By Christina Zander 

Nokia Corp. warned on Thursday of an impending slowdown in the telecommunications-equipment sector amid growing worries about the health of the global economy, just as the Finnish company's integration of the recently acquired Alcatel-Lucent SA gathers speed.

"The first quarter, in particular, looks quite challenging as customers assess their [capital-expenditure] plans in light of increasing macroeconomic uncertainty," said Nokia Chief Executive Rajeev Suri.

"We see a flattish capex environment for all addressable markets in 2016," Mr. Suri said, underlining less buoyant activity in China now that the rollout of new-generation wireless networks is nearly complete in the country.

The Finnish group's wary outlook echoes recent comments from other technology companies and comes days after management disappointed investors with its forecast for how much revenue it is set to gain from its intellectual-property portfolio after a patent deal with Samsung Electronics Co.

It contrasts with Nokia's robust performance at the end of last year, with the group reporting a steep rise in fourth-quarter profit to EUR1.79 billion euros, inflated by EUR1.3 billion in proceeds mostly from the sale of its mapping business last year to a consortium of German auto makers.

Excluding that gain, net profit rose 53% to EUR498 million in the three months to end-December, ahead of market expectations, and up from EUR325 million in the same quarter a year ago. Growth at Nokia's patent-licensing business helped offset lower demand for its telecom-network equipment.

Nokia said it is too early to provide an outlook for the new combined company--Nokia in the final stages of completing its $16.6 billion takeover offer for Alcatel-Lucent--but will update investors in around three months time.

But Nokia did say at the start of the month that, including the patent pact with Samsung, it expects to receive at least EUR1.3 billion in cash between 2016 and 2018 related to settled and continuing arbitration regarding its intellectual property, well below some analysts' expectations.

The disappointing outlook for its patent activities underscores how testing the coming months could prove for the telecom-equipment supplier as well as its Nordic rival Ericsson AB.

Both companies are under pressure to provide telecoms companies with a broader range of equipment, from wireless gear to Internet routers, but have opted for different solutions to achieve that goal.

While Nokia has agreed a takeover of rival Alcatel-Lucent, Ericsson has struck a broad technological and commercial partnership with Cisco Systems Inc. which falls short of a merger. Ericsson, a leader in wireless equipment, has agreed to put its global sales force at the disposal of Cisco, which dominates the market for Internet gear such as routers and switches, but has a much smaller retail footprint.

"Obviously, the Ericsson/Cisco approach means they can do what they want to do faster, but anything they do within product development will be slow, " said Sylvain Fabre, analyst at Gartner Research.

Nokia's full merger with Alcatel-Lucent will take longer to get off the ground, but once it is done, the company should be able to develop products faster, Mr. Fabre said

For Nokia, Alcatel-Lucent is at least finishing its life as an independent company in robust health, surpassing a long-delayed goal of reporting positive free cash flow for an entire year in 2015 and fulfilling its turnaround plan. The Franco-American group reported net profit of EUR589 million euros, or 18 cents a share, more than double net profit of EUR271 million, or 8 cents a share, a year earlier.

Nokia repeated a previous assessment that the tie-up would result in merger-related benefits worth around EUR900 million by 2018.

"We have been operating as a combined company for a month," Nokia's Mr. Suri said.

Nokia said on Wednesday that it controls 91.25% of the share capital of Alcatel-Lucent. Nokia needs to own 95% of the stock to squeeze out the remaining shareholders.

The Finnish company said shareholders will receive an ordinary dividend of at EUR0.16 a share for 2015 plus a special dividend of EUR0.10 a share, up from EUR0.14 a share in 2014

--Sam Schechner contributed to this article.

Write to Christina Zander at christina.zander@wsj.com

 

(END) Dow Jones Newswires

February 11, 2016 06:06 ET (11:06 GMT)

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