By Supantha Mukherjee and Anne Kauranen
(Reuters) - Finnish telecom equipment maker Nokia (NYSE:NOK) is seeing a pick up in orders as its broadband clients race to upgrade networks to meet higher user demand during the COVID-19 pandemic, a company executive said.
Many customers had planned to grow their network by 30% to 40% over the next few years assuming a similar growth in traffic, but COVID-19 brought in that traffic growth overnight, Sandy Motley, Nokia's President of Fixed Networks, told Reuters.
"Customers will need to accelerate the growth that they had planned in the future, and we've seen customers already talking to us about that," she said, adding orders for fixed networks were up 22% in the first quarter.
Nokia boosted its fixed-line networks business with the 2016 purchase of Alcatel-Lucent (PA:ALUA) in a 15.6 billion-euro ($17 billion) deal. The unit's revenue fell 18% year-on-year in the first quarter and 5% between 2018 and 2019 but Motley said the decline was due to business cycles.
"We have seen some upgrades from our customers... but we think a lot of this drive will be more medium term and long term," Motley said.
The European Commission has proposed that by 2025 all European households, rural or urban, should have access to networks offering download speeds of at least 100 MBps.
It takes time to build a new fixed network as the installation of fiber cabling can't be done overnight, Stefaan Vanhastel, CTO of Nokia's fixed networks business, told Reuters.
"Certainly we see that operators are starting to consider accelerating fiber rollouts," he said.
Fixed broadband carries about 90% of all internet traffic in Europe, according to a report by research firm Analysys Mason.
In 2019, Nokia's Fixed Access business amounted to around 10% of the company's main networks business sales, with Mobile Access accounting for 64%.