Q3 2023 Nokia Oyj Earnings Call

Speaker 1: Good morning, ladies and gentlemen. Welcome to Nokia's third quarter 2023 results call. I'm David Mulholland, head of Nokia investor relations. And today with me here in Espoo is Pekka Lindmark, our president and CEO , along with Marco Verran, our CFO .

Good morning, ladies and gentlemen, welcome to Nokia's third quarter 2023 results call when David Mulholland head of Nokia Investor Relations and today with me here in Nashville, as Pekka Lundmark, our president and CEO , along with Mark <unk> our CFO .

Speaker 1: Before we get started, a quick disclaimer. 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 uncertainty.

Before we get started a quick disclaimer.

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 results that could cause factors that could cause such differences can be both external as well as internal operating factors.

Speaker 1: Actual results may therefore differ materially from the results we currently expect. Results that could cause factors that could cause such differences can be both external as well as internal operating factors.

Speaker 1: We have identified such risks in the risk factor section of our annual report on Form 20F, which is available on our investor relations website.

We've identified such risks in the risk factors section of our annual report on form 20-F, which is available on our Investor Relations website.

Speaker 1: Within today's presentation, the references to growth rates will mostly be on a constant currency basis, and where we refer to margins, it will be based on our comparable reporting.

Within today's presentation references to growth rates will mostly be on a constant currency basis, where we refer to margins. It will be based on a comparable reporting.

Speaker 1: Please note that our Q3 report and the presentation that accompanies this call are published on our website. The report includes both reported and comparable financial results and a reconciliation between the two.

Please note that our Q3 record and a presentation that accompanies this call are published on our website. The report includes both reported and comparable financial results and a reconciliation between the two.

Speaker 1: In terms of the agenda for today's call, Pekka will give a quick overview of some of the announcements we've made this morning, along with our financial progress in the quarter. Mark will then go into a bit more detail on some of the key factors influencing our financial performance, before Pekka gives a brief conclusion and we move to Q&A. With that, let me hand over to Pekka.

In terms of the agenda for today's call Mike will give a quick overview of some of the announcements. We've made this morning, along with our financial progress in the quarter. Mark will then go into a bit more detail on some of the key factors influencing our financial performance before Patrick It gives a brief conclusion and we move to Q&A.

Now, let me hand over to Pekka.

Speaker 2: Thank you, David, and thank you all for joining us today. Before we talk about our financial performance, I wanted to actually start and explain some other announcements we have made today, because we are taking decisive action on three levels, strategic, operational, and financial.

Thank you David and thank you all for joining US today before we talk about our financial performance I wanted to actually start then explain some other announcements we have made today I guess, we are taking decisive action on three levels.

<unk> operational and cost.

Speaker 2: We will accelerate our strategy execution by providing our four business groups with increased operational autonomy and agility. This will enable them to better address opportunities in their distinctive markets.

We will accelerate our strategy execution by providing all four business groups with increased operational autonomy and agility. This will enable them to better address opportunities in their distinctive markets.

Speaker 2: They will be empowered to faster diversify beyond service providers, build new ecosystem partnerships, implement new business models and invest for technology leadership. We are also streaming...

They will be empowered to faster diversify beyond service providers build new ecosystem partnerships implement new business models and invest for technology leadership.

We are also streamlining our operating model.

Speaker 2: We had in 2021 created four P&L responsible business groups.

We had in 2021 create did for P&L responsible business groups.

Speaker 2: structure around unique customer offerings, but supported by a shared sales organiser.

Sure down around unique customer offerings, but supported by a shared sales organization.

Speaker 2: We will now embed the sales teams into the business groups. So the new model is the one that you will see here on the right hand side on the...

We will now embed the sales teams into the business groups. So the new model is the one that you will see here on the right hand side of that.

On the slide.

Speaker 2: These dedicated sales teams with a strong product and customer connection will enable business groups to better seize growth opportunities and diversify into enterprise web scale and government.

These dedicated sales teams with a strong product and customer connection will enable the business groups to better see as growth opportunities and diversify into enterprise web scale and government sectors.

Speaker 2: This change will bring highly empowered teams in front of customers that are able to make quicker decisions based on their needs.

This change will bring highly empowered TMC in front of customers that are able to make quicker decisions based on their needs.

Speaker 2: The company will also move to a leaner corporate center with strategic oversight and guidelines, for instance, for financial performance, portfolio development and compliance.

The company will also move to a leaner corporate center with strategic oversight and guidelines for instance for our financial performance portfolio development that compliance.

Speaker 2: We will continue our strong commitment to long-term research through Nokia Bella.

We will continue our strong commitment to long term research through Nokia Bell labs.

Speaker 2: in the face of a more challenging market environment.

In the face of a more challenging market environment.

Speaker 2: We will reduce our cost base to secure our profitability. We are moving quickly to lower our cost base on a gross basis by 800 million to 1.2 billion euros by the end of 2026, assuming on target variable pay in both periods.

We will reduce our cost base secure out perfect ability, we are moving quickly to lower our cost base on a gross basis by $800 million to $1 2 billion euros by the end of 2026, assuming on targets variable pay in both periods.

Speaker 2: Nokia expects Jack to quickly on the program with at least 400 million of in-year savings in 2024 and a further 300 million in 2025.

Okay, I expect Jack quickly out of the program with at least $400 million in year savings in 2024, and a further $300 million and 25.

Speaker 2: The program is expected to result in a 72,000 to 77,000 employee organization instead of the approximately 86,000 employees Nokia has today. Overall this represents a 10 to 15% reduction in personnel.

The program is expected to result in a 72000 to 707000 employee organization instead of the approximately 86000 in place not gas today.

Overall this represents a 10% to 15% reduction in personnel expenses.

The exact scale of the program will depend on the evolution of the market demand in the coming years.

Speaker 2: The exact scale of the program will depend on the evolution of the market demand in the coming year.

Speaker 2: We do expect net savings, but the magnitude will depend on how inflation.

We do expect net savings.

The magnitude will depend on how inflation develops.

Okay.

If we now turn to our financial performance in Q3.

Speaker 2: If we now turn to our financial performance in Q3, we saw an increased impact on our business from the macroeconomic challenges, which are pressuring operator spending. And that's resulted in a 15% year-on-year decline in itself.

We saw an increased impact on our business upfront of the macroeconomic challenges, which are pressuring operator spending.

That has resulted in a 15% year on year decline in net sales.

Speaker 2: Gross margin at 39.2% declined only slightly versus the previous year. And I'm happy to see a sequential improvement in gross margin in mobile net.

Gross margin.

39, 2% declined only slightly versus the previous year and I'm happy to see a sequential improvement in gross margin in mobile networks.

Speaker 2: However, it is during such challenging times that the business proves its resilience. And that is exactly what we see when we look at the over-any margin, which was eight and a half percent for the quarter.

However, it is during such challenging times that our business proved its resilience and that is exactly what we see when we look at the operating margin which was 8.5%.

<unk> for the quarter.

Yeah.

Network infrastructure sales declined by 14% with most business lines declining with the exception of optical networks IP networks sales declined by 24%, reflecting weakness in North America as customers continue to evaluate spending as well as small declines in other other agents.

Speaker 2: Network infrastructure sales declined by 14% with most business lines declining with the exception of optical networks. IP network sales declined by 24% reflecting weakness in North America as customers continue to evaluate the spending as well as small declines in other, other rates.

Speaker 2: The 19% decline in fixed networks was broad-based, exacerbated by soft comparisons to the corresponding quarter year ago. Fixed networks was also impacted by customer spending in America, as well as some.

The 19% decline in fixed networks was broadbased exacerbated by tough comparisons to the quarter year.

Corresponding quarter a year ago.

<unk> networks was also impacted by customer spending in America as well as.

Some.

Digestion.

Speaker 2: There was a small decline of 5% in summary networks which related to code timing.

There was a small decline of 5% in submarine networks, which related to timing.

Speaker 2: The growth in optical networks of 4% was primarily driven by India and showed the continuing momentum and customer engagement without PSC 5s.

Timing.

The growth in optical networks of 4% was primarily driven by India and showed the continuing momentum and customer engagement without PFC five solutions.

Speaker 2: We think the gross margin in network infrastructure in two year old year while operating margin was somewhat resilient that we're half percent a decline of 80.

Pleasingly gross margin and networking infrastructure food year over year.

While operating margin was somewhat resilient up 5% a decline of 80 basis points.

Speaker 2: In mobile networks, we saw the regional trends of the first half continuing in Q3. North America sales were impacted by the challenging macro environment and as customers continued to digest inventories. India grew significantly year over year, but the pace of deployment has slowed significantly compared to H1. There were declines in most other regions with the exception of Middle East and Africa, which had modest.

In mobile networks, we saw the regional trends. So the first half continuing in Q3, North America sales were impacted by the challenging macro environment and best customers continued to digest the inventories India grew significantly year over year, but the pace of deployment that slowed significantly compared to.

Which one they were declines in most other regions with the exception of Middle East and Africa, which had modest growth.

Speaker 2: Gross margin declined year and year reflecting the regional mix, but we did see sequencer improvement and expect further improvement into P4.

Gross margin declined year on year, reflecting the regional mix, but we did see a sequential improvement and expect further improvement into Q4.

Speaker 2: Operating Marching also declined to a lesser extent as it benefited from positive impacts of other operating income. As you can see in the bottom left-

Operating margin also declined to a lesser extent as it benefited from positive impacts of other operating income.

As you can see in the bottom left of this slide.

Speaker 2: Over the last 18 months, we have gained over three points of market share in the overall RAM market, excluding China. A real testament to the improved competitiveness of it.

Over the last 18 months, we have gained over three points of market share in the overall driver market, excluding China, a real testament to the improved competitiveness of our products.

Cloud and network services deliver a day more stable performance in Q3 with a small top line decline we are happy to see that the growth in enterprise solutions continued but was offset by small declines elsewhere.

Speaker 2: Cloud Network Services delivered a more stable performance in Q3 with a small top-line decline. We are happy to see that the growth in enterprise solutions continued but was offset by small decline sales.

Speaker 2: Operating margin in cloud network services expanded by 290 basis points, somewhat also benefiting from other operators.

Operating margin in cloud and network services expanded by 290 basis points somewhat also benefiting from other operating income.

Speaker 2: We take a moment to understand the evolution of the digital ecosystem today. We have visualized on the slide, as we have visualized on the slide that you can see on the screen. This slide brings together the ecosystem of CSB's, hyperscalers, enterprises and developers working together to bring new capabilities to market, to enable industry for the zero, the metaverse and many other new types of value.

We take a moment.

To understand the evolution of the digital ecosystem today, we have vishal lifestyle on the slide as we have vis vis that lifestyle of the slides that you can see on the screen. This slide brings together the ecosystem of <unk>.

<unk> hyper scaler enterprises that developers working together to bring new capabilities to market to enable industrial bought at zero they met diverse and many other new types of Valeant.

Speaker 2: Our network monetization platform, which delivers network as code to the ecosystem launched in September , brings the ecosystem together through API to enable seamless connectivity, whereby enabling new use cases to help CSPs and enterprises take advantage of the opportunities created.

Our network monetization platform, which delivers network S code to the ecosystem launched in September brings to the ecosystem together through API, two and Apis to enable a seamless connectivity whereby enabling new use cases to help csp's and enterprises take advantage.

Of the opportunities created.

Speaker 2: We have created this platform, which once again we call network as code organically, bringing deep knowledge and understanding of networks, enterprises and the developer community, which puts us firmly at the forefront to help operators monetize their advanced 4G and 5G as it's using network API.

We have created this platform.

Which once again, we call network as coach.

Organically.

Bringing knee deep knowledge and understanding of networks enterprises in the developer community, which puts us firmly at the forefront to help operators monetize their advanced for Gen. Five G assets using network Apis.

Speaker 2: We want to empower a new wave of enterprise and industrial applications that can utilize the network in a much more programmable way. We have seen significant interest from operators globally and have already signed for strategic agreements.

We want to empower our new wave of enterprise and industrial applications that can utilize the network in a much more programmable way we.

We have seen significant interest from operators globally and have already signed four strategic agreements.

Speaker 2: Raghav will go into more detail on the work we are doing in this space at our investor event in December .

But I will go into more detail on the work we are doing in this space at our Investor event in December .

Yeah.

Nokia technologies declined 14% as a result of the same two items that have impacted prior quarters in 2023.

Speaker 2: Nokia technologies declined 14% as a result of the same two items that have impacted pride of quarters in 2023.

Speaker 2: Our Q3 run rate remained at 1 billion euro stable compared to prior quarters. We remain confident in our ability to return to the 1.4 to 1.5 billion run rates that we have had been in the past as we complete the smartphone licensing renewal cycle and further expanding to new growth areas.

Our Q3 run rates remained at 1 billion euro stable compared to prior quarters, we remain confident in our ability to return to the one four to $1 5 billion run rate that we have had been in the past as we complete the smartphone licensing renewal cycle and further expanding into new growth areas.

Speaker 2: It is worth noting that renewal negotiations also continue with certain others.

It is worth noting that renewal negotiations also continue with certain other smartphone companies.

Speaker 2: We also passed the key milestone recently. We now have over 6,000 patented patents declared essential to five.

We also passed the key milestone.

Currently we now have over 6000 patents declared essential to five genes.

Speaker 2: And then turning briefly to our enterprise performance in Q3, net sales grew by 5% in the quarter, and I've now reached approximately 10% of the group net sales on a four quarter rolling base.

And then.

Turning briefly to our enterprise performance in Q3 net sales grew by 5% in the quarter and have now reached approximately 10% of the group net sales on a four quarter trailing basis.

Speaker 2: It is well aligned with our ambitions and have no intention to slow down expanding into this.

It is well aligned with our ambitions and have no intention to slow down expanding into this area.

Speaker 2: Private wireless crew at the double digit trade once again and we now have approximately 675 costs.

Wireless grew at a double digit rate once again, and we now have approximately 675 customers.

Speaker 2: Overall, enterprise remains a key part of our strategy. And we are pleased with the progress here, despite the macro uncertainty we have been seeing elsewhere.

Overall enterprise remains a key part of US and we are pleased with the progress here. Despite the macro uncertainty we have been seeing elsewhere in the business.

Speaker 2: So with that, let me turn it over to Marco to comment on our financial performance.

So with that let me turn it over to Michael to comment on our financial performance.

Speaker 1: in a little more detail over to you, Marco. Yeah, thanks, Pec. And let me start by committing the regional performance of our business. And we still continue year-to-year growth in India, where the net sales grew 121% in the quarter. And this was driven by both mobile networks and networking.

And a little bit more detail over to you Michael Yeah. Thanks Pat.

Let me start by commenting the regional performance of our business.

We saw continued year on year growth in India, where the net sales grew 121% in <unk>.

And this was driven by both mobile networks and network infrastructure.

Speaker 3: And as we indicated last quarter as well, we have seen some normalization in the region in quarter three. And we expect the pace of deployment to continue to slow.

