Looking good for Private 5G boom
Nokia has claimed that its quarterly operating profit surpassed even its own expectations and it has revised its forecast higher sales in 2023. The Finnish equipment maker has defied the global recession by improving its market share and benefitting from 5G roll-out in major markets such as India. Nokia shares opened up 5.8 per cent in Helsinki, Reuters reported. Nokia’s fourth-quarter comparable operating profit rose to €1.15 billion ($1.26 billion) from €908 million last year, beating the €924.6 million forecast by 10 analysts polled by Refinitiv.
Nokia chief executive Pekka Lundmark urged caution however. While Nokia sales teams are keenly anticipating 2023, they are “mindful of the uncertain economic outlook,” said a statement. However, there is an optimism that “demand remains robust”. Nokia forecast full-year net sales of between €24.9 billion and €26.5 billion, which implies between two and eight per cent growth, if other factors such as currency remain constant. Analysts expect €25.5 billion. The 16% growth in net sales swelled the coffers to €7.45 billion, soaring above the cautious estimates of €7.11 billion.
The upbeat figures are a contrast to the more downbeat projections for its peer Ericsson, which this week warned that its network profit margins would continue to fall, which it attributed to “near-term macroeconomic headwinds”. There seem to be no such economic headwinds for Nokia which, surging demand from business aside, benefited from substantial contract awards from Indian telecom operators when 5G was launched in one of the world’s fastest growing economies. Even the constraints on chip supplies had eased, according to Lundmark. “We are taking market share now,” Lundmark told Reuters, adding the growth was broad-based and calling India “the highlight of this story”.
Lundmark said Nokia saw another year of growth ahead in 2023, but this came at the expense of its Swedish rival Ericsson, which has reported lower than expected fourth-quarter core earnings. Ericsson expects a fall in its margin in its networks business to persist through the first half of 2023, citing weak sales of 5G equipment in markets such as the United States. “I guess the reason [for Nokia’s comparative fortune] is that we have a more optimistic view on the size of the Indian market,” Lundmark said.
According to Lundmark, the growth has come from creating private networks. Nokia has successfully diversified its customer base from network service providers to industrial customers who set up their own private 5G networks at power plants, utilities and mines. Only a third of the world is digitised and the real growth potential lies in private networks for enterprise business, Lundmark said. It is in that rich seam that Nokia has opened up its lead.