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Ericsson faces sales slowdown in China

Ericsson’s Chinese boom may be running out of steam. The world’s largest maker of wireless phone networks boosted sales in China last year by 22 percent – the biggest jump in seven years – to a record high, as China Unicom (Hong Kong) and other rivals invested in 3G infrastructure.

Now, those same companies are cutting back. Two weeks ago, China Mobile, the country’s biggest phone company, said it will trim capital spending, while China Telecom Corp. said on 22 March such expenditure will be flat. Chinese mobile-network investment, which rose to CNY371 billion (USD54.34 billion) in 2009, may drop below CNY300 billion (USD43.94 billion) this year, according to Beijing-based consultants BDA China.

Ericsson will need new growth drivers, even though government spending to stimulate the economy and competition between carriers will keep investment flowing for some years to come. Orders could come from India, which may award 3G licences this year, or from the US, where Ericsson added SEK2.7 billion (USD374.2 million) in sales, or about 1 percent of the total revenue of SEK206 billion (USD28.55 billion) in the last six weeks of 2009 from its acquisition of Nortel Networks assets.

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