Nokia plans to report its second quarter earnings on July 20. But today, the Finnish telecom vendor lowered its full-year 2023 net sales outlook from a growth of 2% to 8% to a revised outlook of sales growth of -4% to 2%.
The company now expects full year sales in the range from €23.2 billion - €24.6 billion ($26.07 billion - $27.65 billion), dropping from the previous guidance of €24.6 billion - €26.2 billion ($27.65 billion - $29.44 billion). And it also narrowed is comparable operating margin range from 11.5%-14% to 11.5%-13%.
The company said the lowered guidance is related to its Network Infrastructure and Mobile Networks business groups.
“The weaker demand outlook in the second half is due to both the macro-economic environment and customers’ inventory digestion,” said Nokia in its statement today. “Customer spending plans are increasingly impacted by high inflation and rising interest rates along with some projects now slipping to 2024 – notably in North America. There is also inventory normalization happening at customers after the supply chain challenges of the past two years.”
The company had already hinted about a slowdown in North American spending in its Q1 earnings.
Nokia didn’t specify which of the North American operators were letting some projects slip to 2024. But one could speculate that it’s at least partially referring to T-Mobile and also to Dish Wireless.
In its Q1 earnings Nokia CEO Pekka Lundmark said that Nokia’s relationship with T-Mobile was strong. “We are a key supplier and have a long-term agreement with them,” he said.
However, T-Mobile has run into a snag with deploying the 2.5 GHz spectrum that it purchased in last summer’s FCC auction.
Congress has allowed the FCC’s auction authority to lapse. And FCC Chairwoman Jessica Rosenworcel says she does not have the legal authority at this time to issue T-Mobile the 2.5 GHz licenses it won at auction. So, T-Mobile is stymied in its 5G deployments.
In regard to Dish, Nokia provides Dish with its 5G SA core software, which runs on AWS. While Dish recently met its June 2023 mandate to serve 70% of the U.S. population with its wireless service, it has been struggling this year with higher interest rates, turnover in top personnel and a hack of its backend office systems. Dish Chairman Charlie Ergen said in May that after the company met its 70% population-coverage goal it would take “a little bit of a pause” on its 5G capex spends until the late 2024 or early 2025 timeframe.
Of course, Nokia also works with other North American operators such as AT&T and Verizon. And while these companies have announced their rollouts of 5G SA cores, it appears these rollouts are happening slower than first realized.
Piling on further, Dell’Oro this week said that after five years of experiencing 40% to 50% growth in RAN revenues, the global RAN market is expected to decline at a compound annual growth rate (CAGR) of 1% over the next five years.
In addition to lowering its sales and margin guidance, Nokia also today reported preliminary Q2 financial results of approximately €5.7 billion, flat year-on-year on a constant currency basis with a comparable operating margin of approximately 11%.