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Nokia
Nokia creates technology that helps the world act together. As a trusted partner for critical networks, it is committed to innovation and technology leadership across mobile, fixed and cloud networks. The company creates value with intellectual property and long-term research, led by the award-winning Nokia Bell Labs.

Nokia Solutions and Networks India Private Limited
Net sales for Nokia India was ₹11771.15 crore in 2020-21, in comparison to ₹12140.34 crore in 2019-20. However, net profit after tax declined to ₹549.8 crore in FY21, from ₹663.24 in FY20.

Net sales was ₹7530.45 crore in Q1-Q3 2021 (January-September 2021) from ₹6382.66 crore in Q1-Q3 2020, a 20 percent YoY increase, and a 26 percent YoY increase in constant currency. India’s contribution increased from 4.3 percent in 9M 2020 to 5 percent in 9M 2021.

2020 had been a good year for Nokia India. Having closed 108 deals in the year, the largest perhaps was the multi-year contract the gear maker signed with Bharti Airtel at a value of almost USD 1 billion at the beginning of the fiscal. Nokia is deploying SRAN solution across nine circles, helping Airtel to enhance the network capacity of its networks, in particular 4G, and improve customer experience.

The rollout, which will also lay the foundation for providing 5G connectivity in the future, will see approximately 300,000 radio units deployed across several spectrum bands, including 900 MHz, 1800 MHz, 2100 MHz, and 2300 MHz, and is expected to be completed by 2022. The deal will also include Nokia’s RAN equipment, including its AirScale Radio Access, AirScale BaseBand, and NetAct OSS solution, which will help Airtel to monitor and manage its network effectively. Nokia Global Services will also play a crucial role in the installation, planning, and deployment of the project, which will be executed via the cloud-based Nokia Delivery Platform.

Nokia had won under 100 deals in 2019 and 75 in 2018.

“The deal momentum has been quite good for all of our businesses – be it radio, core business, application business, fixed network or GPON. Indian telcos have been preparing for 5G, which has driven the deal momentum,” said Sanjay Malik, Senior Vice President and Head of India Market. “We are managing 5G deployment in the US from India through our GNOC and helping devise strategy. Our engineers are ready for deployment in India from a backend perspective readiness. The government and private entities have also ramped up their network spends, helping Nokia win new business. A 15–20 percent increase in traffic is now forcing Indian telcos to expand network, both in terms of coverage and capacity. And once the spectrum auction happens, then naturally either through the hardware expansions or software expansions or refarming of the spectrum, this is going to grow exponentially,” he added.

Nokia Corporation
In the first nine months of 2021, reported net sales increased 3 percent, primarily driven by Network Infrastructure and Nokia Technologies, partially offset by Mobile Networks and Cloud and Network Services, which were negatively impacted primarily by foreign exchange rate fluctuations. On a constant currency basis, Nokia net sales increased 6 percent in the first nine months of 2021.

Nokia Solutions and Networks India Private Limited

Financial highlights

Year ended March 31

Revenue 2021 2020
Revenue from operations 11771.15 12140.34
Other income 107.65 320.11
Total income 11878.80 12460.45
Total expenses 11125.89 11369.63
Profit before tax 752.91 1090.82
Net profit after tax 549.80 663.24
Total comprehensive  income 505.94 635.33
EBITDA 1156.13

Balance sheet

Year ended March 31

Assets 2021 2020
Total non-current assets 4423.82 3765.51
Total current assets 6220.70 6592.70
Total assets 10644.52 10358.21
Equity and liabilities
Total equity 4932.80 4426.86
Total liabilities 5711.72 5931.35
Total equity and liabilities 10644.52 10358.21

Nokia Corporation

Financial results

January-September 2021

EUR million Q1-Q3’21 Q1-Q3’20 YoY
change
Constant currency YoY change
Net sales 15,788 15,299 3% 6%
Gross margin % 39.9% 36.9% 300bps
R&D expenses (3,096) (2,942) 5%
Selling, general and
administrative expenses
(2,034) (2,121) (4%)
Operating profit 1,418 444 219%
Operating margin % 9.0% 2.9% 610bps
Profit for the period 965 180 436%
EPS, diluted (EUR) 0.17 0.03 467%
Net cash and current
financial investments
4,300  1,869 130%

Third-quarter profitability is up thanks to a mixture of cost-cutting and investment in research and development – the basis of the turnaround strategy Pekka Lundmark, CEO, Nokia announced when he replaced Rajeev Suri last year. His main worry is the shortage of components Nokia needs for its products.