And as we indicated last quarter as well we have seen some normalization in the region in quarter three.

And we expect the pace of deployment to continue to slow.

Speaker 3: We saw declines in most regions, and notably North America, where we saw the largest impacts from the macroeconomic, as well as from inventory digestants, effectively fertilized wall. And this left decline of 40% year on year.

We saw declines in most regions and notably in North America, where we saw the largest impact from the macroeconomic as well as from inventory digesting the pick.

Couple of FERC chest wall.

This led to a decline of 40% year on year.

And then if we look at the operating profit in the quarter you can see here a data maturity of the decline was driven by mobile networks.

Speaker 3: And then if you look at the operating profit in the quarter, you can see here that the maturity of the decline was driven by mobile net.

Speaker 3: And this reflected the regional mix that has been impacting the business through the year.

And this reflected the regional mix that has been impacting the business through the year name.

Speaker 3: namely do the increased levels of sales in India and then of course the lower sales in North America.

Namely due to the increased levels of sales in India, and then of course the logo sales in North America.

Speaker 3: And also, network infrastructure, we can see here that it was rather resilient, despite the overall top line decline.

And also network infrastructure.

You can see here that he was rather resilient despite global overall topline decline.

Speaker 3: Cloud and network services showed some progress in the quarter, while no-cutting launches declined, and the crew hormone change was minimal, as venture fund performance was flat year on year. And turn.

Florida Network services showed some progress in the quarter. One look at technology has declined and the hormone changes was minimal.

Upon before months was flat year on year.

Yeah.

And turning to our cash performance.

Speaker 3: Okay, free cash flow was negative 400 million a quarter and was mainly driven by continued outflows in a networking capital.

Free cash flow was negative $400 million a quarter and was mainly driven by continued outflows in networking capital.

Speaker 3: And this largely reflected an increase in resembles and increase in liabilities, what inventory is declined.

And this largely reflected an increase in receivables and an increase in liabilities.

Inventories declined slightly.

Speaker 3: In the quarter, we returned 260 million euros to shareholders through dividends and share buyback.

In the quarter, we returned 260 million euros to shareholders through dividends and share buybacks.

Speaker 3: And we ended the quarter with 3 billion of net.

And we ended the quarter with $3 billion of net cash.

And while our cash performance has been quite weak year to date, we do expect net working capital headwinds to ease in quarter four.

Speaker 3: And while our cash performance has been quite weak here today, we do expect network in capital had wins to ease in quarter four. And forecast performance in pro.

And for cash performance to improve.

Speaker 3: Next, looking at our addressable markets, we saw further deterioration in the quarter, namely in mobile netbeds, until less extent network infrastructure.

Next looking at our total.

Addressable markets, we saw further deterioration in the quarter, namely in mobile networks and to a lesser extend network infrastructure.

Yeah.

Speaker 3: Mobile networks, addressable market is no expected to decline 9%

Mobile networks addressable market is now expected to decline 9%.

Speaker 3: At the macro uncertainty continued adversely impact all of you.

As the macro uncertainty continued adversely impact Olivia.

Speaker 1: Clearly, all market has seen a challenging environment this year, but we do still believe in the mid-to-long term attractiveness of this space.

Clearly our market has seen a challenging environment. This year, but we do still believe in the mid to long term attractiveness of this space.

And then finally turning to our outlook.

Speaker 3: While our third quarter net sales were impacted by the ongoing uncertainty, we expect to see the more normal seasonal improvement in our network business.

While our third quarter net sales were impacted client the ongoing uncertainty.

We expect to see a more normal seasonal improvement in our network business.

In the fourth quarter.

Speaker 3: based on this and assuming also that we we solve the outstanding renewals impacting Nokia technologies, we are tracking towards the lower end of our 23.2 to 24.6 billion euro net sales range for 23. ????? carrot markets money market

Based on this and assuming also that we sold the outstanding renewals impacting Nokia technologies, we are tracking towards the lower end of our 23 to $24 6 billion Euro net sales range for 2023.

Speaker 3: And we continue to track towards the midpoint of our comparable operating margin range of 11.5 to 13%.

And we continue to track towards the midpoint of our comparable operating margin range of 11, 5% to 13%.

Speaker 3: And with that back to you, Pec got for some final remarks.

And with that back to you pick up for some final remarks.

Speaker 2: Thank you Markov, to summarize our third quarter performance demonstrated resilience in our operating march and despite the impact of the weaker environment on our net sales.

Thank you Marco.

Summarize our third quarter performance demonstrated resilience in our operating margin despite the impact of the weaker environment on our net sales.

Speaker 2: In the last three years, we have invested heavily to strengthen our technology leadership across the business, giving us a firm foundation to whether this period of market week.

In the last three years, we have invested heavily to strengthen our technology leadership across the business gave them, giving us a firm foundation to weather this period of market weakness.

Operator: Good morning ladies and gentlemen. Welcome to Nokia's third quarter, 2023 results call.

David Mulholland: When David Mulholland's head of Nokia Invest relations, and today with me here in Espo, is Pekka Lundmark, our president and CEO, along with Marco Verne, our CFO.

Speaker 2: We continue to believe in the mid to long-term attractiveness of our Mark.

We continue to believe in the mid to long term attractiveness of our market data.

Speaker 2: Data traffic is expected to continue to grow 20 to 30% per year. And actually, the big picture is pretty simple. I mean, the whole world is talking about cloud computing and AR evolution.

Data traffic.

David Mulholland: Before we get started, a quick disclaimer. 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. Results that could cause factors that could cause such differences can be both external as well as internal operating factors. We have identified such risks in the risk factor section of our annual report on form 20, which is available on our investor relations website.

We expect it to continue to grow 20% to 30% per year and actually the big picture is pretty simple I mean, the whole world is talking about the cloud computing and AI revolutions.

Speaker 2: and there are huge expectations on some both. But...

And there are huge expectations on both.

Sure.

Speaker 2: Neither of the two cloud computing or AR evolutions will materialize without significant investments in networks that have vastly improved capability.

Neither of the two cloud computing or evolution of Squalamine arterialize without significant investments in networks, that's how vast and improved capabilities. So that's why we believe that this is a question of timing, but however, it seems that timing of market recovery is uncertain.

Speaker 2: So that's why we believe that this is a question of timing, but however, since that timing of market recovery is uncertain, we are now taking decisive...

David Mulholland: Within today's presentation, the references to growth rates will mostly be on a constant currency basis, and where we refer to margins, it will be based on our comparable reporting. Please note that our Q3 record and a presentation that accompanies this call are published on our website. The report includes both reported and comparable financial results and a reconciliation between the two. In terms of the agenda for today's call, Pekka will give a quick overview of some of the announcements we've made this morning, along with our financial progress in the quarter.

We are now taking decisive action on three levels that Doj operational and cost as I described so.

Speaker 2: the TIG operational and cost as I describe.

Speaker 2: So I believe that these actions will make a significant contribution to creating value for our shareholders. So with that, I'll work with David for Q&N.

So I believe that these actions will make a significant contribution to creating value for our shareholders. So with that over to David for Q&A. Thank.

David Mulholland: Marco will then do into a bit more detail on some of the key factors influencing our financial performance before Pekka gives a brief conclusion, and we move to Q&A.

Speaker 1: Thank you, Peca, and Marco for the remarks. Before we start the Q&A, I just wanted to highlight that, as Peca mentioned, we do plan to hold an analyst and investor progress update event on the 12th of December at our headquarters in Espo, Finland. We hope many of you will be able to join us in person and registration details will be coming out next.

Thank you Pekka and <unk> for the remarks before we start the Q&A I just wanted to highlight that as Pekka mentioned, we do plan to hold an analyst and Investor progress update event on the <unk> of December at our headquarters in <unk>, Finland. We hope many of you will be able to join us in person and registration details will be coming out next week.

Pekka Lundmark: Let me hand over to Pekka. Thank you, David, and thank you all for joining us today.

Speaker 1: At the event, we will have presentations from Peca and Marco on the evolution of our operating model, along with an update from Tom and Yui-Doo on what we're doing in mobile networks, along with Ragafsigal on Cloud and Network Services.

At the event, we will have presentations from Pekka and Marco on the evolution of our operating model along with an update from you would do on what we're doing in mobile networks, along with rug up seagal on cloud and network services.

Pekka Lundmark: Before we talk about our financial performance, I wanted to actually start and explain some other announcements we have made today, because we are taking decisive action on three levels, strategic operational and cost. We will accelerate our strategy execution by providing our four business groups with increased operational autonomy and agility. This will enable them to better address opportunities in their distinctive markets. They will be empowered to faster diversify beyond service providers, build new ecosystem partnerships, implement new business models and invest for technology leadership.

Speaker 1: With that, let's start the Q&A. As a courtesy to others in the queue, please limit yourself to one question and a brief follow-up. Alice, could you please give the instruction?

With that let's start the Q&A.

Courtesy to others in the queue. Please limit yourself to one question and a brief follow up.

Could you please give the instructions.

Speaker 4: We will now begin the question and answer session. If you are also viewing the video webcast, please remember to mute the audio on your computer before asking your question, as there is just 30 seconds delay. To ask a question, you may press start then one on your telephone keyboard. If you're using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press start then two. I will now hand the call back to Mr. David Maholani.

We will now begin the question and answer session. If you are also doing the video webcast. Please remember Tim you dealt with you on your computer for asking your question estimate just secondly to ask a question in the press Star then one on your telephone keypad, if you're using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press star.

Pekka Lundmark: We are also streamlining our operating model. We had in 2021 created four P&L responsible business groups structure around around unique customer offerings, but supported by a shared sales organization. We will now embed the sales teams into the business groups, so the new model is the one that you will see here on the right hand side on the slide. These dedicated sales teams with a strong product and customer connection will enable business groups to better see its growth opportunities and diversify into enterprise web scaling government sectors. This change will bring highly empowered teams in front of customers that are able to make quicker decisions based on their needs.

Thank you I will now hand, the call back to Mr. David Mulholland.

Thank you we'll take our first question from Alex <unk> from Societe Generale, Alex. Please go ahead.

Speaker 1: Thank you, Alex. And we'll take our first question from Alex Petrk from Societe General. Alex, please go ahead.

Speaker 5: Yes, good morning and thank you for taking my question. My first question would be really on what we should read into your substantial new cost cutting plan. Is that merely what you think it requires to get you to 14%?

Hi, Yes, good morning, and thank you for taking my question. My first question would you really on why we should read into your substantially on your cost cutting plan is that's mainly.

What do you think is required to get you to 14%.

Speaker 5: margin by 2024 or should we also re-unit this video planned for potentially a longer and more protracted deeper downturn in your end market. Without guiding on to 2024, could you give us some sense of direction that? I have a good follow up. Thank you. Thank you.

Margin margins by 2020 full or should we also read that you planned for potentially a longer and more protracted deeper.

Deepa downtime.

End markets without God, you're going to wait 24 could you give us some sense of direction that I have a quick follow up thank you.

Yeah. Thank you.

Pekka Lundmark: The company will also move to a leaner corporate center with strategic oversight and guidelines, for instance, for financial performance, portfolio development and compliance. We will continue our strong commitment to long-term research through Nokia Bell Labs.

And.

Speaker 3: What comes to a long term target, we have set that we aim to reach that by 2026. We haven't given any more specific on data. What comes to 24.

When it comes to long term target that we have the sense that we aim to reach that by June 26, we haven't given any more specific on that and what jumps to 24.

Speaker 3: So we cannot give you any guidance on data yet. We'll look it back to that in all quarter four reports.

So we cannot give you any guidance on data yet we will get back to that in our quarter four report.

Pekka Lundmark: In the face of a more challenging market environment, we will reduce our cost-based, secure our profitability. We are moving quickly to lower our cost-based on a growth basis by 800 million to 1.2 billion euros by the end of 2026, assuming on target variable pay in both periods. Nokia expects Jack quickly on the program with at least 400 million of in-year savings in 2024 and a further 300 million in 25. The program is expected to result in a 72,000 to 77,000 employee organization instead of the approximately 86,000 employees Nokia has today. Overall, this represents a 10 to 15% reduction in personal expenses.

Speaker 3: Otherwise, the cost cutting program we are taking actions now to be prepared for.

Otherwise the cost cutting program, we are taking actions now.

To be prepared for.

Speaker 3: the market conditions that we see right now. And as we said also that depending how the market evolves over the next coming years.

The market conditions that we see right now and as we said also that depending how the market evolves over the next coming years and how much we will basically do the cost cuttings and what levels would look at it and that's what we'll be keeping you these into our last fall.

Speaker 3: how much we will basically do the cost cuttings and what levels we will get and that's why we're giving you this interval as well.

Speaker 2: fairly if I add one thing, the key thing here really is to be prepared for various scenarios. We are not saying necessarily that this would be a long downturn, but the thing is that it is impossible to say exactly how long it will last. We just want to be prepared for different possibilities.

Daily if I, if I add one one thing that the key thing here really is to be prepared for various scenarios. We are not saying necessarily that this would be a long downturn, but the thing is that it is impossible to say exactly how long. It will last we just want to be prepared.

Pekka Lundmark: The exact scale of the program will depend on the evolution of the market demand in the coming years. We do expect net savings, but the magnitude will depend on how inflation develops.

For a different a different possibilities.

Yeah.

Speaker 5: Thank you. Just a very quick follow-up. You do note the ongoing inventory reduction that your customers did affect your top line and that was very visible in the quarter. Could you help us understand where you think we are in this stocking cycle at your mobile and fixed network operator clients in major geographies? Thank you.

Thank you Yeah, just just a very quick follow up you do know the ongoing inventory reduction that your customers that affect your topline and it was very visible in the quarter could you help us understand where you think we are in this destocking cycle actually mobile.

Pekka Lundmark: If we now turn to our financial performance in Q3, we saw an increased impact on our business from the macroeconomic challenges which are pressuring operators spending and that resulted in a 15% year-on-year decline in its sales. Gross margin at 39.2% declined only slightly versus the previous year and I'm happy to see a sequential improvement in gross margin in mobile networks. However, it is during such challenging times that the business proves its resilience and that is exactly what we see when we look at the operating margin which was 8.5% for the quarter.

Fixed network operator clients in the major geographies.

Yes, Alex.

Speaker 2: Yes, Alex, this, I mean, the inventory that just, and obviously, varies by customer, but things do continue to trend in the right direction. Some customers are more advanced than others in terms of reaching their desired levels. And it continues to impact Q4, given the pace of rollout of several networks has slowed. But the big picture still is that we expect this to be much less of a topic in 2024.

The inventory digestion, obviously various.

By customer, but things do continue to trend in the right direction.

Some customers are more advanced than others in terms of reaching their desired level of send it.

It continues to impact Q4, given the pace of rollout.

Several network access slowed but yeah.

The Big picture stay at least that we expect this to be much less of a topic in 2024.

