Ericsson Sells Vendor Loans To Increase Cash Flow

Communications Today, Dec 12, 2001

Ericsson [ERICY] is $300 million closer to its goal of positive cash flow for the year after selling $1.5 billion in loans it made to its infrastructure customers, but must still generate $1.23 billion in positive cash flow in the fourth quarter to reach its goal.

The Swedish telecom technology giant, which also on Tuesday announced that it landed a $143 million contract to expand Chinese operator Sichuan Mobile Communication, said credit commitments relating to third-generation network projects represent a significant part of the loan portfolio it sold. The transaction is backed by 13 operators and will be effective before year-end.

The portfolio financing of $15 million includes $300 million in vendor credits transferred from Ericsson's balance sheet, $130 million underwritten off balance risk exposure and $1.09 million in credit commitments. The refinancing is arranged by Swedish bank SEB and by the Industrial Bank of Japan.

The facility has $816 million risk cover from the Swedish Export Credits Guarantee Board and other entities. Ericsson said it bears the rest of the risk.

Ericsson's latest contract with Sichuan Mobile follows its construction of the carrier's initial network and will expand the carrier's GSM network in the Sichuan Province and will expand GPRS functionality across the network.

Ericsson said the contract also covers expansion of the mobile intelligence network, enabling Sichuan Mobile to provide intelligent services including prepaid services, private numbers and private virtual networks. The project will be completed in June and will raise the capacity of the dual-band network to 4.2 million subscribers.

Ericsson's loan-sale announcement apparently sparked interest from U.S. investors. Its shares closed up 3.26 percent on Tuesday at $6.01 in high - volume trading on the Nasdaq. >TK Nextel Communications [NXTL]: Sonic [SONC]: Sprint PCS [PCS]: AT&T Wireless [AWE]: Cingular Wireless, BCE [BCE]: