Q2 2024 Telefonaktiebolaget LM Ericsson (publ) Earnings Call

Operator: Hello everyone, and welcome to today's presentation of Ericsson's second quarter 2024 results.

Hello, everyone and welcome to today's presentation of Ericsson in the second quarter 'twenty 'twenty four results today Boy I call them, our president and CEO joins us by video and lost tons.

Daniel Djurberg: Today, Bory Ekholm, our president and CEO, joins us by video, and Lars Sandstrom, Chief Financial Officer, is here in the studio with me. As usual, we'll have a short presentation, followed by Q&A, and in order to ask a question, you'll need to join the conference by phone. Details can be found in today's earnings release, and on the Investor Relations website.

Speaker Change: Chief Financial Officer is here in the sheet there with me.

Speaker Change: As usual, we'll have a short presentation, followed by Q&A and then in order to ask a question you will need to join the conference by Fine.

Unknown Executive: Details can be found in today's earnings release and on the Investor Relations website. Please be advised that today's call is being recorded and that today's presentation may include forward-looking statements. These statements are based on our current expectations and certain planning assumptions, which are subject to risk and uncertainty.

Speaker Change: Details can be found in today's earnings release and on the Investor Relations website.

Operator: Please be advised that today's call is being recorded, and that today's presentation may include forward-looking statements. These statements are based on our current expectations and certain planning assumptions, which are subject to risks and uncertainties. The actual results may differ materially due to factors mentioned in today's press release and discussed in the conference call. We encourage you to read about these risks and uncertainties in our earnings report, as well as in our annual report.

Please be advised that today's call is being recorded and that today's presentation may include forward looking statements.

Speaker Change: These statements are based on our current expectations and certain planning assumptions, which are subject to risks and uncertainties.

Speaker Change: The actual results may differ materially due to factors mentioned in today's press release and discussed in the conference call.

Speaker Change: We encourage you to read about these risks and uncertainties in our earnings report as well as in our annual report.

Operator: I'll now hand the call over to Borya and Lars for their introductory comments.

Unknown Executive: The actual results may differ materially due to factors mentioned in today's press release and discussed in the conference call. We encourage you to read about these risks and uncertainties in our earnings report as well as in our annual report. I'll now hand the call over to Borja and Lars for their introductory comments. Well, thanks, Daniel. And good morning, everyone.

Speaker Change: I'll now hand, the call over to Barry at an allowance for that introductory comments.

Bory Ekholm: Well, thanks, Daniel, and good morning, everyone. First, I'd like to cover some of the key highlights from the quarter before Lars really goes through all the financials in more detail. So in Q2, we continue to work with our customers and focus on leveraging our leading technology, as well as optimizing our business through our strategic initiatives, which, of course, includes our cost reduction actions that we have taken.

Borja: First, I'd like to cover some of the key highlights from the quarter before Lars really goes through all the financials in more detail. So in Q2, we continue to work with our customers and focus on leveraging our leading technology as well as optimizing our business through our strategic initiatives, which, of course, include our cost reduction actions that we have taken. All these actions made it possible to deliver a very strong performance, and we saw an expansion of the gross margin despite a very challenging overall RAN and mobile networks market. So gross margin for the group came in at 43.9%, and this was supported by proactive actions and our competitive portfolio.

Barry: Well, thanks, Daniela and good morning, everyone first I'd like to cover some of the key highlights from the quarter before Laura really goes through all the financials in more detail.

Barry: So in Q2, we continue to work with our customers and focus on leveraging our leading technology as well as optimizing our business through our strategic initiatives, which of course includes our cost reduction actions that we've taken.

Bory Ekholm: All these actions made it possible to deliver a very strong performance, and we saw an expansion of the gross margin, despite very challenging overall ran-and-mobile networks market. So gross margin for the group came in at 43.9%, and this was supported by the proactive actions and our competitive portfolio. It was, of course, positively impacted by a new 5G licensing agreement, and we're now clearly on track to deliver our 12-13 billion krone revenue target for IPR for 2024. Our IPR portfolio clearly illustrates how our technology leadership is creating value.

Barry: All these actions made it possible to deliver very strong performance and.

Barry: And we saw an expansion of the gross margin despite a very challenging overall run on mobile networks market.

Barry: So gross margin for the group came in at 43, 9% and this was supported by the proactive actions in our competitive portfolio.

Borja: It was, of course, positively impacted by a new 5G licensing agreement, and we're now clearly on track to deliver our 12 to 13 billion kronor revenue target for IPR for 2024. Our IPR portfolio clearly illustrates how our technology leadership is creating value. Let me also briefly touch upon the impairment we recorded last week.

Barry: It was of course positively impacted by a new <unk> licensing agreement.

Barry: We're now clearly on track to deliver our 12 to 13 billion kroner revenue target for IPR for 2024.

Barry: Our IPR portfolio clearly illustrates how our technology leadership is creating value.

Bory Ekholm: Let me also briefly touch upon the impairment we recorded last week. This relates mainly to bondage and reflects lower anticipated market growth rates in bondage portfolio. However, the strategic rationale for the bondage acquisition remains, and that is really to create new ways to monetize the network capabilities and the network features. And long-term, we see this to be crucial for the telecom industry, and actually, if we cannot generate the extra revenues from the features of the network, it's very hard to justify the future investments in late generations as well. So we believe this is a critical initiative for us and for the industry.

Speaker Change: Let me also briefly touched upon the impairment we recorded last week.

Borja: This relates mainly to Vonage and reflects lower anticipated market growth rates for Vonage portfolios. However, the strategic rationale for the Bonnets acquisition remains, and that is really to create new ways to monetize the network capabilities and network features. And long term, we see this to be crucial for the telecom industry, and actually, if we cannot generate extra revenues from the features of the network, it's very hard to justify future investments in later generations as well.

Speaker Change: Relates mainly to ball niche and reflects lower anticipated market growth rates in both niche portfolio.

Speaker Change: However, the strategic rationale for the boat on this acquisition remains and that is really to create new ways to monetize the network capabilities under network features.

Speaker Change: And long term, we see this to be crucial.

Speaker Change: The telecom industry and actually if.

Speaker Change: If we cannot generate extra revenues.

Speaker Change: From the features of the network, it's very hard to justify the future investments in late the generations as well. So we believe this is a critical initiative for us and for the industry.

Borja: So we believe this is a critical initiative for us and for the industry. Network APIs and the global network platform we're creating remain central to this portfolio and to this strategy, and we continue to see good traction. We had two additional mobile operator partnerships announced in Q2, and we are now at 12 in total.

Bory Ekholm: Network APIs and the global network platform we're creating remain central to these portfolios and how to these strategies. And we continue to see good traction. We have two additional mobile operator partnerships announced in Q2, and we are now at the 12 in total.

Speaker Change: Network Api's and the global network platform, we're creating remains central to this portfolio to the strategy.

Speaker Change: And we continue to see good traction we have two additional mobile operator partnerships announced in Q2 and we're now at the 12 in total.

Bory Ekholm: Let's move to the next slide and look at the market development. In Q2, we saw North America returning to growth for the first time actually since 2022. This was, of course, driven by the end of the inventory adjustments that we had predominantly last year and into the beginning of this year, but also driven by some larger customers selectively increasing their network investments. We benefited also from the recent and large contract win that we announced late last year, and we started to have some deliveries in Q2, but that will provide further support during age to this year.

Borja: But let's move to the next slide and look at market developments. In Q2, we saw North America returning to growth for the first time since 2022. This was, of course, driven by the end of the inventory adjustments that we had predominantly last year and into the beginning of this year, but also driven by some larger customers selectively increasing their network investment. We benefited also from the recent and large contract win that we announced late last year, and we started to have some deliveries in Q2, but that will provide further support during H2 this year. But when you look at the rest of the market areas, we see they're all declining. So it's really a challenging market environment. In Europe and Latin America, sales decreased by 3%.

Speaker Change: Let's move to the next slide look at the market development.

Speaker Change: In Q2, we saw North America, returning to growth for the first time actually till 2022.

Speaker Change: This was of course, driven by the end of the inventory adjustments that we had the predominantly last year and into the beginning of this year, but it also is driven by some larger customers selectively increasing their network investments.

Speaker Change: We benefited also from the recent large contract wins that we announced late last year and we started to have some deliveries in Q2, but that will provide further support during H two of this year.

Bory Ekholm: But when you look at the rest of the market areas, we see they're all declining. So it's really a challenged market environment. In Europe and Latin America, sales decreased by 3%. And that's, and I would highlight here, and it's in contrast to what many on the outside think. We're actually seeing a sharply increased competition from Chinese vendors. That includes both in Europe, but particularly in Latin America.

Speaker Change: But when you look at the rest of the market areas, we see they're all declining.

Speaker Change: So it's really a challenged market environment.

Speaker Change: In Europe, or Latin America sales decreased by 3%.

Borja: And I would highlight here, and this is in contrast to what many on the outside think, we're actually seeing sharply increased competition from Chinese vendors, both in Europe but particularly in Latin America. In Southeast Asia, Oceania, and India, sales decreased by 44%.

Speaker Change: And that's it.

Speaker Change: I would highlight here and this is in contrast to what many on the outside think we're actually seeing a sharply increased competition from Chinese vendors that includes both in Europe, but particularly in Latin America.

Bory Ekholm: In Southeast Asia, Oceania, and India sales decreased by 44%. This follows the normalization in India compared to the record pace 5-year rollout of last year. And finally, both North East Asia, the Middle East, and Africa saw declining sales due to slow down in operation investments and an additional macro pressure.

Speaker Change: And southeast Asia, Oceania and India.

Speaker Change: In Europe sales decreased by 44% this call knows the normalization in India compared to the record pace five G rollout of last year.

Borja: This follows the normalization in India compared to the record-paced 5G rollout of last year. And finally, both Northeast Asia, the Middle East, and Africa saw declining sales due to a slowdown in operator investments and additional macro pressure. With that, I would say it's time for Lars to go through the numbers in more detail. All right. Thank you, Bea. Let me start by adding a few additional points about the group before discussing the segments in more detail. Organic sales declined by 7% in the quarter, and this was primarily driven by networks.

Speaker Change: And finally.

Speaker Change: Northeast Asia, Middle East and Africa saw declining sales due to slow down and operate three investments and an additional.

Speaker Change: Additional macro pressure.

Lars Sandström: With that, I would say it's time for Lars to go through the numbers more in detail.

Speaker Change: With that I would say, it's time for loss to go through the numbers more in detail.

Lars Sandström: Alright, thank you very much.

Speaker Change: Alright, so think about that.

Lars Sandström: Let me start by adding a few additional points on the group before discussing the segments in more detail. Organic sales declined by 7% in the quarter, and this was primarily driven by networks. Some of our larger customers in North America did selectively increase their investment, supporting return sales growth in this key market, but our other market declined. And as Bayer already highlighted, we deliver a good expansion in our adjust the gross margin at 43.9% in Q2. This benefited from our strategic actions on cost as well as strong IPR revenue. Also, as Bayer mentioned, we signed the new IPR contract in the quarter, which includes some retroactive revenue.

Lars: Some of our larger customers in North America did selectively increase their investment, supporting a return to sales growth in this key market, but our other markets declined. And, as Börje already highlighted, we delivered a good expansion in our adjusted gross margin at 43.9% in Q2. This benefited from our strategic actions on cost as well as strong IPR revenue. Also, as mentioned, we signed the new IPR contract in the quarter, which includes some retroactive revenue, and reported OPEX was significantly distorted by the Vonage impairment charges in Q2. In the slide, you can see the underlying development. Including the impairment, OPEX was up by 1.2 billion year on year. Savings from our cost actions were balanced by salary increases and higher bonus accruals.

Let me start by adding a few additional points on the group.

Speaker Change: Before discussing the segments in more detail.

Speaker Change: Organic sales declined by 7% in the quarter and this was primarily driven by networks.

Speaker Change: Some of our larger customers in North America did selectively increase their investment supporting return to sales growth in this key market.

Speaker Change: Both are under market declined.

Speaker Change: And if somebody has already highlighted we delivered good expansion in our adjusted gross margin at 43, 9% in Q2.

Speaker Change: This benefited from our strategic actions on costs as well as a strong IPR revenue.

Speaker Change: Also as I mentioned, we signed a new IPR contracts in the quarter, which include some retroactive revenue.

Lars Sandström: And reported OPEX was significantly distorted by the Vonage impairment charges in Q2. And in the slide, you can see the underlying development. Including the impairment, OPEX was up by 1.2 billion year on year. Savings from our cost actions were balanced by salary increases and higher bonus accruals. And we also increased investments in two areas in R&D for technology leadership and operational resiliency, and in SG&A to drive operational efficiency in enterprise. We are continuing to take action on costs, including sizing our organization to serve the new level of customer demand, and we recently announced or recently concluded the union negotiation in Sweden on planned headcount. Adjusted a beta increased to 4.1 billion in the quarter with a margin of 6.8%.

Speaker Change: And reported Opex, well significantly distorted by the vantage impairment charges in Q2 and in the slide you can see the underlying development.

Speaker Change: Including the impairment Opex was up by 1.2 billion year on year.

Speaker Change: Savings from our cost actions were balanced by salary increases and higher bonus accruals.

Lars: We also increased investments in two areas, in R&D for technology leadership and operational resiliency and in SG&A to drive operational efficiency across the enterprise. We are continuing to take action on costs, including sizing our organization to serve the new level of customer demand, and we recently announced or recently concluded the union negotiation in Sweden on planned headcount reduction. Adjusted the data increase to 4.1 billion in the quarter with a margin of 6.8%. With that, let's move to the segments. Next slide, please. In networks, organic sales were down by 11% year-on-year, as customers continued to be cautious with their investments.

Increased investments in two areas.

Speaker Change: In R&D for technology leadership, and operational resiliency and in SG&A to drive operational efficiency in enterprise.

Speaker Change: We are continuing to take action on costs, including sizing our organization to serve the new level of customer demand and we were.

Speaker Change: Recently announced or recently concluded.

Speaker Change: The Union negotiation in Sweden on planned head count reductions.

Speaker Change: Adjusted EBITDA increased to $4 1 billion in the quarter with a margin of six 8%.

Lars Sandström: With that, let's move to the segment. Next slide, please. In networks, organic sales were down by 11% year-on-year, as customers continued to be cautious with their investments. The larger slowdown was in India following the rapid 5G rollout last year. But, as I already mentioned, we did see a return to growth in North America, with sales up 20%. And there was also a benefit from the new IPR-alising agreement signed in the quarter, which included a retroactive element. We generated a strong idea to go small in 0.46.1%, with a favorable business mix, IPR-alising revenue, and cost actions all contributing.

Speaker Change: With that let's move to the segments next slide please.

Speaker Change: In networks organic sales were down by 11% year on year as customers continue to be cautious with their investments.

