HELSINKI (Reuters) - Finnish telecom gear maker Nokia warned that demand for new mobile networks would slow this year in China and said it would not give a financial outlook until April following its acquisition of Alcatel-Lucent.
The 15.6 billion euro deal helps Nokia to compete with Sweden’s Ericsson and China’s Huawei previously the world’s top two suppliers of network gear, in a market where limited growth and tough competition are pressuring prices.
Nokia CEO Rajeev Suri said the company expected market growth this year in North America, India, the Middle East and Africa, while fast growing China will cool down.
“We do expect some market headwinds in 2016 as 4G/LTE rollouts in China and some other markets start to slow,” Suri said.
“The first quarter, in particular, looks quite challenging as customers assess their CAPEX (spending) plans in light of increasing macroeconomic uncertainty.”
Nokia shares were down 3.5 percent by 0920 GMT and have fallen about 30 percent since the announcement of Alcatel deal last April.
“They didn’t give any financial guidance for this year, and all they said about the outlook was that the (networks) market demand looks rather weak. This is a bit like walking in fog,” said Mikael Rautanen, analyst at Inderes Equity Research, who recommends investors reduce their holdings in the stock.
Nokia and Alcatel’s combined sales for 2015 year give the merged company a claim to be the world’s biggest mobile network supplier, but cost-cutting and eliminating overlap will likely relegate it to second place behind Ericsson.
Nokia’s fourth-quarter group sales fell 3 percent in constant currency terms to 3.61 billion euros ($4.08 billion), below analysts’ average expectation of 3.72 billion euros.
But operating profit margin in the networks unit came in at 14.6 percent, up from 14.0 percent a year earlier and 13.8 percent in the poll.
Separately, Alcatel-Lucent reported fourth-quarter sales growth of 13 percent to 4.16 billion euros, with business performing particularly well in Asia and North America.
Some analysts noted that Nokia was on track to deliver the proposed 900 million euro cost synergies by end-2018, and that it pushed forward its 200 million euro financial synergy target to 2016 from previous 2017.
“We remain confident in management delivering on synergies and see potential upside to these figures over the course of the next years,” Bernstein analysts, with an ‘outperform’ rating on Nokia, said in a note to investors.
Nokia proposed an annual dividend of 0.16 euros per share and a special dividend of 0.10 euros per share, compared with analysts’ average expectation of 0.19 euros.
Additional reporting by Mathieu Rosemain in Paris; Editing by Keith Weir