Nokia suffers the blow after the loss of a major contract in the United States

2023-12-12 10:12:00

After the blow, it’s time to take stock. Last week, Nokia lost a huge $14 billion contract with US operator AT&T to upgrade its mobile network. The latter preferred to marry the Swedish Ericsson, the great rival of the Finnish equipment manufacturer. From the outset, Nokia’s staff warned that this slap would not be without consequences for its business. This Tuesday, he confirmed it: Nokia announced that it had lowered its operating margin objective. It is now targeting 13% by 2026, compared to 14% previously.

However, Nokia CEO Pekka Lundmark remains optimistic:

“Nokia considers that it is still possible to achieve the objective of a comparable operating margin of at least 14%, but given the current conditions of the mobile network market, this change is considered prudent, affirms the leader. Nokia sees further opportunities to increase margins beyond 2026, and believes this 14% target remains achievable in the longer term. »

Nokia returns to Deutsche Telekom

Pekka Lundmark agrees, however, that the group is going through a difficult time. According to him, the mobile network market “will face challenges in 2024 and 2025”. Generally speaking, the inflationary context and high competition in telecoms, particularly in Europe, encourage operators to postpone their investments, and in particular those concerning the new and expensive 5G. That said, Nokia believes it can grow “faster than the market” from 2026.

The equipment manufacturer wishes to demonstrate to investors that despite its difficulties, its products remain efficient in the eyes of telecom operators. This is probably the reason why the Finnish group decided, this same Tuesday, to lift the veil on an agreement with Deutsche Telekom. The historic German operator will use the know-how of Nokia and the Japanese Fujitsu to deploy “Open RAN” mobile networks. This technology aims to replace certain equipment with software. This allows, in particular, operators to call on numerous suppliers, and to put them in competition, to lower costs.

Significant job cuts

Nokia is very proud to have signed with Deutsche Telekom. The Finnish group specifies that it is thus making its comeback within the largest European operator. “Nokia will replace the incumbent supplier under this agreement”, he adds. The equipment manufacturer, questioned by The Tribune, does not wish to give a name. But it is, most likely, the Chinese Huawei. The latter is today in difficulty across the Rhine, where the government is considering doing without its services for security reasons.

Regardless, Nokia remains on the tightrope. In October, the equipment manufacturer announced the elimination of 9,000 to 14,000 jobs out of a total of 86,000, following suffering a sharp drop in its profits. The group is, to put it mildly, expected to be around the corner.