Ericsson’s fourth quarter 2022 was punctuated by two events. First, it signed a global patent license agreement with Apple, settling all ongoing patent-related legal disputes between the parties.
The IPR agreement with Apple meant retroactive revenue was recorded in the fourth quarter, which brought IPR as a total up to $580 million (SEK 6 billion) of revenue in Q4.
The second major financial event was that Ericsson set aside $220 million for a potential resolution with the U.S. Department of Justice (DoJ), regarding its latest scandal involving bribery allegations. In early 2022, reports surfaced that Ericsson may have made payments to the ISIS terror organization to gain access to certain transport routes in Iraq. The $220 million is what Ericsson is estimating it will have to pay as a fine.
Aside from the two major financial events in Q4, Ericsson CEO Börje Ekholm said that during the quarter, “We've seen some operators slowing the pace on network investments, and that includes front-runner customers in many markets.”
He said in North America, Ericsson saw a 7% decline year-over-year. “We have during the year seen accelerated Capex investments, but we've also seen customers holding relatively large inventories.”
Ericsson’s CFO Carl Mellander added, “Some CSPs in, especially front-runner markets, are now taking down their Capex in some cases, from record levels previously and some are also adjusting down their inventory levels.”
To address the near-term concerns, the company is implementing $873 million (SEK 9 billion) in cost savings initiatives, beginning in Q2 and taking full effect by the end of 2023.
Networks business
The company reported that its Networks business grew significantly in India. However, the growth from share gains in Indian and some other markets could not fully compensate for reduced operator spending and inventory reduction in markets such as North America.
Ekholm said that in terms of the overall RAN market “We expect a flattish, call it, mobile network market as well as RAN market over the next few years.”
After supply-chain and inventory issues work themselves out, he predicts the underlying traffic growth will propel the RAN market again.
He also expects fixed wireless access (FWA) to expand beyond mid-band spectrum usage and migrate to millimeter wave, which will boost the RAN market over the longer term.