Nokia CEO: 5G accelerating earlier than expected, creating ‘some near-term risk’

Nokia’s top executive said that industry momentum around 5G is accelerating earlier than the company had initially expected, such that he now expects to see notable trials in 2018 and “meaningful deployments” by 2019 in the United States, China and elsewhere. However, Nokia’s Rajeev Suri warned that “this situation does create some near-term risk as it makes the timing of certain project completions and acceptances more uncertain than is typical for us.”

Suri made his comments during Nokia’s recent quarterly conference call with analysts, held in conjunction with the release of Nokia’s second quarter financial results. Overall the company reported largely flat sales amid concerns that its core networks business would continue to weaken.

Nonetheless, Nokia’s Suri explained that industry momentum around 5G network technology is exceeding the company’s expectations; he said previously the company expected 5G to take off in the 2020 and 2021 timeframe. “That is now changing, as we see some lead customers in both the United States and China preparing to move earlier, and that should drive others to respond,” Suri said.

“We also believe that 5G is likely to last longer and be deeper than we first thought. This is not just a small cell game; 5G will go big into the macro world; it will cover low, mid, and high bands to address both capacity and coverage, and drive changes and investment requirements in other parts of the network as well, but that is generally good news for Nokia,” Suri added, according to a Seeking Alpha transcript of Nokia’s call with analysts. “What is less good is that, it puts increased pressure on us to accelerate our 5G roadmaps, expanding the workload on our R&D team and Mobile Networks that is already extremely focused on product integration, and new feature requests.”

Continued Suri: “I want to be transparent that this situation does create some near-term risk as it makes the timing of certain project completions and acceptances more uncertain than is typical for us. But we have successfully worked through such issues before, and I'm confident that we will do so again. We have strong customer relationships, deep R&D capacity, and thanks to our robust balance sheet, the ability to further invest as needed.”

Suri also noted that Nokia doesn’t expect to back off from its efforts in the 5G space. “We believe, we are gaining share from a competitor that is struggling, and we are focused on working hard and fast to meet the needs of our customers,” he said, in comments likely directed toward struggling Ericsson.

Partly in reaction to Suri’s comments, the analysts at investment banking firm Wells Fargo noted that 2017 stands as a bit of a “transition year” for Nokia. The firm said that it believes “the outlook for 2018 could improve with new ION product scaling, opportunities with new customers in its fixed networks business, possibility for further IP license deals, potential for early 5G trials, as well as other strategic adjacency opportunities.”

To be clear though, Nokia executives aren’t the only ones pointing to 5G accelerations. “We have started to increase investments in R&D in radio and here it is again to prepare ourselves both for stronger product offering in LTE as well as getting ready for the 5G launch, which will happen in the next few years. We need to be leaders in 5G and we are committed to being up. So the investments again here in R&D in networks aims to improve the gross margin,” Ericsson’s chief executive Börje Ekholm said earlier this month during his own company’s recent quarterly conference call, according to a Seeking Alpha transcript of that event.