Q3 2023 Telefonaktiebolaget LM Ericsson (publ) Earnings Call

Speaker 1: Hello, everyone, and welcome to this Ericsson's third quarter 2023 results.

Hello, everyone and welcome to this ericsson's third quarter tend to turn to sturdy result.

Speaker 1: With me today, I have here in Sista our CFO , Carl Melander. And direct from New York, I have our CEO , Maria Korn.

With me today I have here and she stopped our CFO cornman under <unk>.

Indirect from New York I have our CEO Barry Quart.

Speaker 1: Last week Thursday we preannounced a Q3 numbers as we announced the impairment of goodwill attributed to our acquisition of Vonn.

Last week Thursday, we pre announced our Q3 numbers as we announced impairment of goodwill attributed to acquisition of vantage.

Speaker 1: Today, however, we will not only give you more details around the Q3 report.

Today, However, we will not only give you more details around the Q3 report.

Speaker 1: and expectations going forward. We would actually spend some time talking about DNP strep.

And expectations going forward, we would actually have to spend some time talking about our G&P stretch to do.

Speaker 1: So we'll start with Borye, summarizing Q3, and then we'll talk more about the DMP strategy. And then Karl will return back and give more details around the Q3 result and explain more about the DMP strategy.

So let's start with summarizing Q3, and then we'll talk more about DMT is jeopardy and then.

Call will be turned back and give him more details around the Q3.

And expectations going forward.

Speaker 1: As usual, we will end the presentation with a Q&A session.

As usual, we will end the presentation.

Q and a session.

Speaker 1: In order to ask those questions, you need to join the conference by telephoning.

And what does the Ulster as Kristin you need to join the conference by telephone.

Speaker 1: Details can be found at today's press release or at our website erickson.com slash investors.

Details can be found todays press release or at our website Ericsson Dot com slash investors.

Speaker 1: Please be advised that today's conference is being recorded.

Please be advised that today's conference is being recorded.

Speaker 1: But before handing over to Bori and Karl, I would like to say the following.

But before handing over 2 billion call I would like to say the following.

Speaker 1: During today's presentation, we will make forward-looking statements. These statements are based on our current expectations and certain planning assumptions, which are subject to...

During today's presentation, we will making forward looking statements. These statements are based on our current expectations.

Certain planning assumptions, which.

Are subject to risks and uncertainties.

Speaker 1: Actually solved my different material due to factors mentioned in today's press release and discussed in this conference.

Actual results may differ materially due to factors mentioned in today's press release and discussed in this conference call.

Speaker 1: We encourage you all to read about this risk and uncertainties in the earnings report as well as in the annual report.

We encourage you all to read about these risks and uncertainties.

In the earnings report as well as in the annual report.

Speaker 1: With that set, I would like to hand over the word to Boris. So, please, Boris.

With that said I would like to handle whatever two 2 billion so Pittsburgh.

Speaker 2: Thanks Peter. First of all welcome to our report presentation for the third quarter and thanks everyone for joining us.

Okay. Thanks, Peter first of all when it comes to our report presentation for the third quarter and thanks, everyone for joining us.

Speaker 2: As Peter mentioned, we will spend some time, some more time now on GMP and this presentation, but the first that may hit on some key takeaways. So Q3 was in line with our previously indicated expectations, with a bit soft the top line in North America, then we expected, but we bet the margins in the rest of the business.

As Peter mentioned, we are going to spend some time some more time now on G. M. P. In this presentation, but first let me hit on some key takeaways. So.

So Q3 was in line with our previously indicated expectation.

With a bit softer top line in North America than we expected, but with better margins than the rest of the business.

Speaker 2: Despite the uncertain macroeconomic backdrop, we continue to execute against our three key priorities.

Despite the uncertain macroeconomic backdrop.

We continue to execute against our three key priorities.

Speaker 2: Strengthen our leadership in mobile networks, build the bond technology leadership, grow our enterprise business, and drive a continued cultural transformation.

Strength in our leadership in mobile networks built upon our technology leadership.

Our enterprise business and drive continued cultural transformation.

We're encouraged by the progress, we're making and it's truly a testament to the strength of our team our strategy and the excellence of our product and our ability to execute.

Speaker 2: I would like to use this presentation to describe why we are excited about what we're creating with GMP and the value we believe it will deliver to our shareholders.

I would like to use this presentation to describe why we are excited about what we're creating with G. M P and the value we believe it will deliver to our shareholders.

Speaker 2: Carl will take you through the more financials in detail and outlooking in greater detail.

Carl will take you through the more financials in detail and outlook in greater detail.

Speaker 2: So in common with the rest of the industry, rising interest rates and changing demand trends have been headwinds to Vonage current core business. And the impairment we took last week is simply a consequence of this.

So in common with the rest of the industry rising interest rates and changing demand trends have been headwind. So bohn, that's current core business and the impairment. We took last week is simply a consequence of this.

Speaker 2: And Von Neck in itself remains key to our expansion into enterprise and to the transformation of our business.

Ball niche in itself remains key to our expansion into enterprise and to the transformation of our business. We believe this is a massive opportunity that can redefine our industry by providing a new source of revenues to the whole industry.

Speaker 2: We believe this is a massive opportunity that can redefine our industry by providing a new source of revenues to the whole industry.

Speaker 2: But first, let me touch on the market environment. Over the last two decades, we've seen that investments in the mobile infrastructure have had built in cycles and in aggregate, it's been overall flatish. We believe this pattern will continue. We don't believe the peak levels of 2022 will return, but we do believe that investments will normalize from current levels.

But first let me touch on the market environment over the last two decades, we've seen that the investments in the mobile infrastructure.

It has built in cycles and in aggregate. It's been overall flat days. We believe this pattern will continue we don't believe the peak levels of 2022 will return, but we do believe that the investments will normalize from current levels.

Speaker 2: And the reason for this recovery is that data traffic continues to grow and thus more capacity will be needed as well as modernisations of the networks will be needed.

And the reason for this recovery is that data traffic continues to grow and us more capacity will be needed as well as modernization of the networks will be needed.

Speaker 2: So it's important to note that while data traffic continues to grow at a very high rate.

So it is important to note that while data traffic continues to grow at a very high rate.

Speaker 2: This implies a market normalization, not an incremental market growth. So the reason for a flatish market for mobile infrastructure is really that the operator service revenues have only had very limited growth.

This implies a market normalization not an incremental market growth.

So the reason for a flattish market for mobile infrastructure is really that the operator or service revenues have only had very limited growth.

Speaker 2: And this is something we actually also see reflected in the operators market multiple.

This is something we actually also see reflected in the operator's market multiples.

Speaker 2: So to achieve growth in our core infrastructure market, we need a catalyst to increase service revenue growth for the operators.

So to achieve growth in our core infrastructure market.

Needed a catalyst to increase service revenue growth for the operators.

Speaker 2: And we need that by addressing new monetization opportunities. And this is what we've been driving with our global network platform. And more on that later on.

And we need that by addressing new monetization opportunities and this is what we've been driving with our global network platform and more on that later on.

Speaker 2: We remain committed to our long-term EBITDA margin target of 15 to 18 percent. And we ain't to get there as soon as possible. However, given that our customers are cautious on investments in a current uncertain market environment, we will not give guidance beyond Q4 of this year.

We remain committed to our long term EBITDA margin target of 15% to 18%.

To get there as soon as possible.

However, given that our customers are cautious on investments in the current uncertain market environment, we will not give guidance beyond Q4 of this year.

Speaker 2: We have started to see more positive discussions with operators about network investments, but it's clearly too early to call this a turning point.

We have started to see more positive discussions with the operators about network investments, but it's clearly too early to call. This a turning point.

Speaker 2: We are though confident that the recovery will come, but the timing is really in our customer's hands. And given that, we think it's prudent to plan for current market conditions to prevail into 2024.

We are though confident that the recovery will come.

But the timing is really in our customers' hands and given that we think it's prudent to plan for current market conditions to prevail into 'twenty 'twenty four.

Speaker 2: Therefore, that provides the basis for how we manage our business with the focus on cost control as well as operational efficiency.

Therefore that provides the basis for how we manage our business with a focus on cost control as well as operational efficiency.

Speaker 2: And with the actions we take, when the market recovers, we will actually see significant operating leverage in the business.

And with the actions we take when the market recovers, we will actually see significant operating leverage in the business.

Speaker 2: So now let me move over to comment on what we're building with Vonne.

So now let me move over to comment on what we're building with vantage.

Speaker 2: As you've heard us say before, we're on the journey to fundamentally reimagine our business. While this take time, we remain confident in our long-term plans and trajectory and believe that Ericsson has a very exciting future ahead of us.

As you've heard US say before we are on the journey to fundamentally re imagine our business. While these take time, we remain confident in our long term plans and trajectory and believe that the Ericsson has a very exciting future ahead of us.

Speaker 2: Our enterprise strategy and positive outlook on the global network platform remains unchanged. Positive interactions with customers have further strengthened our belief in the area.

Our enterprise strategy and positive outlook on the global network platform.

It remains unchanged positive interactions with customers have further strengthened our belief in the area.

Speaker 2: From a strategic lens, Vonage is developing how we saw it and how we envisioned it. So with Vonage, we're developing a platform business and have extended our growth trajectory in new and existing markets, adding to our total return profile for our shareholders. None of this would be possible without the acquisition.

From a strategic lens Vonage is developing how we saw it in how we envisioned it so with bond niche, we're developing a platform business and have extended our growth trajectory in new and existing markets, adding to our total return profile for our shareholders not enough.

This would be possible without the acquisition.

Speaker 2: This quarter we were also proud to announce that Vonage was recognized as a leader in 2023 Gartner Magic Quadrant for SIPA.

This quarter. We were also proud to announce that vantage was recognized as a leader in 2023, Gartner Magic quadrant for C pass.

Speaker 2: But let me take a step back now and expand on our strategy for this area a bit more.

But let me take a step back now and expand on our strategy for this area it's more.

Speaker 2: So in the coming five to 10 years, we will see an acceleration of major trends, such as electrification, the green revolution, resilience supply chain, increased efficiency, productivity and automation.

So in the coming five to 10 years, we will see an acceleration of major trends such as electrification the green Revolution resilient supply chain increased efficiency productivity and automation.

Speaker 2: These trends will not progress unless we fully leverage the mobile first, cloud first, and AI first world. Making this future reality will require ubiquitous high performance, differentiated networks, and the broad ecosystem of businesses and developers who can innovate and build upon the network's powerful capability.

These trends will not progress unless we fully leverage the mobile first cloud first an AI first world.

Making these two children reality will require ubiquitous high performance differentiated networks, and a broad ecosystem of businesses and developers, who can innovate and build upon the networks powerful capabilities.

Speaker 2: That's what we are doing through our strategy, making networks fully programmable and globally available will open interfaces and open APIs that enable continuous business growth and innovation.

That's what we are doing through our strategy, making networks fully programmable and globally available will open interfaces and open AP is that enable continuous business growth and innovation.

Speaker 2: This includes our investments into cloud ran and in doing all this, we can drive a much needed transformation of the telecommendus.

This includes our investments into cloud ran and in doing all this we can drive a much needed transformation of the telecom industry.

Speaker 2: The global network platform is a vital part in exposing the capabilities of the mobile network to the full ecosystem around us, including the developers. And at the heart of...

The global network platform is a vital part in exposing the capabilities of the mobile network to the full ecosystem around us including the developers.

And at the heart of all this is five G.

Speaker 2: With 5G, we have a technology that is 10 times more powerful than previous generations. And actually has a potential to revolutionize society.

We had five D. We have a technology that is 10 times more powerful than previous generations.

I actually have a has the potential to revolutionize society.

Speaker 2: While the previous generation of mobile technology digitalized the consumer and gave rise to the app economy, it was based on best effort connectivity. However, best effort connectivity is no longer good enough. Rapidly digitalizing enterprises need more than consumers.

While the previous generation of mobile technology digitalize, the consumer and gave rise to the App economy. It was based on best effort connectivity. However.

Stafford connectivity is no longer good enough.

Rapid digitalized enterprises need more than consumers.

Speaker 2: They need predictable and reliable connectivity with predetermined SLA.

They need predictable and reliable connectivity with pre determined escalates.

Speaker 2: and 5G was actually designed to do just

And five G was actually designed to do justice.

Speaker 2: With advanced capabilities such as speed, ultra low latency and the ability to offer differentiated quality of service.

With advanced capabilities, such as speeds ultra low latency and the ability to offer differentiated quality of service.

Speaker 2: 5G is a critical tool for transforming industries and consumers.

<unk> is a critical tool for transforming industries and consumers.

Speaker 2: So see on this potential, we must redefine how telecom industry delivers and captures value.

So see some this potential we must redefined how telecom industry delivers and captures value.

Speaker 2: A few years back we tested speed on demand with a push of a button. And so very strong interest from application develop.

A few years back we tested speeds on demand with a push of a button.

So very strong interest from application developers.

Speaker 2: But we also realized to commercialize this, it would require all developers to individually contract with operators around the world. And that was something that simply is not doable if we want to commercialize.

But we also realize to commercialize days it would require all developers to individually contract with operators around the world and that was something that simply is not doable, if we want to commercialize it.

Speaker 2: What was needed was instead an easy way to expose these advanced network capabilities, in this case, speed on demand.

What was needed but since there's an easy way to expose these advanced network capabilities in this case be it on demand.

Speaker 2: along with the strong developer community that actually can use their features to drive the next wave of innovation. And this is the underlying reason why we acquired Bonnet.

Along with a strong developer community that actually can use their features to drive the next wave of innovation and this is the underlying reason why we acquired bond niche.

Speaker 2: Vonich actually provides us with both the platform technology in CPAS and the developer community of today 1.4 million developers. We need to make our vision the reality.

Gordon It's actually provides us with both the platform technology to see pass and the developer community of today 1.4 million developers, we need to make obligation a reality.

