Q2 2024 Nokia Oyj Earnings Call

Good morning, ladies and gentlemen, welcome to Nokia's second quarter 2024 results call I'm, David Mulholland head of Nokia Investor Relations.

David Mulholland: Good morning, ladies and gentlemen. Welcome to Nokia's second quarter 2024 results goal. I'm David Mulholland, head of Nokia Investor Relations. Today with me is Pekka Lundmark, our President and CEO, along with Marco Wirn, our CFO. Before we get started, a quick disclaimer.

David Mulholland: Good morning, ladies and gentlemen. Welcome to Nokia's second quarter, 2024 results goal.

David Mulholland: I'm David Mulholland, Head of Nokia Invest Relations. Today, with me is Pekka Lundmark, our President and CEO, along with Marco Beren, RCFO.

Speaker Change: Today with me as Pekka Lundmark, our president and CEO, along with Mark <unk> our CFO.

David Mulholland: During this call, we will be making forward-looking statements regarding our future business, proposed transactions, and financial performance. These statements are predictions that involve risks and uncertainties. The actual results may therefore differ materially from the results we currently expect. Factors that could cause such differences can be both external as well as internal operating factors.

David Mulholland: Before we get started, a quick disclaimer.

Speaker Change: Before we get started a quick disclaimer. During this call we will be making forward looking statements regarding our future business proposed transactions and financial performance and these statements are predictions and involve risks and uncertainties.

David Mulholland: During this call, we will be making forward-looking statements regarding our future business, proposed transactions, and financial performance, and these statements are predictions in above risks and uncertainties. Actual results may therefore differ materially from the results we currently expect. Factors that could cause such differences can be both external, as well as internal operating factors.

Actual results May therefore differ materially from the results. We currently expect factors that could cause such differences can be both external as well as internal operating factors. We've identified such risks in the risk factor section of our annual report on form 20-F, which is available on our Investor Relations website.

David Mulholland: We have identified such risks in the risk factor section of our annual report on Form 20-F, which is available on our Invest Relations website.

David Mulholland: We have identified such risks in the risk factor section of our annual report on Form 20-F, which is available on our Investor Relations website. Throughout today's presentation, references to growth rates will mostly be on a constant currency basis, and margins will be based on our comparable reporting. Please note that our Q2 report and a presentation that accompanies this call are published on our website. The report includes both reported and comparable financial results and a reconciliation between the two.

Speaker Change: Within today's presentation references to growth rates will mostly be on a constant currency basis and margins will be based on our comparable reporting.

David Mulholland: Within today's presentation, references to growth rates will mostly be on a constant currency basis, and margins will be based on our comparable reporting.

David Mulholland: Please note that our QT report and the presentation that accompanies this call are published on our website. The report includes both the report and comparable financial results and reconciliation between the two.

Please note that our Q2 report and the presentation that accompanies this call are published on our website. The report includes splits reported and comparable financial results and reconciliation between the two.

David Mulholland: In terms of today's agenda, Pekka will go through some of the key messages from the quarter, Marco will give you a deeper dive on the financial performance, and then she will make a few comments on a couple of particular highlights from Q2, and then we'll move to Q&A. With that, let me hand over to Pekka.

David Mulholland: In terms of today's agenda for today, Pekka will go through some of the key messages from the quarter. Marco will give you a deeper dive on the financial performance, and then Pekka will make a few comments on a couple of particular highlights from Q2, and then we'll move to Q&A.

Speaker Change: In terms of today's agenda for today Pekka will go through some of the key messages from the quarter market will give you a deeper dive on the financial performance and then Pekka will make a few comments on a couple of particular highlights from Q2, and then we'll move to Q&A with that let me hand over to Pekka.

Pekka Lundmark: With that, let me hand over to Pekka. Thanks, David, and thank you for all dialing in today. Before we discuss Q2, I'd like to give a quick reminder of some important announcements we made recently. We have, of course, announced the planned divestment of our submarine network's business to the French state, and also our intention to acquire Infinite, our North American optical networking company. The Infinite acquisition will significantly increase the scale and profitability of our optical networks business. It will enable us to deliver faster innovation for customers and expand our position with web scale and regional in North America.

Pekka: Thanks, David and thank you for all dialing in today.

