Nokia joins rival Ericsson in exiting Russia

Finnish telecom equipment maker Nokia is exiting the Russian market permanently, becoming the latest western company to distance itself from the Kremlin and plan for a future in which sanctions persist.

“For us, it has been clear since the beginning of the invasion that it is not going to be possible to continue our presence in Russia,” said chief executive Pekka Lundmark. “Sanctions are getting tighter and tighter which would have made it harder and harder to operate.”

The group is the latest in a slew of companies that have made definitive moves to exit a country that is becoming increasingly toxic to associate with. However, telecoms companies are in a particularly difficult situation, given that their hasty withdrawal could deprive Russian civilians of the ability to communicate and receive information from the rest of the world.

“Western governments have highlighted concerns about three sectors: food, medicine and telecommunications,” Lundmark said. “If western companies withdraw overnight it would lead to undesired results.”

Nokia in early March suspended deliveries of networking equipment to Russia, stopped accepting any new business and moved its limited R&D activities out of the country. It will now begin removing its operations and services from Russia for good, a process that could take some time.

Nokia’s decision comes one day after Swedish rival Ericsson announced that it was “indefinitely suspending” all activities in Russia.

Both European companies account for about 20 to 30 per cent of the market for radio network equipment in Russia respectively, according to market research company Dell’Oro, with Chinese groups Huawei and ZTE making up the rest. These four companies dominate the international market for network equipment.

Unlike Ericsson, Nokia said it would be applying for the necessary licences to continue to maintain and repair network infrastructure in Russia while it undertakes its managed exit from the country. It said this was “for humanitarian reasons” and because of the “importance of ensuring the continued flow of information and access to the internet which provides outside perspectives to the Russian people”.

Nokia has 2,000 staff based in Russia. Those who have international roles will be offered the opportunity to relocate, Lundmark said, while many others will be kept on in paid positions to maintain the networks while Nokia conducts its managed exit.

Asked about whether Nokia would consider returning to Russia if the humanitarian crisis subsided and sanctions were ended, Lundmark said it was “impossible to speculate . . . A lot would need to change for us to return.”

The company said it did not believe that the decision to exit Russia would have any impact on its financial outlook for 2022, given that the country accounted for less than 2 per cent of Nokia’s sales in 2021 and demand in other regions has been strong so far this year.

Shares in Nokia were down 1.3 per cent to €4.87 in Tuesday trading.

Letter in response to this article:

Sanctions play to China’s advantage in telecoms / From Sir Anthony Brenton, Cambridge, UK