Displaying items by tag: telecom vendor

Ericsson reports 6 percent year-on-year drop in Q3 revenue

Written on Sunday, 29 October 2017 12:11

Swedish telecom equipment provider Ericsson published its Q3 financial results on October 20. The company reported a 6 percent year-on-year drop in third quarter revenue which accounted for SEK47.8 billion ($5.9 billion) while the loss was SEK4.8 billion ($590 million), worse than last year’s, reaching $24.5 million.

“We continue to execute on our focused business strategy,” said Ericsson President and CEO Borje Ekholm. “While more remains to be done, we are starting to see some encouraging improvements in our performance despite a continued challenging market.”

Networks showed a slight sales growth year over year. Networks adjusted operating margin was 11 percent. While losses continue in IT & Cloud, said Mr. Ekholm, the company sees increased stability in product roadmaps and projects.

“The general market conditions continue to be tough,” he said. “Sales adjusted for comparable units and currency declined by -3 percent year-on-year. Sales in North America, adjusted for comparable units, currency and the rescoped managed services contract were stable. We also saw growth returning in several countries as operators are increasing their investments in network capacity.”

Mainland China declined for Ericsson as the market is normalizing following a period of significant 4G deployments, representing more than 60 percent of global 4G volumes in the industry. The company managed to increase its LTE market shares in Mainland China to position Ericsson in 5G. However, this will have a dilutive effect on gross margin in Mainland China in Q4 2017, but the ambition is to continue to deliver double digit adjusted operating margin in Networks in Q4 2017.

Sales in Networks grew for Ericsson. Higher hardware capacity sales and a more competitive product portfolio resulted in an adjusted operating margin of 11 percent. The Ericsson Radio System portfolio, accounting for 55 percent of total radio volumes year to date, is proving competitive, Mr. Ekholm said, contributing both to improved earnings and a stronger market position.

In IT & Cloud, sales declined and losses increased in the quarter for Ericsson. The increase in quarter-on-quarter losses is largely due to higher amortization than capitalization of development expenses.

“Our turn-around plan builds on stability, profitability and growth in that order,” said Ekholm. “The initial focus has been on stabilizing both product roadmaps and challenging contracts. We have made good progress in the quarter. However, securing deliveries on large transformation projects puts pressure on gross margin in the near term.”

“The IT & Cloud business is of strategic importance as our customers are preparing for 5G and will digitalize their operations and invest in a future network architecture based on software-defined logic,” Mr. Ekholm added.

Ericsson will now expand its focus to improve profitability through increased efficiency in service delivery. In addition, the company will scale the software part of the business mix and increase the level of pre-integration services, which will lead to a higher gross margin but lower services sales. Positive effects on gross margin are expected in 2018.

“Despite continued decline in legacy product sales, there is good traction in our new media portfolio with several important wins in the quarter,” said Mr. Ekholm. “We have accelerated our efficiency measures and continue to pursue strategic opportunities for this business. Managing our cash is a top priority.”

Ekholm concluded, “We remain fully committed to our focused business strategy. We continue to invest to secure technology leadership and year to date we have recruited more than 1,000 R&D employees in Networks. Customers give positive feedback on both our long-term strategy and on our current 5G-ready portfolio.”

Published in Finance

Huawei exclusively won the bid for China Telecom's Reconfigurable Optical Add/Drop Multiplexer (ROADM) Network Project in the middle and lower reaches of the Yangtze River. This is the first intelligent ROADM WDM backbone network to be built in China, marking the beginning of China Telecom's optical transport network evolving towards the intelligent optical networking era. This is also a major step forward for the "CTNET2025" network transformation strategy of China Telecom.

The middle and lower reaches of the Yangtze River is the fastest developing region in China, including its developments in the internet industry. With the emergence of cloud computing and big data and the ubiquity of new services for smart devices, smart homes, and IoT, the requirements for data storage and analysis is increasing at an exponential rate.

Building a ROADM network in this region will significantly improve the security of China Telecom's optical transport network and its network intelligence, and intelligent operation capabilities, providing better broadband user experience for internet enterprises, e-commerce, and government/enterprise customers.

This project covers 21 ROADM sites in Hubei, Jiangxi, Anhui, Jiangsu, Zhejiang, and Shanghai along the middle and lower reaches of the Yangtze River. The industry leading CD-ROADM technology of Huawei facilitates the provisioning of advantageous routes to upper-layer service networks, such as routes with one-hop transmission, full mesh interconnection, optimal path and latency, and rapid dynamic recovery.

The project can satisfy the low latency and high performance requirements for DC private lines and VIP financial customers. The current phase of the project can provide more than three hundred 100G electrical lines and 100% network recovery capability. The technologies and capacities involved in this project are among the best in the world.

Wei Leping, Deputy Director, Science & Technology Committee, Ministry of Industry & Information Technology and Director, Science & Technology Committee, China Telecom, points out that the all-optical network is the long-term goal of China Telecom.

However, the evolution of the all-optical network cannot be achieved in one day, and there is still a long way to go. When and only when 100% transport, switch, and access are realized in the optical domain, and ROADM and OXC are introduced to the switching layer can a network be called strictly all-optical.

