Q2 2021 Nokia Oyj Earnings Call

[music] welcome to Nokia second quarter 2021 conference call on.

And David Mulholland.

Nokia as Investor Relations today, we have Pekka lundmark, our president and CEO, along with our CFO, Mark Covid and connected with US via video and audio from our ESCO offices. During this call we will be making forward looking statements regarding our future business and financial performance and these statements are predictions that involve risks and uncertainties.

And at 1 of results May therefore differ materially from the results. We currently expect factors that could cause such differences can be both external as well as internal operating factors, we have identified such factors.

In the section titled operating and financial review and prospects risk factors of our 2020 annual report on form 20-F.

Actual as well as our other filings with the U S Securities and Exchange Commission.

Within the presentation today, unless stated otherwise references the growth rates will mostly be on a constant currency growth rate basis and margins will be based on our comparable reporting please.

Please note that our results release, the complete report with tables and the presentation on our website and.

S parable of results information and addition to the reported results information on.

Our complete financial report with tables available on our website includes a detailed explanation of the content of the comparable information and a reconciliation between the comparable and the reported information.

Todays stock exchange release and presentation can be found on.

And click Investor Relations website.

With that I would now like to turn the call over to Pekka.

Thank you David.

And Hello, everyone and thanks for joining the call and I Hope you and your families remain safe and dwell.

A great start to.

The 2021 and continued in Q2 and this has enabled us to increase our outlook for the full year.

My presentation. Today will include a brief overview of our financial performance followed by an update on the progress we have made and each business group against the strategy, we outlined daily and in the year.

I will then hand over to Michael to go through.

And our and vessel the farm and the same more detail.

Yeah.

As highlighted on the slide in the second quarter, we delivered 9% constant currency net sales growth that was primarily driven by networking infrastructure with 20% growth and constant currency and strong performance across all product areas.

We.

The benefit benefiting from the robust and market dynamics, particularly in fixed networks, but we are also achieving meaningful market share gains and there is strong demand for somebody and networks.

Nokia technologies, so on new deals and automotive and some 1 of brand licensing deals. In addition, our underlying recurring.

The final royalty base expanded double digits year on year.

Positively despite being in the reset phase of the stat that you both bulb on both mobile networks and cloud and network services also delivered growth in constant currency.

Profitability wise, our comparable gross margin expanded 200.

And 70 basis points year on year. This benefited from the 1 of software deal and mobile networks, but we saw a strong underlying expense and even excluding that deal.

Comparable up at any much and came in ahead of our expectations of strong growth and network infrastructure and good cost discipline across the businesses drove good operating.

And then leverage this shows that the underlying potential of the business exists, but we still see headwinds into the second half of the year, which we will revisit the later.

Back in March we announced our new 3 phase study of CIT to achieve sustainable and profitable growth and technology leadership.

In Q2, we saw progress and a number of the areas against the strategy. The most notable of these and Q2 were.

All the major product launch just over a month ago in mobile networks.

Our established technology leadership and network infrastructure that has seen us gain market share and in the.

Commodity of license and the new automotive licensees signed and Nokia technologies.

I will revert to these highlights in more detail shortly but I just want to emphasize that we are seeing progress in all areas of the business and across all elements of the strategy.

I'm grateful and proud.

The New York of how quickly the Nokia team has adapted to a new operating model and we are already starting to see some benefits from on the new structure.

Our business groups are taking clear accountability and ownership for the financial performance, which has helped expand margins.

Let's now look into some of the specifics.

Out of the quarter business group by business group and starting with mobile networks.

Earlier in the earlier in the year, we said we were targeting full portfolio of competitiveness through 2020.1.

The launch of our new air scale of radio and baseband product platforms at the end of June of course, a major piece of that.

The fix all the new air scaled product platforms based on new reef chalk system on chips and as a result. These lunch was key to our 2 us remaining on track with our rate shock of targets.

And as a reminder, we said that by year and we won 70 per cent of shipments to be of reef shark based with the target of increasing to 100%.

All of 2020.2.

The launch included a series of new massive mimo active antenna radios, all of which have the industry's widest bandwidth support of up to 400 megahertz.

This can help operators to make efficient use of fragment the of spectrum allocations.

The new reef suck S O C as.

And by the also be used in our eighth T. H R trade deal in addition to massive mimo.

I would also like to highlight that our 32 of T. Rx massive mimo active antenna, which is typically enjoying the largest volumes and operate the deployment is the industry's lightest industry's lightest.

Will this is a very important factor for customers in terms of ease of deployment and loading of site the infrastructure.

With the new baseband boards, we now can take the box of having common of baseband 4 of 5 G and previous radio technologies. The baseband products. We have launched can support up to 90000 connected users with.

The 4 gigabytes per second air interface throughput.

We expect to have largely caught up with the competition by the end of the year and as you can see from these features and some areas we could even lead the market.

Yeah.

Importantly for both of our commitment to efficiency and sustainability of the baseband product the social.

With $8.75 per cent more power efficient.

This is important not only for us, but for our customers as well as we all work to reduce our environment environmental footprint.

Nokia remains committed to our stated goal of reducing our greenhouse gas emissions, including in the use of our product.

Most of all 50 per cent between 2019, and 2000 and thirdly.

The new air scaled products will really help us to hit that figure.

The customer response to the launch of self on so far being very strong.

If you want to launch if you watch the launch of a day on our website you can see a number of the customer endorsement.

And that's we have received.

The baseband products are already shipping with general availability later in the year.

And Meanwhile, our radial products are expected to start shipping later in the year with general availability coming early in 2020.2.

In fact, the introduction of the new baseband.

And on board has been the fastest from time from the time of making the product decision to shipping product in at least 2 decades and it may be the fastest ever and Nokia is wireless business.

This is due to improvements in product development processes and tooling.

Regarding progress on our.

K P ice we continued to see a good and improvement in our array of shock associate best deployment with 54 per cent of 5 G of shipments in Q2.

And I said that is on track to reach out of 70% goal by the end of this year.

On the conversion rate excluding China.

Or are the converse.

Pfizer that we are targeting and and and forecasting excluding China remains approximately 90%, but it has improved slightly in the quarter. We believe this number is now stabilizing and we see opportunities for it to improve although the timing of those deals is uncertain.

And finally I would like.

And rate the progress we have made with customers, including winning back of customer in Canada, and the recently announced share we have provisionally wanted and the China mobile tender.

And China.

As you will have to see and we have recently, we were recently awarded 4% market share and the China mobile and China broadcast networks.

The note 700 megahertz, 5 Jade joint bid positioning us as the third vendor.

We believe this is a good endorsement of our improved product quality.

Yeah.

Moving on to network infrastructure.

We have seen extremely strong growth and this business group and the first half with growth.

Both driven by all the businesses.

Our fixed networks business continues to benefit from what we believe is a structural shift from operators across the globe to increase home broadband connectivity.

And this has been accelerated as many workforces are likely to move to a hybrid home office working model and the future.

Network Nokia will actually be doing the same we have also seen a significant acceleration and demand for our fixed wireless access solutions.

I would also note that we are seeing good market share momentum in many areas of network infrastructure. This has been key to enabling our growth performance of this year.

And we have continued to work hard to deliver on our customers' increasing demand despite the global semiconductor shortage.

As we look forward as we look towards the second half of the year, we face tougher year on year comparisons from a growth perspective, but we feel confident about our midterm opportunities.

And because we see a strong opportunity pipeline, which combined with new product launches to come in the second half of the year should increase our product differentiation and further.

I want to highlight 2 other points from Q2 for networking infrastructure.

The first day of so that our optical business continues.

And here's to make good progress.

And the second is that we are also seeing strong momentum in some of submarine networks are sort of previously mentioned backlog continues to flow through into sales as deployments progress.

Next the ASR cloud and network services business, which continues to make good progress on its portfolio.

The rebalancing as a reminder that includes focusing our R&D efforts on the areas, where we see strong growth opportunities in the mid term.

I would highlight the good progress in 2 areas already our 5 G chord of product now has over 150 customers on our 200 networks.

We also made good progress.

Yes, without private wireless enterprise solutions, and now have more than 340 customers.

Work is clearly still continuing and cloud and network services, and that's where they find out product S. O S where they find out of focus areas for the business to improve its financial performance, but I was pleased with the progress we saw in Q2.

And finally on to Nokia technologies, and as already mentioned, we signed 2 automotive licensing agreements in Q2, including with Diamond.

This shows the underlying strength of our portfolio and the growth prospects and the increasingly connected automotive market.

We also continue.

And year to renew our industry, leading patent portfolio with the investment and 5 G 6 T and multimedia R&D.

Yeah.

Before I hand over to Michael to look at the financials in more detail I wanted to touch on our progress with enterprise customers for many years, we have been working to expand into.

The enterprise market and this has paid off with double digit growth and both the last 2 years.

In Q2, we saw a slight decline and enterprise sales, although in the first half, we still achieved solid 9% growth and constant currency.

The slowdown in Q2 of was largely a reflection of tough year on.

On year comparisons and the Lumpiness that can be present, and some of the larger enterprise deals.

However, we continue to make good progress and the business, we signed 63 of new customers and Q2 and continue to have confidence in the pipeline for the full year.

I will now hand over to Mark of put a little more detail.

Yeah.

Thank you Pekka.

And good morning, everyone from my side of his ball.

And I'll provide some more detail on our financial performance in the second quarter.

Yeah.

As Pekka already mentioned, we continue to benefit from strengthening end markets.

We have also.

Also increased the forecast for addressable marketing tools and 'twenty 1.

And we now estimate that the total addressable market will grow by 5% in constant currency in children and 21.

And this is up from the previous estimate of 3 per cent.

And the increase was primarily be.

And driven by mobile and networks, we have seen rising investments in Fi cheap.

Note also that our forecast from mobile Iran growth in U S dollars would be consistent with the estimates for choosing tune of 1 from third parties just like the Lora.

Yeah.

If we investigate the trial version of our revenue growth all of our business groups crew and constant currency.

We saw particularly strong growth again from network infrastructure as Pekka explained earlier and Nokia technologies, as we signed new automotive licensees.

From a regional perspective, the largest contributors in absolute terms and all growth for India, and Latin America up, 75% and 57% respectively in constant currencies.

And both regions benefited from stronger LTE deployments.

