Ericsson is increasingly pessimistic about its Chinese prospects

In the process of trying to raise half a billion euros, Swedish kit vendor Ericsson warned it’s increasingly unlikely it will get much more work in China.

A couple of weeks ago we reported on a story published by state-controlled Chinese media that effectively threatened Sweden with proxy retaliatory action against Ericsson if it didn’t reverse its ban of Chinese vendors in the country’s 5G networks. While there was no direct reference to Chinese government sources, it was fair to assume that was where the story originated.

It seems Ericsson agrees, because today it updated the ‘risk factors’ in the corporate bond prospectus. While Ericsson’s 2020 annual report noted potential risk factors to its business in China thanks to the decision made by the Swedish communications regulator, the company felt compelled to update that information in the prospectus with the paragraph below.

While Ericsson is invited to various ongoing tender processes in China, the final outcome remains uncertain and it is the company’s current assessment that the risk has increased that Ericsson will in those tenders be allocated a significantly lower market share than its current market share.

That’s hard to argue with and, if anything, exhibits classic Swedish understatement. Of course we have no idea what Chinese leader Xi Jinping is thinking, but the international stance of the country seems to have become increasingly belligerent in recent years. It’s likely that Xi considers a failure to retaliate when it’s in his power to do so will be a sign of weakness, something he seems keen to avoid.