The €15.6bn acquisition of Alcatel-Lucent in 2016 absorbed more money than Nokia expected © ETIENNE LAURENT/EPA-EFE/Shutterstock

It is a situation fishier than the Gulf of Finland. Nokia sells kit to an industry gearing up for the launch of next-generation technology. Chinese rival Huawei has been hobbled by American hostility. So how come Finland’s national telecoms champion has cut earnings guidance for the next two years, halted quarterly dividends and warned recurring free cashflow will fall into the red this year?

Blame legacy issues. The €15.6bn acquisition of Alcatel-Lucent in 2016 absorbed - as such acquisitions inevitably do - more management time and money than Nokia expected. Integration puts an added layer of complexity on to the restructurings already commonplace in this industry.

Look at Ericsson, whose own years in the wilderness only ended after huge job cuts as part of efforts to eliminate costs. But Ericsson appears to have kept its eye on the bigger goal throughout. It has invested in R&D to keep abreast of technology and to price it aggressively. The latter is important, because operators are set to take a bath on 5G .

Investors should also blame swashbuckling managers, who struck out with promises like quarterly dividends. This was unsustainable. They needed to keep up in R&D not only with Ericsson, but also Huawei, which is projecting an annual spend of up to $20bn.

China is not to blame for Nokia’s woes, however. Foreign manufacturers gripe that it is tough to win business from state-owned Chinese telcos browbeaten into buying from Huawei. But China is small fry for Nokia in any case. Last year it contributed under 10 per cent of Nokia’s net sales and far less in profits.

Pricing pressure - from Ericsson, as well as Huawei - is a bigger problem. Moreover, the immediate business case for 5G is far from clear. Speedier video downloads are less glamorous than the internet of things or autonomous cars, even when neither are widespread in factories, homes or highways.

Investors fled on Thursday morning, driving the share price down by a quarter before you could say “please hold, just putting you through”. That matches estimates - Citi calculates the 2020 outlook implies a 25 per cent cut in earnings before interest and tax at consensus revenues.

More falls may follow. The dividend halt screams board nerviness. Ericsson’s years adrift cost chief executive Hans Vestberg his job. Rajeev Suri, Nokia’s current boss, will be aware of the precedent.

Lex recommends the FT’s Due Diligence newsletter, a curated briefing on the world of mergers and acquisitions. Click here to sign up.

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