Pekka Lundmark: Network infrastructure sales declined by 14% with most business lines declining with the exception of optical networks. IP network sales declined by 24% reflecting weakness in not America as customers continue to evaluate the spending as well as small declines in other regions. The 19% decline in fixed networks was broad-based, exacerbated by soft comparisons to the corresponding quarter year ago. Fixed networks was also impacted by customer spending in America as well as some inventory digestion.

Thank you we'll take our next question from Simon Leopold from Raymond James Simon. Please go ahead.

Speaker 1: Thank you all. We will take our next question from Simon Leopold from Rangan James. Simon, please go ahead.

Speaker 6: Thank you very much for taking the question. I want to see if you could maybe unpack a bit about what's informing your confidence in the seasonal improvement for Q. And just remind us what are your views on what is normal seasonal, just so we've got a reference on that. And what I'm looking for is whether it's around products or around geographies, what's kind of the bill to that confidence? Thank you.

Thank you very much for taking the question I wanted to see if you could maybe unpack a bit about what's informing your confidence in the seasonal improvement for four Q and just remind us what are your views on what is normal seasonal just so we've got got a reference on that and what I'm looking for is whether it's around products.

Around geographies, just what's what's kind of the bill to that confidence. Thank you.

Speaker 3: Yeah, absolutely. Thank you. Normally, if you look historically, we've seen the normal seasonality, if you compare between quarter three and quarter four, that there is about 20-25% uptake between those two quarters. And this is how our customers usually buy from us and also they have delivery schedules base.

Yeah, absolutely. Thank you.

Pekka Lundmark: There was a small decline of 5% in summary networks which related to crude timing. The growth in optical networks of 4% was primarily driven by India and showed the continuing momentum and customer engagement without PSC 5 solutions. Pleasingly, gross margin in network infrastructure in crude euro, while operating margin was somewhat resilient at 1.5% a decline of 80 basis points.

Normally if you look at historically, we've seen the normal seasonality if you compare between quarter three and quarter four that there is about 20% to 25% uptick between those two quarters and this is how customers usually and.

Buying from US and also they are delivery.

Schedules.

Based on days.

Speaker 3: What comes to this year, this is what we see right now that we have some regional differences as well. We have said that India is flowing down. Just like we said already in quarter two that we see that during the second half, we see more normalization in India.

What comes to this year.

This is what we see right now that we.

We have some regional differences as well.

Pekka Lundmark: In mobile networks, we saw the regional trends of the first half continuing in Q3. Not America sales were impacted by the challenging macro environment and as customers continued to digest inventories. India grew significantly year over year but the pace of deployment has slowed significantly compared to H1. There were declines in most other regions with the exception of Middle East and Africa which had modest growth. Gross margin declined year on year reflecting the regional mix but we did see sequencer improvement and expect further improvement into Q4. Operating margin also declined to a lesser extent as it benefited from positive impacts of other operating income. As you can see in the bottom of the slide.

We have said that India is slowing down just like we've said already in quarter two that we see that during the second half we've seen more normalization in India.

Speaker 3: But then of course we see other customers and other regions as well that there is normal seasonality.

But then of course, we see other customers in other regions as well that there is.

Normal seasonality.

<unk> trend and this is why we expect the quarter four.

Speaker 3: trend and this is why we expect the quarter four to be an uptick. And of course, here as well, I just want to remind you that we have assumed that we will sign the agreements in the tech side, which are in the litigation right now.

To be an uptick in of course hero's wall I just wanted to remind you that we have assumed that we've assigned the agreements in the tech side, which are in the litigation right now.

Yeah, a couple of follow ups on yeah, just maybe a quick follow up and more just philosophically does does the increased EUR economy imply in any way that that the company is more open to the idea of either some divestitures or separation of any kind can people read that into this.

Speaker 6: Yeah, just maybe a quick follow up and more just philosophically. Does the increased BU autonomy imply in any way that the company is more open to the idea of either some divestitures or separation of any kind? Can people read that into this structure? Thank you.

Pekka Lundmark: And over the last 18 months, we have gained over three points of market share in the overall run market, excluding China, a real testament to the improved competitiveness of our products. Cloud and network services delivered a more stable performance in Q3 with a small top-land decline. We are happy to see that the growth in enterprise solutions continued, but was offset by small decline saleswear. Operating margin in cloud network services expanded by 290 basis points, somewhat also benefiting from other operating income.

Structure. Thank you.

Uh huh.

Speaker 2: Well, as I said, the purpose of the reason why we are doing that I increase autonomy to the businesses is really to accelerate our strategy execution. And we are removing any kind of remaining complexity.

Well as I've said the purpose of the reason why we are doing that I E increased autonomy to the businesses is really to accelerate our strategy.

Execution and we are we are removing any kind of remaining complexity.

Speaker 2: the organization in the interface between the sales teams and the business.

And the organization.

In the interface between between the sales teams and the business units. So that is really the driver to create smaller autonomous units. So that they would be able to do in a way to control their own destiny. When it comes to comes to the market's expansion to non CSP business is.

Pekka Lundmark: We take a moment to understand the evolution of the digital ecosystem today. We have visualized on the slide, as we have visualized on the slide that you can see on the screen. This slide brings together the ecosystem of CSPs, hyperscalers, enterprises, and developers working together to bring new capabilities to market, to enable industry 4.0, the metaverse, and many other new types of value. Our network monetization platform, which delivers network as code to the ecosystem, launched in September, brings the ecosystem together through API, to APIs, to enable seamless connectivity, whereby enabling new use cases to help CSPs and enterprises take advantage of the opportunities created.

Speaker 2: So that is really the driver to create smaller autonomous units so that they will be able to in a way control their own destiny when it comes to comes to the market expansion to non-CSB businesses entering into

Entering into.

Speaker 2: technology and other partnerships of their own without having to negotiate or coordinate always with other businesses. So this is really the driver in all this, but having said all this, I mean, we have said, if you remember, our strategy pillar presentation from already from the Mobile World Congress, Acty Portfolio managed.

Technology and other partnerships up of their own without having to negotiate.

Coordinate always with the with other businesses. So this is really the driver in all of these but having said all this I mean, we have said if you remember our strategy.

The latter presentation from already from.

The mobile World Congress.

Active portfolio management is one of our pillar sand that continues to be so you have seen some more surely it earlier this year in RFS and then on the on the cloud infrastructure deal, we made with the Red hat.

Speaker 2: one of our pillars and it continues to be. So you have seen some moves earlier this year on RFS and on the cloud infrastructure deal we made with the red hat and absolutely these type of things will continue to be on the agenda also going forward.

Pekka Lundmark: We have created this platform, which once again we call network as code organically, bringing deep knowledge and understanding of networks, enterprises, and the developer community, which puts us firmly at the forefront to help operators monetize their advanced 4G and 5G assets using network APIs. We want to empower a new wave of enterprise and industrial applications that can utilize the network in a much more programmable way. We have seen significant interest from operators globally and have already signed for strategic agreements.

Absolutely. This type of things will continue to be on the agenda also going forward.

Great. Thank you.

Speaker 1: We'll take our next question from Daniel Gerber from Handel's Wanker Daniel. Please guys.

And we'll take our next question from Daniel Djurberg from Handelsbanken. Please go ahead.

Speaker 7: Thank you very much and good morning, gentlemen. My first question is a little bit on these. If it can give us any preliminary restructuring charges needed to reach a new sales model and the lower employee base.

Thank you very much and good morning, gentlemen.

My first question is a little bit on these.

Pekka Lundmark: Raghav will go into more detail on the work we are doing in this space at our investor event in December.

If you can give us any preliminary restriction charges needed to reach a new sales model lowered employee base, both perhaps to the 400 that you expect for 'twenty 'twenty four missed one.

Speaker 7: both perhaps to the 400 that you expect for 2024. With 2.95 million I believe, North Action Shorty, or Star-Church Shorty in Q3. And also, for the full, you know, close to 1 billion mid-range of the total cost out that we should expect until 2026.

And I have to find mainland I believe no restructuring charges sort of such charges in Q3.

And also if for the full you know close to 1 billion mid range.

The total cost of that that we should expect something in 2026.

Pekka Lundmark: Nokia technology is declined 14% as a result of the same two items that have impacted prior quarters in 2023. Our Q3 run rates remain at 1 billion euro, stable compared to prior quarters. We remain confident in our ability to return to the 1.4 to 1.5 billion run rates that we had been in the past as we complete the smartphone licensing renewal cycle and further expand into new growth areas. It is worth noting that renewal negotiations also continue with certain other smartphone companies.

Thank you.

Speaker 3: Thank you, Daniel. Just want to start with, excuse me, seeing that...

Thank you Daniel just wanted to start with.

Excuse me, saying that.

Speaker 3: what comes to cost program, cost out program and end up.

When it comes to cost program cost out program and.

Yeah <unk>.

Speaker 3: organizational involvement that we are doing, those are two separate issues and not connected itself. So the reason for the reorganization that comes to sales resources is not cost-coding. It is more to secure that we have the best customer interconnection and conserved customers in the best possible way.

Organizationally enrollment that we are doing those are two separate issues and not connected itself. So the reason for that the reorganization.

First the sales resources is not.

Cost cutting it is more to secure that we have the best.

Pekka Lundmark: We also passed the key milestone recently. We now have over 6,000 patents declared essential to 5G.

Customer.

Interconnection and can serve customers in the best possible way.

Speaker 3: What counts the cost cutting program? And just like we said, we estimate to have already 400 million in your savings next year and 300 in 25.

What comes to the cost cutting program.

Just like we said we estimated to have already $400 million in your savings next year and 300 in 'twenty five.

Pekka Lundmark: And then turning briefly to our enterprise performance in Q3, net sales crew by 5% in the quarter and have now reached approximately 10% of the group net sales on a four quarters rolling basis. This is well aligned with our ambitions and have no intention to slow down expanding into this. Sierja, private wireless crew at a double digit trade once again, and we now have approximately 675 customers. Overall enterprise remains a key part of our strategy and we are pleased with the progress here, despite the macro uncertainty we have been seeing elsewhere in the business.

Speaker 3: What comes to the restructuring one-time charges and cash out, they will be close to the annual savings that we achieve.

It comes to <unk>.

Restructuring one time charges.

On cash so they will be close to the annual savings that we achieved.

Speaker 3: So those usually go hand in hand and this is something we see is quite typical as well.

So those usually go hand in hand, and this is.

Someday we.

He is quite typical as well.

Did you have a follow up Tony.

Speaker 7: Yes, if I'm on the, obviously, I sent it to Matt, there's still important given your outlook on the guidance. The visibility into the IPR renewal outlook today was a quarter ago, given the outcome we've seen in various courts. Thanks, Rowlings. Reason.

Yes, if there's somebody on the obviously.

Obviously, a sensor to them after they're still important given your outlook or.

On the guidance are the visibility into the IPO renewal outlook.

Marco Wirn: So with that, let me turn it over to Marco to comment on our financial performance in a little more detail over to Marco. Yeah, thanks, but come and let me start by committing the regional performance of our business and we still continue to year-year growth in India where the net sales to 121% in the quarter and this was driven by both mobile networks and network infrastructure. And as we indicated last quarter as well, we have seen some normalization in the region in quarter three and we expect the pace of deployment to continue slow.

Today were just a quarter ago, given the outcome is see any of the various courts.

Yeah rulings are recently.

Speaker 3: Yeah, just like you said, we've seen a very good development on different courts outcomes that we've been on a winning side and that's why we are very confident on the quality of our patterns.

Yes, just like you said we've seen.

Very good development on different.

Courts outcomes that we've been on a winning side and Thats why we are very confident on the quality of our patents and.

Speaker 3: And that's why we believe also that we should have a positive outcome in these dedications and negotiations that we have.

And that's why we believe also that that we should have a positive outcome in these litigations in negotiations that we have.

Marco Wirn: We saw declines in most regions and notably in North America, where we saw the largest impacts from the macroeconomics as well as from inventory digest and effectively further as well and this led to decline of 40% year-on-year. And then if you look at the operating profit in the quarter, you can see here that the maturity of the decline was driven by mobile networks and this reflected the regional mix that has been impacting the business through the year, namely due to increased levels of sales in India and then of course the lower sales in North America.

Speaker 3: And as we said that in our guidance for these years, we assume that we will finalize these negotiations with these two outstanding customers in the tech side.

And.

As we said that in our guidance for this year as well, we assume that we will.

Final as these negotiations with these two outstanding.

Customers in the tech side.

No.

So this is pretty much what we can say right now as you understand.

Speaker 3: This is pretty much what we can say right now as you understand. The timing is always difficult to estimate. And we always set also that we prioritize defending the value of a portfolio over a specific time.

Timing is always difficult to yeah.

They made.

And we always said also that we prioritize.

Defending.

The value of our portfolio over specific time lines.

Speaker 1: Thank you, Daniel. We'll take our next question from Felix Hendrickson from Nordea. Felix, please go ahead.

Marco Wirn: And also in network infrastructure, we can see here that it was rather resilient, despite the overall top line decline. Cloud and network services showed some progress in the quarter while knockout declines declined and the recruitment change was minimal as venture fund performance was flat year-on-year.

Thank you Daniel we'll take our next question from Felix Hendrickson from Nordea. She looks please go ahead.

Speaker 8: Hi, thanks for taking my question. Regarding the cost savings and the head contractions that you've announced, I want to hear thoughts on what are you sacrificing while taking these actions? Is there any implications for R&D sales, etc? And sort of when you have to sort of accelerate recruitment, again, once the market sort of picks up on, it comes more favorable. Thanks.

Alright, Thanks for taking my question.

Regarding the cost savings from the headcount reductions that you've announced I wanted to hear your thoughts on what are you sacrificing while taking these actions.

Are there any implications for R&D sales et cetera, and sort of what do you have to sort of.

Marco Wirn: And turning to our cash performance, free cash flow was negative 400 million a quarter and was mainly driven by continued outflows in networking capital. And this largely reflected an increase in resembles and increase in liabilities while inventory is declined slightly. In the quarter, we returned 260 million euros to shareholders through dividends and share buybacks and we ended the quarter with 3 billion of net cash. And while our cash performance has been quite weak here today, we do expect network in capital headwinds to ease in quarter four and forecast performance to improve.

To accelerate recruitment again once the market sort of picks up on becomes more favorable.

Speaker 2: Yeah, thank you. Thank you, Felix. First of all, we are really making structural changes in the operating model and in the group structure in general. We did exactly that aim that what we are now cutting would not automatically have to be recruited back when the market picks up. So we expect that our post base.

Yeah. Thank you thank you Phoenix.

First of all we are we are really making structural changes.

In the operating model lending the group's structure in general with exactly that name that are that are what we are now cutting would not automatically have to be recruited back when when the market.

Picks up so we expect that.

Structural equal.

Improvement of our.

Cost base.

Speaker 2: What is important to keep in mind here is that when we are doing the reductions, we will always protect the R&D output. There is obviously a very interesting opportunity to improve R&D productivity through new technologies. We have already seen that in the right hands, for example,

What is important.

