Nokia intends to cut up to 14 thousand jobs as demand shrinks in the United States and growth is uncertain

STOCKHOLM/HELSINKI (Reuters) – Nokia said on Thursday it would cut up to 14,000 jobs to cut costs, warning it did not expect the market to rebound soon after it reported a 20 percent drop in third-quarter sales due to weak demand for 5G equipment.

Shares of the Finnish company, which produces equipment for telecommunications networks, fell 2 percent by 0900 GMT.

The slowdown in the United States, home to Verizon (VZ.N) and AT&T (TN), and one of the most profitable markets for Nokia and Ericsson (ERICb.ST), has forced it to look for growth in other regions such as India. . But India is now expected to return to normal after a fantastic 2022.

“The market situation is really challenging and it shows by the fact that in our most important market, which is the North American market, our net sales were down 40% in the third quarter,” CEO Pekka Lundmark told Reuters in an interview.

Nokia aims to save between 800 million euros ($842 million) and 1.2 billion euros by 2026.

It expects to reduce its employee base to between 72,000 and 77,000 employees, from 86,000, or about 16% of job cuts in top companies.

Lundmark declined to provide further details, saying the company should first consult with employee representatives. However, he said he wanted to protect research and development.

Nokia expects to save at least 400 million euros in 2024, and another 300 million euros in 2025.

Ericsson, which has laid off thousands of employees this year, said on Tuesday that the uncertainty affecting its business will continue until 2024.

But Nokia, which echoed Ericsson’s comments on uncertainty, said there would be a more normal seasonal improvement in its networks business in the fourth quarter.

The company did not lower its expectations for the full year.

“We still believe in the market in the medium to long term, but we are not going to sit and wait and pray that the market recovers anytime soon,” Lundmark said. “We simply don’t know when he will recover.”

5G has been described as an industry that was supposed to usher in the era of automation and self-driving cars, but companies have been slow to embrace the new technology.

With slow growth, telecom operators were struggling with their investment budgets and began cutting their costs. Earlier this year, British BT Group announced plans to cut 55,000 jobs while Vodafone plans to cut 11,000 jobs.

“This should be a high-flying industry, supported by continued demand for its services… Instead, countless questions remain about the relevance of operators and their long-term future,” said Kester Mann, analyst at CCS Insight.

In order for the market to rebound, Lundmark said the industry needs to invest in faster mid-range equipment to help keep up with the growth in data traffic. “Only 25% of the world’s 5G base stations outside China currently have mid-band,” he said.

Mid-band equipment provides faster 5G speeds, but many telecom operators are starting to deploy 5G with low-band equipment that is cheaper but offers lower speeds.

“There are signs here and there that demand will start to rise again, but it is too early to call that a broad trend,” Lundmark said.

Comparable quarterly net sales fell to 4.98 billion euros from 6.24 billion euros last year, below estimates of 5.67 billion euros according to an LSEG survey.

($1 = 0.9493 euros)

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