Nokia Corporation

Outlook – (October 2021)

Full year 2021 Full year 2023
Net sales EUR 21.7-22.7 billion Grow faster than mkt.
Comparable operating margin 10 to 12% 10 to 13%
Free cash flow Clearly positive Clearly positive
Comparable ROIC 17 to 21% 15 to 20%
Outlook assumptions – (October 2021)
Nokia’s outlook assumptions for the comparable operating margin of each business group in 2021 and 2023:
Full year 2021 Full year 2023
Mobile Networks 4 to 7% 5 to 8%
Network Infrastructure 8 to 11% 9 to 12%
Cloud and Network Services 3 to 6% 8 to 11%
Nokia Technologies >75% >75%

By business group

January-September 2021

in EUR million YoY
change
Constant currency YoY change
Q1-Q3’ 21 Q1-Q3’ 20
Net sales 15,788 15,299 3% 6%
Mobile Networks 6,957 7,217 (4%) 0%
Network Infrastructure 5,420 4,756 14% 17%
Cloud and Network Services 2,125 2,125 0% 3%
Nokia Technologies 1,133 1,020 11% 12%
Group Common and Other 183 210 (13%) (9%)
Items affecting comparability (2)
Eliminations (30) (29) 3%
Comparable Operating profit 1,867 1,025 82%
Mobile Networks 495 403 23%
Network Infrastructure 536 247 117%
Cloud and Network Services 20 (164)
Nokia Technologies 903 816 11%
Group Common and Other (87) (277)
Profit for the period 4,300 1,869 130%

By region

January-September 2021

in EUR million Q1-Q3’21 Q1-Q3’20 YoY
change
Constant currency  YoY change
Asia Pacific 1,851 1,936 (4%) (1%)
Europe 4,695 4,638 1% 2%
Greater China 1,139 1,051 8% 8%
India 789 659 20% 26%
Latin America 876 740 18% 23%
Middle East & Africa 1,305 1,410 (7%) (4%)
North America 5,133 4,864 6% 11%
Total 15,788 15,299 3% 6%

Sales growth of 2 percent year-on-year to nearly €5.4 billion (USD 6.3 billion), was apparently constrained by the supply-chain problems that have hit the entire industry. Improvements across numerous divisions followed a renewed commitment to R&D. Overall investments in that area rose 12 percent for the quarter, to about €1.04 billion (USD 1.21 billion). With a more competitive line-up of products, the company’s gross margin rose 3.6 percentage points, to 40.7 percent.

To fund R&D expenses, Nokia aims to slash other operating costs by around €600 million ($696 million) annually before the end of 2023. That will entail cutting between 5,000 and 10,000 jobs, leaving Nokia with between 80,000 and 85,000 employees in total. It has already cut about 13,000 since 2018.

The CEO is guiding for a full-year net sales of €21.7bn – 22.7bn and comparable operating margin of 10–12 percent He even expects to be closer to the upper end of this range after Nokia’s strong performance so far this year. The vendor continues to manage supply chain constraints but challenges are increasing into 4Q.

It expects to maintain its expectation for Nokia Technologies to deliver a slight improvement in comparable operating profit in full year 2021, relative to full year 2020, and stable performance over the longer-term. Group Common and Other primarily consists of support function costs. The net negative impact of Group Common and Other is expected to be between €150 and 200 million in 2021 and approximately EUR 200 million over the longer-term. The update to its 2021 expectation largely reflects the year-to-date impact from Nokia’s venture fund investments.

Turnaround efforts have largely focused on a mobile networks business that accounts for about 43 percent of sales. The vendor had to seek an alternative source, after Intel, its only supplier for a certain class of 5G chip ran into production problems. Nokia fell back on alternatives supplied by Xilinx but subsequently found these programmable chips to be of higher costs that chewed into profitability. Using chip suppliers including Broadcom, Intel and Marvell, Nokia has been phasing out Xilinx chips, a process it expects to complete by the end of next year. It recently unveiled a more competitive set of 5G products.

However, sales dropped 5 percent, to around €2.3 billion ($2.7 billion), and by the same percentage on a constant-currency basis. It may be attributed to the earlier loss of a major 5G contract with Verizon to South Korea’s Samsung and continued declines in legacy radio access products, as well as services.

There are currently two engines of growth. The first is Nokia’s new-look cloud and network services business, which combines software with other activities. Revenues here grew 13 percent, to €748 million ($867 million), thanks largely to a surge of interest in the 5G core, the control center of the network. This division also swung to an operating profit of €23 million ($27 million), from a loss of €148 million ($172 million) a year earlier.