Keep in mind here is that when we are doing the reductions we will always protect our R&D output there is.

Obviously very interesting opportunities to improve our R&D productivity.

Marco Wirn: And next looking at our total address addressable markets, we saw further deterioration in the quarter, namely in mobile networks until less extent network infrastructure. Mobile networks addressable market is now expected to decline 9%. Sandeep Deshpande as the macro uncertainty continued adversely impact our view. Clearly all market has seen a challenging environment this year, but we do still believe in the mid to long-term attractiveness of this space.

Through new technologies, we have already seen.

That.

The right tenants.

For example, AI co pilots are significantly improving the productivity of our software development. For example, so there are opportunities in terms of R&D productivity, but we are clearly going to always defend.

Speaker 2: are significantly improving the productivity of software development, for example. There are opportunities in terms of R&D productivity, but we are clearly going to always defend.

Speaker 2: Our ability to deliver R&B out of them. When it comes to sales resources, obviously the sales reorganization and simplification.

Our ability.

Deliver RMB.

Then when it comes to a sale.

Sales resource space, obviously, the sales reorganization that simplification of the organization that we are now doing is providing sample stem cell, but they are ultimately sales resources will be scaled in accordance with what we see in terms of opportunities on that on the market and then when it comes to SG&A.

Speaker 2: of the organization that we are now doing is providing some potential, but there ultimately sales resources will be scaled in accordance with what we see in terms of opportunities on the market. And then when it comes to STNA, that is clearly an additional source of savings that we are seeing, and it is a meaningful part of the overall potential in the program.

Marco Wirn: And then finally turning to our outlook while our third quarter net sales were impacted by the ongoing uncertainty. We expect to see the more normal seasonal improvement in our network business in the fourth quarter. And based on this and assuming also that we resolved the outstanding renewals impacting Nokia technologies, we are tracking towards the lower end of our 23.2 to 24.6 billion euro net sales range for 2023. And we continue to track towards the midpoint of our comparable operating margin range of 11.5 to 13%.

That is clearly.

An additional source of.

The savings that we are seeing and it is a meaningful part of the overall potential in the program.

Thank you Felix.

Well did you have a follow up.

Speaker 8: Quick one regarding the market demand. So just want to hear thoughts on whether or not you actually think that the market can turn for the better without sort of these killer apps that actually improve 5G monetization for your Delicom customers or if it sounds like that the current sort of headwinds that you're facing are perhaps also.

Yeah, just a quick one regarding the market demand. So just wanted to hear your thoughts on whether or not you actually think that the market can turn for the better without sort of the killer apps.

Actually improve hardship monetization for your telecom customers or.

Pekka Lundmark: And with that back to you, Pecka, for some final remarks. Thank you, Marco. To summarize, our third quarter performance demonstrated resilience in our operating margin despite the impact of the weaker environment on our net sales. In the last three years, we have invested heavily to strengthen our technology leadership across the business, giving us a firm foundation to whether this period of market weakness. We continue to believe in the mid to long-term attractiveness of our markets.

It sounds like that the current sort of headwinds that you're facing or perhaps also.

Speaker 8: going beyond this in the thoric corrections and the macro slow down at first.

Going beyond the inventory corrections in the macro slowdown the first thing.

Speaker 2: Yeah, I mean, this is obviously one of the most important strategic questions for the whole industry going forward because a key reason, a key reason why operators have been hesitant with their investment.

Yeah.

This is obviously one of the most important.

So to answer your questions for the whole industry going forward because a key.

Reason, a key reason why our operators have been hesitant with their investments has been that.

Speaker 2: has been that their 5G monetization has been slower than expected.

There are five <unk> monetization.

Pekka Lundmark: Data traffic is expected to continue to grow 20 to 30% per year. And actually the big picture is pretty simple. I mean, the whole world is talking about cloud computing and AI revolutions. And there are huge expectations on both. But neither of the two cloud computing or AI revolutions will materialize without significant investments in networks that have vastly improved capabilities. So that's why we believe that this is a question of timing.

It has been slower than expected.

Speaker 2: And the reason for that has been that it has been difficult for them to introduce new applications that would take advantage of the capabilities of 5G. And what we really need is, first of all, in the network infrastructure, we need standalone core.

<unk>.

The reason for that has been that it has been difficult for them to introduce new applications that would take advantage of the capabilities of five Jim what we really need is first of all in the network infrastructure we need.

Need a standalone core.

Speaker 2: with capabilities like slicing, we need more capacity in the radio interface, which is to be achieved through 5G broadband. But then very importantly, we need to make the network more programmable so that it's easier and faster and less costly for application to bring new use cases to the market.

With capabilities like slicing, we need.

More capacity in the radio interface, which is to be achieved through.

<unk>, but then very importantly, we need to make the network more programmable so that it's easier and faster.

Pekka Lundmark: But however, since that timing of market recovery is uncertain, we are now taking decisive action on three levels, strategic operational and cost as I described. So I believe that these actions will make a significant contribution to creating value for our shareholders.

And less costly for application developers to bring new use cases to the market and this is where the network edge cold platform.

Speaker 2: And this is where the network has code platform that we introduce to the market during Q3 comes in. It is a platform that includes a set of APIs with a goal to make the network programmable. And what I do want to emphasize is that we have developed this organically.

We introduced to the market. During Q3 comes in it is a platform that includes a set of Apis with the goal to make the network programmable and what I do want to.

David Mulholland: So with that, or with the David for Q&A. Thank you, Pecka, and Marco for the remarks.

David Mulholland: Before we start the Q&A, I just wanted to highlight that as Pecka mentioned, we do plan to hold an analyst and investor progress update event on the 12th of December at our headquarters in Espo, Finland. We hope many of you will be able to join us in person and registration details will be coming out next week. At the event, we will have presentations from Pecka and Marco on the evolution of our operating model, along with an update from Tom and you, we do on what we're doing in mobile networks, along with Raga's to gal on cloud and network services.

Emphasize is that we have developed this organically.

Speaker 2: within the R&D budget that we have.

With with.

The R&D budget that we have.

Speaker 2: We have excellent feedback from customers. We have significant traction from the market. We have four, as I mentioned, we have four deals already, and there is clearly more in the pipeline. And this is one of the key focus areas that we will be delivering more information in drug-ass presentation in the December investor event.

Bob.

We have excellent feedback from customers, we have significant traction.

From the market, we have four as I mentioned, we have four deals already and there is clearly more in the pipeline and this is one of the key focus areas that we will be delivering more information you'll drive our presentation at the December investor event.

Operator: With that, let's start the Q&A. As a courtesy to others in the queue, please limit yourself to one question and a brief follow-up. Alice, could you please give the instructions?

Speaker 1: Thank you Felix. We will take our next question from Richard Kramer from Maratay. Richard, please go ahead.

Operator: We will now begin the question and answer session. If you are also viewing the video webcast, please remember to mute the audio on your computer before asking your question. Thank you, Alex.

Thank you Felix we will take our next question from Richard Kramer from Arete, Richard Please go ahead.

Speaker 8: Thanks very much. Peck, the first question is, you know, you have this infrastructure progress update this summer, which highlighted, you know, that you are coming into new product cycles and IP routing and optics.

Thanks, very much Pat.

The first question is you know you have this infrastructure progress update this summer, which highlighted that you were coming into new product cycles in IP routing and optics as well as looking forward to big U S. Government funding projects and fixed are you now seeing but infrastructure is no longer driven by product cycles as it was before and can you.

Speaker 9: as well as looking forward to big US government funding projects and fixed. Are you now seeing that infrastructure is no longer driven by product cycles as it was before? And can you give us an update on where the hyper scale or wins that we've long hope Nokia would be able to deliver where you are on realizing those? Thanks.

Alex Paturk: We'll take our first question from Alex Paturk from Société General. Alex, please go ahead. Yes, good morning and thank you for taking my question.

Give us an update on where the hyperscale or wins that we've long Nokia would be able to deliver where you are on an.

Pekka Lundmark: My first question would be really on what we should read into your substantial new cost-cutting plan. If that's merely what you think it requires to get you to 14% margin by 2024 or should we also read it as a video plan for potentially a lot? It's longer and more protracted, deeper downturn in your end markets. Without guiding on to 2024, could you give us some sense of direction that I have a good follow-up. Thank you.

On realizing those thanks.

Speaker 2: Well, we are working on several hyperscale opportunities right now, but as of today, there are no new news. Hopefully, there will be soon. So that remains to be an attractive opportunity. In general, when we talk about.

Well, we are working on several hyperscale opportunities right now, but as of today. There are no new news hopefully that would be soon.

So that remains to be an attractive opportunity.

In general when we talk about.

Speaker 2: Network infrastructure and I guess especially the network architectures and the product cycles in routing and optical and then I comment fixed access as well, but But there is obviously now with the new technology cycles including what we are delivering In routing through fp5 And the 800 gigabit services and then the optical platform psc 5

And Thats working infrastructure, and I guess, especially the network architectures have the product cycles and routing routing and optical and then I'd comment fixed access as well.

Pekka Lundmark: And what comes to the long-term target we have set that we aim to reach that by 2026. We haven't given any more specific on that and what comes to 24. So we cannot give you any guidance on that yet. We'll look at it back to that in our quarter four report.

But there is obviously now with the new technology cycles.

Including what we are delivering.

In routing through <unk> five.

And the 800 gigabit services and then the optical.

Platform.

Five.

Speaker 2: The combination of these two is enabling completely new network architectures in the metronational networks, where the key driver is really a new generation of 400 and 800 gigabit services. We are of course trialing already 1.2 terabits per second. We are able to deliver it. We are able to deliver 800 gigabit services over 2,000 kilometers.

The combination of these two is enabling completely new network.

Pekka Lundmark: Otherwise, the cost-cutting program we are taking actions now to be prepared for the market conditions that we see right now. And as we said also that depending how the market evolves over the next coming years, how much we will basically do the cost-cutting and what levels we will get and that's why we're giving you this interval as well. If I add one thing, the key thing here really is to be prepared for various scenarios. We are not saying necessarily that this would be a long downturn, but the thing is that it is impossible to say exactly how long it will last. We just want to be prepared for different possibilities.

<unk> in the Metro and regional networks, where the key driver is really a new generation of 408 800 gigabit services. We are of course trailing already.

1.1, 0.2 Terabits per second.

We are able to deliver it.

We are able to deliver 800 gigabit services over 2000 kilometers, which is a real technology leadership position in the whole world. These are the drivers.

Speaker 2: which is a real technology leadership position in the whole world. These are the drivers that are pushing network architectures to new boundaries. And we see no slowdown in this type of kind of product driven or architectural development evolution of the networks. You saw that the optical network business.

Pushing network architectures to new new boundaries, and we see no slowdown.

In this type of kind of product driven and our architectural involvement evolution of the networks you saw that the optical network business in terms of volumes has been more resilient than that the other businesses. So this is this is all good but at the same time obviously.

Speaker 2: in terms of volumes has been more resilient than the other businesses. So this is all good, but at the same time, obviously the things piece are taking a very critical look on their investments also in this area because of the macroeconomic situation. But our relative position here is pretty strong. Then in terms of fixed access.

Pekka Lundmark: Thank you. Just a very quick follow-up. You do note the ongoing inventory reduction that your customers that affect your top line and it was very visible in the quarter. Could you help us understand where you think we are in this stockings cycle at your mobile and fixed network operator clients in major geographies? Thank you. Yes, I like this. I mean, the inventory that just and obviously varies by customer, but things do continue to trend in the right direction.

Taking a very critical look on their investment also in this area because of the macroeconomic situation, but our relative position here is a great.

<unk> strong then in terms of fixed access.

Speaker 2: Obviously the comparables are pretty tough now because we had substantial growth in that business, both in 21 and 22. When we get into 24, we do expect to start getting support from government funded programs, especially the B.I. program in the US.

The obviously the comparable is a pretty tough now because we had a we had substantial growth in that business. Both in 'twenty one 'twenty two.

When do we get into 'twenty four we do expect to start getting support from a from.

Pekka Lundmark: Some customers are more advanced than others in terms of reaching their desired levels and it continues to impact Q4 given the pace of rollout of several networks has slowed, but the big picture still is that we expect this to be much less of a topic in 2024.

From Gov.

Government funded programs, especially the bid program in depth.

Speaker 2: the 42 billion high-speed internet grant program where we estimate the power accessible market is about 10 percent of that. We have a, since the announcement in July where we announced that we would be starting manufacturing that would be in compliance with the the bi-america requirements we have a significant traction.

U S.

$42 billion high speed Internet <unk> program, where we estimate that our accessible market is about 10% of that we have since the announcement in July where we where we announced that we would be starting manufacturing that would.

Alex Paturk: Thank you, Alex.

Simon Leopold: We will take our next question from Simon Leopold from Raymond James. Simon, please go ahead. Thank you very much for taking the question. I want to see if you could maybe unpack a bit about what's informing your confidence in the seasonal improvement for Q. Thank you.

Be in compliance with the buy America requirements, we have had significant traction.

Speaker 2: from several service providers, including TTI-2 and TTI-3 service providers that will be making investments and getting funding from the BIT initiative. So this will start coming gradually during 2024. In general, when we talk about the demand for network infrastructure,

From our side that all service providers, including <unk>, two and tier three service providers that we will be making investments.

Marco Wirn: And just remind us what are your views on what is normal seasonal, just so we've got a reference on that. And what I'm looking for is whether it's around products or around geographies, just what's kind of the bill to that confidence. Thank you. Yeah, absolutely. Thank you. Normally, if you look historically, we've seen the normal seasonality, if you compare between Q3 and Q4 that there is about 20 to 25% uptake between those two quarters. And this is how our customers usually buy from us and also they have delivery schedules are based.

Getting funding from the <unk> initiative. So this will start coming gradually.

During 2024 in general when we talk about the demand for network infrastructure.

Various herein, they're interesting evidenced that hopefully we would now be in through that.

Speaker 2: interesting evidence that hopefully we would now be in through the low point in terms of demand in Q3 in terms of new orders and we would expect that gradually the market will start recovering but again.

Low point in terms of demand.

In Q3 in terms of new orders and.

We would expect that gradually the market will start recovering but again.

Marco Wirn: Maldives. What comes to this year, this is what we see right now that we have some regional differences as well. We have said that India is flowing down, just like we said already in quarter two that we see that during the second half we see more normalization in India. But then of course we see other customers and other regions as well that there is. Normal seasonality, trend, and this is why we expect the quarter four to be an optic. And of course here as well, I just want to remind you that we have assumed that we will sign the agreements in the tech side, which are in the litigation right now.

Speaker 2: It is too early to call it a broad-based recovery, but we are seeing signs.

It is too early to call it a broad based.

Recovery, but we are seeing signs here and there. So thats why we definitely continue to believe in that.

Speaker 2: here and there. So that's why we definitely continue to believe in in the potential of the network.

Potential of network infrastructure.