Speaker 2: Longage is actually critical to our journey to build a platform business.

All niches actually critical to our journey to build the platform business.

Speaker 2: who recently took an important step towards the strategy and launched a global network platform, which combines the power of Vonage and network APIs, enabling mobile networks and applications to talk to each other.

Recently took an important step toward this strategy and launched a global network platform, which combines the power of walnuts and network api's, enabling mobile networks and applications to talk to each other.

Speaker 2: This platform makes it easy to expose, consume and pay for advanced network capability.

This platform makes it easy to expose close soon and paid for advanced network capabilities.

Speaker 2: Last month, we announced the historic milestone in the network API journey together with Deutsche Teleko.

Last month, we announced a historic milestone in the network API journey together with Deutsche Telekom.

Speaker 2: So powered by the Global Network Platform, DT is able to offer globally scalable, one-stop shop for both communication APIs, such as Voice, SMS, two-factor authentication, and enhanced security as well as network APIs, location, device, status, and quality on demand.

So powered by the global network platform D. T is able to offer a globally scalable one stop shop for both communication Api's such as voice SMS two factor authentication, and then highest security as well as network Api's location device that doesn't.

Quality on demand.

Speaker 2: Through the Global Network platform, we're creating a new market for exposing 5G capabilities, an opportunity that we believe or analysts estimate to be about $20 billion by 2028. And we aim to capture a sizable part of the market as we are the front runner today.

Through the global network platform, we're creating a new market for exposing five D capabilities.

An opportunity that we believe or analysts estimate to be about $20 billion by 2028.

And we aim to capture a sizable part of the market as we are the front runner today.

Speaker 2: We expect the first revenues from network APIs during 2023, although limited in scale.

We expect the first revenues from network Api's during 2023 although limited in scale.

Speaker 2: There is a change in the market now when we are discussing network APIs with all our customers today. And all of them see this as a major opportunity to monetize the network and the investment in five days.

There is a change in the market now when we are discussing network API as with all our customers today and all of them see days Thats, a major opportunity to monetize the network and the investments in <unk>.

Speaker 2: With network as a platform, every country buter in the ecosystem adds value to the whole. Basically creating a flywheel of exponential growth and innovation.

With network as a platform every contribute contributor in the ecosystem adds value to the whole basically creating a flywheel of exponential growth and innovation.

Speaker 2: It starts with a network API, APIs, that allow developers and enterprises to create enhanced service.

It starts with the networks API.

That allow developers and enterprises to create enhanced services. These solutions combined with before MS based business models.

Speaker 2: These solutions combine with performance-based business models offer CSP's new ways to monetize their net-

First csp's new ways to monetize their network.

Speaker 2: This attracts more CSPs to join the platform, which fuels network enhancements in order to meet growing demand for more advanced capabilities. And in turn, supports demand for our core business in mobile networks.

This attracts more csp's two joined the platform, which fuels network enhancements in order to meet growing demand for more advanced capabilities and in turn supports demand for our core business in mobile networks.

Speaker 2: We also start to see the interest from the developer community increasing as a function of network APIs for the reinforcing the flywheel.

We also start to see the interest from the developer community, increasing as a function of network Api's further reinforcing the flywheel.

Speaker 2: Wireless networks are truly transformative with its flexibility, broad and global availability and cost-efficiency.

Wireless networks are truly transformative wages flexibility broad and global availability and cost efficiency.

Speaker 2: We believe that by exposing them in an easy, scalable way, developers and businesses worldwide can use and build meaningful applications, making wireless networks the center of enterprise digitization and transformation.

We believe that by exposing them in an E C scalable way developers and businesses worldwide that plagued us and build meaningful applications, making wireless networks at the center of enterprises digitalization and transformation.

Speaker 2: What excites me is that this is just the beginning of an extraordinary opportunity for our industry. This will truly transform the telecom industry.

What excites me is that this is just the beginning of an extraordinary opportunity for our industry. This will truly transform the telecom industry.

Speaker 2: This is an entirely new opportunity that we're creating and developing together with Leading CSP.

This is an entirely new opportunities that we create.

Creating and developing together with leading csp's.

Speaker 2: The winners will be the ones who scale their platform first.

The winners will be the ones who stay in their platform first.

Speaker 2: The time is now to see some of this opportunity.

<unk> is now to see some of this opportunity.

Speaker 2: And we are very excited about our position, but now over to call for a review of the numbers for Q3.

And we are very excited about our position, but now over to Carl for a review of the numbers for Q3.

Speaker 2: Thank you, Burya, and very good morning to everyone. Thanks for joining us here.

Thank you Maria and a very good morning to everyone and thanks for joining us here.

Speaker 2: So, well, as you saw already last week, our Q3 results are in line with the guidance we should back in the Q2 report.

So well it is already last week. Our Q3 results are in line with the guidance we issued.

Back in the Q2 report.

Speaker 2: But I want to address some of the key items around the financials in the quarter. Before commenting on the underlying result, I just want to refer again to the impairment related to one edge good real that we announced also last week. And just to add to what Burial or the...

But I want to address some of the key items around the financials in the quarter.

Unknown Executive: Hello everyone and welcome to this Ericsson's third quarter 2023 result.

Before commenting on the underlying result, though I just wanted to refer again to the impairment related to vantage goodwill that we announced also last week.

Peter Jonsson: With me today, I have here in Sista, RCFO, Carl Mellander, and Rick from New York, I have RCO, Maria Colm. Last week Thursday, we pre-enounced the Q-free numbers as we announced the impairment of good will attributed to our position of Vonage. Today, however, we will not only give you more details around the Q-free report and expectations going forward. We will actually spend some time talking about our DMP strategy. So we'll start with Maria, summarizing Q-free and then we'll talk more about the DMP strategy and then Carl will return back and give her more details around the Q-free result and expectations going forward.

And just to add to what Barry already all the dimension.

Speaker 2: This impairment of 31.9 billion Swedish coroner corresponds to 50% of the total amount of good real and other intangible assets attributed to one edge.

These impairment of $31 9 billion Swedish kroner corresponds to 50% of the total amount of goodwill and other intangible assets attributed to Vonage.

Speaker 2: And the total good will in the group now post this impairment amounts to 56.7 billion. And I can also mention that we have done rigorous impairment testing of all of that. And that did not indicate any other impairment needs other than warning.

And the total goodwill in the group now post this empowerment amounts to $56 7 billion.

And I can also mentioned that we have done a rigorous impairment testing of all of that and that did not indicate any other impairment needs other than vantage.

Speaker 2: Now, turning to the underlying business assault. And first of all, if we have a look at the market and our top line then.

Now turning to the underlying business assault and first of all.

Have a look at the market and in our top line then.

Speaker 2: I would say much of the market development, the financial development we saw in the first and the second quarter continued into the third quarter.

Peter Jonsson: As usual, we will end the presentation with a Q&A session and in order to ask of question, you need to join the conference by telephone. Details can be found up today's press release or at our website Ericsson.com slash investors. Please be advised that today's conference is being recorded.

I would say much of the market development the financial development, we saw in the first in the second quarter continued into the third quarter.

Speaker 2: And as Bury Outline before, the telecom market outlook remains uncertain, but is expected to recover to more normalized levels over time.

And as Barry outlined before that the telecom market outlook remains uncertain.

<unk> is expected to recover to more normalized levels over time and.

Speaker 2: And we based this on the fundamentals. I mean, the operators need to continue to invest, to manage data traffic growth.

And we base. This on the fundamentals I mean, the operators need to continue to invest to manage data traffic growth.

Speaker 2: cost, NAB usage, network quality for their customer experience.

Peter Jonsson: But before handing over to Bury and Carl, I would like to say the following. During today's presentation, we will make forward-looking statements. These statements are based on our current expectations and certain planning assumptions, which are subject to risk and uncertainties. The actual result may differ material due to factors mentioned in today's press release and discussed in this conference call. We encourage you all to read about these risks and uncertainties in the earnings report as well as in the annual report.

Cost energy usage network quality.

For their customer experience.

Speaker 2: But what we see now the sales mix shift in the networks particularly that we have discussed many times where sales decrease in North America and increase in India with large rollout projects that continued in a similar manner in the third quarter.

And but what we see now the sales mix shift in the networks, particularly that we have discussed many times, where sales decrease in North America, an increase in India with large rollout projects that continued in a similar manner in the third quarter.

Speaker 3: And I would say we have worked a lot on our resiliency to limit the sensitivity to geographical mix changes. But of course we see an impact on group numbers from this mix change both on on on sales, cross-mode, and a bigger bold.

And I would say we have worked a lot on our resiliency to limit the sensitivity to geographical mix changes, but of course, we see an impact on group Pat numbers from this mix change both on on sales gross margin EBITDA and cash flow.

Unknown Executive: With that said, I would like to hand over the word to Bury. So please Bury. Okay, thanks Peter.

Speaker 3: So on top line, I'm a group organic satisfy by 10% and I would say primarily driven by a 60% drop in North America in the network space.

So on topline and group organic sales declined by 10% and I would say primarily driven by a 60% drop in North America in the networks business.

Maria Colm: First of all, welcome to our report presentation for the third quarter and thanks everyone for joining us. As Peter mentioned, we will spend some time some more time now on GMP and this presentation, but the first let me hit on some key takeaways. So Q3 was in line with our previously indicated expectations, with a bit softer top line in North America than we expected, but we bet the margins in the rest of the business.

Speaker 3: where we continue to see operators adjust inventory. We've talked about this many times, but also slower deployment pace.

Where we continued to see operators adjust inventory we've talked about this many times, but also slower deployment pace.

Speaker 3: I think it's important to note that Q3 last year in 2022 was an absolute record quarter in North America with very large volumes of radiosechip and deployed so that year-of-year comparison is very tough. But nevertheless, the 60% drop.

I think it's important though to note that Q3 last year in 2022 was an absolute record quarter in North America with very large volumes of radio shapes and deployed so that year over year comparison is very tough, but nevertheless, a 60% drop.

Maria Colm: Despite the uncertain macroeconomic backdrop, we continue to execute against our three key priorities. Strength and our leadership in mobile networks, build upon technology leadership, grow our enterprise business and drive a continued cultural transformation. We're encouraged by the progress we're making and it's truly a testament to the strength of our team, our strategy and the excellence of our product and our ability to execute. I would like to use this presentation to describe why we are excited about what we're creating with GMP and the value we believe it will deliver to our shareholders.

M. The.

Speaker 3: The drop down in North America was partly offset by continued role out in India, which continued at full speed, incredible speed. And our sales quadruple, quadruple actually, here over here, to almost 10 billion Swedish crowner in the quarter.

The dropdown in North America was partly offset by continued rollout in India.

Which continued at full speed incredible speed and our sales quadruple quadrupled actually year over year to almost at 10 billion Swedish kroner in the quarter.

Speaker 3: And we are talking here about large rollout projects and therefore working capital builds up and that's quite significant. We'll come back to that in a minute.

And we are talking here about large rollout projection and therefore working capital build Sop and that's quite significant I'll come back to that in a minute.

Speaker 3: We also saw that some front runner customers on 5E resumed investment.

We also saw that.

Some front run their customers on fiber you resumed investments.

Speaker 3: This is a bit of a second wave of 5G investments. It's encouraging, but I would say it's too early to see this as a trend. Nevertheless, the positive side.

Maria Colm: Carl will take you through the more financials in detail and outlook in greater detail. So in common with the rest of the industry, rising interest rates and changing demand trends have been headwinds of bondage current core business and the impairment we took last week is simply a consequence of this, and Von Nech in itself remains key to our expansion into enterprise and to the transformation of our business. We believe this is a massive opportunity that can redefine our industry by providing a new source of revenue to the whole industry.

This is a bit of a second wave of five G. M. S. Mats is encouraging but I would say it's too early to see this as a trend, but nevertheless, a positive sign.

Speaker 3: We closed another IPR license in agreement in the quarter. That's been announced earlier that positions as well to land additional agreements with previously unlicensed vendors. And IPR now, Nessay's landed at 2.8 billion in the quarter. We are on track to reach the levels that we have discussed before for the long run.

Are we close to another IPR licensing agreement in the quarter AR, that's been announced earlier that positions us well to.

To land additional agreements with with previously unlicensed vendors.

19, <unk> IPR now and that says landed at $2 8 billion in the quarter and we are on track to reach the levels that we have discussed before for the longer term.

Speaker 3: So that was top line. Secondly, gross margin, we came in at 39.2% excluding a restructuring.

So that was top line secondly, gross margin and we came in at 39, 2% excluding restructuring.

Speaker 3: Networks I want to highlight again with achieved 39.9% cross margin, which was very much in the upper part of the range that we had I did 4, 38 to 40%.

And that's where because I want to highlight again, which achieved 39, 9% gross margin, which was very much in the upper part of the range that we had guided for 38% to 40%.

Speaker 3: And of course, it again is the market makes that we talk about that continue to impact growth margin in networks. But however, and I think this is important actually achieving 39.9% growth margin is...

Maria Colm: And in aggregate it's been overall flatish. We believe this pattern will continue. We don't believe the peak levels of 2022 will return but we do believe that investments will normalize from current levels. And the reason for this recovery is that data traffic continues to grow and thus more capacity will be needed as well as modernizations of the networks will be needed. So it's important to note that while data traffic continues to grow at a very high rate, this implies a market normalization, not an incremental market growth.

And of course, it again is the market makes that would talk about that continue to impact gross margin in networks.

But however, and I think this is important actually achieving 39, 9% gross margin ace.

Speaker 3: strong proof point because it demonstrates the resiliency of our company. It's the final, how the business transformation that we've been on to over the years now has made us less sensitive to these swings between jobs.

A strong proof point because it demonstrates the resiliency.

Of our company its a sign of how the business transformation that we've been on to over the years now it's made us less sensitive to these swings between geographies.

Speaker 3: Third point regarding Ibiza Martin. We exceeded the previously mentioned expectations due to early positive effects of the cost out ambitions.

