Shubham Sawarkar
Nokia, the renowned telecoms equipment manufacturer, has announced (via Reuters) its decision to halt operations in Russia. The company’s CEO, Pekka Lundmark, made the announcement, stating that Nokia sees no viable options to continue its business in the country under the current circumstances. This decision sets Nokia apart from its rival, Ericsson, who has chosen to continue operating in Russia despite the ongoing tensions.
The deteriorating geopolitical situation in the region, sparked by Russia’s invasion of Ukraine and subsequent Western sanctions imposed on Moscow, has led to the suspension of relationships between hundreds of global corporations and Russia. While certain sectors, such as telecommunications, have been granted exemptions from some bans due to humanitarian concerns, Nokia has deemed the situation untenable and opted to withdraw completely.
Lundmark emphasized that Nokia remains committed to serving its customers during the exit process, although the timeline for completion remains uncertain at this stage. The company has also expressed its intention to apply for the necessary licenses to assist customers in complying with the current sanctions. Notably, both Nokia and Ericsson have only held a minimal market share in Russia, with Chinese companies Huawei and ZTE dominating the industry.
Nokia’s decision to exit the Russian market is not expected to impact its 2022 forecast, but it will incur a provision of approximately 100 million euros ($109 million) in the first quarter. This provision reflects the costs associated with winding down operations and addressing the consequences of the withdrawal.
The strained relationship between Russia and Finland and Sweden, the home countries of Nokia and Ericsson respectively, adds another layer of complexity to the situation. These Nordic nations have expressed interest in joining the NATO military alliance, which has further escalated tensions with Russia. In an attempt to influence Nokia and Ericsson, Russia had urged them to establish manufacturing plants within the country, aiming to promote the use of Russian-made equipment in telecom networks. However, Nokia’s decision to exit Russia effectively puts an end to its proposed joint venture with Russian company YADRO for manufacturing 4G and 5G telecom base stations.
Approximately 2,000 Nokia employees will be affected by the company’s departure from Russia. Lundmark has stated that some employees may be offered alternative positions within the company. However, considering the magnitude of the decision and the uncertain future of business relations between the two parties, the CEO believes that significant changes would need to occur before Nokia could reconsider reentering the Russian market.
As Nokia bids farewell to Russia, the move underscores the gravity of the geopolitical situation and the challenges faced by multinational corporations navigating complex international dynamics. With both political and economic factors at play, companies like Nokia must carefully evaluate the risks and implications of continuing operations in countries embroiled in conflicts or subject to sanctions.
