Nokia wants to topple Huawei, plans expansion in US and China markets

It is trying to expand in the US and China, while steering a path through a global technology showdown

The US and China are waging a war for technological supremacy. Nokia Corp, the onetime cellphone pioneer, is looking to play both sides. The Finnish company, which had nearly disappeared, has transformed itself into a global manufacturer of telecommunications equipment — such gear as cellular antennas, phone switches, internet routers and new components for next-generation 5G wireless systems — and is now the world’s No 2 player behind China’s Huawei Technologies Co.

In the US, the government has all but barred Huawei sales over fears its equipment could be commandeered by Chinese authorities to disrupt or spy on communications. The Trump administration is pushing such allies as Britain, Germany and Japan to do the same.

That’s a part of Nokia’s sales pitch as the world prepares to upgrade wireless systems to 5G, the superfast technology that could enable driverless cars and internet-controlled factories. Its sales staff has cold-called wireless carriers in countries where the US has stepped up its anti-China rhetoric, pushing its gear as an alternative.

Without secure 5G systems, “essential trade secrets will fall with those networks: Airplane innovations, pharmaceutical formulas, electric-car schematics,” Nokia Chief Executive Rajeev Suri said in a February speech.

At the same time, while helping the US wage its campaign against Huawei, Nokia is seeking to build its presence in China. Largely through a joint venture with a state-owned Chinese enterprise, Nokia employs roughly 17,000 in its Greater China region, which includes Hong Kong and Taiwan. That is about triple the number of its employees in Finland. Together, the company runs a factory and six research facilities in the region.

“We want to be a friend of China,” Suri said in an interview at Nokia headquarters in Espoo, a forested city across the bay from Helsinki. He serves on the Chinese premier’s overseas CEO council, which advises the government on business.

Suri has said his goal is to be China’s top foreign supplier. Last year, Nokia’s business in its China region accounted for roughly 10 per cent of its sales, euro 2.1 billion ($2.4 billion).

Nokia Chairman Risto Siilasmaa is the co-head of a bilateral business consortium that China President Xi Jinping and Finland President Sauli Niinisto established. During a June 2017 trip to China, Siilasmaa announced creation of a Nokia unit dedicated to helping Chinese internet companies expand overseas.

To play both sides of the US-China divide, Nokia is following a strategy used by Finland during the Cold War. The nation allied with European countries while mollifying its eastern neighbour, the Soviet Union.

The playbook seems to be working. In July, Nokia signed a deal worth as much as $1.1 billion to provide equipment and services to China Mobile Ltd. , the world’s biggest mobile carrier by subscribers. Three weeks later, it landed a $3.5 billion deal to sell 5G equipment and services to T-Mobile US.

Nokia has a long way to catch up with Huawei, which began to expand beyond China two decades ago. Huawei found a global toehold by first winning over carriers in developing countries with cheap and reliable gear. Huawei has since gained customers across the West. Carriers say the company routinely offers hardware innovations months before Nokia does and is competitive on pricing. 

Last summer, a Finnish wireless carrier set up a 5G network to test a wireless system from Huawei to deliver high-speed Wi-Fi directly to homes. If successful, it could eliminate visits from a cable guy to hook up the home internet.

Nokia didn’t introduce a comparable product until February.

“You can nitpick us on one or two products,” said Suri, Nokia’s chief executive, “but on the whole, we’re competitive.”

Nokia sold its phone business in 2013 to Microsoft Corp. for $7 billion. By then, its market share was around 14 per cent. The company was left with its telecom-equipment enterprise, which it expanded with the purchase of French rival Alcatel-Lucent for $17 billion in 2015.

The acquisition turned Nokia into a major seller of routers and other infrastructure to cable and internet providers, propelling the company past Swedish rival Ericsson AB to become the industry’s No 2 player. Only Huawei was bigger.

Nokia hasn’t had a profitable year since 2015. The company has since gone through layoffs and executive turnover. Last year, Nokia reported revenue of  euro 22.6 billion ($25.5 billion) and a loss of  euro 335 million. In January, it announced more layoffs, including 280 in Finland and 408 in France.

Company executives saw a potentially lucrative edge in the American market: Congress had effectively barred Huawei on national-security grounds in 2012, just as the Chinese company had started to make inroads in the US Nokia’s acquisition of former American giants Motorola and Lucent helped it earn Washington’s seal of approval. The Committee on Foreign Investment in the U.S., a national-security panel, reviewed the purchase of Alcatel-Lucent in 2015 because the deal included Bell Labs, the famed New Jersey research center with a long history of sensitive government work. The panel gave its approval.

Nokia has gotten help at home and abroad. Finland’s export credit agency, Finnvera, reached a novel deal in 2017 with its counterpart in Canada for both organizations to guarantee Verizon Communications Inc.’s purchase of Nokia equipment and services, worth at least $1.5 billion.

Despite the US-led campaign against Huawei, the Chinese company expanded its lead in the global telecom-equipment market in 2018 with a 28.6 per cent share of revenue, compared with Nokia at 17 per cent and Ericsson at 13.4 per cent, according to research firm Dell’Oro Group.

Suri, Nokia’s chief executive, has been cautious in public statements about Huawei, rarely naming Huawei or China as he addresses security risks raised by Washington and its allies.

Source: The Wall Street Journal