Third point regarding EBITDA margin.

We.

Exceeded the previously mentioned expectations due to early positive effects of the cold start ambitions.

Maria Colm: So the reason for a flatish market for mobile infrastructure is really that the operator service revenues have only had very limited growth. And this is something we actually also see reflected in the operator's market multiples. So to achieve growth in our core infrastructure market, we need a catalyst to increase service revenue growth for the operators. And we need that by addressing new monetization opportunities. And this is what we've been driving with our global network platform and more on that later on.

Speaker 3: So for the group we came in at 7.3%. That's the decline, of course, versus last year's 11.3. Again, driven by the growth scene coming in.

So for the group we came in at seven 3%, that's a decline of course versus last year's 11.3.

Driven by the grossing come in in the networks.

Speaker 3: Cloud software and services delivered actually well in the quarter, which I was a point four billion Swedish Troner. And here we continue to execute on the turnaround strategy that we launched actually at the CMD last year. We're talking about strict commercial discipline, improved software sales, accelerated service delivery automation.

Cloud software and services delivered actually well in the quarter.

There was a point for a billion Swedish kroner and here, we continue to execute on the turnaround strategy.

That we launched actually at the CMT last year, we're talking about strict commercial discipline improved software sales accelerated.

Accelerated service delivery automation.

As some of the key pillars that but.

Speaker 3: But given the nature of the cloud software and service business, results will fluctuate between individual quarters. So to assess how this business performs over time, my recommendation is to look more at the four quarter rolling basis.

But given the nature of the cloud software and service business results will fluctuate between individual quarters.

Maria Colm: We remain committed to our long term EBITDA margin target of 15 to 18% and we ain't to get there as soon as possible. However, given that our customers are courses on investments in a current uncertain market environment, we will not give guidance beyond Q4 of this year. We have started to see more positive discussions with operators about network investments, but it's clearly too early to call this a turning point. We are though confident that the recovery will come, but the timing is really in our customer's hands.

To assess how this business performs over time I My recommendation is to look more at the four quarter rolling basis.

Speaker 3: If you do that, you will see a positive EBITDA number. You find all those numbers in the back end of the report. And you can compare this positive number with the four quarters, one year earlier, where we had an EBITDA loss of over 1 billion Swedish grown-up. So we are clearly on track moving in the right.

And if you do that you will see a positive EBITDA number you find all those numbers in the in the backend of the report.

And you can compare this a positive number with the the four quarters one year earlier.

Where we had an EBITDA loss of over 1 billion Swedish krona. So we are clearly on track moving in the right direction.

Speaker 3: I would say, as you know, we have discussed a break even target for at least break even for Fulia 2023. We'll come back to guidance a bit more later, but this quarter is of course a good stepping stone towards that ambition.

And I would say as you know we have we have discussed our breakeven.

Target for or at least breakeven for full year 2023 will come back to the guidance a bit more later, but this quarter is of course, a good stepping stone towards that.

Maria Colm: And given that, we think it's prudent to plan for current market conditions to prevail into 2024. Therefore, that provides the basis for how we manage our business with the focus on cost control as well as operational efficiency. And with the actions we take, when the market recovers, we will actually see significant operating leverage in the business.

Ambition as well.

On the enterprise side, we are impacted by a weaker markets such as macroeconomic headwinds just like other participants in this ecosystem.

Speaker 3: But it's encouraging, though, to see that the global communications platform, as you will remember that, for everyone's interest science, deliver the positive data also in the third.

But it's encouraging though to say that the global communications platform and assay.

As you as you will remember that fairborn interest sites delivered a positive a bit also in the in the third quarter.

Maria Colm: So now, let me move over to comment on what we're building with Vonage. As you've heard us say before, we're on the journey to fundamentally reimagine our business. While this take time, we remain confident in our long-term plans and trajectory and believe that Ericsson has a very exciting future ahead of us. Our enterprise strategy and positive outlook on the global network platform remains unchanged. Positive interactions with customers have further strengthened our belief in the area.

Speaker 3: fourth point free cash flow before MNA came in at 0.5 billion negative. And this we have also explained many times that this is really a result of this. Same business makes shift, which includes big rollout products with a longer order to cash.

Fourth point, our free cash flow before M&A came in at 0.5 billion negative.

And this we have also explained many times that this is really a result of this same business makes shift which includes big rollout projects with a longer order to cash.

Speaker 3: cycle. Maybe I've explained that the Spanish a little bit more on this in North America and some of the other early markets customers largely managed the installment of equipment themselves

Cycle, and maybe if I should explain it to expand a little bit more on the Athene in North America and some of the other early markets customers largely manage the installment of equipment themselves. The payment terms are mainly related to timing of delivery hardware and software.

Speaker 3: Payment terms are mainly related to timing of delivery, hardware and software, rather than completion of sites and installment of equipment.

Maria Colm: From a strategic lens, Vonage is developing how we saw it and how we envisioned it, so with Vonage we're developing a platform business and have extended our growth trajectory in new and existing markets, adding to our total return profile for our shareholders. None of this would be possible without the acquisition.

Rather than completion of sites in an installment of equipment, but most of the large rollout projects on the other hand like in India.

Speaker 3: But most of the large roller products on the other hand, like in India.

Speaker 3: Contrast our rather project based, meaning that we have been assigned to build and install large-scale networks. And that leads, of course, to higher working capital in relation to sales volumes. But we expect the situation to taper off next year as the pace of these large rollers will decrease.

Contracts are rather predict based meaning that we have been assigned to build and install large scale networks and that leads of course to higher working capital in relation to sales volumes, but we expect this situation to taper off next year.

Maria Colm: This quarter, we were also proud to announce that Vonage was recognized as a leader in 2023, Gardiner Magic Quadrant for CPAST, but let me take a step back now and expand on our strategy for this area a bit more. So in the coming five to ten years, we will see an acceleration of major trends such as electrification, the green revolution, resilience supply chain, increased efficiency productivity and automation. These trends will not progress unless we fully leverage the mobile first, cloud first and AI first world.

The pace of these large rollouts will decrease.

Speaker 3: And when that happens, we expect to work in capital to reduce. And then gradually over time we will and should return to our long term free cash for targets as you know, nine to twelve.

And when that happens, we expect to our working capital to reduce and then gradually over time, we will and should return to our long term free cash flow targets as you know, 9% to 12% of that size.

Speaker 3: Finally, and at my fifth point on this slide, I wanted to highlight that we deliver on the cost out effort.

Finally, and as my fifth point on this slide I wanted to highlight that we deliver on the cost out efforts.

Speaker 3: Here today we have achieved run rate savings of 10.5 billion, of which 1.9 has impacted the P&L in the third quarter. It's about 1.2 in coastal sales, 0.7 in OPEC.

Year to date, we have achieved run rate savings of $10 5 billion.

Of which $1 nine has impacted the P&L in the third quarter.

It's about 1.2 in cost of sales 0.7 in Opex.

Maria Colm: Making this future reality will require ubiquitous high performance, differentiated networks and the broad ecosystem of businesses and developers who can innovate and build upon the network's powerful capabilities. That's what we are doing through our strategy, making networks fully programmable and globally available will open interfaces and open APIs that enable continuous business growth and innovation. This includes our investments into cloud ran and in doing all this, we can drive a much needed transformation of the telecom industry.

Speaker 3: The savings are primarily visible in the mobile network business less in enterprise, because in enterprise we continue to increase investments for value creation in that business, both when it comes to the product, meaning competitiveness, but also go to.

The savings are primarily be stable in the mobile networks basically it's lessening the price because in enterprise, we continue to increase investments for for value creation in that business. Both when it comes to the product, meaning competitiveness, but also go to market.

Speaker 3: We booked provisions for restructuring so far in the year, amounting to 5 billion, of which 0.9 in Q3, and that's all in line with the costs.

We booked provisions for restructuring so far in the year amounting to $5 billion of each 0.9 in Q3 and that's all in line with our with the coastal plants.

Speaker 3: So now with this track record with slightly head of our internal plans for cost out and as such we have raised the ambition of 1 billion to 12 billion Swedish crooner of run rate savings until the end of the year. And we will continue to take additional and decisive cost action cost out action as needed over.

So now with this track record with slightly ahead of our internal plans for cost out then and as such we have raised the ambition now by 1 billion to 12 billion Swedish kroner of run rate savings until the end of the year and we will continue to take additional.

Maria Colm: The global network platform is a vital part in exposing the capabilities of the mobile network to the full ecosystem around us, including the developers. And at the heart of all this is 5G. With 5G, we have a technology that is ten times more powerful than previous generations and actually has a potential to revolutionize society. While the previous generation of mobile technology digitalized the consumer and gave rise to the app economy, it was based on best effort connectivity.

And decisive cost actions cost out actions as needed over time.

Speaker 3: So we can move to the outlook for Q4. We are guiding basically for a key parameter.

So we can move to the outlook for Q4, we are guiding basically for our four key parameters we.

Speaker 3: We expect gross margin in networks to land within the range of 39 to 41% in Q4, so up from the guidance we had for Q3. Top line, seasonality between Q3 and Q4 in networks will be somewhat less than normal.

We expect gross margin in networks to land within the range of 39% to 41% in Q4, so up from the guidance we had for Q3.

Topline seasonality between Q3 and Q4 in networks will be somewhat less than normal.

Speaker 3: and this is mainly actually due to a specific factor and that's the fact that in the eyes expected to be sequentially flat.

And this is mainly actually due to specific factor unless the fact that India is expected to be sequentially flat Q3 to Q4.

Maria Colm: However, best effort connectivity is no longer good enough. Rapidly digitalizing enterprises need more than consumers. They need predictable and reliable connectivity with predetermined SLAs. And 5G was actually designed to do justice. With advanced capabilities such as speed, ultra low latency, and the ability to offer differentiated quality of service, 5G is a critical tool for transforming industries and consumers.

Speaker 3: In clouds of transfer, this is expected to reach at least break even for the full year, as we have said before, but with the lower sales top line seasonality than normal between Q3 and Q4.

In clouds of print services EBITDA is expected to reach at least breakeven for the full year as we had said before.

But with the lower sales top line seasonality than normal between Q3 and Q4.

Speaker 3: And again, it's important here to know that, given the characteristics of these business, we don't expect a linear result development quarter after quarter. Results will vary between quarters, depending on software delivery is project accept.

And again, a important here to note that given the characteristics of this business. We don't expect a linear result development quarter after quarter results will vary between quarters, depending on software deliveries project acceptance and so on.

Speaker 3: And then looking at Group of Bitamardin for fourth quarter, we expect to reach around 10%. We see similar market trends from QSV continuing in Q4. But we will see increased support from the cost outro.

And then looking at group EBITDA margin for the fourth quarter, we expect to reach around 10%.

Maria Colm: To see some of this potential, we must redefine how telecom industry delivers and captures value. A few years back, we tested speed on demand with a push of a button, and so very strong interest from application developed. But we also realized to commercialize this, it would require all developers to individually contract with operators around the world. And that was something that simply is not doable if we want to commercialize what was needed was instead an easy way to expose these advanced network capabilities, in this case, speed on demand.

And we see similar market trends from Q3, continuing in Q <unk> Q4.

But we will see increased support from the cost out program.

Speaker 3: And here on the slide you see a few other planning assumptions related to OPEX, Amartization, Restructuring. But if you shall please refer to the report for the full set of planning.

And here on the slide you see a few other planning assumptions.

Related to Opex amortization restructuring.

But as usual please refer to the food to the report for the full set of planning assumptions.

Speaker 3: So with that, thank you and I would like to hand back the word to Burya.

So with that thank you and I would like to hand back the word to <unk>.

Okay. Thank you Carl.

Speaker 2: So while near-turned dynamics are uncertain, our long-term conference remains undiminished. In the current environment, we focus on what's within our control and executing on our strategy to extend our leadership in mobile networks, grow our enterprise business, and drive a lasting culture transformation.

So while near term dynamics are uncertain, our long term confidence remain on diminished in the current environment, we focus on what's within our control and executing on our strategy to extend our leadership in mobile networks grow our enterprise business and drive lasting cultural transformation.

Maria Colm: Along with the strong developer community, that actually can use the features to drive the next wave of innovation, and this is the underlying reason why we acquired Vonage. Vonage actually provides us with both the platform technology in CPAS and the developer community of today 1.4 million developers, we need to make our vision the reality. Vonage is actually critical to our journey to build a platform business, who recently took an important step toward this strategy and launched a global network platform, which combines the power of Vonage and network APIs, enabling mobile networks and applications to talk to each other. This platform makes it easy to expose, consume and pay for advanced network capabilities.

Speaker 2: As we look ahead, we see the mobile network investments intensity is on the lower end as our customers are cautious with investments. And this gives us good confidence recovery. We'll come. Until then, we will continue to take action, that position erics on in the best way to create value.

As we look ahead, we see that mobile networks investments intensity, it's on the lower end as our customers are cautious with your investments and this gave us a good confidence the recovery will come until then we will continue to take actions that position, there Exxon and the best way to create value.

Speaker 2: which with a market recovery of course will create good operating leverage.

Which with the market's recovery of course will create good operating leverage.

Speaker 2: I'm very confident in our team and the work they do every day. So our goal is to make Ericsson a more profitable company, returning to our cash flow target and capturing the next major wave of network innovation with a substantial platform business. With that, I think it's time for some Q.

I'm very confident in our team and the work. They do every day. So our goal is to make Ericsson and more profitable company.

Turning to our cash flow targets and capturing the next major wave of network innovation with a substantial platform business.

Maria Colm: Last month, we announced the historic milestone in the network API journey, together with Deutsche Telefon. So powered by the global network platform, DT is able to offer globally scalable, one-stop shop for both communication APIs, such as Voice, SMS, two-factor authentication, and enhanced security as well as network APIs, location, device, status, and quality on demand. Through the global network platform, we're creating a new market for exposing 5G capabilities, an opportunity that we believe or analysts estimate to be about 20 billion dollars by 2028.

