Nokia, the Finnish telecommunications equipment manufacturer, has announced plans to cut up to 14,000 jobs as it seeks to reduce costs amidst weak demand for 5G equipment. The company reported a 20% drop in third-quarter sales, with the North American market being particularly challenging, experiencing a 40% decline in net sales. Nokia’s CEO, Pekka Lundmark, stated that the market situation is “really challenging” and that they “simply don’t know when it [the market] will recover.”
As a result of the cost-cutting measures, Nokia aims to achieve savings of between 800 million euros and 1.2 billion euros by 2026. This will involve reducing its employee base from the current 86,000 to between 72,000 and 77,000, representing around 16% job cuts at the high end. The company hopes to protect research and development while making these cuts.
Nokia’s struggles are reflective of the wider challenges faced by the industry. The anticipated growth of the 5G industry, expected to drive automation and advancements like driverless cars, has not materialized as quickly as anticipated. Slow growth, coupled with telecom operators’ constrained investment budgets, has led to cost-cutting measures across the sector. British telecommunications giant BT Group and Vodafone have recently announced plans to cut 55,000 and 11,000 jobs respectively.
Nokia’s CEO also emphasized the need for investment in faster mid-band equipment to deal with the increasing data traffic. Currently, only 25% of 5G base stations worldwide, excluding China, have mid-band equipment. Mid-band equipment offers higher speeds compared to low-band gear, which was initially deployed by many operators due to its lower cost.
There are signs of demand starting to recover, but it is still too early to call it a broad-based trend. Overall, the industry is facing uncertainty, and the timeline for market recovery remains uncertain. Ericsson, Nokia’s competitor, has also expressed similar concerns and made significant job cuts this year.
Nokia’s quarterly net sales fell to 4.98 billion euros from 6.24 billion euros last year, missing analysts’ estimates of 5.67 billion euros. The company, however, did not change its full-year outlook.
The challenges faced by Nokia and the wider telecom industry highlight the need for adaptation and innovation. Companies must navigate the changing market dynamics and invest in new technologies to stay relevant. While the road to recovery may be uncertain, the industry’s long-term potential remains promising if it can overcome current obstacles and adapt to evolving customer demands.