We see robust underlying performance and strong momentum in the business as we continue to execute on our strategy. This includes leadership in mobile networks by growing market share. Since 2017 we have increased RAN market share, excluding Mainland China, from 33% to 39% and we have had multiple contract wins across geographies in this quarter. We continue to solidify our strong position in 5G to capture the considerable opportunities presented by the fastest scaling mobile generation. Our expansion into the exciting high-growth Enterprise space is gaining momentum with the acquisition of Vonage, providing us with access to a powerful range of cloud communication services.

Group Net Sales¹ in the quarter grew by 3% organically, driven by strong performance from Networks. EBITA² of SEK 7.7 b. corresponded to a margin of 11.3%, where higher gross income from business growth was offset by increased technology investments and the consolidation of Vonage with acquisition accounting and one-time acquisition costs.

Our Networks business saw strong organic sales¹ growth of 7% excluding IPR (4% including IPR), with growth driven by our market leading portfolio primarily in North America where operators continue to forcefully drive 5G deployment. After expected record operator capex in 2022 in North America, we anticipate RAN capex to hold up well in 2023, albeit at a lower level than this year. We continue to further strengthen our position by increasing our global footprint which we expect will lead to overall growth in 2023. As previously observed, footprint gains with large-scale projects in early stages tend to have a dilutive impact on gross margins. However, the growing gross income will allow continued investment for technology leadership. We are excited by the opportunities presented by our network offering underscored by our portfolio strength.

To fully benefit from the performance and features of 5G it is crucial to leverage on mid-band frequencies. The global 5G build-out is still in its early stages with less than a quarter of global LTE nodes upgraded with mid-band. We expect to see many new use cases for 5G where we already see Fixed Wireless Access gaining increasing traction. The broader consumer and enterprise applications of 5G will also boost demand for network performance, hence we predict a longer investment cycle than for previous mobile generations.

One cornerstone in our expansion into Enterprise is Vonage. 5G offers unique capabilities such as high speed and low latency. We expect to see these capabilities be exposed, consumed and paid for through network APIs. We are intensively working with frontrunner operators to enable further monetization of their network investments through our global network platform. More broadly, we expect the acquisition to be highly accretive, enabling us to help customers accelerate their digital transformations while also significantly shaping how 5G networks are monetized. This will give the operators new revenue sources driving further investments in the network. In the Enterprise Wireless Solutions business, we have almost doubled sales in Q3 compared with Q3 2021.

In the new Cloud Software & Services segment, revenues were impacted by lower managed services sales and IPR revenues. Gross income was stable after offsetting ongoing 5G Core deployment costs. We have an ambition to unleash the great potential that we believe is present in this business. Our new management team is taking further actions to turn around the business and establish a satisfactory profitability. This includes strong focus on driving down costs, including realizing synergies from combining two business areas, while solidifying our technology and market leadership position. Improvements in performance will be gradual.

In the current inflationary environment, we are making pricing adjustments as well as leveraging product substitution to manage margins. We are also simplifying operations across the company and will continue to be proactive in reviewing options to reduce costs, whilst continuing to develop best-in-class products and services. We are fundamentally strengthening cost competitiveness through an intense focus on internal end-to-end efficiency gains and structural costs. We are dedicated to our long-term target of EBITA margin of 15-18% no later than 2024 and we will take out costs to secure delivery of this target. In order to deliver on the cost reductions, we expect restructuring costs to increase and be more in line with our long-term guidance of 1% of net sales, albeit varying by quarter. Cost efficiency is also crucial to allow investments in technology leadership and to strengthen our resilience in an uncertain market.

Strengthening the Ericsson culture is a key part of our strategic priorities. We are dedicated to acting with integrity in everything we do and have taken significant steps in developing our ethics and compliance program, while enhancing our risk management framework. We have changed, but we have more to do. We continue to engage with the Department of Justice and the Securities and Exchange Commission in relation to the 2019 Iraq investigation report and the DPA breach notices and are fully committed to cooperating with government authorities.

In summary, the focused strategy, which is built on the strength of our mobile networks business and supported by investment in R&D driving technology leadership, is leading to increased market share and delivery of robust financial performance. This is complemented by our high-growth Enterprise market strategy.

I want to thank all of our fantastic team around the world for their hard work and dedication. We look forward to discussing our strategy and execution at our upcoming Capital Markets Day in December.

Börje Ekholm

President and CEO

Segments

Group sales were SEK 68.0 (56.3) b. Sales adjusted for comparable units and currency increased by 3% YoY, driven primarily by Networks.

Networks sales adjusted for comparable units and currency increased by 4% YoY. Sales growth was driven primarily by North America. Networks accounted for 71% (72%) of total sales.

Cloud Software and Services sales adjusted for comparable units and currency decreased by -5% YoY, primarily due to a decrease in IPR licensing revenues and a decrease in managed services sales, as a result of rescoping and renegotiations of contracts. Cloud Software and Services share of total sales was 21% (24%).

Enterprise sales adjusted for comparable units and currency increased by 21% YoY driven by Cradlepoint and iconectiv. Vonage sales were SEK 2.9 b. in the quarter. Enterprise share of total sales was 8% (3%).

IPR licensing revenues decreased to SEK 1.6 (2.6) b. impacted by expired patent license agreements due for renewal. Q3 2021 was positively impacted by retroactive revenues for unlicensed periods prior to Q3. With current contracts, IPR revenues are estimated to be SEK 1.0–1.5 b. in Q4.

Market Areas

Sales adjusted for comparable units and currency increased in three of the five market areas.

In market area South East Asia, Oceania and India, significant contracts with resulting market share gains were signed in the quarter. These will support growth in the market area going forward.

Sales in market area North America continued to grow driven by strong 5G demand. Operator capex investments are expected to reach record levels in 2022, and some operators are guiding for lower capex in 2023.

