ERIC Ericsson

Strong business momentum continued during the second quarter. Rollout of 5G networks and market share gains resulted in a 5% organic sales1 growth in the quarter. We have adjusted our group structure to strengthen execution of our strategy to be a leading mobile infrastructure provider and to establish a focused enterprise business. Consumers, enterprises, and society will be digitalized through 5G in a way we have not seen before. With our strategy, we are in a position to capture these opportunities to enable further growth.

Technology leadership is a foundation for our growth strategy. Since 2017, our increased R&D investments have created significant value. The geopolitical situation has also required proactive investments to de-risk our supply chain and ensure that we can deliver on our strategy to gain footprint. The global supply chain situation remains challenging and inflationary pressures are strong. Combined, this results in cost increases which we work hard to mitigate as far as possible. As contracts expire, we aim to adjust pricing. However, we believe the best way to compensate for cost increases is the continued investment in technology to increase the cadence of bringing new innovative solutions to the market.

Fulfilling customer commitments under current challenging conditions, comes at a cost which dilutes gross margin. The increased costs have been largely absorbed through our investments in innovation and continuous improvements. Increased sales resulted in a gross income improvement in absolute terms of SEK 2.4 b. compared with Q2 last year, despite lower IPR revenues of SEK 0.9 b. YoY.

While 5G is the fastest scaling mobile technology, global penetration is still in an early phase. We foresee that the global 5G build-out will be larger and continue for longer than previous mobile generations. The build-out will include evolving consumer use cases, such as Fixed Wireless Access, mobile gaming and XR applications, in addition to new areas, such as enterprise and first responders.

Networks sales1 grew organically by 6% in Q2 underpinned by market share gains. Gross margin was 45.1% (47.9%), impacted by lower IPR revenues, increased component and logistics costs, and proactive investments in supply chain resilience, which enabled continued delivery performance in the quarter. We continue to invest in enhancing and expanding our offerings, and we increased R&D in the quarter primarily for Cloud RAN and acceleration of the next-generation Ericsson Silicon (ASICs).

Digital Services sales1 grew organically by 2% YoY with strong growth in cloud native 5G Core, and an EBIT of SEK -1.3 (-1.6) b. The accelerated 5G Core projects with initial deployment costs partly offset the margin improvement from increased software sales.

Managed Services sales1 were flat YoY with an EBIT margin of 11.2% (8.1%). With a 4Q rolling EBIT margin2 of 9.5%, we achieved our 2022 target two quarters ahead of plan.

The new group structure, to be reported from Q3, positions us well to execute on our strategy. Segment Cloud Software and Services is formed by merging Digital Services and Managed Services to create stronger customer propositions as our customers are moving towards

5G using cloud technologies and intelligent automation. The Digital Services business will leverage our technology leadership to accelerate customers’ transformation to cloud native networks. We are committed to turning around the business in support of the Group reaching the long-term targets.

Segment Enterprise includes Enterprise Wireless Solutions, combining Cradlepoint with Dedicated Networks to capture the growing needs for enterprise solutions. The Enterprise segment will also include the Global Network Platform, which we believe will create a paradigm shift in the industry as the full capabilities of the network will be exposed to the global developer communities and enterprises. This will inspire innovation with new opportunities for the operators to monetize network investments. The intended acquisition of Vonage is an important building block, and we are working to secure approval and close the transaction before end of July. The third element of the Enterprise segment is Technologies & New Businesses, previously within segment Emerging Business and Other.

IPR licensing revenues were affected by several expiring patent license agreements pending renewal and by 5G license negotiations in the quarter. We are confident in our strong 5G position and leading patent portfolio, positioning us well to conclude pending and future license renewals. With current contracts, revenues from IPR are estimated to be SEK 1.0–1.5 b. in Q3.

To secure deliveries we have pro-actively increased our buffer inventories. Additionally, unpredictable deliveries of components and site material led to increased inventory levels across our business. We were, however, able to partly offset the inventory increases with other working capital improvements, thereby delivering an improved free cash flow before M&A amounting to SEK 4.4 (4.1) b. Based on current visibility, we expect a gradual reduction in inventory towards the end of the year.

