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Nokia suspends dividend payouts to boost 5G development

The network company also said it aims to increase its cash reserves and to boost its enterprise and software divisions.

Nokian toimitusjohtaja Rajeev Suri.
Nokia CEO Rajeev Suri. Image: Martti Kainulainen / Lehtikuva

Finnish mobile networking firm Nokia is temporarily suspending dividend payouts to investors for the third and fourth quarters of 2018, the company announced on Thursday.

The firm said Nokia's board decided not to pay dividends in order to boost investments in its next-generation 5G cellular networks, to continue investment in its enterprise and software divisions and to boost its cash position.

Nokia began distributing dividends on a quarterly basis in 2018.

The firm made the announcement in its third quarter report, which lowered its financial outlooks for this and next year. However, Nokia CEO Rajeev Suri, said the company had a "solid third quarter," citing strong performance in its enterprise, software and IP divisions, adding that the firm had also made "good progress" in meeting its cost reduction goals this year.

The company announced that its available cash had decreased by about 150 million euros during the third quarter (July-September), and said it expected to see an 8.5 percent decrease in net sales this year, a downgrade from previous estimates.

5G networks begin to emerge

Suri said Nokia had launched 15 5G live networks with various mobile operators around the world, including in the US, Italy, Saudi Arabia and South Korea.

"Many of our businesses are performing well and we expect Q4 to be strong, with a robust operating margin and an increase in net cash of approximately 1.2 billion euros. At the same time, some of the risks that we flagged previously related to the initial phase of 5G are now materializing," Suri said in a statement issued Thursday.

The CEO said the firm's third quarter had been hit by high costs of rolling out the first generation of 5G products, "profitability challenges in China," uncertainty surrounding operator mergers in North American markets and "pricing pressure in early 5G deals."

"We expect that we will be able to progressively mitigate these issues over the course of next year. To do so, we will increase investment in 5G in order to accelerate product roadmaps and product cost reductions, and in the digitalization of internal processes to improve overall productivity," Suri said.

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