Ericsson sets aside €90m for suspension of Russian operations

Swedish telecoms giant Ericsson has announced an indefinite suspension of all of its activities in Russia and set aside SEK900m (€87m) to cover the cost.

A statement from Ericsson said the move to suspend all deliveries to Russia, and activities with businesses and customers in the country, had been made “in light of recent events and of European sanctions”.

In addition, all of Ericsson’s 600 Russia-based employees have been placed on temporary leave. “The priority is to focus on the safety and wellbeing of Ericsson employees in Russia and they will be placed on paid leave,” stated Ericsson.

The company has recorded an €87m provision in the first quarter of 2022 for “the impairment of assets and other exceptional costs” associated with the move, although this will not include the cost of staff redundancy.

Fellow Nordic telco operator Nokia also suspended its sales to Russian customers in early March.

Telco analyst Paolo Pescatore, from PP Insights, said the move was “inevitable following a swathe of sanctions” but was also a “huge blow to both Ericsson and Nokia as they will not be paid for their networks”.

While Ericsson does not have any manufacturing plants in Russia, it was expected to continue operating its network in Russia beyond 2023. An announcement last year by Russia’s telco regulator stated that operator’s licences would be extended on the condition that they commit to using exclusively Russian equipment.

For Ericsson, the suspension of Russian business and the expected €87m hit to its finances come at a difficult time.

The company was found to be in breach of a settlement made with the US Department of Justice over a corruption case involving bribes made overseas, including terrorist groups in Iraq.

At an extraordinary general meeting (EGM) called in March, the firm’s shareholders voted to hold the senior management accountable for the scandal, by refusing to discharge chief executive Börje Ekholm and the company’s board of directors from liability for the previous year.

Ericsson’s major shareholders, including Nordic financial institutions Swedbank and Nordea as well as Norway’s sovereign wealth fund, had all indicated they would make such a move prior to the EGM.

This had led to a sharp fall in Ericsson’s share price, while analysts from investment bank Citi stated that Ericsson stock would be “uninvestable for most investors for the foreseeable future”.