Global caution over 5G puts pressure on Nokia

Finnish tech company Nokia warned Thursday that its profits will be lower than expected due to tough competition and costs related to new-generation 5G networks, about which mobile operators are cautious amid global concerns about cybersecurity.

The company based in Espoo, Finland, reported a 14 per cent decline in third-quarter net profits to 267 million euros (USD 296 million), though sales were up 4 per cent at 5.7 billion euros.

The share price dropped 20 per cent to 3.79 euros in Helsinki as Nokia said it would stop dividend payments to boost investments into 5G. It pledged to resume them after its cash position improves.

CEO Rajeev Suri said that risks previously flagged regarding the initial phase of the rollout of the high speed 5G networks are "now materializing" for Nokia. He said there was "pricing pressure" in closing initial 5G deals, reflecting operators' reluctance to pay premium prices for the new network technology that allows ultra-fast downloading speeds.

"We expect that we will be able to progressively mitigate these issues over the course of next year," Suri said in a statement. "To do so, we will increase investment in 5G in order to accelerate product roadmaps and product cost reductions, and in the digitalization of internal processes to improve overall productivity."
Nokia didn't comment on Huawei's current woes but noted that "some customers are reassessing their vendors in light of security concerns, creating near-term pressure (for Nokia) to invest in order to secure long-term benefits."