Lars: The largest slowdown was in India following the rapid 5G build-out last year. But, as I already mentioned, we did see a return to growth in North America, with sales up 20%. And there was also a benefit from the new IPR licensing agreement signed in the quarter, which included a retroactive element. We generated a strong adjusted gross margin of 46.1% with a favorable business mix, IPO licensing revenue, and cost actions all contributing. Adjusted EBITDA increased to $5.3 billion compared to $4.9 billion last year.

Speaker Change: The largest slowdown was in India. Following the rapid five do you build out last year.

Speaker Change: But as I already mentioned, we did see a return to girlfriend North America, we'd say, it's up 22%.

Speaker Change: And there were also a benefit from the new IPR licensing agreement signed in the quarter, which included a retroactive element.

Speaker Change: We generated strong adjusted gross margin of 46, 1% with a favorable business mix IPR licensing revenue and cost actions all contributing.

Lars Sandström: Adjusted a beta increased to 5.3 billion compared to 4.9 last year, and we reached a beta margin of 13.9%. The increase in the beta was delivered despite lower sales and despite significant headwinds from salary increases and bonus accrues. This shows the benefit of our cost actions, technical leadership, and competitive product portfolio.

Adjusted EBITDA increased to $5 3 billion compared to $4 nine last year.

Lars: And we reached an EBITDA margin of 13.9%. The increase in the beta was delivered despite lower sales and despite significant headwinds from salary increases and bonus rates. This shows the benefit of our cost actions, technology leadership, and competitive product portfolio. In the segment of cloud software and services, we continue to execute on our strategy of strengthening delivery performance and commercial discipline. Organic sales were stable year on year, with slight growth in core offset by lower sales in other parts of the portfolio.

And we reached an EBITDA margin of 14, 9%.

Speaker Change: The increase in the beta was delivered despite the lower sales and despite significant headwinds from salary increases and bonus accruals.

Speaker Change: This shows the benefit of our cost actions technology leadership and competitive product portfolio.

Lars Sandström: In segment, cloud software and services, we continued to execute on our strategy to strengthen delivery performance and commercial discipline. Organic sales were stable year-on-year, with slight growth in core offset by lower sales in other parts of the portfolio. We delivered an adjusted-grossed margin of 47.2%, and the beta margins continued to improve on a rolling basis.

Speaker Change: In segment cloud software and services, we continue to execute on our strategy to sing strengthening delivery performance and commercial discipline.

Speaker Change: Organic sales were stable year on year with slight growth in core offset by lower sales in other parts of the portfolio.

Lars: We delivered an adjusted Gauss margin of 37.2%, and the beta margins continue to improve on a rolling basis. As I already mentioned, our IPO revenues increased to 3.9 billion in the quarter with the new agreement, and we continue to see further growth opportunities with additional 5G agreements and the potential to expand into additional licensing areas. The revenue run rate is now at $12 billion, so we are on track to reach a target of $12 to $14 billion for 2024. However, the timing of growth will vary as we seek to optimize the value of new agreements. Next slide, please. In enterprise, sales were broadly stable overall.

Speaker Change: We delivered an adjusted gross margin of 47, 2% and the beta margins continue to improve on a rolling basis.

Lars Sandström: As I already mentioned, our IPR revenues increased to 3.9 billion in the quarter, with the new agreement, and we continue to see further growth opportunities, with additional 5G agreements and the potential to expand into additional licensing areas. The revenue run rate is now at 12 billion, so we are on track to reach a target of 12 to 14 billion for 2024. The timing of growth will vary, as we seek to optimize the value of new agreements.

Speaker Change: As I've already mentioned, our IPR revenues increased to $3 9 billion in the quarter with the new agreement and we continue to see further growth opportunities with additional five day agreements and potential to expand into additional licensing areas.

Speaker Change: The revenue run rate is now at 12 billion. So we are on track to reach the target of 12 to 14 billion for 'twenty to 'twenty four.

Speaker Change: The time it will grow if will vary.

As we seek to optimize the value of new agreements.

Lars Sandström: Next slide, please. In enterprise, sales were broadly stable overall. Sales increased in enterprise wireless solutions, with good customer demand for private seller network solutions. The sales also increased in technologies and new businesses.

Speaker Change: Next slide please.

Speaker Change: In enterprise sales were broadly stable overall.

Lars: Sales increased in enterprise wireless solutions, with good customer demand for private cellular network solutions. The sales also increased in technologies and new business. Sales in the global communications platform declined, impacted by decisions to reduce activities in some countries, which we talked about last quarter, as well as the low-margin customer contract loss from Q4. However, adjusted gross margin increased to 51.1% with improved margins in all business areas. Adjusted EBITDA was a loss of 1.2 billion, with higher adjusted gross income offset by higher operating expenses.

Speaker Change: Sales increased in enterprise wireless solutions with good customer demand for private seller network solutions, Let's say, it's also increased in technologies and new businesses.

Lars Sandström: Sales in global communications platform declined, impacted by decisions to reduce activities in some countries, which we talked about last quarter, as well as the low margin customer contract loss from Q4. The adjusted-grossed margin increased to 51.1%, with improved margins in all business areas.

Speaker Change: Sales in global Communications platform declined.

Speaker Change: Impacted by decisions to reduce activities in some countries, which we talked about last quarter as well as the low margin customer contract loss from Q4.

Speaker Change: Adjusted gross margin increased to 51, 1% with improved margins in all business areas.

Lars Sandström: The adjusted beta was the loss of 1.2 billion, with higher adjusted-gross income offset by higher operating expenses. The operating expenses increased was mainly in global communications platform for two reasons. First, a non-cash accounting impact from the discontinuation of capitalization of development expenses. We started already in Q1 and we expect this to have approximately one billion negative impact on OPEX this year. And second, increased investments in operations so we can efficiently meet contractual and regulatory requirements. And in addition, then, as by already mentioned, we continue to invest in the global network platform for network APIs.

Speaker Change: Adjusted EBITDA was a loss of $1 2 billion with higher adjusted gross income offset by higher operating expenses.

Lars: The operating expenses increase was mainly in the global communications platform for two reasons. First, the non-cash accounting impact from the discontinuation of capitalization of development expenses. We started this in Q1, and we expect it to have approximately 1 billion negative impact on OPEX this year. Second, increased investments in operations so we can efficiently meet contractual and regulatory requirements. And in addition, as Börje already mentioned, we continue to invest in the global network platform for network APIs. Then, let's go to the next place.

So operating expense. This increase was mainly in global communications platform for two reasons.

Speaker Change: First a non cash accounting impact from the discontinuation of capitalization of development expenses.

We've started already in Q1, and we expect to have approximately 1 billion negative impact on Opex. This year.

Speaker Change: And second increased investments in operations. So we can efficiently meet contractual and regulatory requirements.

Speaker Change: And in addition, and as I already mentioned, we continue to invest in the global network platform for network Api's.

Lars Sandström: Then let's move to the next place. Turning to free cash flow then, which was 7.6 billion before M&A in the quarter. This strong improvement compared to last year is a result of significant improvement in working capital. This benefited from favorable change in market mix, substantial reduction in inventory levels, and lower accounts receivables due to lower sales volume. There was also a benefit from inflow of the 1.9 billion related to the one-time gain we reported in Q1. So net cash increased sequentially by 2.3 billion here to 13.1 billion.

Speaker Change: Then let's go to the next place.

Lars: Turning to free cash flow then, which was 7.6 billion before M&A in the court, this strong improvement compared to last year is a result of a significant improvement in working capacity. This benefitted from a favorable change in market mix, a substantial reduction in inventory levels, and lower accounts receivables due to lower sales volume. There was also a benefit from the inflow of the 1.9 billion related to the one-time gain we reported

Turning to free cash flow down, which was $7 6 billion before M&A in the quarter.

Speaker Change: This strong improvement compared to last year is a result of significant improvement in working capital.

Speaker Change: This benefited from favorable change in market mix substantial reduction inventory levels and lower accounts receivables due to lower sales volume.

Speaker Change: There was also a benefit from inflow of the $1 9 billion related to the onetime gain we reported in Q1.

Lars: So net cash increased sequentially by 2.3 billion here to 14.1 billion; next, and I will cover the Outlook. So turning first to sales, we have delivered above normal seasonality in Q2, both in networks and in cloud software and services, by around 4 percentage points in networks and 3 in cloud software and services.

Speaker Change: So net cash increased sequentially by $2 3 billion here to $14 1 billion.

Lars Sandström: Next, then I will cover the outlook. So turning first to sales, we have delivered above normal seasonality in Q2, both in networks in cloud software and services by around 4% point in network and free in cloud software and services. So we have a bit of a higher starting point. We expect to carry this out performance into the second half. So normal seasonality is a good assumption for Q3 for both segments. And as you know, we will benefit from North America growth, but overall market condition remains challenging, with our customers remaining cautious with our investments.

Speaker Change: Next I will cover the outlook.

Speaker Change: So turning first to sales.

Speaker Change: Have delivered above normal seasonality in Q2, both in networks in cloud software and services by around four percentage points in network in free and cloud software and services. So we have a bit of a higher starting point.

Lars: So we have a bit of a higher start. We expect to carry this outperformance into the second half, so normal seasonality is a good assumption for Q3 for both segments. And as you know, we will benefit from North America growth, but overall market conditions remain challenging, with our customers remaining to be cautious with their investments. And in enterprise, we expect sales to be further impacted by our decision to reduce operations in some countries.

Speaker Change: We expect to carry this outperformance into the second half so normal seasonality is a good assumption for Q3 for both segments.

Speaker Change: And as you know, we will benefit from North America growth, but overall market conditions remain challenging with our customers remaining to be cautious with our investments.

Lars Sandström: And in enterprise, we expect sales to be further impacted by our decision to reduce operations in some countries.

Speaker Change: And in enterprise, we expect sales to be further impacted by our decision to reduce operations in some countries.

Lars Sandström: And then turning to profitability. In networks, we expect Q3 gross margins to be in the range of 45 to 47%. And as mentioned before, the total market is in decline, but we will benefit from continuous growth in North America. But also, on the other hand, we will not have the IPR benefit. Finally, on OPEX, it's worth noting that we won't see the usual seasonality this year because of the changes in facing here. And as we will also start to see further benefits from our cost actions later in the year.

Lars: And then turning to profitability, we expect Q3 gross margins in networks to be in the range of 45 to 47 percent. And as mentioned before, the total market is in decline, but we will benefit from continued growth in North America, but, on the other hand, we will not have the IPR benefit. Finally, on OPEX, it's worth noting that we won't see the usual seasonality this year because of the changes it's facing here. And as we will also start to see further benefits from our cost actions later in the year. With that, I will hand it back to you, Börje. Thanks, Lars.

Speaker Change: And then turning to profitability.

Speaker Change: In networks, we expect Q3 gross margins to be in the range of 45% to 47%.

Speaker Change: And as mentioned before the total market is in decline, but we will benefit from continued growth in North America, but also on the other hand, we will not have the IPR benefit.

Speaker Change: Finally on Opex, it's worth noting that we won't see the usual seasonality this year because of the changes facing here.

Speaker Change: And thus we will also start to see further benefits from our cost actions later in the year.

Bory Ekholm: With that, I will hand back to you, Bahia.

Speaker Change: With that I will hand back to you about.

Bory Ekholm: Thanks, Lars.

Borja: So to conclude, we're facing a tough market environment at the moment. However, I would say the results in Q2 underscore the underlying strength of our business as well as our competitive portfolio. Going forward, we remain fully focused on executing on our strategy to strengthen leadership in mobile networks, driving a focused expansion into enterprise, and pursuing a cultural transformation. We continue to leverage our technology leadership while prudently managing our business. The actions we've taken, including our focus on costs, will allow us to keep investments critical to protect our leadership position and long-term competitiveness. This will ensure that Ericsson remains well positioned going forward.

Bory Ekholm: So, to conclude, we're facing a tough market environment at the moment. However, I would say the results in Q2 underscore the underlying strength in our business as well as our competitive portfolio. Going forward, we remain fully focused on executing on our strategy to strengthen leadership in mobile networks, driving a focused expansion into enterprise, and pursue a cultural transformation. We continue to leverage our technology leadership, while presently managing our business. The actions we're taking, including our focus on costs, will allow us to keep investments critical to protect our leadership position and long-term competitiveness. This will ensure that Ericsson remains well-positioned going forward.

Lars: Thanks, Lars so.

Speaker Change: To conclude that we're facing a tough market environment at the moment.

Speaker Change: However, I would say the results in Q2 underscore the underlying strength in our basis as well as our competitive portfolio.

Speaker Change: Going forward, we remain fully focused on executing on our strategy to strengthen leadership in mobile networks, driving a focused expansion into enterprise and pursue a cultural transformation.

Speaker Change: We continue to leverage our technology leadership, while prudently managing our business the actions we've taken.

Including our focus on costs will allow us to keep investments critical to protect our leadership position.

Long term competitiveness.

Speaker Change: This will ensure that Eric zone remains well positioned going forward.

Bory Ekholm: At the same time, for the industry to grow long-term, it's necessary to find new revenue streams for our customers beyond the mobile broadband subscriptions. We need to create new opportunities to monetize the networks and the investments our customers make in the networks through differentiated offerings. And that's what our enterprise strategy is targeting. And network APIs is, of course, one of the key opportunities for us. Of course, creating a market and new monetization models and the associated ecosystem will take time, but we are seeing some very good traction. So our vision to become a leading network and enterprise platform is unchanged.

Borja: At the same time, for the industry to grow long term, it's necessary to find new revenue streams for our customers beyond the mobile broadband subscription. We need to create new opportunities to monetize the networks and the investments our customers make in the networks through differentiated offerings. And that's what our enterprise strategy is targeting, and network APIs are, of course, one of the key opportunities for us. Of course, creating a market and new monetization models and the associated ecosystem will take time, but we are seeing some very good traction. So our vision to become a leading network and enterprise platform is unchanged.

Speaker Change: At the same time for the industry to grow long term, it's necessary to find new revenue streams for our customers beyond the mobile broadband subscriptions.

Speaker Change: We need to create new opportunities to monetize the networks and then the investments our customers, making the networks through differentiated offerings.

Speaker Change: And that's what our enterprise strategy is targeting.

Speaker Change: Our network is.

Speaker Change: So of course, one of the key opportunities for us of course, creating a market a new monetization models and the associated ecosystem will take time, but we are seeing some very good traction.

Speaker Change: So our vision to become a leading networks and enterprise platform is unchanged.

Bory Ekholm: The foundation in this strategy is and will remain our leading mobile network's business. And here we will, of course, take every action needed to ensure that we keep our leading position as well as our strong cost position and competitive position in the industry.