With that I think it's time for some Q&A Peter.

Speaker 1: That's correct, Boree. So we will now then start the Q&A session. As the reminder, as you ask a question, you need to press one or star one and one at your telephone. And wait for your name to...

That's correct, yeah, So where we went out and start the Q&A session as a reminder.

As you ask a question you need to press.

Ron or star, one and one at your telephone.

And wait for you're not known to be announced.

Speaker 1: If you're a three-minute webcast, please mute the webcast audio while asking the question and then minimize the audio feedback.

If you're a student of music webcast. Please mute the webcast.

While asking the question and then minimize the audio feedback.

Speaker 1: So let's look at the queue here. I don't think I have the...

So let's look at the Q here I don't think I have this.

Speaker 1: First question from Alexander Petek, episode city general. Good morning, Alexander.

First question from Alexandre protect <unk> Societe Generale.

Maria Colm: And we aim to capture a sizable part of the market as we are the frontrunner today. We expect the first revenue from network APIs during 2023, although limited in scale. There is a change in the market now when we are discussing network APIs with all our customers today, and all of them see this as a major opportunity to monetize the network and the investment in 5G. With network as a platform, every contributor in the ecosystem adds value to the whole, basically creating a flywheel of exponential growth and innovation.

Morning Alexandre.

Speaker 4: Good morning everyone, thank you for taking a question. The first one will be just in broad terms. I know you don't guide on 24. Now that we no longer have this 16% EBTA margin target, but could you give us a sense of whether you think networks cost margins were towards plateau around 40%.

Good morning, everyone and thank you for taking my question. The first one would be just.

In broad terms I know you don't guide on 'twenty four nowadays, we no longer have the 16% EBITDA margin targets, but could you give us a sense of whether you think networks gross margins well towards.

Plateau around 40%.

Speaker 4: that you hold in the third quarter and also into the fourth quarter, despite the adverse development of the US market. So would you be able to hold this into next year or maybe improve it given the cost actions you're taking? And then just a very quick follow up on India, is that now leveling off at high levels and may roll off into the clients next year, or do you see further expansion there? Thank you.

You hold in the third quarter and also into the fourth quarter. Despite the adverse developments in the U S market. So could you would you be able to hold it into next year or maybe improve it given the given the cost actions you're taking and then just a very quick follow up on India is that now leveling off at high levels and May roll off.

Maria Colm: It starts with a network API that allows developers and enterprises to create enhanced services. These solutions combine with performance based business models, offer CSPs new ways to monetize their network. This attracts more CSPs to join the platform which fuels network enhancements in order to meet growing demand for more advanced capabilities. And in turn, supports demand for our core business in mobile networks. We also start to see the interest from the developer community increasing as a function of network APIs for the reinforcing the flywheel. And use and build meaningful applications, making wireless networks the center of enterprise digitization and transformation.

And to the clients next year or do you see further expansion there. Thank you.

So I'll start yeah, sorry, I thought <unk>, yes, I think what we what we say here in the report is really that the tides will turn in the market mix is it going to recover at some point the timing is unclear.

Speaker 3: Yes, I think what we say here in the report is really that the PIDs will turn the market mixes going to recover at some point. The timing is unclear.

Speaker 3: But if you look at the law of forecast for example North America is Would grow by 15% next year

But if you look at the lower forecast for example, North America is a would grow by 15% next year and India to weight within now your last question, India will taper off that's that's quite clear from the record year in 2022.

Speaker 3: And India to wait with you now your last question, India will taper off. That's quite clear from this record year in 2022.

Speaker 3: I think that could support our growth smart in development in networks combined with the other thing that you also mentioned yourself, the cost out, which we have seen a part of the effect so far in the P&L. But of course, as we reach the end of the year, we will have completed all of that, 12 billion cost reduction, and that will play out also in cost of sales. So those are some of the factors that we'll support going forward.

So I think that that could.

Support gross our gross margin development in networks combined with the other thing that you also mentioned yourself the cost out which we have seen are a.

Part of the effect so far in the P&L, but of course as we reached the end of the year. We will have completed all of that 12 billion cost reduction and that will play out also in coastal side. So those are some of the factors that that will will support going forward.

Thank you Colm.

Thank you Aleksander for those questions.

Speaker 1: We will move to the next question. The next question will come from the line of...

We will move to the next question and the next question will come from the line of.

Maria Colm: What excites me is that this is just the beginning of an extraordinary opportunity for our industry. This will truly transform the telecom industry. This is an entirely new opportunity that we're creating and developing together with leading CSPs. The winners will be the ones who scale their platform first.

Let's see here.

I think it's.

Speaker 1: You work in Gunell at DNB. Good morning, you work in.

You were Kim <unk> at Dnb, Good morning, you walk him.

Speaker 5: Good morning. So two questions from my side. 40 months, a bit for Andrew. I'll ask based on the positive customer discussions here, but of course, no visibility. Can you just comment on to what extent you have very conservatism into your view of a quarter 2022 for market recovery, other than walking away from the margin target.

Good morning, So two questions from my side, starting off a bit for Andrew.

Maria Colm: The time is now to see some this opportunity and we are very excited about our position.

Based on the positive your customer discussions here, but of course no visibility can you just comment on to what extent you have very conservatism into your view of quarter to try to transfer market recovery other than walking away from the margin targets.

Carl Mellander: But now over to Carl for a review of the numbers for Q3. Thank you, Burya. And a very good morning to everyone. Thanks for joining us here. Well, as you saw already last week, our Q3 results are in line with the guidance we issued back in the Q2 report. But I want to address some of the key items around the financials in the quarter. Before commenting on the underlying result, I just want to refer again to the impairment related to oneage goodwill that we announced also last week.

Yeah.

Or are they do you want to start to this one.

Speaker 2: I can start. I would say, I think what we like to do is basically to say that there will be a recovery in the market. It's going to happen. Timing is unknown and given that, we think it's just proved and to plan for the current market conditions to prevail.

I can start I would say.

I think what we like to do is basically to say that there will be a recovery in the in the market is going to happen.

Carl Mellander: And just to add to what Burya already mentioned, this impairment of 31.9 billion Swedish Corona corresponds to 50% of the total amount of goodwill and other intangible assets attributed to oneage. And the total goodwill in the group now post this impairment amounts to 56.7 billion. And I can also mention that we have done rigorous impairment testing of all of that and that did not indicate any other impairment needs other than oneage.

The timing is unknown and given that we think it's just prudent to plan for the current market conditions to prevail.

Speaker 2: So that allows us to take the right actions on the coast side, the way we run the company, basically for operational efficiency. And when we set ourselves up that way, so when the market recovery comes, we get the operating level.

So that allows us to take the right actions on the cost side the way we run the company basically for operational efficiency and when we set ourselves up that way. So when the market recovery comes we get the operating leverage so we're kind of plan.

Speaker 2: So we're kind of, you know, planning more cautiously in that sense.

Planning more cautiously in that sense.

Speaker 2: But rather saying, when the recovery comes, let's talk about it at that point in time.

Drive, let's say when the recovery comes let's talk about it at that point in time.

Speaker 5: Perfect. And then one question for Carl. What in particular does the additional CX1 billion in cost savings pertain to? And can you also comment a bit on the timing of identifying those at this stage? Thank you.

Perfect and then one question for Carl.

Carl Mellander: Now turning to the underlying business result. And first of all, if we have a look at the market and our top line then. I would say much of the market development, the financial development we saw in the first and the second quarter continued into the third quarter. And as Bury outlined before the telecom market outlook remains uncertain, but is expected to recover to more normalized levels over time. And we based this on the fundamentals.

What in particular industrial additional CHF 1 billion in cost savings pertaining to <unk>.

Also comment a bit on the timing of identifying those.

At this stage thank you.

Speaker 3: Sure, you are keen. No, I would say this is also a learning from the last time around when we had a big cost at F4. That once you start this machinery, you find more efficiency. It's more possibilities to take out the structural costs.

Sure Joachim though I would say this is also a learning from from the last time around when we had a big cost out there for that once you start. This machinery you you find more efficiencies more possibilities to take out structural costs that has happened also here because every manager in the company is working on this M C.

Carl Mellander: I mean the operators need to continue to invest to manage data traffic grows, costs, energy usage, network quality for their customer experience. And but what we see now the sales mix shift in networks, particularly that we have discussed many times where sales decrease in North America and increase in India with large rollout projects that continued in a similar manner in the third quarter. And I would say we have worked a lot on our resiliency to limit sensitivity to geographical mix changes, but of course we see an impact on group numbers from this mix change both on on on sales, gross more than a bit and cash.

Speaker 3: That has happened also here because every manager in the company is working on this since several quarters.

Since several quarters.

Speaker 3: We now see when we sum up the plans that exist, that actually we will be the well-first at 9 billion that we had initially communicated and then up to 11. Now we see that we can be that as well and deliver 12 billion also having.

We now see when we when we sum up the plants that exists that actually we will beat the well first at 9 billion that we had initially communicated in an opposite 11 now we see that we can beat that that's where I learned and deliver 12 billion of saving so and it's not about singling out the specific areas. Many.

Speaker 3: So it's not about tingling out the specific area, many contributing factors for us.

Contributing factors for us.

Speaker 3: and it's been a great moment actually. As I said, we are slightly ahead of our internal planning as well.

And it's been a great momentum actually.

As I said, we are slightly ahead of our internal planning as well.

Speaker 3: 10.5 billion so far executed on out of the 12

10.5 billion, so far executed on out of the 12, and so we clearly see that the pulse to 12 us where Linda and we will see the impact in the P&L more and more as we as we continue.

Carl Mellander: So, on top line and group organic sales decline by 10%, and I would say primarily driven by a 60% drop in North America in the network's business, where we continue to see operators' adjustmentary, we've talked about this many times, but also slower deployment pace. I think it's important though to note that Q3 last year in 2022 was an absolute record quarter in North America with very large volumes of radio shipped and deployed, so that year-of-year comparison is very tough, but nevertheless the 60% drop.

Speaker 3: So we clearly see that the past 12 as well and we will see the impact in the P&L more and more as we continue.

Speaker 1: Thank you. Thank you. Thank you for that question.

Thanks, Carl Thank you. Thank you walk him for that question.

Yeah.

Speaker 1: So we'll move further to the next question and have the next question from the line of Francois Bolivarie at UBS. Good morning Francois.

So we'll move further to the next question and have the next question from the line of Francois buoy veneer. After UBS good morning Francois.

Speaker 6: one. So I have two quick questions. The first one is on, you know, more high level, but if we look at the current environment, especially North America, quite extraordinary correction, I mean, we just was back to 2018, Levol, and we think this can cause decline. And given the level of my core uncertainty and uncertainty around, you know, the...

Good morning, everyone. Two quick questions. The first one is on the you know more high level.

If we look at the current environment, especially North America quite extraordinary.

Carl Mellander: The drop then in North America was partly offset by continued roll out in India, which continued at full speed, incredible speed, and our sales quadruple, quadruple actually year-of-year to almost 10 billion Swedish crowner in the quarter. And we are talking here about large rollout projects, and therefore working capital builds up, and that's quite significant. We'll come back to that in a minute. We also saw that some front runner customers on 5E resumed investments, this is a bit of a second wave of 5E investments, it's encouraging, but I would say it's too early to see this as a trend, nevertheless a positive sign.

Correction I mean, let me just hand, it back to 2018 and overland with significant cross decline.

And given the level of macro uncertainty and some thoughts around that.

Speaker 6: the recovery, how do you see the pricing evolving going forward? Do you see any pressure from the operators given the challenge they are facing? So it would be interesting to know the pricing dynamic here and if you see any pressure. And maybe you know from...

The recovery.

How do you see the pricing evolving going forward I mean, do you see any pressure from the operators given the challenges they are facing and so.

So it would be very interesting to know your the pricing dynamic here and you said you see any pressure.

And maybe you know from.

Speaker 6: In a very high level, if we look at the past 10 years and you say in your past two decades, you say that the mobile network market has been flatish.

A very high level, if we look at the past the last thing, yes, and you're saying your past two decades, and you say that the mobile network market that's been flattish.

Speaker 6: And your top line is reflecting this dynamic. And yet, you know, level of investment remains very high. When you look at your R&D, S-GNA, I mean R&D is 18% of yourselves, S-DNA, double-git percentage as well, and the network at least. So I'm just wondering.

And your top line is reflecting this dynamic and yet you know level of investment remains very high when you look at your R&D.

Carl Mellander: We closed another IPR license in agreement in the quarter, that's been announced earlier, that positions as well, to land additional agreements with previously unlicensed vendors, and IPR now net sales landed at 2.8 billion in the quarter, and we are on track to reach the levels that we have discussed before for the longer term.

CNA I mean, R&D is 18% of your sales SG&A, the budgeted percentage as well in the network at least so I'm just wondering is there.

Speaker 6: any sort of process that maybe you can make it structurally much more efficient this investment related to the return you get. And you know, you see that you have a couple of...

Any thought process that maybe you can make it structurally much more efficient this investment related to the return you get and you know it.

Carl Mellander: So that was top line. Secondly, gross margin, and we came in at 39.2% excluding restructuring. Networks, I want to highlight again, we achieved 39.9% gross margin, which was very much in the upper part of the range that we had guided for, 38 to 40%. And of course, it again is the market makes that we talk about that continue to impact gross margin in networks. But however, and I think this is important actually achieving 39.9% gross margin is a strong proof point, because it demonstrates the resiliency of our company.

You see that you have a couple of.

Speaker 6: cost-aving programs and it's not new. We have been doing that for a few years now. Can you go a bit deeper, maybe internally, in terms of discussion on the level of investment compared to what you return in terms of revenues? In other words,

Cost saving programs and it's not new we have been doing that for few years now, but can you go a bit deeper maybe internally in terms of discussion.

