News

Ericsson divests Russian ops, but US struggle goes on

Borje Ekholm Ericsson CEO

Ericsson has given up on Russia, but has another year of grief from the American justice system following its illegal activities in Iraq.

The company said yesterday that it is divesting its local customer support business in Russia to “local operational managers”, who will “acquire Ericsson’s customer support business in Russia and will provide customer support for mobile operators in Russia”.

Meanwhile, said the company, it “continues [its] orderly exit from operations in Russia”.

All of Ericsson’s customer engagement in Russia is intended to be terminated by the end of the year, said the Swedish company.

The local customer support business in Russia will go to a Russian company owned by former operational managers of Ericsson’s Russian subsidiary.

“The transaction includes a transfer of approximately 40 Ericsson employees, and certain assets and contracts related to the business,” it added. “The customer support business is a local business engagement that does not involve the export of hardware, software, or related services to mobile operators in Russia.”

Following Russia’s invasion in Ukraine, Ericsson announced the suspension of operations and deliveries to customers in Russia and an orderly wind-down in accordance with applicable sanctions.

Approximately 400 Ericsson employees in Russia have been notified of layoffs and have been leaving the company as operations have been discontinued.

Ericsson said it expects to have a small presence in Russia on a local basis into 2023. “A legal entity owned by Ericsson will continue to be registered to complete the wind-down and to fulfil legal, contractual, and administrative requirements.”

But Ericsson’s tussle with the US Department of Justice (DoJ) and Securities and Exchange Commission (SEC) will go on for another 18 months, to June 2024.

In 2019 Ericsson entered into a deferred prosecution agreement (DPA) with the DoJ and a consent judgment with the SEC to resolve violations of the Foreign Corrupt Practises Act.

However, three years later, in early 2022, the company admitted it had not been candid with the authorities, as required by the DPA. It had been working with Iraqi insurgents to smuggle equipment into telecoms sites in the country. That was illegal and, worse, Ericsson did not tell the DoJ and the SEC.

It has now won an extra year, from mid-2023 to mid-2024, to sort itself out.

Börje Ekholm (pictured), Ericsson president and CEO, said: “This extension is consistent with our commitment to continuous improvement of Ericsson’s ethics and compliance programme. We have made significant progress in changing our culture and implementing an enhanced compliance framework and system of internal controls, and we will use this additional time to ensure these improvements are ingrained in our organization, our daily interactions and the way we do business.”

What Ekholm did not say was that the company he leads could face a huge fine from Washington DC. It paid US$1 billion in 2019 as part of the DPA. It could face another penalty, perhaps more, in 2024.

Ekholm said: “We want to get this right and, to be a true industry leader, we have to conduct our business in the right way.”