By Stephen Wilmot

Washington's war on Huawei eventually seems bound to help the Chinese giant's leading Western rival, Ericsson. But it hasn't yet, leaving the Swedish company dependent for 5G-equipment sales on -- of all places -- China.

Ericsson's shares jumped 11% Friday morning after it posted second-quarter results, but this had more to do with modest expectations than stellar growth. Sales were flat at constant currencies, though the gross margin on those sales -- a closely watched measure of pricing power in a market dominated by Chinese competition -- rose slightly from a year earlier.

Thanks to its investments in technology, Ericsson's core networks business, which sells equipment for mobile towers, has been steadily recovering from the crisis days of 2016, when the company ousted its chief executive and issued a big profit warning. But the long-awaited bonanza of 5G spending has yet to materialize. The same goes for the anticipated geopolitical dividend as Huawei's global advance is reversed.

One of the places where 5G investments are getting under way is China. This spring Ericsson won big contracts for a rollout with China Telecom, China Mobile and China Unicom -- the country's "big three" state-owned carriers. These boosted its second-quarter sales but weighed on profits: Contracts tend to involve an upfront margin hit, and Chinese operators were able to get a particularly good deal given their scale and early adoption of 5G. Ericsson calls the Chinese market "strategic."

Only this week, the U.K. moved to ban Huawei from its network completely, reversing an earlier compromise to allow its equipment in areas deemed less sensitive. But Ericsson's bet on China at a time when its home region is moving to push Huawei out isn't as crazy as it sounds. China has an interest in keeping an eye on Western 5G technology, and Ericsson's contract wins only give it a small slice of the market, which is otherwise dominated by Huawei and ZTE.

The most notable aspect of this year's Chinese contract bidding was the failure of Ericsson's European rival Nokia to win any. The Finnish company, which changed chief executives earlier this year, seems to have fallen behind technologically. This has been a much more important driver of Ericsson's recovery over the past three years than Washington's warnings about Huawei.

So far, the Huawei saga has mainly held back network investment as operators have waited for clear rules before splurging vast sums on new gear. Yet the U.K. delivered greater clarity this week, and other U.S. allies may follow. The European Union talks a lot these days about "digitalization" and "strategic autonomy," which would appear to favor Ericsson in a speedier European 5G rollout. The company's "digital services" unit that develops software to run networks -- a particularly sensitive area -- may benefit even more than the networks business itself.

Investors seem reluctant to give Ericsson much credit for these likely gains before they actually hit the accounts, perhaps because of the industry's poor record of delivering shareholder returns over the past decade. Even after Friday's jump, Ericsson's enterprise value is less than 12 times prospective operating profits, compared with 22 times for the wider European technology sector, which has surged during the Covid crisis.

5G may be fast, but building mobile networks isn't. The rollout of the new network technology will play out over years rather than months, but for investors with patience, Ericsson is still a likely, and inexpensively priced, winner.

Write to Stephen Wilmot at stephen.wilmot@wsj.com