UPDATE 2-Nokia reduces the outlook for the battle for 5G business

(Adding details, background)

By Tarmo Virki

HELSINKI, October 24 (Reuters) – Finland's Nokia lowered its outlook for 201[ads1]9 and 2020 on Thursday, saying profits would come under pressure as the company spends more to ward off rivals in the fast-growing 5G networking business.

The telecommunications network equipment manufacturer, which met third-quarter profit expectations, also said it would stop dividend payments to raise investments in 5G and only resume them when its cash position improves to around € 2 billion.

"Competitive intensity has increased in some accounts as some competitors seek to take part in the early phase of 5G," a statement said.

Nokia, which together with Sweden's Ericsson and Huawei, sells the majority of radio access network equipment that is the key to 5G mobile services, and reduces the previous ambition of gaining in market shares for 2019 and 2020.

Sales are now seeing growth in line with market growth .

"Repo It was a big disappointment … the outlook was cut across the board reflecting (the company's) continuing stumbling as the new cycle of the network market begins to take off," Inderes analysts said in a note.

5G BATTLE

5G networks are at the center of a US-China brewing technology war, as they are expected to host critical features from driverless vehicles to smart electric grids and military communications.

Some analysts say that the Nordic companies could benefit from the challenges Huawei faces after Washington claimed that their equipment could be used by Beijing to spy – an accusation Huawei denies.

Nokia added that mergers in the North American telecommunications market would limit customer consumption, but said security concerns could drive new business.

"Some customers are reassessing their suppliers in light of security concerns and creating short-term pressure to invest to secure long-term benefits," the company said.

Nokia's report contrasts with that of rival Ericsson, which last week beat quarterly earnings expectations and raised its market forecast for this year and its sales target for 2020. The Swedish company said demand for super-fast 5G networks was declining faster than expected.

Nokia now sees underlying earnings per share (EPS) of EUR 0.18-0.24 and 2020 EPS of 0.20-0.30 EUR. These were lowered from previous forecasts of EUR 0.25-0.29 and EUR 0.37-0.42.

Nokia reported a fall in underlying revenues of EUR 0.05 per share in the July-September quarter, compared to EUR 0.06 the year before, but in line with a forecast of EUR 0.05 in a refinitive vote.

Nokia said it now has 48 commercial 5G deals and 15 live networks.

It reported net sales for the third quarter of EUR 5.7 billion against 5.5 billion the year before. [19659019] Nokia said it expected fourth quarter earnings of 0.155 euros per share, below EPS of 0.14 to 0.18 euros expected by analysts. Refinitive data showed.

Nokia shares are down 10.6% this year as investors remain concerned that the Finnish company may arrive late at 5G.

($ 1 = 0.8980 euros) (Writing by Michael Kahn; Editing by Christian Schmollinger and Jason Neely)