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Ericsson profit beats forecasts for fifth straight quarter as savings, 5G sales kick in

Reuters with CNBC.com
Visitors pass through the entrance to the Ericsson AB pavilion at the Mobile World Congress in Barcelona, Spain, on Tuesday, Feb. 26, 2013. 
Simon Dawson | Bloomberg via Getty Images

Mobile telecom equipment maker Ericsson reported a bigger that expected rise in first-quarter operating earnings on Wednesday, adding that it saw particularly strong growth in North America. Boosted by the performance, the firm also raised its outlook for the global networks market.

The Swedish firm posted an operating profit of 4.9 billion Swedish crowns ($530 million), reversing a 312 million crown loss a year ago, easily topping the mean forecast for a 2.8 billion profit seen in a Reuters poll of analysts.

Speaking to CNBC's "Squawk Box Europe" on Wednesday, CEO Borje Ekholm said strong momentum in the U.S. would help position Ericsson as a top provider in 5G technology.

"The reality is the U.S. market is a leader in 5G, they were the first to launch (it) and for us, our strategy is to work with lead customers in lead markets," he said. "I cannot comment on competitors, but I can say that we are a key participant in the North American market to help operators move into 5G."

Ericsson sells 5G telecom equipment including software and radio network hardware. But according to research firm Dell'Oro Group, the telecom equipment market is dominated by China's Huawei, which has 29% of global market share. While Huawei's market share has gained around 2 percentage points of share annually for the past five years, Ericsson's market share has seen an annual drop of around 1%, Dell'Oro's research found.

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Ekholm predicted that Beijing would also push 5G infrastructure "very quickly," and that Ericsson wants to position itself as a supplier to operators using China's new network.

Last month, Ericsson signed a global patent license agreement with Chinese smartphone maker OPPO. Adler Feng, head of OPPO's intellectual property department, said at the time that the agreement would lay a solid foundation for further cooperation between the two companies in the 5G era.

However, Ericsson's growth in China could be hampered by an investigation into the firm's licensing model by Chinese authorities. Ekholm said Ericsson was working with the Chinese government on the investigation but declined to comment further.

He also told CNBC that although new commercial contracts may impact the company's revenues in the short-term, they would drive growth in the long run.

"We foresee that some of these contracts will dilute our operating margins short-term a bit, but … for us it's critical to strengthen our market position, (and) we're not going to do that with price as a weapon, we're going to do that with value to the customer as a weapon," he said.