Nokia, Ericsson Show Signs of Life as Chinese Rivals Hit Bumps
April 27 2018 - 7:37AM
Dow Jones News
By Stu Woo
The two struggling Nordic companies that once dominated the
telecommunications-equipment market are showing renewed signs of
optimism, just as their two largest competitors -- both from China
-- are hitting potentially serious hurdles.
Ericsson AB of Sweden and Finland's Nokia Corp. said in the past
week that U.S. wireless carriers were planning to upgrade their
networks sooner than expected, which would give a boost to both
companies' long-declining equipment sales.
"5G momentum is building fast," Nokia Chief Executive Rajeev
Suri said Thursday, referring to the next, superfast generation of
network technology.
Mr. Suri said U.S. wireless carriers should start significant
spending on 5G equipment in 2018's second half. Carriers originally
weren't expected to spend heavily on 5G until 2019 or later.
Meanwhile, China's booming telecommunications-equipment makers,
Huawei Technologies Co. and ZTE Corp., are facing growing pressure
in the U.S.
Last week, the Commerce Department all but banned ZTE from
buying components from U.S. suppliers, though much is still unclear
about how sweeping enforcement will be.
The sanctions stemmed from U.S. allegations that ZTE broke the
terms of a previous settlement, brokered after the company admitted
to shipping U.S. telecoms equipment to Iran and North Korea, in
breach of U.S. sanctions.
The Wall Street Journal reported on Wednesday that the Justice
Department is investigating whether Huawei also violated U.S.
sanctions related to Iran. After that report, the company scrapped
plans for a EUR500 million bond sale.
The actions come amid a broader Washington campaign to curb
Huawei and ZTE over national-security fears that their equipment
could be used to spy or disable communications. Both companies have
said they pose no threat.
Huawei in 2017 led the global telecom-equipment market with a
27% share, followed by Nokia's 17%, Ericsson's 13%, and ZTE's 10%,
according to Dell'Oro Group, a research firm.
Customers in the U.S. are generally demanding faster internet,
for streaming videos and other reasons, Nokia's Mr. Suri said
Thursday. Wireless carriers want to keep up with rivals who will be
advertising their 5G networks. Mr. Suri said manufacturers are also
investing in 5G connections for factories and other industrial
uses.
Partly because of the stepped-up pace, Nokia said Thursday it
now expects industrywide declines in equipment sales to carriers to
come in less than feared. Nokia said those sales should fall just
1% to 3% in 2018. In February, Nokia predicted a 2% to 4% drop.
Meanwhile, Ericsson shares have risen 20% since it reported last
week that its losses narrowed sharply. Investors see a turnaround
effort -- involving cutting jobs and divesting itself of businesses
that aren't related to selling telecom equipment -- taking hold.
Ericsson also sees 5G momentum rising in the U.S.
Chief Executive Borje Ekholm said carriers in North America are
"investing heavily...in order to be early on 5G."
There is still a long way before either company climbs out of
the deep holes that years of losses have left them in. They are
both still losing money, just not as much of it.
Ericsson said its first-quarter loss was 837 million Swedish
kronor ($98 million), compared with 10 billion kronor in the same
period a year earlier. Sales fell 9% to 43.4 billion kronor.
On Thursday, Nokia reported a first-quarter loss of EUR191
million ($232 million), compared with EUR450 million a year
earlier. Its first-quarter revenue was EUR4.9 billion, down 8%.
Huawei is the world's biggest telecoms-equipment maker and it is
the No. 3 smartphone manufacturer behind Apple Inc. and Samsung
Electronics Co. Last month, it said its net profit rose 28% to 47.5
billion yuan ($7.5 billion) for 2017 on the back of strong
smartphone sales.
Write to Stu Woo at Stu.Woo@wsj.com
(END) Dow Jones Newswires
April 27, 2018 07:22 ET (11:22 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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