In Short:
Finnish company Nokia reported a 68% drop in net sales in India in Q2 2024 compared to last year, with a significant impact from reduced 5G investments by top mobile operators like Reliance Jio and Bharti Airtel. CEO Pekka Lundmark acknowledged market weakness and delayed sales recovery, but remains optimistic about the industry stabilizing. Nokia expects improved net sales growth in the second half of 2024.
Nokia Reports Decline in Net Sales in India in Q2 2024
Finnish telecom gear maker Nokia posted net sales of 329 million euros in India in Q2 2024, down by 68% year-on-year (or -69% in constant currency), compared to 1,043 million euros in the same period last year as the country’s top mobile operators Reliance Jio and Bharti Airtel moderated their 5G investments.
Nokia President and chief executive officer (CEO) Pekka Lundmark, in the earnings report, said the company’s financial performance in the second quarter continued to be impacted by the ongoing market weakness with net sales falling 18% year-on-year in constant currency. Its net sales fell 18% on a reported basis as well.
“The most significant impact was the challenging year-ago comparison period which saw the peak of India’s rapid 5G deployment with India accounting for three quarters of the decline,” Lundmark said.
Impact on Mobile Networks Business
Nokia’s net sales In the Mobile Networks business segment declined 25% on a reported basis and 24% on a constant currency basis, primarily attributed to a decrease in India reflecting the fact that Q2 2023 represented the peak of the India 5G deployments.
Jio and Airtel’s accelerated investments in 5G network deployments financially benefitted both Nokia and its Swedish rival Ericsson last year, propelling India ahead of their top market North America briefly. However, a slowdown in 5G investments in India is now weighing heavily on the European kit vendors.
Outstanding Dues Settlement
In the second quarter, Nokia India and Ericsson India entered into separate agreements with Vodafone Idea to settle outstanding dues and convert them to an equity stake in India’s third-largest telco. Both vendors expect to recognize the impact of the transaction in their Q3 results, and the equity stake is subject to a six-month lock-up period.
Before the share issue, Vodafone Idea was estimated to owe over Rs 1,200 crore to Ericsson.
Future Outlook
An optimistic Lundmark said the industry is stabilizing, and taking into account the order intake in recent quarters, Nokia expects a significant acceleration in net sales growth in the second half. He, however, cautioned that the net sales recovery is “happening somewhat later than we previously expected, impacting our business group net sales assumptions for 2024”.
“We remain solidly on track to achieve our full-year outlook supported by our quick action on cost. We are currently tracking towards the mid-point or slightly below the mid-point of our comparable operating profit guidance of EUR 2.3 to 2.9 billion and towards the higher-end of our free cash flow conversion guidance of 30% to 60,” the Nokia chief executive said.
