Dive Brief:

• Carl Mellander, CFO for Swedish telecommunications company Ericsson will step down from his position in early 2024 following a 25-year tenure at the firm, according to a Monday press release.
• Mellander will depart at the end of Q1 2024, the Stockholm, Sweden-based company said, adding that it will begin a recruitment process to find his successor.
• Mellander’s departure was announced just prior to the telecom firm’s Q1 earnings released Tuesday. While Ericsson reported revenue above expectations, it is continuing to brace for a slowdown in 5G-related spending in mature markets such as the U.S., according to the company’s earnings report.

Dive Insight:

Mellander has served as the company’s finance chief for nearly seven years, beginning in July 2016, according to his LinkedIn profile, and previously served in a variety of roles for the telecom company including as its group treasurer and as a regional CFO for its Northern Europe unit.

He has been “critical in the turnaround of Ericsson and in laying the foundation for the next chapter of our strategy,” President and CEO Börje Ekholm said of Mellander’s resignation during the company’s earnings call. The fact that Mellander is staying on until next year will help the company to execute on its cost savings strategy while also supportng a smooth transition, Ekholm said.

Mellander’s departure comes as the mobile networks provider reported a mixed quarter, with net income of 1.6 billion Swedish kroner ($152 million USD), as well as revenue of SEK 62.6 billion above expectations of SEK 60.57 billion, according to its earnings results.

The company is also taking steps to execute on planned cost savings as well as a wider company restructuring plan, the latter of which could represent SEK 7 billion in costs for the full year, the company said.  As part of its bid to slash costs by SEK 9 billion by the end of the year, Ericsson announced it would be reducing its workforce by approximately 8% in early February, according to a report by Bloomberg.

Ericsson also issued warnings of a pullback related to 5G spending which affected its network sales, down 2% year-over-year, with customers in the company’s early 5G markets having “slowed the deployment pace somewhat,” Ekholm said in a statement included in the company’s earnings results.

The 5G space reached a “tipping point” in 2022, with networks now active in 47 of the world’s 70 largest economies by GDP, according to a recent report by network test provider VIAVI. The U.S. displaced China as the country with the highest number of 5G cities for the first time, the State of 5G report said, while 18 countries — including India and Mexico — announced their first 5G network deployments last year.

This has led to a shift in the 5G industry as spending shifts to developing markets. Sales particularly slumped in North America, Ericsson reported, declining 26% annually due to a lessening in customer inventory levels as well as reduced capex spending, following previously high investment levels over the past two years.

However, “we had strong growth in markets where the massive 5G rollouts have begun more recently,” Mellander said Tuesday, with a boost in sales in the company’s East Asia, Oceania and India segment offsetting some of the weakness in North America.

Sales for the segment rose by 132% YoY, an increase driven mainly by 5G market gains in India, the company said. India is now the second-largest market for Ericsson in terms of sales, Mellander said.

Still, Ericsson “continues to see a choppy environment during 2023 with poor visibility,” Ekholm said. “In Q2, we expect operators to remain cautious with capex investments and to continue to adjust inventories.”

Within its quarterly results, the company also reported it had reached a resolution with the U.S. Department of Justice relating to breaches of a 2019 Deferred Prosecution Agreement (DPA).

The company agreed to pay a $206 million criminal penalty relating to the breach of the DPA, and will also plead guilty to engaging in a scheme which violated the Foreign Corrupt Practices Act (FCPA) by “paying bribes, falsifying books and records, and failing to implement reasonable internal accounting controls in multiple countries around the world,” the DOJ said in a March press release.

The breaches were “contractual and non-criminal in nature,” and the resolution will enable the company to “focus on strategic execution and cultural change,” Ericsson said. The DOJ has not identified criminal conduct past 2016, it said. The payment, which occurred in early April, was not included in Q1’s numbers but will be recorded in Q2, Ekholm said Tuesday.