Borja: The foundation of this strategy is and will remain our leading mobile network business, and here we will, of course, take every action needed to ensure that we keep our leading position as well as our strong cost position and competitive position in the industry. With that, Daniel, I think we're ready to take all your questions. Thanks, Bira. We'll now move to Q&A. As a reminder, to ask a question, you'll need to press star 1 and 1 on your telephone and wait for your name to be announced. If you're streaming the webcast, please mute the webcast audio while asking a question to minimize any audio feedback.

Speaker Change: The foundation and the strategy is and will remain our leading mobile networks business.

Speaker Change: And here, we will of course take every action needed to ensure that we keep our leading position as well as our strong cost position our competitive position in the industry.

Daniel Djurberg: With that, Daniel, I think we're ready to take all your questions.

Speaker Change: With that Danielle I think we're ready to take all your questions.

Operator: Thanks, Vera.

Operator: We'll now move to Q&A. As a reminder to ask a question, you'll need to press star, one, and one on your telephone and wait for your name to be announced. If you're streaming the webcast, please mute the webcast audio while asking a question to minimize any audio feedback. And, as usual, can I request one question per participant? So we've got time to hear from as many of you as today as possible. Super.

Danielle: Thanks Pierre.

Speaker Change: Well now move to Q&A as a reminder to ask a question you will need to press star one and one on your telephone and wait for your name to be announced.

Speaker Change: If you're streaming the webcast. Please meet the webcast audio while asking a question to minimize any audio feedback.

Unknown Executive: And as usual, can I request one question per participant, so we've got time to hear from as many of you as possible today. Okay, I can see the first question on the line is from Francois Bovine from UBS. Francois, your line is now open, please go ahead. Thank you very much.

Speaker Change: And as usual can I request one question per participant so we've got time to hear from as many of you as today as possible.

Speaker Change: Okay.

Francois Bovine: I can see the first question on the line is from Francois Bovine from UBS.

Speaker Change: So I can see the first question on the line is from Francois <unk> from UBS.

Francois Bovine: Francois, your line is now open. Please go ahead. Thank you very much. So my question would be on this slide 8 that you showed in the presentation where you showed the adjusted EBITDA margin and adjusted gross margin. So what we see in the chart, we can clearly see, I think, a correlation between the gross margin and EBITDA margin since 2022. And I checked in 1921 and 20. I think it's the same correlation directionally.

Speaker Change: Francois Your line is now open. Please go ahead.

Francois Bovine: So my question would be on this slide 8 that you show in the presentation where you show the adjusted EBITDA margin and adjusted gross margin. So what we see in the chart, we can clearly see, I think, a correlation between the gross margin and the adjusted EBITDA margin since 2022. And I checked in 1921 and 20. I think it's the same correlation directionally, but for some reason, from Q4 to Q3, we see the gross margin going up, but the EBITDA margin going down.

Francois: Thank you very much. So my question would be on the same.

Slide eight that you show in the presentation, where you show the adjusted EBITDA margin and adjusted gross margin. So what we see in the in the chart you can clearly see a I think a correlation between the gross margin and EBITDA margin since 2022.

And I checked in 1921, and 'twenty I think it's the same correlation that directionally, but for some reason from Q4 'twenty three we see the gross margin going up but the EBITA margin going down.

Lars Sandström: But for some reason, from Q423, we see the gross margin going up, but the EBITDA margin going down. And I was wondering why, because we see the in Q2, for example, the top line increasing. So should it help the scale? Well, you have the North America increasing; should help the show mix. And you have the IPR, which is almost all time high, which should help the margin. So, I'm wondering why you have a disconnection between the Ghost Margin and the Ibita Margin since the beginning of the year. That would be my question, and, yeah, please.

Lars: And I was wondering why, because, you know, we see in Q2, for example, the top line increasing, so it should help the scale. You have North America increasing, which should help the mix. And you have the IPR, which is almost at an all-time high, which should help the margin. So I'm wondering why, you know, you have had a disconnection between the gross margin and the EBITDA margins, you know, since the beginning of the year. That would be my question. And, yeah, please.

And then.

Francois: I was wondering why because we see the in Q2 for example, the.

Increasing social to help the scale you have North America, increasing should help the show mix and you have the IPR, which is almost a all time high which should help the margins. So I'm wondering why you know you have a disconnection between the gross margin and EBITDA margins you know since the beginning.

Francois: Of the year.

Francois: That would be my question and yes. Please.

Lars Sandström: Thanks, Francois. How far is that? Thanks.

Francois: Thanks, Francois I'll hop off Thanks, I think it is that we have somewhat higher cost base compared to what we had a couple of years ago when it comes to.

Lars Sandström: I think it is that we have a somewhat higher cost space compared to what we had a couple of years ago when it comes to especially on the R&D side. We have had an increased level of data now. This is on a quarterly basis, so it's not a rolling 12. So that's why the significant lower revenue basis is also impacting quite a lot on the up-ex ratio there. So that is what is, so to say, kicking through. And also some of the higher the difference there on from coming from the enterprise business, that is impacting to some extent as well compared to where we were in 2022.

Yeah.

Speaker Change: Especially on the R&D side, we have had an increased level of that and now you see it on a quarterly basis. So it's not a rolling 12. So that's why the Sydney for a lower revenue base. It's also impacting quite a lot on the opex ratio down. So that is what is so lets say kick you through and also somewhat higher.

Lars: And now this is on a quarterly basis, so it's not a rolling 12. So that's why the significantly lower revenue base is also impacting quite a lot on the OPEX ratio there. So that is what is, so to say, kicking through. And also, somewhat higher, the difference thereon from coming from the enterprise business, which is impacting to some extent as well compared to where we were in 2022. But do you move the cost of sales into OPEX at all?

Speaker Change: In the defense area, one from coming from the enterprise business that is impacting to some extent as well compared to where we were in 2022.

Lars Sandström: So if you do the same, looking at the pure mobile networks and the enterprise, I say you will see it's a little bit different.

Speaker Change: If you do the same looking at the pure mobile networks and the enterprise side, you would say, it's a bit little bit different.

Lars Sandström: But do you move cost of sales into up-ex at all? I mean, because when I look at this chart, it looks like you are the cost base. And you always invested a lot in Up-ex, increasing R&D in the last few years. So why would you invest even more now than before? It is not more. It's the relative. With the significant lower revenue base, that impact the ratios is not more cost-perce in absolute levels in that sense. It's the revenue that gives the impact. Thank you.

Lars: I mean, because when I look at these charts, it looks like you are, you know, the cost base, and you have always invested a lot in OPEX, including R&D, in the last few years. So why would you invest even more now than before? It is not more; it's the relative with a significantly lower revenue base that impacts the ratios. It's not more cost per in absolute terms in that sense. It's the revenue that gives the impact. Thank you.

Speaker Change: Or do you move cost of sales in into Opex at all I mean, because when I look at these charts it looks vulnerable are.

Yeah, the cost base and you're always invested a lot in opex, increasing R&D in the last few years. So why would you invest even more now than than before it is not more it's the relative weight of significant lower revenue base that impacts the ratios if not more of course purse in.

Speaker Change: Luton levels in that sense, it's the revenue that gives the.

Speaker Change: Impact.

Speaker Change: <unk>.

Speaker Change: Consolidated.

Bory Ekholm: I think you should think about it in a bit of a different way. Our cost base is, in reality, a base to drive the competitiveness. It depends on which markets we're in as well as our R&D intensity. And the R&D is driven by the future. So it's actually oriented towards in here than programmable networks. So we are there to lead into developing the programmable networks for the future. That allowed us to win with AT&T, so that win in reality doesn't translate to revenues until time after we make the investment. So what you see right now is a situation where sales have fallen, and we have kept the R&D intensity to be able to compete in the future and be successful longer term.

Lars: I think you should think about it in a bit of a different way, you know, the OSPACE is, in reality, based to drive competitiveness. It depends on which markets we're in, as well as our R&D intensity. And the R&D is driven by the future, so it's actually oriented towards here rather than programmable networks. So we are there to lead in developing programmable networks for the future. That allowed us to win with AT&T.

Speaker Change: Thank you.

Speaker Change: I think you should think about it in a bit of a different way.

Speaker Change: The hour.

Speaker Change: Oh space is in reality a.

Speaker Change: Base to drive the competitiveness it depends on which markets we're in.

Speaker Change: Well.

Speaker Change: As our R&D intensity and the R&D is driven by.

Speaker Change: The future so it's actually a oriented towards.

Speaker Change: In here then programmable networks. So we are.

Speaker Change: They are to lead into developing the programmable networks for the future that allows us to win with AT&T. So that when in reality it doesn't translate to revenues until time after we make the investments.

Lars: So that win, in reality, doesn't translate to revenues until a time after we make the investment. So what you see right now is a situation where sales have fallen, and we have kept the R&D intensity to be able to compete in the future and be successful longer term. So you will understand this, you know, it's not that the cost base can follow revenues in R&D because that's simply not the... It doesn't become the relevant timing to think about.

Speaker Change: So what you see right now is a situation where sales have fallen and we have kept the R&D intensity to be able to compete in the future.

Lars Sandström: So you will get this, you know, it's not that the cost base can follow revenues in R&D because that's simply not the relevant timing to think about it in. Thank you very much. Great. Thanks for the question, Francois.

Speaker Change: Successful longer term so you will get this.

Speaker Change: It's not that the cost base camp for low revenues in R&D, because that is simply not there.

Speaker Change: It doesn't become the relevant timing to think about it.

Speaker Change: Understood. Thank you very much.

Unknown Executive: Great. Thanks for the question, Francois. We're now ready for the next question. So the next question will come from Alex Duval at Goldman Sachs. Alex, your line will now be open. Please go ahead. Yes, good morning, Alex Duval.

Speaker Change: Yeah.

Speaker Change: Great. Thanks for the question Francois we're now ready for the next question.

Alex Duval: We're now ready for the next question. So the next question will come from Alex Duval at Goldman Sachs. Alex, your line will now be open. Please go ahead. Yes.

Speaker Change: So the next question will come from Alex Duval at Goldman Sachs. Alex Your line will not be open. Please go ahead.

Alexander Duval: Thank you very much for the question. In your report, you state what normal seasonality is like on the top line. Curious to what extent one should take this for modeling purposes as the right quarterly-on-quarter growth rate for the next few quarters? Clearly, you have the AT&T win, but then in your report, you talk about some of the dynamics in markets like Europe being tough, so just trying to understand if AT&T should be added on top of that seasonality, or if that's already included. Lars, I think one for you.

Alex Duval: Good morning, Alex Duval. Thank you very much for the question. In your report, you state what normal seasonality is like on top line. Curious to what extent one should take this modeling purposes as the right quarter-on-quarter growth rate for the next few quarters? Clearly, you have the AT&T win, but then in your report, you talk about some of the dynamics in markets like Europe being tough. So just trying to understand if AT&T should be added on top of that seasonality, or if that's already included. Many thanks. What we say in Q3 here is we show the seasonality, and I think that is including the growth rate that we see in North America, and then, of course, we have a weaker situation in all regions outside North America.

Speaker Change: Yes, good morning, Alex Duval. Thank you very much for the question.

Speaker Change: A report you state what normal seasonality is like on top line.

Speaker Change: Curious to what extent one should take this modeling purposes is the right quarter on quarter growth rate for the next few quarters cleaning.

Speaker Change: Clearly you have the AT&T win.

Speaker Change: But then in your report you talk about some of the dynamics in markets like Europe being tough.

Speaker Change: Just trying to understand if AT&T should be added on top.

Speaker Change: Of that seasonality or if that's already included many thanks.

Laurence: Laurence I think one thing I think.

Laurence: What we say in Q3 here is we sold the seasonality.

Speaker Change: That is including.

Speaker Change: Did the growth rate that we see in North America, and then of course, we have a weaker situation in all regions outside North America. So that's why we say that the seasonality is probably a good indicator for Q3.

Lars Sandström: So that's why we say that the seasonality is probably a good indicator for Q3.

Operator: Very helpful, thank you.

Speaker Change: Very helpful. Thank you.

Andreas Joelsson: Thanks, Alex. Thanks for the question. We can move on to the next question now, so that will come from Andreas Jolson. At Carnegie, Andreas, your line will now be open. Please go ahead. Thanks a lot, Daniel. Follow up on the previous question, but maybe give a little bit more flavor into the various regions on the network side. So North America, I understand the improvement is a mix between the AT&T contract and the improvement from others, but how do you see that play out going forward? Or are the customers a little bit more forward leaning now than a year ago, perhaps?

Alexander Duval: Thanks, Alex Thanks for the question.

Lars: I think what we say in Q3 here is that we show seasonality, and I think that is including the growth rate that we see in North America, and then, of course, we have a weaker situation in all regions outside North America, so that's why we say that the seasonality is probably a good indicator for Q3. Very helpful, thank you. Thanks Alex. Thanks for the question. We can move on to the next question now. So that will come from Andreas Joelsson at Carnegie. Andreas, your line will now be open. Please go ahead.

Alexander Duval: We can move onto the next question now so that will come from Andreas Yeltsin.

Alexander Duval: Carnegie Andreas your line will not be open. Please go ahead.

Andreas Joelsson: Thanks a lot, Daniel. And follow up on the former or the previous question, but maybe give a little bit more flavor to the various regions on the network side. So North America, I understand the improvement is a sort of a mix between the AT&T contract and improvement from others. But how do you see that playing out going forward? Are the customers a little bit more forward leaning now than a year ago, perhaps? And then also,

Daniel: Thanks, a lot Daniel.

Andreas Joelsson: Follow up on the former or the previous question, but maybe give a little bit more flavor into the various regions on the network side and so North America I understand the improvement is a sort of a mix between the AT&T contract and improvement from others, but how do you see that.

Speaker Change: Play out going forward, what are the the customers a little bit more forward leaning now than a year ago, perhaps and then also on.

Andreas Joelsson: And then also on the other regions, except the obvious headwind from India, where do you see the main reason for the customers holding back their investments currently? For you, maybe one, this is we can pass to you and you can give a little bit of flavor around the various markets. Thanks.

Borja: On the other regions, except the obvious headwind from India, where do you see the main reason for customers holding back their investments currently? Barry, maybe one of these we can pass to you, and you can give a little bit of flavor around the various markets. Thanks.

Speaker Change: On the other regions.

Speaker Change: The obvious headwind from India, where do you see the main reason for the customers holding back their their investments currently.

Speaker Change: Sorry, maybe one this is we can pass to you and you can give a little bit of flavor around the various market. Thanks.

Borja: Yeah, if we start in the US, you know, we had a big inventory adjustment, and that really came out of the big supply chain disturbances from COVID. So our customers built up larger than normal inventory levels that started to be depleted fully at the beginning of this year, which has led to a bit of this, you know, call it normalization in our sales. We're also seeing, of course, some customers here, and, you know, the investment levels in the market have been very, very low for a number of years following the rapid build-out of C-band.

