Last updated: April 28, 2011 3:32 am

Ericsson triples profit to SKr4.1bn

Ericsson has revealed a surge in demand for mobile broadband infrastructure as telecoms operators scramble to upgrade their networks to cope with bandwidth-hungry smartphones and tablet computers.

Ericsson Q1 results
Sales Net profit Earnings per share Dividend
SKr53bn SKr4.1bn SKr1.27 -
↑17% ↑215% ↑226% -

Hans Vestberg, Ericsson chief executive, said growth in third and fourth-generation mobile network equipment was outstripping decline in second generation GSM infrastructure for the first time.

The Swedish company has long been viewed as a potential winner from the mobile broadband revolution because of the need for increased network capacity to cope with surging volumes of data traffic.

However, the benefits have been slow to reach Ericsson shareholders as growth in 3G has been offset by reduced investment in older technologies. Mr Vestberg said that changed in the first quarter of 2011, as network equipment sales increased by 35 per cent.

“We’ve been feeling the benefits of mobile broadband for several quarters, but until now it had always been exceeded by the decline in 2G,” Mr Vestberg told the FT, highlighting the US, India, Japan, South Korea and Russia as the fastest-growing markets.

Ericsson shares rose more than 10 per cent in response to the better than expected first-quarter results, with net profits more than tripling from last year to SKr4.1bn ($671m). Sales rose 17 per cent to SKr53bn.

The strong performance increased confidence in Ericsson’s ability to cope with competition from Chinese rivals Huawei and ZTE, which have rapidly emerged as serious challengers over recent years.

Mr Vestberg said Ericsson increased its share of the 3G equipment market in 2010 and at least held its more than 50 per cent share of the nascent but fast-growing 4G, also known as long term evolution technology, market.

He said demand was especially strong for multi-standard radio base stations which could provide everything from 2G GSM to 4G LTE services using the same infrastructure.

Telecoms operators in the US, Europe and Japan are starting in the early stages of rolling out LTE networks, capable of delivering much higher speed mobile broadband connections than previous technology.

Mr Vestberg warned that Ericsson would be affected by supply chain disruptions from the Japanese earthquake. “Our global supply chain of components is partly dependent on Japan and we estimate delays in delivery,” said Mr Vestberg. “Our best estimate is that we will be able to deliver the majority of these volumes before the end of the third quarter.”

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