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U.S. agencies investigated the company earlier, with the result
that Ericsson had to pay a $1 billion fine in 2019 as part of
settlement of a bribery case. It also had to enter a deferred
prosecution agreement (DPA).
"We believe the combined penalty to be paid in this round of
investigations is likely to be somewhat higher than the previous
one, in light of the repetitive misconduct, the breach of the
DPA and the corruption being in Iraq," Jefferies analysts said
in response to news that the SEC was investigating.
The Department of Justice (DoJ) had already begun doing so.
The controversy, which broke in February, relates to Ericsson's
own investigation in 2019. This found payments had been made to
the Islamic State militant group in Iraq.
While the misconduct did not take place under the current
management, the company did not share the entire report with the
DoJ, prompting it to investigate.
Upset investors voted against discharging board members of
liability for 2021. The board members could be held personally
liable for their actions.
Ericsson has lost about a third of its market value since
February. Analysts have said that, although any potential fine
is likely priced into the shares, it does create an overhang
until a settlement is reached.
They estimate that any settlement is unlikely to come this year
and could even derail Ericsson's $6.2 billion deal to buy U.S.
cloud communications firm Vonage.
The deal was expected to close in the first half of the year but
the closure has been postponed to August.
Mads Rosendal, an analyst at Danske Bank Credit Research, wrote
that the new probe "could also mean further delays to the Vonage
acquisition, which we now see as having a slightly higher
probability of getting cancelled."
(Reporting by Supantha Mukherjee in Stockholm; Editing by
Bradley Perrett)
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