Ericsson makes $220 million Iraq provision over US probe, shares rise

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STOCKHOLM (Reuters) -Ericsson said on Thursday it would book a 2.3 billion Swedish crown ($220 million) provision for an expected fine from the U.S. justice department over the company's handling of an earlier settlement related to its operations in Iraq.

Ericsson (BS:ERICAs)'s share price surged on the news, rising 7.7% by 1336 GMT.

Ericsson had in 2019 settled bribery allegations with U.S. authorities and agreed to be under review for three years. But it failed to fully disclose results of an internal investigation about potential payments to the Islamic State militant group in Iraq, leading to more regulatory scrutiny.

Ericsson's announcement indicates that a resolution is nearer than the market expected, which removes much of the overhang to the investment case, Danske Bank Credit Research analyst Mads Lindegaard Rosendal said.

"The provision is significantly below both our and S&P's base case of about 10 billion SEK," he said.

($1 = 10.4692 Swedish crowns)