Telefonaktiebolaget LM Ericsson CFO Update Presentation Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Frank Maa° - DNB Markets, Research Division - Analyst : Yes, I can.

Question: Frank Maa° - DNB Markets, Research Division - Analyst : Okay. Well, Ericsson recently disclosed an additional risk factor to -- or related to the bond program relating to China. I'm not expecting you to comment on that. But could you please remind us of what you have -- what your comments have been in the past when it comes to the profitability profile of your sales in China what -- so that investors can gauge a potential risk of potentially losing market share, partially or entirely in the country? I mean that's my first question. So if you could comment on that, whether it's marginally positive but gradually increasing or whether or not it's closer to group levels at some stage here in a couple of years, that would be excellent. And then I'm referring to gross margins, actually. And secondly, on ORAN, if you could comment on whether or not you see these reference designs for radios that have come out of Qualcomm, Marvell and [Exynos] over the past half year as something that's kind of shifting or accelerating the Open RAN or ORAN space going forward with potentially more kind of disruptive radio alternatives coming in and with reasonably good specs that can be deployed. Fredrik Jejdling - Telefonaktiebolaget LM Ericsson (publ) - Executive VP, Head of Business Area Network & Head of Segment Networks Shall I start, Carl? Or do you want to go? Carl Mellander - Telefonaktiebolaget LM Ericsson (publ) - Senior VP, CFO and Head of Group Function Finance & Common Functions Yes. Yes, exactly. Thanks, Frank. I think if you take the ORAN piece, I can -- if you like, I can also answer the China question. Please go ahead, Fredrik. Fredrik Jejdling - Telefonaktiebolaget LM Ericsson (publ) - Executive VP, Head of Business Area Network & Head of Segment Networks No, I can start there with ORAN. And you're right, there is a multitude of reference designs coming out on the market. We should have seen that there is a time-to-market aspect of this and the readiness of these type of solutions. And if you look at the LoRa, they look at around 15% by 2025 of total volumes being ORAN. So there is an aspect of time here, and that goes back to the point that we have a 5G technology that constitutes critical infrastructure that we believe needs to be built out right at this point in time. So that's on the ORAN part. And as I said also that when we look at ORAN, there are elements here that we are engaging with our customers on and that is the Cloud RAN part of it, where we look at disaggregation of hardware and software being an important part. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 03, 2021 / 12:00PM, ERICb.ST - Telefonaktiebolaget LM Ericsson CFO Update Presentation I think also over time, there is an aspect here of making sure that standards in interfaces are harmonized over time, to my previous point, that's important that we keep this industry together for global competitiveness. And we all know what constitute the basis of 8 billion connected devices. That has to do with 1 standard, 1 technology that everybody can scale and participate in. And by the way, 3GPP offers that today. So that's on that point. Then China, of course, Carl, shall I hand it over to you, and you can take that? Carl Mellander - Telefonaktiebolaget LM Ericsson (publ) - Senior VP, CFO and Head of Group Function Finance & Common Functions No, yes, I can do it. And I -- thanks for the question, Frank. We -- when it comes to specific profitability per region and so on, and you know that we don't really go into much detail. But what we have said, just to remind everyone, is that in the beginning of the 5G era in China for us, we had challenging margins and even losses. We communicated that. Of course, we had a business case to turn that around, and that we also delivered on. So the contracts that we are delivering on are generating profitability and are on track on our own internal business case. So that's all good from that point of view. In China, I mean, from a top line point of view, as you know, then probably, it's about 8% of our total group turnover. So let's see. And I mean, we communicated this risk. We wanted to say that the risk has increased given signals we pick up in the market, including what's stated in Chinese media and so on. That is not to say that something concrete has happened or that we have additional information. We will see how the upcoming tenders actually develop over time.