Ericsson has indefinitely suspended all activities at its business in Russia, the Swedish telecoms equipment maker said on Monday, in a bid to distance itself from a country accused of war crimes in Ukraine and to defend itself against the possibility of European sanctions to violate.
“Ericsson is working with customers and partners to indefinitely suspend affected business,” the company said. “The priority is to focus on the safety and welfare of Ericsson employees in Russia and they will be placed on paid leave.”
The company has also set aside a provision of SKr 900 million (US$ 95 million) for possible losses it may incur as a result of the cessation of its operations in Russia. Ericsson employs around 600 people in Russia and supplies some of the country’s largest network operators with telecommunications equipment. Russia and Ukraine account for less than 2 percent of Ericsson’s global sales.
Companies with a presence and customer base in Russia have been wrestling with how to protect themselves from reputational damage caused by continuing to operate in the country since the invasion of Ukraine in late February. Legal teams from corporations with ongoing supply contracts with large Russian companies have also spent the last few weeks ponder new sanctions Regulations to determine if they can continue to operate some parts of their business and pay local staff.
Ericsson and Finnish competitor Nokia both temporarily suspended shipments to Russia six weeks ago to comply with sanctions. Ericsson’s move on Monday is an admission that business operations in the country cannot be resumed for an extended period of time.
According to market research firm Dell’Oro, Nokia and Ericsson each account for about 20 to 30 percent of the wireless network equipment market in Russia, while Chinese groups Huawei and ZTE control the rest.
After years of consolidation, these four companies dominate the global network equipment market, and their withdrawal from Russia is likely to pose serious obstacles to Russian telecoms’ ability to upgrade and repair infrastructure.
It is unclear whether Chinese state-owned companies will aim to do this plug gap made possible by the exit of their European rivals. Huawei is looking to increase and diversify its revenue streams after being hit hard by sanctions in the US last year and is in the process of removing all of its equipment from UK network infrastructure.
However, ramping up deliveries to Russia would also entail risks. Under the new export controls imposed by Washington, any device containing US chips or manufactured using US machinery and technology must be approved by the government in order to be shipped to Russia. Any company violating these rules would likely face even tougher sanctions from the US.
Ericsson shares fell 1.6 percent to 90.68 kroner in midday trading on Monday.
https://www.ft.com/content/dc09be0f-fec1-4b17-b660-94ae6acf9950 Ericsson announces “indefinite suspension” of Russian business