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Nokia issues disappointing Q2 result, banking on 5G roll-out in second half

Nokia's figures for the second quarter reveal a profit loss of 42 percent, but the company expects the launch of the 5G network in the US to help sales in the second half of the year.

Verkkoyhtiö Nokian pääkonttori Espoossa.
Image: Aku Häyrynen / Lehtikuva

Network services giant Nokia saw its operating profit fall to 334 million euros in April through June of this year, down 42 percent from 574 million euros in the same period one year ago.

The news agency Reuters says the disappointing result did not meet the analyst mean forecast of 373 million euros.

During the second quarter, Nokia's turnover fell six percent to 5.32 billion euros.

Despite this bad news, the company is sticking to its outlook for 2018. Active cost-saving plans are on schedule and close to meeting their targets, and the transition to the next generation 5G network – promising between 15 to 50 percent faster service – is expected to pick things up when deployment in the US starts at the end of the year.

The fourth quarter has typically been Nokia’s strongest period.

"Nokia’s Q2 2018 results were consistent with our view that the first half of the year would be weak, followed by an increasingly robust second half," CEO Rajeev Suri wrote in a Nokia press release.

Holding out for the coming 5G transition

Nokia says that it is still well-positioned for the transition to 5G, due to the strength of its end-to-end portfolio. Nokia is one of three network services companies that is providing the infrastructure and equipment for the 5G roll-out in the US, where 40 percent of the deals are end-to-end, meaning that Nokia in effect manages the service from start to finish.

Reuters reports that North America contributed 31 percent of Nokia’s sales in the second quarter, and is responsible for most of its growth relative to other regions.

"Our deal win rate is very good, with significant recent successes in the key early 5G markets of the United States and China," says Suri.

The 5G transition timeline has moved up in the US, and operators are now dropping hints that the first systems might be operational as early as late 2018.

Suri said in February that Europe "lacks the catalysts for rapid, large-scale 5G rollouts", so it will likely be launched there one year later, in 2019.

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