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Nov. 10, 2020, 2:34 a.m. EST

Ericsson expects margins to rise

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By Dominic Chopping

STOCKHOLM--Ericsson AB said late Monday it expects margins to rise as it outlined new long-term targets ahead of its capital markets day Tuesday.

The telecommunications equipment vendor said it is targeting a group operating margin excluding restructuring charges of 15%-18% beyond 2022, with free cash flow before mergers at 9%-12% of sales.

Ericsson's group operating margin stood at 9.7% for 2019.

"Growth as well as gross margin improvements, driven by software sales and operational leverage, will be the cornerstones in reaching the long-term targets," it said in a statement.

The company maintained its 2022 operating margin target of 12%-14%, excluding restructuring charges, but raised the margin target of its key networks unit to 16%-18%, from 15%-17%, helped by increasing fifth-generation network contracts.

Its managed services margin target is also raised, to 9%-11% from 8%-10%.

However, the 2022 margin forecast at its digital-services unit was cut to 4%-7% from 10%-12%, due to higher research and development spending and a decline in legacy sales.

Write to Dominic Chopping at dominic.chopping@wsj.com

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