World number one mobile telecom gear maker Ericsson said tough market conditions hit sales and profits in the first quarter and gave no sign a recovery in operator spending was on the horizon.

The telecom equipment market contracted sharply in 2009 as the global downturn forced phone companies to keep a tight rein on costs. Ericsson said little had changed in the first three months of the year.

Its sales fell 9 percent year-on-year, the same pace as rival Nokia Siemens Networks, which reported on Thursday.

The majority of analyst forecasts are for meager market growth at best in 2010 and competition -- especially from Chinese vendors -- is also set to remain fierce.

I think this is a weak start of the year. Sales are somewhat disappointing and the decline in Networks sales is quite stunning, said Thomas Langer, analyst at West LB.

Ericsson's operating profit, excluding joint ventures and restructuring costs, was 4.5 billion Swedish crowns ($625 million) against a forecast of 4.8 billion in a Reuters poll of analysts and 4.7 billion in the year-ago period.


Sales were 45.1 billion crowns versus a forecast of 48.4 billion. Sales in the key network unit were down 14 percent year-on-year, hit by market caution and tight component supply conditions.

The market conditions we saw in the second half of 2009 prevailed also in this quarter with mixed operator investment behavior across regions and markets, Chief Executive Hans Vestberg said in a statement.

Rival Nokia Siemens Networks repeated on Thursday it expected no growth in the equipment market this year in euro terms. Cost cuts helped it swing to a small, but unexpected, profit in the first quarter.

(Editing by Mike Nesbit)