And demand for all of fixed IP and optical products.

In Europe, we saw significant growth and volume Chi of deployments with recite re silence in in most other areas of the business.

North America, so a robust performance despite the hand.

Wins on market share and pricing based on the contracts negotiated.

And in tourism.

In trade of China, we saw a continuation of the strong mobile networks capacity deployments that we saw in Q1.

1 area, we wanted to provide.

Some more visibility on our progress and this quarter is all of cross margin.

And this quarter has shown the importance of gross margin expansion in driving our overall financial performance.

At the group level on gross margin so.

A slight headwind from product mix.

We saw strong accruals and lower margin products, including fixed networks and submarine.

And these will stand offset by bit of regional it makes along weighted volume benefits and good cost control Undrawn the operating model.

Giving much greater accountability to the business groups for the financial performance.

Finally, we would also we also benefit from FX and mobile networks, 1 of software of deal, which has been previously mentioned and that contributed about 1 third of our gross margin expansion.

If we then focus on specifically on mobile and networks was was we have seen some financial benefits from our product mix shifting towards 5 cheap reef shark based products.

And they are also other important factors to be over of that are driving our progress.

In mobile networks and regional mix was of limited benefit, but we saw a significant improvement from the new operating model.

You also see the FX benefit and the impact of the mobile Aneth Brooks, 1 off and the quarter.

And looking.

At the group comparable operating margin performance you can clearly see the structural improvements we are making in our operating margin.

We did face some 1 off benefits and the quarter, but even despite those we continue to make growth good structural progress.

Our cost base.

<unk> remains well managed and.

I just sent the benefit of the M and 1 of we saw positive fluctuation in the other operating income and expenses.

Related to both itching and venture fund gains.

It is also worth noting that in Q2 of the strong of business outlook late led.

Afraid of incentive accruals that but partially offset all the efforts on cost.

Despite this progress.

It is worth noting that we face many headwinds still and the second half of the year as Pekka will highlight in our guidance, but we are encouraged.

By the progress we've made.

And then moving to the finance of performance of our individual beaches.

And I already touched upon the cross margin performance and mobile net brooke's earlier.

And the comparable operating margin and the mobile networks, excluding the 1 off.

2 it would have been essentially stable year on year as the improved gross margin was offset by a higher R&D investments.

In network infrastructure, we saw good evidence on how our plan from the capital markets day is playing out.

The growth.

Of business combined with stable gross margin and stable opec's led to strong expansion in operating margins.

Now, we do expect to see some increased R&D expense and the second half of the year as we continue to invest and the future products to extend our differentiation.

And the beam.

But we are pleased to see the operating performance that we have and H 1.

And Nokia technologies, just like Pekka mentioned, we benefited from 2 automotive of licensing agreements signing of the quarter.

And the underlying revenue run rate of crew and.

Is now between 1.4 billion to $1.5 billion per year.

Yeah.

And the quarter was largely uneventful and from a cash perspective, we generated strong operating profit, but then we saw a meaningful net working capital increase.

As we paid to us and 'twenty related performance incentives to employees.

And also invested in inventory.

As we continue to see rising and demand for our products.

And the freight payables by of largely stable and the quarter.

We further reduced the sale of receivables and the quarter.

And at this point I'm very pleased with the underlying cash performance and the business.

We have now deliver it also of fifth quarter of positive free cash flow.

And in quarter, 2 and we generated a pool of about 80 million euro of freight.

Hello.

And the final point I wanted to make today was to remind you of the valley year Nokia has within our wench of funds.

In recent quarters, you've seen a positive revaluation gain impacting our other operating income.

Cash and investments within various funds have much yard.

Was there is never any guarantee of performance. These investments have delivered typically between 15 to 20 per cent irr's to Nokia by material regime.

There have also been other.

The benefits the Nokia core business in both licensing opportunities and partnerships with companies within the venture funds.

Some of the investments within the venture fund have now seen cash distributions back to Nokia and we continue to have.

About 760 million and book value of assets and our balance sheet debt.

And that we believe can be.

And our creative to nokia's value creation going forward.

Now back to you pick them.

Thank you and Michael.

Given the strong Q2.

Here in the first half.

<unk>, we have today revised our full year 2021 outlook upwards.

From a net sales perspective, we now expect the land between $21.7 and $22.7 billion euros. As we are now assuming actual currency rates for the first half and that the end of June right the continuous into.

<unk> and half.

We have also revised our comparable up at any much and outlook now expecting it to be and the range of 10 to 12 per cent.

While our first half results provide a strong foundation for the rest of the year, we still expect the earlier communicate the had headwinds the impact us in the second half.

The second more specifically this is related to market share and pricing and North America and regards to contracts made in 2020.

Therefore, we still expect typical quarterly earnings seasonality to be less pronounced in 2020.1.

In addition, we continue to accelerate R&D investments and of course, we.

So on monitoring the components situation and working very closely with our suppliers to ensure we can meet the strong customer demand we are seeing.

We have also adjusted out of free cash flow and comparable return on invested capital guidance today based on our first half results.

So and.

The summary, I am pleased with our strong performance and the first half of the year. Our team has done a great job and establishing such a firm foundation.

But as we have said it is important to bear in mind that our results benefited from some 1 offs and we have a lot of work ahead of US we are still only in the first face.

A lot of said that your execution.

But with the good start for the year. We are confident that we are on the rights of track to achieve our long term targets. Thank you.

Yeah.

Thank you Petra and when I move over to the Q&A session as a courtesy to everyone.

2 we would ask that you kindly limit yourself to 1 question and 1 brief follow up with that I'll hand over to the operator, Rachel who will give the instructions.

Thank you we will now begin the question and answer session.

We're also reviewing the video webcast. Please remember to mute the audio on your.

Every 1 of the techniques.

No question.

Thank you.

And.

You asked the question.

And then 1 on your telephone keypad.

Thank you Brian.

Has that kind of indicating.

Indicating.

Your question. Please press Star then 2.

The effect.

The compute comes from Dominik Olszewski from Morgan Stanley. Please go ahead.

Yeah.

Good morning, everyone. Thank you for taking the question. So the main question would be whether you could discuss the puts and takes around.

The outlook for 2020, 3 obviously very strong performance and the price off of this year and improved.

Question on guidance for this year. So could you just talk about the puts and takes the train 3 and 3 obviously no change to the the midterm. It looks at the main question and then the follow up is just around the gross margin bridge you gave them.

During the the fixed business Sandy and the submarine networks business and we said it was a drag on gross margin.

Given that you feel confident and those businesses going forward in terms of the backlog could you talk about what do those become less of the headwind going forward. Thank you.

Got it. Thank you if I take the first 1 on Michael if you take the gross margin.

The question.

Hey look we are still in the early stages of executing on our third.

Third the chair of <unk>.

Yes.

We are really happy with the H 1 results, but the west also some 1 offs that way of helping US there and then we have the the earlier communicated the headwinds in the second half.

Of the year. So the H 1 provides a very good foundation, but the it's.

It's only 4 months since we announced our 'twenty 'twenty 3 outlook. So we do not see a reason to change it today.

And of what counts to the and mix changes and and their impact on all of crush margins and mix is ongoing up and down quarter by quarter and that's why.

Why.

We believe that it's better to look on the longer term the business of course, if we have a continuation of all of a strong growth and a lower margin businesses that will hit and and our.

The future gross margins and and whatever mixes we see those have been already taken into account.

Count in our guidance for 'twenty, 1 of Us wall.

And so I would say that that there's the puts and takes and and all of our business. He is not only with these 2.

Thank you Richard next question please.

Thank you. Your next question comes from Alex.

From Goldman Sachs. Please go ahead.

Yes, good morning, everyone and thanks for the question and firstly your gross margins. So obviously very strong.

Quantified the product mix benefits from wireless and <unk>.

The interesting to know a bit more about the extent to which customers not reward you with better prices.

The other mobile products and the extent to which mobile gross margins have further to expand and <unk>.

Coming quarters or years, if you make further improvements on the wireless side and then my quick follow up with just the on network infrastructure revenues.

And the strength and the growth there.

And I wonder to what extent do you see the unsustainable given.

And you did reference work from home demand being at the Easter, which arguably could start to run the hard comps at some point I'm wondering if there are key product cycles, you could point us to.

On whether youre seeing sustainable demand driven by digitalization and more broadly many things.

Okay. Thanks, Thanks, Alex.

And if I take.

The network infrastructure and medical continues to be on gross margin extra threat. So it network infrastructure of course.

Hey, look 20% growth and in the quarter and and Ah you saw of even some higher numbers and the individuals the businesses.

We do believe that there is.

Some kind of structural underlying the.

Changes in the market, especially the especially the home connectivity of home broadband.

Connectivity and.

And then actually we are starting to see the effects of the the 5 J deployment, though so and when you need connectivity for the for base stations and all of that capacity that.

And needed is there and also boosting boosting the IP and optical networks up market and.

And there are reasons to believe that that this trend will continue.

Continue and when you then move to the next phase of the mobile network development.

When a when.

That is the smallest sales and.

And the millimeter wave radio and start to get more and more common you will need even more.

The capacity in base station connectivity. So we are optimistic about the structural development of this of this.

Market, but just to be realistic on numbers.

We will already and the second half start facing tougher comparables. So don't just automatically assume that this percentage will continue but structurally good market going forward.

And what counts to the gross margin.

As you saw in and of the breaches wall, we have the regional mixes that are impacted.

The positively volume on and of course, the cost and <unk> and.

But and in the mobile networks, we have.

Oh, the school of course, the fine Chi and.

On the reef shark and he is impacting but also within that there's a cost elements that we have been able to improve on and.

And also in the.

Mobile networks.

Services and part of it is improving on gross margin in and the quarter as well.

And as they've been cleaning up the portfolio and and and agreements as wall.

So the different elements that are impacting how that will continue and the future.

And.

To put that we'd look it back to you and all.

<unk> zone and and of.

Of course, we all ambition is that we will.

Matt be ask you it as as we can and customers actually expecting a small debt that we have to show the cost improvements and our products.

And thank you Alex and Rachel next question. Please.

Okay. The next question is from Sandeep Deshpande day from J P. Morgan. Please go ahead.

Hi, Thanks for letting me on 2 quick questions if I may.

But we are showing progress.

Volume in China, you've taken some share and in China and the most recent auction.

