Ericsson Boosts R&D Efforts In 5G Technology With NIB Loan
Zacks Investment Research | Dec 23, 2019 09:38PM ET
Recently, Ericsson (BS:ERICAs) (NASDAQ:ERIC) communicated that it has inked an agreement for credit facility with the Nordic Investment Bank (NIB) for $150 million, maturing in 2025. Of this, $98 million would replace credit with the NIB that was slated to mature in 2021. The company’s share price increased 0.45% in Monday’s trading session to close at $8.84.
The Swedish telecom equipment maker continues to witness strong momentum in its business owing to its strategy to increase investments for technology leadership, including 5G. In Networks business (which accounts for the lion’s share of total sales), Ericsson’s ongoing activities include investing in R&D to safeguard a leading product portfolio and cost leadership; increase investments in automation and serviceability driving down costs; and selectively gain market shares based on technology and cost competitiveness.
Apart from reinforcing its balance sheet, the loan has been granted to support Ericsson’s R&D investments in 5G technology during 2020-2022. The company invested SEK 38 billion in R&D in 2018. Ericsson has reached almost 80 commercial 5G agreements with communications service providers, of which 24 are live networks. Network deployments are likely to ramp up during 2020, building the foundation for massive adoption of 5G subscriptions.
Ericsson’s latest Mobility Report, issued in November, anticipates global 5G subscriptions to exceed 2.6 billion within the next six years, on the back of sustained momentum and a rapidly evolving ecosystem. The report states that 5G will cover up to 65% of the world’s population by the end of 2025 and handle 45% of global mobile data traffic. Average monthly data-traffic-per-smartphone is expected to rise from the current figure of 7.2 GB to 24 GB by the end of 2025, supported by consumer behavior like virtual reality streaming.
Moreover, growth in 5G subscription is expected to be significantly faster than that of LTE. The fastest uptake is likely to be in North America with 74% of projected 5G mobile subscriptions by the end of 2025. North East Asia is projected to follow at 56%, with Europe at 55%.
In October, the company completed the acquisition of Kathrein’s antenna and filter business in order to expand its Radio System portfolio with new products and capabilities. Ericsson has been executing its strategy and is on track to achieve its 2020 financial goals. It is working with operators to help in their network modernization, while optimizing on plenty of opportunities.
Shares of Ericsson have gained 7.6% compared with the Zacks Investment Research
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