In market area Europe and Latin America, the orderly withdrawal from the Russian market impacted sales by SEK -0.8 b. YoY and organic sales growth by -6.5 percentage points.

Market area Other primarily includes IPR licensing revenues and a major part of segment Enterprise. Growth was driven mainly by the consolidation of Vonage, more than offsetting the decline in IPR licensing revenues.

Gross income

Gross income increased by SEK 3.4 b. to SEK 28.1 b. driven by sales growth in Networks and Enterprise (mainly Vonage). Gross margin was 41.4% (44.0%). Networks gross margin decreased, mainly impacted by lower IPR revenues of SEK -0.9 b. YoY, increased component costs and investments in supply chain resilience. Gross margin decreased in Cloud Software and Services mainly impacted by lower IPR revenues of SEK -0.2 b. YoY and by deployment costs for the cloud native 5G Core portfolio.

Sequentially, gross income increased by SEK 1.8 b. with increases in Networks and Enterprise (mainly Vonage). Gross margin declined to 41.4% from 42.1%, primarily due to a higher share of services and lower share of software in the sales mix.

Research and development (R&D) expenses

R&D expenses amounted to SEK -11.9 (-10.2) b. including a negative currency effect of SEK -0.6 b. R&D expenses increased primarily in Networks due to further investments in Cloud RAN and in Ericsson Silicon (ASICs). R&D expenses were also impacted by the consolidation of Vonage and increased investments to expand the Enterprise Wireless Solutions portfolio.

Selling and administrative (SG&A) expenses

SG&A expenses were SEK -9.4 (-6.2) b. including a negative currency effect of SEK -0.7 b. The increase is mainly related to consolidation of Vonage (SEK -1.8 b., including amortization of SEK -0.3 b. and a one-off M&A related transaction cost of SEK -0.3 b.). Furthermore, there were higher SG&A expenses due to higher compliance and legal costs as well as investments in the go-to-market organization in Enterprise Wireless Solutions.

Other operating income and expenses

Other operating income and expenses was SEK 0.2 (0.5) b. following a positive fair market revaluation of Ericsson Ventures investments of SEK 0.2 (0.5) b.

Restructuring charges

Restructuring charges amounted to SEK -0.1 (0.0) b.

EBITA

EBITA decreased to SEK 7.6 (9.3) b. corresponding to an EBITA margin of 11.2% (16.5%). EBITA was primarily impacted by increased investments in R&D, selling expenses in segment Enterprise (mainly from consolidation of Vonage) as well as one-off costs of SEK -0.5 b.

EBIT

EBIT decreased to SEK 7.1 (8.8) b. EBIT margin was 10.5% (15.7%).

Sequentially, EBIT decreased to SEK 7.1 b. from SEK 7.3 b. primarily due to lower EBIT in Enterprise.

EBIT margin rolling four quarters was 12.1%.

Financial income and expenses, net

Financial net was SEK -0.5 (-0.6) b. The strengthened USD to SEK resulted in a negative currency hedge effect of SEK -0.4 (-0.3) b.

Sequentially, financial net changed to SEK -0.5 b. from SEK -0.8 b. The currency hedge effect was SEK -0.4 b. in the quarter, versus SEK -0.5 b. in previous quarter. The USD strengthened against the SEK between June 30, 2022 (SEK/USD rate 10.31) and September 30, 2022 (SEK/USD rate 11.18).

Income tax

Taxes were SEK -1.2 (-2.5) b. Effective tax rate in Q3 was 25%, as a result of utilization of tax assets. Tax rate in Q3 2021 was 30%.

Net income

Net income declined to SEK 5.4 (5.8) b. The decrease in EBIT was partly offset by lower income tax. EPS diluted decreased to SEK 1.56 (1.73).

Employees

The number of employees on September 30, 2022, was 104, 490 compared with 101, 459 on June 30, 2022. The increase is related mainly to Vonage.

Financial highlights, year to date (Jan-Sep) development

Sales increased by 15% to SEK 185.6 b., where Vonage contributed SEK 2.9 b. Sales adjusted for comparable units and currency increased by 3% driven primarily by sales in market area North America and in market area Europe and Latin America. Networks sales adjusted for comparable units and currency increased by 5%, Cloud Software and Services declined by -3%, and Enterprise grew by 17%.

Gross income increased to SEK 77.7 (69.9) b. as a result of higher sales. Gross margin decreased to 41.9% (43.4%) as a result of lower IPR licensing revenues, increased component costs, investments in supply chain resilience and a larger share of services in the sales mix following expansion of market share in Networks.

R&D expenses increased by SEK -3.9 b. to SEK -34.1 (-30.2) b., including a currency effect of SEK -1.4 b. R&D expenses increased primarily in Networks as a result of further investments in Cloud RAN and in Ericsson Silicon (ASICs) as well as in Enterprise, with consolidation of Vonage and increased investments in Enterprise Wireless Solutions.

SG&A expenses increased by SEK -4.6 b. to SEK -23.9 (-19.3) b. including a currency effect of SEK -1.4 b. The increase is mainly related to consolidation of Vonage (SEK -1.8 b., including a one-off M&A-related transaction cost of SEK -0.4 b.), continued investments in Enterprise Wireless Solutions and increases in compliance and legal expenses.

EBITA decreased to SEK 20.0 (21.0) b. YoY corresponding to an EBITA margin of 10.8% (13.0%). Higher gross income was offset by higher operating expenses.

EBIT decreased to SEK 19.2 (19.9) b. YoY, corresponding to an EBIT margin of 10.3% (12.4%).

Net income improved to SEK 12.9 (12.8) b. positively impacted by lower taxes.

Mobile Infrastructure –

Segment Networks

Breakdown of sales into products, services and IPR licensing is available in note 3.

Net sales

Sales adjusted for comparable units and currency increased by 4% YoY with continued momentum in 5G. Sales growth was driven primarily by North America. Market areas South East Asia, Oceania and India as well as Middle East and Africa also reported double-digit growth. Excluding lower IPR licensing revenues, sales growth was 7%. Reported sales increased by 19% YoY. Sequentially, sales increased by 5%, driven primarily by North America.

After expected record operator capex in 2022 in North America, RAN capex is anticipated to hold up well in 2023, albeit at a lower level than in 2022. Initial adjustment to lower levels in North America is expected in Q4 this year. At the same time, revenues from market share gains are expected to accelerate during Q4 compensating for potentially lower sales in North America.

Gross income

Gross income increased by SEK 2.0 b. to SEK 21.4 b. driven by increased sales following market share gains. Gross margin decreased to 44.4% (47.8%). The margin was impacted by lower IPR licensing revenues, increased component costs, continued investments in supply chain resilience and a larger share of services in the sales mix following expansion of market share. Sequentially, gross income increased by SEK 0.6 b. while gross margin decreased mainly as a result of a larger share of services in the sales mix than in the previous quarter.

Market share gains across various geographies with large-scale projects in early stages tend to have a dilutive impact on gross margins. In Q4, revenues from market share gains are expected to contribute to improved gross income, while gross margins will be diluted. It is anticipated that component cost and inflation will continue to negatively impact margins in the coming quarters.

EBIT

EBIT was stable at SEK 9.6 b. with an EBIT margin of 19.9% (23.7%). EBIT margin was impacted by lower gross margin and increased operating expenses, primarily due to investments in R&D in Cloud RAN and in Ericsson Silicon (ASICs). Sequentially, EBIT increased to SEK 9.6 b. from SEK 8.9 b. driven primarily by higher sales and gross income.

Net sales rolling four quarters were SEK 185.9 b. and EBIT margin rolling four quarters was 20.3%. EBIT margin for full-year 2022 is expected to somewhat exceed Networks financial target range of
16–18% excluding restructuring charges.

Mobile Infrastructure –

Segment Cloud Software and Services

Breakdown of sales into products, services and IPR licensing is available in note 3.

Net sales

Sales adjusted for comparable units and currency decreased by -5% YoY primarily due to lower IPR licensing revenues and contract descoping and renegotiations in managed services. Market area South East Asia, Oceania and India reported growth. Reported sales increased by 4% YoY.

Sequentially, sales increased by 1%, driven primarily by North America.

Gross income

Gross income was stable YoY. Gross margin was 31.8% (33.6%). Gross margin continues to be impacted by a lower share of IPR licensing revenues and deployment costs for cloud native 5G Core contracts.

Sequentially, gross income and gross margin declined in the quarter, primarily due to higher share of services in the sales mix from deployment of 5G Core contracts.

EBIT (loss)

EBIT (loss) was SEK -0.8 (-0.4) b. with an EBIT margin of -5.6% (-3.3%). EBIT was negatively impacted mainly by higher operating expenses, primarily for investments in the cloud native 5G portfolio.

Sequentially, EBIT was SEK -0.8 b. compared with SEK -0.7 b. in Q2, impacted by lower gross income.

Net sales rolling four quarters were SEK 58.3 b. and EBIT margin rolling four quarters was -3.0%.

EBIT loss, excluding restructuring charges, for full-year 2022 is expected to be in line with full-year 2021.

Enterprise –

Segment Enterprise

Net sales

Sales adjusted for comparable units and currency increased by 21% YoY driven by Cradlepoint. Reported sales increased by SEK 3.6 b. YoY driven by the Vonage acquisition (SEK 2.9 b.).

Gross income

Gross income increased by SEK 1.6 b. to SEK 2.4 b., driven by the Vonage acquisition. Gross margin decreased to 46.5% (48.8%) due to Vonage. Vonage’s gross income was negatively impacted by SEK -0.1 b. from the preliminary Vonage PPA (purchase price allocation), corresponding to a margin impact of -2.5 percentage points. Gross margin excluding Vonage increased by 3 percentage points.

Sequentially gross income increased by SEK 1.6 b. driven by Vonage. Gross margin increased to 46.5% from 45.0%.

EBITA (loss)

EBITA (loss) was SEK -1.2 (-0.5) b. The decline is mainly due to the consolidation of Vonage (SEK -0.5 b.) primarily from one-off acquisition costs of SEK -0.4 b. and SEK -0.1 b. from the preliminary PPA. Excluding these items, Vonage EBITA was positive. At the same time investments in developing network APIs continue. The quarter was also impacted by growth investments in Enterprise Wireless Solutions.

EBIT (loss)

EBIT (loss) was SEK -1.7 (-0.8) b. impacted by amortization of intangible assets from acquired businesses.

Sequentially, EBIT (loss) increased to SEK -1.7 b. from SEK -0.8 b.

Segment Other

Net sales

Sales adjusted for comparable units and currency decreased by -1% YoY. Sales in the media business were stable. Reported sales increased by 3% YoY.

Sequentially, sales declined by -12% due to project timing in the media business.

Gross income

Gross income decreased by SEK -0.2 b. due to one-off costs related to a market exit (SEK -0.2 b.). For this reason, gross margin decreased to -27.9% (7.9%).

Sequentially gross margin decreased to -27.9% from 5.4% mainly due to one-off costs (SEK -0.2 b.) for a market exit.

EBIT (loss)

EBIT (loss) was SEK 0.0 (0.5) b., with an EBIT margin of -3.9% (95%). EBIT was negatively impacted by lower gross income and materially lower revaluation of Ericsson Ventures investments compared with Q3 2021.

Sequentially, EBIT (loss) was stable.

Vonage transaction

(SEK -51.3 b.) including support from a cash flow hedge release.