We continue to strengthen our governance, risk management, and compliance across the group and are fully committed to operating with integrity. We continue to engage with the Department of Justice and the Securities and Exchange Commission in relation to the 2019 Iraq investigation report and the DPA breach notices. The outcome of these matters cannot be assessed at this point in time. We are fully committed to cooperating with the US authorities.

Our strategy targets a higher growth trajectory as we aim to grow our core mobile infrastructure business and capitalize on the fast-growing enterprise market. With 5G, the world is experiencing the largest innovation platform to date, where anything that can go wireless, will go wireless. Ericsson is at the epicenter of this powerful trend, and we will continue to invest in technology leadership to ensure we capitalize on this position. EBITA margin2 rolling four quarters was 14% and we remain determined to reach our long-term target of an EBITA margin2 of 15–18% no later than in 2–3 years.

Börje Ekholm

President and CEO

Group reported sales were SEK 62.5 (54.9) b. Sales adjusted for comparable units and currency increased by 5% YoY, with growth in four of the five market areas.

IPR licensing revenues decreased to SEK 1.4 (2.3) b. Q2 2021 was positively impacted by two quarters of revenue from a renewed patent license agreement.    

Networks sales adjusted for comparable units and currency increased by 6% YoY. Sales growth was driven primarily by North America and Europe. Networks accounted for 73% (73%) of total sales.

Digital Services sales adjusted for comparable units and currency increased by 2% YoY, driven primarily by cloud native 5G Core. Digital Services share of total sales was 14% (14%).

Managed Services sales adjusted for comparable units and currency were stable. Managed Services share of total sales was 9% (9%).

Emerging Business and Other sales adjusted for comparable units and currency increased by 7% YoY driven by Cradlepoint and iconectiv. Emerging Business and Other share of total sales was 4% (4%).

Gross margin

Reported gross margin was 42.1% (43.4%). The margin was impacted by lower IPR revenues of SEK 0.9 b. YoY. Furthermore, increased component and logistics costs, and proactive investments in supply chain resilience in Networks impacted the margin negatively, but this impact was partly offset by timing of software sales in a large contract and underlying improvements. Gross margin increased in Digital Services and Managed Services YoY, while it declined in Networks and in Emerging Business and Other.

Sequentially, reported gross margin declined slightly to 42.1% from 42.3%, however with an increase in Networks.

Research and development (R&D) expenses

R&D expenses amounted to SEK -11.5 (-10.5) b. including a negative currency impact of SEK -0.4 b. R&D expenses increased primarily in Networks due to further investments in Cloud RAN and in Ericsson Silicon (ASICs).

Selling and administrative (SG&A) expenses

SG&A expenses were SEK -7.9 (-7.0) b. including a negative currency impact of SEK -0.3 b. The increase is mainly in legal and compliance related expenses.

Other operating income and expenses

Other operating income and expenses was SEK 0.4 (-0.6) b. Q2 2021 was negatively impacted by SEK -0.8 b. from a commercial settlement. There was a positive impact from Ericsson Ventures of SEK 0.1 b. in the quarter.

Restructuring charges

Restructuring charges amounted to SEK 0.0 (0.0) b.

EBIT

Reported EBIT increased to SEK 7.3 (5.8) b. driven by higher sales and higher gross income. EBIT improved across all segments. EBIT margin was 11.7% (10.6%).

Sequentially, reported EBIT increased to SEK 7.3 b. from SEK 4.7 b. as a result of seasonally higher sales and higher gross income.

Reported EBIT margin rolling four quarters was 13.4%.

EBITA

Reported EBITA increased to SEK 7.5 (6.1) b. corresponding to an EBITA margin of 12.0% (11.1%).

Reported EBITA margin rolling four quarters was 13.9%.

Financial income and expenses, net

Reported financial net was SEK -0.8 (-0.5) b. The strengthened USD to SEK resulted in a negative currency hedge effect of SEK -0.5 (0.1) b.

Sequentially, financial net decreased by SEK -0.1 b. to SEK -0.8 b. The currency hedge effect was SEK -0.5 b. in the quarter, versus SEK -0.2 b. in Q1 2022. The USD strengthened against the SEK between March 31, 2022 (SEK/USD rate 9.32) and June 30, 2022 (SEK/USD rate 10.31).

