LTE, HSPA, outsourcing drive up Ericsson's North American revenues 39%

The triumvirate of long-term evolution (LTE), high speed packet access (HSPA) and outsourced network management bolstered another big quarter for Ericsson (NASDAQ:ERIC) in North America, making the region a major contributor to its global growth.

Revenues in North America increased 39% year-over-year to 13.2 billion Swedish kroner (U.S. $2.16 billion) in the first quarter, following an equally stellar 49% increase in Q4 (CP: Ericsson CFO: LTE infrastructure market still small but growing quickly in U.S.) Ericsson CFO Jan Frykhammar said not much changed in Q1 from the last half of 2010: Ericsson continued its LTE, building its portion of Verizon Wireless’ (NYSE:VZ, NYSE:VOD) network rollout and completing MetroPCS’ (NYSE:PCS) initial LTE footprint; it continued to expand T-Mobile (NYSE:DT) and AT&Ts’ (NYSE:T) HSPA+ networks; and it continued to draw revenue from its managed services contracts, the biggest of which by far is its network operations outsourcing deal with Sprint (NYSE:S).

“We’re seeing the same trends,” Frykhammar said. “We see investments in mobile broadband growth, also good momentum in our services portfolio.”

But can such growth continue? Frykhammar said it would be hard to maintain such a steep trajectory and year-over-year comparisons likely won’t show such huge percentage increases. But Frykhammar pointed out that Ericsson continues to land new infrastructure contracts in the U.S. and growing its services business. Sprint is set to begin its network modernization plan, which will require the replacement of its CDMA and iDEN base stations with new radio-agnostic infrastructure. Ericsson will play both a key role as in the deployment and integration aspects of that project. AT&T will begin its LTE rollout this year, adding a second nationwide LTE deployment to Ericsson’s project list. And T-Mobile is upgrading its Ericsson HSPA+ networks to dual-carrier, allowing it to double the bandwidth it can offer over a single connection. While Ericsson maintains its current rollout activity, it will add several new projects to its list.

“We’ll see if we can sustain this growth—that would be fantastic,” Frykhammar said. But Frykhammar cautioned that there were other factors besides contract revenues that influenced the numbers. Currency valuations have been volatile, which can hurt or benefit Ericsson’s overall performance in any given quarter. “What is important is the industry fundamentals are strong across the world for mobile broadband,” he said.

Globally Ericsson saw revenues increase in Q1 by 17% to 53 billion kroner (U.S. $8.7 billion). Its second largest region, China and Northeast Asia, saw even bigger growth than North America, with a revenue increase of 74% to 8.6 billion kroner.

LTE has yet to make a noticeable impact in overall revenue as, apart from U.S. operators, few carriers are deploying the technology commercially, Frykhammar said. But he added that by the beginning of 2012, LTE infrastructure should start making a sizable contribution to Ericsson’s global sales.