Swedish mobile telecom gear maker Ericsson will be seeing long-running U.S. investigations into corruption charges in past being hurting its third-quarter results for about 12 billion crown ($1.2 billion), the company said on Thursday.
Ericsson was facing two investigations, one by the U.S. Securities and Exchange Commission since 2013 and the other by the Department of Justice that has been running since 2015, both of which were related to company’s compliance with the U.S. Foreign Corrupt Practices Act (FCPA).
The Swedish telecom gear maker said that it is estimating a financial impact of $1 billion to settle the investigations, and additional cost linked to those probes will take the total monetary effect to $1.2 billion.
It is clear that the company failed in its execution, and I personally feel very disappointed finding the company in this situation, Ericsson CEO Borje Ekholm told a conference call.
Though the financial penalties Ericsson has to face are severe, but it is also a critical step for the company to get these matters closed with the U.S. authorities, he said.
The investigations covering the time period till the end of first quarter 2017, found that Ericsson remained failed to comply with its Code of Business Ethics and also breached the FCPA in China, Indonesia, Saudi Arabia, Vietnam, Kuwait and Djibouti, the company said.
Ericsson said that the breaches were the result of several deficiencies which also includes lack of adequate internal controls and failure to timely respond to the red flags.
As the discussions with the U.S. authorities are still in process, but they had now reached at a position where they can made a reliable estimated cost to settle those probes, Ekhlom said.
The Stockholm-based company come turning around dramatically during the second year of Ekholm in the leading position with improvement in profits and rising demands for its next-generation 5G equipment.