Income tax

Taxes were SEK -1.9 (-1.5) b. The effective tax rate in Q2 was 29%, unchanged from Q1 2022. Tax rate in Q2 2021 was 27%.

Net income

Net income improved to SEK 4.7 (3.9) b. and EPS diluted increased to SEK 1.35 (1.10).

Employees

The number of employees on June 30, 2022, was 101,459 compared with 101,067 on March 31, 2022. The increase is related mainly to R&D.

Financial highlights, year to date (Jan-June) development

Reported sales increased by 12%. Sales adjusted for comparable units and currency increased by 4% driven primarily by sales in market areas North America and Europe and Latin America. Networks sales adjusted for comparable units and currency increased by 5%, Emerging Business and Other grew by 11%, Digital Services sales were stable while Managed Services declined by -2%.

Reported gross income increased to SEK 49.6 (45.2) b. as a result of higher sales. Gross margin decreased to 42.2% (43.1%) impacted by investments in supply chain resilience in Networks as well as increased component and supply chain costs.

Reported EBIT increased YoY to SEK 12.1 (11.1) b. The higher gross income was partly offset by higher operating expenses. R&D expenses increased by SEK -2.1 b. including a currency impact of SEK -0.8 b. R&D expenses increased primarily in Networks as a result of further investments in Cloud RAN and in Ericsson Silicon (ASICs). SG&A expenses increased by SEK -1.3 b. including a currency impact of SEK -0.6 b. The increase is mainly related to legal and compliance expenses.

Reported EBITA increased to SEK 12.4 (11.7) b. YoY, corresponding to an EBITA margin of 10.6% (11.1%).

Net income year to date improved to SEK 7.6 (7.1) b. where the improved EBIT more than offset a more negative financial net and slightly higher taxes.

South East Asia, Oceania and India

Currency adjusted sales increased by 6% YoY. Networks sales grew, primarily driven by project milestones in several markets. Digital Services grew as a result of market share gains as well as project milestones. Managed Services sales increased mainly due to timing of variable sales and a new contract signed in the second half of 2021. Reported sales increased by 12% YoY.

North East Asia

Currency adjusted sales declined by -1% YoY. Sales in Networks declined, while sales in Digital Services increased as a result of project timing. Reported sales increased by 3% YoY.

North America

Currency adjusted sales increased by 12% YoY driven by strong demand for 5G solutions in Networks. Sales in Digital Services were stable. Reported sales increased by 27% YoY.

Europe and Latin America

Currency adjusted sales increased by 4% YoY with 4% growth in Europe and stable sales in Latin America. The invasion of Ukraine by Russia and the subsequent suspension of the affected business impacted sales by SEK -1.2 b. YoY. Sales in Networks showed double-digit growth as a result of market share gains. Sales in Digital Services declined due to suspension of affected business in Russia. Managed Services sales declined as a result of rescoping and renegotiations of contracts. Reported sales increased by 9% YoY.

Middle East and Africa

Currency adjusted sales increased by 8% YoY. Sales increased in Networks driven predominantly by 4G rollouts in Africa. Digital Services sales grew due to software upgrades in Africa. Reported sales increased by 17% YoY.

Other

IPR licensing revenues decreased to SEK 1.4 (2.3) b. impacted by expired patent license agreements pending renewal. Q2 2021 was positively impacted by two quarters of revenue from a renewed patent license agreement.

Sequentially, IPR licensing revenues were stable at SEK 1.4 b.

Net sales

Sales adjusted for comparable units and currency were stable YoY. Sales in Network Optimization showed growth in all market areas, and variable sales grew. Reported sales increased by 6% YoY.

Gross margin

Reported gross margin increased to 23.0% (19.0%) driven by increased variable sales and increased Network Optimization sales.

Reported gross margin decreased slightly to 23.0% from 23.2% QoQ.

EBIT

Reported EBIT increased to SEK 0.6 (0.4) b. with an EBIT margin of 11.2% (8.1%). The improvement was driven by increased gross margin.

Segment Emerging Business and Other

Net sales

Sales adjusted for comparable units and currency increased by 7% YoY driven by Cradlepoint and iconectiv. Reported sales increased by 17% YoY.