The level of investment compared to what your return in terms of revenues.

The words you know.

Speaker 6: managing the business more for margins or cash flow if you like, rather than photoplankles. Is that makes sense?

Managing the business more for margins or cash flow, if you like rather than for top line growth if that makes sense.

It started earlier.

Speaker 2: And it's a highly relevant question you're asking. This is one of the areas we're looking at. We do believe and not focusing on the North American market here, but we actually face competitors in all other markets, from all other markets.

And it's a highly relevant question you're asking this is one of the.

Carl Mellander: It's a sign of how the business transformation that would be known to over the years now has made us less sensitive to these swings between geographies. Third point regarding elite margin, we exceeded the previously mentioned expectations due to early positive effects of the cost out ambitions. So for the group we came in at 7.3% that's the decline of course versus last year 11.3 again driven by the grossing coming in in networks.

The areas, we're looking at we do believe in and not focusing on the North American market here, but we actually face competitors in all other markets, where most other markets.

Speaker 2: That actually we will be evaluating based on technology leadership on what type of solutions we provide.

That's actually where we will be evaluated based on technology leadership.

What type of solutions, we provide.

Speaker 2: And therefore we need to provide leading edge solutions.

And therefore, we need to provide leading edge solutions.

Speaker 2: So that drives a bit of the R&D intensity in the industry, which then is very high.

So that that drives a bit of the R&D intensity in the industry, which then is very high.

Carl Mellander: Cloud software and services delivered actually well in the quarter, but that was a 0.4 billion Swedish thrown and here we continue to execute on the turnaround strategy that we launched actually at the CMD last year. We're talking about strict commercial discipline improved software sales accelerated service delivery automation, as some of the key pillars there. But given the nature of the cloud software and service business, results will fluctuate between individual quarters. So to assess how this business performs over time.

Speaker 2: Having said that, there are areas where we can leverage much more or improve the way R&D efficiency.

Having said that there are areas, where we can leverage much more or improve the way our R&D efficiency.

Speaker 2: in many ways and and one of the things we are working on is actually to get the more efficient R&D. You know we've been take for example BCSS where

In many ways and one of the things we are working on is actually to get them more efficient R&D.

We've been.

Take for example, a b C. S S, where we have gone from almost a hardware centric model to a software model and we see now that we can improve the their software development efficiency.

Speaker 2: gone from almost a hardware-centric model into a software model. And we see now that we can improve the software development efficiency. And we are working on that. And the same thing on the B-new side.

Carl Mellander: My recommendation is to look more at the four quarter rolling basis. And if you do that, you will see a positive EBITDA number. You find all those numbers in the back end of the report. And you can compare this positive number with the four quarters one year earlier. Where we had an EBITDA loss of over one billion Swedish grown up. So we are clearly on track moving in the right direction. I would say, as you know, we have discussed a break even target for at least break even for fully at 2023.

And we are working on that and the same thing on on the B new side.

Speaker 2: So I do think there are opportunities.

So I do think there are opportunities, but I would also say that given that we compete for global scale with vendors that are investing very heavily we need to match that so it's it's really a bit of a tricky question. If you would only have a market where our technology.

Speaker 2: But I would also say that given that we compete for global scale with vendors that are investing very heavily, we need to match that.

Speaker 2: It's really a bit of a tricky question. If you would only have a market where

Speaker 2: technology would not matter, you could actually slow down a bit of the investments, but that would make us uncompetitive in most parts of the world.

It would not matter you could actually slow down a bit of the investments, but that would make us uncompetitive in most parts of the world.

Carl Mellander: We come back to guidance a bit more later, but this quarter is of course a good stepping stone towards that ambition as well. On the enterprise side, we are impacted by weaker markets, such as macroeconomic advices, just like other participants in this ecosystem. But it's encouraging, though, to see that the global communications platform, as you will remember, that's where one interest science delivered the positive EBITDA also in the third quarter. Fourth point, free cash flow before a minute came in at 0.5 billion negative.

Speaker 2: So I do think we should expect or in the intensity to be high, but we need to be more efficient in the way we develop our solution.

So I do think we should expect.

R&D intensity to be high, but we need to be more efficient in the way, we do very low power solutions.

Speaker 2: And that is, you actually see part of the cost savings now come out of a bit of reduction in R&D as well, and you will see that continue.

And that that is you actually see part of the cost savings now come out of AR.

A bit of a reduction in R&D as well and you will see that continue.

Speaker 1: Maybe Barry, I want to take the first question about the pricing discussions with customers as well.

Maybe Barry you want to take the first question about the pricing discussions with customers is what have you.

Carl Mellander: And this we have also explained many times that this is really a result of this same business makes shift, which includes big rollout projects with a longer order to cash cycle. Maybe explain that expand a little bit more on this in North America and some of the other early markets, customers largely managed the installment of equipment themselves. So payment terms are mainly related and to timing of delivery hardware and software, rather than completion of sites and an installment of equipment.

Speaker 2: Yeah, it is, I mean, it's actually a global industry. So when we think about prices, it's set in competition with the other vendors. And that's kind of where the market environment is. So that's why I would say it used to be very competitive. It continues to be very competitive.

Yeah. It is I mean, it's the it it's actually a global industry. So when we think about price is it set in competition with the other vendors and that's kind of where the market environment is so.

That's why I'm I, you know I I.

I would say it used to be very competitive it continues to be very competitive.

Speaker 1: Thank you very much. Thank you, Francois, for that question.

Thank you very much. Thank you Francois for that question.

Carl Mellander: But most of the large rollout projects on the other hand, like in India, contrasts our rather project based, meaning that we have been assigned to build and store large scale networks. And at least, of course, to higher working capital in relation to sales volumes, but we expect the situation to taper off next year as the pace of these large rollouts will decrease. And when that happens, we expect to working capital to reduce and then gradually over time we will and should return to our long term free cash flow target, as you know, 9 to 12% of that says.

Speaker 1: We will now move to the next question. We have the next question coming from Donnie Eubel at Handa Spanken. Good morning, Donnie.

We will now move to the next question.

We have the next question coming from the owner you burned.

I have found a spanking good morning Donald.

Speaker 7: I'm wondering Peter and the morning worry on Carl. And my question would be a little bit on the given capricum strain.

I'm wondering pizza in the morning call and my question would be a little bit on the given capital constraints.

Speaker 7: I obviously understand it's tricky to forecast CSP's wrong spending in 2024. But if we would see an improvement or in the visibility, I should say, for example, mobile congress or whatever, is it your ambition to return to guidance with a launch to the 24th, after the day with a range, or is it, should we forget about that?

I understand it's tricky to forecast CSP spending in 2024.

But if we would see an improvement in the visibility I should say that for example in mobile World Congress.

Or whatever is that your ambition to return to.

Guidance with regards to the brand.

Carl Mellander: Finally, and as my fifth point on this slide, I wanted to highlight that we deliver on the cost out efforts. Year to date, we have achieved run rate savings of 10.5 billion, all which 1.9 has impacted the P and L in the third quarter. It's about 1.2 in cost of sales 0.7 in in in OPEX. The savings are primarily visible in the mobile networks, business less in enterprise, because in enterprise we continue to increase investments for for value creation in that business, both when it comes to the product.

For adjusted EBITDA range or is it should we forget about that.

In a later stage.

Speaker 2: Adonio, I think it's fair to say that let's take that discussion when we see you know the change in market sentiment. Right now I feel we need to be proved and then plan for the current conditions to prevail because then we take the right operating decisions. So when that changes let's see where we are.

When a sarcoma I Don your line I think it's fair to say that lets take that discussion when we see.

The change in market sentiment right now I feel that we need to be prudent and plan for the current conditions to prevail. Because then we take the right operating decisions.

So when when that change shows that let's see where we are.

Speaker 7: Perfect. And I know you don't want to speak on specific customers, but the reasons that mobile world congress of VHGATs, we heard from Verizon, executive vice presidents, talking about that they have deployed to themselves on mobile sites with the VHGATs, mainly with Samsung, in last five months, but that they have started to deploy apps on the Iran right now. My question is, have you seen this kind of...

Carl Mellander: Meaning competitiveness, but also go to market. We booked provisions for restructuring so far in the year. We are amounting to 5 billion, of which 0.9 in Q3, and that's all in line with the cost. So now with this track record with slightly head of our internal plans for cost out and as such we have raised the ambition now by 1 billion to 12 billion Swedish Chroner of run rate savings until the end of the year and we will continue to take additional and decisive cost action cost out action as needed over time.

Perfect.

I know you don't want to speak on specific customers, but the recent mobile World Congress subsidy I guess have you heard from Verizon Executive Vice President is talking about.

We have deployed 7000 mobile sites with their own mainly with Samsung.

Lost.

But they have started to deploy some of the around right now.

My question is have you seen you know it's kind of.

Speaker 7: The changes are found that a project goes to someone else and then it's your turn back and forth. And should we expect to see an improvement coming from the US, given the statements from Ryzen Braton.

Shane yes.

That project goes to someone else and then it's your turn back and forth.

We expect to see.

An improvement.

Coming from the U S. Given the statements from alright.

Carl Mellander: So we can move to the outlook for Q4, we are guiding basically for key parameters, we expect gross margin in networks to land within the range of 39 to 41% in Q4, so up from the guidance we had for Q3, top line, seasonality between Q3 and Q4 in networks will be somewhat less than normal and this is mainly actually due to a specific factor and that's the fact that in the eyes expected to be sequentially flat, Q3 to Q4. In clouds of transfer services, EBITDA is expected to reach at least break even for the full year as we have said before, but with the lower sales, top line, seasonality, the normal between Q3 and Q4 and again important here to know that given the characteristics of this business we don't expect a linear result development quarter after quarter results will vary between quarter depending on software deliveries, project acceptance and so on.

Speaker 2: you know we would never comment on specific customers but you know the

We would now very cold meant on specific customers.

But the you know.

The the.

Speaker 2: Our investments, for example, in the cloud run has continued and you'd see us launch.

Our investments for example into cloud drawing has continued new then you'll see us launch.

Speaker 2: or signed MOUs here together with Telefonica, for example, to actually deploy.

Or signed a Mou who's here together with telephone makeup for example to to actually deploy.

Speaker 2: Cloud run and open run on an industrial scale. We believe networks in the future are going to be much more open and we're always better off leading that. And that's what we invest for. We see that to work with leading customers, including the US operators as well. Don't want to go into specific customers because I think they ought to comment on that, themselves.

Cloud drawn in and open ran on an industrial scale, we believe networks into future are going to be much more open and we're always better off leading that and that's what we invest for and we see that to work with leading customers, including the U S operators elsewhere.

Don't want to go into specific customers because I think they all took hold meant on that themselves.

Speaker 7: Yeah, I understand. That's super quick to call the extra one billion cost savings.

Understand.

So quick to call the <unk>.

<unk> 1 billion of cost savings.

Speaker 7: If the cost for that included in the CX7 barely understretched shoulders, it will come in 2024.

The cost for that included in the six seven barely understood since August .

Carl Mellander: And then looking at group EBITDA margin for fourth quarter, we expect to reach around 10%, we see similar market trends from Q3 continuing in Q4, but we will see increased support from the cost out program. And here on the slide you see a few other planning assumptions related to OPEC's amortization, restructuring, but if you shall please refer to the report for the full set of planning assumptions.

It had come in 2024.

Speaker 3: It's included, so we maintain the 7 billion, a 7 billion, the restructuring charges has the full year number. So we have done five so far, a bit more than coming in the second quarter, the fourth quarter, sorry. And with that, we will deliver the 12 billion run rate.

It's included so we maintain the 7 million is a 7 billion restructuring charges as the full year number. So it's we have done five so far a bit more than coming in in the second the fourth quarter, sorry, and we had that we will deliver the $12 billion run rate savings.

Speaker 1: Thank you, Donna, for that.

That's great. Thank you. Thank you. Thank you. Thank you donut for that.

Maria Colm: So with that, thank you and I would like to hand back the word to Burya. Okay, thank you, Corn. So while near-turned dynamics are uncertain, our long-term conference remain undiminished in the current environment, we focus on what's within our control and executing on our strategy to extend our leadership in mobile networks, grow our enterprise business and drive a lasting culture transformation. As we look ahead, we see the mobile networks investments intensity is on the lower end as our customers are cautious with investments and this gives us good conference recovery will come until then we will continue to take action that position Ericsson in the best way to create value, which with the market recovery, of course, will create good operating leverage.

Christian.

Speaker 1: So we will further in the queue and I have the next question coming from Eric Lyendom Røsdol from SAB. Good morning Eric.

So we will further into cube and I have the next question coming from Eric Leant Rosenthal from Seb Good morning, Eric.

Speaker 7: Yes, good morning and thank you for taking my questions. So I'm starting on the guidance for networks. It's another thing here in Q4. You mentioned that you see India flat sequentially. Like you talk a bit about this means for North America and what you assume there. And is there any other mark of sort of standing out into Q4? And I'll follow up with another question. Thank you.

Yes, good morning, and thank you for taking my questions. So starting on the guidance for networks.

In Q4.

You mentioned that you see in there flat sequentially can you talk about what this means for North America, and what you assume there and is there any other markets sort of standing out seem to into Q4.

And I'll follow up with another question. Thank you I.

Speaker 3: I would say over all we see that average seasonality is representative on markets excluding India where we have a flat development. And of course given the size now the magnitude of India, the proportion of India in India and to also say it matters for the full seasonality calculation or development I could say.

I would say overall, we see that the average seasonality representative on markets, Excluding India, where we have a flat development and of course, given the size now the magnitude of India proportionally in dental to say is it matters for the full seasonality.

Maria Colm: I'm very confident in our team and the work they do every day so our goal is to make Ericsson a more profitable company returning to our cash flow target and capturing the next major wave of network innovation with a substantial platform business.

Calculation or development you could say so all other markets I would say no specific guidance other than normal.

Speaker 3: So all other markets, I would say no specific guidance other than normal.

