Ericsson outlined aims to accelerate initiatives to cut costs by SEK9 billion ($880 million) by the end of 2023, while stating it was planning for a flat overall RAN market over the next three years, as it presented its wider strategy to investors.
In a statement updating on its Capital Markets Day 2022, the Swedish vendor explained it was preparing its cost base and operations for a flat overall network market, while forecasting annual growth of 11 per cent over the next three years for 5G RAN.
Underlying the flat market is a “technology shift to 5G from earlier generation”, Ericsson stated, while noting deployments of the technology was still in its early days, with only 20 per cent of all base station sites outside China installed with mid-band.
Ericsson said it was confident in its ability to capitalise on the long runway of opportunities presented by 5G, and with investments in a competitive portfolio, it remains committed to growing its 39 per cent RAN market share outside of China by 1 per cent a year and increasing profit growth.
For the cost-cutting push, it is targeting a run-rate gross reduction of SEK9 billion, of which 70 per cent comes from the cost of goods sold and 30 per cent in other areas of the business, which it hopes will offset headwinds such as inflation.
In its other segments, the vendor said it continued to execute on its enterprise strategy of finding ways of monetising 5G and eventually transition in to a platform company with new revenue streams for operators.
In cloud software and services, Ericsson said it aims to address network managed services, business and operations support systems and finally core networks. “The target is to reach break-even in full year 2023, with gradual improvements towards long-term sustainable profitability.”
Following its patent agreement with Apple last week, which ended litigation between the pair, Ericsson said there was “significant growth potential in IPR revenue” in the next 18 months to 24 months and it was “in a good position to pursue other, currently unlicensed” companies.
Ericsson confirmed its long-term target of an EBITDA margin in the range of 15 per cent to 18 per cent, stating it was committed to reaching the lower end. It also aims to generate free cash flow before M&A of 9 per cent to 12 per cent of sales by 2024.