Have you seen any progress with your base.

The product in the United States, where you because the other region, where you had a significant change and market share over the last few years I've been secondly on.

What's the margin.

The mobile with the.

The kidney is.

Is there the.

Between shipment and Oh, yeah, the shop product and the.

The new recognition of that lease shop product. So I mean, given that you'll see on you know given where the.

On the go day in terms of shipping lease shop based products, we deemed and your mobile business, where are you in terms of recognizing them in terms of your gross margin today.

Yes. Thank you thank you of Sunday.

And the next yesterday.

Thank you and take the gross margin, but then and yes. The U S U S market.

And the good news is that that this <unk>.

Much discussed headwinds.

In terms of market share and pricing.

They have been quite well understood already since October of last year. When we for the first time started to talk about them because they relate to early of things fairly of contracts.

<unk> 2020.

The matters the.

We are actually pretty.

Confident on.

The U S market, the citrus and we have a we have signed as you have seen a 5 year 5 J deals now.

With both the T mobile and the.

The AT&T and we also have to remember that.

That eitan.

<unk> used to be a very big and important that the customer to us and many segments and then the U S. Market. This is actually look more than the 3 large operators. There is a significant number of smaller operators that we're.

And with and we are fairly confident and our position there and on top of all of this there is a growing and depressed market private wireless market and now as we have recently seen there is a high likelihood the adult so all sort of the government driven programs are in terms of connectivity will increase.

We have work going forward. So we have every reason to be optimistic about the U S market.

And what kind of the mobile networks gross margin before I touch upon the the reef shark and and shipments versus revenues I just want to highlight of one's more of that remember the other factors and as Walter.

The other important for the cross margin expansion and improvement that we've seen and the first half and if we look at them and.

And what Tony and his team and mobile networks have done and and 5 <unk> and.

The the way, we are producing and and developing and farm. She is much more efficient today and then he was just a year ago and then of course when we.

See the volume of say, increasing that will also impact our ability to improve.

The cost base and in the product area.

In addition data.

Yeah, we have other areas and mobile networks, just like I mentioned about the services that are impacting us wall put camps. The reef shark that's 1.

And part of the improvement and.

Yeah, we've said that there's a bound the 6 months delay between the shipment until we've recognized that in our P&L and and I would say that that's about the same today and it was a year ago. So you can you can used as of as a rule of thumb on and see you know.

1 out of what is the relationship with <unk> and shipments.

Shipments of <unk> and.

The revenue recognition on on reef shark.

Uh huh.

And based products.

Thank you Sandeep Richard next question. Please.

Thank you the next.

And then it sounds like.

From the air market.

Go ahead.

And my question would be on mobile networks, where your method of really upgrading your margin assumptions.

And he explained of what has surprised you with the surpass the U on the upside this year and.

And also why do you have.

<unk> chosen not to move the goalpost for 'twenty 3 even though you will still not the early benefits from our system on chip the transition.

And then maybe a follow up any reason why you couldn't get to Ericsson and gross margin levels and mobile networks. Once you have completed the system on chip conversation I think the 44%.

And excluding the IPR revenues.

Thanks.

Okay.

Some of it.

If I start with that 'twenty 'twenty, 3 I think I actually already answered that the.

Question of course, we we are.

Pleased with our H 1.

The even.

And the effect of some of the 1 offs, we've been talking about of the issues that I went to face us and the second half of the year, meaning that the the typical seasonality that we have seen.

It will be less pronounced this year and our thesis of only 4 months since we published the 'twenty 3 targets. So we do not feel that.

<unk>.

Today is the right time to revisit the them then when it comes to the mobile networks of surprises and on medical Medical you again, and then go deeper into the into the margin and see if if needed but the but.

1 thing that that has clearly changed and the last few months of just the market itself there.

There is strong.

Demand on the market, we have as you saw we upgraded Oh, so our market size and market growth forecast the.

This year.

Oh of product execution has been foster we've been able to speed up their asthma article I explained and then there and on top of that very.

The operational cost control and here I would say that's the simplification of the operational model that we did where we're in the earliest setup, we had actually multiple sometimes even 5 management team members being partially responsible for 1 of mobile network deal now it's all in and in.

Good day on network business and and told me. He is fully responsible for that so that is already or a day showing it's a it's of of effects positive effects and just building on that it would count stood at the new price on model is extremely nice to see that that each of the businesses and have really.

And the mobile and that responsibility and focusing on cost but on.

So on the top line and see how can we improve the business and we have totally different discussions today than we had before the neo person on our model. So I'm very pleased to see how small the half that has landed.

Thank you Sir.

Taking original next question please.

The next question.

And it comes from Simon Leopold from Raymond James. Please go ahead.

Thanks for taking the question.

Wanted to ask 2.1 I think it's a quick 1 on the other ones a little bit more strategic in terms of the quick 1 with the.

The award.

I mean, the Chinese and 700 megahertz of project.

And I presume, that's a little bit of on the gross margin headwind and could you help us understand how that particular project factors into your overall thinking and if in fact, the assumption is correct and then in terms of the strategic question I want.

Toward understanding of your priorities, specifically and your optical business given that you're currently lag the sector leaders and technology and profitability, how do you address or solve those problems as your priority to close the the.

On a GAAP 1 of the profitability GAAP, how can you do both thank you.

Okay.

Just quickly the China.

Question on the effect on volume send the margins.

Margins are the.

This year will be the will be it will not be a material we do not comment on.

On margins on the individual deals, but it is of course known that the the Chinese market.

Highly of.

The competitive and the typically on these type of deals the margin is a slower and in the beginning and then there is an opportunity at the tip of increase over the time, but of course.

4%. This is 4% it's not more of its 19200 base stations and so you have.

To put it into into perspective. So it is it is not really material.

And then I mean, we are right now are moving to the fifth generation of optical coherent technologies with the PSC of 5 architecture, we are seeing our our technology of competitiveness clearly.

The increase with this technology.

We have optimized the in.

And the way the the cost to performance ratio for the for the sweet spot of.

Of our 400 gig and sometimes 600 gig connectivity and Metro Metro regional and naval lung the stem cell.

The net works.

800 gig can be implemented by 2.

400 and.

Thank god, but that's only a very small part maybe of 2 to 3 per cent of the total demand at the moment and that's why the full portfolio of that we are now having with the having launched PSC 5 has greatly increased and competitiveness and if and when.

When there is then a face we're aware of the 800 are with the direct the implementation would become a mass market. We will certainly be there at the right time as well.

Thank you Simon and Richard next question. Please.

The next question is from fans.

Yeah.

And <unk>.

Go ahead.

Hi, everyone I've, a follow up on the 2023 sort of I think and.

No I understand the pick up that you don't want to you know and inquiries now because it's been on these 4 months and I totally understand that I just wanted to understand.

On the moving parts. So if we look at the full year 'twenty, 1 you already and we'll have 10 to 12 per cent.

23 of 10% to 13% if we look at you know these 10 to 12 per cent already includes the headwinds of pricing of Verizon and so some things that force do you believe would be less of a headwind in the next.

And then you have the scale with shock you know benefit that would probably increase your cost and improve.

The improved your cost sorry.

The strong network infrastructure.

The troll.

The demand with a positive mix if we look at.

2 year on year 'twenty 3 guidance for operating margin for the Division and then you have the C band and the U S were supposed to be you know is of good geographic mix.

So my question is what is there anything that they MISO or what kind of the headwind we should expect in the next 2 years at Twitter of.

Set negatively.

At your day.

These drivers just trying to understand the moving parts and and.

Thank you and I don't disagree with your with your facts, but again H 1 strong foundation.

Boosted by certain 1 offs.

The component markets each of us and will remain.

And.

There could be always surprises there this will continue well into 2020, 2 salmonella save and saying this is not necessarily our estimate but some are even saying that it will continue into 2020..3. So there is also even though we are seeing strong demand. There is also uncertainty is there.

There. So we just feel that this is not the right time, we are only 4 months into the execution of the stat that we are still in the reset the face and and let's now focus focus on the day to day hard the hard work and we do not want to speculate anything more on 2020.3.

Thank you Francois Rachel next question please.

Thank you the next question.

1 of outlet.

Please go ahead.

Yes, hi, and thanks for taking the question good morning tool.

Firstly, just on network infrastructure.

If you look at the underlying businesses and the growth rate so far this year.

Could you comment whether you're gaining share in IP routing and optical and and fixed access.

And the second the next couple of follow up just on the components situation.

Can you confirm the despite the tightness you don't see.

And a top line headwind.

And the currently from the from the basketball and the situation.

He simply being held back by the shortages excellent. Okay. Thank you if I take the component. The question on medical if you take the ni and our growth prospect. The question I mean, we.

<unk> the component of market is tight and I think I said are in the cube. After Q1 that are that you have to fight for your share of every day and that situation continues we are on daily calls with many many suppliers we have been for the most parts able to deal very well with this situation.

We have said.

But it actually.

Interestingly that we could grow even faster if there were more components of available.

But all of this is included and assumed in our guidance and of course.

If it's any comfort that the regarding.

Regarding our ability.

Creation with the situation and as you saw we upgraded our topline guidance by roughly 1 billion euro. So it just shows that the yes, we are able to deliver there and on top of that I'm, saying that it could even have been a bit more if there were more components available.

And what kind of as to the IP and and.

The deal and perks and.

These are the 2 areas actually will be half of technological.

Advantage and.

We have.

On the IP side, we've been gaining market shares and sit on regions and we see that we are actually taking.

And getting closer to 2.

And the number 1.

Instead of on areas like Europe, we and number 1 already and EM and definitely the the technical technological.

Technological leadership is extremely important here.

And this is 1 reason why we believe that in the Tech high Tech industry, you have to have a very good focus on technology.

And largely on and securing the yeah.

Absolutely top notch on technology side on and that's why we invest in R&D and.

And the same actually goes for.

Fixed networks. So if you look are we on the only 1 that can offer 25 gig and solutions and the fixed networks and they sort of definitely.

And shown as a very cute and sales pitch to watch our customers and and it's literally 1 when we see that the and the connectivity and demand is increasing very heavily and not only because of the Phi Chi, but also because of the and.

The COVID-19 situation and remote and.

<unk> working.

Solutions.

So I.

