Welcome to Ericsson's conference call. When you would like to ask a question, please press zero one on your push-button phone. And if you'd like to decline from the process, you can press zero two. Peter Nyquist will now open the call. Morning, everyone, and welcome to this call today. We will be handling this morning's press release on the Iraq investigation. The reason behind having this call is that we have received quite a lot of questions, mostly from the international community lately. We will try, but we maybe cannot answer all the questions that will be asked during this call. We will do our best. The setup will be that we will have an introduction by our President and CEO, Börje Ekholm, for 10 minutes. We will spend the rest of the time with Q&A. During the Q&A, Börje will be supported by our CFO, Carl Mellander, and our Chief Legal Officer, Xavier Dedullen. Before starting the presentation, I would like to read this. During today's presentation, we will be making forward-looking statements. These statements are based on our current expectations and certain planning assumptions, which are subject to risk and uncertainty. The actual result may differ materially due to factors mentioned in today's press release and discussed in this conference call. We encourage you all to read about these risks and uncertainties in our earnings report, as well as in our annual report. That said, I would like to hand over the word to you, Börje. Please. Thank you, Peter, and thank you all for joining. First of all, of course, this is a serious matter, a very serious matter, and involves embarrassing and unacceptable misconduct in the past. Before going into that, I want to start by making a little bit of a perspective of what we are trying to do and have executed on over the past few years. Of course, this is, and you all know this, we have had control failures in the past, significant control failures in the past, and we've had a culture that has not allowed us to capture this behavior in time. If we take just the recent report on Iraq, that's a behavior that started 2011, went on uninterrupted for many years until our new compliance efforts that was put in place in 2017-2018, detected a suspicious expense claim, and that led to a roll-up of a number of misconducts and breaches of our Code of Business Ethics. I'll come back and touch upon that a little bit more, but it's important that you understand that it is this investment we made in strengthening compliance effort that allows us to detect these things. Equally important is to strive towards changing a culture because we have these past wrongdoings, they're hugely embarrassing, but they still need to be tackled, and that's what we are trying to do. That includes changing the culture and actually create the culture of speak up. If you look, for example, take just to measure the progress is how many allegations we get internally. A few years ago, so in 2016, we had 145 reported compliance concerns. This past year, we had about 1,000. That allows our people to speak up when they see things and when they detect things. This is the cultural journey we have to go through. It's a cultural journey of behaving in the right way, behaving ethically, taking ethical decisions, but it's also speaking up when you see something or hear something. We invest significant resources in this. We have invested over the years in growing our compliance staff, compliance functions, but also our investigation functions. We have made significant commitments on making progress and cleaning up the bad behavior we've had. I've been working on that it feels like every single day since I came in to clean up that path, but it takes time. Unfortunately, we do uncover things that are bad and that are poor performance. I would also say that we have 99% plus of our people delivering every day and would never even consider a misconduct. We need to have a culture in place where those 99% are truly empowered to speak up when they see and feel something. Here, you know, over these years, we made progress. We made progress on the strategic side, and you see that with our market share gains, our competitive product portfolio. You see the financial numbers. We're also doing something on the, or call it on the cultural side, where we're making progress. I think the speak up, the number of allegations, is a progress indicator. We have more to do. In this specific case, it's of course very, you know, hugely embarrassing and hugely unsatisfactory, but we still need to tackle them, and we need to deal with the situation. We are gonna continue to do that because we are determined as a team in the company to really root out past misconduct and poor performance. I remain firmly committed to doing that. I think maybe we should move on, Peter. Yes. Thank you, Börje, for those words. I will open up the operator Mark for Q&A. Thank you. Uh, if you wish to ask a question, please dial zero one on your telephone keypads now to join the queue. If you'd like to land a decline from the polling process, please press zero two. If you are streaming the webcast, please mute the webcast audio whilst asking a question to minimize any audio feedback. There'll be a brief