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Ericsson announces profit boost in wake of 5G rollout

Swedish telecoms giant Ericsson announced increased annual profits on Friday, largely thanks to the rollout of 5G networks.

Ericsson announces profit boost in wake of 5G rollout
Ericsson's headquarters in Sweden. Photo: Maja Suslin/TT

However the company also expressed worries it could suffer reprisals from China after its home country banned the use of competitor Huawei's equipment in the next generation of phone networks.

“The pandemic has fast forwarded the digitalization of societies, including remote working, by months if not years… We see more signs that countries and enterprises see 5G as a key access technology,” Ericsson CEO Börje Ekholm said in a comment to the annual results.

Ericsson, one of the leaders in 5G equipment, reported an annual net profit of 17.5 billion Swedish kronor ($2.1 billion, 1.7 billion euros).

This can be compared to a 2.2 billion kronor profit the previous year, though in 2019 the company was also burdened by settlements in a US corruption probe.

For 2020, turnover increased 2.0 percent to 232 billion kronor, beating analyst expectations.
 
The gross margin, excluding restructuring costs, which is the equipment makers preferred indicator of profitability, rose 3.1 percentage points to 40.6 percent.
 

Ericsson shares traded up more than six percent on the Stockholm stock exchange after the results.

To date, Ericsson has signed 127 commercial 5G contracts with operators around the world, for 79 operational networks, the group said.

Together with China's Huawei and Finland's Nokia, they account for the majority of the world market for 5G network equipment.

However, Sweden, the birthplace of Ericsson, announced in October that it was banning new equipment from Huawei and ZTE, both from China, from its new 5G telecoms network, citing national security concerns.

The moved prompted protests from Beijing. Sweden was the second European country to explicitly ban Huawei after the UK did so in July.

With some countries banning Huawei, analysts say its Nordic competitors stand to benefit, but Ericsson's CEO have also voiced concerns about reprisals targeting its Chinese operations, Ericsson's second largest after the US.

In the annual report, the company listed as a “risk” that the actions of Sweden could “lead to measures taken by China that are targeted at the economic interests of Sweden and Swedish industry, including those of Ericsson”.

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EUROPEAN UNION

Pensions in the EU: What you need to know if you’re moving country

Have you ever wondered what to do with your private pension plan when moving to another European country?

Pensions in the EU: What you need to know if you're moving country

This question will probably have caused some headaches. Fortunately a new private pension product meant to make things easier should soon become available under a new EU regulation that came into effect this week. 

The new pan-European personal pension product (PEPP) will allow savers to take their private pension with them if they move within the European Union.

EU rules so far allowed the aggregation of state pensions and the possibility to carry across borders occupational pensions, which are paid by employers. But the market of private pensions remained fragmented.

The new product is expected to benefit especially young people, who tend to move more frequently across borders, and the self-employed, who might not be covered by other pension schemes. 

According to a survey conducted in 16 countries by Insurance Europe, the organisation representing insurers in Brussels, 38 percent of Europeans do not save for retirement, with a proportion as high as 60 percent in Finland, 57 percent in Spain, 56 percent in France and 55 percent in Italy. 

The groups least likely to have a pension plan are women (42% versus 34% of men), unemployed people (67%), self-employed and part-time workers in the private sector (38%), divorced and singles (44% and 43% respectively), and 18-35 year olds (40%).

“As a complement to public pensions, PEPP caters for the needs of today’s younger generation and allows people to better plan and make provisions for the future,” EU Commissioner for Financial Services Mairead McGuinness said on March 22nd, when new EU rules came into effect. 

The scheme will also allow savers to sign up to a personal pension plan offered by a provider based in another EU country.

Who can sign up?

Under the EU regulation, anyone can sign up to a pan-European personal pension, regardless of their nationality or employment status. 

The scheme is open to people who are employed part-time or full-time, self-employed, in any form of “modern employment”, unemployed or in education. 

The condition is that they are resident in a country of the European Union, Norway, Iceland or Liechtenstein (the European Economic Area). The PEPP will not be available outside these countries, for instance in Switzerland. 

How does it work?

PEPP providers can offer a maximum of six investment options, including a basic one that is low-risk and safeguards the amount invested. The basic PEPP is the default option. Its fees are capped at 1 percent of the accumulated capital per year.

People who move to another EU country can continue to contribute to the same PEPP. Whenever a consumer changes the country of residence, the provider will open a new sub-account for that country. If the provider cannot offer such option, savers have the right to switch provider free of charge.  

As pension products are taxed differently in each state, the applicable taxation will be that of the country of residence and possible tax incentives will only apply to the relevant sub-account. 

Savers who move residence outside the EU cannot continue saving on their PEPP, but they can resume contributions if they return. They would also need to ask advice about the consequences of the move on the way their savings are taxed. 

Pensions can then be paid out in a different location from where the product was purchased. 

Where to start?

Pan-European personal pension products can be offered by authorised banks, insurance companies, pension funds and wealth management firms. 

They are regulated products that can be sold to consumers only after being approved by supervisory authorities. 

As the legislation came into effect this week, only now eligible providers can submit the application for the authorisation of their products. National authorities have then three months to make a decision. So it will still take some time before PEPPs become available on the market. 

When this will happen, the products and their features will be listed in the public register of the European Insurance and Occupational Pensions Authority (EIOPA). 

For more information:

https://www.eiopa.europa.eu/browse/regulation-and-policy/pan-european-personal-pension-product-pepp/consumer-oriented-faqs-pan_en 

https://www.eiopa.europa.eu/browse/regulation-and-policy/pan-european-personal-pension-product-pepp_en 

This article is published in cooperation with Europe Street News, a news outlet about citizens’ rights in the EU and the UK. 

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