Ericsson under pressure to sell Iconectiv operations – report

Ericsson is reportedly under pressure from activist investors to sell OSS/BSS business unit Iconectiv, a deal which could be worth more than $1.5 billion.

According to Bloomberg, activist investor and Ericsson’s largest shareholder Cevian Capital is kicking up a fuss. Several new ideas have been presented to the management team, as well as demands to sell Iconectiv, a business unit which provides solutions for network and operations management, numbering, registry and fraud prevention.

Ericsson has said it would not be able to provide confirmation or comment for market rumours.

With 5G deployment plans being slowed in recent months thanks to the on-going COVID-19 pandemic, vendors are starting to feel the pinch. Although Asian radio equipment vendors seem to be surviving the slowdown, European rivals are seemingly under pressure.

Nokia recently said COVID-19 had a €200 million negative impact on the business, with revenues for the Networks unit down 6% year-on-year, while Ericsson reported a group revenue decline of 2%.

Ericsson CEO Börje Ekholm has put a brave face on the situation, and it did appear investors were rallying around the Swedish telecom infrastructure vendor. The divestment rumours would suggest otherwise, however.

While there has been a positive reaction from the financial markets following Ericsson’s most recent earnings call, share price has dropped 4% the weekend albeit there has been a minor recovery today (May 4).

Under Ekholm, Ericsson has been stripping back investments in areas which would be considered outside core competencies. Mobile telecoms infrastructure is front and centre of the business, which might please some of the more traditional investors who wear the scars of attempted diversification, but there is such a thing as going too far.

Such a move is certainly in-line with the slash and crash Ekholm strategy to double down on network infrastructure, but it still remains to be seen whether such a restrictive and finite approach to business is sustainable in the long-term.