An Ericsson logo is pictured at Mobile World Congress (MWC) in Shanghai
An Ericsson logo is pictured at Mobile World Congress (MWC) in Shanghai

Ericsson expects to pay $1bn in U.S. corruption probes

By Dave McCombs Time of article published Sep 28, 2019

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INTERNATIONAL - Ericsson AB said it expects to pay $1 billion to resolve investigations by U.S. authorities into business ethics breaches in six countries including China in one of the costliest corruption cases on record.

The Sweden-based telecommunications equipment maker has made a provision of 12 billion kronor ($1.2 billion), which will dent third-quarter earnings, it said in a Sept. 25 statement. The company said it can’t comment on details of the process with the U.S. Securities and Exchange Commission and Department of Justice.

Ericsson has cooperated with investigators since 2013, when the SEC began its probe into possible Foreign Corrupt Practices Act violations. The company didn’t disclose details of the ethics breaches under investigation, although it said in 2013 that the probe by U.S. authorities was related to a payment system used to win contracts in the 1990s.

“We have to recognize that the company has failed in the past and I can assure you that we work hard every day to build a stronger Ericsson, where ethics and compliance are cornerstones in how we conduct business,” Borje Ekholm, Ericsson’s chief executive officer, said in the statement.

Ericsson shares fell as much as 3.1% in early Stockholm trading.

The FCPA prohibits American companies and overseas firms with stocks trading on U.S. exchanges from paying bribes to foreign officials.

The company is moving to resolve the probes as it battles Nokia Oyj for 5G network supply contracts and looks to win customers amid a U.S.-led boycott against rival vendor Huawei Technologies Co. Ericsson said in July the first big deployments in Asia will gradually pull down margins, although not enough to jeopardize profitability targets for 2020.


Ekholm took over as CEO in 2017 to turn Ericsson around after fierce competition from Chinese rivals and dwindling carrier spending on fourth-generation wireless gear led to a plunge in the company’s shares. The introduction of 5G networks offers the company a chance to boost sales as companies invest big on equipment in a global market dominated by just three players.

Third-quarter net income is expected to drop about 15% to 2.3 billion kronor, according to the average of analyst estimates compiled before Ericsson’s Thursday statement.

Penalties of $1 billion would surpass the $965 million payment imposed on Sweden-based Telia Company AB in 2017 after the telecommunications carrier admitted to paying hundreds of millions of dollars in bribes to a government official in Uzbekistan.

Ericsson’s Sept. 25 announcement has “some clear negative implications” with “meaningful cash outflows down the line,” analysts at Citigroup, including Amit Harchandani and Robert Lamb, said in a note. They also see potential risks of prosecution or charges against executives.

Ericsson’s estimate is “within the ballpark” of similar settlements, such as that of Telia Co., the Citigroup analysts said. The “overhang” around the case would probably go away by next year, they said.

Corruption List

The SEC has undertaken 11 enforcement actions under the FCPA this year, including fines against Walmart Inc., Microsoft Corp. and Deutsche Bank AG and Telefonica Brasil SA, according to the regulator’s website.

Petróleo Brasileiro SA agreed to pay $1.78 billion last year over a bribery and bid-rigging scandal, according to the SEC website.

Ekholm will hold a conference call Thursday for journalists, analysts and investors at 9 a.m. local time in Stockholm. Chief Financial Officer Carl Mellander and the company’s chief legal officer will also make comments and take questions.

Ericsson has acted to address shortcomings after identifying breaches of its code of business ethics and the FCPA, it said Wednesday in the statement. The company also said it failed to react to red flags, enabling some employees to circumvent internal controls.

The company’s shares have gained about 3.4% this year compared with a 15% advance for the benchmark OMX Stockholm 30 Index.

The probes involve FCPA breaches in China, Djibouti, Indonesia, Kuwait, Saudi Arabia and Vietnam, according to the statement.


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