Jio earnings more than double as it tops a quarter of a billion subscribers

The spectacular, if unsurprising growth of Indian operator Reliance Jio continues with an annual EDITDA increase of 148%.

You can see the main numbers below and you don’t even need to be able to get your head around India’s arcane number system to see that everything’s moving in the right direction, fast. This doesn’t come as a great surprise since it put up similarly spectacular numbers last quarter too, but the Jio train is showing no sign of slowing.

Jio Q3 financials

“We, at Jio, are glad with our progress towards our mission with more than 250 million subscribers on our network within 25 months of commencement of services,” said Reliance boss Mukesh Ambani. “Our next generation FTTH and enterprise services are now being made available to our customers to further enhance our value proposition to our customers. We are making rapid progress on the growth of our digital platforms, across new commerce, media and entertainment, agriculture, education, healthcare and financial services, which will further enhance the quality of life and productivity of the people of India.”

Not content with all this ownage, Jio is splashing some of the cash that is now flowing in on some other strategic investments. It has grabbed majority stakes in Indian cablecos Den Networks, Hathway Cable and Datacom, as well as a 12.7% stake in US personal rapid transit company SkyTran,

“Our partnership with SkyTran reflects our commitment to invest in futuristic technologies,” said Jio Director Akash Ambani. “Reliance is well-poised to capitalize on its existing business portfolio and capabilities to accelerate the development of SkyTran across the world and especially in India.”

Check it out.


More gloom for Ericsson – sales down, shares down, media unit sale fudged

It was yet another tough quarter for networking giant Ericsson, with sales down 12% and an unsatisfactory conclusion to the strategic review of its media business.

Sales were down by a rather worrying 12% (7% when adjusted for adjustments), although Ericsson says that was expected. Much of the blame has been placed on reduced sales of LTE gear in mainland China. There was also the big write-down Ericsson warned us about a few weeks ago. Here’s the Q4 2017 summary table and we challenge you to find the highlight.

Ericsson Q4 2017 table

“The fourth quarter was in line with our overall expectation, with gradual improving performance in Networks and continued significant losses in Digital Services,” said Börje Ekholm, Ericsson CEO. “The result is however far below our long-term ambition. For 2018, the Radio Access Network (RAN) equipment market is expected to decline by -2%, compared with estimated -8% in 2017. The Chinese market is expected to continue to decline due to reduced LTE investments, while there is positive momentum in North America.

“Segment Networks showed stable performance with the ramp-up of Ericsson Radio System (ERS), representing 71% of radio unit deliveries in the quarter, and efficiency gains in service delivery as key drivers. Networks adjusted gross margin increased to 36% (32%) YoY and the success of our 5G-ready portfolio continues. In the quarter, we made deliveries related to our market share gain in Mainland China and we signed several break-through contracts, including with Verizon and Deutsche Telekom.

“Segment Digital Services had another challenging quarter with significant losses, mainly due to higher costs in ongoing large transformation projects. As previously communicated, our turn-around plan builds on stability, profitability and growth – in that order. The initial focus has been on stabilizing both product roadmaps and challenging customer contracts. We have identified 45 critical or non-strategic customer contracts and the plan is to complete or exit approximately half of these contracts in 2018. The actions to improve profitability in Digital Services are expected to generate positive effects on gross margin in the second half of 2018.

“The refocus of Managed Services to improve profitability is underway, with 23 out of the 42 under-performing contracts completed, resulting in an annualized profit improvement of SEK 0.5 b. As a result of these efforts, the underlying gross margin improved slightly QoQ. One-time effects and seasonality in operating expenses impacted operating income negatively.

“For our Media Solutions portfolio, reported in segment Other, we have executed on a profit improvement program while continuing to invest in the product offering. This has significantly improved operating performance during the year, thereby improving our strategic flexibility as we have completed our strategic review of the business. We have evaluated various options including partnerships, divestments and continued in-house development, with the objective to maximize shareholder value.

