Nokia expects second year of falling sales

Nokia is expecting a second year of declining revenues with the telecoms equipment maker warning of a tough 2021 as it struggles to assert itself in the 5G market against rivals Huawei and Ericsson.

The Finnish group said on Thursday it expected sales this year to be €20.6bn to €21.8bn compared with €21.9bn in 2020 and cautioned that it would suffer a “significant decline” in its core mobile networks business due to fierce competition in the US.

“We expect 2021 to be challenging, a year of transition, with meaningful headwinds due to market share loss and price erosion in North America,” said Pekka Lundmark, Nokia’s chief executive since August.

He added that the group would sacrifice “some short-term margin” this year to make further investments in 5G technology as it seeks to recoup lost ground to China’s Huawei and Sweden’s Ericsson.

Nokia was caught off guard by the early start of sales for 5G networks as it was still digesting its €15.6bn acquisition of Alcatel-Lucent. It replaced both its chief executive and chairman last year amid questions about why it had not been able to capitalise on the US-led campaign against Huawei.

Fourth-quarter sales and profits fell but by less than expected by analysts. Revenues dropped 5 per cent to €6.57bn against a consensus forecast of €6.42bn, according to data from Refinitiv, while underlying earnings per share were €0.14, down from €0.15 a year earlier but ahead of analysts’ estimate of €0.11.

Nokia said it expected its comparable operating margin to be 7 to 10 per cent compared with 9.7 per cent in 2020. It will not pay a dividend for 2020 but will evaluate at the end of the year whether to pay one for 2021 taking into account its net cash position and outlook for 2022.

Mr Lundmark has pledged to “invest whatever it takes to win in 5G” in a sign of how seriously Nokia is taking the fight.

Nokia’s shares are up by more than a fifth this year. It was one of the stocks pushed up by amateur traders on Reddit, but has fallen 14 per cent from a recent high last week.