- Wednesday, October 16, 2024
Finnish telecommunications equipment maker Nokia has decided to revise its long-term operating margin guidance due to the impact of AT&T's recent decision to choose Ericsson over Nokia for a $14 billion contract. Nokia has lowered its 2026 operating margin guidance from 14% to 13%, stating that it is being cautious in light of the market conditions faced by its mobile networks business. The company anticipates challenges in 2024 and 2025 before experiencing faster growth in 2026.
AT&T's move to award the contract to Ericsson forms part of its plans to develop a commercial-scale open radio access network in the United States starting next year. As a result, Nokia has adjusted its timeline for achieving double-digit operating margin in its mobile networks by extending it by two years. The company foresees a decline in mobile networks sales in 2024, with AT&T's snub being one of the primary factors. Other reasons highlighted by Nokia include the challenging spending environment and a normalization phase in India following the rapid deployment of 5G technology.
Despite these challenges, Nokia remains positive about its long-term prospects and believes that it can still achieve a comparable operating margin of at least 14% beyond 2026. However, considering the current market conditions in the mobile networks sector, the company views the adjustment to its margin guidance as a prudent move.
In more positive news, Nokia announced that it has started rolling out its commercial open RAN network in partnership with Deutsche Telekom in Germany. This development has had a positive impact on Nokia's shares, which saw a 2.2% increase in premarket trading. However, the shares have still experienced a decline of 33% over the course of 2023.
Despite recent setbacks, investors can find some relief in the fact that Nokia's long-term guidance was not worse than expected. As the company continues to navigate the competitive telecommunications landscape, it remains committed to achieving its operational goals and delivering value to its stakeholders.
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