NSN India sales at EUR 150 mn, down 23.5 percent

NSN (Nokia Solutions and Networks) India Q2 net sales reached EUR 150 million, down 23.5 percent with the corresponding quarter in 2012 due to slow 3G uptake.

NSN second quarter 2013 net sales was EUR 2.8 billion declined 14.7 percent year-on-year, but increased 1.5 percent sequentially. If one excludes businesses divested and exiting of certain customer contracts and countries, net sales were down approximately 11 percent year-on-year on a constant currency basis, but were up approximately 4 percent sequentially on a constant currency basis.

The year-on-year decrease in mobile broadband was primarily due to lower GSM and Voice and IP transformation net sales partially offset by higher LTE net sales. The year-on-year decrease in global services was primarily due to a reduction in network implementation activity, as some major network deployment projects near completion.

On a regional basis, we had lower cyclical sales in Japan following high levels of spending a year ago, and lower year-on-year sales in Europe related to network modernization and constrained operator spending. In China, the year-on-year decline was due to constrained operator spending in anticipation of a technology shift to TD-LTE.

Commenting on the results Rajeev Suri, CEO, NSN said, “Our fourth consecutive quarter of strong profitability is testament to excellent performance in both our Mobile Broadband and Global Services segments. As a result of our focused strategy and strong financial position, we believe NSN is very well positioned to build on its leadership position in LTE as our customers build the next generation of mobile broadband networks.”

Gross margin before specific items was 38.4 percent in the second quarter 2013, an improvement of 12.2 percentage points from the second quarter 2012 and an increase of 4.6 percentage points from the first quarter 2013.

The year-on-year improvement was primarily due to higher gross margin in both mobile broadband and global services and non-recurring IPR income of EUR 17 million, as well as a slightly higher proportion of mobile broadband within the total sales mix.

On a sequential basis, the increase in NSN gross margin before specific items in the second quarter 2013 was due to significantly higher gross margin in global services as well as non-recurring IPR income of EUR 17 million, partially offset by lower gross margin in mobile broadband.

Operating expenses before specific items in the second quarter 2013 were EUR 722 million, down from EUR 820 million in the second quarter 2012 and approximately flat compared to EUR 717 million in the first quarter 2013.

On a year-on-year basis, operating expenses before specific items were lower primarily due to reduced investments in business activities that are not consistent with the focused strategy and structural cost savings from NSN’s transformation and restructuring program, partially offset by higher investments in areas that are consistent with our focused strategy, most notably LTE.

In the second quarter 2013, NSN delivered operating margin before specific items of 12.2 percent, driven by strong execution of NSN’s focused strategy. Operating margin before specific items was 0.9 percent in the second quarter 2012 and 7.4 percent in the first quarter 2013.

Free cash flow was EUR 5 million in the second quarter 2013, compared to EUR 121 million in the second quarter 2012 and EUR 239 million in the first quarter 2013.

In the second quarter 2013, NSN’s free cash flow was affected negatively by net working capital-related outflows of EUR 239 million which included approximately EUR 190 million of restructuring-related outflows.

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