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Nokia warns of declining investment in 5G networks

27. 04. 2023 Thursday / By: Robert Denes / Business / Exact time: BST / Print this page

In the face of an uncertain economic environment and a declining investment trend, the world's two leading network operators, Nokia and Ericsson, have assured that they will reduce their investments in the infrastructure of the new 5G mobile phone network. This announcement was made during the presentation of its first quarter report, which shows that telecom operators are indeed facing a complex situation.

If investment in telecommunications networks slows, global demand for connectivity and communications services slows. The economic downturn, strict legal requirements, and changes in government regulations and policies are forcing companies to make this complex decision.

Relatedly, Nokia posted lower-than-expected economic profits, mainly due to a slowdown in demand for 5G equipment in some of the world's leading markets. Its adjusted profit was 479 million euros, 17% less than in the first quarter of 2022.

This decline is due to a decline in investment in new telecommunications network infrastructure, an initiative that some operators are pursuing and which has an impact on their network division. Its subsidiary, Nokia Technologies, contributed less to growth, which was particularly noticeable in North America. However, the group has seen significant growth in India, thanks to the country's operators investing in 5G networks.

Nokia maintains its forecast that it will close the year with an operating profit margin of between 11.5% and 14%, which is higher than the 12.5% registered last year. They are aware of the... difficult situation as the average cost to customers has slowed down, and their stock is down more than 8% after the accounts are presented. In the past two years, the titles have traded at their lowest prices.

Reduced investment by operators in new telecommunications networks will delay or limit the development of applications and services such as 5G, IoT and AI. And that thanks to 5G technology, innovation could be promoted in these areas as well. All of this would have a negative impact on the economy and the competitiveness of countries.

Added to this is the difficult bureaucratic situation faced by telecommunications providers. And there are many restrictive policies and measures around 5G and network security. In fact, many countries have restricted the participation of some operators in building out their 5G networks.

Global smartphone sales fell 12% in the first quarter, marking five consecutive quarters of decline in the market. According to the data of the consulting firm Canalys, consumer demand is stagnant despite price reductions and large trade promotions. Thus, the market share of companies like Samsung fell from 24% to 22%, and Xiaomi fell from 13% to 11%. On the other side of the coin are Apple and Oppo, which increased from 18% to 21% and from 9% to 10% respectively.

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