I would say that in both those areas. We are definitely seeing a positive development and may be it may be of chest to add and they just looking purely at that number so of first half.

Yeah, the topline growth and IP and networks is 15.

Definitely and in optical networks 10 per cent and fixed networks 30.37 per cent.

You are saying that the that the market growth is maybe 4.

4 per cent or something like that there could be a faster growing buckets, yes, but with these numbers I think it's absolutely clear that we are taking market share.

Thank you Alex of original next question. Please.

Thank you. The next question is from Andrew Gardiner from Barclays. Please go ahead.

Good morning, Thank you for taking the question and.

And sort of follow up to that last 1 really on network infrastructure and that's just.

And just to the points that you.

Bursting and really I mean, you're talking about the 4% growth in the Tam for Ni this year, yet qualitatively, you're sounding very bullish and and yet you haven't upgraded the Tam I think.

I can see as you guys have said, you're clearly gaining market share.

And so.

2 part question and 1 you know what why.

And we'll make all of a bit more upside to that time and given given the end market trends, you're saying and in terms of market share and.

And you guys, just showing real strength in fixed and terms of the year on year of growth submarine as well, perhaps to a slightly lesser extent and and optical but still good growth clearly.

Clearly you've got a major competitor there.

And Huawei can.

Can you talk about the the trade war backdrop and how that yeah. This has been sort of obviously ongoing for a number of years now do you feel like the share gains that youre seeing now of all Oh, youre being boosted by that effect and many of these markets, particularly outside of China. Thank you.

And I don't think.

Is that and those things of that you referred to.

That they would have at least so far being a big needle mover and.

IP optical our fixed networks, there has to be and locational tenders are occasional suggestions were that the code that played into it but not in in and in any big way.

The the Israeli comes from our technology competitiveness of that is it and then when it comes to the market size estimates are.

Your question is Sir we have not yet seeing what the the market analysts the.

So as I was saying about the Q2, we don't have those numbers available yet.

Way and see what they are saying and then than we have to say if we if we keep the saudis. There is reason to change, but but we are clearly seeing strength and this market.

Yeah.

Thanks Andre original next question please.

Thank you.

And in terms of.

Right.

And handle and Ken. Please go ahead.

Thank you operator, taking the question and congrats to sort of the report.

The question and that's mainly be on all this and I'll.

But of those get both Japan, and perhaps I think you mentioned Q.

Q1 that it was little bit per would get the temporary and project.

On the differences to the wheel.

The components or or Eric some of them.

The Super strong first half and the comments a bit on the Japanese market outlook and the.

Well, so Oh I guess, we saw APAC ex the China, and India was down put something on the.

Okay.

Yeah that that force really.

APAC and Japan, and what's the only market, which was slightly down and we had 6 hours set and the markets where we're growing are the primary countries that are that the effective that slightly negative remember remember it was only slightly and they've got Dave was Korea. It was not.

The Japan.

The picture and in Japan.

And it's a strong and the same statement that we made after Q1 remains that there seem to be set and timing differences between the.

Operators plans between hour in a way our reagents and.

5 G and then and some of our competitors reagents and that is our understanding as to why you may have seen some differentiation and and statements about the growth in Japan and just the building of that remember that we are the customer all of a supplier to all top.

And C S piece and Japan as well.

And.

Thanks, So on your original next question please.

Thank you. The next question in terms of it and from Deutsche Bank. Please go ahead.

Yes, good morning, and just really 1 question, which is just about your commentary around north.

Cash on share loss and price erosion in the second half I was just wondering if you thought that might continue into the first half because especially when you're saying a lot of the first half of it is temporary or 1 time effects.

It could be a difficult comparison to the first half of 'twenty 2 so I just wanna be setting the that youre still on the growth path.

It's a marathon first half of 'twenty 2 based on what you can see today. Thanks.

I mean as I said those things are related to them.

2 mostly.

The events before this year so of the effect on the second half will be stronger than in the first half, but the but that should really and then b.

And the it for the most parts, but we have not given of course, 2020.2 guidance of I refer to what I said earlier that the we remain.

Over the kind of overall I'm optimistic and confident on the North American market. There are there are no new.

And if you will that are would have surfaced. After we first started to talk about this thing in October of last year.

Thank you Rob Richard next question. Please.

Thank you. The next question is from Richard.

Hi, Matt.

The research. Please go ahead.

Thanks, very much a 1 per pack on 1 for Marco Pekka, you talked about your conversion rate and and people are asking about market share but.

Inside your installed base clearly a lot of customers were shared with Huawei, So I'd like to know and I'm certain that something <unk>.

Track to what extent do you think your share gains or some sort of dividend, which is coming in the wake of of various carriers being obliged to exclude Huawei from many markets. How much do you think the market share gains have come directly as a result of that and then from Marco maybe you could give us the little insight into the licensing pipeline.

Was the renewal with Samsung and.

Including cellular standard essential patents, because it's not entirely clear from that and do you have any material renewals coming up in the next year or 2 that could change the outlook in terms of the run rate you've you've laid out for the licensing business. Thank you.

Yep.

Thank you and when we look at the mobile the network market share.

Our estimate continues to be for this year that it would be of 25% to 27% excluding.

China that is slightly lower and then.

And what we had the last year and.

And as we said, we now expect and and target.

That the the conversion rate would stabilize indicating that they would not be further market share losses and done and hopefully we would then start winning back customers and we have already done that now in China and in Canada.

Canada so there.

There is a there are cases as you know and as we.

Of discussed where operators are for various sometimes politically driven reasons have decided to change of the supply of switch suppliers and we have already estimated and and I can confirm that we have a we have won approximately.

Approximately 50% of such opportunities, but we are not.

Publicly quantifying that the how much that would be in and.

In terms of revenue on margin.

And what kind of through the pipeline and in technologies.

And we basically have renewals continuously and and different scales and and.

Most.

Most of all of our agreements and.

And what comes to also.

On the renewals happening are confidential.

But you could you could calculate that we have always the handful of renewals every year that we.

And.

Negotiated with just like you've seen now that all poised is.

And at the moment on the table.

And so these are coming continuously and this is normal business for taking lunches. So yeah.

Yeah and.

And what kind of Samsung deal, we signed with them and.

It is covering.

Yeah.

And wide area of of.

Of the.

Video and <unk>.

Systems on and so forth and.

And we're quite happy with that system all of the the agreement as Paul.

Thank you Richard Richard next question. Please.

Thank you next question.

Thanks, Matt.

And from Dnb and.

Go ahead.

Hi, good morning, all and.

Congrats on a great quarter here and most of my questions have been on the answer but.

I want to just follow up on on the the market share situation, especially in mobile networks outside of the U S.

Now the.

And 1 thing is of course, you know that.

And some countries operators have been legally obliged to exclude <unk>.

Huawei on the Chinese vendors and in general, but also there's a quite difficult chip supply situation of full of the market leader.

Potentially leading to net.

The last sort of competitiveness on that we've seen and Eric small also starting to win contracts in Chinese lenders strongholds, such as Malaysia portfolio G on the.

The national networks there.

That is not due to legal obligations to exclude Huawei now to what extent are you seeing.

Pipeline booster of contract wins.

Give you confidence with regards to being able to growth falls to the on the market also on mobile networks, especially in the light of these.

Yeah the developments.

Thank you.

And look as I said, we are estimating 25 to 27 per cent.

The excluding China, this year and and they the market share the.

Decline seems now have to have been stopped on the so I said earlier, we have on the swap case since we have won approximately 50 per.

And.

There had been and occasional of cases.

There were some of our competitors have had a.

Delivery of difficult task because of various reasons. So I think I said earlier that the they have not been.

I think I commented network infrastructure business, and I said that they would not have been kind of a big needle movers and the same thing and mobile networks, we do not want to speculate.

<unk> done now compared with this our ability to buy our components. They have it each and every 1 of us have to comment our own business. We did not want to comment on competitors, we focus on our products and we are highly confident that after the especially after the recent launches we have and he can't so much of our product the competitiveness that.

That we are able to take care of our market share and now we have the conversion rate that we published the is now slightly above 90% done and we also stated that we we are optimistic about the development there and we could see some some improvements there going forward.

The.

Thank you Frank I'm Rich last week and I check of our last question. Please.

The final question comes from.

From a day part.

Part of that please go ahead.

Great. Thanks. Good morning, Thanks for taking the question Mark just a question for you on.

Cash flow.

If I look at the last 4 quarters, you had $2.3 billion euros of cash flow.

Positive each quarter, despite some headwinds in terms of unwinding of factoring and the lower gross margins.

Were there any significant 1 offs within those 12 months of benefit benefited free cash flow and.

When we look forward and we.

And look at the improvements that are still to come in terms of gross margins and renewing some of those licensing deals shouldn't we see that cash generation improve.

Thank you.

Yeah, you are totally correct.

We have had very good cash collection on and if you look especially true.

On top of that we had and <unk>.

Extremely good.

Net cash.

<unk> and <unk> came from accounts receivables and.

And that always when you have a big swings in working capital and.

On the diesel on a little bit like 1 offs, because you get the new level and is exactly what happened.

Quite a while and that's why the rolling 12 of these is very good because we are comparing very and.

And quite good and so.

Second half last year and on and very good and.

The first half of this year.

And that broke and capital is always the.

The spring factor and and now we've sent going forward that we are aiming to.

So he is on inventories.

Specifically on on the.

Semiconductor side as we've seen that supply is quite tight on and it's good to have lived with me more buffers here and otherwise and longer term of course, the and I would say that all of our EBIT is yeah.

Break it.

The income measurement, where well on cash flow of Atlanta.

And because our depreciations and and Capex on quite close to each other and.

And and of course, when you have a big hikes and in net sales like we normally have seen any of the past and in the fourth quarter that will also.

The increase your.

Net receivables.

But normal development.

The development is basically based on what is the hour.

And <unk>.

Profit development.

That's great. Thank you Stephane and thank you to Marco and Pekka. Thank.

Thank you everyone for your question and stay on literature.

And this does conclude today's call and.

I would like to remind you the during the call. We have made a number of forward looking statements that involve risks and uncertainties actual results may therefore differ materially from the results currently expected factors that could cause such differences can be both external as well as internal operating factors. We have identified these risks and more detail.