Gross margin

Reported gross margin decreased to 35.8% (37.9%). The decrease relates mainly to Cradlepoint, where Q2 2021 was positively impacted by SEK 0.1 b. from the changes between the preliminary and final PPA (Purchase Price Allocation), impacting net sales, gross margin and EBIT. Cradlepoint gross margin continues to be well above group average.

Reported gross margin decreased to 35.8% from 38.1% QoQ, with decline across several businesses.

EBIT (loss)

Reported EBIT (loss) was SEK -0.8 (-1.7) b.

Reported EBIT in the quarter was positively impacted by SEK 0.1 b. related to Ericsson Ventures investments. In Q2 2021, reported EBIT was negatively impacted by SEK -0.8 b. from a commercial settlement.

Reported EBIT (loss) decreased to SEK -0.8 b. from SEK -1.2 b. QoQ. In Q1 2022, reported EBIT was negatively impacted by SEK -0.3 b. from revaluation of Ericsson Ventures investments.

Net sales rolling four quarters were SEK 8.7 b. and reported EBIT margin rolling four quarters was -32.9%.

Cash flow from operating activities

Reported cash flow from operating activities was SEK 6.3 (5.9) b. Cash flow was supported by improved EBIT, partly offset by an increase in working capital. Inventory increased but was partly offset by higher customer collections. Q2 2021 was positively impacted by higher IPR payments. Taxes paid were SEK -1.0 b.

Free cash flow

Free cash flow before M&A was SEK 4.4 (4.1) b. Capex net and other investing activities were SEK -1.3 (-1.1) b. mainly related to investments in test equipment in Networks. Repayment of lease liabilities was stable at SEK -0.6 b. YoY. There were limited M&A activities in the quarter and free cash flow after M&A was SEK 4.6 (4.0) b.

Cash flow from investing activities

Reported cash flow from investing activities was SEK 21.9 (-7.1) b. mainly due to the disposal of interest-bearing securities.

Cash flow from financing activities

Reported cash flow from financing activities was SEK -14.5 (4.3) b. driven primarily by the repayment of a USD -1.0 b. (SEK -10.0 b.) bond and the first of two equal dividend payouts of SEK -4.2 b. The second payout of SEK 1.25 per share (SEK -4.2 b.) will be paid out in October.

Financial position

Gross cash declined by SEK -3.8 b. QoQ to SEK 100.4 b. The repayment of a USD -1.0 b. (SEK -10.0 b.) bond and the payout of the dividend to shareholders were partly offset by the positive free cash flow and positive FX effect on cash positions held in foreign currency. Net cash increased by SEK 5.2 b. QoQ, from SEK 65.2 b. to SEK 70.3 b. as a result of the positive free cash flow and FX effect on cash, partly offset by dividend paid to shareholders and increase in reported debt held in foreign currency.

The average maturity of long-term borrowings as of June 30, 2022, was 4.4 years, an increase from 4.0 years 12 months earlier.

Liabilities for post-employment benefits decreased to SEK 25.3 b. from SEK 30.6 b. in the quarter, due to significantly higher discount rates. The Swedish defined benefit obligation (DBO) was calculated using a discount rate based on the yields of Swedish government bonds. If the discount rate had been based on Swedish covered mortgage bonds, the liability for post-employment benefits would have been approximately SEK 6.8 b. (SEK 18.5 b. lower than current DBO).

Return on capital employed (ROCE) was 12.8% (13.5%), where the decline was driven by an increase in capital employed, partly offset by improved EBIT.

Key data points

Market related

Source: Dell’Oro Mobile RAN Quarterly report 1Q 22. Numbers in brackets from Dell’Oro Mobile RAN outlook report February 2022.

Ericsson related

Group long-term financial targets

Net sales

Reported average seasonality last 3 years (2019–2021), %

Net sales may show large variations between quarters.

Sales to Russia amounted to SEK 4.1 b. in 2021.

Operating expenses excluding restructuring

Reported average seasonality last 3 years (2019–2021), SEK b.

Positive numbers = decrease in operating expenses.

Negative numbers = increase in operating expenses.

Operating expenses may show large variations between quarters.

M&A

Working to secure approval and close the Vonage transaction before end of July 2022.

