As expected, Nokia has published a set of financials that highlight the extent to which operators have reined in their capex.

Nick Wood

July 20, 2023

3 Min Read
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As expected, Nokia has published a set of financials that highlight the extent to which operators have reined in their capex.

Sales in the second quarter reached €5.7 billion, flat compared to last year on a constant currency basis. Gross margin narrowed to 38.2% from 40.2%, and operating margin shrank to 8.3% from 9.6%. Operating profit fell 16% to €474 million.

While Nokia’s Mobile Networks unit reported modest sales growth of 5%, this was cancelled out by a 6% decline at the Network Infrastructure division (see below), which encompasses Nokia’s activities in optical, IP, fixed-line and submarine networking.


A quick glance at the regional revenue split tells the story.

North America sales fell 42% year-on-year as operators wind down their 5G capex (see chart below). The opposite is happening in India, where telcos are pushing on with their aggressive 5G deployments; however it is not enough to offset the steep decline in the US and elsewhere. It is a continuation of the story Nokia presented with its Q1 results.


As mentioned above, these figures are hardly surprising.

Nokia last week lowered its sales forecast for the remainder of 2023, citing lower demand due to inflation, and higher inventory levels among customers. The doom and gloom cast a long shadow over Ericsson, which on the same day reported a 9% year-on-year decline in Q2 revenue.

“Earlier in the year I highlighted that we were starting to see signs of macroeconomic challenges along with inventory digestion impacting customer spending and this has intensified through the second quarter. In the second half we expect these trends to continue to impact our business, meaning we now see second half net sales broadly similar to the first half in both Network Infrastructure and Mobile Networks with some sequential improvement visible into Q4,” said Nokia CEO Pekka Lundmark, in a statement on Thursday.

Also last week, analyst firm Dell’Oro said it expects the global RAN market to shrink by 1% over the next five years, as continued growth in 5G spending fails to offset steep declines in LTE investments. Similarly to Nokia, Dell’Oro pointed to operators being careful with their capital in the face of economic uncertainty. It doesn’t expect a significant new capex cycle to begin until 6G arrives, which will be a while since it hasn’t even been standardised yet.

Dell’Oro also lowered its five-year growth forecast for the mobile core networking market to 1% from 2%, attributing it to a slowdown in subscriber growth. It also trimmed its outlook for the multi-access edge computing (MEC) market, which it said is taking longer to get going due to a lack of commercially-viable enterprise applications.

Lundmark said on Thursday that Nokia’s strong balance sheet, which includes a €3.7 billion net cash position, gives it a “firm foundation from which to navigate this period of uncertainty.”

Indeed, with Ericsson and Nokia’s numbers pretty much confirming Dell’Oro’s bearish outlook, vendors would do well to brace themselves for a bumpy few years.


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About the Author(s)

Nick Wood

Nick is a freelancer who has covered the global telecoms industry for more than 15 years. Areas of expertise include operator strategies; M&As; and emerging technologies, among others. As a freelancer, Nick has contributed news and features for many well-known industry publications. Before that, he wrote daily news and regular features as deputy editor of Total Telecom. He has a first-class honours degree in journalism from the University of Westminster.

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