attributed to Vonage. These impairments resulted from the significant drop in the market capitalization of Vonages publicly traded peers, increased interest rates, and on overall slowdown
in Vonages core markets, as well as lower anticipated growth in certain Vonage businesses.
Negative deviations in actual cash flows compared to
estimated cash flows as well as new estimates that indicate lower future cash flows might result in recognition of impairment charges. Other impairment indicators, such as the impact of increased interest rates, inflation, macroeconomic conditions,
and other market events can also lead to the recognition of impairment charges. Non-cash impairment charges reduce the Companys non-restricted equity and,
consequently, impact dividend capacity. The impairments were reported in segment Enterprise as items affecting comparability. Estimates require management judgment as well as the definition of cash-generating units for impairment testing purposes.
Other judgments might result in significantly different results and may differ from the actual financial condition in the future.
Ericsson could
experience penalties and adverse rulings in enforcement or other proceedings, breach of contract claims and/or loss of revenue for non-compliance with laws, rules and regulations governing its business.
Compliance with existing or changed laws, rules or regulations may subject Ericsson to increased costs or reduced products and services demand and may adversely affect Ericssons development efforts.
As mentioned in the Annual Report 2023, including in the risk factor 3.1, Ericsson is subject to applicable laws, rules and regulations in multiple
jurisdictions. The Company could experience penalties and adverse rulings in enforcement or other proceedings for non-compliance with applicable laws, rules or regulations governing its business, which could
have a material adverse effect on Ericsson and its customers, including its reputation, business, financial condition, operations, research and development, operating results, cash flows, prospects or its current or future customer relationships,
including both private and government customers. Ericsson strives for compliance, but the burden of monitoring and maintaining compliance across global operations in a rapidly changing world and evolving industry is significant. There can be no
assurance that Ericssons compliance policies and programs, including in connection with the now-concluded monitorship, will be effective. The Company has not been in compliance with all such laws, rules
and regulations in the past and cannot assure that all past violations have been addressed or that additional violations will not occur in the future. Ericssons non-compliance with laws, rules and
regulations may also affect its customers compliance requirements and/or lead to actual or perceived breach of Ericssons contractual obligations to its customers resulting in contract claims and loss of revenue. It may also impact
Ericssons ability to gain new customers.
Further changes in laws, rules or regulations could subject Ericsson to liability, increased costs, or
reduced products and services demand, market access restrictions, inability to deliver products of certain
origin and have a material adverse effect on Ericsson, including its reputation, business, financial condition, operating results, cash flows or prospects.
Changes to laws, rules or regulations may adversely affect both Ericssons customers and the Companys own operations. For example,
regulations imposing more stringent, time-consuming or costly planning and zoning requirements or building approvals for radio base stations and other network infrastructure could adversely affect the timing and costs of network construction or
expansion, and ultimately the commercial launch and success of these networks. Similarly, tariff and roaming laws, regulations or rules on network neutrality could also affect communications service providers ability or willingness to invest in
network infrastructure, which in turn could affect the sales of Ericssons systems and services. Additionally, delay in radio frequency spectrum allocation, and allocation between different types of usage may adversely affect communications
service provider spending or force Ericsson to develop new products to be able to compete. Furthermore, the rapid development and deployment of tools that leverage AI is also causing governments to consider regulation of AI, even for AI that does
not pertain to personal data.
Further, Ericsson develops many of its products and services based on existing laws, rules, regulations and technical
standards. Changes to existing laws, rules, regulations and technical standards, or the implementation of new laws, rules, regulations, restrictions and technical standards relating to products and services not previously regulated, could adversely
affect Ericssons development or supply efforts by increasing compliance costs and causing delay or disruptions. Demand for those products and services could also decline. Regulatory changes related to e.g., license fees, environment, health
and safety, security, data localization, privacy (including the cross-border transfer of personal data for example between the EU and the US), and other regulatory areas may increase costs and restrict Ericssons operations or the operations of
network operators. Also, indirect impacts of such changes and changes to laws, rules or regulations in other fields, such as pricing regulations, could have an adverse impact on Ericsson, even though the specific laws, rules or regulations may not
apply directly to the Company or its products.
Ericssons substantial international operations are subject to uncertainties that could affect the
Company, including its reputation, business, financial condition, operating results, cash flows or prospects.
As mentioned in the Annual Report 2023,
including in the risk factor 3.2, Ericsson conducts business throughout the world and is subject to the effects of general global economic conditions as well as conditions unique to specific countries or regions. The Company has customers in
approximately 180 countries, with a significant proportion of Ericssons sales to emerging markets in the Asia Pacific region, Latin America, Eastern Europe, the Middle East and Africa. Ericssons extensive global operations subject the
Company to additional risks on many fronts, including civil disturbances, acts of terrorism, acts of war, economic and geopolitical instability and conflict, potential misuse of technology leading to human rights violations, pandemics, the
imposition of exchange controls, economies that are subject to significant fluctuations, nationalization of private assets or other governmental actions affecting the flow of goods and currency, effects from changing climate and difficulty of
enforcing agreements and collecting receivables through local legal systems.
Further, in certain markets in which Ericsson operates, there is a risk that
national governments actively favor or establish local vendors or introduce requirements for local content in their respective markets at the expense of foreign competitors or introduce other requirements impacting how Ericsson can provide products
and services to its customers. The implementation of such measures could adversely affect Ericssons sales, Ericssons market share and its ability to purchase or supply critical products or components.
Compliance with applicable export control regulations and sanctions or other trade embargoes in force is paramount for the Company. The geopolitical situation
in parts of the world, particularly in Russia/Ukraine, parts of the Middle East and China, remains uncertain, and the level of export controls and sanctions is still relatively high from a historical perspective. This level could even increase, thus
significantly impacting Ericssons operations where such increase occurs, including in these markets. The most recent increase in export controls has particularly targeted Chinas ability to develop advanced super computers and artificial
intelligence, including the semiconductors needed for those operations. A universal element of the sanctions is the financial