Currency exposure

Parent Company

Income after financial items January–June 2022, was SEK 18.0 (5.7) b.

At the end of the quarter, gross cash (cash, cash equivalents, short-term investments and interest-bearing securities, non-current) amounted to SEK 85.1 (62.9) b.

There was a decrease in intercompany lending of SEK 3.7 b. and in intercompany borrowing of SEK 0.8 b. in the second quarter.

The Parent Company has recognized dividends from subsidiaries of SEK 16.7 (0.6) b. in the quarter.

The holding of treasury stock on June 30, 2022, was 4,009,306 Class B shares.

Other information

Legal proceedings

On October 4, 2021, Ericsson asked the U.S. District Court for the Eastern District of Texas for a declaration that Ericsson has, in its negotiations with Apple, complied with its FRAND commitment and all other applicable laws and policies that would affect the terms of Ericsson’s and Apple’s prospective license. On December 17, 2021, Apple filed a responsive case against Ericsson in the U.S. District Court for the Eastern District of Texas alleging, among other things, that Ericsson breached obligations associated with the licensing of its standard essential patents under FRAND terms.

Ericsson and Apple were not able to renew the now expired patent license agreement between the parties in a timely manner. On January 18, 2022, Ericsson filed three complaints with the US International Trade Commission (ITC) alleging infringement of 12 patents by certain Apple products. In addition, Ericsson filed companion lawsuits in the Western District of Texas alleging infringement of the same 12 patents. On January 19, 2022 Apple responded by filing a complaint against Ericsson in the ITC alleging that certain Ericsson products infringe three Apple patents.

In January of 2022, Ericsson also filed lawsuits in several jurisdictions in Europe (Germany, the Netherlands, and Belgium) and South America (Brazil and Colombia) alleging that certain Apple products infringe Ericsson patents. Apple likewise filed lawsuits in Germany and China alleging that certain Ericsson products infringe Apple patents and utility models. In the following months, Ericsson made further filings in the United Kingdom, the Netherlands, and Brazil alleging Apple products infringe additional Ericsson patents. Apple filed further lawsuits in Germany alleging Ericsson products infringe additional Apple patents.

PRESS RELEASES

April 20, 2022 | Ericsson’s Nomination Committee appointed

On April 20, 2022, Ericsson’s Nomination Committee for the Annual General Meeting 2023 has been appointed in accordance with the Instruction for the Nomination Committee resolved by the Annual General Meeting 2012.

The Nomination Committee consists of:

Johan Forssell is the Chair of the Nomination Committee.

Shareholders who wish to submit proposals to the Nomination Committee are welcome to contact the Nomination Committee. Proposals must be received in due time before the Annual General Meeting to ensure that the proposals can be considered by the Nomination Committee.

CONTACT THE NOMINATION COMMITTEE:

Telefonaktiebolaget LM Ericsson

The Nomination Committee

c/o The Board of Directors Secretariat

SE-164 83 Stockholm

Sweden

E-mail: nomination.committee@ericsson.com

https://www.ericsson.com/en/press-releases/2022/4/ericssons-nomination-committee-appointed

May 18, 2022 | Ericsson changes Group structure and Executive Team to execute on growth strategy

Ericsson’s strategy is to be a leader in mobile infrastructure and to establish an enterprise business. Today, Ericsson announces changes to the group structure and Executive Team to position itself to execute on its strategy and growth ambitions while continuing to invest in R&D to maintain its technology leadership. The new Executive Team roles and the new organization will take effect June 1, 2022.

Business Area Cloud Software and Services

To lead in the mobile infrastructure business, a Business Area Cloud Software and Services is created by merging Business Area Digital Services and Business Area Managed Services. This will enable Ericsson to capitalize on the convergence of cloud, software and services. Through the new structure, Ericsson will be able to leverage investments in R&D, increase cloud native expertise and build its combined offerings for automation and AI for service delivery. This will allow Ericsson to build on the success in recent years which includes strong development in the cloud native 5G core portfolio where 16 out of the 20 largest operators globally have chosen Ericsson. Managed Services has undergone a significant transformation in recent years with the introduction of the AI-driven Ericsson Operation Engine, enabling proactive and predictive network and IT operations and optimization, and a shift towards a more software-driven offering.

