2 May 2004

LONDON - Swedish communications equipment maker Ericsson is predicting strong growth in the mobile infrastructure business after reporting better than expected revenues and profits in its first quarter.

The company said it now expects the global market for mobile systems, measured in U.S. dollars, will show "slight to moderate growth in 2004," revising earlier guidelines that the market this year would be in line with that achieved in 2003.

"This improved outlook is mainly driven by growing traffic, network expansions and continued 3G rollout. There is also an element of operators catching up on previous years' limited investments," the company said.

Ericsson said it is a major supplier to 50 networks rolling out 3G or Edge services. "Our year has started well with a number of contracts in key growth areas," said Carl-Henric Svanberg, Ericsson's chief executive officer.

The company said at least 75 operators in 50 countries are committed to deploying Edge technology in their networks. The number of wideband-CDMA subscribers increased by 57 percent in the quarter to 4.4 million, while those based on CDMA20001X grew 35 percent to 95 million. Ericsson said it doubled its share of CDMA shipments to nearly 10 percent over the past year.

Svanberg said much of the overall improvement was the results of increasing demand, but stressed the the company's recent restructuring and the drive to improve operational efficiency also made significant contributions to the turnaround.

For the three months to March 31, pre-tax profits were SKr4.3 billion ($558.2 million) compared to losses of SKr2.8 billion ($362 million) for the corresponding quarter last year. Sales were up 9 percent to SKr28.1 billion ($3.6 billion) and, importantly, gross margins improved to 44.7 percent. Earlier guidelines suggested margins would be about 42 percent for the quarter.

Orders booked during the quarter were 22 percent higher than the same period last year, reaching SKr 28.1 billion, driven by strong demand in Asia, central Europe, Africa and the Middle East. Sequentially, orders booked increased by 12 percent, the company said.