Ericsson-True Partnership to Power Thailand 5G Ecosystem

Ericsson (BS:ERICAs) ERIC recently announced its collaboration with a leading communications conglomerate in Thailand — True Corporation. The collaboration is likely to aid the Thailand-based wireless service provider to bridge the digital gap for a seamless access to 5G technology. Also, the partnership will strengthen the Sweden-based communication equipment firm’s position in South East Asia.

Per the agreement, True will leverage Ericsson’s much-acclaimed 5G-supported Radio Access Network (RAN) technology for a cost-effective transition from 4G to the ultra low-latency 5G technology. The Swedish company’s 5G RAN is an integral component of its 5G Platform and includes software support for migration from LTE, a 4G mobile communications standard, to NR (New Radio), a global 5G standard. It reportedly provides an infrastructure required to meet the growing demand for high-bandwidth connections and support the real-time, high-reliability communication requirements of mission-critical applications.

Per the deal, True will deploy active antenna products with Ericsson’s Radio System to improve 5G user experience through 4G/5G dual connectivity with enhanced network capacity. Currently serving 26.2 million Thailand-based mobile network subscribers, True will utilize the Radio System to deliver an end-to-end 5G access system. Before this avant-garde network launch, both the companies had jointly conducted 5G pilot run in multiple locations of Thailand. Leveraging on these experiences from field study, True will be able to enhance its 5G coverage with 700MHz to 26GHz frequencies in the central-west, north and upper south regions of Thailand. Markedly, the rollout of 5G network has been in full swing since Mar 2020.

With 31 live networks in 17 countries, Ericsson is witnessing healthy momentum in its business, based on the strategy to increase its investments for technology leadership, including 5G. Its mobility report predicts 1.9 billion mobile 5G subscriptions globally by the end of 2024, up from 1.5 billion subscriptions predicted in the mobility report of 2018. In Networks, the company’s ongoing activities include investments in R&D to safeguard a leading product portfolio and cost leadership; increase investments in automation and serviceability, while lowering costs; and selectively gain market shares led by technology as well as cost competitiveness.

Ericsson has been doing relatively well during the COVID-19 pandemic. Although the company’s tepid first-quarter 2020 results had a limited impact on its operating income and cash flow, business momentum has been strong for the new portfolio of 5G and cloud-native products. Important 5G core contracts were signed with several tier 1 operators in 2020. The Digital Services segment’s gross margin also improved to 39.9% from 36.8%, supported by a higher share of software sales and improved hardware margins. Further, it is on track with its 2020 and 2022 financial targets, while focusing on strengthening its business in the long term. The company resorts to a restructuring plan to cut costs and streamline focus areas as well as explore options for the media business.

Zacks Rank & Other Key Picks

Ericsson currently carries a Zacks Rank #2 (Buy). It has a long-term earnings growth expectation of 25.9%. The stock has lost 17.3% compared with 17.1% decline of the industry in the past year.

Some other top-ranked stocks in the broader industry are InterDigital (NASDAQ:IDCC), Inc. IDCC, Opera (NASDAQ:OPRA) Limited OPRA and Radcom (NASDAQ:RDCM) Ltd. RDCM. While InterDigital sports a Zacks Rank #1 (Strong Buy), Opera and Radcom carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

InterDigital’s bottom line surpassed the Zacks Consensus Estimate thrice in the last four quarters. The company has a trailing four-quarter positive earnings surprise of 62%, on average.

Opera’s bottom line surpassed the Zacks Consensus Estimate twice in the last four quarters. The company has a trailing four-quarter positive earnings surprise of 192.9%, on average.

Radcom’s bottom line surpassed the Zacks Consensus Estimate thrice in the last four quarters. The company has a trailing four-quarter positive earnings surprise of 47.1%, on average.

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