Cash flow from operating activities

Cash flow from operating activities was SEK 4.7 (14.7) b. Cash flow was negatively affected mainly by buildup of SEK -3.3 (4.9) b. of working capital and by lower EBIT YoY. Compared with Q3 2022, Q3 2021 was supported by a higher share of customer prepayments and lower payments to suppliers. Inventory of components increased to ensure supply chain resilience; however, the inventory level is expected to decrease towards the end of the year. As a result of market share gains, working capital is expected to remain at a high level.

As mentioned, when announcing the closing of the acquisition, Vonage has been in discussions with the US Federal Trade Commission (FTC) to resolve an investigation initiated in 2020 into historic consumer practices. Resolution is subject to the approval of the FTC. The estimated impact is in the range of approximately USD 100 m. A provision for this matter was made in the Vonage opening balance, and we therefore do not expect any P&L impact to occur. Depending on the timing of the closure of the settlement, a final settlement amount could become payable in Q4 and thereby impact Q4 cash flow. This legal matter is pending and there can be no assurance as to the final outcome.

Free cash flow

Free cash flow before M&A was SEK 2.5 (13.0) b. and, on a rolling 12-month basis, SEK 18.8 b. or 7.3% in relation to sales. Capex net and other investing activities were SEK -1.4 (-1.2) b. The increase is related to product development. Cash flow from M&A activities was SEK -51.4

b. driven mainly by the acquisition of Vonage in the quarter. Free cash flow after M&A was SEK -48.9 (12.9) b.

Cash flow from investing activities

Cash flow from investing activities was SEK -58.9 (-9.1) b. following the Vonage acquisition. Adjusted for a positive cash flow hedge release of SEK 3.7 b. the acquisition amounted to SEK -51.3 b.

Cash flow from financing activities

Cash flow from financing activities was SEK -5.3 (-2.5) b. following the acquisition of Vonage, debt of USD -0.6 b. (SEK -5.9 b.) was repaid. Proceeds from issuance of long-term debt were SEK 1.7 (0.0) b.

Financial position

Positive cash flow from operating activities in the quarter supported the cash position. Gross cash declined by SEK -54.6 b. QoQ, to SEK 45.8 b. from SEK 100.4 b. due to the payment for Vonage shares and debt. Net cash decreased by SEK -57.0 b. QoQ, to SEK 13.4 b. from SEK 70.3 b. The average maturity of long-term borrowings as of September 30, 2022, was 4.1 years, an increase from 3.8 years 12 months earlier.

Liabilities for post-employment benefits decreased to SEK 25.1 b. from SEK 25.3 b. in the quarter, due to increase in discount rates. The Swedish defined benefit obligation (DBO) was calculated using a discount rate based on the yields of Swedish government bonds. If the discount rate had been based on Swedish covered mortgage bonds, the liability for post-employment benefits would have been approximately SEK 6.4 b. (SEK 18.7 b. lower than current DBO).

Return on capital employed (ROCE) was 13.2% (15.9%), reflecting the increase in capital employed as well as lower EBIT YoY.

Market

The global RAN equipment market is estimated to grow by 5% (5%) in 2022. North America is expected to grow by 12% (8%), Europe by 1% (5%) and Mainland China by 4% (4%).

Source: Dell’Oro Mobile RAN 5-year forecast, July 2022. Numbers in brackets from Dell’Oro Mobile RAN outlook report February 2022.

Ericsson

Net sales (excluding Vonage)

Reported average seasonality last 3 years (2019–2021), %

Net sales may show large variations between quarters, including currency changes.

Operating expenses excluding restructuring (excluding Vonage)

Reported average seasonality last 3 years (2019–2021), SEK b.

Positive numbers = decrease in operating expenses.

Negative numbers = increase in operating expenses.

Operating expenses may show large variations between quarters, including currency changes.

Currency exposure

Rule of thumb: A change by 10% of SEK to USD would have an impact of approximately +/-5% on net sales and approximately +/-1 percentage point on EBIT margin.

Income after financial items January–September 2022, was SEK 20.2 (7.3) b.

At the end of the quarter, gross cash (cash, cash equivalents, short-term investments and interest-bearing securities, non-current) amounted to SEK 29.9 (74.8) b.

There was a decrease in intercompany lending of SEK 6.9 b. and in intercompany borrowing of SEK 1.8 b. in the third quarter.

The holding of treasury stock on September 30, 2022, was 4,009,306 Class B shares.

Other information

Legal proceedings

On October 4, 2021, Ericsson asked the U.S. District Court for the Eastern District of Texas for a declaration that Ericsson has, in its negotiations with Apple, complied with its FRAND commitment and all other applicable laws and policies that would affect the terms of Ericsson’s and Apple’s prospective license. On December 17, 2021, Apple filed a responsive case against Ericsson in the U.S. District Court for the Eastern District of Texas alleging, among other things, that Ericsson breached obligations associated with the licensing of its standard essential patents under FRAND terms.

Ericsson and Apple were not able to renew the now expired patent license agreement between the parties in a timely manner. On January 18, 2022, Ericsson filed three complaints with the US International Trade Commission (ITC) alleging infringement of 12 patents by certain Apple products. In addition, Ericsson filed companion lawsuits in the Western District of Texas alleging infringement of the same 12 patents.

On January 19, 2022 Apple responded by filing a complaint against Ericsson in the ITC alleging that certain Ericsson products infringe three Apple patents. In January of 2022, Ericsson also filed lawsuits in several jurisdictions in Europe (Germany, the Netherlands, and Belgium) and South America (Brazil and Colombia) alleging that certain Apple products infringe Ericsson patents. Apple likewise filed lawsuits in Germany and China alleging that certain Ericsson products infringe Apple patents and utility models. In the following months, Ericsson made further filings in the United Kingdom, the Netherlands, and Brazil alleging Apple products infringe additional Ericsson patents. Apple filed further lawsuits in Germany alleging Ericsson products infringe additional Apple patents.

