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Huawei's strongest competitor was fined 7.4 billion yuan and received high fines for unfair competit

Original title: bribe tens of millions of US dollars, Huawei's strongest competitor in 5g field fined 7.4 billion

As we all know, since this year, all countries have started 5g construction. The major telecom operators also show their magic power and try to sign as many 5g contracts as possible in the world. Huawei, Nokia and Ericsson are the three leading companies in 5g field. The competition among these three companies is naturally concerned by the industry.

Just as the competition between Ericsson and Huawei over 5g is getting hotter, the Swedish telecom equipment giant has been exposed to a bribery scandal.

On December 7, according to the global times, Ericsson admitted that the company had been involved in bribery in many countries in the past 17 years. For this reason, it has reached a settlement with U.S. prosecutors and paid more than $1 billion in settlement. Compared with the company's recent results, the fine is equivalent to a fifth of Ericsson's single quarter revenue.

Subsidiaries bribed and fined $1 billion

According to the global times, according to a document released by the US Department of justice on December 7, Ericsson's Egyptian subsidiary admitted to conspiring with other participants in violation of the U.S. overseas anti corruption act from 2000 to 2006. Through third-party agents and consultants, they bribed government officials in five countries, including Vietnam and Djibouti, with bribes of more than tens of millions of dollars And suspected of forging accounting records.

Ericsson was investigated by the securities and Exchange Commission and the judiciary in 2013 and 2015 respectively. On the other hand, Ericsson also laid off 50 employees in May 2018, which is suspected to have responded to the pressure from the US prosecutors. According to U.S. law, Ericsson will face severe sanctions such as' license revocation 'if it is prosecuted and convicted by US prosecutors.

According to a document issued by the US Department of justice, the US Securities and Exchange Commission accused Ericsson of offering bribes in six countries, including Vietnam, Indonesia, Kuwait, Saudi Arabia and Djibouti. However, according to the announcement of the U.S. Department of justice, the settlement agreement reached by Ericsson covers five countries, including Vietnam, Kuwait, Indonesia and Djibouti, excluding Saudi Arabia.

Jeffrey & middot; Berman, prosecutor for the Southern District of New York, said in a statement: 'Ericsson conducts its telecommunications business with the guiding principle of & lsquo; money can do everything' through bribery, bribery, gifts and corruption. '

Ericsson's Egyptian subsidiary has admitted bribery in five countries, including Vietnam, Indonesia and Djibouti. Between 2010 and 2014, Ericsson's Egyptian subsidiary paid bribes of about $2.1 million to senior officials of the government of Djibouti to obtain contracts from the country's state-owned telecommunications company and cover up illegal payments by forging receipts.

'Swedish telecom giant admits that in order to consolidate its telecom business, the company has been engaged in bribery in five countries for a long time, involving several high-level executives of the company for 17 years.

But Ericsson and U.S. prosecutors eventually settled the investigation. Ericsson will pay $979 million in settlement, plus $81.5 million in taxes, with a total fine of $1065.5 million (about 7.4 billion yuan).

It is worth mentioning that Ericsson was expected to receive high fines.

At the end of September this year, Ericsson announced the provision of 12 billion Swedish kronor (about 1.23 billion US dollars) in response to the US investigation. It also said that the company has launched anti-corruption programs and taken measures to improve ethics and compliance procedures.

In response, the U.S. Department of justice has said that Ericsson has actively cooperated with the investigation, and the fine amount has been reduced by 15%. Of course, Ericsson's cooperation is limited, not fully and fully. For example, Ericsson did not disclose some corruption charges, did not provide some documents, and did not require discipline of some employees.

Ericsson's settlement to the U.S. government is about eight times its operating profit in the latest year. According to Ericsson's annual report, its net sales volume in 2018 was SEK 210.8 billion, equivalent to RMB 156.2 billion, and its operating profit was SEK 1.2 billion, equivalent to RMB 890 million.

Compete with Huawei in 5g field

On December 7, the day of the announcement of the Ministry of justice, Ericsson published a statement on its website confirming that the company would pay the fine and said the payment would be completed this month (December 2019). That means Ericsson's cash flow will be affected in the fourth quarter of this year, but the company insists the impact is' manageable '.

The fine will have an impact on Ericsson, which is trying to compete with Huawei in 5g. Since the second quarter of this year, with the United States stepping up its efforts to suppress Huawei, Huawei's' strongest competitor 'in the 5g field has encountered an opportunity to' pick up and leak 5g contracts'.

On October 16, Yang Chaobin, President of Huawei's 5g product line, said at the 10th global mobile broadband forum held in Zurich, Switzerland, that the number of 5g commercial contracts obtained by Huawei worldwide has reached 65, and the shipment volume of 5g base stations has exceeded 400000.

On November 25, after signing 5g commercial contracts with azercell, Ericsson announced in a high profile that it had more than 75 5g commercial contracts in its hands.

Ericsson plans to invest 230 million US dollars (about 1.619 billion yuan) in Brazil and will build a new 5g technology production line there, foreign media reported on November 26. It is understood that this investment will be completed from 2020 to 2025. Ericsson explained that because 40% of the equipment they assembled in Brazil was exported to other Latin American countries, the company intends to bet on Brazil's 5g market to expand its influence in the whole Latin America region.

It is worth mentioning that Brazil is still in the process of planning 5g auction. It is reported that the 5g auction in Brazil was originally scheduled to be held in March 2020, but it was later postponed due to some other tests. At this time, Ericsson took the initiative to extend its olive branch. It is likely that Ericsson wants to participate in the construction of 5g in Brazil and win the 5g contract of the country. However, some analysts pointed out that Ericsson's move is obviously a "business grab", because Huawei has already occupied a certain advantage in Brazil's 5g market.

As of this year, Huawei has been operating in Brazil for 21 years and has a plant in Sao Paulo, which has created more than 2000 jobs there. Moreover, Brazil has recently expressed its support for Huawei 5g. The country is currently discussing allowing Huawei to participate in its 5g spectrum auction to be held next year, and it is likely to choose Huawei as its 5g partner. As a result, even if Ericsson sends out investment intention, it is difficult to catch up with Huawei's position in the Brazilian market.

It is worth noting that Ericsson's net loss reached 711 million US dollars, and the sales of network equipment business increased only 9% year on year.

In contrast to Huawei's third quarter report, as of the third quarter of 2019, Huawei achieved sales revenue of 61.8 billion yuan, a year-on-year increase of 24.4%; net profit of 53.1 billion yuan, with a net profit rate of 8.7%. According to this calculation, Huawei's year-on-year growth rate in the third quarter far exceeded the 12.83% in the second quarter, with a good momentum.