Ericsson blames pre-paid market for profit warning

NEWS Swedish telecoms giant Ericsson is attempting to ride out the storm today after issuing a profit warning for the fiscal fourth quarter and the whole of 1998. In a statement released yesterday, chief executive Sven-Christer Nilsson warned that income would be 15 to 20 per cent below market expectations and net sales would also be disappointing. Nilsson blamed the continuing impact of the "global financial crisis". He added that a shift in demand towards entry-level phones for the pre-paid market had reduced margins. Pre-paid mobile services are rapidly increasing in popularity across Western Europe and now account for up to one third of the total mobile market. Nilsson said the company is undergoing re-structuring and rationalisation, and that this would involve "substantial reductions in the number of employees". More detailed figures will be announced next month but Nilsson admitted it could be as much as 10 per cent of Ericsson's 100,000 worldwide employees. The news will not help to calm industry nerves following profit warnings in September from Alcatel, Nortel and Philips. After the announcement Ericsson's share price crashed 23 per cent, but recovered a little to end the day down 16 per cent. The company has been criticised by some analysts for not producing enough cheap, low-end handsets to satisfy the market. Ericsson is the world's third largest supplier of mobile phones - behind Nokia and Motorola - and is Sweden's largest company.