Will Nokia Deliver This Time?

Last year, Nokia (NOK) acquired Alcatel-Lucent in a multi-billion dollar deal. However, it was in 2016 that the company finally started combining the operations. In January, Nokia enjoyed its first joint-workspace with Alcatel-Lucent.

On the other hand, Nokia also detailed that it has plans to carry on executing this complex merger and management anticipates it will result in an overall reduction of 14 percent in the company’s workforce, the abolition 10,000-14,000 jobs, before the end of 2106.

In the meantime, Nokia has also been busy manufacturing a new product for launching their consumer smartphone business once again.
Moreover, the company anticipates launching its first smartphone based on Android OS soon. While Nokia is trying to revive its smartphone business, the massive merger will certainly bring some erratic challenges.

Moving onward, Nokia recently signed a deal with China Telecom to prolong its 4G network across 19 Chinese provinces to fulfill the rising subscriber demand. The company also detailed that the deal will offer swift access to mobile Internet services and enhance coverage in urban as well as suburban areas.

The company’s revenue from China plunged 5 percent on a yearly basis previous quarter and accounted for just 13 percent of its revenue.
Will Nokia Deliver This Time?
Image by hawkHD / Pixabay
However, that drop was not as sharp as the 6 percent drop Nokia witnessed across the rest of Asia, and was also better than the double digit drops that Nokia witnessed across many other regions. Most significantly, Nokia outdid Huawei as the world’s second largest vendor of mobile equipment before this year after completely merging its operations with Alcatel-Lucent.

Despite the trivial size of China Telecom, it has been evolving swiftly. It had approximately 207 million mobile subscribers at the end of June. As a matter of fact, 90 million of those users were registered on 4G networks, a surge of 31 million during the first half of this year. This surging demand clearly suggests why China Telecom must buy more telecom equipment from companies such as Ericsson, Nokia, as well as Huawei.

Going forward, this trend should benefit Nokia greatly. While I am not so sure about the company’s plan to revive its smartphone business, I do think the company can benefit a lot if it manages to successfully integrate Alcatel-Lucent into its core business. Nokia is already expanding its 4G offering to 19 provinces in partnership with China Telecom. While the effect of the deal on Nokia’s bottom-line is yet to be seen, I am bullish on the stock going forward.
Published on Aug 26, 2016
By Prudent Investor

Copyrighted 2020. Content published with author's permission.

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