Pekka Ilmari Lundmark: Thanks, David, and thank you all for dialing in today. Before we discuss Q2, I'd like to give a quick reminder of some important announcements we made recently. We, of course, announced the planned divestment of our submarine networks business to the French state and also our intention to acquire Infinera, a North American optical networking company. The Infinera acquisition will significantly increase the scale and profitability of our optical networks business.

Pekka: Before we discuss Q2 I'd like to give a quick reminder of some important announcements we made recently.

Pekka: We of course announced the planned divestment of our submarine networks business to the French State then also our intention to acquire Infinera North American optical networking company.

Pekka: The Infinera acquisition will significantly increase the scale and profitability of our optical networks business. It will enable us to deliver faster innovation for customers and expand our position with web scale and regionally in North America.

Pekka Ilmari Lundmark: It will enable us to deliver faster innovation for customers and expand our position with web scale and regionally in North America. These transactions will focus and strengthen our network infrastructure business with its future built on three market-leading units, six networks, IP networks, and optical networks. Moving on to our second quarter performance,

Pekka Lundmark: These transactions will focus and strengthen our network infrastructure business with its future built on three market leading units, six networks, IP networks, and optical networks.

Pekka: These transactions will focus on strengthening our network infrastructure business with its future built on three market, leading units fixed networks IP networks and optical networks.

Pekka Lundmark: Moving on to our second quarter performance. Marco will go into more detail, but the headlines are that the market remained weak during the quarter. We saw an 18% decline in our top line year and year, but it should be noted that three quarters of that decline was driven by India, with Q2 last year marking the peak of their 5G deployment. We were pleased to see order intake trends continuing to improve in Q2 with the book to be level one and orders growing year on year. Again, this strength was most notable in network infrastructure and supports our expectation of a significant improvement in net sales in the second half of 2024.

Moving on to our second quarter performance medical will go into more detail, but the headlines are that the market remained weak during the quarter. We saw an 18% decline in our top line year on year, but it should be noted that three quarters of that decline was driven by India.

Pekka Ilmari Lundmark: Marco will go into more detail, but the headlines are that the market remained weak during the quarter. We saw an 18% decline in our top line year on year. But it should be noted that three quarters of that decline was driven by India, with Q2 last year marking the peak of their 5G deployment. We were pleased to see order intake trends continuing to improve in Q2, with the book-to-bill ratio above one and orders growing year on year.

Pekka: With Q2 last year, marking the peak of their Fi J deployment.

Pekka: We were pleased to see order intake trends continuing to improve in Q2 with the book to Bill above one and orders growing year on year.

Pekka Ilmari Lundmark: Again, this strength was most notable in network infrastructure and supports our expectation of a significant improvement in net sales in the second half of 2024. We also continue to have good deal traction across the business group. We won some important deals in N.I.

Pekka: Again this strength was most notable in network infrastructure and supports our expectation of basic <unk> the improvement in net sales in the second half of 2024.

Pekka Lundmark: We also continue to have good deal tracks and across the business groups. We want some important deals in NI in the quarter, especially for mobile networks. We want some completely new customers such as Mio in Portugal and also expanded our share at many existing customers. In addition, and I'll touch on this later, cloud and network services is also making good progress on winning core network deals and with our network as code platform.

Pekka: We also continue to have good deal traction across the business groups.

Speaker Change: We won some important deals in NII in the quarter is bad.

Pekka Ilmari Lundmark: in the quarter, especially for mobile networks, we want to win some completely new customers, such as Mio in Portugal, and also expand our share at many existing customers. In addition, and I'll touch on this later, cloud and network services are also making good progress on winning core network deals and with our network as code platform. Regarding our cost savings program, we've been taking quick action under the program that we announced in October. We have so far achieved 400 million of run rate savings of the targeted 800 million to 1.2 billion in gross savings by 2026.

Speaker Change: For mobile networks, we want some completely new customers such as MEO in Portugal, and also expanded our share at many existing customers in.

Speaker Change: In addition.

Speaker Change: And I'll touch on these later cloud and network services is also making good progress on winning core network deal signed with our network gets cold platform.