As previously disclosed, on March 3 2022, Telefonaktiebolaget LM Ericsson and certain officers of Ericsson were named as defendants in a putative class action filed on behalf of investors in Ericsson securities in the United States District Court for the Eastern District of New York. An amended complaint was filed on September 9 2022, which added a former Ericsson officer as defendant. The amended complaint alleges violations of United States securities laws, in connection with allegedly false and misleading statements principally concerning the Company’s adherence with its compliance and anti-corruption policies and obligations and the conduct of its business in Iraq.

In August 2022, a civil lawsuit was filed in the United States District Court for the District of Columbia against Telefonaktiebolaget LM Ericsson and Ericsson Inc. The lawsuit was brought by US military service members and employees of US government contractors who were killed or injured in terrorist attacks in Iraq, Afghanistan and Syria from 2005 to 2021, as well as by their family members. The lawsuit asserts claims against Ericsson under the US Anti-Terrorism Act alleging that Ericsson made payments that ultimately aided the terrorist organizations that committed, planned or authorized the attacks.

PRESS RELEASES

July 15, 2022 | Ericsson receives regulatory approval to complete acquisition of Vonage

Ericsson (NASDAQ: ERIC) today announced that it has received clearance from the Committee on Foreign Investments in the United States (CFIUS) to complete its acquisition of Vonage Holdings Corp. (NASDAQ: VG) (“Vonage”). This represents the final requisite approval to complete the deal. The parties now expect the Merger to close no later than July 21, 2022, as provided for in the Merger Agreement.

https://www.ericsson.com/en/press-releases/2022/7/

ericsson-receives-regulatory-approval-to-complete-acquisition-of-vonage

July 21, 2022 | Ericsson completes acquisition of Vonage

Ericsson (NASDAQ: ERIC) has completed its acquisition of Vonage Holdings Corp. (Vonage) (NASDAQ: VG), supporting Ericsson’s strategy to leverage technology leadership to grow its mobile network business and expand into enterprise. The acquisition provides Ericsson with access to powerful building blocks to offer a full suite of communications solutions including, Communications Platform as a Service (CPaaS), UCaaS and CCaaS.

By leveraging the Vonage CPaaS offering, Ericsson aims to transform the way advanced 5G network capabilities are exposed, consumed and paid for. This will provide the global developer community, including Vonage’s more than one million registered developers, with easy access to 4G and 5G network capabilities via open Application Program Interfaces (APIs).

For communications service providers (CSPs), global network APIs - such as location and quality of service APIs - provide new opportunities to expand their profit pools to monetize 5G network capabilities. For Ericsson, global APIs provide a new material growth opportunity. The existing market for communications APIs – such as video, voice and SMS – is currently growing at 30 percent annually and projected to reach USD 22 billion by 2025.

Accessing network capabilities in an open, intuitive, and programmable ways via global APIs will enable developer communities to create applications for any device that benefits from connection to the 5G network. Developers can utilize network characteristics such as user authentication, bandwidth, responsiveness, energy efficiency, security, identification and reliability - or network information such as device information or predictive coverage.

These new and innovative consumer and enterprise applications will further drive the rollout of 5G and network Capex.

To accelerate growth in Vonage’s UCaaS and CCaaS solutions, Ericsson intends to increase R&D investments and offer these solutions to CSPs, enabling Ericsson’s existing customers to sell through their own brands, and accelerate growth. Ericsson will also complement existing communications offerings to small and medium sized companies with the Vonage UCaaS and CCaaS solutions which will form a strong part of Ericsson’s offerings to both CSPs and enterprises.

Börje Ekholm, President and CEO, says: “We are excited to welcome Vonage as part of Ericsson. With Vonage’s suite of communications solutions – UCaaS, CCaaS and Communications APIs – Ericsson will further expand its offerings into the enterprise space. In the future, network capabilities will be consumed and paid for through open network APIs, creating the opportunity for unparalleled innovation. We have already launched the first network API, Dynamic End-user Boost, based on existing 4G infrastructure. With Vonage, we will now develop and commercialize these new APIs. We are already seeing great progress with frontrunner CSPs, and we aim to launch the first 5G network APIs in the coming year. We will continue to create new, enhanced applications and services for enterprises, while driving continued innovation on Vonage’s UCaaS and CCaaS applications, helping businesses create new digital experiences for better communications, connections and engagement.

“By linking the network world with the global developer community, we’re creating a paradigm shift that will put the network at the center, allowing the CSPs a new monetization opportunity supporting increasing investments in high-performance networks.”

“4G was the platform that allowed the consumer to digitalize. It opened new business models and created some of the fastest-growing companies in history. With 5G, we have an innovation platform, unlike anything we’ve seen before, offering almost limitless opportunities to develop super-fast, highly reliable, low-latency and mission-critical services. With 5G, we will see accelerated digitalization of enterprises with Vonage’s UCaaS and CCaaS suite being a solid growth platform.”

Vonage was recently named the leader in the Omdia Universe: Selecting a CPaaS Platform 2022 report, ranked in top positions on customer experience and solutions capability. It currently serves over 120,000 business customers, has a global community of more than one million registered developers and a highly scaled platform with a combined 25 billion messages and minutes per year. This, combined with Ericsson’s deep network expertise, industry-leading portfolio and global scale, is expected to enable Ericsson to seed and accelerate the market for global network APIs. CSPs will benefit from global reach, beyond national or regional setups.

The acquisition will also further strengthen Ericsson’s presence and long-term commitment to the United States, where it has a 120-year history of conducting business.

