Nokia – from global market leader to global market leader?

The Helsinki-based company currently has roughly 88,000 employees around the world and reported group revenues of over EUR 22 billion for the 2021 financial year.

Following its humble beginnings in the year 1865 as the only paper factory in Finland, Nokia has enjoyed success in a number of different industrial sectors over the years. The company has produced such varied products as paper, cables, tyres, televisions, the famous rubber boots, and, of course, mobile phones. Nokia’s transition to a telecommunications company began in the 1990s. The first phone call using the GSM standard was made with Nokia devices in 1991. Due to the tremendous success in the mobile phone sector, Nokia became the highest-selling mobile phone brand in the world in 1998. Nokia’s logo was also prominently placed on the first mobile phone with an integrated camera.

Due to several bad strategic decisions, the company lost ground to competitors such as Apple in subsequent years. A strategic partnership with Microsoft ended in 2014 with the complete sale of the mobile phone business to the American software company, and Nokia was once again forced to fully reorient itself.

The founding of Nokia Networks following the acquisition of the shares of the joint venture partner, Siemens, in 2013 laid the foundation for Nokia’s transformation to primarily a network hardware and software provider. In 2015, the French-American telecommunications equipment supplier Alcatel-Lucent was acquired. With the expanded customer base, the resulting revenues, and several more small acquisitions, Nokia established itself as one of the leading companies in the telecommunication network and 5G segments.

Thanks to a licensing agreement with HMD Global, Finnish mobile phones have also been available under the Nokia brand again since 2016, but it has not been possible to match the past successes and sales figures.

Nokia and the climate

The sectors of manufacturing, energy and utilities, transport, and buildings account for 80% of the total global carbon emissions. The transition to renewable energy will not be enough for these industries to reach net zero by 2050. More ambitious, far-reaching measures are necessary. And Nokia is one of the companies that could play a role here. GSMA Intelligence and Nokia jointly published a study entitled Industry pathways to net zero, which shows how mobile and digital technologies will make it possible for companies to achieve their decarbonisation goals faster. In the manufacturing industry, for example, this study shows that the construction of intelligent factories, the automation of labour-intensive tasks, and the use of conventional network technology can lead to an annual increase in productivity and energy savings of 10 to 20% until 2030.

In an increasingly networked and digitised world, energy consumption is also rising significantly. Nokia is working on this problem very intently and aims to counteract it with a wide range of measures. There are clearly communicated goals for the reduction of greenhouse gases at every plant and business location, and Nokia also plans to thoroughly examine its supply chain in this regard in the near future.

Overall, the company strives to reduce greenhouse gas emissions by 50% by 2030, with the generally recognised Science Based Targets serving as the foundation. This target pertains to the entire value chain (i.e. scope 1, 2, and 3). The emissions from 2019 were used as the basis. This target is in line with the Paris climate targets and is aimed at achieving full climate neutrality by 2050. We feel that this is a very ambitious plan for a company that is inherently very energy-intensive.

Nokia and society

Nokia firmly believes that the positive effects of the technologies developed by the company and the associated networking and digitalisation of society far outweigh the potential negative factors. Digital networking makes it possible for people to interact, communicate, share, learn, and work. It provides access to services, work, health care, education, and opportunities. It makes life and work easier, more productive, and thus more sustainable. Nokia aims for its products to contribute towards solving many of the social and economic challenges facing the world today by providing more integrative access to basic social services and human rights.

According to Nokia, its business is based on trust. The company-wide code of conduct explicitly references this trust, which has to be earned in all business activities and in every country in which Nokia operates. This strategy is also viewed in the same way by external experts. In March 2022, the company was named to the “World’s Most Ethical Companies” list by the research firm Ethisphere for the fifth time in a row and was the only Finnish company to make the cut.

Nokia and cybersecurity

Particularly the telecommunications sector with the relatively new technology of 5G can offer many targets for potential cyberrisks. Nokia attempts to counteract these risks with comprehensive protection that differentiates the company from the competition. In this context, Nokia cites the triangle of trust, a combination of detection, scalability, and adaptability. Nokia provides a broad portfolio of security products, ranging from general security risk assessment and consulting services to corresponding software and hardware. As such, Nokia is also the leader in this rapidly growing segment.

Marking another chapter in the company’s eventful history, these efforts have forged a path in recent years that has once again put the company in a promising position in a segment with above-average growth prospects.

Herbert Perus
Fondsmanagement/Corporate Responsibility, Raiffeisen Kapitalanlage GmbH