In the all cloud era, to satisfy the requirements of larger bandwidth and lower latency, Huawei will help operators to build the future-facing CloudOptiX transport network and realize the simplified one-hop transmission network architecture, and closely work with operators, enterprise customers, and upstream and downstream industrial partners to advance the development of optical networks.

The digital transformation brings important opportunities. Network construction is transforming from being technology-driven to being business value-driven, and technological development is gradually shifting back to being business focused. Huawei's all cloud network solution is centered on the realization of business value. By building agile, smart, highly efficient, and open all cloud networks, Huawei helps customers achieve business success.

Published in Infrastructure

ZTE Corporation showcased Qcell Plus, its next-generation digital indoor mobile broadband solution, at the 11th global Small Cell World Summit in London on May 24. The upgraded Qcell Plus solution helps operators build evolving-towards-5G digital indoor infrastructure with a view to providing enhanced digital architectures, digital services and digital operation and maintenance, as to deliver a full indoor digital experience to users.

Supporting key Pre5G technologies such as 256 quadrature amplitude modulation (QAM), massive carrier aggregation (CA), distributed multiple-input multiple-output (D-MIMO), and LTE augmented access (LAA), the Qcell Plus solution can bring an nGbps experience to users. It adds to 300MB full broadband, which ZTE first implemented as an industry first to meet operators’ demands for sharing and co-building indoor infrastructure and to improve economic benefits.

The Qcell Plus solution can provide various digital services, such as indoor high-precision positioning, local distribution, local caching, big data, and the Internet of Things. With open APIs, this solution allows a variety of third-party applications and content to enter operators’ network channels in order to meet the diversified service needs of indoor users and to add value to the channel.

With all nodes visible, measurable and manageable, the digital operation and maintenance of the Qcell Plus solution, which includes various operation and maintenance scenarios, can implement in-depth indoor performance analysis and optimization to dramatically improve the precision level of fault location and operation and maintenance efficiency. The upgraded Qcell Plus solution has already become the new engine to accelerate the drive towards indoor services in the 4G era.

Published in Telecom Vendors

Finland’s Nokia plans to sell its undersea cable unit, a business that underpins the global Internet, two union sources and a French government source told Reuters.

The division, valued at about 800 million euros ($870 million), is one of the top suppliers of undersea cable networks in the world and was bought by the telecom equipment maker last year as part of its 15.6 billion euro ($17 billion) acquisition of French rival Alcatel. It has been run as a standalone business and it is known as Alcatel Submarine Network (ASN). Nokia had previously tried to sell the unit in 2014 but cancelled those plans.

ASN is one of the two standalone businesses that Nokia runs. The other is the Radio Frequency Systems (RFS). Although these businesses are not part of Nokia, the company reports the results of these in its consolidated results. However, Nokia does not provide specific details of these segments. As a result, it is difficult to assess the financial impact and contribution of these businesses.

Only last year, Nokia conducted tests to double the speed of cable transmission capacity and the management was quite bullish about the prospects of the segment in the next 2-3 years. According to different estimates, there were going to be about $8.1 billion worth of cable deployments in the next three years.
ASN being the leader in this segment (it had around 47% of the market share) would have benefited from this growth opportunity. In 2015, only three networks worth $490 million were deployed. Compare this to the potential 33 networks to be built in the next three years that could be worth $8.1 billion, and the opportunity looks massive.
On the other hand, when we look at the structure of the business, it becomes clear that Nokia might have never wanted this business at all. It has tried to integrate all the other segments of Alcatel-Lucent into its own. However, this segment was kept as a separate business from the start. It indicates that the company wanted to keep it as a separate asset and sell it at an opportune time. ASN does not complement Nokia's core business of mobile and fixed networks.

ASN provides high-speed connectivity with African countries and overseas territories. Also, it is important for national security and cyber-surveillance. Whenever the words ‘national security’ come into play, business becomes a little bit tricky.

If ASN is considered a strategic asset for the French and the government pokes its nose into operations, then it becomes a hassle for the company. This might have played a role in Nokia deciding to keep it separate and eventually selling it.
However, the sale is not imminent and it might not be a smooth transaction. The French government will certainly want to be involved in the sale procedure and would most likely want to review the buyer. It might take some time to find a suitable buyer that can satisfy all the parties.

ASN is valued at around $870 million. It will be a nice cash injection to an already strong financial position of the company. Since Nokia does not give numbers for the business division, it is not possible to value the transaction. Hence it is difficult to comment whether this is a good price for the company. This division has 1,000 employees and since the results are consolidated, it might also be part of Nokia's plan to reduce costs.

The company is still talking with the government behind closed doors about their wish to sell the business. It is likely going to be a lengthy process, and due to its strategic importance for France, the process will not be as smooth as selling a part of business. This all looks like Nokia's continued efforts to become a leaner and more efficient business and focus on its core networks business.

Nokia's core business still remains under pressure and we are unlikely to see any major movement in the short term. However, Nokia's efforts to become a leaner operator and strengthening of financial position through non-core asset sales such as ASN will give it a better platform to grow. These cash inflows can be diverted towards new business acquisitions. Nokia might want to add some complementary businesses with high gross margin in order to enhance its metrics as it waits for the networks market to pick up. Sale of ASN will be good for the company and it makes Nokia an even better pick.

Published in Telecom Vendors