Speaker 9: Thank you. And maybe a quick one from Marco. Yeah, quick follow up from Marco, you know, just so we can understand it. Does the rise of reaching 10% of enterprise sales within the mix? Does that have a near term delutive or positive impact on margins? Given you obviously are spending your product portfolio there, you need to do your sort of go to market model, but at the same time, enterprise historically has had very healthy margins.

Thank you and maybe a quick one for Marco Yeah, a quick follow up from Marco just so we can understand it does the rise of reaching 10% of enterprise sales within the mix does that have a near term dilutive or positive impact on margins. Given you. Obviously you are expanding your product portfolio, there and you need to.

Do you sort of go to market model, but at the same time enterprise historically has had very healthy margins.

Speaker 3: Yeah, thank you for the question. We haven't specified the margin in Android side, but as we said that we believe in this sector very heavily and our ambitions is to grow in this sector. And this is one of all.

Yeah.

For the question, we haven't specified margin in enterprise side, but as we said that we believe in this sector very heavily in our ambitions these and to grow in this sector and these wonderful stuff.

Pekka Lundmark: Do you have a follow-up sign? Yeah, just maybe a quick follow-up and more just philosophically. Does the increased BU economy imply in any way that the company is more open to the idea of either some divestitures or separation of any kind? Can people read that into this structure? Thank you. Well, as I said the purpose or the reason why we are doing that I increased autonomy to the businesses is really to accelerate our strategy execution and we are we are removing any kind of remaining complexity in the organization in the interface between between the sales teams and the business units.

Speaker 3: strategic pillars as well at the growth level, we believe that this will create new opportunities just like I mentioned already in network infrastructure side. In IP side, we have increasingly introducing new offerings to our customers in the web scale side, where we are still quite small. And...

<unk> dealers as well at the.

Group level, and we believe that that this will create new opportunities just like I think I mentioned already in network infrastructure side in <unk>.

IP side we.

Pekka Lundmark: So that is really the driver to create smaller autonomous units so that they will be able to in a way control their own destiny when it comes to comes to the market expansion to non-CSB businesses entering into technology and other partnerships of their own without having to negotiate or coordinate always with with other businesses. So this is really the driver in all this but having said all this, I mean we have said if you remember our strategy pillar presentation from already from the Mobile World Congress active portfolio management is one of our pillars and it continues to be.

Increasingly introducing new offerings to our customers in the web scale side, where we are still quite small.

Speaker 3: This gives beyond the normal market development, this gives the new opportunities for growth in NIS role.

These gains beyond the more normal market.

Development.

The new opportunities for growth.

And I as well.

Thank you rich thank you very much.

Speaker 1: We'll take our next question from Andre Gardner from City. Andre, please guys.

We'll take our next question from Andrew Gardiner from Citi. Andrew. Please go ahead.

Speaker 10: Thank you, David. Good morning, all. I just wanted to come back to the seasonality you're calling out in the fourth quarter. Mark, you described the normal seasonality, I think, in particular, with reference to mobile networks and network infrastructure.

Thank you Debbie good morning, all.

Wanted to come back to the seasonality, you're calling out in the fourth quarter.

Mark could you describe the normal seasonality I think in particular with reference to mobile networks and network infrastructure.

Speaker 10: low for mid 20% for quenchal. But at the same time, you're also telling us that India's off the peak and volumes are coming down. So that is a headwind all else with me, Cool. And I think Packard, you mentioned as well that there's still some impact in the inventory cycle in the fourth quarter. So what would be offsetting those two headwinds to get you to a more normal level of seasonality in the fourth quarter?

Yes.

The mid 20% sequential but at the same time, you won't start telling us that India's off the peak volumes are coming down so that is a headwind all else being equal.

And I think Pat you mentioned as well that there's still some impact from inventory cycle or in the fourth quarter. So what would be offsetting those two <unk>.

Pekka Lundmark: So you have seen some moves earlier this year on RFS and then on the on the cloud infrastructure deal we made with the red hat and absolutely this type of things will continue to be on the agenda also going forward. Thank you.

A headwind to get you to a more normal level of seasonality in the.

The fourth quarter.

Speaker 3: Yeah, as I said, we see

Yeah.

We see it.

Different areas and different customers and that their plans are and it.

Speaker 3: different areas in different customers and that their lands are a B.C. potential increase in quarter four. And this is how we are based our work as well. And we've seen that when we gave the two quarter two report as well, that the second half would be more skewed towards the quarter four and quarter three would be a lower.

Daniel Gerberg: And we'll take our next question from Daniel Gerberg from Hanzo Spanke. Daniel please go ahead.

We see potential increase in quarter four and this is how we are based on forecasts us wall and.

Daniel Gerberg: Thank you very much and good morning, gentlemen. My first question is a little bit on these. If it can give us any preliminary restrictions charges needed to reach a new sales model and the lower employee base, both perhaps to the 400 that you expect for 2024. The so 95 million, I believe, north short short short short short in Q free and also if for the full you know close to one billion mid range of the total cost out that we should expect until 2026.

We we've seen.

When we gave the two quarter to report as well.

The second half would be more skewed towards the quarter four and quarter three would be a lower one in there.

Speaker 3: And this is exactly how we've seen the development so far. So these where we are based our assumptions in our forecast for Quattro Forest Falls.

This is exactly how we've seen the development. So for so this is where we are based our assumptions in our forecast for quarter four as well.

Speaker 10: Is it possible to help at a little bit in terms of the region or two that might be a little bit better than normal as a result of that? I just obviously we've had your competitor, Ericsson, earlier this week and I fully take your point that be phasing through the year for the different...

Is it possible to help us a little bit in terms of the in the region or two that might be a little bit better than normal as a result of that.

Daniel Gerberg: Thank you. Thank you, Daniel. Just want to start with. Excuse me, saying that what comes to cost program cost out program and and organizational involvement that we are doing those are two separate issues and not connected itself. So the reason for the reorganization what comes to sales resources is not cost cutting. It is more to secure that we have the best customer into connection and and can serve customers in the best possible way.

Obviously, we've had your competitor Ericsson earlier this week.

To your point that the phasing through the year for the different operators in different vendors, there's going to be a little bit different depending on exactly what youre doing for them.

Speaker 10: operators and different vendors is going to be a little bit different depending on exactly what you're doing for them and you know where in the country but just you know it would be helpful to understand where you might be seeing a better trend in the fourth course.

Where in the country.

But yes, it would be helpful to understand where you might be seeing a better trend in the fourth quarter.

Speaker 3: We haven't given any specific guidance on this, but if you look at different business as well and how they performed equal to three and take it all to this as well that we believe, for example, that in NIside and network infrastructure side that we perhaps have seen the low point now. And there seems to be some signs of improvement on the market as well.

Yeah, we haven't given any specific guidance on this but if you look at them.

Different businesses as well and how they performed in quarter, three and Pekka alluded to this as well that we believe for example that ni side and network infrastructure side.

Daniel Gerberg: What comes to the cost cutting program. Just like we said, we estimate to have already 400 million in your savings next year and 300 in in 2025. What comes to the restructuring, one-time charges and cash sell, they will be close to the annual savings that we achieve. So those usually go hand in hand and this is something we see is quite typical as well. Did you have a forward annual? Yes, if I'm on the, obviously a standard matter.

We perhaps haven't seen the low point now.

And there seems to be some signs of improvement on the market as well.

Speaker 2: And then of course, to be added, maybe it's obvious, but of course in cloud and network services business, we are again expecting a seasonal leap.

And then of course.

To be added maybe it's obvious but but of course in the cloud and network services business, we are again expecting.

A seasonally big quarter in Q4, and then in the forecast there is of course for the technologies business. The assumption that we will close the ongoing negotiations with Oh, Paul and.

Speaker 2: big quarter in Q4 and then in the forecast there is of course for the technologies business there something that we we closed the ongoing negotiations with OPPO and DEVO. On India maybe one comment our India business last year was 1.3 billion euros and now we have you're to date 2.5 billion euros there was a big sequential dropping Q3 compared to Q2.

Daniel Gerberg: Still important given your outlook or on the guidance. The visibility into the IPR renewal outlook today was a quarter ago given the outcome is seen in various courts rulings recently. Just like you said, we've seen a very good development on different courts outcomes that we've been on a winning side and that's why we are very confident on the quality of our patterns. And that's why we believe also that we should have a positive outcome in these dedications and negotiations that we have.

They are all on India, maybe you wanted to comment our India business last year was $1 3 billion euros and now we have year to date $2 5 billion euros. There was a big sequential drop in Q3 compared to Q2.

Speaker 2: So now we are getting to getting to levels which would be closer to what we said earlier that in a way the new normal run rate When we then look into 24 and 25 would be somewhere between the 1.3 billion in 2022 and wherever we will land this year

So now we are getting to getting to levels, which would be closer to what we said earlier that in a way the new normal run rate.

When we then look into 'twenty, four and 'twenty five would be somewhere between the one.

One 3 billion in 'twenty to 'twenty, two and wherever we will land this year so.

Speaker 2: So this is something that is important to keep in mind in terms of India. So there was already a big sequential drop between Q2 and Q2.

This is something that is important to keep in mind in terms of India. So there was already a big sequential drop between Q2 Q3.

Daniel Gerberg: And as we said that in our guidance for this year's role, we assume that we will finalize these negotiations with these two outstanding customers in the tech side. So this is pretty much what we can say right now, as you understand, the timing is always difficult to estimate and we always set also that we prioritize defending the value of a portfolio over specific timelines.

Speaker 11: Thank you, Andrew. We'll take our next question from Sandeep Deschbandee from JP Morgan. Sandeep, please go ahead. Yeah. Hi, thanks for letting me on. I'm trying to understand actually now going into 2024, clearly you are adjusting your cost base as well. But on the top line, I mean, if the US doesn't show signs of significant recovery, and India, as Peckler just mentioned, is going to be between 22 and 23. It's going to be down from 23. Then unless something else is going to kick in on a full year basis, Nokia could see quite a big drop in revenues, that's really. So, I mean, maybe you can help us understand how you are thinking of that clearly and not giving any guidance for how you're thinking of 24 at this point, that's that really. And I have a quick follow-up after that.

Thank you Andrew we will take our next question from Sandeep Deshpande from JP Morgan Sandeep. Please go ahead, yeah, hi, Thanks for letting me on I'm trying to understand actually now going into 'twenty 'twenty four clearly you are.

Adjusting your cost base as well, but on that on the top line I mean, if the U S doesn't show signs of significant recovery in India.

I just mentioned is going to be between 22 and 23. So it's going to be down from 23, then unless something else is going to kick in on the fully obese is locked.

Nokia could see quite a big drop in revenues is that JD. So I mean, maybe you can help us understand how you are thinking about that clearly you're not giving any guidance, but how youre thinking of 24 at this point that's that treaty.

Felix Henriksson: Thanks for taking my question regarding the cost savings and the head contradictions that you've announced. I want to hear thoughts on what are you sacrificing while taking these actions? Is there any implications for R&D sales, etc. And sort of when you have to sort of accelerate recruitment again once the market sort of picks up on becomes more favorable. Thanks. Yes, thank you. Thank you, Felix. First of all, we are we are really making structural changes in the operating model and in the group structure in general, with exactly that aim that that what we are now cutting would not automatically have to be recruited back when when the market picks up.

I have a quick follow up on the costs.

Speaker 2: As you understand, it is too early to provide a full view on 24. However, the macroeconomic environment clearly remains the key factor as we head into next year.

Yes.

Hey.

Okay.

As you understand.

It is too early to provide a full view on 24, however, the macroeconomic environment clearly remains the key effects there as we head into into next year.

Speaker 2: We do not know where the market will take us in 24. I mentioned some early positive signs.

We do not know where the market will take US 24, I mentioned, some early positive signs, especially in the network infrastructure business that good start.

Speaker 2: especially in the network infrastructure business that could start providing support in 2024. But the reality is that there are so many macro uncertainties out there that we simply should not assume that we get a lot of support from the market next year. And that is why we are now taking decisive action on course.

Providing support in 2024, but the reality is that that.

There are so many macro uncertainties out there that we simply should not assume that we get a lot of support from the market next year and that is why we are now taking decisive actions on cost. So we believe that this is a win win. If then there is a fast recovery of the market.

Felix Henriksson: So we we expect an actual improvement of our cost base. What is important to keep in mind here is that when we are doing the reductions, we will always protect the R&D output. There is obviously very interesting opportunities to improve R&D productivity through new technologies. We have already seen that in the right hand. For example, AI call pilots are significantly improving the productivity of software development, for example. So there are opportunities in terms of R&D productivity, but we are clearly going to always defend our ability to deliver R&D output.

Speaker 2: So we believe that this is a win-win. If then there is a fast recovery on the market, and we have taken cost action, then it's even better. But we want to be in a position to get to that 14% comparable operating margin by 2026, also in a scenario where there would not be a fast.

And we have taken cost action and it's even better but we want to be in a position to.

To get to that 14% comparable operating margin by 2026, or so in a scenario, where there would not be a fast.

Speaker 2: significant market recovery. That is the point.

Significant market recovery that is the point here.

Speaker 11: Thanks, Peter. I mean, on your cost, just by quick, follow up as on your cost position, in terms of, you know, what you've announced in terms of cost reduction, then what we've seen in the most recent quarter, I mean, you feel, fell very substantially short in the third quarter, but your mind, Rosmargin wasn't that bad, it was quite good. I mean, maybe in that respect, where are the costs going to be taken out? Is it mainly in the OPEC, because the problems don't seem to be on your Rosmargin line, there seems to be, I mean, so maybe you're

I mean on your cost just by a quick follow up is on your cost position in terms of.

What you've announced in terms of cost reduction than what we've seen in the most recent quarter. I mean, you feel felt very substantially all are short in the third quarter, but gross margin wasn't that bad it was quite good I mean, maybe in that respect where all the possible it could be taken out is it mainly in the.

Felix Henriksson: Then when it comes to sales resources, obviously the sales reorganization and simplification of the organization that we are not doing is providing some potential, but there ultimately the sales resources will be scaled in accordance with what we see in terms of opportunities on the market. And then when it comes to SGNA, that is clearly an additional source of savings that we are seeing, and it is a meaningful part of the overall potential in the program. Thank you, Felix. Did you have a follow-up?

Opex that you're taking out cost because the problem is you don't seem to be on your gross margin line. There seems to be I mean, maybe you're removing costs into the future because you would think that your overall cost.

Speaker 11: or plating God's bases to high. Yeah.

Operating cost basis too high.

Thank you.

Speaker 3: Yes, we actually, in the plans that we have now for the cost cutting program, we aim to cut about 70% from, is coming from the old back side. And 30% is coming from above cross profit side, the cost of control.

Yes, we actually in the plans that we have now for the cost cutting program.

We aim.

<unk> got about 70% from is coming from the Opex side, and 30% is coming from above cost.

Pekka Lundmark: Yeah, just a quick one regarding the market demand. So just want to hear thoughts on whether or not you actually think that the market can turn for the better without sort of these killer apps that actually improve 5G monetization for your telecom customers. Or if it sounds like that the current sort of headwinds that you're facing are perhaps also going beyond this inventory corrections and the macro slow down the first scene.

