Heavy fines of 7.4 billion!Huawei’s 5G “strongest rival” was exposed in bribery scandal

At a time when the 5G development is in full swing, Huawei and Nokia are actively laying out the 5G territory, but the Swedish telecom equipment giant Ericsson broke the bribery scandal.

On December 6, 2019 U.S. local time, the U.S. Department of Justice and the U.S. Securities and Exchange Commission jointly issued an announcement stating that the Swedish communications equipment giant Ericsson agreed to pay approximately US$1.06 billion (approximately RMB 7.46 billion) to the US government. Reached a settlement to quell years of overseas corruption investigations against Ericsson.

Bribery of five countries, fines of up to 1.06 billion U.S. dollars

According to documents issued by the U.S. Department of Justice, Ericsson committed bribery in five countries including Vietnam and Indonesia from 2000 to 2016, and claimed that the act was suspected of violating the U.S. Foreign Corrupt Practices Act (FCPA). And the attorney of the Southern District of New York, Jeffrey. Berman also said: “Ericsson uses bribery, acceptance of bribes, gifts and corruption to carry out telecommunications business based on the guiding principle of “money is everything”.”

The bribery news was also confirmed by Ericsson’s subsidiary in Egypt. The company admits that the bribery is to consolidate its telecommunications business, and the bribery covers five countries around the world, involving many high-level executives of the company.

In the end, Ericsson chose to accept the fine and reach a settlement with the US prosecutors. It is reported that Ericsson will pay about 980 million U.S. dollars in settlement funds, plus 81.5 million U.S. dollars in taxes, and a total fine of 1.06 billion U.S. dollars (approximately RMB 7.4 billion). According to information disclosed by the US, due to Ericsson’s active cooperation with the investigation, the fine has been reduced by 15% compared to the original. But the fine of US$1.06 billion is still not a small amount. The penalty amount has reached one-fifth of Ericsson’s single-quarter revenue.

Ericsson seems to be well prepared for this punishment. In September of this year, when Ericsson announced its Q3 financial report, it mentioned that it would prepare 12 billion Swedish kronor (approximately US$1.23 billion) in response to the US bribery investigation. Now the US Department of Justice has officially announced the penalty, and Ericsson has announced that it will accept the penalty and that it will complete the payment within this month. This behavior may affect the performance of Ericsson’s fourth-quarter earnings. However, Ericsson’s chief financial officer Karl. Melander still said that this will not affect any of the company’s financial goals.

Concluding remarks

Since last year, the construction of 5G has been in full swing, and major communication manufacturers have put it on the agenda, especially the competition among the 5G leaders represented by the “big three” of Huawei, Nokia, and Ericsson is more likely to attract people’s attention.

As the largest supplier of mobile telecommunications equipment, Ericsson has outstanding performance in automation technology, digital services, and IoT platforms. In terms of 5G layout, Ericsson has signed more than 75 commercial 5G agreements or contracts with different telecom operators around the world, of which 23 large-scale 5G networks have been officially put into commercial use.

However, the rise of Huawei subsequently surpassed Ericsson, which forced the latter to further invest in 5G R&D layout. When Huawei was recently sanctioned by the United States, there were many claims in the industry that Ericsson would seize the opportunity to repress Huawei. However, the bribery scandal that broke this time caused itself a nuisance, and the desire to surpass Huawei in 5G has increased. Less difficulty.

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Author: Yoyokuo