Ericsson's MEA sales remain robust in Q2

MEA region outshines mature markets for Ericsson as global profits flag
Hans Vestberg said that demand for global services and support solutions remained strong.
Hans Vestberg said that demand for global services and support solutions remained strong.

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Ericsson, the world’s biggest telecoms vendor, continued to see strong growth in the Middle East and Africa in Q2, offering a stark contrast to Europe and India, where network sales flagged.

The vendor posted year-on-year sales growth of 26% in Sub-Saharan Africa in Q2, with sales reaching SEK 2.8 billion ($0.4bn), of which SEK1 billion was derived from networks.

“[Sub-Saharan African] Sales increased YoY and QoQ, driven by increased investments in 2G,” Ericsson said in a statement. “2G investments are expected to level out, while 3G will increase. Mobile broadband penetration is slowly expanding from its low level of 4% today, as low cost smartphones enter the market and the internet connectivity is improving.”

The Middle East experienced slower year-on-year growth, with sales up 4% in Q2 compared to the same period last year. Middle East sales reached SEK3.7 billion. However, this figure represented a 17% rise compared with Q1.

Ericsson said that year-on-year sales growth in the Middle East was mainly driven by sales in global services and support solutions. It added that political unrest “is still impacting the region” and stated that operators in those countries continue to be cautious with infrastructure investments.

“Services grew, especially in managed services and systems integration, as operators are looking into network performance quality and operational efficiencies,” the vendor said in a statement.

Globally, Ericsson felt the effects of the ongoing economic turmoil, with net profits plummeting by 63% in Q2 to SEK1.2 billion, compared to SEK3.2 billion. This decline came despite a small increase in global revenues, which reached SEK55.3 billion in Q2, representing growth of 1% in Q2. Q112 includes a gain from the divestment of Sony Ericsson of SEK 7.7 billion.

Hans Vestberg, CEO and president of Ericsson, said: “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.

“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.”

For an overview of Ericsson's Q4 2011 results, click here.

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