Ericsson (NASDAQ:ERIC) Q2 2020 Earnings Conference Call - Final Transcript

Jul 17, 2020 • 03:00 am ET

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Ericsson (NASDAQ:ERIC) Q2 2020 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Welcome to Ericsson's Analyst and Media Conference Call for the Second Quarter Report. To view visual aids for this call, please log on to www.ericsson.com/press or www.ericsson.com/investors. [Operator Instructions] As a reminder, replay will be available one hour after today's conference.

Peter Nyquist will now open the call.

Executive
Peter Nyquist

Thank you, Gary. And everyone, welcome to today's Q2 call. With me here in Stockholm, I have Borje Ekholm, President and CEO of Ericsson; and Carl Mellander, Chief Financial Officer.

Before starting, I would like to read these words. During the call today, we will be making forward-looking statements. These statements are based on current expectations and certain planning assumptions, which are subject to risks and uncertainties. The actual result may differ materially due to factors mentioned in today's press release and discussed in this conference call. We encourage you to read about these risks and uncertainties in our earnings report, as well as in our annual report.

With those words, I would like to hand over the word to Borje. Please, Borje.

Executive
Borje Ekholm

Thank you, Peter, and welcome, everyone, to our call for the second quarter. The human toll from COVID-19 is increasingly clear. It's impacting lives for all of us either directly or indirectly through the macro economy. However, despite the devastation from COVID-19, we've delivered a solid quarter. I'm very proud of all my colleagues here at Ericsson that have been able to execute in the middle of this pandemic.

We have reached this stage where we are now able to demonstrate how we can capture the benefit of our increased investments in R&D. We're demonstrating our technology leadership through customer momentum. We're increasing our market share in key markets, and we now have 99 commercial 5G contracts and 54 live 5G networks performing across 27 countries. But I would say we're mostly proud of our in-field performance of the equipment we deliver.

We are winning contracts based on our technology leadership. And we have selectively grown our strategic contract over the past quarters, which are now showing profitability in line with our plans. And they are now a normal part of our business. So on this basis, we will no longer be reporting on the strategic contracts, unless we see an extraordinary impact.

I'm very pleased to see that we have delivered a solid performance, which has been predominantly driven by the Networks and Digital Services. Our sales are SEK55.6 billion with an operating margin of 8.2%. During the quarter, we have increased our market position in Mainland China, winning contracts from all major players. This is important to us as a company as it provides us with the scale and, equally important, China will be a driver of important features for the futures. We have also seen an increase across several market areas, including Europe.

In segment Digital Services, we've been impacted by COVID-19 and related market uncertainty, and we have also seen a decline in our legacy portfolio. However, we see a strong demand for our cloud-native and