Bory Ekholm: Yeah, if we start in the US, I, you know, we had the big inventory adjustment, and that really came out of the big supply chain disturbances from COVID. So our customers built up larger than normal inventory levels. That started to be depleted fully in the beginning of this year, which has led to a bit of this, you know, call it normalization in our sales. We're also seeing, of course, some customers here. And you know, the investment levels in the market have been very, very low for a number of years, following the rapid build-out of the band.

Speaker Change: If we start in the U S side.

Speaker Change: We had the big inventory adjustment.

Speaker Change: And that really came out of the supply chain disturbances from Colgate So.

Speaker Change: So our customers built up.

Speaker Change: Larger than normal inventory levels that start it to be deeply did poorly in the beginning of this year.

Speaker Change: She has led to a bit of this.

Speaker Change: Call it normalization in our assays.

Speaker Change: We're also seeing of course some.

Speaker Change: Some customers here.

Speaker Change: And you know the investment levels in the markets has been very very low.

Speaker Change: For a number of years following the rapid build out of C band.

Borja: So, you know, as network capacity starts to be used, we are seeing a different discussion, but I don't want to say that this is a turning point, you know; that's too early. But, as you can see, at least it's a positive indication that sales are starting to come back.

Bory Ekholm: So, you know, as network capacity starts to be used, we are seeing a different discussion, but I don't want to say that this is a turn. You know, that's too early. I, but, but as you can see, at least it's supposed to be indication that that's saying start to come back. So I, you know, let's, let's continue to focus on the longer term. This market is ultimately going to come back. But it will, and we've said that for quite some time. But don't be too optimistic every quarter, let's put it that way.

Speaker Change: No.

Speaker Change: As network capacity starts to be used we are seeing a different discussion, but I don't want to say that this is a turn that's too early.

Speaker Change: But but but as you can see at least it's a positive indication that sales start to come back.

Borja: Let's continue to focus on the longer term. This market is ultimately going to come back, but it will, and we've said that for quite some time. But don't be too optimistic every quarter. Let's put it that way. If you look outside of North America, you know, overall, I would say this is a problem in the industry where our customers are. If you generalize, and that's not entirely accurate because you have some customers doing better than others, but if you look as an industry, return on capital employed has been under pressure for quite some time, that has driven our customers to actually cut down investments and sweat assets, which is something you can do for a period of time.

Speaker Change: Now, let's let's continue to focus on the longer term. This market is ultimately going to come back, but it will and we have said that for quite some time, but don't be too optimistic.

Every quarter, let's put it that way.

Bory Ekholm: If you look outside of North America, you know, the overall, I would say this is a problem in the industry where our customers, if you would generalize, and that's not entirely accurate, because you have some customers to invest in others. But, but if you look as an industry, return on capital employed has been under pressure for quite some time. That has driven our customers to actually up-down investments and sweat assets, which is something you can do for a period of time. The good thing for us is that traffic continues to grow, continues to grow at a very healthy rate, and I would even argue now that we overlay fixed wireless access, for example.

Speaker Change: If you look outside of North America.

Speaker Change: Overall I would say this is a problem in the industry, where our customers.

Speaker Change: If you would generalize and that's not entirely accurate because you'll have some customers doing better than others, but if you look as an industry return on capital employed has been under pressure for quite some time.

Speaker Change: That has.

Speaker Change: When our customers two to actually cut down the investments elsewhere that says which is something you can do for a period of time.

Borja: The good thing for us is that traffic continues to grow and continues to grow at a very healthy rate. And I would even argue now that we overlay fixed wireless access, for example, we see growth rates coming back in the networks as well, quite a lot, again, quite positive. That will, you know, either result in deteriorating customer experience, so customers basically can't use the network, and therefore, we will see that investments come back, but the overall industry problem remains, which is really that unless we can monetize the new capabilities of the network, it doesn't really become a new source of revenue for the operators, and thus, marginal investments will only be done to manage capacity in the network. If you're going to see this kind of rollout of 5G, we actually need to see new monetization start to come.

The good thing for US is the traffic continues to grow continues to grow at a very healthy rate.

Speaker Change: And I would even argue now that we overlay fixed wireless access for example, we see actually growth rate.

Bory Ekholm: We see actually growth rates coming back in the networks as well, quite a lot. We're going quite positive. Either you get deteriorating customer experience, so customers basically can't use the network, and therefore you are going to be seen as investments come back. But the overall industry problem remains, which is really that unless we can monetize the new capabilities of the network, it doesn't really become a new source of revenue for the operators, and thus more general investments will only be done to manage capacity in the network. If you're going to see this kind of rollout of 5G, we actually need to see new monetization start to come.

Speaker Change: Back in the networks as well quite quite a lot because I'm quite positive that win.

Speaker Change: Either you get deteriorating customer experience, so customers basically can't use the network.

Speaker Change: And therefore, you are going to be the seed investments come back, but the overall industry problem remains.

Speaker Change: Which is really that unless we can monetize the new capabilities of the network it doesn't really become.

A new source of revenue for the operators and thus more.

Generally investments only will only be done near term to manage capacity in the network if youre going to see this.

Speaker Change: Kind of rollout of <unk>, we actually need to see new monetization start to come.

Bory Ekholm: And that's why we are excited about our enterprise efforts in both enterprise wireless solutions, where we see a fairly healthy growth rate, but also in the network API, where we have a real opportunity to create this new market. We're starting to see very good traction on getting supplies sorted out. That's what our partnerships do, and we are seeing an emerging interest from application developers. Still early; will take time, but that's what's needed.

Borja: And that's why we are excited about our enterprise efforts, you know, both in enterprise wireless solutions, where we see a fairly healthy growth rate, but also in network APIs, where we have a real opportunity to create this new market. We're starting to see very good traction on getting supplies sorted out. That's what our partnerships do, and we are seeing an emerging interest from application developers. It's still early, it will take time, but that's what's needed. So overall, the industry is actually in a very difficult spot. And then, if you look more globally, of course, India had a very rapid rollout last year.

Speaker Change: And Thats why we are excited about our enterprise efforts.

Speaker Change: Both in enterprise wireless solutions, where we see a fairly healthy growth rate.

Speaker Change: But also internetwork API is why we have a real opportunity to create this new market.

Speaker Change: We're starting to see very good.

No traction on getting supplies sorted out that with our partnerships do.

Speaker Change: We're seeing an emerging interest from application developers Stella Li will take time.

Bory Ekholm: So overall, the industry is actually in a very difficult spot, and then if you look more globally, of course India had a very rapid rollout last year. And that is tapering off, like we have said, and that's what we see there. So again, underlying traffic continues to grow, etc. But that's why you see the slowdown.

Speaker Change: But that's what's needed.

Unknown Executive: So overall the industry is actually in a very difficult spot and then if you look at them.

Unknown Executive: More globally of course, India.

Unknown Executive: A very rapid rollout last year and that is tapering off like we have said and that's what we see there.

Borja: And that is tapering off, like we have said, and that's what we see there. So, again, underlying traffic continues to grow, etc. But that's why you see the slowdown. If you look outside, you see a bit of a macro challenge in Africa and parts of the Middle East, where predominantly Africa has currency movements, etc., that actually makes it very painful for our customers. The same parts of Latin America.

Unknown Executive: So so that again underlying traffic continues to grow et cetera, but but that's why you see the slowdown you look outside you'll see a bit of a macro challenge in Africa and parts of middle East, whereas predominantly Africa's car.

Bory Ekholm: If you look outside, you see a bit of a macro challenge in Africa and parts of the Middle East, where predominant the Africa as a currency movement, etc. That actually makes it very painful for our customers, same parts of Latin America.

Unknown Executive: Currency movements et cetera that actually makes it very painful for our customers same parts of Latin America. So when you look at this is subdued environment right now where.

Bory Ekholm: So when you look, it is a subdued environment right now, where, you know, let's, I think for us, that's why we're a bit prudent in our planning. You'll say that we need to control what we can control on our side, that is, work on the course side.

Borja: So when you look, it is a subdued environment right now where... You know, let me... I think for us, that's why we're a bit prudent in our planning and say that we need to control what we can control on our side, that is, work on the cost side. Perfect. That is very helpful. And may I also wish you a great summer.

Unknown Executive: Let's.

Unknown Executive: I think for US it's that's why we're a bit.

Unknown Executive: And in our plan you can say that we need to control what we can control on our side that is work on the cost side.

Andreas Joelsson: Perfect, that is very helpful, and I also wish a great summer. Thank you; same too.

Unknown Executive: Perfect that is very helpful.

Speaker Change: May I also wish you a great summer.

Speaker Change: Thank you same to you.

Unknown Executive: Thank you. Same to you. Thanks for the question, Andreas, so we're now ready to move to the next question. The next question will come from Andrew Gardiner at CityAndrew. Your line should now be open, so please go ahead.

Operator: Thanks for the question, Andreas. So we're now ready to move to the next question.

Andreas: Thanks for the question Andreas I, we're not ready to move to the next question.

Andrew Gardiner: So the next question will come from Andrew Gardner at City. Andrew, your line should now be open, so please go ahead. Thank you, Daniel. Morning all. If I could just do two quick follow-ups on the last points that you were making for you, first on the US, can I take it that when you say "selective investment," you weren't really expecting it, it's come sort of short lead time orders from customers, perhaps refilling a little bit of capacity here and there where they needed it. But they're not yet giving you visibility beyond AT&T, perhaps, which is obviously quite specific, but the others aren't really giving you visibility into the sustainability of that into the second heart.

Speaker Change: The next question will come from Andrew Gardiner at.

Andrew Michael Gardiner: Citi Andrew Your line should not be open Sir Please go ahead.

Andrew Michael Gardiner: Thank you, Daniel. Good morning all. If I could just do two quick follow-ups on the last points that you were making for me. First on the US, can I take it that when you say, quote, selected investment, I mean you weren't really expecting it, it came sort of short lead time orders from customers, perhaps refilling a little bit of capacity here and there where they've needed it, but they're not yet giving you visibility beyond AT&T, perhaps, which is obviously quite specific, but the others aren't really giving you visibility into the sustainability of that into the second Is that a fair characterization?

Daniel: Thank you Daniel good morning, all.

Speaker Change: If I could just two quick follow ups on the last point that you were making boy at best.

Andrew Michael Gardiner: First on the U S can I take it that when you say quite selective investment you werent really expecting it it's come to a short lead time.

Andrew Michael Gardiner: Orders from customers, perhaps refilling, a little bit of capacity here and there where they needed it but theyre not yet, giving you visibility beyond AT&T apps, which is obviously quite specific.

Andrew Michael Gardiner: The others arent really giving you visibility into the sustainability of that into the second half.

Bory Ekholm: Is that a fair characterization? Yeah, that's a fair characterization, but I would say though that given the, you know, when you have a, if you operate in a rolling out, you try to keep that as a relatively constant, and they've been, you know, buying less from us to deplete their own inventory, is that just needed to adjust? Bit of that is what you see.

Andrew Michael Gardiner: Is that a fair characterization.

Borja: Yeah, that's a fair characterization. But I would say, though, that given the, you know when you have a if you operate in a rolling out just try to keep that that's a relatively constant and they've been you know buying less from us to deplete their own inventories that just needed to adjust a bit of that is what you see, And then also on the point you made, particularly in Europe and Latin America, where you're seeing increased competition from the Chinese vendors once again, do you feel like you're losing share as a result of this competitive activity?

Speaker Change: Yes, that's a fair characterization, but.

Speaker Change: Would say, though that given the.

Speaker Change: And when you have a.

Speaker Change: If you operate in rolling out just try to keep that at a relatively cold stone and they've been.

Speaker Change: Buying less from us to deplete their own inventories that just needed to adjust based on that is what you see.

Bory Ekholm: Okay. And then also on the point you made particularly in Europe and Latin America where you're seeing increased competition from the Chinese vendors, once again, do you feel like you're losing share as a result of this competitive activity, or are you able to hold share, but perhaps it's coming at the expense of price and margin? And you know, we like to be managing our overall pricing and profitability and gross margin. So it will all depend on specific situations. I'm sure we will lose some, but we'll do that because we think it's right for the overall gross profit in the company.

Speaker Change: Okay.

Speaker Change: And then also on the point you made.

Particularly in Europe, and Latin America, where you're seeing increased competition from the Chinese vendors once again.

Speaker Change: Do you feel like you're losing share as a result of this competitive activity or are you able to hold share, but actually it is coming at the expense of price and margin.

Borja: Or are you able to hold shares, but perhaps it's coming at the expense of price and margin? You know, we like to be managing our overall pricing and profitability and gross margin. So, it will all depend on specific situations. I'm sure we will lose some, but we'll do that because we think it's right for the overall gross profit in the company. So, you know, you don't don't don't expect us to be the most aggressive in the market. Okay. Thank you.

Speaker Change: You know, we like to be managing our overall pricing and profitability on gross margin. So it will all depend on specific situations I'm sure. We will lose some but we'll do that because we think it's right for the overall gross profit in the company.

Bory Ekholm: So, you know, don't, don't, don't expect us to be the most aggressive in the market.

Speaker Change: So.

Speaker Change: Don't expect us to be.

Speaker Change: The most aggressive in the market.

Andrew Gardiner: Understood.

Andrew Gardiner: Thank you.

Speaker Change: Understood. Thank you.

Operator: Thanks for the question, Andrew.

Unknown Executive: Thanks for the question, Andrew. So we'll now move on to the next question, which will come from the line of Sandeep Deshpande from J.P. Morgan. Sandeep, your line should now be open. Please go ahead.

Speaker Change: Thanks for the question Andrew.

Sandeep Deshpande: So we'll now move on to the next question. That will come from the line of Sandeep Deshpande from JP Morgan. Sandeep, your line should now be open. Please go ahead.

Speaker Change: Well now move onto the next question.

Speaker Change: That will come from the line of Sandeep Deshpande.

Speaker Change: From JP Morgan Sandeep your line should not be an open. Please go ahead.

Sandeep Deshpande: Thank you, Daniel. My question is on your IPR deals in the first two quarters. You've had two deals in Q1 and in Q1 and 1 in Q2 as well. What has been the one of associated with these deals and what is the ongoing run rate associated with your IPR revenues? Have a quick follow-up after that.

Sandeep Sudhir Deshpande: Thank you, Daniel. My question is on your IPR deals in the first two quarters. You had two deals in Q1 and one in Q2 as well. What was the one-off associated with these deals?

Sandeep Sudhir Deshpande: My question is on your IPR deals in the past two quarters, you've had two deals in Q1.

Sandeep Sudhir Deshpande: Q1, one in Q2 as well.

Speaker Change: What has been the one offs associated with these deals.

Speaker Change: What is the ongoing run rate associated with the IPO does it have a quick follow up after that.

Unknown Executive: And what is the ongoing run rate associated with the IPR revenues? And I have a quick follow-up after that. We don't comment on this. They always have, as you know, a retroactive part, and then it's forward leaning.

