Ericsson, the world’s leading mobile phone network equipment supplier, saw its net profits fall by 35 per cent today as the global downturn continued to hit the market.

In the period from January to March, the Stockholm-based company posted a net profit of SwKr1.8 billion (£150.7 million), down from SwKr2.6 billion in the first quarter of 2008. Its operating profit fell by an even greater margin —- 49 per cent to SwKr1.7 billion.

As Ericsson’s stock plunged as much as 10 per cent in early trading this morning, the company said that customers in some markets had postponed investments because of weaker local currencies and that some operators were “more cautious” with long-term investments. Ericsson is slashing 5,000 jobs this year because it expects further spending cuts.

Carl-Henric Svanberg, Ericsson’s chief executive, said that it remained difficult to “precisely predict how operators will act in the current environment”. But he remained upbeat, adding: “The effects of the global economic recession on the global mobile network market are so far limited.”

Ericsson was hurt by the performance of Sony Ericsson, its mobile phone joint venture with Sony, which reported a first-quarter net loss of €293 million (£262 million) on April 17, its third successive quarterly loss. ST-Ericsson, a venture with the chipmaker STMicroelectronics, posted a £59 million loss in its first two months of operation and is cutting 1,200 jobs.

The company’s share in earnings from the joint ventures fell to a loss of SwKr2.2 billion in the first quarter from a profit of SwKr900 million a year ago.

Despite the fall, Ericsson beat the expectations of analysts, who forecast a net profit of SwKr1.65 billion in a survey by Dow Jones Newswires. Ericsson wants to make annual savings of SwKr10 billion by the second half of 2010, which Mr Svanberg said was “running according to plan".

“It’s not a disaster report,” Michael Andersson, an analyst at Evli, said. ”Overall it looks stable. But I do think the market will want more information on Ericsson’s view of the markets and where growth is heading.”

Although the telecoms sector has proved comparatively resilient to the economic downturn, major players have still suffered.

Nokia Siemens Networks, a rival of Ericsson, posted its first quarterly loss in the January-March period and warned the market would shrink 10 per cent this year. Deutsche Telekom, Europe’s biggest phone company and an Ericsson customer, cut its annual earnings forecast last week and said that it would freeze €1 billion of capital expenditure as customers canceled their fixed-line phones.

Ericsson may also lose money when Telefónica and Vodafone start sharing wireless networks, which they say will save hundreds of millions of pounds over the next decade.

Ericsson said: “The year-over-year decline is mainly due to large initial rollouts of 3G in China, higher sales in India, higher proportion of services sales and the transfer of Ericsson Mobile Platform.” Mr Svanberg added that his company's investment in wireless networks continued, with rollouts of new networks and new technologies accelerating in markets such as the US, China and India.

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