India flat.

Speaker 3: Right. Thank you. Just to follow up on that, I guess. I mean, I guess the key public has been the inventory levels in the US market. I mean, what are you seeing now in terms of inventory levels at the pop cell close in the US market? And, yeah, do you see the inventory of jobs and things done now in queue for this? Still the case.

Right.

Thank you.

Just to follow up on that I guess.

Peter Jonsson: With that, I think it's time for some Q&A, Peter. That's correct, Burya.

To pick up in the.

Inventory levels in the U S market.

Peter Jonsson: So we will now then start the Q&A session. As the reminder, as you ask a question, you need to press one or store one and one at your telephone. And wait for your name to be announced. If you are streaming the webcast, please mute the webcast audio while asking the question and then minimize the audio feedback.

What are you seeing now in terms of inventory levels.

Top telcos in the U S market and.

Do you see that.

The inventory adjustments being done now in Q4 is still the case, yes, yeah. So we saw we saw a continuation in the third quarter, but it's starting to flatten out and even more so in the fourth that's basically done on the on the part of amount there that mattress that has.

Speaker 3: Yeah, yeah, so we saw we still continuation in the quarter, but it's starting to flatten out and even more so in the fourth.

Speaker 3: basically done on the on the part of inventory that matters that has the larger value. We are really flattening out here in the in the fourth quarter. So that's that's of course the helpful factor for us.

The larger value and we are really flattening out hiring in the in the fourth quarter. So that's that's of course a helpful fact for asthma.

Speaker 1: Perfect. Thanks, sir. Thank you, Eric, for those questions.

Alright, perfect. Thanks, a lot thanks. Thank.

Thank you for those questions.

Speaker 1: and we'll have the next question from Andreas Yulison, the Danski Bank. Good morning Andreas.

And we'll have the next question from Andreas you Wissam and Tonks Keybanc good morning Andreas.

Speaker 8: Good morning, everyone. Just a question on a reference that you made very in the beginning that you need a catalyst to see investments coming through from the operators over time.

Good morning, everyone.

Just a question on a reference that you made for you in the beginning that you need a catalyst to see investments coming through from the operators all the time.

Speaker 8: Fures to understand if you are a little bit surprised by the 5G.

Curious to understand if you are.

Unknown Executive: So would you be able to hold this into next year or maybe improve it given the cost actions you're taking and then just a very quick follow-up on India is that now leveling off at high levels and may roll off into the clients next year or do you see further expansion there. Thank you. I'll start. Yes, I think what we say here in the report is really that the tides will turn the market mixes going to recover at some point.

Little bit surprised by the five G.

Speaker 8: business models from the operators so far because it hasn't really kicked off in terms of art.

This model from the operators so far.

Because it hasnt really kicked off in terms of ARPA.

Speaker 8: growth, et cetera. What do you see that they are missing from a 5G business model so far?

Growth, etc.

What do you see that they are missing from our <unk> business model so far.

Speaker 2: That's a great question. What we see so far with the 5G networks launched, it's kind of a little bit better, mobile broadband.

And that's a that's a great question, what we see so far with the <unk> networks launched its kind of a little bit better mobile broadband.

Speaker 2: But to really get kind of deliver on the promise of 5D we need to tap into new revenue pool.

Unknown Executive: The timing is unclear. But if you look at the law of forecast, for example, North America would grow by 15% next year. And India to weigh within our last question India will taper off that's that quite clear from this record year in 2022. So I think that that could support gross our gross margin development in networks combined with the other thing that you also mentioned yourself the cost out which we have seen a part of the effect so far in the PNL but of course as we reach the end of the year.

But to really get kind of deliver on the promise of five do we need to tap into new revenue pools.

Speaker 2: And that's where enterprises come in and enterprise digitalization.

And that's where enterprises come in an enterprise digitalization, so we need to basically and there is an opportunity I would say to leverage wireless for enterprise digitalization, just because of the way I think about the flexibility of the wireless network think about the global available.

Speaker 2: So we need to basically, and there is an opportunity, I would say, to leverage wireless for enterprise digitization, just because of the way, you know, think about the flexibility of a wireless network, think about the global availability of the network. And actually that, that it has a very high level of security as well.

Lithia over the network.

And actually that that it has a very high level of security as well. So you use when you start to put that we can actually digitalized. So many more enterprise processes using five G.

Unknown Executive: We will have completed all of that 12 billion cost reduction and that will play out also in cost of say so those are some of the factors that that will will support going forward. Thank you. Thank you, Alexander for those questions.

Speaker 2: So when you start to put that, we can actually digitalize so many more enterprise processes using...

Unknown Executive: We will move to the next question.

Speaker 2: that that is an area that naturally lends itself, or we should enter enterprises with 5G. We see that of course on enterprise networks or dedicated networks, for example. We see that to be a very early market, but that's happening. It's we're using wireless networks to digitalize enterprises. And we see that.

That this is an area that that naturally lends itself well, we should enter enterprises with <unk>, we see that of course on the enterprise network. So dedicated networks. For example, we see that to be a very early market, but that's happening it's it's.

Joachim Gunell: And the next question will come from the line of here. You work in Gunele at DNB. Good morning, you work in. Good morning. So two questions from my side. A bit for Andrew. Based on the positive customer discussions here, but of course low visibility. Can you just comment on to what extent you have the conservatism into your view of a quarter 2022. For market recovery, other than walking away from the margin target. Yes. Where really do you want to start this one?

What are you seeing a wireless networks to digitalize enterprises, and we see that.

Speaker 2: Some large automotive OEMs, for example are deploying them now on their sites to drive new type of automation.

Some large automotive Oems for example are deploying them now in on their sites to drive new type of automation, but.

Speaker 2: But we also see this as the major, this is the kind of starting point for our global network platform. So if we can create the network into a horizontal platform that can make the features of the network easy to expose, consume and pay for, we have actually created something.

But we also see this as the major they this is kind of starting point for our global network platform. So if we can create the network into a horizontal platform that can can make the the features of the network easy to expose consume and pay for.

Maria Colm: I can start. I would say I think what we like to do is basically to say that there will be a recovery in the market. It's going to happen. Timing is unknown and given that we think it's just proved and to plan for the current market conditions to prevail. So that allows us to take the right actions on the coast side the way we run the company. Basically for operational efficiency. And when we set ourselves up that way, so when the market recovery comes, we get the operating leverage. So we kind of you know planning more cautiously in that sense.

Unknown Executive: But rather saying, when the recovery comes, let's talk about it at that point in time. Perfect.

Sure we have actually created something.

Speaker 2: for a developer to drive. And we start to see this. We're launching some new network APIs. We great interest from the developer community. And of course, this is a market where...

For a developer to drive and we start to see days, where we're launching some new network a tea ice with great interest from the developer community and and.

Of course, we are the this is a market where.

Speaker 2: You know, we don't want to talk about it until we have lost, basically, for competitive reasons. But we think it's actually a major opportunity to create this new type of revenue pool that the industry needs to drive more investments into the network. Otherwise, the network investments would just continue to be flat.

You know, we don't want to talk about it until we have launched basically four for competitive reasons.

But we think it's a it's actually a major opportunity to create this new type of revenue pool that the industry need to drive more investments into the network otherwise the network.

First investments, we just continue to be flat.

Speaker 2: and I have the service revenues for the operators are largely

If the service revenues for the operators are largely flat.

Speaker 1: flat or very low growth. There is not going to be growth for network investments either. So we need to create this new type of monetization pool in order to drive investments. Thank you.

<unk> or very low growth there is not going to be growth for for network investments either so we need to create this new type of monetization pools in order to drive the investments.

Carl Mellander: I'm done one question for Carl. What in particular does the additional CX-1 billion in cost savings pertain to? Can you also comment a bit on the timing of identifying this at this stage? Thank you. Sure, Joachim, now I would say this is also a little learning from the last time around, when we had a big cost out there for that. Once you start this machinery, you find more efficiency. It's more possibilities to take out structural cost.

Thanks Maria.

They actually have a second question.

No that's perfect. Thanks.

Thank you Andreas.

Well that question.

Speaker 1: So we'll move further on. We have the next question from the line of Janodan Menon at Yafris.

So it will move further on it we have the next question from the line of young at a minimum you Fritz.

Good morning, Adam.

Speaker 9: Good morning Peter, good morning everyone. I just want to follow up on the GMP business and Vonage. Can you give us some kind of an indication of timing when you will have developed?

Hi, Good morning, Peter Good morning, everyone.

Carl Mellander: That has happened also here because every manager in the company is working on this since several quarters. We now see when we sum up the plans that exist that actually we will beat the well-first at 9 billion that we had initially communicated and then up to 11, and we see that we can beat that as well and deliver 12 billion of saving. So it's not about singling out the specific area, many contributing factors for us, and it's been a great moment, actually.

Hum.

I just wanted to follow up on the.

GMP business and vantage.

Can you give us some kind of an indication of timing when you will have developed.

Speaker 9: the required number of 5G network APIs. Clearly you have been on that process since the acquisition. Is that something that we can say by the end of 2024, you will have the required number. And by then you would have signed up enough agreements like the Deutsche Telekom agreement with operators worldwide and with developers. And so we can...

You know the required number of five G network AP is yeah, clearly you have been on that process since the acquisition.

Is that something that we can say by the end of 2024, you will have the required number.

And by then you would have signed up enough agreements like the Deutsche Telekom agreement with operators worldwide and with the developers and so we can.

Carl Mellander: As I said, we are slightly ahead of our internal planning as well, 10.5 billion so far executed on out of the 12. So we clearly see the past to 12 as well, and we will see the impact in the PNL more and more. As we continue. Thank you. Joachim for that question.

Speaker 9: At least we can start seeing that revenue inflecting shop more sharply upwards. Is there some kind of a timing that you can give on when you expect that process to happen? And secondly, just on the India side, you're saying that the revenues are beginning to flatten out. You had said that the network roll out, initial portion has lower margins because of, and of course, I cash intensity. I'll be reaching the second phase of India from Q1 next year. And will that result in average India margins being higher in 2024 compared to 2023? Thank you very much.

So we can start seeing that revenue inflicting shop more sharply upwards or is there some kind of a timing that you can give us.

On when you expect that process to happen.

And secondly, just on the India side are you, saying that the revenues are beginning to flatten out.

Francois Bolivini: So we'll move further to the next question and have the next question from the line of Francois Bolivini at UBS. Good morning, Francois. Good morning, everyone.

You had said that you know the network rollout initial portion has has lower margins because of that and of course higher cash cash and density.

Maria Colm: So I have two quick questions. The first one is on, you know, more high level, but if we look at the current environment, especially in North America, quite extraordinary correction. I mean, we just fell back to 2018, and we think we can cross decline. And given the level of macro uncertainty and uncertainty around the recovery, how do you see the pricing evolving going forward? I mean, do you see any pressure from the operators given the challenge they are facing?

I'll be reaching the second phase of India from Q1 next year.

And will that result in average India margins being higher than in 2024.

Compared to 2023, thank you very much.

Speaker 2: If I take the GMP and you take the India question part. So if you look at the MP, we actually started already in 2019.

If I take the G M P and you'll take the India question part. So sorry, if you. If you look at G. M. P where will we liked we actually started already in 2019, we.

Speaker 2: We customer trials of speed on demand.

We customer trials of the speed on demand. So this that was really the trigger point when we could see the customer interest.

Maria Colm: So it would be interesting to know your pricing dynamic here, and if you see any pressure. And maybe, you know, from, you know, very high level, if we look at the past 10 years, and you say in your past two decades, you said that the mobile network market has been flatish. And your top line is reflecting this dynamic. And yet, you know, level of investment remains very high when you look at your R&D, S-D-N-A, I mean, R&D is 18% of yourselves, S-D-N-A, the budgeted percentage as well, and the network at least.

Speaker 2: That was really the trigger point when we could see the customer interest and we're thinking about the application developers here, both in the gaming side as well as in collaborative software.

Thinking about the application developers here, both in the gaming side as well as in.

Collaborative software's.

Speaker 2: So there was a great interest with Soda.

So so there is there was a great interest we saw that.

Speaker 2: of course to launch quality of service.

Of course to launch a quality of service.

Speaker 2: APIs, you need some network investments, we need the network exposure layer, et cetera. So it takes some time to get there. There are some other simpler network APIs that still rely on the network, but that can be presented over a C-pass.

I do need a you'll need some network investments, we need a network exposure layer etcetera. So it takes some time to get there, but there are some out there simpler network API is that still rely on the network, but that can be.

Maria Colm: So I'm just wondering, is there any sort of process that maybe you can make it structurally much more efficient, this investment related to the return you get? And, you know, you see that you have a couple of cross saving programs, and it's not new, we have been doing that for a few years now. But can you go a bit deeper, maybe internally, in terms of discussion on, you know, the level of investment compared to what you return in terms of revenues? You know the words, you know, Managing the business more for margins or cash flow, if you like, rather than photoplankos. Is that make sense? Did you start it earlier?

You know presented the oversea pass.

Speaker 2: Those will be the first ones. We'll come back to tell you what we're launching. But we expect to see some early revenues this year, small in scale. We're talking tens of millions of crores this year. But they will start to grow into next year.

Those will be the first ones will come back to to tell you what we're launching a but we expect to see some early revenues. This year small in scale, we're talking tens of millions of chrome there this year.

But they will start to grow into next year.

Speaker 2: really to be meaningful. I think the fair thing is to expect that during 2025 in reality because it really needs to get not only

Really to be meaningful I think the first thing is to expect that during 2025 and reality.

Because it it it will really need to get not only.

Speaker 2: Several operators involved. We need to get the industry and the developers to start using the APIs as well for this to scale. And it's hard for them, or actually impossible for them to use it. Before we've gotten the operator community signed on to a...

Several operators involved we need to get the industry on the developers to start using the API. He says well for these to scale and it's hard for them or actually impossible for them to use it before we got in the operator community signed onto a.