Speaker Change:

Lars Sandström: We don't comment on this. They have always, as you know, a retroactive part and then it's forward. But you can see the jump in revenue that is, of course, partly to large part explained by the one off there. And for the run rate, we are at around 12 billion now coming out of Q2. And, as we said, we are the target of 12 to 13 is well in reach.

Speaker Change: We are we don't comment on this is that they have always as you know a retroactive part and then its forward.

Unknown Executive: But you can see the jump in revenue that is, of course, partly and to a large extent explained by the one-off there. And for the run rate, we are at around $12 billion now coming out of Q2. And as we said, the target of $12 to $13 billion is well in reach; you've seen this recovery in the U.S. market. Is this mainly coming from, you know, that the U.S. market now, those inventories of parts that they were holding are not there anymore?

Speaker Change: But you can see the jump in revenue that is of course, partly.

Speaker Change: Two large part explained by the one offs there.

Speaker Change: And for the run rate we are at around 12 billion now coming out of Q2 and as we said we are to target.

Speaker Change: First thing is well and rich.

Sandeep Deshpande: Okay. Thank you.

Bory Ekholm: And my follow-up is quickly on the United States and the US market. You know, you've seen this recovery, the US market. Is this mainly coming from, you know, that the US market, now those inventories of parts that they were holding are not there anymore, or is it that they are actually not starting up new projects? There are some new movements in terms of where the investments are occurring, or it is to do with the immediate replacement or AT&T new contract.

Speaker Change: Okay. Thank you and my follow up quickly on the United States and the U S market.

Speaker Change: You've seen the recovery in the U S market is this mainly coming from the.

Speaker Change: The U S market boundless in Lindsay is a box that they were holding are not there anymore or is it that Dr activities are starting up new projects.

Unknown Executive: Or is it that they are actually now starting up new projects? There is some new movement in terms of where the investments are occurring, or it is to do with inventory replenishment or AT&T's new contract? Ariel, maybe we can pass that one over to you.

Speaker Change: There are some there is a.

Speaker Change: New movement in terms of where the investments are occurring order it is to do it.

Speaker Change: Or it would be new contracts.

Bory Ekholm: Ariel, maybe we can pass that one over to you. Yeah, I think it's fair to say it's a combination of those, right. But that's why we also say let's not, you know, let we know that the investment level has been. If you look at the underlying traffic growth and the growth of fixed wireless access.

Speaker Change: Maybe we can pass that one over to you.

Borja: Yeah, I think it's fair to say it's a combination of those, right? But that's why we also say, let's not, you know, let. We know that the investment level has been, if you look at the underlying traffic growth and the growth of fixed wireless access. We know that traffic has grown, so that requires a certain level of investment. We knew that, but we had the inventory adjustment. And, of course, now that they have run out of room to adjust that.

Speaker Change: Yeah, I think it's fair to say, it's a combination of those right.

Speaker Change: But that's why we also say let us know.

Speaker Change: We know that the investment level has been.

Speaker Change: If you look at the underlying traffic growth.

Speaker Change: The growth of fixed wireless access.

Bory Ekholm: We know that traffic has grown so that requires a certain level of investment, so we knew that. But we had inventory adjustment, and of course now that they have run out of room to adjust that, they need to buy it more from us. So that one thing that's clearly happening. But we're also seeing that they need to manage the network quality, and that's what gives us comfort that you have a bit of a cyclical behaviour in the investments if you look historically. We've been at the low point, and now that starts to come back, that's a bit what we just should expect.

Speaker Change: We know that traffic has grown so that requires a certain level of investment. So we knew that we had the inventory adjustment.

Speaker Change: And of course now that the Abra.

Unknown Executive: They need to buy a bit more from us, so that's one thing that's clearly happening. But we're also seeing that they need to manage network quality. And that's the, you know, that's what gives us comfort at the. You have a bit of a cyclical behavior in the investments if you look historically. We've been at a low point, and now that starts to come back, that's a bit of what you should expect, and of course, you have the big contract win as of last year that starts to contribute in Q2, but it'll be more in H2. Thanks, Sandeep.

Speaker Change: I've run out of room to adjust out the they need to buy a bit more from us.

Speaker Change: So thats one thing Thats clearly happening.

Speaker Change: But we're also seeing that they need to manage the network quality.

Speaker Change: And that's the.

Speaker Change: That's what gave us comfort that the.

Speaker Change: You have a bit of a cyclical behavior in the in the investments. If you look historically, we've been at the low point now that starts to come back that's a bit what we should expect.

Bory Ekholm: And of course you have the big contract within us of last year that starts to contribute in Q2, but it'll be more in H2.

Speaker Change: And of course drive the big contract wins last year that starts to contribute in Q2, but it will be more in H two.

Thank you.

Joachim Gunell: We can move now to the next question. The next question on the line will come from Joachim Gunell from DNB. Joachim, your line should now be open.

Joachim Gunell: We can move now to the next question. The next question on the line will come from Joachim Gounal from DNB. Joachim, your line should now be open.

Speaker Change: Thanks, Sandeep, we can move now to the next question.

Kim <unk>: The next question on the line will come from Kim <unk> from Dnb.

Tim: Tim Your line should be open.

Bory Ekholm: Thank you. So can you just comment a bit on where you are in India and the US in relation to what you would consider more like the sales level status.

Unknown Executive: Thank you. So can you just comment a bit on where you are in India and the US in relation to what you would consider normalized sales levels at this stage? Sure. Borja, do you want to provide some high-level thoughts on those two markets? Yeah, if you look at the US, I mean, we think if you look historically, we're at the lower end of more of a normal cycle. So that's what we feel. India is more normalized now.

Speaker Change: Thank you.

Kim <unk>: Can you just comment a bit on where you are in India and the U S. In relation to what you would consider normalized sales levels at this stage.

Bory Ekholm: Sure, Borried, you want to provide some high-level thoughts on those two markets? Thanks. Yeah, if you look at the US, I mean, we think if you look historically, we're at the lower end of more of a normal cycle. So that's what we feel.

Sure Barry do you want to provide some high level thoughts on those two markets. Thanks.

Kim <unk>: Yeah. If you look at the U S. I mean, the we think.

Kim <unk>: If you look historically.

Barry: We're at the lower end of the of more of a normal cycle.

Bory Ekholm: India is more normalized now. Understood.

Barry: That's what we feel is more normalized now.

Borja: Understandable, and if I may just make a quick comment here in light of the competitive environment comments you made, what is your view of the component availability situation for your Chinese competitors? I, you know, the honest answer is they should comment on that. But at least we see them quite aggressive in the market. And ultimately, it's a choice customers will have to make, right, what they think about their network resilience, decisions for the future, etc. It's really in the customer's hand to choose, but this is more a comment that we see them becoming increasingly aggressive. Thank you, and have a great summer!

Bory Ekholm: If I may, just a quick comment here in light of the competitive environment comments you made. What is your view of the component availability situation for your Chinese competitors? I, you know, the honest answer is they should comment on that. But, but at least we see them quite aggressive in the market. And ultimately, thanks to choice, customers will have to make right how they think about their network resilience decisions for the future, etc. It's really in the customers aren't to choose. This is more a comment that we, we see them increasingly aggressive.

Barry: Understood and if I may just a quick commentary in light of the competitive environment comments you made.

Speaker Change: What is your view of the components availability situation for your Chinese competitors.

Speaker Change: I know the honest answer is they should comment on that but.

Speaker Change: But at least we see them are quite aggressive in the market.

Speaker Change: And the ultimate choice customers will have to make right how they think about their network resilience.

Speaker Change: This issue for the future et cetera, it's really in the customers hand to choose this is more of a comment that we see them.

Speaker Change: Creasing the aggressive.

Bory Ekholm: Thank you.

Joachim Gunell: I have a great summer. Thank you. The same to you.

Speaker Change: Yeah.

Speaker Change: Thank you and I have great summer.

Borja: Thank you and the same to you. Thanks for the question, Joachim. We'll move on to the next question, which is going to come from the line of Daniel Djurberg at Hounsell Bank. Please go ahead, Daniel.

Speaker Change: Thank you the same to you.

Operator: Thanks for the question, Joachim.

Speaker Change: Thanks for the question here Okay.

Daniel Gehrberg: We'll move on to the next question, which is going to come from the line of Daniel Gehrberg at Hansel Banken. Please go ahead, Daniel. Thank you, Daniel, and hi, Maria. I would like to just ask a little bit to give a healthy network of Morgan ambition here for Q3 and 45 to 47%.

Speaker Change: Move onto the next question.

Speaker Change: Which is going to come from the line of Daniel Djurberg at Handelsbanken. Please.

Daniel Djurberg: Please go ahead Daniel.

Daniel Djurberg: Thank you Daniel and hi Börje and Lars. I would like to just ask a little bit. You give a healthy network of smorgasbord ambition here for Q3, 45-47%. My question is if it is also relevant to... See this positive similar uptake also for Q4 or also into next year on the back of the max you expect. That's the first.

Danielle: Thank you Danielle.

Daniel Djurberg: Hi.

Daniel Djurberg: I would like to just.

Speaker Change: I was a little bit you gave a healthier network gross margin ambition here for Q3 and.

Lars Sandström: My question is if it's also relevant to see this positive similar uptake also for Q4 or also into the next year on back of the next you expect. As you know, we have done certainty going forward on volume, so that's why we try to keep and stay onto the Q3, that's where we guide now, we're the 45 to 47, and so it is the cost on the positive side we have the cost in our activities that we are doing that is helping us, but we also have a downturn in the market, yeah, in total, that we, when you do the calculation, there are no seasonality on Q3, you see, so that's our, so to say, the big impact, so we don't see that we should give you a guidance on going after Q3, so, but that's why we are cautious still.

Five 7% My question is if it's also relevant to them.

Speaker Change: To see this positive.

Speaker Change: Similar uptake you also.

For Q4 also into next year on back on the mix you.

Speaker Change: You expect.

Speaker Change: That's the first question.

Unknown Executive: As you know, we have uncertainty going forward on volumes, etc. So that's why we try to keep and stay on to Q3. That's where we are now with the 45 to 47.

Speaker Change: Alright.

Speaker Change: No. We are we have that uncertainty.

Speaker Change: Going forward on volumes et cetera. So that's why we try to keep them stay.

Speaker Change: On to the Q3.

Yeah. That's whoever you guide now with a 45% to 47.

Unknown Executive: And so it is the cost on the positive side. We have the cost-cutting activities that we are doing that is helping us. But we also have a downturn in the market overall. When you do the calculation around the seasonality in Q3, you can see.

Speaker Change: And so if this.

Speaker Change: The cost on the positive side, we have the cost in our.

All activities that we're doing that is helping us, but we also have a downturn in the market.

Speaker Change: In total.

Speaker Change: When you do the calculation on the seasonality in Q for U C.

Unknown Executive: So that's our, so to say, big impact. So we don't think... see that we should give you guidance going after Q3, but that's why we are cautious still. I see. And just a quick follow-up on the horseshoe competition in Sub-Saharan Africa. Is it mainly your number one competitor, Huawei, or is it also more broad-based like Satee, Samsung, Fiat, etc., that are also more aggressive?

And so that's our let's say the big impact so.

Speaker Change: We don't.

Speaker Change: So you that should give you.

Speaker Change: Guidance on going after Q3, so, but that's why we are cautious still.

Daniel Gehrberg: I see, and just to follow up on the harsher competition in Sbastien, is it mainly your number one competitor, you are way worse, it's also more broad-based, that's the same song for you, that are also more aggressive, or is it mostly the one. It's, you know, you're seeing a growth, I mean, a competitive market, right, that I think is fair to say, the, the, and we're more in mentioning the, I've gotten the impression over the last few months that everyone thinks that the Chinese vendors are kind of disappeared, and that's not true, that's why we won't.

Speaker Change: I see.

Speaker Change: Just a first follow up on the harsher competition subset.

Speaker Change:

Speaker Change: Is it mainly your number one competitor go away or is it also more broad based it set the Samsung fits et cetera that are also more aggressive or is it.

Unknown Executive: Mostly the one. It's, it's, you know, you're seeing an aggressive, I mean, a competitive market, right? That I think it's fair to say. The, And we're more mentioning the, I've gotten the impression over the last few months that everyone thinks that the Chinese vendors have kind of disappeared, and that's not true. That's why we wanted to bring it up. It's always been very competitive, but I almost felt that everyone thinks they're gone, and that's not true. I should go to Barcelona in February, I guess.

Speaker Change: Mostly that the one.

Speaker Change: Okay.

Speaker Change: It's it's.

Speaker Change: You're seeing an aggressive competitive.

Speaker Change: The market right that I think it's fair to say.

Speaker Change: Yeah.

Speaker Change: I am more in mentioning the.

Speaker Change: <unk> gotten the impression over the last few months that everyone thinks that the Chinese vendors have kind of.

Speaker Change: Disappeared and Thats not true Thats, why we want to bring it up.

Bory Ekholm: It'll bring it up; it's always been very competitive, right? So, but, but I almost felt that everyone thinks they're gone, and that's not true.

Speaker Change: It's always been very competitive right so but.

Speaker Change: But I almost felt that everyone thinks their goal and thats not true.

Bory Ekholm: I should go to Barcelona in February, I guess.

Speaker Change: That should go to Barcelona in February I guess.

Operator: Okay, thanks. I'll have a great summer.

Speaker Change: Okay, Thanks, and have a great summer.

Operator: Thank you. Thanks for the question, Daniel.

Speaker Change: Thank you.

Unknown Executive: Okay, thanks, and have a great summer. Thank you. Thanks for the question, Daniel. We'll move on to the next question now, please. So the next question is going to come from Erik Lindholm at SEB. Erik, your line should now be open. Yes, thank you, and good morning, everyone.

Speaker Change: Thanks for the question Danielle well move onto the next question now please.

Erik Lindholm: We'll move on to the next question now, please. So, the next question is going to come from Eric Lindholm at Sb. Eric, your line should now be open. Yes, thank you, and good morning, everyone. So, you mentioned taking some cost actions here, both in enterprise and outside enterprise. It's possible to quantify these actions and what they should be in here for, for the second half, and especially maybe in the light of not expecting normal or peccisionality. Thank you. Sure.

Speaker Change: So the next question is going to come from Eric Lindholm at Seb.

Speaker Change: Eric Your line should be open.

Erik Lindholm: So you mentioned taking some cost actions here, both in the enterprise and outside the enterprise. Thank you. Just to help you a little bit on the guidance before we dive into the, as we said, the normal seasonality, you should not, it does not really apply since we are continuously having impacts of the cost reductions, but on the other end, we have salary inflation coming in, and also last year we had rather or very low provisioning for incentives. So those are, so to say, counterbalancing.

Erik Lindholm: Yes, Thank you and good morning, everyone.