Right side, so cost cost of consoles.

Speaker 3: So this is the split that we are aiming to do.

So this is the strength that we were aiming to do the same.

Speaker 3: saying that I want to emphasis once again that our aim is to protect the R&D capacity so that we would...

Saying that I want to emphasize once again that.

Our aim is to protect the R&D capacity, so that we will continue to.

Speaker 3: for technology leadership position in the future as well. That's why it's so important that R&D capacity

Yeah.

Yeah.

For technology leadership position in the future as well.

Pekka Lundmark: Yeah, I mean, this is obviously one of the most important. So these questions for the whole industry going forward because a key reason, a key reason why operators have been hesitant with their investments. Has been that that their 5G monetization has been slower than expected. And the reason for that has been that it has been difficult for them to introduce new applications that would take advantage of the capabilities of 5G. And what we really need is, first of all, in the network infrastructure, we need need standalone core with capabilities like slicing.

Why it's so important that R&D capacity protection.

Speaker 2: And that obviously has a direct connection to the product, technology competitiveness and your observation of the cross margin is excellent because our technology position product competitiveness is improved a lot in the last couple of years. And that is now, of course, extremely important when we aim to defend our cross margin also in week.

That obviously has a connection direct connection to the product technological competitiveness.

Your observation of the gross margin is excellent because because our technology position our product competitiveness and has improved a lot in the last couple of years and that is now of course extremely important when we aimed to defend our gross margin also in weaker times.

Speaker 1: Thank you, Sunday. We'll take our next question from from FWAAB, from UBS. From FWAAB please go ahead.

Thank you Sunday, we'll take our next question from <unk> <unk> from UBS. Please go ahead.

Speaker 12: Thank you very much. I wanted to come back on the coastside. I understand that.

Thank you very much.

I don't want you to come back I'm afraid on the on the cost side, so I understand that.

Speaker 12: The industry is going to slow down that is maybe takes more time than you expected and maybe a bit deeper

The industry is going to slow down that maybe it takes more time than you expected then that gives the deep here.

Pekka Lundmark: We need more capacity in the radio interface, which is to be achieved through 5G broadband. But then very importantly, we need to make the network more programmable so that it's easier and faster and less costly for application developers to bring new use cases. And this is where the network has code platform that we introduce to the market during Q3 comes in. It is a platform that includes a set of APIs with a goal to make the network programmable.

Speaker 12: But the magnitude strikes me a little bit because you can do cosaving, but it's not because of you have one year delay that you are just 10 to 15% of your workforce. I would imagine it's a very important strategic petitions also on top of your realignment or reorganization, I should say.

But the magnitude strikes me a little bit because you know you can do cost savings, but you still because of you have one delay that you had just 15% of your workforce I would imagine it's a very important strategic decisions.

So on top of your.

Our realignment are all reorganization I should say so.

Speaker 12: So, you know, you talked about the fundamental zone change. You still believe in it and the data growth is one that you mentioned as an example. But yet, you know, your top line is not and you said that the operators are struggling to monetize this data growth anyway. So I'm just for-

About the fundamental is unchanged we believe in terms of data gross is one.

That you mentioned as an example, but yet you know your top client needs. He's not and you said that the operators are struggling to monetize this data growth.

Pekka Lundmark: And what I do want to emphasize is that we have developed this organically. With within the R&D budget that we have, we have excellent feedback from customers. We have significant traction from the market. We have four. As I mentioned, we have four deals already. And there is clearly more in the pipeline.

Anyway. So I'm just wondering is given the magnitude of this.

Speaker 12: given the magnitude of this cost saving.

Cost savings, what literally changed you know beyond the timing element because it seems like it's much deeper than just a timing issue issue to it I mean.

Speaker 12: what literally changed beyond the timing element because it seems that it's much deeper than just a timing issue if it you want to remain.

Speaker 12: And the third one question I had is a bit more on the technology side of things.

And one other question I had is a bit more.

Felix Henriksson: And this is one of the key focus areas that we will be delivering more information in Raga's presentation in the December investor event. Thank you, Felix.

On the technology side of things can you maybe tell US seeks G. You know should we expect <unk> at some point, if yes when ending.

Speaker 12: Can you maybe tell us 6G should we expect 6G at some point if yes, when and the impact of open run and update on open run if it's impacting your business at all right now? Thank you.

Richard Kramer: We'll take our next question from Richard Kramer from where I take. Richard, please go ahead. Thanks very much.

Opened widen I mean, another take on the open Ryan if it's impacting your business at all.

Right now.

Pekka Lundmark: Pekka, the first question is you have this infrastructure progress update this summer, which highlighted that you are coming into new product cycles and IP routing and optics as well as looking forward to big US government funding projects and fixed. Are you now seeing that infrastructure is no longer driven by product cycles as it was before? And can you give us an update on where the hyperscaler wins that we've long hope Nokia would be able to deliver where you are on on on realizing those.

<unk>.

Speaker 2: Okay, all right. Well, when I would first of all like to point out these that that

Okay, Alright, well, what I would first of all I'd like to point out is that.

The.

Speaker 2: There is a reason why we gave a range and not a definitive number in terms of the cost reduction. So 10 to 15 percent, that is a wide range. And that will depend exactly on the timing and the shape of the market recovery, because we know that it will come. It is a question of timing.

There is a reason why we gave a range and not a definitive.

Definitive number in terms of the cost reductions so 10% to 15% that is saved wide range and that will depend exactly on on that.

<unk> and the shape of the market recovery.

We know that it will come a day so a question of timing.

Speaker 2: It may sound a lot, but we believe it's doable without sacrifice.

It may sound a lot, but we believe it's doable without sacrificing the R&D output.

Pekka Lundmark: Thanks. Well, we are working on several hyperscale opportunities right now, but as of today, there are no new news. Hopefully there will be soon. So that remains to be an attractive opportunity. In general, when we talk about network infrastructure, and I guess especially the network architectures and the product cycles in routing, routing and optical, and then I comment fixed access as well, but there is obviously now with the new technology cycles, including what we are delivering in routing through FB 5 and the 800 gigabit services and then the optical platform PSC 5.

Speaker 2: the R&D output as sent. You have to remember that...

Uh Huh sett.

You have to remember that our.

Speaker 2: Most important market from a profitability point of view is the North American market and now we have two quarters behind us where we have 40 percent drop in top line.

Most important market from a profitability point of view is the north American market and now we have two quarters behind us where we have 40% drop in top line.

Speaker 2: And when we look at the operator plans there, we know that there will be a recovery, but again, we do not know when it will come. And I'm not sure if the operators themselves either understand yet or know yet when they will start increasing their investments again. So this is all only, I mean, the question is, this simply being prepared. If then there is a faster recovery, then it's super good. We have lower cost than then we get the benefits of a recovery, but we feel that it's

And when.

When we look at the operator plants. There we know that there will be a recovery, but again, we do not know when it will come in I'm not sure if the operators themselves either on.

Understand yet don't know yet when they will start increasing their investments against so this is all only I mean, the question is simply being prepared if there.

Pekka Lundmark: The combination of these two is enabling completely new network architectures in the metro and regional networks, where the key driver is really a new generation of 400 and 800 gigabit services. We are of course trialing already 1.2 terabits per second. We have able to deliver it. We are able to deliver 800 gigabit services over 2000 kilometers, which is a real technology leadership position in the whole world. These are the drivers that are pushing network architectures to new new boundaries and we see no slowdown in this type of kind of product driven or architectural development evolution of the networks.

There is a fast recovery then it's super good we have lower cost and then and we get the benefits of a recovery, but we feel that it's better not only in this situation where there is so much uncertainty.

Speaker 2: better now in this situation where there is so much uncertainty to, in a way, go all in.

In a way go all in.

Speaker 2: And then it's always easier to take then a step back if for some reason you have got too much somewhere. But we believe that this at least 10% is fully doable without sacrificing some of the most important things which are which definitely is R&D output. Then your second question, the timing of 60, I mean there's obviously a lot of discussions now within the operator community that how that game should be.

And then it's always easier to take a step back if if if for some reason you haven't got too much somewhere but we believe that this at least 10% is fully doable without without sacrificing some of the most important things, which are which definitely is R&D output. Then your second question of the timing.

Six cheap I mean, there's obviously a lot of these questions now within the operator community.

That game should be it should.

Speaker 2: should be played because they are all now thinking that how do I monetize 5G? They have been disappointed on their own ability to monetize 5G and then there is the weak economy and high interest rates and so on. I mean the base case continues to be that that

Should be played because they are all now thinking about how do I monetize <unk> been disappointed.

Pekka Lundmark: You saw that the optical network business in terms of volumes has been more resilient than the other businesses. So this is this is all good, but at the same time, obviously the things piece are taking a very critical look on their investments also in this area because of the macro economic situation, but our relative position here is pretty strong. Then in terms of fixed access, obviously the comparables are pretty tough now because we had substantial growth in that business, both in 21 and 22.

Their own ability to monetize five G. And then there is the weak economy and high interest rates.

I mean, the base case continues to be at that.

That.

<unk> would start 60, it would start delivering around 20 mine and then maybe volumes in 2030.

Speaker 2: 5G would start, sorry, 6G would start delivering.

Speaker 2: around 20, 9 and then maybe volumes in 2030. So there would be roughly 10-year difference between 5G and 6G. This is still uncertain. There could be changes, but this is the base case we are working against. I don't actually-

They would be roughly 10 year difference between five and six <unk>.

This is still uncertain there could be changes, but this is the base case, we are working against.

Pekka Lundmark: When we get into 24, we do expect to start getting support from government funded programs, especially the BIT program in the US, the 42 billion high speed internet program, where we estimate that our accessible market is about 10% of that. We have a since the announcement in July, where we, where we announced that we would be starting manufacturing that would be in compliance with the bi-America requirements. We have a significant traction from several service providers, including yet two and three service providers that will be making investments and getting funding from the BIT initiative.

I actually think that that the number of five or six is the most important thing. The most important thing is that what will the applications beyond what will they demand if we expect that.

Speaker 2: that the number 5 or 6 is the most important thing. The most important thing is that what will the applications be and what will they demand? If we expect that...

Speaker 2: that the data traffic will continue to grow, 20 to 30% per year, and then little by little we will start seeing completely new types of use cases. For example, driven by...

That.

The data traffic will continue to grow 20% to 30% per year, and then little by little we will not see them completely new types of use cases for example, driven by.

Speaker 2: augmented reality, various types of immersive use cases for consumers, for video conferencing, for industrial applications, and so on and so on. There's a lot like this in the pipeline, and you have seen the Apple announcement on the AR device. We believe that there will be a race where there will be a lot of new devices driving bandwidth usage in the coming years. If that happens,

Augmented reality various types of immersive use cases for consumers for video conferencing for industrial applications.

And so when I'm, so and there is a lot like this in the pipeline and you have seen in the Apple announcement on the on that.

Device, we believe that there will be a eight.

Race.

Pekka Lundmark: So this will start coming gradually during 2020, for in general, when we talk about the demand for network infrastructure, there is here and there interesting evidence that that hopefully we would now be into the low point in terms of demand in Q3 in terms of new orders. And we would expect that gradually the market would start recovering, but again, it is too early to call it a broad-based recovery, but we are seeing signs here and there. So that's why we definitely continue to believe in the potential of networks.

Where there will be a load of new devices driving bandwidth usage in the coming years if that happens.

Speaker 2: We are looking at somewhere around 26, 27, 28, when most of the 5G frequencies will have been exhausted, which means that new frequencies for new capacities will be needed. They must be allocated. And once that is done.

Looking at the way it around.

26, 27 28 win win most of the <unk> frequencies will have been exhausted.

Which means that new frequencies for new capacity this will be a needed they must be allocated and once that is done.

Speaker 2: A very important thing for everybody, including operators, are consumers, will be the cost of that bandwidth. How do we make sure that we deliver the services as costificently and with as little power consumption as possible? And that will require new generations of Silicon. It will require new innovations in terms of mass in my mind, in the radio interview.

A very important thing for everybody, including operators, how consumers will be the cost of that bandwidth how do we make sure that we deliver the services as cost efficiently and with as little power consumption as possible and that will require new generations of select Glenn it will require new innovations.

Marco Wirn: Thank you.

In terms of massive mimo and the radio interface. If you want to call that six cheap fine, but I don't think that matter. So the driver is really what's the new applications will need and they are our expectation again is that when we get to 27 28 the capabilities of <unk> will provide you always start to be exhausted.

Speaker 2: If you want to call that 6G fine, but I don't think that matters. The driver is really what the new applications will need. And there our expectation, again, is that when we get to 2728, the capabilities of 5G will radio start to be exhausted and something new will be needed.

Marco Wirn: And maybe a quick one for Marco.

Marco Wirn: Yeah, quick follow up for Marco, you know, just so we can understand it. It is the rise of reaching 10% of enterprise sales within the mix. Does that have a near term dilutive or positive impact on margins given you obviously are spending your product portfolio there need to do your sort of go to market model but at the same time enterprise historically has had very healthy margins. Yeah, thank you for the question.

Something something new will be needed.

Thank you Francois will take our next question.

Speaker 1: Sebastian's public from Kaplershibra. Sebastian please go ahead.

Sebastian <unk> from Kepler Shubra Sebastian Please go ahead.

Marco Wirn: We haven't specifying margin in enterprise side, but as we said that we believe in this sector very heavily and our ambitions is to grow in this sector and this is one of our strategic pillars as well at the group level that we believe that this will create new opportunities just like I mentioned already in network infrastructure side in IP side we have increasingly introducing new offerings to our customers. In the web scale aside, where we are still quite small and this gives beyond the more normal market development, this gives the new opportunities for growth in and I as well.

Speaker 13: Yeah, hi, everyone. And thanks for taking my question. On six broad-scale access, some news canaries are not targeting roughly stable market development for the next five years. And you have been historically quite consultive or positive on the growth prospect for fiber going forward. Have you seen any major change in market dynamics?

Hi, everyone and thanks for taking my question on <unk>, what about excess so many scan that are you still targeting roughly stable market development for the next five years and you have been you still could be quite costly T. Wolff was given the growth prospects for <unk> going forward have you seen any major change in market dynamics.

Speaker 13: six more than access that would be my first question. The second one is on the mix for next year. How do you see the mix evolving moving into 2024? And what could be the different moving paths to your goals margin moving into 2024? Thank you.

She wasn't one access that would be my first question. The second one is on the phone.

For next year, how do you see the mix evolving moving into 2024, and what could be the different moving parts to your gross margin moving into 2024. Thank you.

Marco Wirn: Thank you.

Speaker 14: Was was this question I'm a little bit difficult to

So what was this question.

I had a little bit difficult.

Speaker 13: Here all the points. So was this about fixed networks and the yeah Oh my god, yeah fixed network and yeah, it would look for fixed network for the coming years

He had all the points so what's this about fixed networks.

