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Picture: REUTERS/BAZ RATNER
Picture: REUTERS/BAZ RATNER

Finnish telecom group Nokia will cut as many as 14,000 jobs to reduce costs, it said on Thursday, after weaker demand for 5G equipment lowered third-quarter sales by a fifth.

The company added it didn’t expect a market recovery soon, sending its shares down 5% in early trade.

As demand has slowed in countries such as the US, Nokia and rival Ericsson have tried to offset some of the weakness with higher sales to India, a low-margin market.

“The market situation is really challenging and it is witnessed by our most important market, which is the North American market, where our net sales are down 40% in the third quarter,” CEO Pekka Lundmark said in an interview.

Nokia is targeting savings of between €800m and €1.2bn (R16.1bn-R24.2bn) by 2026, its deadline to deliver a long-term comparable operating margin plan of at least 14%.

The company expects to reduce its employee base to between 72,000 and 77,000 employees, from 86,000.

Lundmark declined to give more details saying the company must consult with employee representatives first. However, he said he wanted to protect research & development.

Nokia expects at least €400m of savings in 2024, and a further €300m in 2025.

Ericsson, which has also laid off thousands of employees this year, said on Tuesday the uncertainty affecting its business would persist into 2024.

But Nokia, which echoed Ericsson’s comments on uncertainty, said there will be a more normal seasonal improvement in its network businesses in the fourth quarter.

The company maintained its full-year outlook. “We continue to believe in the mid- to long-term market, but we are not going to sit and wait and pray that the market will recover any time soon,” Lundmark said. “We simply don’t know when it will recover.”

Lundmark said the industry needs to invest in faster mid-band equipment to help cope with the growth in data traffic. “Only 25% of 5G base stations in the world outside China currently has mid-band,” he said.

Mid-band equipment offers higher 5G speeds but many telecom operators started their 5G deployment with low-band gear that is cheaper but offers lower speeds.

Quarterly comparable net sales fell to €4.98bn from €6.24bn last year, missing an estimate of €5.67bn according to an LSEG poll.

Nokia will move to a leaner corporate centre to boost strategic focus while protecting spending on research & development, and giving more operational autonomy to business units, it said.

“There are signs here and there that demand would start to pick up again but it’s too early to call it a broad-based trend,” Lundmark said.

Reuters

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