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Why Nokia Moved to Limit Its Exposure in Iran

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Trump withdraws from Iranian nuclear agreement

Nokia (NOK) says that it won’t accept any new business in Iran in 2019, adding that its operations in the country this year will be limited to delivering on existing contracts. Nokia’s decision not to take on new business in Iran is based on the company’s assessment that it will be challenging for it to operate in the country because of the opposing foreign policy regimes of the United States and the European Union.

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In 2015, the United States and the European Union agreed to lift sanctions on Iran on the condition that the Islamic country curb its nuclear program. But last year, the Trump administration pulled the United States out of the nuclear deal with Iran, resulting in conflicting US and EU trade policies toward the country.

Nokia made $40 million from its top Iranian customer

Nokia operates two offices in Iran and employs 80 people in the country. It sells telecommunications equipment and related services to several network operators in Iran. In 2018, Nokia generated ~$62 million in revenue from its Iranian operations. Nokia’s top Iranian customer in 2018 was MTN Irancell, from which it earned ~$40 million in revenue. Nokia made ~$13 million in revenue from doing business with Iranian operator MCCI and $6.4 million in revenue from its business with Iranian Internet service provider HiWeb in 2018.

Nokia’s worldwide revenue was $25.4 billion in 2018 compared to Ericsson’s (ERIC) $22.7 billion. Samsung (SSNLF) generated revenue of $210 billion in 2018.

Nokia has been careful to avoid US sanctions

By deciding not to accept new contracts from customers in Iran, Nokia is being careful to avoid the trouble its Chinese peers ZTE Corporation and Huawei ran into for violating US sanctions on Iran.

Last year, the Financial Times and Reuters reported separately that insurance major American International (AIG) and oil giant Total (TOT) planned to exit the Iranian market to avoid trouble with US authorities.

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