Fitch Ratings lifted its outlook on telecom equipment maker Ericsson to stable from negative and affirmed the long-term issuer default rating and senior unsecured rating at BBB-.
The agency cited the stabilization of the global mobile infrastructure market and Ericsson's improving financial performance, increased research and development expenditure, and continued cost-cutting.
"A structural shift in the cost base, with higher R&D accompanied by other operating cost savings, is credit-positive, in our view, even if it does not lead to a higher operating margin," Fitch said.
Fitch expects Ericsson's focus on costs and efficiency to produce further gross and operating margin improvements. It also expects cost benefits to significantly exceed the company's restructuring costs.
The rating agency also cited the highly concentrated structure of the radio access network market, which protects Ericsson from excessive competition, and the company's positive cash flow and strong balance sheet.