Mobile telecom equipment maker Ericsson said today it was cutting its annual dividend by 73%.

Its new CEO said the Swedish company would prioritise profitability after it suffered an operating loss in the last three months of 2016. 

The dividend cut is Ericsson's first since 2008 and caps a difficult year which has seen the firm's shares fall 35%. 

The 1 Swedish crown dividend was well below expectations of 1.73 crown in a Reuters poll. 

Veteran board member Borje Ekholm took over as CEO this month and most analysts say he faces a tough task in leading Ericsson through its worst crisis in a decade.

The company is grappling with shrinking markets and fierce competition from China's Huawei and Finland's Nokia.

Ericsson has been hit by a drop in spending by telecoms firms, with demand for next-generation, 5G technology still years away, and weak emerging markets. 

"In the near term, stability will be key to establishing a strong base for future growth. This means prioritising profitability over growth," CEO Borje Ekholm said in a statement. 

He added in a conference call that he believed it was "extremely important" to continue to pay dividends.

Ericsson said sales in North America, its biggest market, had fallen 13% year-on-year, while sales dropped 21% in Western and Central Europe. Overall sales at Ericsson were down 11% year-on-year.

Last year was brutal for Ericsson with former CEO Hans Vestberg ousted, a profit warning in October which shocked investors and the announcement of sweeping staff cuts. 

Ericsson's CFO Carl Mellander said concern about its credit rating was one of the factors behind the cut in dividend.

The company also said the dividend cut was due to the current weak market outlook. 

"It's important to us with investment grade rating. The rating companies have told us they think the level of dividend is important," Mellander told Reuters.

Ekholm said investment priorities would be reevaluated. 

Ericsson is one of the top global suppliers in mobile infrastructure, while its media segment has a small share in a very fragmented market. 

"Emphasis will be on refining the strategy to focus investments into areas where we both can and must win," Ekholm said. 

The company's operating income was a loss of 300 million Swedish crowns compared to a 11 billion profit in the year-ago quarter and below a mean forecast of a 417 million crowns profit in a Reuters poll of analysts. 

Sales were 65.2 billion crowns, above a forecast of 59.2 billion, helped by hardware deliveries previously planned for the first quarter coming ahead of schedule.