Operator: Thank you very much.

Andrew Gardiner: We'll take our next question from Andre Gardner from city. And you guys. Thank you, David.

Yeah, one of the market.

The outlook for future work for the coming years, Yes, Yes, I mean, we continue to believe in a highly favorable.

Marco Wirn: Good morning all. I just wanted to come back to the seasonality you're calling out in the fourth quarter. Marker, you described the normal seasonality I think in particular with reference to mobile network and network infrastructure. So low to mid 20% sequential, but at the same time you're also telling us that India's off the peak and volumes are coming down. So that is a headwind all else with me cool. And I think packing you mentioned as well that there's still some impact in the inventory cycle in the fourth quarter.

Speaker 2: Yeah, yeah. I mean, we continue to believe in a highly favorable outlook for fixed networks because if you look at, for example,

Look for fixed networks, because if you look at for example, the stats that we gave you. The Q2 report as to how many percent of the world's homes have been passed are connected we are still looking at pretty low low numbers and then we have to remember that already those homes, which are connected today, they will be subject to capacity.

Speaker 2: that we gave in the Q2 report as to how many percent of the world's homes have been passed or connected. We are still looking at pretty low numbers and then we have to remember that already those homes which are connected today they will be subject to capacity upgrades.

Upgrades and all of this will be further supported by the various government programs like the U S program that were discussed where where the goal of the government is to have a gigabit service.

Speaker 2: And all of this will be further supported by the various government programs like the U.S. program that we discussed where the goal of the government is to have a gigabit service in every...

Marco Wirn: So what would be offsetting those two headwinds to get you to a more normal level of seasonality in the in the fourth quarter? Yeah, as I said, we see different areas in different customers and that their lands are that we see potential increase in quarter four. And this is how we are based off of work as well. And we've seen that when we gave the two quarter two report as well that the second half would be more skewed towards the quarter four and quarter three would be a lower one.

Every every home so we believe that.

Speaker 2: So we believe that this will be a highly attractive market.

This will be a highly attractive market going forward. Despite the short term slowness. We are number one in <unk> globally with more than 40% market share in cheap on OLED is we have 46% market share in next year's corn, which is the latest generation of.

Speaker 14: going forward despite the short term.

Speaker 2: Sloaness we are number one in Jeep on globally with more than 40%

Speaker 2: market share in cheap on OLT's we have 46% market share in XTS point which is the latest generation of

Speaker 2: 10 gigabit SIM-metrical chip on, which is used in about 95% of the next generation on the deployments. And we have clear technology leader in this segment.

10 gigabit symmetrical J partner, which is used in about 95% of the next generation on the deployments that we had clear technology leader in this segment.

Speaker 14: So this is a perfect example of a market now where there is a lot of long-term potential combined and also mid-term potential combined with a strong technology leadership position. So we continue to be pretty bullish on in terms of the potential of the fixed market.

This is a perfect example of a market now where there is a lot of long term potential combined and also midterm potential combined with a strong technology leadership position. So we continue to be a pretty poorly bullish on in terms of the potential of the fixed markets. Thank you.

Marco Wirn: And this is exactly how we've seen the development so far. So these where we are based our assumptions in our forecast for quarter four as well. Is it possible to help us a little bit in terms of the region or two that might be a little bit better than normal as a result of that? And just obviously we've had your competitor, Ericsson earlier this week and I fully take your point that the phasing through the year for the different operators and different vendors is going to be a little bit different depending on exactly what you're doing for them and you know where in the country.

Speaker 1: Thank you, Sebastian. We'll take our next question from Sami Sarkamese from Donkabank. Sami, please go ahead.

Sebastian will take our next question from Xiaomi Sarcomere from Danske Bank.

Please go ahead.

Speaker 15: Thanks, I wanted to follow up the earlier question by San Dave regarding puts and takes going into next year. I think you already covered the top line that is obviously the big unknown. But if we focus on things that you can control, what should we think about all next year? I guess even the new course program that has been announced.

Thanks, Hi.

I wanted to fall off the earlier question Sandeep regarding puts and takes going into next year.

Thank you already covered this.

Offline that is obviously the big unknown, but if we focus on things that you can control.

Marco Wirn: But just, you know, it will be helpful to understand where you might be seeing a better trend in the fourth quarter. We haven't given any specific guidance on this, but if you look at different business as well and how they perform the quarter three, and take alluded to this as well that we believe, for example, that in NIside and network infrastructure side, we perhaps have seen the low point now, and there seems to be some signs of improvement on the market as well.

What should we think about Opex next year, I guess, given the new cost program.

Been announced.

Speaker 15: at least be higher than this here. And then if you think about cross margins, I guess those should also be higher.

At least to be higher.

This year.

And then if we think about gross margins I.

I guess those should also be higher.

Speaker 15: next year as it will probably benefit from normalization of geographic mix.

Next year as you will probably benefit from normalization of geographic mix and then there will be also a cost measure impacting our cogs.

Speaker 16: and then there will also cost measures impacting our cogs. Yeah, thank you, Sami.

Marco Wirn: And then of course, to be added, maybe it's obvious, but of course, in cloud and network services business, we are again expecting a seasonally big quarter in Q4, and then in the forecast there is of course for the technology business, there are some signs that we close the ongoing negotiations with OPPO and DIVO. On India, maybe one comment, our India business last year was for 1.3 billion euros, and now we have your to date 2.5 billion euros, there was a big sequential dropping Q3 compared to Q2.

Yeah. Thank you Sammy.

When it comes to the 24 because we.

Speaker 3: because of the uncertainty we don't guide 24 years, but if we look to different elements of your question regarding cost-earning programs.

Because of the uncertainty we don't guide to any four yet, but if we look to different elements of.

Question.

Regarding cost saving programs.

Speaker 3: So like we said, we ambition is that we get already in your savings of 400 million in 24.

So it's like we said we ambition is that we get over the in year savings of $400 million in 'twenty four.

Speaker 3: And also we said that about 70% of the total savings in the program will come from Oakback.

And.

And also we said that about 70% of the total savings in the program will come from Opex.

Speaker 3: And this is our planning right now, it comes to 24, then it comes to exactly...

Yeah.

This is our planning right now would constitute any for then what comes to exactly.

Marco Wirn: So now we are getting to getting to levels which would be closer to what we said earlier that in a way the new normal run rate, when we then look into 24 and 25 would be somewhere between the 1.3 billion in 2022 and wherever we will land this year. So this is something that is important to keep in mind in terms of India. So there was already a big sequential drop between Q2 and Q3.

Development on gross margin levels, partly it depends on the.

Speaker 3: development on cross-margin levels partly depends on that.

Speaker 6: The mix is well both product mix but also regional mix.

The mix as well both product mix, but also regional mix.

Speaker 6: And then also how the market recoveries is happening and what is the speed and...

And then also.

How the market recoveries is happening and what is the speed and.

Andrew Gardiner: Thank you, Andrew.

Speaker 3: And when we will see in different parts, as the market recovery, most likely will not be, perhaps the exact same for all our segments that we have. Then we have to also remember that in 2023, we have...

And.

When we will see in different parts.

Market recovery, most likely will not be perhaps the exactly the same for all our segments that we have then we have to also remember that in <unk>.

Sandeep Deshpande: We'll take our next question from Sandeep Deshbhander from JP Morgan. Sandeep, please go ahead. Hi, thanks for letting me on. I'm trying to understand actually now going into 2024, clearly you are adjusting your cost base as well, but on the on the top line, I mean, if the US doesn't show signs of significant recovery. And India, as Peckler just mentioned, is going to be between 22 and 23. So it's going to be down from 23. Then unless something else is going to kick in on a full year basis, Nokia could see quite a big drop in revenues as that really.

In 2023, we have.

At.

<unk> received say.

Speaker 3: Favings also from the variable pay that we have in the company.

Savings also from from the variable pay.

That we have.

In the company.

Somebody did you have a four.

Speaker 15: Yeah, regarding the course evidence program, just curious, home material contribution, could we see from divestments in you reaching out?

Yeah regarding the cost savings program.

I guess, how material contribution could we see from divestments.

And you reaching out to lower cost base.

Speaker 14: Well, of course what we are communicating in terms of cost would be...

Well of course, what we are communicating in terms of cost would be.

Marco Wirn: So I mean, maybe you can help us understand how you are thinking of that clearly and not giving any guidance for how you're thinking of 24 at this point, essentially. And I have a quick follow up on that on the cost. If you understand, it is too early to provide a full view on 24. However, the macro economic environment clearly remains the key factor as we head into into next year. We do not know where the market will take us in 24.

Speaker 2: not including any effects from our divestments that we would potentially do in the future. So this is on a comparable basis.

Not including any effects from.

From divestments that we would we would potentially do in the future. So this is this is.

Like like.

On a comparable basis.

Speaker 1: Thank you, Sammy. We'll take our last question from DDS Kim Antler from Bank of America. DDS, please go ahead.

Thank you Sophie we'll take our last question from <unk> from Bank of America. Please go ahead.

Speaker 2: Yep, thanks very much for taking my question.

Yeah, Thanks, very much for taking my question.

Speaker 17: I guess most of my questions have been asked. What I wondered, clearly you're taking very decisive actions on a cross-base, I think, realizing that the run market's probably going to be in a downturn for the next every years, and especially at 6G, quite far away.

<unk>.

I guess most of my questions have been asked what I wonder the.

Marco Wirn: I mentioned some early positive signs, especially in the network infrastructure business that could start providing support in 2024, but the reality is that there are so many macro uncertainties out there that we simply should not assume that we get a lot of support from the market next year. And that is why we are now taking decisive action on cost. So we believe that this is a win-win. If then there is a fast recovery on the market, then we have taken cost action, then it's even better. But we want to be in a position to get to that 14% comparable operating margin by 2026, also in a scenario where there would not be a fast.

Clearly you were taking very decisive actions on the cost base I think realizing.

Is that the run market is probably going to be in a downturn for the next several years and especially as <unk> is quite far away.

Speaker 17: What I wondered is, are there any other sort of strategic alternative you're considering for the business? I think Simon, I asked the question earlier, whether you're considering a breakup of the business to give more autonomy to your divisions, etc. because it feels like it's not going to be fun to just cut costs for the next several years.

What I wondered is are there any other sort of strategic alternatives, you're considering for the business I think Simon asked a question earlier, where whether you're considering a breakup of the business.

Just to give more to what it means to your divisions et cetera, because it feels like it's not going to be fun to just cut costs for the next several years.

Marco Wirn: Markets Recovery, that is the point here. Thank you. I mean, on your cross, just by quick follow-up is on your cross position. In terms of, you know, what you've announced in terms of cross-reduction, then what we've seen in the most recent quarter, I mean, your sales fell very substantially short in the third quarter, but your mind, Rosmargin wasn't that bad. It was quite good. I mean, maybe in that respect, where are the costs going to be taken out?

Speaker 14: You are absolutely right. You cannot run a business if your only strategy is to cut costs. But I want to repeat what I said earlier that that when we are cutting costs, what is really important for us is that we do not sacrifice our our own deals because otherwise it would be just downsizing and downsizing and downsizing.

No you are absolutely right you cannot run a business if you round it to cut costs, but I want to repeat what I said.

That when we are cutting costs.

What is really important for us is that we do not sacrifice, Colorado and the outlook because because otherwise this otherwise it would be just downsizing and downsizing of downsizing.

Speaker 14: When it comes to the question of...

When it comes to that.

A question of.

Speaker 14: structural moves like what, as you said, splitting that company. I already answered that what we are going to continue with is optimization of our portfolio.

Structural moves like you.

Leading the company I already answered that.

What we are going to continue with optimization of our portfolio.

Speaker 2: And that is one of our strategic pillars. You have seen some moves already, and we are not excluding that there would be additional moves going forward. It is part of our strategy as we announced already in Barcelona. But then I would like to slightly disagree with you that when you kind of concluded that the ran market will be...

That is one of our strategic Pls you Havent seen some moves already in and we are not excluding that there would be additions almost going forward. It is part of our stated yes, we announced the other day in Barcelona, but then I would like to slightly disagree with you that.

Marco Wirn: Is it mainly in the op-ex that you're taking out costs because the problems don't seem to be on your gross margin line. There seems to be, I mean, so maybe you're moving costs into the future because you think that you're overall cost operating cost basis too high. Thank you. Yes, we actually, in the plans that we have known for the cost cutting program, we aim to cut about 70% from, is coming from the op-ex side, and 30% is coming from above cross profit side, the cost of good sales.

When you when you kind of concluded that.

End market will be.

Speaker 14: I had a client in market all the way until 60. We do not agree. 25% of base stations outside of China are currently 5G mid-bass upgraded, which means that 75% of that potential is still there. If and when the data traffic will continue to grow, operators will have to start investing again.

I had a declining market all the way until <unk>, we do not agree.

25% of base stations outside of China are currently five <unk>.

Upgraded which means that 75% of that potential is still there if and when the data traffic will continue to grow operators will have to start investing again.

Speaker 14: In a couple of years time, 5G advanced will hit the market, providing some significant additional new capabilities for new use cases such as digital twins, drones, immersive applications, AR, and so on. Roughly at the same time.

A couple of years time, five G advanced will hit the market, providing some significant additional new capabilities for new use cases, such as digital twins drones.

Marco Wirn: So this is the split that we are aiming to do, saying that I want to emphasis once again that our aim is to protect the R&D capacity, so that we will continue to aim for technology leadership position in the future as well. That's why it's so important that R&D capacity protection. And that obviously has a direct connection to the product, technology competitiveness, and your observation of the cross margin is excellent because our technology position product competitiveness has improved a lot in the last couple of years. And that is now, of course, extremely important when we aim to defend our cross margin also in weaker times. Thank you.

Hey, Bob.

Applications.

And so on.

Yes, roughly at the same time.

Speaker 14: comes the time when the first 5G installations that were made in 2019, 2020, will hit the mid-generation upgrade cycle, as we have seen in the previous cycles as well. And the technology has improved so much from 2019, 2020, especially the fall consumption that given the high-power prices and ESG.

It comes at a time when we're not the first.

<unk> installations that were made in 2019 2020 will hit the meat.

Generation upgrade cycle as we have seen in the previous cycles as well as the technology has improved so much.

The 19th 2020.

Especially.

A follow up on assumption that's given.

The high power prices and ESG.

Speaker 14: Now, now have we believe that that there will be significant upgrade opportunities in mid-generation as well. So and then on top of this comes all the potential from from private 5G and then the price and all the use cases. So respectfully I would disagree with you that that this will be a declining market all the way until

Operator, now now have we believe that there will be significant upgrade opportunities in mid generation as well so.

Pekka Lundmark: And they will take our next question from from from from you from UBS from so please go ahead. Thank you very much. I wanted to come back. I'm afraid only on the coast side, so I understand that the industry is going to slow down that is maybe it takes more time than you expected and maybe a bit deeper. But the magnitude strikes me a little bit because you know you can do cosaving but it's not because of you have one year delay that you are just 10 to 15% of your workforce would imagine it's a very important strategic petitions also on top of your realignment or reorganization, I should say.

