Nokia April-June sales drop after record 2023, pins hope on Vi deal

Global networks vendor Nokia’s sales in India continued to plunge in the second quarter of calendar 2024, in line with rival Ericsson reporting a similar fall a few days back, with their big telco clients, Reliance Jio and Bharti Airtel cutting down on network capex spends having concluded their pan-India 5G rollouts.

Industry executives and analysts say Finland’s Nokia and Sweden’s Ericsson will now have to rely on fresh 4G and 5G gear supply deals from Vodafone Idea (Vi) to revive their plunging sales in India, and support global growth.

Nokia Thursday posted a steep 68% on-year fall in India net sales to 329 million euros (Rs 3007.3 crore) in Q2, 2024, while Sweden’s Ericsson reported a 44% on-year slide in sales in its Southeast Asia, Oceania and India market to SEK 7.7 billion (Rs 6,093 crore approx) in Q2 2024. Ericsson does not reveal India-specific sales numbers.

In a statement, Nokia CEO Pekka Lundmark said India accounted for three quarters of the Finnish gear maker’s 18% on-year overall sales decline (in constant currency) in Q2, 2024. “The most significant impact was the challenging year-ago comparison period, which saw the peak of India's rapid 5G deployment with India (now) accounting for three quarters of the decline.”

Nokia’s mobile networks business net sales also fell 24% on a constant currency basis, primarily due to the decrease in India reflecting the fact that Q2 2023 had represented the peak of the India 5G deployments.

Ericsson CEO Borje Ekholm also expects market conditions to remain challenging this year, as the pace of India investments slow. “The decline in (Ericsson’s) sales was primarily a result of materially lower sales in market area South East Asia, Oceania and India, as investment levels in India have normalised after a record year in 2023.”

As per company data, India remains the second-biggest market — after the US — for Ericsson on the net sales contribution metric. But India accounted for only 6% of the Swedish gear maker’s global net sales in Q2, 2024, versus 14% in Q2, 2023, amid lower operator capex investments in the country. Likewise, India’s contribution to Nokia’s overall net sales shrunk to a modest 7.4% in Q2, 2024, from almost 19.2% in Q2, 2023.

Ericsson executives, though, are unfazed amid the India business challenges.

“After a record rollout during 2023, the Indian market has normalised. We continue to stay really close to all our customers and continue to support them with our leading technology solutions,” an Ericsson India spokesperson said over email in response to ET’s queries.

Queries to Nokia went unanswered.

Previously, both Nokia and Ericsson had seen a sharp surge in India sales numbers from the fourth quarter of 2022 and first quarter of 2023 respectively, shortly after Airtel and Jio had started rolling out 5G networks nationally from October 2022. But India’s top two telcos are now focusing on boosting revenue via recent headline tariff hikes and driving monetisation of their 5G businesses, having invested billions of dollars in buying spectrum and rolling out networks but not generating meaningful returns. In fact, they are likely to keep the next round of capex plans on hold till they adequately monetise their 5G operations.

As a result, equipment supply deals from Vodafone Idea (Vi) have now critical for both the European network vendors, say analysts.

The telecom joint venture between UK’s Vodafone and India’s Aditya Birla Group recently raised around Rs 23,000 crore via the equity and is targeting another Rs 23,000-25,000 crore via long term loans from an SBI-led banking consortium.

“Under the current circumstances, both Nokia and Ericsson will look to leverage Vi’s plans to spend around Rs 55,000 crore in network capex towards expanding its 4G operations and rolling out 5G in priority markets,” a senior industry executive told ET.

Vi has recently said it’s in discussions with Ericsson and other vendors for buying 5G gear.

In June, Vi had approved a preferential allotment of equity shares to Ericsson and Nokia to clear a portion of its pending dues to these European networks vendors. As per both vendors’ Q2 earnings reports, the impact of the transaction is expected to be recognised in their Q3 results.

The shares will be subject to a six-month lock-up period. Before the share issue, Vi was estimated to owe around Rs 1,200 crore and Rs 3,000 crore to Ericsson and Nokia respectively.