Rory Read, Vonage CEO, says: “Vonage was born out of innovation and is today a global leader in business cloud communications. This partnership will strengthen our offerings to businesses across the globe by leveraging Ericsson’s leadership in 5G, global market presence and strong R&D capabilities. With the demand for UCaaS, CCaaS and Communications APIs growing rapidly, the combined expertise, talent and innovation is good news for our customers and partners.”

He adds “The way we work, shop, learn, see a doctor, exercise and entertain is fundamentally changing. Together, Ericsson and Vonage will be at the heart of the next wave of the digital transformation, providing enterprises, CSPs and end users with innovative applications and services that will change how business gets done. We will drive deeper connections and engagement among employees and across customer touchpoints, making for exceptional experiences.”

Additional information about the transaction

The transaction is expected to be accretive to Ericsson’s EPS (excluding non-cash amortization impacts) and free cash flow before Mergers & Acquisitions (M&As) from 2024 onwards.

Vonage will become a separate business area within the Ericsson Group - called Business Area Global Communications Platform (BGCP). Rory Read, current CEO of Vonage, is appointed Senior Vice President and Head of Business Area Global Communications Platform and a member of Ericsson’s Executive Team.

With the completion of the transaction, Vonage will continue to operate under its existing name and brand being part of the Ericsson Group.

As of the closing date, Vonage’s financial performance will be reported in Segment Enterprise along with Business Area Enterprise Wireless Solutions and Business Area Technologies & New Businesses as of the third quarter 2022.

Vonage common stock has ceased trading and will no longer be listed on the Nasdaq Global Select Market.

The acquisition was funded with cash on hand. The USD amount has been hedged with both external transactions and internal netting of Ericsson’s ongoing USD inflows.

The transaction is expected to deliver near-term revenue synergy opportunities, including CSPs selling through their own brands and cross-selling of the combined product portfolio estimated to contribute USD 0.4 billion by 2025. Ericsson also expects to achieve some cost efficiencies now that the deal is complete.

Vonage has a strong track record of growth and margin evolution. Sales were USD 1.4 billion in the 12-month period to 31 March 2022 and, over the same period, the company delivered an adjusted EBITDA margin of 13 percent and free cash flow of USD 93 million.

Ericsson remains committed to the previously communicated long-term financial targets of an EBITA margin of 15-18 percent and Free Cash Flow before M&A of 9-12 percent of sales; as well as the 2022 EBIT margin target of 12-14 percent for the Ericsson Group excluding Vonage.

Vonage is currently engaged with the U.S. Federal Trade Commission to resolve an investigation into historic consumer practices which was initiated in 2020.

https://www.ericsson.com/en/press-releases/2022/7/

ericsson-completes-acquisition-of-vonage

Other important information published on Ericsson.com

Connectivity in an increasingly complex world

Since our founding over 145 years ago, Ericsson has been driven by the belief that access to communications is a basic human need. We are committed to providing people with continuous global connectivity, information and all that flows from this. After all, in today’s world, communications drive the way we socialize, shapes politics and commerce, is relied on for healthcare and emergency networks, and increasingly shapes how people learn and what they believe. Digital connectivity creates immeasurable opportunities for society, yet one-third of the world’s population currently does not have access to the Internet. We believe every person should have safe and affordable wireless communications – enabling inclusion, education and job opportunities, and a means for everyone to be better connected.

In this context, we have over the years expanded our global operations and are today present in over 180 markets. This is a leadership position that comes with great responsibility, which we take seriously. Today’s world is highly unpredictable and doing business across diverse and complicated operating environments is challenging. We are thoughtful about where we work and who we work with, always striving to fulfil our mission responsibly and with integrity. This means doing business with our eyes open, living up to our values and, importantly, putting people first by ensuring the safety of our employees as well as respecting and supporting the communities in which we work. If, as part of our continuous assessment, we conclude that our operations conflict with our fundamental principles and core values, we will change how we operate and exit if appropriate.

In the past, the company has not always lived up to the high expectations that we all have for our company and that is unacceptable - it does not represent who we are or what we stand for and we remain committed to being a positive force and to operate ethically at all times. We won’t compromise our values or the safety of our people.

As a global company, changing circumstances may require or lead us to exit a market. In some instances, this happens under sudden, unplanned, and complex circumstances. However, exiting any market

is not straightforward. People will always need access to communications and this is a core principle for us. Recent global events underscore the importance of digital connectivity. The importance for people to communicate freely with each other, and with the wider world, has never been clearer. When conflict or natural disaster strike, connectivity becomes a lifeline. Without access to the Internet, mobile networks and other methods of digital communication, vital information flow is slowed down or even halted entirely. This leaves people without an opportunity to communicate with loved ones, share what is happening locally with the world, obtain real-time sources of accurate information, access remote learning, and more. This is why many governments promote the development of digital infrastructure, even in geopolitically sensitive regions. Accordingly, we always look to honor our responsibility to provide civilian connectivity in times when societies may need it most.

If we make a decision to leave we will take every measure to exit in a responsible manner; compliant with the law, adhering to sanctions requirements, aligned with our Code of Business Ethics and corporate values and, most importantly, ensuring the safety of our people and respecting the community we are leaving.

Importantly, as a critical infrastructure provider, we take pride in and will continue to deploy our resources for humanitarian purposes. This is a duty we take seriously. For 20 years, Ericsson Response has been at the forefront of the UN Emergency Telecommunications Cluster – using our telecoms skills and technology to bring together the aid organizations that help alleviate affected populations in disasters and other humanitarian emergencies. It is vital work like this that underpins Ericsson’s engagements across several of the complex markets in which we operate.

