Nokia off to a slow start in 2019 due to delay in 5G rollouts

Nokia sign at MWC18
Nokia expects a slow start to 2019 due to slower deployments of 5G. (Monica Alleven/FierceWireless)

Nokia cautioned that it would be slow out of the starting block in the first half of this year due to the staggered timing of 5G rollouts.

Nokia CEO Rajeev Suri issued the caution during the company's fourth-quarter earnings announcement Thursday, but also said he expects Nokia's fortunes to bounce back in the second half of this year as 5G deployments start to ramp up.

"Looking forward, I expect Nokia's performance to strengthen for the full year 2019 versus 2018 and our view of a fast and meaningful shift to 5G remains unchanged," Suri said in a prepared statement. "Given that 5G rollouts will be staggered over the course of the year, we expect 2019 to have a soft first half followed by a much more robust second half."

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The lowered expectations for 5G growth caused Nokia's shares to drop by as much as 7.3% in early morning trading after it released its earnings report.

The sluggish start for 5G this year overshadowed Finland-based Nokia's fourth-quarter results. Nokia's net profit for the quarter was €741 million ($852 million) against €716 million a year earlier. Sales were up 3% at €6.9 billion ($7.9 billion) for the quarter.

Nokia's networks business' net sales increased 6.7% year over year to €6,215 million ($7,091.2 million) while net sales in ultra-broadband networks increased 7%, primarily due the growth in radio networks and small cells.

Net sales in IP networks and applications improved 5% due to growth in both the software and IP/optical network segments. Sales in Nokia's global services increased 7%, driven by network implementation, systems integration and managed services.

"Over the longer-term, we expect a virtuous cycle of investment, where operators update their networks across multiple domains—from optical to macro radio, fixed wireless access to cloud core, small cells to IP routing, network agnostic software and more," Suri said. "Following this, we expect a second wave where industrial customers will invest in private wireless technology including LTE and 5G-ready networks. With our end-to-end portfolio, Nokia is well-positioned to tap this extended cycle."

After previously providing guidance for growth this year, Nokia lowered its outlook for its main addressable market in 2019.  According to Bloomberg, Nokia’s forecast for full-year earnings per share of €0.25 ($0.49) to €0.29 ($0.33) was below the average estimate of €0.32 ($0.37).

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Nokia has been successful selling its 5G gear in North America, including a $3.5 billion deal in July with T-Mobile, but the pace of 5G rollouts is slower in Europe, partially due to a delay in finalizing 5G standards by the 3GPP.

Last week, Ericsson was able to beat fourth-quarter profit margin and sales forecasts due to cost cuts and the demand from U.S. mobile operators for its 5G gear.

Nokia's main rivals are Ericsson and Huawei, but Suri declined to speculate on whether his company would benefit from Huawei's ongoing troubles in countries such as the U.S. over espionage concerns, according to Reuters.