Ericsson has updated its risk factors as it prepares to issue a EUR 500 million unsecured eight-year bond under its Euro Medium Term Note (EMTN) programme. It said the decision by Sweden’s Post and Telecommunication Authority (PTS) to exclude Chinese vendors' products from the 5G auction there may adversely affect the economic interests of Sweden and Swedish industry, including those of Ericsson.
It said it has been invited to various ongoing tender processes in China but the final outcome "remains uncertain" and it believes that the risk has increased that Ericsson will be allocated a significantly lower market share of those contracts than its current market share.
Ericsson said there are uncertainties for the future bilateral trading relationship between China and several countries as a result of restrictions towards Chinese vendors in national 5G networks. The geopolitical situation could have consequences for the entire industry, with an increased likelihood of further industry split, separation of global value chains and separation of global standards for mobile telecommunications.
The vendor said this overall development has led to several countries evaluating how to ensure uninterrupted access to telecommunication network infrastructure, for example by promoting disaggregation of the Radio Access Network (RAN) and support of national communication network infrastructure champions as alternatives to the established global vendors such as Ericsson, although "the timing and extent of this remains unclear".
All of the this, said Ericsson, might have a "material and potentially lasting adverse impact" on its business including sales, market share, market access and supply chain and R&D activities, its financial condition and results of operations.
PTS held an auction of 5G frequencies in January, after declaring in October 2020 that Huawei and ZTE would not be allowed to supply equipment for 5G networks, citing security concerns. The Swedish Administrative Court upheld the PTS decision and Huawei appealed against that ruling, but the Supreme Administrative Court rejected Huawei's appeal. PTS also said in October that any products from Huawei and ZTE on existing infrastructure for central functions to provide services in 5G bands must be phased out by 01 January 2025. In late April, an oral hearing took place at the Administrative Court on the terms for allocating the 3.5 GHz and 2.3 GHz bands, and this matter is now continuing via correspondence. The parties in the two cases heard were PTS and Huawei.
