Ericsson announces sale of iconectiv

Rhea-AI Summary

Ericsson (NASDAQ: ERIC) has announced the sale of its US subsidiary iconectiv to Koch Equity Development The transaction is expected to generate a cash benefit of approximately SEK 10.6 billion (USD 1.0 billion) for Ericsson after taxes and expenses. The company anticipates recording a one-off EBIT benefit of about SEK 8.8 billion (USD 0.8 billion) upon closing. iconectiv, acquired by Ericsson in 2012, is a leading provider of network number portability solutions and data exchange services. The sale is subject to regulatory approvals and is targeted for completion in the first half of 2025. In 2023, iconectiv contributed approximately SEK 1.0 billion (USD 0.1 billion) to Ericsson's net income.

Positive

• Expected cash benefit of SEK 10.6 billion (USD 1.0 billion) from the sale
• Anticipated one-off EBIT benefit of SEK 8.8 billion (USD 0.8 billion)
• Divestment allows iconectiv to continue growth under new ownership

Negative

• Loss of iconectiv's SEK 1.0 billion (USD 0.1 billion) contribution to annual net income
• Reduction in Ericsson's portfolio diversity and market presence in number portability solutions

Insights

Financial Analyst

Ericsson's divestment of iconectiv is a strategic move with significant financial implications. The SEK 10.6 billion (USD 1.0 billion) cash benefit, after taxes and expenses, represents a substantial influx of capital. This could potentially be used for debt reduction, reinvestment in core operations, or returned to shareholders.

The expected one-off EBIT benefit of SEK 8.8 billion (USD 0.8 billion) will boost Ericsson's profitability in the short term. However, investors should note that iconectiv contributed SEK 1.0 billion to Ericsson's 2023 net income, which will no longer be part of future earnings. This sale might signal Ericsson's intent to streamline its portfolio and focus on core competencies in the telecom infrastructure market.

Tech Industry Analyst

The sale of iconectiv highlights Ericsson's strategic shift away from non-core assets. While iconectiv provides critical services in number portability and data exchange, its synergies with Ericsson's main portfolio suggest this divestment could enhance operational focus. The telecom industry is rapidly evolving with 5G rollouts and emerging technologies; this move may allow Ericsson to reallocate resources to more strategically aligned areas.

Koch Equity Development's acquisition of iconectiv is intriguing. Their involvement could potentially accelerate iconectiv's growth in sectors beyond traditional telecom, possibly into areas like IoT or smart city infrastructure. This transaction underscores the ongoing consolidation and specialization trends in the tech industry, as companies refine their portfolios to remain competitive in a fast-changing landscape.

• iconectiv is a US subsidiary of Ericsson acquired in 2012, and a provider of network number portability solutions and data exchange services
• The divestment will allow iconectiv to continue its growth trajectory under the new ownership of Koch Equity Development LLC

STOCKHOLM, Aug. 16, 2024 /PRNewswire/ -- Ericsson (NASDAQ: ERIC) announces that it has entered into a binding agreement with Koch Equity Development LLC in relation to the sale of iconectiv (the "Transaction").

Ericsson's cash benefit from the Transaction, after the settlement of anticipated taxes, transaction expenses, and other liabilities, is expected to be approximately SEK 10.6 billion [1] (USD 1.0 billion).

Ericsson expects to record a one-off EBIT benefit of approximately SEK 8.8 billion [1] (USD 0.8 billion) on closing of the Transaction.

The Transaction is subject to customary closing conditions, including regulatory approvals, with completion targeted during the first half of calendar 2025.

iconectiv is consolidated by Ericsson and reported within Segment Enterprise. iconectiv's contribution [2] to Ericsson 2023 net income was approximately SEK 1.0 billion (USD 0.1 billion).

iconectiv is a US subsidiary of Ericsson acquired in 2012 as part of the Telcordia acquisition. Since 2017, iconectiv has been co-owned with private equity firm Francisco Partners. iconectiv serves over 5,000 customers across various sectors as a leading provider in number portability solutions, and a provider of core network and operations management, numbering and data exchange services as its main segments, and with limited strategic synergies with the rest of Ericsson's portfolio.

[1] Assuming a USD - SEK exchange rate of 10.56. Realized exchange rate to be determined on closing.

[2] Contribution to net income including minority interests and shareholder loan impacts. Ericsson's shareholder loan to iconectiv was SEK 6.7 billion at year end 2023.

NOTES TO EDITORS:

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FOR FURTHER DETAILS CONTACT:

Contact person
Daniel Morris, Head of Investor Relations
Phone: +44 7386657217
E-mail: investor.relations@ericsson.com

Investors
Lena Häggblom, Director, Investor Relations
Phone: +46 72 593 27 78
E-mail:  lena.haggblom@ericsson.com

Alan Ganson, Director, Investor Relations
Phone: +46 70 267 27 30
E-mail: alan.ganson@ericsson.com

Media
Ralf Bagner, Head of Media Relations
Phone: +46 76 128 47 89
E-mail: ralf.bagner@ericsson.com

Media relations
Phone: +46 10 719 69 92
E-mail: media.relations@ericsson.com

Forward-looking statements

This release includes forward-looking statements. All statements other than statements of historical fact are forward-looking statements. The words "believe," "expect," "foresee," "anticipate," "assume," "intend," "likely," "projects," "may," "could," "plan," "estimate," "forecast," "will," "should," "would," "predict," "aim," "ambition," "seek," "potential," "target," "might," "continue," or, in each case, their negative or variations, and similar words or expressions are used to identify forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially and adversely from those expressed in, or implied or projected by, the forward-looking statements.

We caution investors that these statements are subject to risks and uncertainties many of which are difficult to predict and generally beyond our control that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements.

Important factors that could affect whether and to what extent any of our forward-looking statements materialize include, but are not limited to, the factors described in the section "Risk Factors" in the latest interim reports, and in "Risk Factors" in the Annual Report 2023.

These forward-looking statements also represent our estimates and assumptions only as of the date that they were made. We expressly disclaim a duty to provide updates to these forward-looking statements, and the estimates and assumptions associated with them, after the date of this release, to reflect events or changes in circumstances or changes in expectations or the occurrence of anticipated events, whether as a result of new information, future events or otherwise, except as required by applicable law or stock exchange regulations.

This is information that Telefonaktiebolaget LM Ericsson is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 22:30 CEST on August 16, 2024.

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Ericsson announces sale of iconectiv

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SOURCE Ericsson

FAQ

What is the expected cash benefit for Ericsson (ERIC) from the sale of iconectiv?

Ericsson expects to receive a cash benefit of approximately SEK 10.6 billion (USD 1.0 billion) from the sale of iconectiv, after taxes and transaction expenses.

When is the iconectiv sale by Ericsson (ERIC) expected to close?

The sale of iconectiv is targeted for completion during the first half of calendar year 2025, subject to customary closing conditions and regulatory approvals.

How much did iconectiv contribute to Ericsson's (ERIC) net income in 2023?

iconectiv contributed approximately SEK 1.0 billion (USD 0.1 billion) to Ericsson's net income in 2023.

What one-off EBIT benefit does Ericsson (ERIC) expect from the iconectiv sale?

Ericsson expects to record a one-off EBIT benefit of approximately SEK 8.8 billion (USD 0.8 billion) upon closing of the iconectiv sale.