So you mentioned, taking some cost actions here, both in enterprise and outside on five.

Erik Lindholm: Is it possible to quant.

Speaker Change: Quantified quantified those actions and Walton should minute and therefore for the second half and especially maybe in the light of not expecting normal Opex is Saturday.

Erik Lindholm: Yeah.

Lars Sandström: Just a little bit on the guidance before we dive into the, as we said, the normal seasonality you should not, it's not really applied since we are continuous having impacts of the cost reduction. But they are on the other end; we have salary inflation coming in, and also last year we had rather or very low provisioning for incentive. So those are also say counter balancing, and then we have some dedicated investment in the R&D area. So that is a little bit just to try to help you to understand. So, if you look at the H1 where we also had the similar development with cost out offset by salary increases and provisionings, that we see that for the remainder half of the year as well.

Speaker Change: Sure I mean, just purely based on the guidance before we dive into the.

Speaker Change: As we said the normal seasonality you should know it.

It does not really apply it seems we are continuous having an impact so the cost reductions, but they are.

Speaker Change: On the other end, we have salary inflation coming in and also last year, we had a broader or very low.

Speaker Change: Provisioning for incentives, so oh, sorry, it's I would say counterbalancing and then we have some dedicated investments are in the R&D area. So that is a little bit just to try to help you to understand so if you look at the H, one where we also had the similar development with cost out or offset by.

Unknown Executive: And then we have some dedicated investments in the R&D area. So that is just a little bit to try to help you understand. So if you look at H1, where we also had the similar development with cost out offset by salary increases and provisioning, we see that for the remainder of the year as well. Alright, any comments on where you're taking out costs, which areas, both in enterprise and outside of enterprise?

Speaker Change: Salary increases.

Speaker Change: The provisioning.

Speaker Change: We see that for the remainder of half of the year as well.

Lars Sandström: All right, any comments on where you're taking up costs? Which area sort of been both an enterprise and outside of enterprise? I think the cost basis, of course, is significantly larger in the mobile network side. And we need to adapt, too. We are still in a declining market, so that requires us to adapt accordingly over time. So we don't point out specific at this broad-based in the different markets and activities where we are active. All right, thank you.

Speaker Change: Alright.

And then any comment on where you are taking out cost, which area sort of thing that both on enterprise cloud or enterprise.

Unknown Executive: Yes, I think the cost base is, of course, significantly larger on the mobile network side, so and we need to adapt to it. We are still in a declining market, so that requires us to adapt accordingly over time. So we don't point out a specific area. It is broad-based in the different markets and activities where we are active. All right. Yes. Thank you.

Speaker Change: So I think yeah, the cost basis of course significantly larger in the mobile network side, So and we need to adapt to we are still in a declining market. So that requires us to adapt accordingly over time, So we don't point out specific care right.

Speaker Change: Based in the different markets and activities, where we are active.

Speaker Change: Alright, thank you.

Erik Lindholm: Great, thanks for the question, Erik.

Unknown Executive: Great. Thanks for the question, Erik. We will now move on to the next question. The next question will come from the line of Sami Sarkamies from Danske Bank. Sami, your line is now open, please go ahead.

Erik Lindholm: Great. Thanks for the question, Eric We will now move on to the next question.

Sami Sarkamies: We will now move on to the next question. The next question will come to the line of Sami Sarkamies from Danskerbank. Sami, your line is now open. Please go ahead. Hi, thanks. I would actually like to continue on the course topic we just discussed. Could you provide additional color on the OPEC development during the second quarter and provide some color on the outlook for the rest of the year? If we look at second quarter, OPEC was somewhat higher than what you had guided for. It seems that in the price was offering some sort of surprise here.

Speaker Change: The next question will come from the line of semi saw kameez from Danske Bank semi your line is now open. Please go ahead.

Sami Sarkamies: Hi, thanks. I would actually like to continue on the course topic we just discussed. Could you provide additional color on the OPEX development during the second quarter and provide some color on Outlook for the rest of the year? If we look at the second quarter, OPEX was somewhat higher than what you had guided for. It seems that Enterprise was offering some sort of surprise here.

Speaker Change: Hi, Thanks.

Speaker Change: I'd actually like to continue on the course that topic, we just discussed.

Could you provide additional color on the Opex development during the second quarter.

Speaker Change: And for.

Speaker Change: Provide some color on also for the rest of the year. If you look at second quarter Opex was somewhat higher than what you had guided for.

Speaker Change: It seems that in the price that was offering some sort of a surprise here and then why have you chosen not to provide opex guidance for the third quarter.

Unknown Executive: And then why have you chosen not to provide OPEX guidance for the third quarter as has been customary in the past? If you look at the cost in the second quarter, on the guidance that you gave for the mobile networks part, it's actually not so far off, but we had some additional investments in the R&D side there. And then we had higher costs on the enterprise side, where, as I mentioned there, we are not, we have stopped capitalizing R&D, so that is around a billion on an annual basis. We did that already, we started that already in Q1, so that continues for the rest of the year.

Lars Sandström: And then why have you chosen not to provide OPEC's guidance for the third quarter, as well as being a customer in the past? If you look at the cost in the second quarter on the guidance that you gave for the mobile networks part, it's actually not so far off. But we had some additional investments in the R&D side there. And then we had higher costs on the enterprise side, where, as I mentioned, there we are not. We have stopped capitalizing R&D, so that is around a billion on an annual basis. We already started that already in Q1, so that continues for the rest of the year.

Speaker Change: Asphalt has been customary in the past.

Speaker Change: So if you look at the cost in the second quarter on the guidance that we gave for the mobile networks part, it's actually not so far off.

Speaker Change: But we had some additional investments in the R&D side there.

Speaker Change: And then we had higher costs.

On the enterprise side, where as I mentioned earlier, we are not we have stopped capitalizing.

Speaker Change: R&D, so that the surround a billion on annual basis will be or did that already have you started that already in Q1. So that continues for the rest of the year and then we have some higher costs and investments that we are doing connected to some of the market exits, but also to increase.

Unknown Executive: And then we have some higher costs and investments that we are doing connected to some of the market exits, but also to increase operational efficiency and ensure that we are following all, or following the developments when it comes to different regulations, etc. So that is building some cost in the enterprise part, so the big deviation here in Q2 is more connected to that. And then going forward, we took out seasonality because we see that it doesn't really apply here.

Lars Sandström: And then we have some higher costs and investments that we are doing connected to some of the market exits, but also to increase the operational efficiency and ensure that we are following all or following the developer. And then we have some additional investments when it comes to different regulations, et cetera, so that is building some cost in the enterprise part. So the big deviation here actually in Q2 is more connected to that.

Speaker Change: And the operational efficiency and ensure that we are.

Speaker Change: Following all or following the development when it comes to different regulations et cetera. So that is building some costing the enterprise part.

Speaker Change: So the big deviation here actually in Q2 is more connected to that.

Lars Sandström: And then, going forward, we took out the sustainability because we see that it doesn't really apply here. We see more of a stable cost development, you can say, compared if you look at from the first half of this year. So where we have continued costs out activities, developing, but also then that is offset and by some salary inflation and some higher provisioning. So that is more to help you to see what is happening on the enterprise side there, or so to say, more stable on the cost space going into the rest of the second half.

Speaker Change: And then going forward, we took out the seasonality because we see that it doesn't really apply here, we see Moreover, north stable cost development you can say.

Unknown Executive: We see more of a stable cost development, you can say, compared with the first half of this year, where we have continued cost-out activities delivering, but also, that is offset by some salary inflation and some higher provisioning. So that is more to help you understand what is happening on the enterprise side; there we are, so to say, more stable in the cost space going into the rest of the second half.

Speaker Change: Compare if you look at from the first half of this year, so where we have continued cost out activities develop delivering but also then that this offset then by some of the salary inflation and some higher provisioning. So that is more to help you.

Speaker Change: To see what is happening on the enterprise side, Barry or let's say more stable on the cost base going into the rest of the second half.

Sami Sarkamies: Okay, thanks.

Unknown Executive: Okay, thanks. And I would have a follow-up on IPR licensing guidance. I mean, if we do the math, you're basically already at 13 billion kronas for the full year if the front rate amounts to 12 billion, as you discussed earlier.

Lars Sandström: And I would have follow up on IPR licensing guidance. I mean, if we do the math, you're basically already at 13 billion cronus for the full year. If a front rate amounts to 12 billion, as you already discussed, so why have you chosen not to raise the IPR licensing guidance. You did mention that there's still a possibility for additional deals. Yes, we aim to get the best economic outcome of any agreement that we are working on. So, therefore, we keep, so take the guidance now for the 12 to 14 billion for the full year. And then, if there is more to come, then we will announce that.

Speaker Change: Okay. Thanks, and I would have a follow up on IPR licensing guidance I mean, if we do the math.

Unknown Executive: So why have you chosen not to raise the IPR licensing guidance? You did mention that there's still a possibility for additional deals. Yes, we aim to get the best economic outcome of any agreements that we are working on. So therefore, we keep the guidance now for 12 to 14 billion for the full year.

Speaker Change: You're basically already at 13 billion Kronos for the full year, if Ron rate amounts to $12 billion. As you discussed so why have you chosen not to raise the IPR licensing guidance.

Speaker Change: You did mention that there is still a possibility for additional deals.

Speaker Change: Yes.

Speaker Change: We aim to get the best economic outcome of any agreements that we are working on so therefore, we keep so to say the guidance now for the $12 billion to $14 billion.

Unknown Executive: And then, if there is more to come, then we will announce that. Okay, thank you. Good.

Speaker Change: For the full year and then if there is more to come and then we will announce that.

Sami Sarkamies: Okay, thank you.

Unknown Executive: Thanks for the question, Sami. And just as a clarification, in terms of the base, think about H1 in terms of overall OPEX when we talk about similar sorts of levels rather than the single quarter. Just to clarify that, in case it's helpful.

Operator: Super, thanks for the question, Sami, and just as a clarification, in terms of the base, think about the H1 in terms of overall optics when we talk about similar sorts of levels, rather than the single quarter. Just to clarify on that in case it's helpful.

Speaker Change #100: Okay. Thank you.

Speaker Change #101: Thanks for the question Sami and just as a clarification.

In terms of that that the base think about the H one in terms of overall opex. When we talk about similar sorts of levels rather than a single quarter just to clarify on that in case, it's helpful. Super ready to move to the next question that's going to come from Joseph same at Barclays. Joe. Your line is now open.

Joseph Zhou: Super, ready to move to the next question. That's going to come from Joseph Sue at Barclays. Joe, your line is now open. Thank you. Hi, thank you. Thank you for taking my questions. And my first one is on the growth margin for network business. And it's a good level. And if I look at the business historically, only in 2021, you had a kind of higher growth margin around something like 47%. And you're guiding to 45 to 47, 44, Q3. And obviously, there's an element of the structure improvement with IPR. But my question is, is it as good as it gets in a second half when you have this kind of in around 47% growth margin.

Unknown Executive: I'm ready to move to the next question, which is going to come from Joseph Zhou at Barclays. Joseph, your line is now open.

Joseph Zhou: Hi, thank you for taking my questions. And my first one is on the gross margin for network business. And it's at a good level.

Speaker Change #101: Yeah.

Joseph: Hi, Thank you thanks for taking my questions and my first one is on the.

Joseph: Gross margin for network.

Joseph: And <unk>.

Joseph: <unk>.

Speaker Change #103: Good level.

Speaker Change #104: If I look cats in the business historically only in 2021 you had a.

Unknown Executive: And if I look at the business historically, only in 2021 did you have a kind of higher gross margin of around, I think, something like 47%. And you're gliding to 45% to 47% for Q3. And obviously, there is an element of structural improvement with IPR. But my question is, is this as good as it gets in the second half when you have this kind of, around 47% gross margin, considering in 2021, you obviously have a very, very high level of sales in North America five years out?

Speaker Change #104: And have a higher gross margin that surround.

Speaker Change #104: Something like 47%.

Speaker Change #104: You are guiding to 45% to 47 for Q3, and obviously there is an element of that.

Speaker Change #104: Structure improvement with IPR.

Speaker Change #105: My question is.

Is it <unk>.

Speaker Change #106: Good day at the cash in the second half when you have this kind of a.

Speaker Change #106: In around 47% gross margin.

Joseph Zhou: Considering in 2021, you actually had a very, very high level of sales scene of America with a five year out. And I think it's safe to say we are not going back to that level of volume. And so is that a fair understanding that this level of growth margin is as good as it gets, or am I missing anything? Yeah, now it's a good question. We are, of course, quite happy with the margins that we saw now and also what we're trying to guide for here. And it is good levels, as you say. If it's as good as it gets, that we are continuously working to improve, but it is reaching a good or a high level now, I would say.

Unknown Executive: And I think it's safe to say we are not going back to that level of volume. And so is that a fair understanding that this level of gross margin is as good as it gets, or am I missing something? Yeah, Norway. It's a good question.

Speaker Change #107: One you obviously had a very very high level sales in North America, I would probably go out and I think it's safe to say, we are not going back to that level of volume.

Speaker Change #108: So is that fair.

Speaker Change #109: Pending that this level of gross margin is as good as you guys or am I missing anything.

Unknown Executive: We are, of course, quite happy with the margins that we see now and also what we're trying to guide for here, and they are good levels, as you say, if it's as good as it gets, we are continuously working to improve, but it is reaching a good or a high level now. I would say, Yeah. I think also about where we are going as an industry right now. You will see less hardware and more software. So, as you think about the longer term.

Speaker Change #109: Yeah, no. It's a good question where of course.

Speaker Change #110: Quite happy with the margins that we saw now and also what we are trying to guide for here and it is good levers that you say if it's as good as it gets that we're continuously working to improve but it is reaching a good or a high level now I would say.

Joseph Zhou: Yeah, I think also there you should think about where are we going as an industry, right? You will see less hardware, more software. So, as you think about the longer term, you know, the product mix hasn't changed dramatically now, but that's going to look different as we move forward.

Speaker Change #110: Yeah.

Speaker Change #110: I think also there you should think about.

Where we go we got a certain industry right you will see less hardware more software.

Speaker Change #110: So as you think about the longer term.

Unknown Executive: You know, the product mix hasn't changed dramatically now, but that's going to look different as we move forward. That's very clear. Thank you. And my small follow-up is just on IPA. It's just the new contract. Can I assume it's with, say, a Chinese smartphone maker that you probably didn't have a 4G or 5G license with?

Speaker Change #110: The product mix hasn't changed dramatically now but.

But thats going to look different as we move forward.

Joseph Zhou: Yeah, that's very clear. And thank you.

Speaker Change #110: Okay. That's fair. Thank you and a small follow up is just on Ips.

