted by 5G rollout

Swedish telecoms equipment maker Ericsson on Friday announced greatly increased annual profits, boosted by the rollout of 5G networks.

However the company also expressed worries it could suffer reprisals from China after its home country banned the use of competitor Huawei's equipment in the next generation of phone networks.

"The pandemic has fast forwarded the digitalization of societies, including remote working, by months if not years... We see more signs that countries and enterprises see 5G as a key access technology," Ericsson CEO Borje Ekholm said in a comment to the annual results.

Ericsson, one of the leaders in 5G equipment, reported an annual net profit of 17.5 billion Swedish kronor ($2.1 billion, 1.7 billion euros).

This can be compared to a 2.2 billion kronor profit the previous year, though in 2019 the company was also burdened by settlements in a US corruption probe.

For 2020, turnover increased 2.0 percent to 232 billion kronor, beating analyst expectations. 

The gross margin, excluding restructuring costs, which is the equipment makers preferred indicator of profitability, rose 3.1 percentage points to 40.6 percent. 

Ericsson shares traded up more than six percent on the Stockholm stock exchange after the results.

To date, Ericsson has signed 127 commercial 5G contracts with operators around the world, for 79 operational networks, the group said.

Together with China's Huawei and Finland's Nokia, they account for the majority of the world market for 5G network equipment.

However, Sweden, the birthplace of Ericsson, announced in October that it was banning new equipment from Huawei and ZTE, both from China, from its new 5G telecoms network, citing national security concerns.

The moved prompted protests from Beijing.

Sweden was the second European country to explicitly ban Huawei after the UK did so in July.

With some countries banning Huawei, analysts say its Nordic competitors stand to benefit, but Ericsson's CEO have also voiced concerns about reprisals targeting its Chinese operations, Ericsson's second largest after the US.

In the annual report, the company listed as a "risk" that the actions of Sweden could "lead to measures taken by China that are targeted at the economic interests of Sweden and Swedish industry, including those of Ericsson."