Ericsson (ERIC.US) Q3 beats expectations as AT&T partnership bears fruit

Swedish telecom equipment maker Ericsson (ERIC.US) reported better-than-expected third-quarter earnings, driven by the company's cooperation with US carrier AT&T (T.US) starting to bear fruit.

Ericsson reported an adjusted Ebita of SEK7.3bn ($699m) in the third quarter, far exceeding analysts' expectations of SEK5.6bn. The adjusted operating margin was 11.9%, compared with expectations of 8.5%.

B rje Ekholm, chief executive, said in a statement: "We see signs of stability in the overall market and recovery of growth in the early-adopter market of North America. While market development ultimately is in the hands of our customers, we are working to achieve excellent operations regardless of market conditions."

The telecom equipment market has had a tough time in recent quarters as operators scale back or delay network investments. Ericsson has taken aggressive cost-cutting measures, including laying off thousands of employees, and won investor confidence with a $14bn contract with AT&T in December. Shares have risen 24% this year through Monday.

Ericsson said previously that the AT&T OpenRAN contract would boost revenue in the second half of the year. OpenRAN technology allows operators to choose flexible suppliers for antennas and infrastructure.

Lars Sandstr m, chief financial officer, said in an interview that sales in the quarter were "exceptionally high" after a "very weak" start to the year. He expects them to stabilise in the next quarter and next year.

However, demand for equipment has fallen in some key markets. India, one of the fastest countries to deploy 5G in 2022, has slowed its spending, while many US carriers have stockpiled equipment. Dell'Oro Group, which tracks the telecoms industry, said operators' spending fell 10 per cent year on year in the first half of 2024 and would continue to decline for the rest of the year.

Mr Ekholm added that Ericsson's recent announcement of a joint venture with 12 other telecoms operators to create an interface for app developers to access all mobile networks would continue to create "new opportunities for monetising the network".

Ericsson's Nordic rival Nokia (NOK.US) will report its third-quarter results on Thursday.