pause now whilst we register your questions. Thank you, Mark. I think we have the first question here from Peter Kurt Nielsen from ABG. Oh, sorry, it's Aleksander Peterc from Société Générale. Hello, Aleksander. Yes. Hi. Good morning. Good morning to you all, and thank you for taking my question. I guess the most important question I would have really is if you could help us understand what is your assessment of the maximum financial damage to Ericsson from today's revelations of breaches of your DPA. Are we looking at a potential additional fine that could be of a similar order of magnitude as the December 2019 fine or settlement, or is it something a little bit more marginal? Just if you could give us a range of possibilities here, I guess investors are entitled to know if the damage is potentially destabilizing your financial position and if it has any implication on your ongoing bid for Vonage as well. Thank you. Alexander, it's a very good question, and I wish we could answer. We cannot assess that today. We do not have enough information to provide you with any type of guidance, so it would be incorrect to try to do that. I have to refrain from answering. Regarding Vonage, we believe that we can still proceed as per before, so we do not believe or expect it to impact the process. Of course, given the situation, we can never rule out anything, but I do not see that to be impacted. Thank you, Aleksander. Thank you very much. Thank you. Well, thanks. We'll move to the next question from Andrew Gardiner from Citi. Good morning, Andrew. Good morning, Peter. Good morning, Börje. Thanks for hosting the call. One question I have is just a clarification. Can you just draw a distinction between the breach of the deferred prosecution agreement of which you notified the market last year in October and today's update? Is it correct to say that, you know, last year's notification was to do with misconduct in a country other than Iraq, and then now you've got these two additional issues, the insufficient disclosure on Iraq under the original settlement and then the insufficient disclosure on Iraq under the DPA? Are there sort of three questions outstanding with the DOJ at the moment? Xavier, should you take that? Yeah. Let me try and answer that question. The breach notice that we received last year has to do with the failure by the company to provide certain information and data. The failure of the breach notice that we have today is in connection specifically with the disclosure that was made to DOJ pre-DPA and the failure to follow up with disclosures post-DPA. It does not concern any conduct that are violations under the FCPA post-DPA. We're not talking about conduct issues. We're talking about failure to adhere to conditions as to disclosure DOJ. Thanks, Xavier. Okay, Andrew? Thank you. Thank you. We'll move to the next question. Peter Kurt Nielsen from ABG. Hello, Peter Kurt. Yeah. Thank you very much, Peter, and thank you for taking the question. Just quickly, Börje, you have explained, and as you've said often, how you have strengthened the company's compliance function since you came in. You've highlighted that often. We also know you have an independent monitor working with you and, I guess, supporting you. Is there anything you can tell us to reassure the market that you have complied with the DPA, that you are providing the information to the DOJ that you are supposed to do? Is there anything at all you can say to reassure us that that is the case? Then just secondly, follow up. Can you talk about the process from here? How does that progress? Do you have any idea? Is it likely we will have clarity before the DPA expires, or will we have to wait until next year? Any clarity here would be helpful. Thank you. We start with the second one. We do cooperate fully with the U.S. authorities, and we have discussions with them. Of course, it is our ambition to try to resolve these things as quickly as possible, but there is no time limit on that, so I cannot give you a firm guidance on that. Of course, we are gonna do what we can to work with them. There are a number of obligations in the deferred prosecution agreement, including disclosure, and they're very specific. Of course, we are committed, and that's why we entered into the DPA to disclose these things. Now we have a breach notice, so we need, of course, to make improvements and to change and to adjust, that's for sure. We of course are committed to follow the DPA, so we're not trying to dismiss that in any way. I think here it's hard for us to comment more than we have here. I think, you know, we need some time to work with this matter. We need to work with the U.S. authorities and we have to take it from there. I'm sorry, it's a bit unsatisfactory, but that's where we are. Okay, thank you very much. Did I miss one question? Okay. How we invest in strengthening compliance? I must have missed that question. If we look at what we have done to strengthen, the compliance program consists of a number of different parts. It has included how we work with internal controls, what we do to strengthen our processes around that. It also involves how we manage third parties. For example, we used to have a large