And the section titled operating and financial review and prospects risk factors of our 2020 of annual report on form 20-F, as well as other filings with the U S Securities and Exchange Commission with that thank you very much for joining us and enjoy the rest of your day bye.

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Welcome to Nokia second quarter, 2021 conference call and David Mulholland head of Nokia as Investor Relations today, we have Pekka lundmark, our president and CEO, along with our CFO, Mark Covid and connected with US via video and audio from our escrow offices. During this call we will be making forward looking statements regarding our future.

Business and financial performance and these statements are predictions that involve risks and uncertainties actual results may therefore differ materially from the results. We currently expect from.

And that could cause such differences can be both external as well as internal operating factors, we have identified such factors in.

And the section titled operating.

And financial review and prospects risk factors of our 2020 annual report on form 20-F, as well as our other filings with the U S Securities and Exchange Commission.

Within the presentation today, unless stated otherwise references the growth rates will mostly be on a constant currency growth rate basis and margins will be based on our comparable reporting.

Porting. Please note that our results release, the complete report with tables and the presentation on our website include comparable results information and addition to the reported results information.

Our complete financial report with tables available on our website includes the detailed explanation of the content of the comparable information and a reconciliation between the comparable.

And the reported information.

Todays stock exchange release and presentation can be found on our Investor Relations website.

With that I would now like to turn the call over to Pekka.

Thank you David.

And Hello, everyone and thanks for joining the call and I.

And I hope you and your families remain safe and dwell.

Oh, great start the 2021 and continued in Q2 and this has enabled us to increase our outlook for the full year.

My presentation. Today will include a brief overview of our financial performance followed by an update on the progress we have made in each business group against the standard.

The 2 we outlined daily and in the year.

I will then hand over to Michael to go through the financial performance in more detail.

Yeah.

As highlighted on the slide and the second quarter, we delivered 9% constant currency net sales growth that was primarily driven by network infrastructure with 20% growth.

And constant currency and strong performance across all product areas.

We of benefit benefiting from the robust and market dynamics, particularly in fixed networks, but we are also achieving meaningful market share gains and there is strong demand for submarine networks.

Yeah, the technology, so on new deals and automotive.

And so on 1 of brand licensing deals. In addition, our underlying recurring royalty base expanded double digits year on year.

Positively despite being in the reset phase of the stat that you both bulb on both mobile networks and cloud and network services also delivered growth in constant currency.

Yeah.

Profitability wise, our comparable gross margin expanded 270 basis points year on year. This benefited from the 1 of software daily and mobile networks, but we saw a strong underlying expense and even excluding that deal.

Comparable or better and the margin came in ahead of our expectation.

And there's a strong growth and network infrastructure and good cost discipline across businesses drove good operating leverage this shows that the underlying potential of the business exists, but we still see headwinds into the second half of the year, which we will revisit the later.

Back in March we announced our new <unk>.

The 3 phase to start the CIT to achieve sustainable and profitable growth and technology leadership.

In Q2, we saw progress and a number of the areas against the strategy. The most notable of these and Q2 were.

All the major product launch just over a month ago and mobile networks.

Our established.

The technology leadership and network infrastructure that has seen us gain market share and in the new automotive license and the new automotive licensees signed and Nokia technologies.

I will revert to these highlights in more detail shortly but I just want to emphasize that we are seeing progress in all areas of the business.

And across all elements of the strategy.

I'm grateful and proud of how quickly the Nokia team has adapted to a new operating model and we are already starting to see some benefits from the new structure.

Business groups are taking clear accountability and ownership for the financial performance, which has helped.

Expand margins.

Let's now look into some of the specifics of the quarter business group by business group and starting with mobile networks.

Elliot the earlier in the year, we said we were targeting full portfolio of competitiveness through 2020.1.

The launch of our new.

Air scale of radio and baseband product platforms at the end of June the plus a major piece of that.

All of the new air scaled product platforms based on new reef Chuck system on chips and as a result, this lunch was key to our 2 us remaining on track without a shock of targets.

As a reminder, we said that by year.

We have on 70% of shipments to be reef shark based with the target of increasing to 100 per cent by the end of 2020.2.

The launch included a series of new of massive mimo active antenna radios, and all of which of the industry wide bandwidth support of up to 400 megahertz.

And this can help operators.

And the efficient use of fragment the of spectrum allocations the.

The new reef suck S. Ocs will also be used in our eighth T. H R. Trade deal in addition to massive mimo.

I would also like to highlight that our 32 of T. Rx massive mimo active antenna, which is typically enjoying.

To make and just volumes and operate the deployment is the industry's lightest industry's lightest. This is a very important factor for customers in terms of ease of deployment and loading of sides of the infrastructure.

With the new baseband boards, we now can take the box of having common baseband 4 of 5 G and previous radio technologies.

The baseband products, we have launched can support up to 90000 connected users with 84 gigabytes per second air interface throughput.

We expect to have largely caught up with the competition by the end of the year and as you can see from these features and some areas we could even lead the market.

Yeah.

And the law importantly for both of our commitment to efficiency and sustainability of the baseband product is also up to 75 per cent more power efficient.

And this is important not only for us, but for our customers as well as we all work to reduce our environment environmental footprint.

Nokia remains committed to state.

And all of reducing our greenhouse gas emissions, including in the use of our product by 50% between 2019 on 2000 and thirdly.

The new air scaled products will really help us to hit that figure.

The customer response to the launch of soap on so far being very strong.

The if you want to launch if you watch the launch of a day on our website you can see a number of the customer endorsements we have received.

And the baseband products are already shipping with general availability later in the year.

And Meanwhile, our radio products are expected to start shipping later in the year with general availability coming early in.

The 22.

In fact, the introduction of the new baseband and board has been the fastest from time from the time of making the product decision to shipping products in at least 2 decades and it may be the fastest ever and Nokia is wireless business.

This is due to improvements and <unk>.

Twin development processes and the tooling.

Regarding progress on our 5 J K P. Ice we continued to see of good improvement and a reef shark associate base deployment with 54 per cent of 5 G of shipments in Q2 and.

That is on track to reach out of 70% goal by the end of this year.

On the conversion rate excluding China.

Or are the conversion rates that we are targeting and and and forecasting excluding China remains approximately 90%, but it has improved slightly in the quarter. We believe this number is now stabilizing and we see opportunities for it to improve although.

The binding of those deals is uncertain.

And finally I would like to note. The progress we have made with customers, including winning back of customer in Canada, and the recently announced share we have provisionally wanted and the China mobile tender.

In China.

So you will have seen and we have recently.

We were recently awarded 4% market share and the China Mobile and China broadcast network 700 megahertz, 5 Jade joint bid positioning us as the third vendor.

We believe this is a good endorsement of our improved product quality.

Moving on to network infrastructure.

Sure.

We have seen extremely strong growth and this business group and the first half with growth driven by all the businesses.

Our fixed networks business continues to benefit from what we believe it's the structural shift from operators across the globe to increase home broadband connectivity.

This has been accelerating.

The address many workforces are likely to move to a hybrid home office working model and the future Nokia will actually be doing the same.

We have also seen a significant acceleration and demand for our fixed wireless access solutions.

I would also note that we are seeing good market share momentum in many.

The areas of network infrastructure. This has been key to enabling our growth performance of this year and we have continued to work hard to deliver on our customers' increasing demand despite the global semiconductor shortage.

As we look forward as we look towards the second half of the year, we face tougher.

Your comparisons from a growth perspective, but we feel confident about our midterm opportunities as we see the strong opportunity pipeline, which combined with new product launches to come in the second half of the year should increase our product differentiation and further.

I want to highlight 2 other points.

Year on Youtube for network infrastructure the.

First day, so that our optical business continues to make good progress and the second is that we are also seeing strong momentum in some Matt submarine networks are sort of previously mentioned backlog of continues to flow through into sales as deployments progress.

From connects the ASR of cloud and network services business, which continues to make good progress on its portfolio rebalancing and sort.

A reminder, that includes focusing our R&D efforts on the areas, where we see strong growth opportunities and the meet them.

I would highlight the good progress in 2 areas already our 5 core of product now has.

150 customers on our 200 networks.

We also made good progress with our private wireless enterprise solutions and now have more than 340 customers.

Work is clearly still continuing and cloud and network services, and that's where they find out product and so as we refine our focus areas for the business to improve its.

As all of our share performance, but I was pleased with the progress we saw in Q2.

And.

And finally on to Nokia technologies, and as already mentioned, we signed 2 automotive licensing agreements in Q2, including with Diamond.

This shows the underlying strength of our portfolio and the growth prospects.

Finally on the increasingly connected automotive market.

We also continue to renew our industry, leading patent portfolio with the investment and 5 G 6 T and multimedia R&D.

Yeah.

Before I hand over to Michael to look at the financials in more detail I.

And I'll touch on our progress with enterprise customers for many years, we have been working to expand into the enterprise market and this has paid off with double digit growth and both the last 2 years.

In Q2, we saw a slight decline and enterprise sales, although in the first half, we still achieved solid 9% growth and.

I wanted it on the currency.

The slowdown in Q2 of us largely a reflection of tough year on year comparisons and the lumpiness that can be present and some of the larger enterprise deals.

However, we continue to make good progress and the business, we signed 63 and new customers and Q2 and continue to have confidence in the pipeline.

Pipeline for the full year.

I will now hand over to Marco for a little more detail.

Thank you Pekka.

And good morning, everyone from my side of his wall.

And I'll provide some more detail on our financial performance in the second quarter.

Yeah.

As Pekka.

And country mentioned, we continued to benefit from strengthening end markets.

We have also increased the forecast for addressable marketing tools and 'twenty 1.

And we now estimate that the total addressable market will grow by 5% and constant currency and Joseph 'twenty 1.

And these.

And up from the previous estimate of 3 per cent.

And the increase is primarily being driven by mobile and networks.

We have seen rising investments and find cheap.

Note also that our forecast for mobile Iran growth in U S dollars would be consistent with the estimates.

And for choosing to new 1 from third parties just like the Lora.

Yeah.

If we invest to get the trial version of our revenue growth all of our business groups crew and constant currency.

We saw particularly strong growth again from network infrastructure as Pekka explained earlier.

Earlier, and Nokia technologies, as we signed new automotive licensees.

From a regional perspective, the largest contributors in absolute terms and all growth for India, and Latin America up, 75% and 57% respectively and.

In constant currencies.

