Ericsson reported flat to lower fourth quarter margins today as less lucrative network rollouts in new markets like India countered strong demand for smartphone equipment that lifted sales and profits.

The world's biggest mobile network gear maker posted forecast-beating sales on the back of strong demand for mobile broadband equipment to support growing use of smartphones like Apple iPhone and tablets like Samsung's Galaxy.

But an increasing proportion of network rollout projects, including initial 3G rollouts in India, and network modernization projects, meant the company's gross margin slipped and the operating margin was flat, quarter-on-quarter.

Rollout projects include more hardware and less high-margin software.

Ericsson's gross margin slipped to 37 per cent from 39 per cent in the July-Sept period and its operating margin was unchanged at 13 per cent.

Operating profit excluding joint ventures and restructuring in the seasonally strong quarter was 8.4 billion crowns ($1.28 billion), against analysts' 8.2 billion crown forecast in a poll and 7.5 billion crowns in the year ago period.

While 2009 and 2010 were tough years, the market for telecom equipment is finally showing signs of recovery.

"We expect the strong uptake for mobile broadband to continue in 2011, with number of mobile broadband subscriptions expected to double and hit one billion already this year," Ericsson chief executive Hans Vestberg said in a statement.

Ericsson saw its sales rise 7 per cent for comparable units and excluding currency effects in the fourth quarter.

Sales totalled 62.8 billion crowns beating all forecasts in the poll. Ericsson's key Networks unit, its biggest revenue generator, reported sales growth of 14 per cent year-on-year.

Rivals Nokia Siemens Networks, a joint venture between Finland's Nokia and Germany's Siemens report on January 27th and Alcatel Lucent on February 10th.

Reuters