Nokia to Slash 14,000 Jobs Amid 20% Sales Dip, Cites Stagnant 5G Market

Nokia announced its plans to cut up to 14,000 jobs as part of a cost reduction strategy. The company, which reported a 20% drop in third-quarter sales due to weaker demand for 5G equipment, anticipates a slow market recovery in the near future.

Challenging Market Conditions Lead to Workforce Reduction

The Finnish company's decision to downsize is a response to the slowdown in the United States, a lucrative market for Nokia and its competitor, Ericsson. With Verizon and AT&T experiencing a decline in demand, Nokia and Ericsson sought growth opportunities in other regions, such as India. However, even the Indian market is expected to stabilize after an exceptional 2022.

Nokia aims to achieve savings between 800 million euros ($842 million) and 1.2 billion euros by 2026. As part of the cost-cutting measures, the company plans to reduce its workforce from 86,000 to 72,000 and 77,000 employees, representing a potential 16% job cut.

"The market situation is really challenging and it is witnessed by the fact that in our most important market, which is the North American market, our net sales are down 40% in Q3," Pekka Lundmark, Nokia's CEO, told Reuters.

"There are signs here and there that demand would start to pick up again but it's too early to call it a broad-based trend," Lundmark said.

Ericsson, also undergoing employee layoffs, anticipates persistent uncertainty affecting its business until 2024. Nokia shares similar concerns regarding market volatility. Nokia foresees a normal seasonal improvement in its network businesses for the fourth quarter.

Long-Term Market Confidence, But No Waiting Game

Nokia maintains confidence in the mid-to-long-term market outlook. However, according to Yahoo, CEO Lundmark, who emphasized the company's commitment to safeguarding research and development efforts, said that the company is not passively waiting for a market recovery. Lundmark stated, "We simply don't know when it will recover." Businesses' slow adoption of 5G technology has contributed to the industry's challenges.

The telecommunications industry, expected to spearhead the age of automation and driverless cars with 5G, has encountered slow growth in adopting this technology. Constrained by limited investment budgets, Telecom operators have embarked on their own cost-cutting measures. BT Group announced plans to cut 55,000 jobs, while Vodafone aims to reduce 11,000 positions.

Investing in Mid-Band Equipment for Recovery

Lundmark stated that the industry needs to invest in faster mid-band equipment, which currently represents only 25% of 5G base stations worldwide, excluding those in China. Mid-band technology offers higher 5G speeds and would help telecom operators cope with the growing data traffic.

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