And both regions benefited from strong on LTE deployments and demand for our fixed IP and optical products.

Okay.

In Europe, we saw significant growth in volume Chi of deployments with <unk>.

Silence in in most other.

Areas of the business.

North America saw a robust performance despite the headwinds on market share and pricing based on the contracts negotiated.

And in tourism.

In creative China, we saw continuation of the strong mobile networks kept us at the deployments.

It's that we saw in Q1.

1 area, we wanted to provide some more visibility on all the progress this quarter is all of cross margin.

And this quarter has shown the importance of gross margin expansion in driving our.

And overall financial performance.

At the group level on gross margin and saw a slight headwind from product mix as we saw strong accruals and lower margin products, including fixed networks and submarine.

And these more than offset by better regional it makes.

Makes a long weighted volume benefits and good cost control on drawing new operating model, giving much greater accountability to the business groups for the financial performance.

Finally, we would also we also benefit from FX and mobile networks, 1 of software of deal which.

And previously mentioned and that contributed about 1 third of our gross margin expansion.

Yeah.

If we then focus on specifically on mobile and networks Wise was we have seen some financial benefits from our product mix shifting towards 5 cheap reef shark based product.

Which has been and they are also other important factors to be over here of that are driving our progress.

In mobile networks and regional mix was of limited benefit, but we saw a significant improvement from the new operating model.

You also see the FX benefit and the impact of.

Rx on at Brooks, 1 off and the quarter.

And looking at the group comparable operating margin performance you can clearly see the structural improvements we are making in our operating margin.

We did face some 1 off benefits and the quarter, but even despite.

And those we continue to make wrote good structural progress.

Our cost base remains well managed and as you said the benefit of the M and 1 of we saw positive fluctuation in other operating income and expenses related to both itching and venture fund gains.

It is also worth noting that in Q2 of the strong and business outlook.

<unk> led to a greater incentive accruals that but partially offset all the efforts on cost.

Despite this progress it is worth noting that we face many headwinds still and.

Half of the year as Pekka will highlight in our guidance, but we are encouraged by the progress we've made.

And then moving to the finance of performance of our individual beaches.

I already touched upon the cross margin performance and mobile.

The second Brooke's earlier.

And the comparable operating margin and the mobile networks, excluding the 1 of would have been essentially stable year on year as the improved gross margin was offset by a higher R&D investments.

Okay.

In net broke infrastructure we saw good every.

The net per cent of how our plan from the capital markets day is playing out.

The growth in the business combined with stable gross margin and stable opec's led to strong expansion in operating margins.

Now, we do expect to see some increased R&D expense and.

Have you down half of the year as we continue to invest and the future products to extend our differentiation.

But we are pleased to see the operating performance that we have and H 1.

And Nokia technologies, just like Pekka mentioned, we benefited from 2 automotive of licensing.

And the <unk> signing of the quarter.

And the underlying revenue run rate of crew and is now between 1.4 billion to 1.5 daily on a per year.

Yeah.

And the quarter was largely uneventful and from a cash perspective, which.

And they create a strong operating profit, but then we saw a meaningful net working capital increase and.

As we paid to the 20th related performance incentives to employees.

And also invested in inventory.

As we continue to see rising and demand for our products.

And trade payables.

Which and largely stable and the quarter.

We further reduced the sale of resumed bullets in the quarter.

And at this point I'm very pleased with the underlying cash performance and the business.

We have now deliver it also of fifth quarter of positive free cash flow.

And as bill and in quarter, 2 and we generated about.

About 80 million euro of free cash flow.

And the final point I wanted to make today was to remind you or the valley year Nokia has within our finished once of funds.

And reason.

But as you've seen a positive revaluation gain impacting our other operating income as investments within various funds have matured.

While there is never any guarantee of performance. These investments have delivered typically between 15 to 200 per cent irr's.

And quarter Nokia by material regime.

There have also be and other benefits the Nokia <unk> core business in both licensing opportunities and partnerships with companies within the venture funds.

Some of the investments within the venture.

Ares fund have now seen cash distributions back to Nokia and.

And we continue to have about 700 of 60 million book value of assets and our balance sheet.

That we believe can be.

And our creative to Nokia delegation going forward.

Now back to you pick them.

Bench of.

Thank you and Michael.

Given the strong Q2 and first half results, we have today revised our full year 2021outlook upwards.

From a net sales perspective, we now expect the land between $21.7 and $22.7 billion euros as we are now assuming actual.

Currency rates for the first half and that the end of June right the continuous into the second half.

We have also revised style of comparable up at any much and outlook now expecting it to be and the range of 10 to 12 per cent.

While our first half results provide a strong foundation for the rest of the year.

Actual of they still expect the earlier communicate the had headwinds to impact us and the second half.

More specifically this is related to market share and pricing and North America in regards to contracts made in 2020.

Therefore, we still expect typical quarterly earnings seasonality to be less pronounced in 2020.1.

In addition, we continue to accelerate R&D investments and of course, we are also monitoring the components situation working very closely with our suppliers to ensure we can meet the strong customer demand we are seeing.

We have also adjusted out of free cash flow and comparable return on invested capital guidance.

Today based on our first half results.

So in summary, I'm pleased with our strong performance and the first half of the year. Our team has done a great job and establishing such a firm foundation.

But as we have said it is important to bear in mind that our results benefited from some 1 offs and.

We have a lot of work ahead of US we are still only in the first phase of our strategy execution.

But with the good start for the year. We are confident that we are on the right track to achieve our long term targets. Thank you.

Thank you Pekka.

And I move over to the Q&A session.

Courtesy to everyone on the queue, we would ask that you kindly limit yourself to 1 question and 1 brief follow up with that I'll hand over to the operator, Rachel who will give the instructions.

Thank you we will now begin the question and answer the question.

And the video please.

Please remember to mute audio on your computer.

And your question and thank you.

Second of July.

You asked the question.

And then 1 on the telephone keypad.

Thank you Brian.

Putting.

The key.

Your question. Please press Star then 2.

The first question comes from Dominik Olszewski from Morgan Stanley. Please go ahead.

Yeah.

Good morning, everyone. Thank you for taking the question. So the main question would be whether you can discuss the puts and takes around.

The outlets the train 3 and 3 obviously very strong performance and the first half of this year and improved guidance for this year. So could you just talk about the puts and takes the train train 3 of the no change to the the midterm outlook says the main question and then the follow up is just around the gross margin bridge you gave.

Sharing the fixed business.

The and the submarine networks business and we said it was a drag on gross margin.

Given the you feel confident and those businesses going forward in terms of the backlog could you talk about whether those become less of the headwind going forward. Thank you.

Thank you if I take the first 1 on Michael if you take the gross margin.

The question.

Hey.

And the are still in the early stages of executing on our our strategy.

Of course, we are really happy with the H 1 results, but there were also some 1 offs that way of helping US there and then we have the of the earlier communicated the headwinds in the second half.

Of the.

The year. So H 1 provides a very good foundation, but the it's only 4 months since we announced the 'twenty 'twenty 3 outlook. So we do not see a reason to change it today.

And of what counts to the and mix changes and and their impact on our gross margins.

At the mix is ongoing up and down quarter by quarter and that's why.

We believe that it's better to look on the longer term the business of course, if we have a continuation of of strong growth and a lower margin businesses that will hit and and our future.

Future gross margins and and.

And whatever mixes we see those have been already taken into account in our guidance for 'twenty, 1 as well.

And so I would say that of that there's puts and takes and and all of our business. He is not only with these 2.

Thank you Joe and Richard next question. Please.

Thank you and your next question comes from Alex Duval from Goldman Sachs. Please go ahead.

Yes, good morning, everyone and many thanks for the question Firstly your gross margins. So obviously very strong you've quantified the product mix benefits and wireless, but it'd be interesting to know a bit more about the extent.

And to which customers now reward you with better prices so that the <unk>.

Mobile products and the extent to which mobile gross margins have further to expand and coming quarters or years. If you make further improvements on the wireless side and.

And then my quick follow up with just the on network infrastructure revenues, you referenced the strength and the growth there.

I wonder to what extent do you see the unsustainable given you did reference work from home demand being of Easter, which arguably can start to run the hard comps at some point I'm wondering if there are key product cycles, you could point us to.

Whether youll seeing sustainable demand driven by digitalization more broadly many things.

Thanks, Alex.

And if I take the networking infrastructure and medical continues to be our gross margin extra right. So the network infrastructure. So of course I mean.

He looked 20% growth in the quarter and and you saw it even some higher numbers and the individual businesses.

Okay. We do believe that there is some kind of structural underlying the.

Changes in the market, especially the especially the home connectivity of home broadband.

Connectivity and.

And then actually we are starting to see the effects of the the 5 J deployment, though so when when you need connectivity for.

For base stations and all of that capacity that is needed is there and also boosting boosting the IP and optical networks market and.

There are reasons to believe that that this trend will continue.

Continue and when you then move to the next phase of the mobile networks.

And what meant.

When the when the smallest sales and and.

And the millimeter wave of ideas start to get more more of a common you will need even more.

The.

The capacity in base station connectivity. So we are optimistic about the structural development of this of this market but.

<unk> just to be realistic on numbers.

We will already and the second half start facing tougher comparables. So don't just automatically assume that this percentage will continue but structurally good market going forward.

And what counts of the gross margin.

And she saw in and of the breaches.

But we have the regional mixes that are impacted positively volume on and of course, the cost and <unk>.

But and in the mobile networks, we have.

Oh School of course, the 5 Chi.

And the reef shark that is impacting but also within that there's a cost elements that we have been able to.

Wall move on and.

And also in the mobile networks.

Services and part of it is improving on gross margin in the quarter as wall and.

And as they've been cleaning up the portfolio and and and agreements as wall and.

So the different elements that that all of our impacting.

How that will continue and the future and then we'd look it back to you and all.

Guidance and and and.

And.

Of course, we ambition is that we will at the ask you it as as we can and customers actually expecting a small debt that we have to show the cost improvement.

Improving our products.

Thank you Alex and Rachel next question. Please.

Okay. The next.

And Kevin Sandeep Deshpande day from J P. Morgan. Please go ahead, yeah hi.

Hi, Thanks for letting me on 2.

2 quick questions if I may.

<unk>.

But we are showing progress.

China, you've taken some share in China and the most recent auction.

