Fitch ratings agency on Tuesday downgraded Nokia Corp.'s debt to junk status to reflect the company's poor first-quarter earnings and its uphill struggle to remain competitive.

Fitch downgraded company to double-B-plus with a negative outlook from an investment grade rating of triple-B-minus after earnings from Nokia's key Devices & Services unit declined rapidly in the first quarter.

The ratings agency said the downgrade to BB+ from BBB- reflected the deterioration in the company's core devices and services division and the "general lack of visibility" in Nokia's near-term future. It gave it a negative outlook, meaning more downgrades are possible.

“The downgrade reflects Fitch’s view that the deterioration in the company’s core Devices and Services division in Q1, together with the company guidance of -3% non-IFRS operating margins or below for the division for Q2 and the general lack of visibility beyond this point, means Nokia’s profile is no longer commensurate with an investment grade rating,” Fitch said in a statement.

"In order to avoid further negative rating action, Nokia needs to demonstrate substantial improvements" in the latter half of the year and in 2013, it said. "Fitch believes that Nokia needs to stabilize revenues and be capable of generating low-single digit. Operating profit margins and positive pre-dividend free cash flow."

That will be tough. Nokia has said that a ramped-up competitive landscape, the difficulty in timing product launches and a tough economy will continue to weigh on the company's financial results through the next few quarters.

The ratings agency said that the launch of the new Lumia phone with AT&T, and the potential launch of new Nokia products later in the year, could be positive for Nokia’s credit profile. “However, there are also numerous negative potential factors which could delay or fully impede a recovery,” Fitch said.

The agency said it believes Nokia will not be able to attain that during those 18 months because of the "potential headwinds" facing the cellphone maker.

The company's share price fell more than 2 percent to euro2.63 (USD 3.45) in Helsinki after Fitch's downgrade. Nokia said it would quickly take action to improve "future growth and success."