number of cash transactions. We don't anymore. That's one important avenue actually to control misbehavior, so you cannot create or you can't use cash, or we're very restricted. Certain markets only allow it, but it's very, very restricted. We have an element here which is the culture side, and I think that's where we can put the other parts in place. They are more process system-oriented, but it's the culture part that actually takes time, and that's on the journey we're on. That includes of course involving or integrating integrity in decision-making. That's why we made it a core value of ours last year. That is something we train our people, we discuss internally, and bring that up to the front and center. The other element of culture is actually speak up. For me, speak up is critically important in compliance, of course, but actually speak up is equally important in the regular business. When you think about what we do on compliance cultural journey, it's no different than what you would like to see in a regular business decision. Think about integrity in decision-making. Yeah, that's like looking at facts. It's a good thing to do. These are things that we're working on. Speak up if you see the project you're working on has a delay. I'd rather get people to speak up early than not. They are actually not unique for compliance. They're actually making the whole company a better company. Honestly, I think part of the reason why the company has turned around and performed differently today is this commitment to compliance, because it drives good behavior throughout the company. Thanks, Börje. Thanks, Peter. We'll move to Alexander Duval and then expert in Goldman Sachs. Alex, can you hear us? Yes, many thanks for the question. Just wondered if you could answer an investor question, which is really the extent to which you see this news having a significant impact on the business you could be awarded in the U.S. or elsewhere by customers. Is there any way you can give a perspective on the view of customers here and what drives their decision-making? Any help on that would be appreciated. It's very difficult to assess. It's a good question. We're of course gonna be committed to our compliance program, and we describe what we are doing in this area, how we are changing as a company. For example, the behavior here actually dates back to a period many years ago. We try to describe why we're different now and how it has changed. Of course, there is always that exposure that you're raising. I would also add here that when we had the announcement in 2019 in December, where we showed and committed to a number of these controls, books and records violations as well as corruption, and you can see that on our total numbers, we had very limited impact on our business. I don't wanna trivialize the question. I think it is a very serious situation we're in, and we take it very seriously. We also know that when we discuss with customers what we're doing, how we're changing, how the company is evolving, it helps us. I do not want to trivialize the question you're raising. Many thanks. Thanks, Alex. We'll move to the next question, which is from François Meunier at DNB. Yes. Hi, and thank you for taking it. I have a question regarding the Vonage deal again, which is basically an investor question that I'm conveying. It's about, you know, given the context of possible impact, extended material fines that you might learn of during the next weeks and months, if you see a need to, or would wish to break up and not move forward with that Vonage agreement, is there a way for you to do that by paying the $200 million pre-agreed breakup fee, or is that breakup possibility just only applicable for a regulatory approval, a non-approval situation? That's the question from the investor side. Xavier, you wanna take that or Börje? Yeah. The conditions under which the transaction can be broken up would not relate to the ability to. Yes, I apologize. I am messing around then. The conditions under which the transaction can be broken up would not relate to our ability to pay, but it would relate to matters that are to do with the regulatory approvals, as such, and the failure to obtain those. Okay. Okay. Thank you. Okay. Could I please follow up on an earlier question? Sure. Can I just add to which I think is important. Strategically, we are actually stronger. We're more convinced today that is with the customer discussions we're seeing over the past few months, actually, the strategic attractiveness here is very interesting. We feel that we want to proceed with that transaction, right? Because it actually is going to drive the market in a very different way. We probably should schedule a different call or maybe on the Capital Markets Day to discuss that more in detail. I think that's why we're still very committed to the transaction. Okay. Thanks. Anything else? Great. Yeah. You had a follow-up question as well, right? Yes. We can take it later offline. It's fine. Okay. Good. We've taken a bad line here, so thanks. Okay. Thanks, Frank. We'll move to Sandeep Deshpande from JP Morgan. Hi. Hi, Sandip. Yeah. Hi. Thanks for having me on. My question is, I mean, was what was disclosed in the