Ericsson Records 39% Dip In India Revenues

Telecom equipment giant Ericsson AB India has posted a 39 percent year-on-year drop in its India revenues, as the uncertain regulatory environment continues to affect its margins. The company has recorded revenue of INR 13.4 billion ($0.24 billion) in the recently ended April-May-June quarter up from INR 11.2 billion ($0.20 billion) in the previous quarter, up by 20 percent quarter-on-quarter and down 39 percent year-on-year.

The 20 percent growth is largely attributed to the improvement in the network capex spend by the operators, that is largely driven by the growth in the data traffic.

The cancellation of 122 2G licenses and a consistent delay in fixing the reserve price has put several telecom operators in a position of fix, which has resulted in delaying their investment plans.

In Q1 2011, the company's high revenues were the result of initial 3G rollouts which made a positive impact on its network sales. The core focus of operators towards cost competitiveness has resulted in increased interest in reducing their operating expenses. Ericsson's gross margin was down YoY to 32 percent (37.8 percent), and from 33.3 percent QoQ.

Globally, the network equipment vendors' sales in Q2,2012 increased 1 percent YoY and 9 percent QoQ. Overall, the company's revenues stood at INR 441.72 billion ($7.94 billion) up by INR 437.73 billion. Ericsson's overall revenue growth was impacted due to the factors like a slowdown in orders from China, depressed investments in Europe, low CDMA network infrastructure business and the ongoing uncertainty in India. Its CDMA network sales declined by almost 50 percent year-on-year to INR 15.97 billion ($287 million), a trend which it expects to continue in the future as well.

The acquisition of Telcordia Technologies, a telco OSS/BSS company, added sales of INR 8.78 billion in the quarter. This has resulted into 47 percent growth in support solutions, which represents about half of the Group's revenues. The Support Solutions growth was driven by billing systems and TV solutions.

Its Global Services division achieved a 26 percent increase in year-on-year revenues. The company's joint venture ST-Ericsson is still in a tight situation because of a significant drop in sales of new products to one of its largest customers and a decline in legacy products demand.

The company, however is hopeful and believes that the growing mobile-subscriber addition, will lead to strong focus on network performance and quality of service by operators which will encourage operator investments in hardware, software and services.

Jatinder Singh, Principal Correspondent, Light Reading India