“We have decided to partner with One Equity Partners (OEP) to further develop the Media Solutions business through retaining a 49% ownership stake. This allows us to capture the upside of the business while at the same time taking active part in the expected consolidation of the industry. We have decided to keep Red Bee Media (former Broadcast and Media Services) as the bids received did not reflect the value of the business. We will develop the business as an independent entity within Ericsson, building on the improved operations.”

So the conclusion of Ericsson’s big strategic review of its media unit is to sell 51% of the ‘media solutions’ (i.e. broadcast and media hardware) to private equity, thus relinquishing control of it while still retaining substantial risk (and potential upside, it should be said). Red Bee Media is the rebranded broadcast services bit and it looks like Ericsson just couldn’t find any buyers at almost any price, so it’s stuck with it.

Lastly it wouldn’t be an Ericsson announcement without a bit of a reshuffle. This time it involves the creation of a new ‘business area’ called Emerging Business, which seems to be all about exploring new business opportunities in the areas of IoT and distributed cloud solutions. To head the unit up Ericsson poached Åsa Tamsons from McKinsey’s, where she was previously partner at its Stockholm office.

Meanwhile Ekholm’s purge of the old guard continues with Ulf Ewaldsson losing his job as head of Business Area Digital Services, which had another bad quarter, and will now just be Advisor to the CEO. The Ericsson release says Ewaldsson ‘decided to step down’, but Ekholm’s last two advisors – Jan Frykhammar and Magnus Mandersson lasted just eight months before the decided to pursue other opportunities.

Clearly the Ericsson work in progress continues. One result of this constant purging, reviewing and streamlining must surely be that Ekholm at least has a clearer picture of the task in front of him. At MWC 2017 Ekholm was able to duck the matter of the grand plan to turn things around but he won’t have that luxury this year.

He would presumably like to have better numbers to talk about at Ericsson’s traditional first-morning press event but, regardless, he has to try to demonstrate how things are going to improve. Even if the plan is just to continue downsizing until 5G ramps up then he probably needs to admit it if he wants to avoid further share price shocks such as the 8% loss of the value of his company that had happened at time of writing this article.

Ericsson gropes for the light at the end of the tunnel

Another quarter, another pretty average set of results, but Ericsson’s CEO insists there are signs of encouragement to be found if you look hard enough.

Overall sales declined -6% year-on-year, or -3% if you adjust for things. Networks sales were down -4% YoY but again, if you adjust for things, they actually grew! A lot of these adjustments, as you can see in the second table below, were for either restructuring (again), or a ‘rescoped managed services contract’ in North America, meaning that without them the company actually broke even in terms of operating income.

There seemed to be no such mitigation for another rubbish set of numbers from the IT and Cloud division, which saw sales decline -12% YoY and served up an operating margin of -41%. Other, which includes things like the media division that Ericsson is keen to offload, told a similar story, albeit with a fifth of the sales of IT and Cloud.

Unsurprisingly Ericsson CEO Börje Ekholm was keen to focus on the underlying positives from the networks division. “We continue to execute on our focused business strategy,” he said. “While more remains to be done we are starting to see some encouraging improvements in our performance despite a continued challenging market.

“Networks showed a slight sales growth year over year, adjusted for the rescoped managed services contract in North America and for currency. Networks adjusted operating margin was 11%. While losses continue in IT & Cloud, we see increased stability in product roadmaps and projects.

“We remain fully committed to our focused business strategy. We continue to invest to secure technology leadership and year to date we have recruited more than 1,000 R&D employees in Networks. Customers give positive feedback on both our long-term strategy and on our current 5G-ready portfolio.”

The market seems to be mildly encouraged by the underlying positive numbers in the Networks division, boosting Ericsson’s share price by 3% at time of writing. That’s fair enough because if Ericsson doesn’t get that division heading in the right direction everything else is irrelevant. The plight of IT and Cloud remains a major concern, however, as is Ericsson’s apparent inability to find a buyer for its Media interests.

Ericsson Q3 2017 - 1


Ericsson Q3 2017 - 2