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Ericsson to write down 1.4 billion euros in fourth quarter

© AFP | A big writedown, but no impact on cash flow

STOCKHOLM (AFP) - 

Swedish telecoms equipment maker Ericsson on Tuesday said it would write down 14.2 billion kronor (1.4 billion euros, $1.8 billion) in assets as the troubled company struggles to compete in a rapidly changing sector.

The writedowns, which will be booked in the fourth quarter of 2017 and which were expected, originate mainly from goodwill from "investments made 10 years ago or more, and has limited relevance for Ericsson's business going forward," the company said in a statement.

The depreciation has no impact on cash flow, it said.

The two business areas mainly responsible for the writedowns are Ericsson's digital services unit and media business.

Press reports have speculated that Ericsson is seeking to divest its media business, which provides services for television channels, telecom operators and content providers.

Ericsson has not confirmed those reports, saying only that it is exploring strategic opportunities for the media business since it is no longer considered part of the group's core businesses of networks, digital services and Internet of Things.

In addition to the writedowns, Ericsson also announced a 1.0 billion kronor non-cash tax charge due to US tax rates being cut from 35 percent to 21 percent this month.

Once a global leader in equipment making, Ericsson is facing intense competition from the likes of Finland's Nokia and China's Huawei, coupled with sagging investment in networks.

In the third quarter, Ericsson posted a net loss of 4.4 billion kronor and registered its fourth straight operating loss, after being hit by a range of factors including higher development and hardware costs.

The company is to publish its annual results on January 31.

© 2018 AFP