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5G-focused Nokia boosts profits

Analysts are speculating as to whether security concerns swirling around Chinese network rival Huawei will benefit Nokia.

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Nokia predicts a bumpy start to 2019, but a strong second half. Image: Jussi Nukari / Lehtikuva

Finnish tech giant Nokia's profits perked up in the final quarter of 2018. In the October-to-December period, the company's results grew to 1.12 billion euros, up from about one billion a year earlier. Turnover grew by three percent to about 6.9 billion euros.

Nokia, one of the world's three biggest network equipment manufacturers, said that "strong competitiveness across [its] portfolio" and a second consecutive quarter of sales growth in all business groups showed that its strategy is on track.

"The execution of our strategy also proceeded well, with the work we have put into building a solid foundation for Nokia Software showing clear results and our enterprise business rapidly becoming a pillar of growth, Nokia CEO Rajeev Suri said in a statement on Thursday.

"Overall it was a quite good Q4 as expected," said analyst Mikael Rautanen of research firm Inderes told Reuters. "There was a bit more uncertainty in the outlook than I was expecting but the big picture is still the same. The market is recovering well with 5G and they're heading toward their 2020 targets."

Banking on 5G

Nokia is banking heavily on the adoption of super-fast 5G networks, saying that it sees "strong customer engagement related to 5G" across most of its portfolio. The 5G rollout has naturally incurred costs related to customer trials and other pre-sales expenses, but Suri is confident that the investments will pay off.

"Our view of a fast and meaningful shift to 5G remains unchanged. 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," Suri said.

He said Nokia expects operators around the world to briskly updating their existing networks and technology this year. Nokia has been testing 5G networks in Finland since at least 2017, and last summer Elisa set up the country's first local 5G network in Tampere - although devices that can use it are not yet available on the mass market.

Speculation around Huawei

A day earlier, Nokia chair Risto Siilasmaa said that the company is keeping a close eye on the security scandal surrounding Chinese rival Huawei, the world's largest telecom equipment supplier.

"We are following very closely what is happening, but it's not our thing to talk about it," Siilasmaa told students at Aalto University on Wednesday as analysts speculated on whether the concerns around Huawei will benefit Nokia.

Also on Wednesday, senior officials said the European Union is considering proposals that would amount to a de-facto ban on Huawei equipment for next-generation mobile networks, following similar moves in the United States and Australia.

The Canadian government is also reportedly mulling a ban on using Huawei over security concerns. According to the Financial Post, Nokia and Swedish rival Ericsson - which along with Huawei are the world's top three vendors of network radio gear - "appear to be seeking opportunities in Canada."

More jobs cuts in Finland

Nokia says it has managed to achieve annual cost savings of 1.2 billion euros over the past two years. Last year the firm announced yet another cost-cutting programme aimed at trimming expenditures by a further 700 million euros annually.

As part of that scheme, in early January it announced a new round of redundancy talks with employees in Finland, expecting to pink-slip some 350 people here this year. The downsizing affects all Nokia locations in Finland besides its Oulu plant.

Nokia now has some 6,000 employees in Finland, down from a peak of nearly 25,000 around the turn of the millennium.

The 154-year-old Nokia, once the world's largest smartphone maker, has focused on network operations since selling its handset business to Microsoft in 2013 -- though it has gradually re-entered the phone market through a brand licensing arrangement with HMD Global.

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