press in the past weekend disclosed to the DOJ before 2019? The second question I have is actually a follow-up to an earlier one, which is that, what DOJ said in October 2021, so are there now two cases? Is that what you're saying, is that there are two ongoing investigations at the DOJ which are different from each other associated with Ericsson? If you could start, Xavier. Yes. Thank you for the question. In terms of your second question, that is correct. We have been informed by the DOJ in 2021 that they determined that there was a breach with respect to failures to disclose certain information. That has nothing to do with this incident where they again determined that we failed to comply with our disclosure obligations under the DPA, and that prior to entering to the DPA, our disclosures were how to say, inadequate. These are two different instances, and they both relate to our disclosures to DOJ. They do not relate to post-DPA breaches of the FCPA. It's not conduct related under the FCPA, it is failures to comply with the disclosure obligations under the DPA, and those are two unrelated instances where DOJ has made those determinations. I guess Sandeep had a second question. You had a second question as well. Yeah. Sorry, what was the other question again now? Yeah, Sandeep. Can you repeat, please? Yeah. My first question was there were some disclosures in the press this past weekend on internal Ericsson documents. Were those internal Ericsson documents made available to the DOJ before the DPA was signed in 2019? We are not in a position where we can comment on what we exactly are disclosing or not disclosing to DOJ. I can only refer you to the fact that DOJ has made a determination that the pre-DPA disclosure was insufficient and that we failed to make subsequent disclosures post-DPA. Thank you. Okay, thank you, Sandeep. We have the next question from Andreas Joelsson from Danske Bank. Hello, Andreas. Yes. Hello. Thanks for taking my question. Maybe a follow-up on the last one. I noticed in the press release that you write that you feel that the internal investigation covered everything that has been brought up by media. Would that mean that you do not agree with DOJ that the information given was insufficient? The second question, can DOJ, do they have the power to sort of impose other actions than a fine, if they should decide to do so? Do they have powers to do anything else, if you understand what I mean? Sure. As to your first question, our assessment of whether our investigation covers what has been covered by the media is independent of what the topic is of what we disclosed or didn't disclose to DOJ. These are unrelated questions. I'm sorry. The second question. Can you repeat again? No, if DOJ can, do they have? Oh, yes. other actions to take to then decide fine? DOJ has wide discretionary powers, and it would be premature for us to speculate on how they may exercise it and what the outcome would be, of this particular matter. Okay, thanks. Thanks, Andreas. We'll move to Sébastien Sztabowicz at Kepler Cheuvreux. Sébastien. Yes, good morning. Thanks for taking my question. Just two, I guess. First one, just on Vonage. Just trying to understand what you said there. Can you confirm that you have the ability to break that deal for any reason, not just for failure to receive regulatory approval? And then the second one question would be, you know, we've spoken about obviously the past compliance breaches, but it seems like the new information here from the DOJ is your failure to disclose information before 2019 and after 2019. So, I mean, can you talk about what steps you've taken to maybe improve that process around disclosing to the DOJ and sharing information? Because it seems like that's where, you know, the breach is not necessarily what happened from a compliance standpoint pre-2018, for example. Thank you. On the first question, we have only very limited instances pursuant to which the deal can be broken, and I would refer you to the materials that have been published. I think the agreement is a matter of public record, so rather than trying to go through the details here, I would refer you to that. In terms of the breach notice and what we're doing around this, obviously we have learned, we've done some root cause analysis, and we're taking precautionary measures to make sure that we have a better grip on the information such that we can be more fulsome in our disclosures with DOJ and avoid having future determinations like the one we have been notified of today or yesterday. Okay, Séba. Thank you. Thanks. We'll move to the next question, which is Thomas Seal at Bloomberg. Tom, can you hear me? Hi. Yes. Can you hear me? We hear you. Perfect. Fantastic. I just wanted to ask about some of the specific staff that were named in the press reports. They say that some of those staff have, you know, not left. In fact, some have been promoted senior positions. Just wondered whether that's still the case and whether that might change and, you know, why they might have not left. So- Following the findings, we have a process to decide on remediation, be they disciplinary measures or process remediation. They're being done in light of the