Ericsson AB, the Swedish maker of wireless networks, said it has been cooperating with U.S. authorities since receiving a March 2013 request to provide information on its operations, and that it is working “diligently” to answer the questions.
The questions pertain to the company’s anti-corruption program and the U.S. Foreign Corrupt Practices Act, Ericsson said on June 17 declining to provide further details. Swedish newspaper Svenska Dagbladet reported on June 16 Thursday that the Securities and Exchange Commission and the U.S. Department of Justice are investigating Ericsson for suspected corruption, including at its operations in China.
“As a listed company, we always follow the requirements to publicly disclose any information about events that would have a material impact on the company or its finances,” Ericsson said. “Should such materiality arise, Ericsson will disclose information in accordance with regulatory requirements.”
The company is cooperating with U.S. authorities to answer the questions, it said.
The report of allegations in China adds fresh fodder to critics of CEO Hans Vestberg, who’s contending with a sales slowdown, brutal price competition and forays into areas like television that haven’t yet borne fruit. He received an unusually blunt critique of his performance in May, when Helena Stjernholm, who heads Ericsson’s second-largest shareholder, Industrivaerden AB, said problems at the company are taking up more of her time, and that Ericsson “hasn’t performed as a share and neither has the company.”
Sasja Beslik, head of Responsible Investment at Nordea Asset Management, said Ericsson has failed to properly inform the market about the SEC probe. Nordea holds about 21 million shares in the mobile-network supplier, valued at about 1.3 billion kronor (US$156 million).
“An issue like this can affect how we value an asset and what we want to know now is how systematic a problem like this might be for Ericsson and whether it has occurred in other markets,” he said. “There are many moving parts to an investigation like this and we’re trying to understand what has happened.”
In May 2013, the company said the U.S. SEC had started an investigation into its payment system used to win contracts in the 1990s, including orders in Romania.
The U.S. review covers more recent activities in China as well as events from earlier years, the SvD reported, without saying how it obtained the information.
Ericsson last week said that Mats H. Olsson, a career company executive and former head of North East Asia, had left the company.
Ericsson is locked a global battle with rivals Huawei Technologies Co. and Nokia Oyj in a market for phone-network equipment that’s showing little growth after much of the so-called fourth-generation networks have been built already in the U.S. and China. Vestberg has carved out units targeting media and enterprise customers to expand beyond wireless networks to return to growth.
By Kim McLaughlin