UPDATE: Ericsson Wins $1.7 Billion Deals With Chinese Operators
July 08 2009 - 11:23AM
Dow Jones News
L.M. Ericsson Telephone Co. (ERIC) said Wednesday that it has
won deals totaling $1.7 billion to deliver second- and
third-generation mobile communication equipment to Chinese
operators China Mobile Communications Corp. and China Unicom,
indicating rapid growth on the country's telecom market.
Mats Olsson, the Stockholm-based equipment vendor's president
for Greater China, told Dow Jones Newswires that the value of the
deals is roughly equivalent to Ericsson's entire sales in the
country during 2008, adding that "this reflects the growth we feel
in China."
The framework contract with China Mobile, valued at $1 billion,
includes products and solutions to expand the company's networks in
18 Chinese provinces.
Under the framework agreement with China Unicom, valued at $700
million, Ericsson will upgrade the operator's GSM networks in 10
provinces and provide GSM/WCDMA networks and wireless access system
in 15 provinces.
Chinese operators were awarded 3G mobile phone business licenses
from the authorities as recently as January. Western gear companies
like Ericsson and Alctatel-Lucent (ALU) have since then been
fighting for market share in the country, aiming for a slice of its
investment in improving the networks as growth on other markets
slows.
Olsson described the composition of Wednesday's deals as
favorable, noting that the Chinese operators have been quick to
adopt 3G technology since the licenses were awarded.
Ericsson has already started delivery under the framework
agreements, which will run for "a good part" of the remainder of
the current year, he added.
Analyst Pierre Ferragu at Bernstein said the news was expected
but still positive for Ericsson. He said Bernstein expects the
equipment maker's sales in China to grow 12% in 2009, and added
that following Wednesday's agreements "the chances for Ericsson to
deliver even better growth in China than what we expect are now
very high."
Swedbank analyst Hakan Wranne said the framework agreements had
been expected by investors for some time, so that the value of the
deals should already be reflected in Ericsson's share price. Still,
at 1440 GMT, shares in the company were up 0.3% at SEK75,
outperforming a 0.3% drop in the wider Stockholm market.
Company Web site: http://www.ericsson.com
-By Gustav Sandstrom, Dow Jones Newswires; +46-8-5451-3099;
gustav.sandstrom@dowjones.com