The other is fixed access. Previous underinvestment in fiber, a backlash against Chinese vendors and pandemic-fueled demand for broadband services have provided a perfect combination for Nokia, which reported a 29 percent increase in fixed network sales, to €588 million ($682 million).

January-December 2020. 2020 was a year of unprecedented change, and brought to the fore the true value of technology and the need to find smart solutions to global problems, from climate change to stalling productivity. Fixed and mobile networks kept the global economy and critical infrastructure running even as the COVID-19 pandemic led to nationwide shutdowns across the world.

Overall in 2020, Nokia saw improvement both in gross margin and operating margin performance up by 2.1 percentage points and 1.9 percentage points year-on-year respectively. This development was supported by a regional mix shift towards the higher-margin North America region, ongoing R&D efforts to enhance product quality and cost competitiveness, and improvements in the Networks business.

From the financial point of view, Nokia reported 21.852 billion euro in revenue with an operating profit of 885 million euro. The revenue is 6 percent lower than in 2019, while the operating profit increased 82 percent. Nokia’s reported net loss for 2020 of 2.513 billion euro.

Reason for such a reported loss is an increase in sales tax related to derecognition of Finnish deferred tax assets worth 2.9 billion euro. Nokia explained it this way: “The derecognition was required due to a regular assessment of our ability to utilize the tax assets in Finland in the foreseeable future that is done primarily based on our historical performance. These tax assets are not lost, and the derecognition can be reversed.”

The company delivered a strong cash performance for the year and ended 2020 with net cash and current financial investments at approximately EUR 2.5 billion, up approximately EUR 0.8 billion from 2019. Net sales decreased by 6 percent year-on-year primarily due to network deployment and planning services within Mobile Access. Nokia Enterprise continued to make great progress in 2020 and delivered double digit year-on-year growth in net sales.

Mobile Access displayed a clear financial improvement. 2020 saw growth in radio access products and the 5G gross margin increase due to product cost reduction, partly helped by higher ReefShark shipment volumes.

Nokia invested 4.1 billion euro in Research and Development in 2020, resulting in 1500 new patent fillings, with 4000 patent families now declared as essential to 5G. The company owns 20,000 patent families, wherein each family comprises multiple individual patents.

Nokia has some big names as customers of the OZO Audio technology including ASUS, Axon, HMD Global, OPPO, OnePlus, and Panasonic, while the company also has program to license Nokia’s patents in industries like connected cars, smart meters, payment terminals, asset tracking and other IoT device.

2020 ended with 188 commercial 5G agreements and 44 live 5G networks.

October 2020 saw an announcement that the company would move to a new operating model from the beginning of 2021. The new structure comprised four new business groups, each with a clear mission and empowered with the resources and accountability to achieve their goals:

Nokia Corporation

By customer type

January-September 2021

in EUR million Q1-Q3’21 Q1-Q3’20 YoY
change
Constant currency  YoY change
Communication service providers 12,739 12,561 1% 5%
Enterprise 1,079 1,070 1% 3%
Licensees 1,133 1,020 11% 12%
Other 836 648 29% 30%
Total 15,788 15,299 3% 6%
Financial performance – 2020
Continuing operations 2020 EUR m
Net Sales 21,852
Gross profit 8,193
Gross margin 37.5%
Operating profit 885
Operating margin 4.0%
(Loss)/profit for the year (2,513)
EPS diluted (EUR) (0.45)

Nokia closed 2020 with a Board satisfied with its operational performance and strengthened cash position. And entered 2021, expecting a year of transition, with meaningful headwinds due to market share loss and price erosion in North America. Nokia would go on to make further investments 5G R&D, sacrificing some short-term margin to ensure technology leadership in 5G and sustainable long-term financial performance. Nokia’s top priorities for 2021 included completing the turnaround in Mobile Networks and implementation of the new operating model while strengthening accountability and inspiring corporate culture.

Pekka Lundmark
President & CEO,
Nokia Corporation

“Overall, I am pleased with our strong financial performance in 2021 so far. We continue to expect seasonality to be less pronounced this year than previously, and are reiterating our full-year 2021 outlook. Considering our continued strength, we now expect to be toward the upper-end of our comparable operating-margin range. As we look ahead, we believe we are well positioned to capitalize on strong demand in our end-markets through strengthened technology leadership and improved cost competitiveness. However, the uncertainty around the global semiconductor market limits our visibility into 4Q and 2022. We are working closely not only with our suppliers to ensure component availability but also with our customers to ensure we can meet their needs and mitigate the unprecedented component-cost inflation our industry faces. Coupled with the one-offs we’ve benefited from this year, this may limit our margin expansion potential in 2022.”

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