Investing.com – ADRs of Ericsson (NASDAQ:ERIC) traded 2.3% lower in Tuesday’s premarket as the telecom equipment maker’s market share in China eroded and sales fell.
Some impact was seen from disturbances in the supply chain as well and Ericsson warned “such issues will continue to pose a risk.”
China is the world’s largest market for 5G services. The Swedish company was caught in a tit-for-tat between China and Europe as the latter kept companies from the mainland out of contracts of their telecom companies over security issues and the Chinese responded in equal measure.
At one time, Ericsson was expecting big orders from Chinese carriers for deploying 5G networks, but with the acrimony showing no signs of abating it warned in July of a hit to its sales.
The warning came true as China Mobile (NYSE:CHL) awarded it a contract significantly smaller than previous ones. As a result, the company closed the third quarter with China’s contribution to its net sales halving to 5% from a year ago.
China sales declined by 3.6 billion Swedish crowns and the company told Reuters it plans to resize its sales and delivery framework in the country.
Strong sales in the U.S. helped the company absorb the damage in China. The company won 5G contracts from the three telecom firms there -- Verizon (NYSE:VZ), AT&T and T-Mobile -- and that kept the decline in sales at 2% to 56.3 billion Swedish crowns ($6.53 billion).
Net profit was 4% higher at 5.8 billion SEK.