Ericsson announces SEK 14.2 billion write-down

Impairment across Digital Services, Managed Services, and Networks including cancelled plans for transformation activities and technologies have resulted in a 14.2 billion SEK write-down for Ericsson.
Written by Corinne Reichert, Contributor

Ericsson has revealed a write-down of 14.2 billion Swedish kronor ($1.8 billion) following impairment testing and restated financials due to a new segment structure announced last year.

The write-down is being distributed via 6.7 billion SEK impairment of goodwill and 0.4 billion SEK impairment of intangible assets in its Digital Services segment; 6 billion SEK impairment of goodwill, 0.3 billion SEK of intangible assets, and 0.4 billion SEK of fixed assets across its Other segment; 0.3 billion SEK impairment of deferred costs related to the termination of "certain transformation activities" in its Managed Services segment; and 0.2 billion SEK impairment of "capitalised development expenses related to technologies that are no longer planned to be used" in its Networks segment.

"The majority of goodwill originates from investments made 10 years ago or more, and has limited relevance for Ericsson's business going forward," Ericsson explained.

"All impairments are non-cash accounting adjustments. The adjustments have no influence on Ericsson's commitment to executing its strategies and to investing in technology to support customers' success."

While impairments will have a negative effect on the operating income from its Digital Services and Other segments in its Q4 2017 results, Ericsson said it will not affect cash flow.

A non-cash tax charge of 1 billion SEK was also announced due to a change in the United States corporate income tax rate.

"The lowering of the US corporate income tax rate from 35 percent to 21 percent (effective 1 January 2018) requires a revaluation of US deferred tax assets," the company explained.

Ericsson added that an impairment "is not an indication of the performance of the business in the quarter", and that its gross and net cash position will remain strong. It is due to publish Q4 and full-year results on January 31.

Ericsson 5G consumer report

Ericsson has also published a report on consumer expectations for 5G, detailing six "calls to action" for the next-generation mobile networks.

According to the 5G consumer future: January 2018 report, the six things consumers most want from 5G are an "effortless buying experience" of mobile plans; gigabytes treated as currency so that unused data can be traded or saved; more bundled offers including media content; a "sense of unlimited" data usage; being provided with more than just mobile connectivity with 5G, such as "5G-enriched services"; and operators steering away from "baseless marketing slogans" to focus on real-world user experience.

"Only 4 percent trust operators' advertising and network quality test results," Ericsson said.

"Moving into a 5G future, three in five smartphone users are concerned that 4G connectivity will be marketed as 5G even before 5G networks are widely available. Consumers are calling on operators to steer clear of baseless marketing slogans and instead to focus on network experience, thus keeping networks more honest in their marketing."

Ericsson added that on average, consumers who believe their telco has the best network performance will spend 17 percent more per month.

The networking giant has previously predicted that 5G will improve Australian telco revenue by almost 50 percent, with up to $13.5 billion worth of digitalisation potential to tap into.

According to Ericsson MD for Australia and New Zealand Emilio Romeo, there are three potential roles for operators: As pure network providers; as service enablers; and as service creators, with telcos that offer all three of these to tap into the full $13.5 billion up for grabs.

Romeo said that the operator-addressable 5G digitalisation revenues are across automotive, retail, manufacturing, financial services, public transport, agriculture, media and entertainment, healthcare, energy and utilities, and public safety.

Globally, there will be $619 billion in operator-addressable 5G digitalisation revenues across these 10 sectors, he said.

Ericsson last month raised almost $400 million, including $220 million from the Nordic Investment Bank (NIB) and $150 million from AB Svensk Exportkredit, to be used to support Ericsson's 5G, mobile, and Internet of Things (IoT) research and development (R&D) activities, the networking giant said.

The NSA 5G NR specs were approved by standards body 3GPP in December, with an accelerated 5G deployment as a result announced by Ericsson, Huawei, Intel, Nokia, Samsung, AT&T, BT, China Mobile, China Telecom, China Unicom, Deutsche Telekom, Fujitsu, KT Corporation, LG Electronics, LG Uplus, MediaTek, NEC Corporation, NTT DoCoMo, Orange, Qualcomm, SK Telecom, Sony Mobile Communications, Sprint, TIM, Telefonica, Telia Company, T-Mobile USA, Verizon, Vodafone, and ZTE.

Last month alone, Ericsson was chosen to build the 5G networks of mobile carriers Deutsche Telekom and Verizon, while also running trials with AT&T in Texas and KDDI in Japan, and joining the Australian government's 5G working group.

It also completed several global 5G New Radio (5G NR) interoperability trials following the 3GPP standardisation with Australian mobile carrier Telstra; United States carriers T-Mobile, Verizon, Sprint, and AT&T; Japanese carrier NTT DoCoMo; Korean carrier SK Telecom; and European carriers Vodafone and Orange.

The live demonstrations utilised the 3.6GHz and millimetre-wave (mmWave) 28GHz spectrum frequencies using Ericsson's pre-commercial 5G base stations. Ericsson claims to have "the most complete 5G portfolio in the industry".

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