Nokia secures Deutsche Telekom and acquires a new company amid business plan adjustments
The loss of AT&T took its toll, and Nokia has announced what was expected. The Finns provided an update on the group’s strategy, adjusting the 2026 comparable operating margin target and sharing preliminary assumptions for the business year 2024. To enhance responsiveness to the fast-changing market, Nokia’s business groups will have increased autonomy to pursue growth strategies, portfolio management, investments, and strategic partnerships.
In addition to this, Nokia plans to increase reporting transparency, providing business group level cash flow reporting and regional sales starting with 2024. Despite the AT&T deal forcing Nokia to revise the comparable operating margin target from 14% to at least 13% by 2026, the company is confident that future opportunities will arise to increase margins beyond 2026. While this may not be favorable news for investors, Nokia remains optimistic.
The initial planning assumptions by business groups for 2024 are also provided, along with further details on the strategy for Mobile Networks to unlock long-term value. The company aims to transform its mobile networks business, reducing its cost base to attain a double-digit operating margin on sales amounting to €10.78 billion by 2026. Achieving this target will necessitate sales of close to €11.5 billion.
However, not all is bleak. Network Infrastructure has extended its technology leadership position and is growing faster than the market. Mobile Networks has substantially improved the competitiveness of its products, securing a leadership position in 5G and gaining significant market share. Cloud and Network Services have grown faster than the market in their five growth segments, including Enterprise private wireless, while rebalancing their portfolio.
Nokia Technologies has expanded into areas such as automotive, multimedia, and consumer electronics, signing new, long-term patent license agreements with Apple and Samsung. Additionally, Nokia Technologies remains focused on resolving outstanding litigation/renewal discussions with smartphone customers. If these discussions are resolved by the end of 2023, Nokia assumes Nokia Technologies’ operating profit will exceed EUR 1.0 billion in 2024. We shouldn’t forget Bell labs to which Nokia will continue to be committed and push the long-term research that brings new technologies.
Furthermore, Nokia and Deutsche Telekom announced a deal on Tuesday to use ORAN in Germany, marking the Finnish company’s return to DT’s commercial networks. Additionally, Nokia will be acquiring the North American Fenix Group, allowing Nokia to offer a more comprehensive suite of solutions to its defense customers. The Fenix Group is a privately held company specializing in tactical 3rd Generation Partnership Project (3GPP) communications solutions for defense communities. Their Banshee product family is designed to provide high-speed, low-latency data connections to many devices and users simultaneously, making them ideal for supporting a wide range of military applications.