Per Narvinger is appointed Senior Vice President and head of Business Area Cloud Software and Services and will be a member of the Ericsson Executive Team. Narvinger is currently Head of Product Area Networks within Business Area Networks.

Jan Karlsson, currently head of Business Area Digital Services, will leave the Executive Team and instead drive the development of the Global Network Platform, reporting to CEO Börje Ekholm. As previously communicated, Peter Laurin, currently head of Business Area Managed Services will leave Ericsson for opportunities outside Ericsson.

“Through the new Business Area Cloud Software and Services we provide solutions that will help our customers automate the increasingly complex networks for cost advantages and speed to market. By combining the two business areas we can coordinate our investments in orchestration and AI solutions leveraging insight from our network operations. This will allow us to remain a technology leader in a constantly evolving market. I look forward to working with Per as we take the next steps in reaching Ericsson’s growth ambitions. I also want to thank Jan and Peter for their contributions to the Executive Team. They have both been instrumental in executing on our focused strategy and Ericsson’s turnaround”, says Börje Ekholm.

Business Area Enterprise Wireless Solutions

A new Business Area Enterprise Wireless Solutions, comprised of the current Cradlepoint business and Dedicated Networks, is created to take full accountability and focus to develop solutions to meet the growing needs of enterprises and create a dedicated go-to-market organization for enterprise customers including leveraging the established relationship with service providers. The new Business Area will enable Ericsson to build on recent success which includes strong growth for Cradlepoint as 5G coverage increases on the US C-band and the launch of Ericsson Private 5G (EP5G) in several leading markets.

George Mulhern is appointed Senior Vice President and head of Business Area Enterprise Wireless Solutions and will be a member of the Ericsson Executive Team. Mulhern is currently CEO of Cradlepoint.

Åsa Tamsons will continue in her role as Senior Vice President and head of Business Area Technologies & New Businesses which will continue to focus on developing new business solutions to accelerate growth across Ericsson’s core and enterprise businesses – building on the successful model established to incubate new growth businesses, such as Dedicated Networks and Cradlepoint.

“With this change we are taking important steps in our journey to execute on our strategy. The new Business Area Enterprise Wireless Solutions will provide the focus and conditions we need to thrive in the enterprise market and secure the next wave of success for this business. We are also excited to continue to invest in new businesses for our long-term growth through the proven model established in Business Area Technologies & New Businesses. I want to extend a warm welcome to George as he joins Ericsson’s Executive Team“, says Börje Ekholm.

Group Function Global Operations

The company is also changing its group function structure by adding a Group Function Global Operations. This function will combine the many support functions that are currently spread across the Company, including Sourcing, IT, Digital Transformation, Group Sales, Real Estate and the operations parts of the People and Finance Functions. By creating a global operations function, Ericsson will be able to run its global operations more effectively and consistently across the organization.

Moti Gyamlani is appointed Senior Vice President and head of Group Function Global Operations and will be a member of the Ericsson Executive Team. Moti is currently working as Head of Group Sourcing.

“Global Operations is created to achieve best-in class customer and employee experience by simplifying and digitalizing end-to-end process flows in the company. By creating this function, we will be able to better serve the needs of our customers and better support our people, making us more agile and more competitive. It is great to welcome Moti to the Executive Team and look forward to working together with him to create a world class global operations function”, says Börje Ekholm.

Executive Team changes

Arun Bansal, currently Executive Vice President and Head of Market Area Europe and Latin America, will leave the company to pursue other opportunities and will therefore step down from his EVP role with immediate effect. He has been with Ericsson since 1995 and has been in his current role for the last five years. The Acting Head of Market Area Europe and Latin America will be announced separately.

“Arun has been leading our Market Area Europe and Latin America for the last five years and has been instrumental in driving change across the organization, and in establishing and nurturing some of our most important customer relationships. I wish Arun all the best in his future endeavors”, says Börje Ekholm.

“After turning around the company, Ericsson is entering a new phase of growth. The changed group structure that we announce today represents exciting opportunities for our people, our customers and our business and will allow us to continue to grow our core mobile infrastructure business and capitalize on the fast-growing enterprise market. Within 2-3 years, we want to achieve our long-term goal of growing faster than the market and an EBITA margin (excluding restructuring costs) of 15-18% for the Group. I look forward to working together with the new Executive Team, and the whole Ericsson team, as we accelerate our work to execute on our strategy, strengthen our company culture and continue to grow the company with increased profitability”, concludes Ekholm.