Summary

Ericsson has a long tradition of global engagement and today is present in 180 countries. As a cornerstone principle, Ericsson is committed to the development and maintenance of sustainable communications networks, guided by our core values of integrity, respect, professionalism and perseverance. Importantly, we are committed to being a positive force in the communities in which we operate – in line with the UN Sustainable Development Goals. Given our global presence and the ever-changing geopolitical situation, we continuously assess our presence, work and impact in countries and regions to ensure that our operations have not become impossible or intolerable to our core values. This includes a constant assessment of the safety and security of our people and contractors, the respect for the rule of law in the areas where we work, and the respect for human rights. As we decide to enter or exit a market, we will consider all these matters in the broad context of Ericsson’s long held principles and foundational belief that access to communications is a basic human need.

https://www.ericsson.com/en/newsroom/ericsson-comments

/connectivity-in-an-increasingly-complex-world

Risk factors

Ericsson is exposed to a number of risks in its activities. To stimulate identification and support cross-functional treatment within the Ericsson Group, risks are grouped in a number of categories, including for example risks relating to technology, IPR, compliance, project execution, operations, products and services, treasury and accounting, the geopolitical environment, M&A, cyber security and occupational health and safety.

Ericsson’s risk management is embedded into strategy development and operational processes and is a part of the Ericsson Group Management System to ensure accountability, effectiveness, efficiency, business continuity and compliance. Risks are defined in both a short-term and long-term perspective and are related to long-term objectives as per the strategic direction as well as to short-term objectives.

Risk factors and uncertainties of relevance to Ericsson are described in the Annual Report 2021 and in the Annual Report on Form 20-F 2021 (in the following the “Annual Report 2021”). Updates to these risk factors and uncertainties observed by Ericsson that are deemed of short-term relevance include, but are not limited to, the following risks described below:

Deferred Prosecution Agreement with the United States Department of Justice

In December 2019, Ericsson entered into a deferred prosecution agreement (DPA) with the United States Department of Justice (DOJ). The DPA has a three-year term and includes a guilty plea by our Egyptian subsidiary to a criminal violation of the FCPA’s anti-bribery provisions. We admitted to conduct described in the DPA’s statement of facts, and the DOJ agreed to defer prosecution of Ericsson for the DPA’s three-year term if Ericsson does not violate the terms of the DPA. In October 2021, the DOJ notified us of its determination that we breached our obligations under the DPA by failing to provide required information to the DOJ.

In March 2022, the DOJ informed Ericsson that, before entering into the DPA, the Company provided insufficient information to the DOJ about the Company’s 2019 internal investigation into conduct in Iraq. The DOJ also determined that the Company breached the DPA by failing to inform the DOJ about the investigation post-DPA. The DOJ’s determination that the Company violated the DPA allows the DOJ, in its sole discretion, to commence prosecution for criminal violations, including the charged conspiracy to violate the FCPA’s anti-bribery, books and records and internal controls provisions referenced in the DPA. In doing so, the DOJ could rely upon Ericsson’s DPA admissions and would benefit from Ericsson’s waiver of certain procedural and evidentiary defenses. The DOJ also may, in its sole discretion, extend the term of the DPA.

The Company is in communication with the DOJ regarding the facts and circumstances of the breach determinations and is committed to co-operating with the DOJ to resolve the matters. While the length of the process cannot be determined, the resolution of these matters could result in a range of actions by DOJ, including criminal prosecution, civil or criminal penalties and additional monetary fines or penalties, the magnitude of which cannot at this time be reliably estimated. Accordingly, no provisions have been recorded for such potential exposure.

We are subject to certain US and other anti-corruption (including anti-bribery, anti-money-laundering, sanctions, terror finance and anti-terrorism) laws, rules and regulations. Ericsson may be subject to further adverse consequences under the DPA with the DOJ and the injunction issued in connection with the settlement with the SEC, both from 2019, and other investigations by governmental authorities

The Company is required to comply with anti-corruption (including anti-bribery, anti-money-laundering, sanctions, terror finance and anti-terrorism) laws, rules and regulations in jurisdictions where Ericsson does business. As previously disclosed, the Company has not complied with all such laws, rules and regulations in the past and faces exposure to possible past, present and future violations, which could lead to significant civil or criminal liability that would materially harm the Company, including its reputation, business, financial condition, results of operations (EBIT), cash flows, and prospects.

In February 2022, the Company publicly disclosed that an internal investigation in 2019 included a review of the conduct of Ericsson employees, vendors and suppliers in Iraq during 2011–2019. The investigation found serious breaches of compliance rules and the Company’s Code of Business Ethics and identified evidence of corruption-related misconduct and other serious violations, including payments to intermediaries and the potential use of alternate transport routes in connection with circumventing Iraqi Customs, at a time when terrorist organizations, including ISIS, controlled some transport routes. The investigation also identified payment schemes and cash transactions that potentially created the risk of money laundering. The company took remedial actions and is continuing to work to identify additional measures to take.

In June 2022, the SEC informed us that it opened an investigation concerning matters described in the Company’s 2019 Iraq investigation report. Under Ericsson’s consent judgment with the SEC, we are permanently enjoined from violating the FCPA’s anti-bribery, books and records and internal controls provisions. Violations of the injunction or consent judgment could subject us to new civil and criminal penalties as well as a new enforcement action.

Ericsson is committed to cooperating with the DOJ and the SEC to resolve these matters, the outcome of which we are unable to predict. We also face other negative consequences from these matters, including matters under review as part of our ongoing and future communications with governmental authorities to comply with our obligations under the DPA. Governmental authorities in the US and elsewhere are investigating us for possible violations of applicable anti-corruption (including anti-bribery, anti-money laundering, sanctions, terror finance and anti-terrorism) laws, rules or regulations, and we currently face litigation related to these matters (including the matters described below). Any criminal prosecution or civil or criminal penalties imposed as a result of non-compliance for any reason with the DPA or consent judgment could materially harm Ericsson, including our reputation, business, financial condition, results of operations (EBIT), cash flows, or prospects.