information that is available at the time, and I do not intend to go into the specifics here of those individuals and the merits of the decisions that were made at the time. We do have a process. Okay. My other question is there any possibility that other regulators or bodies like E.U. could get involved in this? Or you see that it's gonna be limited to U.S. authorities? Other enforcement authorities may decide that they want to look into the same matters as well. As yet, we have not been notified to my knowledge, but of course, that's a possibility. Thank you. Thanks, Tom. We'll move to the last question for this session, and, I guess that would be, Jesper Mothander at Dagens Industri. Hi, Jesper. Hi. Thank you for taking my question. Börje, earlier in this presentation, you spoke about a culture of speak up. Why did you choose not to provide the market with any information whatsoever regarding this internal report? It certainly has had a material impact on the company value. Jesper, if you look at the internal reports, we usually get 1,000 allegations a year. That means a large number of investigations. If you look at the practice for most companies that actually do internal investigations is they keep them confidential. There are a number of good reasons for that. The most important one in my mind is actually that we need to protect the identity of reporters. Anyone that is speaking up, we need to protect their identity because otherwise we are not gonna encourage others to speak up. My big worry right now is that this might expose individuals, people that actually have spoken up, helped out in the investigation, and reached those conclusions, may deter others in the company to do the same. Here I am very... You know, that's why we do not go public with every investigation, because I think it would be defeating the purpose of creating a culture of compliance. That's the first one. Second one is, as we move along this journey, you know, we actually do a lot of training courses, education with our people, and, you know, try to kind of encourage the right behavior. That's when we use those cases, but it's much later and in a very different setting than the original report, but we can therefore trust in the system by creating the confidentiality around the investigation in order to become a better company. I encourage you to ask other companies how they treat their internal investigations, and you will find similar answers. Okay. Thank you. Just a follow-up. The internal report, which obviously is not public, nevertheless, you have stated that you have identified possible money flowing to ISIS. Have you reported this possible crime to the Swedish prosecution authorities as per your obligation? Börje, I think you're good at answering that. Yes. Thank you. We are not gonna comment on our discussions at this point with other enforcement authorities. Okay. Thank you. Okay, Jesper. That was the last question. I don't know if you want to add a final remark, Börje, before we close the call. Thank you all for the questions. I know this is a difficult situation for all of you, but it's equally serious for us, so we take it very seriously. The key here is that we are on a journey, a cultural journey to change our culture, to strengthen our culture, and root out past performance. We're very committed to doing that, and we're gonna remain committed to doing that. We believe that the only way Ericsson is gonna be long-term successful, combining a culture of technology leadership with compliant behavior is the only way for us to long-term succeed. That's a commitment that's very strong. Of course, it's unfortunate when past events cast shadows over where we are, but that's something we need to confront as well as part of this journey. That's what we're doing. You can count on us to investigate, create a speak-up culture, create a compliance system that will detect anomalies, investigate them, and remediate them. Just looking at the numbers for last year, we had about 1,000 allegations. We terminated a little bit less than 100 people. Some 20 resigned voluntarily when they realized the results. When you look at this, it's a fairly big operation that we're going through, but we're committing to really making sure that we are at the front and center of compliance. Thank you, Börje. Just a brief comment on the Iraq. I think the reality here is we found this ourselves in 2018, investigated during 2019. There are parts that can be substantiated, and there are parts that cannot be substantiated. The question on financing armed factions cannot be substantiated. What can be substantiated are several breaches of our Code of Business Ethics, conflict of interest allegations, as well as other type of misconduct that includes, for example, you know, payments of donations where we cannot find the ultimate recipient, and there are a number of those. Those are hugely embarrassing by itself. Don't get me wrong. They're unacceptable. We cannot do them as a company, and we're gonna fix it in the future. Thank you. Thank you, Börje. By that, we will close this call. Mark, please. Thank you. This now concludes the conference. Thank you all very much for attending. You may now disconnect.