NOK Nokia Corp

By Dominic Chopping

Nokia expects the challenging network industry environment to continue through the first half of 2024 as operator spending remains muted, but the situation should improve later in the year, it said.

The Finnish telecommunications company said Thursday that it is now starting to see some "green shoots on the horizon," with improving order intake in its network infrastructure business.

Last year was blighted by high inflation and rising interest rates that hit demand in its network infrastructure and mobile networks businesses, while operators also worked through stockpiles of inventory.

Those conditions persisted in the final quarter of the year but an uptick in customer spending helped network infrastructure orders rise from the third quarter, while cost savings helped support margins, it said.

Nokia's comments come after Swedish rival Ericsson earlier this week said it expects challenges in the mobile-network industry to continue this year. The two Nordic telecom gear giants faced challenges last year from a shift in business mix from higher-margin 5G work in early-mover markets such as North America to lower-margin developing markets such as India, which supported sales but dragged on margins.

After a period of frantic 5G rollouts in India work there is moderating, while North American demand continues to be held back as customers work through inventories and prioritize cash flow.

The loss of work from AT&T is also starting to be felt, it said, after the U.S operator last month awarded Ericsson a deal valued at up to $14 billion to supply network gear, replacing Nokia equipment.

Overall, sales at Nokia's key mobile networks business fell 17% on year while network infrastructure sales declined 26%.

The company expects a strong improvement in network infrastructure sales growth in the second half of 2024, which will drive solid growth for the full year, while top-line challenges will remain in mobile networks due to normalized investments in India and the AT&T decision.

"We do expect further improvement in gross margin and then in the second half we will start to see more benefits from our cost-savings program," Nokia Chief Executive Pekka Lundmark said.

The company expects to deliver comparable operating profit of between 2.3 billion and 2.9 billion euros ($2.5 billion-$3.16 billion) in 2024 compared with EUR2.38 billion in 2023.

The company posted a 40% fall in its fourth-quarter comparable net profit to EUR558 million as sales fell 23% to EUR5.71 billion. Analysts polled by FactSet had expected comparable net profit of EUR672 million on sales of EUR6.28 billion.

Nokia proposed a full-year dividend of EUR0.13, up from EUR0.12 in 2022, and initiated a EUR600 million two-year share buyback program.

Write to Dominic Chopping at dominic.chopping@wsj.com

(END) Dow Jones Newswires

January 25, 2024 03:07 ET (08:07 GMT)

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