Ericsson may have to inject an extra E500 million into its handsets joint venture Sony Ericsson sometime next year. Under the terms of the contract between the two giant firms, if the ratio of SonyEricsson’s equity-to-assets falls below 30%, Sony has the right to demand cash to rebalance it.
Unfortunately for Ericsson, the ratio for Q2 2002 fell to 21%. The joint venture made a profit in Q1, but this was negated by its Q2 results and the outlook is looking gloomy for the rest of the year.
Ericsson has been expecting to raise E3.3 billion through an underwritten rights issue, but now it may have to spend E500 million of the proceeds on an unexpected bail-out of its mobile unit.