Ultra Broadband Boosts Nokia's Bottom Line

Nokia reaped overall gains in sales and profitability for fiscal 2017, despite currency fluctuations and increased competition, but saw a slight downshift in ultra-broadband revenue, partly attributable to heavy expenditures on research and development expected to pay off this year.

The Finnish vendor's reported revenue dropped 1% to €6.67 billion ($8.26 billion) because of foreign-exchange rate impacts, but saw small improvements across many lines of business (LoBs), as well as major gains at Nokia Technologies after inking a deal with Huawei, wrote Iain Morris in Light Reading. (See Nokia Outperforms Ericsson in Mobile But Sees Margin Pressure.)

Nokia's Ultra Broadband Networks group, part of its Networks business unit, was also hit by unfavorable currency rates. Operating profit for the most recent quarter dropped 20% compared with the same period 12 months prior, according to the financial information released by Nokia Corp. (NYSE: NOK) The overall Networks line-of-business saw its operating profit decrease 25% year-over-year in the fourth-quarter 2017. The company credited Ultra Broadband for helping generate its positive results.

"[Nokia's] 2% net sales growth at constant currency in Q4 2017 was driven by IP Networks and Applications and by Ultra Broadband Networks," the report said.

At €2.5 billion, Ultra Broadband sales dropped 4% in the fourth quarter compared with Q4 2016, but were up 21% versus the third quarter of 2017. For the full year, sales of €20.52 billion marked a 6% drop from 2016 sales of €21.83 billion.

Nokia invested in ultra broadband opportunities such as cable and smart home, areas it expects to pay off in 2018.

"The increase in Fixed Networks R&D expenses was primarily due to investments to drive growth and higher returns in our current addressable market, as well as to expand into adjacent markets, both of which are priorities for Fixed Networks," Nokia said in statement. "Related to our current addressable market, Fixed Networks has increased its investments to enhance its portfolio of offerings towards the digital home and software-defined access markets. Related to adjacent markets, Fixed Networks has increased its investments towards the cable access market, and is now offering a disruptive cable solution which gives operators the flexibility to choose from a full range of options across both fiber and cable to meet their unique network needs."

The vendor saw early success in both established and new fixed access technologies. They included:

• Nokia and WOW! announced the deployment of a virtualized distributed access architecture (DAA)

• Australia's nbn selected Nokia to deploy Gfast this year

• United Arab Emirates' du successfully trialed Nokia's software-defined access network technology on a next-generation PON network

• Nokia and Zain Saudi Arabia deployed Fastmile to enhance customer experience

• Japan's Enecom agreed to deploy Nokia's Gfast solutions with the country's VDSL after the Gfast technology successfully passed interoperability tests.

Demand for 5G will drive further need for fixed access technologies, said Rajeev Suri, president and CEO, in the release. Margins will be squeezed, he said, but the vendor's expansion into new verticals and 5G's need for a holistic approach benefit Nokia.

"Looking forward on the Networks side, we expect our market to decline again in 2018, although at a slightly lower rate than our previous forecast, given early signs of improved conditions in North America," wrote Suri. "For 2019 and 2020, we expect market conditions to improve markedly, driven by full-scale rollouts of 5G networks."

Related posts:

• Nokia’s Guillén: 'SPs, Take a Holistic View'
• Why the Time Is Right for Fixed Wireless Access
• BBWF: G.fast, Video, NG-PON2 & a New Way of Thinking

— Alison Diana, Editor, UBB2020. Follow us on Twitter @UBB2020 or @alisoncdiana.