During 9M 2024, Ericsson NT recorded a revenue decrease of 18% YoY, an EBITDA decline of 25%, and a net income of EUR 11.9m, a decrease of 42% YoY.
Starting with sales revenue, it amounted to EUR 168.1m during 9M 2024, noting a decrease of 18.4% YoY. The decrease came mainly due to lower sales revenue in the domestic market, caused by the contract expiration with HT which was completed at the end of last year. However, Ericsson NT noted that, with the exclusion of the same revenue in the past year (for a comparison purpose), the top line would note an increase of 6% – indicating stable performance. The group’s strategy is to strengthen business operations in export markets and in new business segments, which have already been showing results. Sales revenue in the operator segment in the export markets and the Digital Society segment recorded growth, partially offsetting the decline in sales revenue in the domestic market from the aforementioned HT contract expiration.
Breaking down the revenue by markets, domestic market revenue amounted to EUR 38.5m, a 52.2% decline YoY, due to the aforementioned non-renewal of the contract with HT. To further amplify the domestic market development, the operators are focused on 5G network monetization and have slowed down capital investments in the mobile telecom infrastructure.
Ericsson NT highlighted that at the beginning of 2024, they signed a cooperation agreement with HT, making Ericsson NT the exclusive supplier of the radio part of HT’s mobile network until 2027. The Company has also been working with A1 Hrvatska, under multi-year framework contracts, to expand the coverage and capacity of the 5G radio network, and to modernize and construct the convergent core network. Group noted that activities of implementations successfully continue.
In the export markets (excluding services to Ericsson), revenue amounted to EUR 25.2m, a 20.8% increase YoY due to the realization of contracted activities. The Company signed a multi-year framework contract with Telekom Kosova for the complete modernization and maintenance of the radio network. With Kosovo operator IPKO, several projects for the modernization and maintenance of the core network were contracted. Additionally, with HT Mostar, the implementation of the latest technological version of Ericsson Evolved Packet Core (EPC) and Diameter Signaling Controller (DSC) solutions was contracted. Projects were also contracted with Crnogorski Telekom and Ucom Armenia for the modernization and maintenance of mobile networks.
In the Ericsson market, revenue amounted to EUR 104.4m, mostly flat YoY development. Overall, R&D activities are increasing YoY. In Q3, Ericsson NT’s R&D Center gained new responsibilities for the development of the 5G Radio Access Network.
Ericsson NT sales breakdown by market (9M 2020 – 9M 2024, EURm*)
Source: Ericsson NT, InterCapital Research
*Converted using CNB’s EUR/HRK average exchange rate for the quarters in question
The EBITDA decreased 24.6% YoY to EUR 22m. The EBITDA margin was 13.1%, a decrease of 1.1 p.p. YoY, driven by operating expenses declining faster than revenue. In 9M 2024, OPEX decreased 17% YoY to EUR 154.6m. The main driver of this decrease was the cost of raw materials and consumables, which declined 35.6% YoY to EUR 59.2m, while net salaries and wages declined 8.4% YoY to EUR 91.1m. This suggests that, along the lower business volume, inflationary pressures, especially for material costs, have largely dissipated. Moving on, the net financial result improved almost 3x YoY to EUR 840k, driven by higher interest income. This should not be a surprise, as short-term financial assets also increased in the balance sheet. Taking everything into account, a net income of EUR 11.9m experienced a 41.9% decrease YoY. Consequently, the net margin declined by 2.8 p.p. to 7.1%.
Ericsson NT key financials (9M 2024 vs. 9M 2023, EURm)
Source: Ericsson NT, InterCapital Research
Also, we note that recently, Ericsson NT published a notice of the EGM, you can read more about it here (Croatian only). Finally, during the previous week, Gordana Kovačević, the president of the Group, won another term in office.
Ericsson NT YTD share price development
Source: Bloomberg, InterCapital Research
Looking at this year’s (so far) share price development, we can clearly see that the share price has been under pressure, reflecting the loss of the Managed Services deal with HT – directly impacting Group operating result. However, The Internal Ericsson market remains the backbone of the company’s performances. Ericsson NT has a competitive R&D center, and as one of its strategic goals is to stimulate future margin expansion.
