Ericsson India 2Q, 2012 revenue at Rs 1,344 crore

Ericsson India second quarter revenue reaches Rs 1,344 crore, an increase of 20 percent QoQ and -39 percent YoY growth.

The India revenue has shown some recovery in network capex spend as operators have started focused investments in areas where data traffic is growing. YoY sales decreased due to the strong H1, 2011, when the initial 3G deployments peaked.

For Ericsson, the sales in 2Q, 2012 increased 1 percent YoY and 9 percent QoQ. The company registered revenues of SEK 55.3 billion. Sales for comparable units, adjusted for foreign exchange and hedging, decreased -6 percent YoY. The acquired Telcordia operation added sales of SEK 1.1 billion in the quarter, split 50/50 between segments global services and support solutions.

Networks sales decreased -17 percent YoY primarily due to the expected decline in CDMA equipment sales as well as weaker development for GSM sales in China and slower operator investments in Russia. Networks sales increased 2 percent QoQ. CDMA equipment sales declined close to -50% YoY to SEK 2 billion and are expected to continue its rapid decline in H2, 2012.

Global services continued to show strong momentum with growth of 26 percent YoY and 17 percent QoQ and all areas grew. Global services represented 44 percent (35 percent) of total sales in the quarter compared to 40 percent in Q1, 2012. Support solutions sales were strong with 47 percent growth YoY and 15 percent QoQ driven by strong demand for billing systems and TV solutions. Both global services and support solutions were positively impacted by the added sales from the acquired Telcordia.

Ericsson restructuring charges amounted to SEK 0.6 (1.7) billion, mainly related to execution of the service delivery strategy through transformation from local to global resource centers. As previously communicated, restructuring charges are estimated to approximately SEK 4 billion for the FY12.

Gross margin was down YoY to 32 percent (37.8 percent), and from 33.3 percent QoQ. The YoY decrease is due to the increased Global Services share as well as a higher proportion of coverage projects and network modernization projects in Europe. Approximately half of the YoY gross margin percentage decline is related to the increased services mix. The QoQ gross margin reduction is due to a higher Global Services share and lower sales of mobile broadband capacity than in Q1,2012.

The underlying business mix, with higher share of coverage projects, was unchanged in the quarter and is expected to prevail short-term. The negative gross margin impact from the network modernization projects in Europe will start to gradually decline end 2012.

Hans Vestberg, president and CEO, Ericsson “In the quarter, demand for global services and support solutions was strong, while networks sales decreased YoY mainly due to the expected decline in CDMA equipment sales as well as lower business activity in China, including weaker sales of GSM and lower 3G sales in Russia."

Speaking on 2Q results, Hans Vestberg, president and CEO of Ericsson said “In global services all areas showed good growth in the quarter due to operators’ focus on operational efficiency and high project activities. The strong development for support solutions was driven by billing systems and TV solutions. Global services and support solutions together represented about half of the Group’s revenues. The growing Global Services business has a dilutive impact on gross margin."

We continue to stay close to our customers to monitor the impacts of macroeconomic development and political uncertainty in certain regions on their investments. Today there are more than 700 million smartphone subscriptions and according to our estimates this number will increase to three billion in 2017. Based on these drivers, we see an increasing focus from our customers on network performance and quality of service and this will require continuous operator investments in hardware, software and services.