Joseph Zhou: And my small part is just on my computer. It's just the new contract kind of soon. It's with a Chinese smartphone maker, but that you probably didn't have a 4G or 5G lightness, which is a fair to assume. We normally don't disclose these kind of contracts, but we will see if there is, if there is, you will see it, but normally we don't not share who we share sign of contracts. Thank you.

Speaker Change #110: The new contract kind of assume that way.

Speaker Change #110: As a.

Chinese smartphone maker.

Speaker Change #110: You didn't have a kind of.

Speaker Change #111: 40 of Apache license, which is that fair to assume.

Unknown Executive: Is that fair to assume? We normally don't disclose these kinds of contracts, but we will see if there is, if there is, you will see it, but normally we do not share who we share, sign off contracts. Okay, thank you. Thanks for the question, Jo. We'll move to the next question. The next question is going to come from Felix Hendrickson from Nordea. Felix, your line should now be open.

Speaker Change #112: We normally don't disclose are these kind of contracts, but we will see if there is if there you see will see its but normally we don't know.

Speaker Change #112: Sure.

Speaker Change #112: Sign up contracts with.

Speaker Change #112: Okay. Thank you.

Operator: Thanks for the question, Joe.

Speaker Change #113: Thanks for the question Jeremy.

Felix Henriksson: We'll move to the next question. The next question is going to come from Felix Hendrickson, from Nordaya. Felix, your line should now be open. All right. Thanks for taking my question. I wanted to touch on the big game plan for Bowenachendic Global Communications Platform. You've not had the right down under your belt. Organic growths being in a gutting and the business is lost making. So just one of your thoughts about the thawing line. So when do you have to achieve profitable growth in this business area to be somewhat satisfied with the acquisition here? Super.

Speaker Change #114: Move to the next question.

Speaker Change #114: The next question is going to come from Felix Hendrickson from Nordea Phoenix Your line should now be opened.

Felix Henriksson: Hi, thanks for taking my question. I wanted to touch on the game plan for Vonage and the global communications platform. You've now got the right down under your belt, organic growth has been negative, and the business is loss-making. So just wanted to hear your thoughts about the timeline. So when do you have to achieve profitable growth in this business area to be somewhat satisfied with the acquisition here?

Felix Henriksson: Hi, Thanks for taking my question.

Felix Henriksson: I wanted to touch on that the game plan for Boeing agenda Global Communications platform, we've not had to write down on your belt. The organic growth's been negative pieces is lossmaking. So just wanted to hear your thoughts about the timeline. So so when do you have to achieve profitable growth in this business area to be somewhat satisfied with that with the acquisition here.

Felix Henriksson: Yeah.

Lars: Lars, do you want to start with any financial comments, albeit probably limited on our side, and then Buri, we can talk a little bit about the strategic rationale as well. I think we are continuously working on managing the current business and improving that, and that will require a return to growth. There have been some decisions now to step out of some of the low margin deals that we have had and then to get back to more profitable growth, especially in the global communication platform part. Whereas for enterprise-wide solutions, it's more full steam ahead to capture the opportunities there. So that is clearly in the targets.

Lars Sandström: Lars, do you want to start with any financial comments, or be it probably limited on our side, but then very we can talk a little bit about the strategic rationale as well? I think we are continuously working with managing the current business and improving that, and that will require a return to growth. That has been some decisions now to step out of some of the low margin deals that we have had. And then we'll get back to more of profitable growth in the especially in the global communication platform park, whereas enterprise wireless solutions there, there's more full steam ahead to capture the opportunities there.

Speaker Change #116: Super last do you want to start with any financial comments, albeit probably limited on our site and then we can talk a little bit about the strategic rationale as well I think we are continuously working with.

Speaker Change #117: Managing the current business.

Speaker Change #117: And improving that and that.

Speaker Change #118: We will require a return to growth there has been some decisions now to step out of some of the low margin deals.

Speaker Change #118: We have had.

Speaker Change #118: But and then to get back to a Moreover.

Profitable growth in the especially.

Speaker Change #118: Especially in the global communication platform Park, whereas enterprise wireless solutions there.

Speaker Change #118: That's more of a full steam ahead and to capture the opportunities. There. So that is clearly the targets I will not give you a timeline today on that but that is what we are definitely working on.

Bory Ekholm: So that is clearly in the targets. I will not give you a timeline today on that, but that is what we are definitely working on.

Borja: I will not give you a timeline today on that, but that is definitely what we are working on. And I think then for you, Börje, to add a little bit on, so to say, the full, the longer-term picture. Yeah, I think that if we start on the global network platform, it falls down into buckets, right?

Bory Ekholm: And I think then for you, Barry, to add a little bit onto the full longer term picture. Yeah, I think the, you know, on the, if we start on the global network platform, the, if we're down into buckets, right, it's the strategic reason why we're viable, and that's what we're actually investing in. So, you know, we need to manage the existing business better than we have; that's for sure work, but we have also seen a decline in growth rates that we didn't expect or didn't plan for. And that's to be, to be honest, and that, that I think is what you see on the current performance. What we are trying to do still is actually the north star, if you put it that way, that's to build a new marketplace for network APIs.

Speaker Change #119: And I think then for you Barry to add a little bit on the let's say the full the longer term picture.

Barry: Yes, I think.

Speaker Change #120: If we start on the global network platform.

Speaker Change #120: Yeah.

Borja: It's the strategic reason why we acquired Vonage, and that's what we're actually investing in. So, you know, we need to manage the existing business better than we have, that's for sure. But we have also seen a decline in growth rates that we didn't expect or didn't plan for.

Speaker Change #121: Down into buckets right. It's the strategic reason why we acquired both niche and that's what we are actually investing in so.

Speaker Change #122: We need to manage the existing this is better than we have that's for sure.

Speaker Change #122: But we have also seen a decline in growth rates that we didnt expect or didn't plan for that.

Borja: And that's to be honest, and that I think is what you see in the current performance. What we are still trying to do is actually the North Star, if you put it that way. That's to build a new marketplace for network APIs. And when we talk about network APIs, it becomes a technical language, but think about it this way: you can have 3D positioning, for example; you have new ways of authenticating devices. You have speed on demand if you have a broadcasting camera that uses...

Speaker Change #122: That's to be to be honest in that.

I think what you'll see on there on the current performance.

Speaker Change #122: We are trying to do at scale.

Speaker Change #122: It's actually the North Star if you put it that way that is to build a new marketplace for network Kpis.

Bory Ekholm: And when we talk about network APIs, it becomes a technical language, but think about it that you can have three the positioning; for example, you have new ways of authenticating devices. You have speed on demand. If you have a broadcasting camera that uses capacity, they can actually order the capacity with milliseconds latency. There are a number of these things that are now started to be implemented. That's a new way for the industry to drive a new type of revenue source. The industry has not had. In reality, the, you know, if you've simplified the beat, you can say it's mountain, the subscription.

Speaker Change #122: And when we talk about network Aps becomes a technical language, but think about it that you can have the three the positioning for example, Yahoo.

Hi.

Speaker Change #122: New ways of authenticating devices.

Speaker Change #122: You have the speed on demand if you have a broad casting camera that uses.

Unknown Executive: Transcribed by https://otter.ai, There are a number of these things that are now starting to be implemented. That's a new way for the industry to drive a new type of revenue source the industry has not had. And in reality, if you simplify it a bit, you can say it's monthly subscriptions, and it's basically not linking revenues to network investments or to costs in reality. So we think that paradigm has to change.

Speaker Change #122: Capacity, they can actually ordered a capacity with milliseconds latency.

Speaker Change #122: There are a number of these things that are now starting to be implemented.

Speaker Change #122: A new way for the industry to drive new type of revenue source.

Speaker Change #122: The industry has not hot.

Speaker Change #123: I'll, let the.

Simplified debate you can say it's monthly subscriptions.

Bory Ekholm: and it's basically not linking revenues to neither to network investments or to costs in reality. So we think that paradigm has to change. There are part monetization on 5G for operators. You see operators that have rolled out 5G; they typically have a bit higher or, when they have a bit lower cost, so they get actually gross margin expansion. But it's not a new investment case. What we can't see with network APIs is that we think that is the investment case. That's actually what we are focused on. That's not the track from we need to run the business better than we have.

Speaker Change #123: And it's basically no linking revenues to needed some network investments or two to costs in reality. So we think that paradigm has the shape.

Unknown Executive: There is part monetization of 5G for operators. You see operators that have rolled out 5G, they typically have a bit higher ARPU, and they have a bit lower cost, so they get gross margin expansion. But it's not a new investment case.

Speaker Change #123: There are parts monetization on five gay for operators you'll see.

Speaker Change #123: Operators that have rolled out <unk>, they typically have a bit higher or two and they have a bit lower it costs. So they get actually gross margin expansion.

Speaker Change #123: But it's not a new investment case both.

Borja: What we can see with network APIs is that we think that is the investment case. That's actually what we are focused on.

What we can see with network API is that we think that is the investment case, that's actually what we are focused on that's not to detract from we need to run the business better than we have so that's an element of improvement that we need to do and Thats, what Laura said here, We review, where we are with products we offer.

Borja: We need to run the business better than we have, so that's an element of improvement that we need to do. And that's what Lars said here.

Bory Ekholm: So that's an element of improvement that we need to do. And that's what Laura said here. We review where we are with products we offer, how we offer them, etc. to actually optimize the current business.

Borja: We review where we are, what products we offer, how we offer them, etc., to actually optimize the current business. But that's also why when we talk about it, our focus is actually on the global network platform, not on the perceived existing business or bondage. Then on enterprise wireless solutions, it's full steam ahead. We have a product offering of wireless WANs as well as dedicated networks.

Speaker Change #123: How we offer them et cetera, so actually optimize the current business, but thats also why when we talk about it it's actually our focus is on the global network platform not on the first <unk> existing business.

Bory Ekholm: But that's also why, when we talk about it, it's actually our focus is on the global network platform, not on the per se existing business or bondage. Then on enterprise wireless solutions is full steam ahead. We have a product offering of wireless ones as well as dedicated networks. And we're seeing it's been an experimental market so far on dedicated networks, but we're seeing that increasingly pick up with actually some interesting customer wins. So I think that is an emerging market as well.

Speaker Change #123: Although niche than on the enterprise wireless solutions is full steam ahead, we have a product offering of wireless wants as well as dedicated networks and we're seeing a it's been a.

Borja: And we're seeing it's been an experimental market so far on dedicated networks, but we're seeing that increasingly pick up with actually some interesting customer wins. So I think that is an emerging market as well. So, of course, we're working on two emerging opportunities here, which will require some more time before you see the contribution in the P&L. But it's all part of the notion.

Speaker Change #123: Mental market, so far on dedicated networks, but we're seeing that the increasingly pick up.

Speaker Change #123: With actually some some interesting customer wins, so I think that they say emerging market as well. So of course, we are working on two emerging opportunities here, which are you know will require some more time before youll see the contribution in the P&L.

Bory Ekholm: So, of course, we're working on two emerging opportunities here, which are, you know, will require some more time before you see the contribution in the P&L. But it's all part of the notion: how do we leverage the cellular technology for new applications and for driving new revenues to the industry. Great.

Speaker Change #123: But it's all part of the open Ocean, how do we leverage the cellular technology for new applications and for driving new revenues to the industry.

Unknown Executive: How do we leverage cellular technology for new applications and for driving new revenues to the industry? Great. Thanks for the question, Felix. We will move on to the next question. The next question will come from the line of Janardan Menon at Jeffreys.

Felix Henriksson: Thanks for the question, Felix.

Great. Thanks for the question Felix we will move on to the next question.

Janardan Menon: We will move on to the next question. The next question will come to the line of Shanadan Menong at Jeffries. Your line is now open. Please go ahead. Hi, good morning, and thanks for taking the question. One question, and I should follow up. The question is on the Q3 gross margin and networks again on the 45 to 47%. I'm just wondering what are the specific upward drivers of that gross margin because I would calculate roughly between 100 and 200 basis points of sort of IPR impact, which you're sort of guiding that you will cover in the current quarter.

Speaker Change #123: Yeah.

Speaker Change #124: The next question will come from the line of.

Shana: Shana down Menno <unk> at Jefferies. Your line is now open. Please go ahead.

Janardan Nedyam Menon: Your line is now open. Please go ahead. Hi, good morning, and thanks for taking the question. I have one question and a short follow-up. The question is on the Q3 gross margin and networks again, on the 45 to 47%. I'm just wondering what are the specific upward drivers of that gross margin?

Speaker Change #126: Hi, good morning, and thanks for taking the question.

Speaker Change #127: One question that I still in follow up.

Speaker Change #127: Question is on the Q.

Speaker Change #128: Q3 gross margin in networks again on the 45% to 47%.

Speaker Change #129: I'm just wondering what are the specific upward drivers of that gross margin because I would calculate roughly between 102 hundred basis points, so sort of IPR impact, which you're sort of guiding that he will cover in the in the current quarter. So is that coming from a better mix because of more U S. A.

Lars Sandström: So is that coming from a better mix because of more US revenue versus sort of lower margin revenue, or is it coming from further cost reduction?

Speaker Change #129: Revenue versus sort of lower margin revenue or is it coming from further cost reduction. That's my first question and the follow up is just on the competitive environment. You were talking about Latin America Africa et cetera, but in Germany. There was recently some news flow about.

Bory Ekholm: That's my first question. And the follow-up is just on the competitive environment you were talking about in Latin America, Africa, etc. But in Germany, there was recently some new slow about, you know, them excluding Chinese vendors from their core network. Does that signal any improvement in the European environment, which also you've said has been competitive in the past, more than worth the market things, or is that not really yet coming through to the RAN side and just still on the core side.

Speaker Change #129: Excluding Chinese vendors from their core network does that signal any improvement in the European environment, which also you said there's been competitive in the past more than what the market thinks.

Or is that not really yet coming through because I ran side and just sit on the cost side et cetera.

Bory Ekholm: Thanks, Janet Anne. Say, last first on the margin drive is in Tiki. No, I think you have done the calculation, so to say we had a bit of positive impact in Q2, so taking that off, that shows a bit of an underlying improvement, and we have the cost of the activities that we expect to support, and then of course also a bit of the geographical mix as you mentioned. So I think that this your capturing it rather well in that sense, and then of course on the downside we have still a declining market that compared to last year, so those are the key components, and on the other question I think it's better for you, Barry, to give your point of view.

Lars: Because I would calculate roughly between 100 and 200 basis points of sort of IPR impact, which you're sort of guiding that you will cover in the current quarter. So is that coming from a better mix because of more U.S. revenue versus sort of lower margin revenue, or is it coming from further cost reduction? That's my first question, and the follow-up is just on the competitive competitive environment; you were talking about Latin America, Africa, etc.

Janet: Thanks, Janet I'll say last fast on the on the margin drivers into Q3, and I think you have done the calculation. So to say, we had a bit of positive impact in <unk>.

Speaker Change #129: Q2.