Have you seen any progress with your <unk>.

The product in the United States, where EBITDA is the other region, where you had a significant change in market.

Over the last few years and secondly on the gross margin.

The mobile business.

The clearly is a day a day the.

He said, it's between shipment and Oh, Yeah, all of these shop product and your revenue recognition of that the shock product.

I can share.

And that you'll see.

Given where you are today in terms of shipping the lease shop based products with Disney our mobile business, where are you in terms of recognizing them in terms of your gross margin today.

And thank you. Thank you of Sunday was the same.

And the next year.

You take the.

And I think but then and yes, the U S U S market.

The good news is that that this much.

Much discussed headwinds in.

In terms of market share and pricing.

They have been quite well understood the already since the October of last year, when we for the first time.

The gross me to talk about them because they relate to early of thing surely of contracts 2020.

The matters.

We are actually pretty.

The confident on.

On the U S market, the citrus and we have a we have signed as you have seen a 5 year 5 J deal snow.

Started with.

With both the T mobile and the AT&T and we also have to remember that the.

On that item.

<unk> continues to be a very big and important that the customer to us and many segments and then the U S. Market. This is actually look more than the 3 large operators.

There is a significant number of smaller operators that way of working with and we are fairly confident and our position there and on top of all of this there is a growing enterprise market private wireless market and now as we have recently see and there is a high likelihood that those so well so the government driven.

Now.

In terms of connectivity will increase going forward. So we have every reason to be optimistic about the U S market.

And what comes to the mobile networks gross margin.

Before I touch upon the the.

The reef shark and and shipments versus revenues I just want to highlight.

Programs more of that remember the other factors as well that are important and for the cross margin expansion and improvement that we've seen and the first half and if we look at them and what Tony and his team and mobile networks have done and 5 <unk> and <unk>.

The the way, we are producing and and developing and farm. She is much more efficient.

Right on 1 day and then he was just a year ago and then of course, when we see the volume of say, increasing and that will also impact our ability to improve.

And the cost base and in the product area and in.

The additions data.

And we have other areas and mobile networks, just like I mentioned about the services that I.

Isn't impacting us wall put camps the reef shark, that's 1.1 part of the improvement and.

Yeah, we've said that there's about a 6 months delay between the shipment until we've recognized that in our P&L and and I would say that that's about the same today and it was a year ago. So.

And you can use the asset as a rule of thumb on and see you know about and what is the relationship could be in and ship.

Shipments on and.

Revenue per Nielsen on on reef shark.

Uh huh.

And based products.

Thank you Sandeep ritual net.

And you can include.

Thank you. The next question is from Stephanie satellite.

Slides from load and market. Please go ahead.

Hi, Thanks, My question would be on mobile networks, where your method of really upgrading your margin assumptions.

And can you explain what the surprise to you.

Question back to you on the upside this year and and also why you have chosen not to move the goalpost for 'twenty 3 even though you will still not the early benefits from our system on chip transition.

And then maybe a follow up any reason why it couldn't get to Ericsson and gross margin levels and <unk>.

Mobile networks once you have completed the.

Well the strategic conversation I think the 44% excluding the IPR revenues.

Okay.

Thank you Sammy.

If I start with the 2023, I think I actually already answered that the.

Question of course, we we are pleased with.

System on this 1.

The even excluding the effect of some of the 1 offs, we've been talking about the the issues that I went to face us and the second half of the year, meaning that.

The typical seasonality that we have seen.

The will be less pronounced this year and the thesis only 4 months since.

Our published the twenty-three target so we do not feel that.

Today's the right time to revisit the them then when it comes to the mobile networks of surprises and on medical Medical UK again, and then go deeper into the into the margins if needed but the but.

Of course, 1 thing that that has.

Since we changed and the last few months of just the market itself. There is strong demand.

The demand on the market we have as you saw we upgraded and also our market size and market growth forecast the.

This year.

All of product execution has been foster we've been able to speed up there.

Lastly of course explained and then are there and on top of that very good operational cost control and here I would say that's the simplification of the operational model that we did where we're in the earliest setup, we had actually multiple sometimes even 5 management team members being partially responsible.

And before when mobile network deal now, it's all in and the mobile network business and and Tommy is fully responsible for that so that is already already showing it's a it's of the effects positive effects and just building on that it would counts to the new Rhopressa on model is extremely nice to.

As part of that that each of the businesses and have really taken that responsibility and focusing on cost, but also on the top line and see how can we improve the business and we have totally different discussions today than we had before the neo personal on model. So I'm very pleased to see how small the half that has landed.

The C. Thank you Sammy and original next question. Please.

The next question comes from Simon Leopold from Raymond James Please go on.

Ahead.

Thanks for taking the question I wanted to ask 2 <unk>..1 I think it is a quick 1 on the other ones a little bit more strategic in terms of the quick 1.

With the the award of the Chinese and 700 Megahertz project.

I presume, that's a little bit of of a gross margin headwind could you help us understand how that particular project factors into your overall thinking and if and when.

On the assumption is correct and then in terms of the strategic.

The question I wanted to get an understanding of your priorities, specifically and your optical business given that you currently lag the sector leaders and technology and profitability, how do you address or solve those problems as your priority to close the the the product gap, where the profitability GAAP how can you do.

Both thank you okay.

Just quickly the China.

And the effect on volume Center.

Margins are.

This year will be it will be it will not be material, we do not comment.

On margins on the individual deals, but it is of course known that.

The Chinese market this highly the competitive.

Competitive and the typically and this type of deals the margin is a slower and in the beginning and then there is an opportunity at the tip of.

The increase of over time, but of course.

4%. This is 4% it's not more of its 19200 base.

And so you have to put it into into perspective. So it is it is not really material.

And then I mean, we are right now moving to the fifth generation of optical coherent technologies with the PSC of 5.

The <unk> architecture, we are seeing our our technology of competitiveness clearly increase weighted.

With this technology, we have are optimized and the way the the cost to performance ratio for the for the sweet spot of of <unk>.

400 gig and sometimes 600 gig connectivity and Metro Metro regional and naval lung the stem cell and networks.

800 gig can be.

We implemented by 2 times 400, the line card, but that's only a very small part maybe of 2 to 3 per cent of the total demand at the moment and that's why the full portfolio of that we are now having with the having launched PSC 5 of has greatly increased and competitiveness and.

If and when there is then a face we're aware of the 800 with the direct implementation would become a mass market. We will certainly be there at the right time as well.

Thank you Simon and Richard next question. Please.

Thank you. The next question is from from.

Thanks, Bob.

From UBS.

Go ahead.

Hi, everyone as a follow up on the 2023 sort of I think I know and I understand the pick up that you don't want to.

The increase now because it's been done on these 4 months and I totally understand that.

I just wanted to understand the moving parts. So if we look at the full year 'twenty, 1 you already and we will have 10% to 12%.

23 of 10% to 13%.

Look at you know this 10 to 12 per cent already includes the headwinds of pricing of Verizon and so some things that possibly would be less of a.

Had we need in the next 2 years and then you have the scale with shock you know benefit.

The increase your cost and improve your cost of sorry.

The strong network infrastructure with the structural.

The demand with a positive.

Mix, if we look at your full year 'twenty 3 guidance for operating margin for the Division and then you have the C band and the U S were supposed to be you know is of good geographic mix.

My question is what is there anything that they missed or what kind of the headwind. We should expect in the next 2 years that would offset the negative.

Tivoli.

And this just drivers just trying to understand the moving parts and and.

And thank you and I don't disagree with your with your effects, but again the H 1 strong foundation.

The boosted by certain 1 offs.

On the component markets he chairs.

And will remain tight.

There could be always surprises there this will continue well into 'twenty 'twenty 2 some analysts say, even saying this is not necessarily our estimate but some of our even saying that it will continue into 2020..3. So there is also even though we are seeing strong demand. There is also.

The uncertainties there. So we just feel that this is not the right time.

We are only 4 months into the execution of the said the 2 we are still in the reset the face and and let's now focus focus on the day to day hard hard work and we do not want to speculate anything more on 2020.3.

Thank you Francois Rachel next question please.

Thank you. The next question and sort of I was done.

That's the part.

Please go ahead.

Yes, hi, and thanks for taking the question good morning tool.

Firstly, just on electrical infrastructure.

If you look at the underlying businesses and the growth rate so far this year.

Could you comment whether you're gaining share.

In IP routing and optical and and fixed access.

On the second of its couple of follow up just on the component and situation.

Can you confirm the despite the type of message you don't see.

And a top line headwind in the.

The currently from the from the pickup on the situation.

And I E no sales of being held back by the shortages excellent. Okay. Thank you.

And I take the component the question on Michael If you take the ni and our growth prospect.

I mean.

We.

We have said the component of market is tight and I think I said.

And the cube after Q1 that.

That you have to fight for your share of every day and that situation continues we are on daily calls with many of.

Many suppliers, we have been for the most part table the deal very well with the situation.

Jason.

But it actually.

And interestingly that we could grow even faster if there were more components of available.

But all of this is included and ashamed and our guidance and of course.

And if it's any comfort that the regarding our ability.

The deal with the citrus and as you saw we upgraded our topline guidance by roughly 1 billion euros. So it just shows that yes, we are able to deliver there and on top of that I'm, saying that it could even have been a bit more if there were more components available.

And what kind of as to the IP and and.

And fixed networks and.

These are the 2 areas actually will be half of technological.

Advantage and.

We have and.

On the IP side, we've been gaining market shares and in certain regions and we see that we are actually taking.

The getting closer to 2.

And then the number 1.

Instead of on areas like Europe, we and number 1 already.

And.

And definitely the the technological.

Technological leadership is extremely important here.

And these 1.1 reason why we believe that in the Tech high Tech industry, you have to have a very good focus on technology.

Largely on and securing the yeah.

So at the top notch on technology side on and that's why we invest in R&D and.

The same actually goes for.

Fixed networks. So if you look we are the only 1 that can offer 25 gig and.

Solutions and the fixed networks and the center.

Definitely and shown as a very good and sales pitch to watch our customers on and it's probably 1 point and we see that the and the connectivity and demand is increasing very heavily and not only because of the fine cheap, but also because of the the.

And the Covid situation and remote and flexible working.

Solutions.

So I.

I would say that in both those areas. We are definitely seeing a positive development and may be it may be of chest to add.