Maria Colm: You know, and it's a highly relevant question you're asking. This is one of the areas we're looking at. We do believe, and you know, not focusing on the North American market here, but we actually face competitors in all other markets for most other markets. That actually where we will be evaluated based on technology leadership on what type of solutions we provide. And therefore we need to provide leading edge solutions. So that drives a bit of the R&D intensity in the industry, which then is very high.

Speaker 2: a similar type of solution. We're not gonna be alone with our GMPs. They're gonna be other platforms as well, but we are at least the front runner, so we should be able to run as long as we can run fast.

S C. Miller type of solution, we're not gonna be alone without where G. M. P theyre going to be out there platforms as well, but we are at least the phone drove on the so we should be able to run as long as we can run fast we are going to be rather attractive to sign up with but we will face competition.

Speaker 2: We are going to be rather attractive to sign up with, but we'll face competition here as well, but I'm convinced we can outgrow where we are today, but don't expect this to be really meaningful until a 25-time friend.

As well, but I'm I'm convinced we can outgrow.

Where we are today, but don't expect this to be really meaningful until 'twenty five timeframe.

Maria Colm: Having said that, there are areas where we can leverage much more. Or improve the R&D efficiency in many ways. And one of the things we are working on is actually to get more efficient R&D. You know, we've been take, for example, BCSS where we have gone from almost a hardware centric model into a software model. And we see now that we can improve the software development efficiency. And we are working on that and the same thing on the Bnew side.

Speaker 2: In your question, thank you, Janadaan. Thanks for the India question. I'll take that so

Understood in your question Scott. Thank you Janet and thanks for the India question I'll take that so.

Speaker 3: I mean I won't comment on specific margin profiles in the four different customers of four obvious reasons.

I mean, I won't comment on specific margin profiles in the for different customers for obvious reasons.

Speaker 3: But of course it's our job to deliver customer value and make sure that we make decent margins out of that And I think that that has been the case already Now the big rollout project or the pace of rollout I should say will will be coming down The more maybe more interesting fact is on the cash flow style because we Tie up significant working capital

But of course, it's our job to deliver customer value and make sure that we make decent margins out of that and I think that that has been the case already all the big rollout projects are or the pace of rollout I should say will be coming down then the more maybe more interesting fact is on the on the cash flow side because we.

Tie up the significant working capital because of the ne.

Speaker 3: because of the nature of this piece in the rollout, but that tide will turn.

Maria Colm: So I do think there are opportunities. But I would also say that given that we compete for global scale with vendors that are investing very heavily, we need to match that. So it's really a bit of a tricky question. If you would only have a market where technology would not matter, you could actually slow down a bit of the investments, but that would make us uncompetitive in most parts of the world.

Nature of this business through the rollout, but that tide will turn as volumes come down we will we will start to collect more and get a positive cash flow impact from that so that that we should see in 2024 margin.

Speaker 3: volumes come down, we will start to collect more and get a positive cash flow impact from that. So that we should see in 2024.

Speaker 3: Martin is an everyday job for us of course to make sure that we have the right margins and that will continue

Margin is an everyday job for us of course to make sure that we have the right margins and that we will continue with.

Thanks Carl.

Speaker 1: Thank you, Janodont, for that question.

Thank you for that question.

Maria Colm: So I do think we should expect R&D intensity to be high. But we need to be more efficient in the way we develop our solutions. And that is, you actually see part of the cost savings now come out of a bit of a reduction in R&D as well. And you will see that continue.

Speaker 1: So we move further in the queue here and we have the next question coming from the line of Sunday the Spand at Deepen Morgan.

So it will move further in the queue here and we have the next question coming from the line of Sandeep Deshpande.

Morgan.

Speaker 10: Good morning, Sandeep. Good morning, can you hear me?

Good morning Sandeep.

Good good morning can you hear me.

Yes, yes, Yeah, Hi, My question is on the margin going into 'twenty four I mean couldn't you seem to be seeing some positively back from the restructuring in CFS and possibly in the networks business itself. If you see yeah.

Speaker 10: Yeah, hi. My question is on the margin going into 24. I mean, clearly, you seem to be seeing some positive impact from the restructuring in CFS and possibly in the network business itself. If you say India is potentially flat-patient to Q4 and then

Maria Colm: Maybe you want to take the first question about pricing discussions with customers as well, if you. Yeah, it is. I mean, it's actually a global industry. So when we think about prices, it's set in competition with the other vendors. And that's kind of where the market environment is. So that's why I, you know, I would say it used to be very competitive. It continues to be very competitive. Thank you very much.

Potentially you know flattish into Q4, and then potentially.

Speaker 10: potentially rolling off in 2024, US should increase as a percentage of business as well as your restructuring should kick in. So theoretically, we should be assuming that your network's margin and your CSS margin should be improving in 2024. Is this the correct content? And by second question is, are there any signs of any revival in demand in Europe ? Europe has had very little 5G rollout. I mean, they have invested very little this year as well compared to where India has invested, which is a much...

We're going to be rolling off in Q.

Great training for U S shouldn't Greens as a percentage of their business as well as your restructuring should conclude so periodically we should be assuming that works budget yes.

Margins should be improving in critical is is that correct.

Good advice.

And my second question is I doubt it.

Francois Bolivini: Thank you Francois for that question.

Site offer any revival.

Unknown Executive: We will now move to the next question.

In Europe , Europe has had very little fiber rollout.

Donnie Eubel: And we have the next question coming from Donnie Eubel at Anders Banken. Good morning, Donnel. Good morning Peter and good morning, Brian Carl.

I need to have an investor day later this year as well compared to where <unk> has invested a bunch of pretty historically, a bunch further behind market compared to Europe , so, but what I can say that it could be a European customers at this point I think that with great people.

Speaker 10: historically much further behind market compared to Europe . So what are you sharing from European customers at this point and regard to 20?

Unknown Executive: And then my question would be a little bit on the given capital constraints. I obviously understand it tricky to forecast CSP's wrong spending in 2024. But if we would see an improvement or in the visibility, I should say, for example, mobile congress, or whatever, is it your ambition to return to guidance with a launch today. 24th of the day with a range or is it, should we forget about that.

Speaker 3: What do you want to take the Europe and I take the first one afterwards? Yeah, you can take it. I go. Okay. Hi Sandip. Now, the fact is that you point to they are relevant. And as you see in the report, we are not guiding for specific models beyond Q4 where we say 39 to 41 in the network segment.

Do you want to take the Europe and I take the first one afterwards or yeah. I'll tell you who can tell you is I start I go Oh, okay.

Hi, Sandeep not are the factors that you point to they are they are relevant and as you've seen the report we are not we are not guiding for specific models beyond Q4, where we say 39% to 41 in the networks segment.

Speaker 3: on gross margin, but the factors that you point to of course are the positive ones that could support gross margin. We have the cost out that will be fully executed by year end.

Gross margin.

But the fact is that to your point of course, our the positive ones that could support our gross margin. We have the cost out that will be fully executed by year end.

Maria Colm: I think it's fair to say that let's take that discussion when we see the change in market sentiment. Right now, I feel we need to be prudent and plan for the current conditions to prevail because then we take the right operating decisions.

Speaker 3: on the current 12 billion that we have communicated.

On the current 12 billion that we have communicated we are talking also about the market mix recovery, which is needed for us to improve margins going forward until the extent that that happens that should support gross margins of course, and I mean again, we are fully committed to the 15% to 18% EBITDA margin target for the long term.

Maria Colm: So when that changes, let's see where we are.

Speaker 3: We are talking also about the market mix recovery which is needed for us to improve more in going forward and to the extent that happens.

Speaker 3: that should support the gross margins of course. And I mean again, we are fully committed to the 15 to 18% of the margin target for the long term. And of course we will work very hard in Ericsson to reach that as soon as possible. I mean, that's a key message as well.

Maria Colm: Perfect. And I know you don't want to speak on specific customers, but the reasons that Mobile World Congress of Villagas, we heard from Verizon, Executive Vice President, talking about that they have deployed to themselves in mobile sites with the V-Rone, mainly with Samsung, in last five months, but that they have started to deploy Ericsson V-Rone right now. My question is, have you seen this kind of change? Yes, I've been found that a project goes to someone else, and then it's your turn, back and forth, and should we expect to see an improvement coming from the US, given the statements from Verizon.

Of course, we will we will work very hard and Ericsson to reach that as soon as possible I mean, that's the key message as well and we are dependent on this market the mix to improve at some point that will come in so I just wanted to repeat that again that is what will drive the margins are upwards when that happens.

Speaker 3: We are dependent on this market mix into improve.

Speaker 3: at some point it will come. So I just want to repeat that again. That is what will drive the margins upwards when that.

Speaker 2: I'll tie into your question about the global rollout of 5D. It varies a bit by region, but in average it's about 1 in 4 that's upgraded for midband.

Well tie into your question about <unk>.

The global rollout of <unk> it varies a bit by region, but in average is about while NIM for the upgraded for mid band.

Speaker 2: 5G midband and so it's really compared to previous generations with still relatively early in the cycle.

Five G mid band and so it's it's really compared to previous generations were still relatively early in the cycle.

Speaker 2: Investments in Europe have been slower than that in hybrid

Maria Colm: You know, we would never comment on specific customers, but you know, our investments, for example, into CloudRone has continued and you'd see us launch or signed MOUs here together with Telefonica, for example, to actually deploy CloudRone and OpenRAN on an industrial scale. We believe networks in the future are going to be much more open, and we're always better off leading that, and that's what we invest for. We see that to work with leading customers, including the US operators as well.

Investments in Europe .

Have been slower than that are in average.

Speaker 2: Depends, it varies a bit by market, but overall, the rollout of 5G, especially midband, have been very slow and much slower than India. You know, India basically have nationwide.

It varies a bit by market, but but overall the rollout of five G, especially mid band I have been very very slow in much slower than India.

You basically have nationwide <unk>.

Speaker 2: 5G coverage now, at least of the metropolitan areas.

<unk> coverage now or at least of the of the metropolitan areas.

Speaker 2: You know, in a way, kind of just second to China today, very strong. Have also a nationwide 5G standalone network.

You know in a way kind of second to.

To China not today are.

Very strong have also nationwide five standalone network so.

Speaker 2: We are likely to start to see applications now coming out of India as well, leveraging the very strong digital infrastructure. Europe is not on that map today. We see very limited build-out as several of the European operators are under pressure and you know that in the capital markets as well.

We are likely to start to see applications now coming out of India as well.

Unknown Executive: Don't want to go into specific customers, because I think they ought to comment on that themselves. Yeah, I understand.

Leveraging the very strong digitally infrastructure.

Europe is not on that map today, we see a very limited build out as a separate of the European operators are under pressure and you know that in the capital markets as well.

Carl Mellander: That's super quick to call the extra one billion cost savings. Is that the cost for that included in the CX-7 billion stretch and charges, or will it come in 2024? It's included, so we maintain the $7 billion as a $7 billion restructuring charges as the full year number. So we have done five so far, a bit more than coming in the fourth quarter, sorry, and with that, we will deliver the $12 billion run rate saving.

Unknown Executive: That's great.

Speaker 2: So it's a challenge. I personally I worry a bit about Europe's future competitiveness.

So it's it's a it's a challenge I.

Unknown Executive: Thank you.

Personally I worry a bit about Europe , she was sheer competitiveness.

Speaker 2: Infrastructure tend to be something that drives a nation's long-term competitiveness and without the digital infrastructure in Europe . It's going to be a bit of a challenge. So I do think that, or I hope, that we will start to see investments come up, because it's going to be needed for future and long-term competitiveness of our industry in Europe .

Infrastructure tends to be something that drives a need.

Unknown Executive: Thank you, Carl.

Ne shows long term competitiveness and without the digital infrastructure in Europe . It is gonna be a bit of a challenge. So I do think that the or I hope that we will start to see investments come up because its going to be needed for future long term competitiveness of our industry in Europe .

Unknown Executive: Thank you, Donna, for that question.

Eric Lindholm: So we will further in the queue, and I have the next question coming from Eric Lyendon, Roy Stoll from S&B.

Speaker 1: Boria and thank you. Thank you. Sounded we are they're moving to the last question of this call and that question will come from

Thanks.

Thanks, Sandy we are then moving to the last question of this call and the question will come from.

Carl Mellander: Good morning, Eric. Yes, good morning, and thank you for taking my question. So I'm starting on the guidance for networks. It's another thing here in Q4. You mentioned that you see India flat sequentially, but you talk a bit about this means for North America and what you assume there. And is there any other market sort of standing out into Q4? And I'll follow up with another question. Thank you. I would say over all we see that average seasonality is representative on markets excluding India where we have a flat development.

See here.

Speaker 1: from Köpley Køvr a good morning for working on this.

Sebastien <unk> from Kepler.

Kepler Chevron when morning Sebastien.

Speaker 11: Yeah, hello everyone and thanks for taking my question, Peter. One question on Vonage, you did this big, big, right of on Vonage because business seems to be as slowing down, which part of the Vonage business is really slowing down and what kind of a growth trajectory do you expect for?

Hello, everyone and thanks for taking my question, Peter one pushing them Boone H <unk> visa B B you write off on an H M.

Because it seems to be slowing done, which part of when H business, He's really flowing done and what kind of gross tragic delay do you expect for <unk>.

Speaker 11: the global communication platform segment for the next few years. Can you give us a little bit of an indication there? And the second one is linked to clouds of 2N services, which has been growing nicely over the last four quarters. Do you see finally, side G-core deployments picking up? Or is there any different reason for this business to restart to grow? And what is the outlook for the next few years for clouds of 2N services? Thank you.

Carl Mellander: And of course, given the size now, the magnitude of India proportion of India and to also say it matters for the full seasonality calculation or development, you could say. So all other markets, I would say no specific guidance other than normal in India flat.

Global communication platform Sigma in full for the next few years can you you guys seem to be tougher.

