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Nokia lowers 2026 profit margin target, wins Deutsche Telekom contract

Published 12/12/2023, 01:30 AM
Updated 12/12/2023, 02:55 AM
© Reuters. A view shows Nokia headquarters in Espoo, Finland, October 19, 2023. JUSSI NUKARI/Lehtikuva/via REUTERS/file photo
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By Supantha Mukherjee

STOCKHOLM (Reuters) -Finnish telecom equipment maker Nokia (HE:NOKIA) said on Tuesday it had revised down its comparable operating margin target to at least 13% by 2026 from at least 14% previously, after losing a deal with a U.S. telecom carrier.

Nokia said it still sees a path to achieving the previous target, but considering current market conditions in its mobile networks business, it deemed the revision prudent.

The company took a hit after AT&T (NYSE:T) chose Ericsson (BS:ERICAs) to build a telecom network using a new cost-cutting technology called open radio access network (ORAN) that will cover 70% of its wireless traffic in the United States by late 2026.

"AT&T is bad news, we are of course admitting it," Nokia chief executive Pekka Lundmark said in an interview, adding that it was a customer-specific situation, fairly financially driven and not technology or performance driven.

"We are not seeing this spreading to other customers," he said.

Separately, Nokia and Deutsche Telekom (OTC:DTEGY) (DT) announced a deal on Tuesday to use ORAN in Germany, marking a return of the Finnish company into DT's commercial networks.

"We have been out of that network since 2017 and now we are making a comeback there through ORAN technology, so that is a significant win for us," Lundmark said.

The project is already under way and will be extended from the first quarter of next year.

Nokia also plans to revamp its mobile networks business by lowering its cost base to achieve a double-digit operating margin on sales of 10 billion euros ($10.78 billion) by 2026. It would need about 11.5 billion euros of sales to reach that level.

© Reuters. A view shows Nokia headquarters in Espoo, Finland, October 19, 2023. JUSSI NUKARI/Lehtikuva/via REUTERS/file photo

Nokia in October said it would cut up to 14,000 jobs to reduce costs, warning it did not expect any immediate market recovery after posting a 20% drop in third-quarter sales on weaker demand for 5G equipment.

($1 = 0.9281 euros)

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