Outlook points to a ‘bumpier’ 5G, Nokia says

‘STAGGERED’ ROLLOUT::The Finnish manufacturer of wireless networks expects the telecom equipment market to remain stagnant this year before growing next year


Fri, Feb 01, 2019 - Page 10

Nokia Oyj shares plunged after the telecom equipment maker forecast weaker-than-expected earnings this year as carriers delay their purchases of the 5G systems that are key to its growth.

Nokia forecast earnings that missed analysts’ estimates and predicted the first quarter would be “particularly weak” as carriers in markets, including the US, delay their purchases of 5G systems to the second half of the year.

The Finnish maker of wireless networks now expects the market for telecommunications gear to remain stagnant this year before growing next year.

It predicts a “staggered” rollout in important places like the US, Japan, South Korea and China, chief executive officer Rajeev Suri said on a call with reporters.

“The market was expecting better guidance for this year, ” Inderes analyst Mikael Rautanen said in comments posted online. “The prize remains there, and Nokia is heading toward it, but the journey is foggier and bumpier than expected.”

Suri spent much of last year promising that the final months of the year would show a sharp increase in spending by US operators, which are starting 5G services.

Although the final quarter of last year delivered, lifting the full-year operating margin at the company’s key networks business to 6 percent, Nokia expects the first six months of this year to be “soft” followed by a much more robust second half.

Nokia still believes it can win market share in competition with Huawei Technologies Co (華為) and Sweden’s Ericsson AB, which last week said it expects the market for radio-access network equipment to grow by 2 percent this year.

Nokia’s forecast for full-year earnings per share of 0.25 euros to 0.29 euros lagged the average estimate of 0.32 euros, according to data compiled by Bloomberg.

The Finnish company’s earnings follow an more upbeat report from Ericsson, which said last week it reached its 2020 profitability target two years early. Nokia and Ericsson stand to gain market share at a critical time for 5G system spending from carriers globally as security concerns about Chinese competitor Huawei mount.

Executives from Nokia and Ericsson have been careful not to be seen to benefit from Huawei’s pain. Both companies manufacture in China and do business with carriers in the country. Suri on Thursday said that Nokia is closely monitoring the situation around Huawei.

“The situation is still very much in flux, and the outcome is for governments to decide, not Nokia,” Suri told reporters.