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What’s Likely to Drive Ericsson’s Future Revenue?

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4G LTE in developing markets

We’ve seen that lower broadband spending and the completion of LTE (long-term evolution) rollouts in developed markets have driven the fall in Ericsson’s revenue during the last year or so. In 2Q17, Southeast Asia, Oceania, and India were the only regions where Ericsson didn’t experience a YoY (year-over-year) revenue decline.

Telecom infrastructure firms such as Ericsson (ERIC), Nokia (NOK), Cisco Systems (CSCO), and China’s (FXI) Huawei are now eyeing emerging economies where mobile operators are still enhancing network coverage to drive revenue.

Market research firm IHS Markit stated that the worldwide mobile infrastructure fell 10.0% YoY in 2016 to $43.0 billion. The LTE market is estimated to fall from $25.9 billion in 2015 to $12.0 billion in 2021 as well.

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5G to be major growth driver

The acceleration of 5G NR (new radio) trails and schedules has meant that 5G (fifth-generation) technology will most likely launch in 2019, whereas large-scale rollouts are likely to begin in 2020. IHS Markit expects the 5G market to touch the $2.0 billion mark in revenue by 2021, which will probably offset the decline in LTE for Ericsson and its peers. According to Ericsson’s Mobility Report, 5G subscriptions will exceed 500.0 million by the end of 2022.

To gain a leadership position in the 5G space, Ericsson (ERIC) has partnered with tech giants such as Cisco Systems (CSCO) and Verizon (VZ).

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