Ericsson is involved in lawsuits, legal proceedings and investigations which, if determined unfavorably, could require the Company to pay substantial damages, fines and/or penalties

As previously disclosed, on March 3, 2022, Telefonaktiebolaget LM Ericsson and certain officers of Ericsson were named as defendants in a putative class action filed on behalf of investors in Ericsson securities in the United States District Court for the Eastern District of New York. An amended complaint was filed on September 9, 2022, which added a former Ericsson officer as a defendant. The amended complaint alleges violations of United States securities laws, in connection with allegedly false and misleading statements principally concerning the Company’s adherence with its compliance and anti-corruption policies and obligations and the conduct of its business in Iraq.

In August 2022, a civil lawsuit was filed in the United States District Court for the District of Columbia against Telefonaktiebolaget LM Ericsson and Ericsson Inc. The lawsuit was brought by US military service members and employees of US government contractors who were killed or injured in terrorist attacks in Iraq, Afghanistan and Syria from 2005 to 2021, as well as by their family members. The lawsuit asserts claims against Ericsson under the US Anti-Terrorism Act alleging that Ericsson made payments that ultimately aided the terrorist organizations that committed, planned or authorized the attacks.

Business in Russia

As mentioned in the Annual Report 2021, including in the risk factor 1.1 and 3.2, conducting business throughout the world makes Ericsson subject to the effects of general global economic conditions as well as conditions unique to specific countries or regions. In addition to the risk factors described in the Annual Report 2021 and the provision recorded by the Company in Q1 and Q2 2022, the large uncertainties relating to the Russian market, including the applicable and changed sanctions landscape, lead to large uncertainties relating to other potential costs and consequences that may follow. All of the above could have a material adverse effect on the Company, including its reputation, business, financial condition, results of operations (EBIT), cash flows, or prospects.

Stockholm, October 20, 2022

Telefonaktiebolaget LM Ericsson

Börje Ekholm, President and CEO

Org. No. 556016-0680

Date for next report: January 20, 2023

Media and analyst briefing

Ericsson invites media, investors and analysts to a conference call and live video webcast at 9:00 AM CEST on October 20, 2022.

Link to the webcast, dial-in to audio conference, supporting material and replay will be available at:

www.ericsson.com/investors and

www.ericsson.com/newsroom

For further information, please contact:

Carl Mellander, Senior Vice President, Chief Financial Officer

Phone: +46 72 583 88 70

E-mail: investor.relations@ericsson.com or

media.relations@ericsson.com

Stella Medlicott, Senior Vice President, Chief Marketing and

Communications Officer

Phone: +46 73 095 65 39

E-mail: investor.relations@ericsson.com or

media.relations@ericsson.com

Telefonaktiebolaget LM Ericsson

Org. number: 556016-0680

Torshamnsgatan 21

SE-164 83 Stockholm

Phone: +46 10 719 00 00

www.ericsson.com

Investors

Peter Nyquist, Vice President,

Head of Investor Relations

Phone: +46 70 575 29 06

E-mail: peter.nyquist@ericsson.com

Lena Häggblom, Director,

Investor Relations

Phone: +46 72 593 27 78

E-mail: lena.haggblom@ericsson.com

Stefan Jelvin, Director,

Investor Relations

Phone: +46 70 986 02 27

E-mail: stefan.jelvin@ericsson.com

Alan Ganson, Director,

Investor Relations

Phone: +46 70 267 27 30

E-mail: alan.ganson@ericsson.com

Media

Kristoffer Edshage, Director of Corporate Media

Phone: +46 72 220 44 46

E-mail: media.relations@ericsson.com

Corporate Communications

Phone: +46 10 719 69 92

E-mail: media.relations@ericsson.com

This report includes forward-looking statements, including statements reflecting management’s current views relating to the growth of the market, future market conditions, future events, financial condition, and expected operational and financial performance, including, the following:

The words “believe,” “expect,” “foresee,” “anticipate,” “assume,” “intend,” “likely,” “projects,” “may,” “could,” “plan,” “estimate,” “forecast,” “will,” “should,” “would,” “predict,” “aim,” “ambition,” “seek,” “potential,” “target,” “might,” “continue,” or, in each case, their negative or variations, and similar words or expressions are used to identify forward-looking statements. Any statement that refers to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements.

We caution investors that these statements are subject to risks and uncertainties many of which are difficult to predict and generally beyond our control that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements.

Important factors that could affect whether and to what extent any of our forward-looking statements materialize include, but are not limited to, the factors described in the section “Risk Factors”, and in “Risk Factors” in the Annual Report 2021.

These forward-looking statements also represent our estimates and assumptions only as of the date that they were made. We expressly disclaim a duty to provide updates to these forward-looking statements, and the estimates and assumptions associated with them, after the date of this report, to reflect events or changes in circumstances or changes in expectations or the occurrence of anticipated events, whether as a result of new information, future events or otherwise, except as required by applicable law or stock exchange regulation.

Introduction

We have reviewed the condensed interim financial information (interim report) of Telefonaktiebolaget LM Ericsson (publ.) as of September 30, 2022, and the nine months period then ended. The board of directors and the CEO are responsible for the preparation and presentation of the interim report in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.

Scope of review

We conducted our review in accordance with the International Standard on Review Engagements ISRE 2410, Review of Interim Report Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing, ISA, and other generally accepted auditing standards in

Sweden. The procedures performed in a review do not enable us to obtain assurance that would make us aware of all significant matters that might be identified in an audit. Therefore, the conclusion expressed based on a review does not give the same level of assurance as a conclusion expressed based on an audit.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act, regarding the Group, and with the Swedish Annual Accounts Act, regarding the Parent Company.

Stockholm, October 20, 2022

Deloitte AB

Thomas Strömberg

Authorized Public Accountant