And the second one is linked to cloud software and services, which has been growing nicely over the last two full quarters.

She played maybe sorry G called deployment speaking gopro ease any different reason for these business too.

He stopped to go and what is the outlook for the next few years for cloud software and services. Thank you.

Carl Mellander: Thank you. Just to follow up on that, I guess, I guess the key topic has been the inventory levels in the US market. I mean, what are you seeing now in terms of inventory levels at the top cell close in the US market? And, yeah, do you see that the inventory of Johnson's being done now in Q4? Is there still the case? Yeah, so we saw, we saw continuation in the third quarter, but it's starting to flatten out and even more so in the fourth, basically done on the, on the part of inventory that matters that has the larger value, we are really flattening out here in the fourth quarter. So that's, that's of course a helpful fact for us as well.

Oh yeah.

Speaker 2: So if we look at the start with bondage, we see basically it's a couple of reasons for the good will impairment that we took. There are of course a slowdown in the market that we've seen.

So if if we look at the start with the ball niche we see.

Basically it's a couple of reasons for the goodwill impairment that we took there are.

Of course.

Slowdown in the market that we've seen.

Speaker 2: for kind of the demand trends have been softer. And we see a much higher interest rates as well.

Sure.

For kind of the the demand trends have been softer.

We see a much higher interest rates as well.

Speaker 2: When you put those two together, the impairment, you know, it's the right thing to do to take that. And by the way, it also led to a lot of the peers trade it's significantly lower in the market.

When you put those two together the empowerment of it.

You know, it's the right thing to do to take that and by the way. It also led to a lot of the peers trade at significantly lower in the market.

Speaker 2: So that's no doubt about that and those trends have come down. We have so far grown.

That's no doubt about that and those trends have come down.

So far <unk> grown in.

Speaker 2: in line or faster than competitors, but I would say

In line or faster than than competitors, but but I would say.

Unknown Executive: All right, perfect. Thanks a lot.

Speaker 2: It's fair to say that the market expectation is somewhat lower today than it was if you look up.

You know, it's it's fair to say that the market expectation is it's somewhat lower today than it was a.

Unknown Executive: Thank you, Erik, for those questions.

If you look a few years back.

Speaker 2: The growth trajectory on, and we believe it.

The growth trajectory on our end and we believe it's it's you know it will be in line or slightly better the market going forward as well.

Speaker 2: You know, we'll be in line, or slightly better, the market going forward as well. But really, what we're investing for is not the core business in Von Nitsch that we really did the impairment testing on. It is the global network platform.

But really what we're investing for is not the core business involved niche that it really did the impairment testing on it is the global network platform.

Maria Colm: And we'll have the next question from Andreas Julesson, Danski Bank. Good morning Andreas. Good morning everyone. Just a question on a reference that you made very in the beginning, that you need a catalyst to see investments coming through from the operators over time. Just curious to understand if you are a little bit surprised by the 5G business models from the operators so far, because it hasn't really kicked off in terms of our growth, et cetera.

Speaker 2: which will provide ample growth opportunities in the future and position Eric's on to be a completely different company in a few years time. That's the really the underlying strategy behind the Von Nitchak position. So in a way, the reason for taking the impairment relates to the core business, but that was not really our investment thesis when we acquired Von Nitch.

Which will provide ample growth opportunities in the future and position Ericsson to be a completely different company in a few years' time.

Maria Colm: What do you see that they are missing from a 5G business model so far? And that's, that's a great question. What we see so far with the 5G networks launched, it's, it's kind of a little bit better mobile broadband. But to, to really get kind of delivered on the promise of 5G, we need to tap into new revenue pools. And, and that's where enterprises come in and enterprise digitization. So we need to basically, and there is an opportunity, I would say, to leverage wireless for enterprise digitization, just because of the way, you know, think about the flexibility of a wireless network, think about the global availability of the network.

It's the really the underlying strategy behind the voting each acquisition. So in a way there is simple taking the the impairment relates to the core business, but that was not really our investment thesis when we acquired both niche.

Speaker 2: So that, so our strategy stands firm on developing global network platform. The traction we have with customers is very strong today and the inbound interest we get from basically all operators are very exciting and I think positions as well for the future. It's up to us to deliver. It's up to us to execute on that. And that's what we're focusing on 100%.

So that so so our strike did you stands firm on developing global network platform.

The traction we have with customers is very strong today and the inbound interest we get from basically all of our operators are very exciting and I think positions us well for the future.

Maria Colm: And actually that, that it has a very high level of security as well. So you, when you start to put that, we can actually digitalize so many more enterprise processes using 5G. That, that is, is an area that, that naturally lends itself or will, we, we should enter enterprises with 5G. We see that, of course, on enterprise networks, so dedicated networks, for example. We see that to be a very early market, but that's happening.

Oh, it's up to us to deliver its up to Australia execute on that and that's what we're focusing on 100%.

Missed your second question.

Speaker 3: The growth expected 5d core, not least.

On cloud software and services the gross expected five decor not list.

Speaker 2: Yeah, I would say we're still early in the 5G core deployments. You know, it really needs to be 5G standalone to be widely deployed. And that's so far.

Yeah I would.

I'd say, we're still early in the five year cohort deployments you know, it's it really needs to be five standalone to be widely deployed and and that's so far.

Speaker 2: call it maybe some 40 and 50 networks around the world, very few. So we're not, you know, not seeing the big ramp until that happens.

Call. It it may be at some 40 or 50 networks around the world very few.

Maria Colm: It's, it's, we're using wireless networks to, to digitalize enterprises. And we see that some large automotive OEMs, for example, are deploying them now in on their sites to drive new type of automation. But we also see this as the major, this is the kind of starting point for our global network platform. So if we can create the network into a horizontal platform that can, can make the features of the network easy to expose, consume and pay for, we have actually created something, for a developer to drive.

So we're not you know not seeing the big ramp until that happens.

Speaker 2: So I would not hang it on there. We've seen some good developments in other areas of the business that actually has started to grow. And that's encouraging as well. But I would say the 5G core, the future is ahead of us.

So I I would would not the hang it on there.

We've seen some good developments in other areas of the business that actually has started to grow and that's encouraging as well, but I would say the.

Five day core are the future is ahead of us.

Speaker 1: Thanks, Maria. And thanks Sebastian. So that concludes today's call. So thank you all for letting in to this Q3 earnings call for in 2023. So I'm looking forward to the next call here in January with that.

Thanks, Brett.

Thanks, Sebastian so that concludes today's call.

Alright. Thank you all for listening to this Q3 earnings call for in 2023, So I'm looking forward to the next call here in January .

Maria Colm: And we start to see this, we're launching some new network APIs with great interest from the developer community. And of course, this is a market where, you know, we don't want to talk about it until we have lost, basically, for competitive reasons. But we think it's actually a major opportunity to create this new technology. It's a new type of revenue pool that the industry needs to drive more investments into the network.

With that.

Speaker 1: Have a great day. Good bye. Thank you. Thank you.

Have a great day goodbye. Thank you. Thank you. Thank you.

Okay.

[music].

Okay.

Okay.

Okay.

[music].

Maria Colm: Otherwise, the network investments would just continue to be flat. You know, if the service revenues for the operators are largely flat or very low growth, there is not going to be growth for network investments either. So we need to create this new type of monetization pool in order to drive investments. [inaudible] really to be meaningful.

Yeah.

Yeah.

Okay.

Okay.

Sure.

[music].

So.

Yeah.

[music].

Maria Colm: I think the fair thing is to expect that during 2025 in reality because it we really need to get not only several operators involved. We need to get the industry and the developers to start using the APIs as well for this to scale and it's hard for them are actually impossible for them to use it before we've gotten the operator. But don't expect this to be really meaningful until a 25-time frame.

Carl Mellander: Thank you Janadhan. Thanks for the India question I'll take that. I mean I won't comment on specific margin profiles for different customers for obviously sense but of course it's our job to deliver customer value and make sure that we make decent margins out of that. I think that that has been the case already. Now the big rollout project or the pace of rollout I should say will be coming down. Then the more maybe more interesting fact is on the cash flow side because we tie up significant working capital because of the nature of this business with rollout but that tide will turn as volumes come down we will start to collect more and get a positive cash flow. So impact from that so that we should see in 2024. Margin is an everyday job for us of course to make sure that we have the right margins and that we will continue with. Thanks Carl.

Unknown Executive: Thank you Janadhan for that question.

Sandeep Deshpande: So we will move further in the queue here and we have the next question coming from the line of Sunday the Spand at deep in Morgan. Good morning Sunday. Good morning. Can you hear me? Yes. Hi.

Carl Mellander: My question is on the margin going into 24. I mean clearly you seem to be seeing some positive impact from the restructuring in CFS and possibly in the networks business itself. If you say India is potentially in a plantation to queue for and then potentially rolling off in 2024, you should increase as a percentage of business as well as your restructuring should take in. So theoretically we should be assuming that they are networks margin and the CFS margin should be improving in 2024.

Maria Colm: So is this the correct contention and by second question is are there any signs of any revival in demand in Europe Europe has had very little 5G roll out. I mean they have invested very little this year as well compared to where India has invested which is a much historically a much further behind market compared to Europe. So what are you sharing from European customers at this point and regard to 20.

Maria Colm: What do you want to take the Europe and I take the first one afterwards? No, you can't take the first one. I go. Hi Sandeep. Now, the fact is that you point to, they are, they are relevant. And as you see in the report, we are not, we are not guiding for specific models beyond Q4, where we say 39 to 41 in the network segment on Gross Martin. But the fact is that you point to, of course, are the positive ones that could support Gross Martin.

Maria Colm: We have the cost out that will be fully executed by year end on the current 12 billion that we have communicated. We are talking also about the market mix recovery, which is needed for us to, to improve margins going forward and to the extent that that happens, that should support gross margins, of course. And I mean, again, we are fully committed to the 15 to 18 percent of data margin target for the long term.

Maria Colm: And, of course, we will, we will work very hard in Ericsson to reach that as soon as possible. I mean, that's a key message as well. And we are dependent on this market mix into improve. At some point, it will come. So I just want to repeat that again. That, that is what will drive the margins upwards when that happens.

Maria Colm: Let's tie into your question about, you know, the global rollout of 5G. It varies a bit by region, but, but in average, it's about one in four that's upgraded for midband, 5G midband. And so it's, it's really compared to previous generations, we're still relatively early in the cycle. Investments in Europe have been slower than that in average. Depends, it varies a bit by market, but, but overall, the rollout of 5G, especially midband, have been very, very slow and much slower than India.

Maria Colm: You know, India basically have nationwide 5G coverage now, or at least of the of the metropolitan areas. You know, in a way, kind of just second to, to China today, very strong have also nationwide 5G standalone network. So we are likely to start to see applications now coming out of India as well, leveraging the very strong digital infrastructure. Europe is not on that map today. We, we see very limited buildouts as, as several of the European operators are under pressure.

Maria Colm: And you know that in the capital markets as well. So it's, it's a challenge. I personally are worried a bit about Europe's future competitiveness. Infrastructure tend to be something that drives a nation's long term competitiveness. And without the digital infrastructure in Europe, it's going to be a bit of a challenge.

Maria Colm: So I do think that, or I hope that we will start to see investments come up, because it's going to be needed for future and long term competitiveness of our industry in Europe.

Sebastian Sztabowicz: Thanks. Thank you. Hello everyone and thanks for taking my question, Peter. One question on Vonage, you did this big, big right of on Vonage because the business seems to be slowing down. Which part of Vonage business is really slowing down? And what kind of a growth trajectory do you expect for the global communicator? Well, I would like to have a presentation platform segment for the next few years, can you give us a little bit of an indication there.

Sebastian Sztabowicz: And the second one is linked to clouds of joint services which has been growing nicely over the last four quarters. Do you see finally 5G core deployments picking up or is there any different reason for this business to restart to grow? And what is the outlook for the next few years for clouds of joint services?

Maria Colm: Thank you. So if we look at the start with Vonage, we see basically it's a couple of reasons for the goodwill impairment that we took. There are of course a slowdown in the market that we've seen for kind of the demand trends have been softer. And we see a much higher interest rates as well. When you put those two together, the impairment is the right thing to do to take that. And by the way, it also led to a lot of the peers trade is significantly lower in the market.

Maria Colm: So that's no doubt about that. And those trends have come down. We have so far grown in line or faster than competitors. But but I would say, you know, it's fair to say that the market expectation is somewhat lower today than it was. If you look a few years back, the growth trajectory on and we believe it's, you know, will be in line or slightly better the market going forward as well.

Maria Colm: But really what we're investing for is not the core business in Vonage that we really did the impairment testing on. It is the global network platform, which will provide ample growth opportunities in the future. And position areas on to be a completely different company in a few years time. That's the really the underlying strategy behind the Vonage acquisition. So in a way, the reason for taking the impairment relates to the core business, but that was not really our investment thesis when we acquired Vonage.

Maria Colm: So that so our strategy stands firm on developing global network platform. The traction we have with customers is very strong today and the inbound interest. We get from basically all operators are very exciting and I think positions as well for the future. It's up to us to deliver. It's up to us to execute on that. And that's what we're focusing on 100%.

Maria Colm: Miss your second question, on cloud software and services, the growth expected 5G core, not least? Yeah, I would say we're still early in the 5G core deployment, you know, it really needs to be 5G stand alone to be widely deployed and that's so far call it it's maybe some 40, 50 networks around the world, very few, so we're not, you know, not seeing the big ground. And until that happens, so I would not hang it on there, we've seen some good developments in other areas of the business that actually has started to grow and that's encouraging as well, but I would say the 5G core, the future is ahead of us.

Unknown Executive: Thanks, Maria, and thanks, Sebastian, so that concludes today's call. So I thank you all for letting in to this Q3 earnings call for in 2020, so I'm looking forward to the next call here in January.

Unknown Executive: With that, have a great day, goodbye.

Thank you.