Reporting segments

Following the new group structure, Ericsson will have the following reporting segments:

https://www.ericsson.com/en/press-releases/2022/5/ericsson-changes-group-structure-and-executive-team-to-execute-on-growth-strategy

June 9, 2022 | Update on Ericsson engagement with U.S. authorities

As previously announced, Ericsson has been engaged with authorities regarding the review and investigation of the Company’s conduct in Iraq. The United States Securities and Exchange Commission (SEC) has notified the Company that it has opened an investigation concerning the matters described in the company’s 2019 Iraq investigation report. It is too early to determine or predict the outcome of the investigation, but Ericsson is fully cooperating with the SEC.

https://www.ericsson.com/en/press-releases/2022/6/update-on-ericsson-engagement-with-u.s.-authorities

June 28, 2022 | Update on Ericsson’s proposed acquisition of Vonage

Ericsson continues to work closely with the Committee on Foreign Investment in the United States as it reviews its proposed acquisition of Vonage Holdings Corp. The merger has cleared all other requisite foreign and US regulatory approval requirements, and the parties are working to conclude the regulatory process as expeditiously as possible. Ericsson and Vonage remain fully committed to this transaction and are working towards closing before end of July, 2022.

https://www.ericsson.com/en/press-releases/2022/6/update-on-ericssons-proposed-acquisition-of-vonage

Ericsson is exposed to a number of risks in its activities. To stimulate identification and support cross-functional treatment within the Ericsson Group, risks are grouped in a number of categories, including for example risks relating to technology, IPR, compliance, project execution, operations, products and services, treasury and accounting, the geopolitical environment, M&A, cyber security and occupational health and safety.

Ericsson’s risk management is embedded into strategy development and operational processes and is a part of the Ericsson Group Management System to ensure accountability, effectiveness, efficiency, business continuity and compliance. Risks are defined in both a short-term and long-term perspective and are related to long-term objectives as per the strategic direction as well as to short-term objectives.

Risk factors and uncertainties of relevance to Ericsson are described in the Annual Report 2021 and in the Annual Report on Form 20-F 2021 (in the following the “Annual Report 2021”). Updates to these risk factors and uncertainties observed by Ericsson that are deemed of short-term relevance include, but are not limited to, the following risks described below:

Deferred Prosecution Agreement with the United States Department of Justice

On December 6, 2019, Ericsson entered into a Deferred Prosecution Agreement (DPA) with the United States Department of Justice (DOJ). In October 2021, Ericsson received correspondence from the DOJ stating its determination that the Company had breached its obligations under its DPA by failing to provide certain documents and factual information. On March 1, 2022, the DOJ informed Ericsson that the disclosure made by the Company prior to the DPA about its internal investigation into conduct in Iraq in the period 2011 until 2019 was insufficient. Furthermore, it determined that the Company breached the DPA by failing to make subsequent disclosure related to the investigation post-DPA. As mentioned in the Annual Report 2021, the Company is in communication with the DOJ regarding the facts and circumstances of the breach determinations and is committed to co-operating with the DOJ to resolve the matters. While the length of the process cannot be determined, the resolution of these matters could result in a range of actions by DOJ, and may likely include additional monetary payments, the magnitude of which cannot at this time be reliably estimated. Accordingly, no provisions have been recorded for such potential exposure.

Business in Russia

As mentioned in the Annual Report 2021, including in the risk factor 1.1 and 3.2, conducting business throughout the world makes Ericsson subject to the effects of general global economic conditions as well as conditions unique to specific countries or regions. In addition to the risk factors described in the Annual Report 2021 and the provision recorded by the Company in Q1 2022, the large uncertainties relating to the Russian market, including the applicable and changed sanctions landscape, lead to large uncertainties relating to other potential costs and consequences that may follow. All of the above could have a material adverse effect on the Company, including its reputation, business, financial condition, results of operations (EBIT), cash flows, or prospects.

