Ericsson said it encountered “very limited impact from COVID-19” during the first quarter of 2020, but warned that the current quarter is “likely to be a tad softer than normal” due to uncertainty induced by the pandemic.

Overall, the company is holding firm amid a wave of calamity brought on by the pandemic, but it shared concerns about 5G deployment delays in Europe and difficulty in gaining access to operators during the lock down and travel restrictions. Nonetheless, the company is maintaining confidence in previously reported guidance through 2022.

The radio access network (RAN) and software vendor reported a 5% year-over-year decline in net income of $227.7 million and a 2% increase in sales of $4.93 billion during the quarter. 

“Of course, we have to recognize that with COVID-19, we truly live in an unprecedented time. It’s impossible to predict how long, and also at what level this pandemic will impact our lives. But one thing is for sure, it has a direct and indirect impact on all of us and the way we live and the way we work,” CEO Börje Ekholm said during an earnings call, according to a Seeking Alpha transcript.

“We are determined to get through these difficult times as a much stronger company, more agile and well positioned in the market,” he said.

The Swedish vendor is pushing ahead with investments in research and development for its cloud-native software and 5G core portfolios, according to Ekholm. “Our industry has shown resilience even during this pandemic, but I think it is reasonable to expect some impact as well. And we continue to be prepared to take action, if needed.”

Ericsson closed the quarter with 86 commercial 5G contracts and 29 live 5G networks, adding that an additional two 5G networks were activated this month. The company closed the previous quarter with 78 commercial 5G agreements and 24 live 5G networks.

“We remain positive on the long-term outlook, but we anticipate a tad softer second quarter and this is due to the uncertainty from COVID-19, but also that we see a number of strategic contracts falling in Q2 instead of being evenly spread out over the year,” Ekholm said.

At least 85,000 Ericsson employees are working from home now and the company has assembled teams to respond to different scenarios and ensure that the supply chain, research and development, service delivery, and network operating centers are unencumbered by the pandemic. 

Ekholm admitted that the coronavirus outbreak has led to unprecedented disturbances on supply chains, but added that the company hasn’t experienced any impact because it had already stockpiled gear due to geopolitical uncertainties, including the ongoing trade war between the United States and China. 

“As of today, we believe we can fulfill supply also in the second half of the year because we have prepared for it, and we put ourselves in that position,” he said. However, if public health restrictions remain in place for a long time, there will be increased stress in the supply chain, he added. “We live and die by what we supply to our customers on a daily basis, and we will not waver from that commitment.”

The pandemic’s impact on 5G deployments is mixed, according to Ericsson. While some countries, particularly China, are increasing investments in 5G, the opposite is occurring in Europe, Ekholm said. “What we see so far, actually on the totality for our business, is no impact at all. We see continued good demand and that we expect to continue throughout the year.”

Restrictive measures put in place by governments to protect public health is making service delivery and supplier more difficult for the company. While it hasn’t experienced any material effects thus far, Ericsson notes that it is prudent to expect the economic slowdown will lead some operators to delay investments.

As it has reported throughout much of T-Mobile US and Sprint’s nearly two-year battle to merge, the uncertain outcome continued to impact Ericsson during the quarter and over time. But, now that the merger has been finalized, Ericsson expects the combined company to pick up spending in the second half of this year.

It did, however, note that T-Mobile US is less reliant on the outsourcing of managed services so it expects a decline during the current quarter as a result of the merger. Ericsson’s digital services division, which includes managed services, fell by 9% during the quarter, but Ekholm said the company is seeing good traction on its 5G core and other services like dynamic spectrum sharing. Sales in Ericsson’s networks division were flat during the quarter.