Thursday 4 February 2021 8:09 am

Nokia growth knocked by losing part of Verizon 5G contract

Growth at Nokia has been impacted by the firm losing part of the Verizon 5G contract in the United States to Samsung.  

Nokia’s new CEO Pekka Lundmark said in October that Nokia would do “whatever it takes” to take the lead in 5G.

While both Nokia and its Nordic rival Ericsson have been gaining 5G customers as China’s Huawei is increasingly shunned out by several governments over security concerns, Ericsson seems to have benefited more.

Nokia said a growth in its 5G equipment sales was partially offset by decreases in its legacy radio access products.

Read more: BT taps Nokia to replace Huawei in 5G networks

“We expect 2021 to be challenging, a year of transition, with meaningful headwinds due to market share loss and price erosion in North America,” Lundmark said.

Overall Nokia reported better-than-expected fourth quarter revenue and underlying profits, with the Finnish telecom network buoyed by the new chief executive’s strategy revamp.

Read more: Nokia named as NASA partner to build mobile network on the moon

Revenue fell 5 per cent to €6.57bn during the quarter, but beat a consensus figure of €6.42bn, Refinitiv Eikon data showed.

The quarterly underlying earnings fell to €0.14 per share from €0.15 a year ago, beating the €0.11 consensus.

Net sales for Q4 were down five per cent on a reported basis and up one per cent in constant currency, and for full year 2020 they were down six per cent on a reported basis and down four per cent in constant currency.

“Nokia delivered a solid Q4. We saw healthy gross margin and operating margin performance for both Q4 and full year 2020, supported by a regional mix shift towards the higher margin North America region,” Lundmark added.

Third Bridge analyst Dan Thomas said it looks like Nokia is losing ground to Ericsson in the 5G arena.

“Nokia continues to make progress on its chipset strategy which could give the company a more competitive cost base in the future,” he said.

“Traditional vendors are battling each other for market share. They are also facing competition from new software only vendors, reflecting the increasingly sophisticated software layer associated with 5G network deployment.

“The adoption of a clearly defined set of 5G technology standards will increase the interoperability of network hardware and potentially constrain the future pricing power of incumbent vendors.”