We are subject to certain US and other anti-corruption (including anti-bribery, anti-money-laundering, sanctions, terror finance and anti-terrorism) laws, rules and regulations. Ericsson may be subject to further adverse consequences under the DPA with the DOJ and the injunction issued in connection with the settlement with the SEC, both from 2019, and other investigations by the DOJ and SEC

As mentioned in the Annual Report 2021, including in the risk factor 3.3, in February 2022, the Company publicly disclosed a 2019 internal investigation that included a review of the conduct of Ericsson employees, vendors and suppliers in Iraq during the period 2011–2019. The Company is responding to investigative inquiries from the DOJ and SEC about the matters described in the Iraq investigation report, including allegations relating to illegal financing of terrorism and bribery.

Ericsson is involved in lawsuits, legal proceedings and investigations which, if determined unfavorably, could require the Company to pay substantial damages, fines and/or penalties

As previously disclosed, on March 3, 2022, Telefonaktiebolaget LM Ericsson and certain officers of Ericsson were named as defendants in a putative class action filed on behalf of investors in Ericsson securities in the United States District Court for the Eastern District of New York. The complaint alleges violations of United States securities laws, in connection with allegedly false and misleading statements principally concerning the Company’s adherence with its compliance and disclosure policies and obligations and the conduct of its business in Iraq.

This report has not been reviewed by Telefonaktiebolaget LM Ericsson auditors

Date for next report: October 20, 2022

Media and analyst briefing

Ericsson invites media, investors and analysts to a conference call and live video webcast at 9:00 AM CEST on July 14, 2022.

Link to the webcast, dial-in to audio conference, supporting material and replay will be available at:

www.ericsson.com/investors and

www.ericsson.com/newsroom

For further information, please contact:

Carl Mellander, Senior Vice President, Chief Financial Officer

Phone: +46 72 583 88 70

E-mail: investor.relations@ericsson.com or

media.relations@ericsson.com

Stella Medlicott, Senior Vice President, Chief Marketing and Communications Officer

Phone: +46 73 095 65 39

E-mail: investor.relations@ericsson.com or

media.relations@ericsson.com

Telefonaktiebolaget LM Ericsson

Org. number: 556016-0680

Torshamnsgatan 21

SE-164 83 Stockholm

Phone: +46 10 719 00 00

www.ericsson.com

Investors

Peter Nyquist, Vice President,

Head of Investor Relations

Phone: +46 70 575 29 06

E-mail: peter.nyquist@ericsson.com

Lena Häggblom, Director,

Investor Relations

Phone: +46 72 593 27 78

E-mail: lena.haggblom@ericsson.com

Stefan Jelvin, Director,

Investor Relations

Phone: +46 70 986 02 27

E-mail: stefan.jelvin@ericsson.com

Media

Kristoffer Edshage, Director of Corporate Media

Phone: +46 72 220 44 46

E-mail: media.relations@ericsson.com

Corporate Communications

Phone: +46 10 719 69 92

E-mail: media.relations@ericsson.com

This report includes forward-looking statements, including statements reflecting management’s current views relating to the growth of the market, future market conditions, future events, financial condition, and expected operational and financial performance, including, the following:

The words “believe,” “expect,” “foresee,” “anticipate,” “assume,” “intend,” “likely,” “projects,” “may,” “could,” “plan,” “estimate,” “forecast,” “will,” “should,” “would,” “predict,” “aim,” “ambition,” “seek,” “potential,” “target,” “might,” “continue,” or, in each case, their negative or variations, and similar words or expressions are used to identify forward-looking statements. Any statement that refers to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements.

We caution investors that these statements are subject to risks and uncertainties many of which are difficult to predict and generally beyond our control that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements.

Important factors that could affect whether and to what extent any of our forward-looking statements materialize include, but are not limited to, the factors described in the section “Risk Factors”, and in “Risk Factors” in the Annual Report 2021.

These forward-looking statements also represent our estimates and assumptions only as of the date that they were made. We expressly disclaim a duty to provide updates to these forward-looking statements, and the estimates and assumptions associated with them, after the date of this report, to reflect events or changes in circumstances or changes in expectations or the occurrence of anticipated events, whether as a result of new information, future events or otherwise, except as required by applicable law or stock exchange regulation.