Ericsson Aims to Suspend Its Russia Business in ‘Orderly Fashion’: CEO

Ericsson will record “extraordinary costs” of about 900 million Swedish krona ($94.3 million) from its decision to suspend its “effective business in Russia indefinitely,” said CEO Borje Ekholm on a Q1 earnings call Thursday.

When Russia invaded Ukraine Feb. 24, “we realized that our business in Russia could not be sustained, and we suspended all deliveries to Russia already at that point in time,” he said. When the exemption for public telecom networks was removed from the EU’s Russia sanctions on April 10, Ericsson immediately suspended its Russia operations, he said.

Withdrawing from Russia “is a complex matter, as telecommunication networks are part of the critical infrastructure,” plus many Western governments “have pointed out the importance of maintaining internet access and the flow of information for the people of Russia,” said Ekholm. “We will monitor the situation closely. We will continue to engage with the authorities, as we suspend our business in Russia indefinitely in an orderly fashion.”

The global supply chain headwinds remain “challenging,” said the CEO. “To ensure that we can deliver, we’ve made proactive investments in buffer inventory, among other things.” Ericsson also is investing in diversifying its supplier base “due to the geopolitical environment we’re in, and that’s an environment that we foresee to continue for quite some time,” he said. Though supplier diversification drives “some short-term costs,” it also “establishes greater resiliency in the company as it improves our ability to deliver to our customers,” he said.

Ericsson is “currently engaging” with DOJ about the company’s alleged breaches in its deferred prosecution agreement over its conduct in Iraq, said Ekholm. “It’s our assessment that the resolution will likely result in monetary and other measures,” he said. “However, the magnitude of these cannot, at this time, be reliably estimated. As this process is ongoing, we remain limited in what we can say about the historical events covered in the Iraq investigation and related matters.” DOJ didn’t comment.

The company experienced "very strong" momentum during the quarter in North America, where sales were up 9% year over year, said Ekholm. "Very high demand for 5G solutions across all segments" drove the increase, he said. "U.S. customers continue to be at the forefront of 5G deployment," including clients that report "good traction in fixed-wireless access as a new use case," he said.