Then on top of these pumps all the potential from from private <unk> and enterprises and all the use cases, so respectfully I would disagree with you that that is.

It will be a declining market all the way until 16.

Speaker 17: I mean respectfully also, I mean if you look at...

I mean respectfully also I mean, you should look at.

Speaker 17: You know, when you look at the transition from 4G to 5G, we had I think three years of downturn and I think he was all about cross-catching the rate there. Period, it was pretty painful.

You know when you look at the transition from 42 five G. We had I think three years of downturn in and I think he was all about cost cutting to read day period was pretty painful.

Speaker 17: also looking at the history of Nokia and Alcatelus, and it's been...

Also looking at you know the history of Nokia and Alcatel Lucent has been.

Speaker 17: consistent, you know, cost-cutting over the course of the last 15 years or so been quite difficult and you know the promises of things like LTE advanced or you know 4.5G have not materialized and as you said yourself, you know the problem, fundamentally is that although 5G was great from a quest per bit 10.4 the operators, they have not been able to monetize their investments with higher up, higher a bit that's ultimately

Consistent cost cutting over the course of the last 15 years or so it's been it's been quite difficult and the promises of things like LTE advanced or <unk>.

Pekka Lundmark: So, you know, you talked about the fundamentals on change, you still believe in it and the data growth is one that you mentioned as an example. But yet, you know, your top line is is not and you said that the operators are struggling to monetize this data growth. Anyway, so I'm just wondering is given the magnitude of this. Cost savings what literally changed, you know, beyond the timing element because it seems that it's much deeper than than just the timing issue is what you really mean.

Does materialize and as you said yourself the problem fundamentally is that although five G was great from a cost per bit standpoint for the operators. They have not been able to monetize our investments with higher op, while EBITDA. So ultimately.

Speaker 17: It's got a knock on effect on the ability to invest in Capac. So that's why I would rather not be too very, but at the same time, I don't see too much difference between 4G and 5G cycles, you know what I mean.

It's got a knock on effect on on their ability to invest in capex. So.

That's why I, you know I would rather not be too bearish, but at the same time I don't see too much difference between 40 and 50 cycle. If you know what I mean.

Speaker 2: I believe that this will be a different fund. You are absolutely correct when you talk about five immunization. I mean, that is what we need to help operators do. We need to get to APIs, programmable networks, make it easier for them to build new use cases. But again, I mean...

I believe that.

Pekka Lundmark: And the second question I had is a bit more on the technology side of things. Can you maybe tell us 6G, you know, should we expect 6G at some point if yes when and the impact of open run and an update on open run if it's impacting your business at all right now. Thank you.

This will be a difference.

You are absolutely correct. When you talk about the five came on.

I mean that is helpful.

To help operators do we need to get to Api's programmable networks make it easier for them to build a new.

Use cases, but again I mean.

Speaker 2: I do believe that once we start seeing these new devices on the market AR, VR immersive experiences, we will start to see a completely new range of applications emerging that will be driving capacity needs. But what I would suggest is that since this will be one of the key themes in our December update where Tommy will be...

I do believe that once we start seeing these new devices on the market.

Pekka Lundmark: What I would first of all like to point out is that there is a reason why we gave a range and not a definitive number in terms of the cost reduction. So 10 to 15% that is a wide range and that will depend exactly on the timing and the shape of the market recovery because we know that it will come. It is a question of timing. It may sound a lot, but we believe it's doable without sacrificing the R&D output as said.

Ah VR immersive experiences, we will start to see a completely new range of applications emerging that will be driving capacity needs, but what I would suggest is that.

Since this will be one of the key themes in our December update where Tommy will be will it be.

Speaker 2: talking about in more detail in terms of what those use cases will be. We would continue this discussion there. And of course, this whole theme of new use cases and immersive applications is not only an event theme. It's very much also going to be a driver for fixed networks and home roads.

Talking about.

In more detail in terms of what those use cases will be we will continue this discussion there and of course this whole theme of new use cases and.

Immersive applications is not only an MNC I mean, it's very much also going to be a driver for fixed networks.

Pekka Lundmark: You have to remember that our most important market from a profitability point of view is the North American market. Now we have two quarters behind us where we have 40% drop in top line. And when we look at the operator plans there, we know that there will be a recovery, but again, we do not know when it will come. And I'm not sure if the operators themselves either understand yet or know yet when they will start increasing their investments again.

Home broadband.

Speaker 1: Thank you, Lydia. Ladies and gentlemen, that concludes today's call. I would like to remind you that during the call today, we have made a number of poor looking statements that involve risks and uncertain.

Thank you Dear ladies.

Ladies and gentlemen that concludes today's call I would like to remind you that during the call. Today. 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 internally.

Speaker 1: actual results may therefore differ materially from the result currently expected. Factors that could cause such differences can be both external, as well as internal learning factors. We have identified such risks in the risk factor section of our annual report on Form 20F, which is available on our Invest Relations website. Thank you all for joining us today.

We have identified such risks in the risk factor section of our annual report on form 20-F, which is available on our Investor Relations website. Thank you all for joining us today.

Pekka Lundmark: So this is all only I mean, the question is simply being prepared. If then there is a faster recovery, then it's super good. We have lower cost and then then we get the benefits of a recovery, but we feel that it's better now in this situation where there is so much uncertainty to in a way, go all in. And then it's always easier to take than a step back if if for some reason you have got too much somewhere, but we believe that this at least 10% is fully doable without sacrificing some of the most important things which are which definitely is R&D output.

Speaker 4: The conversation is now concluded. Thank you for attending today's presentation. You may now disconnect.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Okay.

Speaker 18: The I P the.

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Yes.

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Pekka Lundmark: Then your second question, the timing of 6G, I mean, there's obviously a lot of discussions now within the operator community that how that game should be should be played because they are all now thinking that how do I monetize 5G they've been disappointed on their own ability to monetize 5G and then there is the weak economy and high interest rates and so on. I mean, the base case continues to be that 5G would start sorry 6G would start delivering around 20 mine and then maybe volumes in 2030.

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Yeah.

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Speaker 18: The.

Pekka Lundmark: So there would be roughly 10 year difference between 5G and 6G. This is still uncertain, there could be changes, but this is the base case we are working against. I don't actually think that the number 5 or 6 is the most important thing. The most important thing is that what will the applications be and what will they demand. If we expect that the data traffic will continue to grow 20 to 30% per year and then little by little we will start seeing completely new types of use cases.

Pekka Lundmark: For example, driven by augmented reality, various types of immersive use cases for consumers, for video conferencing, for industrial applications and so on and so on. There's a lot like this in the pipeline and you have seen the Apple announcement on the AR device. We believe that there will be a race where there will be a lot of new devices driving bandwidth usage in the coming years. If that happens. We are looking at somewhere around 26, 27, 28, when most of the 5G frequencies will have been exhausted, which means that new frequencies for new capacities will be needed.

Speaker 18: The F that.

Pekka Lundmark: They must be allocated. And once that is done, a very important thing for everybody, including operators and consumers will be the cost of that bandwidth. How do we make sure that we deliver the services as costificently? And with as little power consumption as possible, and that will require new generations of silicon, it will require new innovations in terms of mass in MIMO in the radio interface. If you want to call that 6G fine, but I don't think that matters.

Okay.

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Speaker 18: I.

Pekka Lundmark: The driver is really what the new applications will need. And there our expectation, again, is that when we get to 27, 28, the capabilities of 5G will radio start to be exhausted and something new will be needed.

Speaker 18: ithe.

Pekka Lundmark: Thank you for so much.

Pekka Lundmark: We'll take our next question. Sebastian Stavovitz, from Kapil Shibra. Sebastian, please go ahead. Yeah, hi everyone, and thanks for taking my question. On 6th, Robert Balex says, some municipalities are not targeting roughly stable market development for the next 5 years. And you have been historically quite constructive or positive on the gross prospect for 5G going forward. Have you seen any major change in market dynamics on 6-1 access? That would be my first question.

Pekka Lundmark: The second one is on the mix for next year. How do you see the mix evolving moving into 2024? And what could be the different moving paths to your gross margin moving into 2024? Thank you. Was this question, I had a little bit difficult to hear all the points. So was this about fixed networks? Yeah. Oh my goodness. Yeah, fixed network and the outlook for fixed network for the coming years. Yeah, yeah.

Speaker 18: Hi.

Speaker 18: I F.

Yeah.

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Pekka Lundmark: I mean, we continue to believe in a highly favorable outlook for fixed networks. Because if you look at, for example, the stats that we gave in the Q2 report as to how many percent of the world's homes have been passed or connected, we are still looking at pretty low low numbers. And then we have to remember that already those homes which are connected today, they will be subject to capacity upgrades. And all of this will be further supported by the various government programs like the US program that we discussed where where the goal of the government is to have a gigabit service in every home.

Pekka Lundmark: So we believe that this will be a highly attractive market going forward, despite the short and slowness. We are number one in Jeep on globally with more than 40 percent market share in Jeep on OLT. We have 46 percent market share in next year's point, which is the latest generation of 10 gigabit symmetrical Jeep on, which is used in a number 95 percent of the next generation on the deployments. And we have clear technology leader in this segment. So this is a perfect example of a market now where there is a lot of long-term potential combined and also midterm potential combined with a strong technology leadership position.

Pekka Lundmark: Thank you, Sbastien.

Sami Sarkamies: We'll take our next question from Sami Sarkamies from Dunstobank. Sami, please go ahead. Thanks, hi. I wanted to follow up the earlier question by Sandeep regarding Putin takes going into next year. I think you already covered the top line. That is obviously the big unknown. But if we focus on things that you can control, what should we think about OPEX? Yes, next year. I guess even the new course program that has been announced, it shouldn't at least be higher than this year.

Sami Sarkamies: And then if you think about cross margins, I guess those should also be higher next year as you'll probably benefit from normalization of geographic mix. And then there will also course measures impacting cooks. Yeah, thank you, Sami.

Sami Sarkamies: What comes to 24, of course, because of the uncertainty, we don't guide 24 yet. But if we look to different elements of your question, regarding cost saving programs. So like we said, we ambition is that we get already in year savings of 400 million in 24. And also we said that about 70% of the total savings in the program will come from OPEX. And this is our planning right now, which comes to 24.

Sami Sarkamies: Then what comes to exactly development on cross margin levels partly depends on the mix as well. Both product mix, but also regional mix. And then also how the market recoveries is happening and what is the speed. And when we see in different parts, as the market recovery, most likely will not be perhaps exactly the same for all our segments that we have. Then we have to also remember that in in 2023, we have received savings also from from the variable pay that we have in the company.

Sami Sarkamies: Thank you, Sami. Did you have a full? Yeah, regarding the cost saving program, just curious, how material contribution could we see from divestments in you reaching the lower cost base? Well, of course, what we are communicating in terms of cost would be not including any effects from divestments that we would potentially do in the future. So this is on a like on a comparable basis. Thank you, Sami.

DDSC Manila: We'll take our last question from DDSC Manila from Bank of America. DDSC, please go ahead. Yeah, thanks very much for taking my question. I guess most of my questions have been asked. What I wondered, clearly you're taking very decisive actions on the cost base, I think realizing that the run market is probably going to be in a downturn for the next several years, and especially as 6G is quite far away. What I wondered is, are there any other sort of strategic alternative you're considering for the business?

DDSC Manila: I think Simon asked the question earlier, whether you're considering a breakup of the business, you know, to give more autonomy to your divisions, etc, because it feels like it's not going to be fun to just cut costs for the next several years. You are absolutely right, you cannot run a business if your only strategy is to cut costs, but I want to repeat what I said earlier that when we are cutting costs, what is really important for us is that we do not sacrifice our own deals because otherwise it would be just downsizing and downsizing and downsizing.

DDSC Manila: When it comes to the question of structural moves like what, as you said, the company, I already answered that what we are going to continue with is optimization of our portfolio and that is one of our strategic pillars you have seen some moves already and we are not excluding that there would be additional moves going forward. It is part of our strategy as we announced already in Barcelona, but then I would like to slightly disagree with you that when you conclude that the run market will be a declining market all the way until 60, we do not agree.

DDSC Manila: 25% of base stations outside of China are currently 5G mid-bass upgraded, which means that 75% of that potential is still there. If and when the data traffic will continue to grow operators will have to start investing again. In a couple of years time, 5G advanced will hit the market providing some significant additional new capabilities for new use cases such as digital twins, drones, immersive applications, AR and so on. Roughly at the same time comes the time when the first 5G installations that were made in 2019-2020 will hit the mid-generation upgrade cycle as we have seen in the previous cycles as well.

DDSC Manila: And the technology has improved so much from 2019-2020 especially the power consumption that given the high power prices and ESG cost operators. Now we believe that there will be significant upgrade opportunities in mid-generation as well. And then on top of this comes all the potential from private 5G and then the price and all the use cases. So respectfully, I would disagree with you that this will be a declining market all the way until 60.

DDSC Manila: Respectfully also, when you look at the transition from 4G to 5G, we had I think three years of downturn. And I think it was all about cost-cutting during the period, it was pretty painful. Also looking at the history of Nokia and Alcatel-Lusand has been consistent cost-cutting over the course of the last 15 years also. It has been quite difficult and the promises of things like LT advanced or 4.5G have not materialized.

DDSC Manila: And as you said yourself, the problem fundamentally is that although 5G was great from a cost-per-bit standpoint for the operators, they have not been able to monetize their investments with higher up or higher EBITAs. Ultimately, it has not got an effect on the ability to invest in CAPEX. So that's why I would rather not be too bearish but at the same time I don't see too much difference between 4G and 5G cycles.

DDSC Manila: I believe that this will be a different fund. You are absolutely correct when you talk about 5G monetization. I mean, that is what we need to help operators do. We need to get to APIs, programmable networks, make it easier for them to build new use cases. But again, I mean, I do believe that once we start seeing these new devices on the market, ARVR, immersive experiences, we will start to see a completely new range of applications emerging that will be driving capacity needs.

Pekka Lundmark: But what I would suggest is that since this will be one of the key themes in our December update, where Tommi will be thinking about in more detail in terms of what those use cases will be. We would continue this discussion there. And of course, this whole theme of new use cases and immersive applications is not only an amen theme. It's very much also going to be a driver for fixed networks and home broadband. Thank you, Andrea.

Operator: Ladies and gentlemen, that concludes today's call. I would like to remind you that during the call today, we have made a number of poor looking statements that involve risks and uncertainties. Actual results may therefore differ materially from the result, currently expected factors that could cause such differences can be both external, as well as internal effects. We have identified such risks in the risk factor section of our annual report on form 20F, which is available on our investor relations website. Thank you all for joining us today.

Operator: The conference has now concluded. Thank you for attending today's presentation.

Operator: You may now disconnect.

Alexander Duval: [inaudible] Alexander Duval, Alexander Duval, Alexander Duval,