The Finland-based vendor signed the latest loan transaction with the Nordic Investment Bank and said the funds would primarily be used for the development of new 5G-related products and services for different business areas. Nokia added that the loan has an average maturity of about five years after disbursement.
Kristian Pullola, chief financial officer at Nokia, welcomed the financing commitment from the bank, declaring that “it bolsters the momentum we have already seen this year as the era of 5G begins.”
The new deal also comes hot on the heels of a $567 million loan from the European Investment Bank (EIB), backed by the European Fund for Strategic Investments (EFSI). The EFSI is one of three pillars of the Investment Plan for Europe, the so-called Juncker Plan.
A Nokia spokesperson confirmed that the “public figure” for 5G financing is $851 million so far but said the vendor has not provided a figure for planned R&D spending in the coming years. “For reference, we spent $4.9 billion on R&D in 2017, and in coming years the priority of spending is on 5G versus legacy technologies,” the spokesperson added.
In its earnings results presentation for the third quarter of 2018, Nokia said it expects to incur $113 million to $227 million in “temporary incremental expenses related to 5G customer trials” in 2018. It also noted that the order backlog in its networks business was strong at the end of Q3 2018 and said it continues to expect commercial 5G network deployments to begin near the end of 2018.
As previously reported, Nokia has scored a number of 5G deals in recent months, with a strong showing in North America. Those deals have typically been part of three-way contracts with carriers shared with rivals Ericsson and Samsung.
At the same time, the vendor has warned that despite these early wins, it will still need to significantly reduce its operating expenses. Nokia plans to do this by adding more automation to its systems, simplifying some of its processes, and significantly reducing its support functions. It also will prioritize its research and development so it stops investing in legacy products.
Furthermore, Nokia has undertaken some corporate restructuring measures in recent months to better position itself against rivals Ericsson, Huawei, Samsung, and ZTE in 5G contract bids. For example, it is merging its fixed and mobile network operations into a new Access Networks organization, and also plans to eliminate thousands of jobs as part of an effort to reduce costs by nearly $800 million by 2020.