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Ericsson Reached an $81 Million Settlement with RCom

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Ericsson originally sought over $150 million from RCom

Ericsson (ERIC) has accepted a payment of $82 million to settle a dispute over dues with Indian mobile operator Reliance Communications (or RCom). The settlement paves the way for RCom to sell off its assets to raise funds toward paying down its debt. RCom is expected to release Ericsson’s settlement payment by September 30, according to a report by the Economic Times.

Ericsson originally sought to recover more than $150 million from RCom, but it seems to have agreed to lower its claim after lengthy negotiations with RCom to settle the dispute outside bankruptcy court. RCom is selling its wireless assets to rival Reliance Jio, while Brookfield is buying its real estate properties.

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Settlement to eliminate distraction for Ericsson

For Ericsson, the settlement with RCom will eliminate a distraction as the company redeems time and funds spent on court matters. The settlement is also poised to boost Ericsson’s cash position, and it comes at a time when Ericsson is continuing to invest in 5G (fifth-generation) research. Ericsson exited the first quarter with ~$4.0 billion in cash.

In the past six months, Ericsson has struck deals with several European lenders to borrow more than $600 million to fund its 5G research.

5G to drive demand for network equipment

Ericsson and Nokia (NOK) are banking on 5G network deployments by mobile operators and the adoption of 5G services by consumers to stimulate demand for their products, particularly networking equipment. Verizon (VZ) and AT&T (T) are set to begin commercial 5G network deployments in select US markets this year, while T-Mobile (TMUS) is eyeing nationwide 5G coverage by 2020.

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