Just looking purely at that number so the first half.

Yeah, the topline growth and IP and networks is 15.

And per cent and optical networks 10 per cent and fixed networks 30.37 per cent.

You are saying that the that the market growth is maybe.

4 per cent or something like that there could be a faster growing pockets, yes, but with these numbers. So I think it's absolutely clear that we are taking market share.

Thank you Alex Rachel next question please.

Thank you. The next question is from Andrew Gardiner from Barclays. Please go ahead.

Hi, Good morning, Thank you for taking the question.

And so a follow up to that last 1 really on network infrastructure.

And just to the points that you.

And we're making really and when youre talking about the 4% growth in the Tam for Ni. This year, yet qualitatively you are sounding very bullish and yet you haven't upgraded the Tam I think.

I can see as you guys have said, you're clearly gaining market share.

So 2 part question 1 why.

So all of a bit more upside to that Tam given given the end market trends, you're saying and in terms of market share.

And you guys, just showing real strength in fixed and terms of the year on year of growth submarine as well, perhaps to a slightly lesser extent and and optical but still good growth.

Clearly you've got a major competitor there.

Huawei and can.

Can you talk about the the trade war backdrop and how that yeah. This has been sort of obviously ongoing for a number of years now do you feel like the share gains that youre seeing now of all of you being boosted by the effect and many of these markets, particularly outside of China. Thank you.

And I don't think.

Those things of that you referred to.

And that they would have the at least so far being a big needle mover in the eye.

The optical our fixed networks there has to be on location. All tenders are occasional suggests and that's where that could have played into it but not in in and in any big way.

Wei.

This really comes from our technology competitiveness of that is it and then when it comes to the market size estimates are.

Your question is Sir we have not yet seeing what the the market analysts the.

Houses and I was saying about the Q2, we don't have those numbers available yet.

So let's see what they are saying then then we have to see if we if we keep the Saudis. There is reason to change, but but we are clearly seeing strength and this market.

Okay.

Thanks Andre original next question please.

Thank you.

And in terms of.

Right.

And Haynesville and Ken.

Ken Please go ahead.

Ahead.

Thank you operator, taking my question relates to some degree a question on that might have been all of us.

And we're ready but of those of you both Japan and perhaps I think you mentioned.

Q1 that it was a little bit probably get the temporary and project.

And the differences to the wheel.

Key components or or Ericsson and the type of them.

Super strong first half and you commented a bit on the Japanese market outlook and the.

Or so.

I guess, we saw APAC ex the greater China, and India was down for something on hand.

Yeah that that forced the daily.

APAC and Japan was the only market, which was slightly down and we had 6 hours set and the markets, where we're growing the primary countries that the that the effective that slightly negative number remember at the Sony slightly negative was Korea it was not.

The Japan.

The picture and Japan.

And it's a strong and the same statement that we made after Q1 remains that there seem to be set and timing differences between the.

Operators plans between.

Our in a way our agents and.

5 G and then and some of our competitors reagents and that is our understanding as to why you may have seen some differentiation and and statements about the growth in Japan and just the building of that remember that we are the customer all of a supplier to all top.

And C S piece and Japan as well.

And.

Based on your original next question please.

Thank you. The next question in terms of it and then from.

From Deutsche Bank. Please go ahead.

Yes, good morning, and just really 1 question, which is just about your commentary around north.

America on share of loss and price erosion and the second half I was just wondering if you thought that might continue into the first half because I see what you're saying a lot of the first half of it is temporary or 1 time effects.

Could be a difficult comparison to the first half of 'twenty..2 so I just wanna be set and that you are still on the growth path.

The first half of 'twenty 2 based on what you can see today. Thanks.

And thank you I mean, as I said those things are related to them.

2 mostly.

And the events before this year so of the effect on the second half will be stronger than in the first half, but the but that should really then be.

The it for the most parts, but we have not given of course, 2020.2 guidance of I refer to what I said earlier that the we remain.

Over the kind of overall I'm optimistic and confident on the North American market. There are there are no new.

Headwinds if you will that would have surfaced. After we first started to talk about this thing in October last year.

Thank you Richard next question please.

Thank you. The next question in terms of it.

Hey, Matt.

Please go ahead.

Thanks, very much a 1 per pack on 1 from Marco Pekka you talked about your conversion rate and and people are asking about market share, but inside your installed base clearly a lot of customers were shared with Huawei, So I'd like to know and I'm certain that something you track.

What extent do you think your share gains or some sort of dividend, which is coming in the wake of of various carriers being obliged to exclude Huawei from many markets. How much do you think the market share gains have come directly as a result of that and then from Marco maybe you could give us a little insight into the licensing pipeline.

<unk> was the renewal with Samsung and.

Including cellular standard central patents, because it's not entirely clear from that and do you have any material renewals coming up in the next year or 2 that could change the outlook in terms of the run rate you've laid out for the licensing business. Thank you.

Yeah. Thanks.

But when we look at the mobile networks market share.

Our estimate continues to be for this year that it would be of 25% to 27% excluding <unk>.

China that is slightly lower.

And on what we had the.

Last year and as.

We said wait now.

Expect on and target the.

The the conversion rate would stabilize indicating that they would not be a further market share losses and done and hopefully we would then start winning back customers and we have already done that now in China and in Canada.

Canada so.

There is a there are cases as you know and as we have discussed.

The cost where operators are for various sometimes politically driven reasons have decided to change of the supply of switch suppliers and we have already estimated and and I can confirm that we have a we have 1.

Approximately 50 per cent of such opportunities, but we are not.

Particularly of quantifying that a how much that would be in and Ah in terms of our revenue on margin.

And what kind of as to the pipeline and in technologies.

And we basically have renewals continuously and and different scales and and.

Yeah.

Most.

Bubble of our agreements and and what comes to also 1 of the renewals happening are confidential.

But you could you could calculate that we have always the handful of renewals every year that we.

Negotiated with just like you've seen now that all poised is.

First of all at the moment on table.

And so these are coming continuously and this is normal business for taken launches so yeah.

And and what kind of Samsung deal, we signed with them.

It is covering them.

Yeah.

Light area off of.

And the video systems.

The systems on and so forth and we're quite happy with that system all of the the agreement as Paul.

Thank you Richard Richard next question. Please.

Thank you.

It sounds like.

From Dnb.

Please.

Pat.

Hi, good morning, all and.

Congrats on a great quarter here.

Most of my questions have been on answer but.

I want to just follow up on on the the market share situation, especially in mobile networks outside of the U S. Now.

1 thing is of course a lot.

And some countries all creditors have been legally obliged to exclude.

Huawei on the Chinese lenders and in general.

But also there's a quite difficult chip supply situation of all the market leader.

The potentially leading to net.

And that vertical.

So competitiveness on how we've seen Eric and I'll also starting to win contracts in Chinese lenders strongholds, such as Malaysia for Fuji.

The national networks there.

That is not due to legal obligations to exclude the hallway now to what extent are you seeing.

Multiply and boost of contract wins that give you confidence with regards to being able to growth falls to the on the market also on mobile networks, especially in the light of these.

Yeah the developments.

Thank you.

And look as I said, we are estimating 25 to 27 per cent.

Part of coding, China, this year and and they the market share of the decline seems to now have to have been stopped and as I said earlier, we have on the swap the case since we have won approximately 50 of.

Percent.

And there have been occasional cases where were.

The competitors have had.

The delivery difficulties because of various reasons I think I said earlier that the they have not been.

I think I commented networking infrastructure business and I said that they would not have been kind of a big needle movers and the same thing and mobile networks, we do not want to speculate.

Some of our competitors.

The ability to buy our components they have it each and every 1 of us have to comment our own business. We did not want to comment on competitors, we focus on our products and we are highly confident that after the especially after the recent launches we have 3 can't so much of our product the competitiveness of that.

That we are able to take care of our market share and now we have the conversion rate that we published is now.

Slightly above 90% and we also stated that we are optimistic about the development there and we could see some some improvements there going forward.

On us.

Thank you Frank I'm Rich last week and I take our last question. Please.

The final question comes from.

From a day part.

Part of that Okay go ahead.

Yes, great. Thanks. Good morning, Thanks for taking the question Mark just a question of few on.

On cash flow.

If I look at the last 4 quarters, you had $2.3 billion euros of cash flow.

Positive each quarter, despite some headwinds in terms of unwinding of factoring and the lower gross margins.

Are there any significant 1 offs within those 12 months of benefit benefited free cash flow and.

We look forward and we.

Look at the improvements that are still to come in terms of gross margins and renewing some of those licensing deals shouldn't we see that cash generation improve.

Thank you.

Yeah, you are totally correct.

We have had very good cash collection on and if you look especially true.

Quarter, 1 that we had and <unk>.

Streaming the Kid.

Net cash.

Cash collection, and and came from accounts receivables and.

And that always when you have a big swings in working capital and.

On the diesel a little bit like 1 offs, because you get the new level and this is exactly what happened.

And so and that's why the rolling 12 is very good because we are comparing very well.

And quite good and so.

Second half last year, and and very good and.

First half of this year.

And that broke and capital is always the.

The spring factor and and now we've sent going forward that we are aiming to.

And as our inventories.

Specifically on on the semiconductor.

The semiconductor side as we've seen that the supply is quite tight on and it's good to have lived with me more buffers here.

And otherwise and longer term of caused the net I would say that all of our E. Bts is yeah.

Break it.

The <unk> measurement, where well on cash flow should land at because all of depreciations and and Capex on quite close to each other.

And and of course, when you have a big hikes and in net sales like we normally have seen any of the past and in the fourth quarter that will also.

Increase your.

Net receivables.

But normal development.

The development is basically based on what is our.

The profit development.

That's great. Thank you Stephane and thank you to Mark of on Pekka I'm, sorry, 2 of them for your question and stay on ladies.

The account this does conclude today's call and.

And I would like to remind you the during the call. We have made a number of forward looking statements that involve risks and uncertainties actual results may therefore differ materially from the results currently expected factors that could cause such differences can be both external as well as internal operating factors. We have identified these risks and more detail.

And the section titled operating and financial review and prospects risk factors of our 2020 of annual report on form 20-F, as well as the other filings with the U S Securities and Exchange Commission.

Thank you very much for joining us and enjoy the rest of your day bye.