So taking that off that shows a bit of an underlying improvement.

Speaker Change #129: We have the cost both activities that we expect to support and then of course also a bit on the geographical mix US you mentioned, so I think that this year.

Speaker Change #129: We're capturing it water well in that sense and then of course on the downside we have still a declining market.

That's compared to last year. So those are.

The key components.

The other question I think it's.

Speaker Change #131: It's better for Ya barrier to give your point of view.

Bory Ekholm: Yeah, I think it's still a bit too early to have a view on what's going to happen in Europe. I, I, I, we saw the legislation being passed or announced. The, you know, I, I think we have to see how that impacts the market.

Lars: But in Germany, there was recently some news flow about, you know, them excluding Chinese vendors from their core network. Does that signal any improvement in the European environment, which you've also said has been competitive in the past more than the market thinks? Or is that not really yet coming through to the RAN side and just still on the core side?

Speaker Change #132: Yeah, I think it's still a bit too early to have a view on what's going to happen in Europe.

Speaker Change #132: We saw the legislation being passed or announced.

Speaker Change #132: Yes.

Speaker Change #132: No.

Speaker Change #132: I think we'd have to see how that impacts the market.

Richard Kramer: Thanks for the question. We've got time just for a couple more questions, so the next question will come from the line of Richard Kramer. Richard at Arate, your line is now open. Please go ahead. Thanks very much for you.

Speaker Change #133: Understood Alright. Thanks.

Borja: Thanks Janardan, so Lars first on the margin drivers into Q3. I think you have done the calculation, so to say we had a bit of a positive impact in Q2, so taking that off, that shows a bit of an underlying improvement, and we have the cost out activities that we expect to support and, then of course, also a bit of the geographical mix as you mentioned. So I think that is. You are capturing it rather well in that sense, and then, of course, on the downside, we still have a declining market compared to last year, so those are the key components.

Speaker Change #134: Thanks for the question. We've got time just for a couple more questions. So next question will come from the line of Richard Kramer Richard Arete. Your line is now open. Please go ahead.

Borja: And on the other question, I think it's better for you, Berger, to give your point of view. Yeah, I think it's still a bit too early to have a view on what's going to happen in Europe.

Unknown Executive: If we saw the legislation being passed or announced, the know, I think we'd have to see how that impacts the market. Understandable. All right. Thanks.

Bory Ekholm: I want to go back to Vonage, and, and given the further write downs, which are now over four billion, I want to ask you, you know, who's ultimately accountable for this level of value destruction, and, and sort of what conclusions should investors draw that, that the management has learned lessons from this level of losses, which, I mean, it's really the largest we've seen since shortly after you arrived in 2017, and maybe alongside that with Lars, you need to adjust your EBITA targets, given that, you know, they had been changed from EBITA to EBITA to include the larger amortization post Vonage, and, and now you'll obviously have much lower amortization.

Thanks, very much for you I want to go back to vantage and given the further write downs, which are now over $4 billion I wanted to ask you who is ultimately accountable for this level of value destruction and sort of what conclusions should investors draw that the management has learned lessons from this level of losses, which.

Unknown Executive: Thanks for the question. We've got time just for a couple more questions. So the next question will come from the line of Richard Kramer. Richard at Arate, your line is now open. Please go ahead.

Richard Alan Kramer: Thanks very much, Borja. I want to go back to Vonage, and given the further write-downs, which are now over $4 billion, I want to ask you, you know, who is ultimately accountable for this level of value destruction. And sort of what conclusions should investors draw that management has learned lessons from this level of losses, which, I mean, it's really the largest we've seen since shortly after you arrived in 2017. And maybe, alongside that with Lars, do you need to adjust your EBITDA targets, given that, you know, they had been changed from EBIT to EBITDA to include the larger amortization post-Vonage? And now you'll obviously have a much lower amortization.

Speaker Change #134: I mean, it's really the largest we've seen since shortly after you arrived in 2017 and maybe.

Speaker Change #135: Alongside that with Lars do you need to adjust your EBIT.

Speaker Change #136: Targets given that they had been changed from EBIT to EBIT ought to include the larger amortization post vantage and and now you'll obviously have much lower amortization.

Lars Sandström: Thanks. Hi, it's clearly, I'm accountable to see you, no choice about that, so you can, you can have that there, but hold your horses a bit before you assess the overall transaction until we know if we can create the separate new markets for network APIs. I think that's where our focus was the whole time; maybe we have not delivered on the current performance of the existing business. Take that; we need to improve that. So, let's take a look at this in a few. Once we see how the market for network API is pans out. Yeah, and on the EBITA, as you say, we will have less to amortize, but as it does not impact the beta, it will not impact the EBITA level as such, but there will be somewhat lower amortization going forward.

Borja: Thanks. I am accountable as CEO, no choice about that, so you can have that there, but hold your horses a bit before you assess the overall transaction until we know if we can create a separate new market for network APIs. I think that's where our focus was the whole time. Maybe we have not delivered on the current performance of the existing business. Take that; we need to improve that. So let's take a look at this in a few once we see how the market for network APIs pans out.

Speaker Change #136: Yeah.

Speaker Change #137: Hi, there its clear accountability.

It's about that so you can you can have that they're on hold your horses a bit before you assess the overall transaction until we know.

Speaker Change #137: If we can create a separate new markets for network API I think that's where.

Speaker Change #137: Our focus was the whole time, maybe we are we have not delivered on the current performance of the existing business take that we need to improve that.

Speaker Change #137: So, let's let's take a look at this.

Speaker Change #137: In Q1.

Speaker Change #137: We see how the market for network API it pans out.

Borja: Yeah, and on the beta, as you state, we will have less to amortize, but as it does not impact the beta level, it will not impact the beta level as such, but there will be a somewhat lower amortization going forward.

Speaker Change #137: And on the beat.

Speaker Change #138: Yeah as you state.

We will have less to amortize, but as it does not impact the beta.

Speaker Change #138: It will not impact so today ebay debate the level as such but there will be somewhat lower amortization going forward. I think that's also part of the outlook guidance we gave.

Lars Sandström: I think that's also part of the outlook guidance we give.

Operator: Great, thanks for the question, Richard, and we will move to our final question today.

Speaker Change #139: Great. Thanks for the question, Richard and we will move to our final question today.

Didier Scemama: So, final question today is coming from the line of Didier Scemama at Bank of America. Didier, your line should now be open. Please go ahead. I'll conclude from your commentary and the guidance you've given on revenue and margins that you're happy to give a market share to protect your gross margins. And related to that, if you don't, are you prepared to, you know, provide bundle financing in those emerging markets as we've seen in the past, given the effects had wins that some of your customers are facing. Thank you.

Lars: I think that's also part of the outlook guidance we give. Great, thanks for the question Richard, and we will move to our final question today. So our final question today is coming from the line of Didier Simalma at Bank of America. Didier, your line should now be open. Please go ahead. Good morning, Daniel. Thank you for taking my question. And good morning, everyone.

Speaker Change #140: So final question today is coming from the line of DD&A semi AMA at Bank of America DDA Airlines should now be open. Please go ahead.

Didier Scemama: Just a quick one. It's on this comment you made on the increased Chinese competition, or Chinese vendors' competition. I've got a simple question.

Daniel Djurberg: Yes. Good morning, Daniel Thank you for taking my question and good morning, everyone. Just a quick one on dish.

Daniel: Comments, you made on increased China competition, our Chinese competition.

Ive got a simple question.

Borja: Should we conclude from your commentary and the guidance you've given on revenue and margins that you're happy to give up market share to protect your gross margins? And related to that, if you don't, are you prepared to provide vendor financing in those emerging markets as we've seen in the past? Given the FX headwinds that some of your customers are facing, thank you. Sure, various and high-level thoughts on that one. Thank you. Yeah, there isn't, you know; this is very dependent on how the customer situation looks. It also depends on choice.

Speaker Change #141: Should we should we conclude from your commentary and the guidance you've given on revenue and margins that you are happy to give up market share protection.

Don: Protect your gross margins and related to that if you. Don are you prepared to provide vendor financing those emerging markets as we've seen in the past.

Don: Given the FX headwinds that some of your customers are thinking thank you.

Bory Ekholm: Sure, various and high level thoughts on that one. Thank you. Yeah, there is. And you know, this is very dependent on how the customer situation looks like. It depends also on choice. I mean, this is overall in the customer's hands. You know, the customers need to make a choice of vendor balance, what the risk profile they take with different vendor balances, etc. So it's very hard to give you a generic answer. And so, but I would say for us what we know is that we need to be able to deliver a healthy gross profit in order to be able to invest in technology leadership.

Speaker Change #143: Sure various some high level thoughts on that one. Thank you yes, there is.

Speaker Change #144: This is very dependent on how the customer situation looks like it depends also on choice I mean this.

Borja: I mean, this is overall in the customer's hands. You know, the customers need to make a choice of vendor balance, what the risk profile they take with different vendor balances, etc. So it's very hard to give you a generic answer, right?

Speaker Change #144: This is overall in the customers' hands.

Customers need to.

Make a choice of vendor balance what the risk profile, they would take with different vendor.

Speaker Change #144: Balances et cetera, so it's very hard to give you a generic answer right.

Borja: And then, but I would say for us, what we know is that we need to be able to deliver a healthy gross profit in order to be able to invest in technology leadership. So for us, if that requires us to be disciplined, then we're going to continue to be that in how we take market share. I think you've seen that over the last few years we've been rather disciplined in managing the overall gross profit of the company.

Speaker Change #144: Yeah.

Speaker Change #144: And then so but I would say for us what we know is that we need to be able to deliver a healthy gross profit in order to be able to invest in technology leadership so for us.

Bory Ekholm: So for us, you know, if that requires us to be disciplined, and we're going to continue to be that on how we take market share. I think you've seen that over the last few years that we've been rather disciplined in managing the overall gross profit of the company. We've been able to do that and still gain market share. So it actually comes back to another question, which is the technology leadership we have with the type of portfolio we can offer. We're actually able to do to do both. Is that always you can take that for granted?

Speaker Change #144: If that requires us to be disciplined and we're going to continue to be that on how we take market share I think you've seen that over the last few years that we've been.

Speaker Change #144: Rather disciplined in managing the overall gross profit of the company, we've been able to do that and still gain market share.

Borja: We've been able to do that and still gain market share. So it actually comes back to another question, which is the technological leadership we have with the type of portfolio we can offer. We're actually able to do both. But is that always something you can take for granted? No, you can't.

Speaker Change #144: So it's actually comes back to another question, which is the technology leadership, we have with the type of portfolio we can offer.

Speaker Change #144: Really able to do to do both.

Speaker Change #144: Is that all the ways you can take that for granted no you can't do you need to make sure you invest in leadership and invest in the portfolio and Thats why we try to manage the total business with the gross profit on the the need to invest in technology and trading those two O in order again to <unk>.

Bory Ekholm: No, you can't. You need to make sure you invest in leadership and invest in the portfolio. And that's why we try to manage the total business with the gross profit and the need to invest in technology and trading those two off in order again to win in the marketplace in the long run. It's always expensive to give output print. I know that, and you know that as well. So we need to manage both, and how it looks will depend on individual situations. But we're not, you know, unless we get paid for our technology, why should we take enough contract?

Borja: You need to make sure you invest in leadership and invest in the portfolio. And that's why we try to manage the total business with the gross profit and the need to invest in technology and trade those two off in order, again, to win in the marketplace in the long run. It's always expensive to give up a footprint.

Speaker Change #145: Win in the marketplace in the long run it's always it's expensive to give up footprint.

Borja: I know that, and you know that as well. So we need to manage both, and how it looks will depend on individual situations.

Speaker Change #146: No doubt and you know that as well so we need to manage both.

Unknown Executive: But we're not, you know, unless we get paid for our technology, why should we take off the contract? Brilliant. Thank you. May I ask for a photo op?

Speaker Change #146: How it looks will depend on individual situations, but.

Speaker Change #146: No.

Speaker Change #148: Unless we get paid for our technology why shouldn't be taken off of a contract.

Didier Scemama: Brilliant, thank you.

Operator: May I ask a follow-up? If it's very brief today, we're just about out of town. Very brief. Go ahead. Very brief.

Speaker Change #147: Or do you think you may ask a follow up.

Didier Scemama: If it's very brief, Didier, we're just about out of time. Very brief. Go ahead. Very brief.

Speaker Change #149: If it's very brief today, we're just about out of town or as rigs go ahead very brief.

Bory Ekholm: Your main competitor in Europe just acquired an optical vendor to sort of a bigger footprint in data center and sort of AI. I know it's not your focus. I should we think about their actions role if any data center in the future. Thank you. Yeah, I think that, you know. I think they're in a very different position than we are. They already have a business there. So, for them, it's kind of a rational acquisition. For us, I think that's a market. We serve through the access technology, but seeing us directly sent to data centers is rather unlikely.

Unknown Executive: Your main competitor in Europe just acquired an optical vendor to have sort of a bigger footprint in data centers and sort of AI, although I know it's not your focus. How should we think about Ericsson's role, if any, in the data center? Yeah, I think that, you know... I think they're in a very different position than we are. They already have a business there, so for them, it's kind of a rational acquisition. For us, I think that's the market. We serve through access technology, but seeing us directly sent to data centers is rather unlikely.

Speaker Change #150: One competitor in Europe, just acquired an optical vendor through to us.

Footprint in data center sort of AI I know, it's not your focus how should we think about ericsson's role if any in data center in the future. Thank you.

Speaker Change #150: Yes.

You know.

I think there is a very different position than we are they already have a business. There. So for them, it's kind of a rational acquisition for us that I think thats a market we serve through the access technology and we are seeing.

Speaker Change #150: Seeing us to directly sell to.

Speaker Change #150: Data centers this is rather unlikely.

Borja: Brilliant. Enjoy your summer. Thanks, you too. Super. That concludes today's conference call. Thank everyone for joining, and we'll catch up after the summer. Thank you for watching!

Speaker Change #151: Enjoy your summer.

Speaker Change #152: Thanks, you too.

Bory Ekholm: Thank you.

Operator: That concludes today's conference call. Thanks everyone for joining, and we'll catch up after the summer. Thank you very much. Thank you.

Speaker Change #152: So that concludes today's conference call. Thanks, everyone for joining and we'll catch up after the summer.

Speaker Change #152: Right.

Speaker Change #152: Yeah.

Speaker Change #152: [music].

Speaker Change #152: Okay.

Speaker Change #152: Okay.

Speaker Change #152: Okay.

Speaker Change #152: [music].

Yeah.

Speaker Change #152: [music].

Speaker Change #152: Yeah.

Speaker Change #152:

Speaker Change #152: [music].

Speaker Change #152: Okay.

Speaker Change #152: [music].

Speaker Change #152: Okay.

Speaker Change #152: Okay.

Speaker Change #152: [music].