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Ericsson Extends Collaboration with NBN Co in Australia

Ericsson’sERIC partnership with NBN Co to provide fixed wireless as well as satellite operational services across Australia’s regional and rural parts was recently extended to 2020 by the latter. Per the latest deal, Ericsson will continue to be in charge of operations for nbn fixed wireless network and ground systems operations for Sky Muster. The company will also handle customer connections and assurance for both technologies.

NBN Co’s fixed wireless and Sky Muster services cater to over 980,000 homes in regional as well as remote Australia. Over 290,000 homes are linked to broadband services through NBN Co’s retail service providers. The presence of extensive broadband across Australia will facilitate the bridging of the digital divide, while supporting economic as well as community growth.

Of late, soft mobile broadband demand and challenging macroeconomic conditions in the emerging markets are acting as a deterrent for major investments by telecom equipment behemoths, and this has hurt Ericsson’s operations severely in recent times.

Persistently low investments in mobile broadband in certain markets and lower managed services sales have harmed the sales of the company’s Networks segment, while lower legacy product sales have hurt IT & Cloud revenues. Lower IPR licensing revenue and an unfavorable mix between coverage & capacity and services are adding to concerns. Notably, the Zacks Rank #5 (Strong Sell) company has lost 4.4% in the past six months in contrast to the industry’s gain of 2.5%.

Moreover, high restructuring charges are knocking on the company’s door, and we also have a subdued view of operator spending and investments in R&D. The company’s current savings plans and job reductions do not seem enough to counter macroeconomic miseries and swiftly waning product demand, further adding to the woes.

This apart, spectrum crunch has become a major issue in the U.S. telecom industry that has a saturated wireless market. In addition, the company’s cash flow could be materially hurt by market and customer project adjustments. Though the company is working diligently to improve the situation, tangible results are yet to materialize.

Stocks to Consider

Some better-ranked stocks from the same space include Comtech Telecommunications Corp. CMTL, Motorola Solutions, Inc. MSI and Harris Corporation HRS. While Comtech Telecommunications sports a Zacks Rank #1 (Strong Buy), Motorola Solutions and Harris carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Analog Devices has surpassed estimates in the trailing four quarters, with an average positive earnings surprise of 88.7%.

Motorola Solutions has surpassed estimates in the trailing four quarters, with an average positive earnings surprise of 13.2%.

Harris has outpaced estimates thrice in the preceding four quarters, with an average earnings surprise of 2.8%.

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