Pekka Lundmark: Regarding our cost savings program, we've been taking quick action under the program that we announced in October. We have so far actioned 400 million of run rate savings of the target, the 800 million to 1.2 billion in gross savings by 2020. Sx, we had another strong quarter of free cashflow with approximately 400 million in Q2.

Speaker Change: Regarding our cost savings program, we've been taking quick action under the program that we announced in October we have so far action 400 million of run rate savings over the target the 800 million to $1 2 billion in gross savings by 2026.

Marco Wirn: We had another strong quarter of free cash flow with approximately 400 million euros in Q2. And finally, our full year outlook is unchanged, and we are currently tracking towards the midpoint or slightly below the midpoint of our comparable operating profit guidance of 2.3 to 2.9 billion euros. And regarding our free cash flow guidance of 30 to 60% conversion, we are tracking towards the higher end of that range. With that, I will hand over to Marco, who will go into the financials in more detail. Thank you, Pekka, and good morning, everyone, and welcome from my side as well.

Speaker Change: We had another strong quarter of free cash flow with approximately $400 million in Q2 and.

Pekka Lundmark: And finally, our full year outlook is unchanged, and we are currently tracking towards the midpoint or slightly below the midpoint of our compatible operating profit guidance of 2.3 to 2.9 billion euro. And regarding our free cash flow guidance of 30 to 60% conversion, we are tracking towards the higher end of that range.

Speaker Change: And finally, our full year outlook is unchanged and we are currently tracking towards the midpoint or slightly below the mid point of our comparable operating profit guidance of 2.3 point 9 billion Euro and regarding our free cash flow guidance of 30% to 60% conversion, we are tracking towards the higher end of that.

Speaker Change: That range with that let me hand over to Marco who will go into the financials in more detail.

Marco Beren: Let me hand over to Marco, who will go into the finance source in more detail. Thank you, Pekka. Good morning, everyone. Welcome from my side as well.

Marco: Thank you Pat and good morning, everyone and welcome from my side this fall.

Marco Beren: Before I get into numbers, let me make one important comment. Considering the plant sale of Alcatel Submarine Networks, the business is now reported under discontinued operations and is no longer seen in our Network Infrastructure unit figures. As Pekka mentioned, the environment remained challenging, and in Q2 24, we saw a sales decline of 18% compared to a year-ago quarter. India was really the main driver here, but pleasingly we returned to modest growth in North America. First margin increased by 450 basis points, mainly driven by mobile networks' improvement. Import due to the 150 million of accelerated revenue recognition related to the AT&T contract resolution.

Marco Wirn: Before I get into numbers, let me make one important comment. Considering the planned sale of Alcatel Submarine Networks, the business is now reported under discontinued operations and is no longer seen in our network infrastructure unit figure. However, as Pekka mentioned, the environment remained challenging.

Marco: Before I get into numbers, let me make one important comment considering the planned sale of Alcatel submarine networks. The business is now reported under discontinued operations and he is no longer seen you know net broke infrastructure unit figures.

Marco: As Pekka mentioned the environment remained challenging and in quarter 224, we saw a sales decline of 18% compared to year ago quarter.

Marco Wirn: And in quarter 2024, we saw a sales decline of 18% compared to a year ago quarter. India was really the main driver here. But pleasingly, we returned to modest growth in North America. Cross-margin increased by 450 basis points, mainly driven by the mobile network's improvement, in part due to the $150 million of accelerated revenue recognition related to the AT&T contract resolution. Our operating margin, at 9.5%, was 190 basis points below the prior year.

Speaker Change: India was really the main driver here, but pleasingly, we returned to modest growth in North America.

Speaker Change: Gross margin increased by 450 basis points.

Pekka: Mainly driven by mobile networks improvement.

Pekka: In part due to the $150 million of accelerated revenue recognition related to the AT&T contract resolution.

Marco Beren: Our operating margin at 9.5% was 190 basis points below the prior year. This also benefited from the accelerated revenue recognition. However, the decrease in top line negatively impacted the operating profit. Then network infrastructure sales declined by 11% with declines across all three business lines, but we did see a sequential improvement from quarter watt. The net sales decline also impacted our operating margin in the quarter, along with somewhat higher indirect cost of sales. Importantly, as we mentioned before, we saw a continuation of the improving order intake trends, which support our view of significant improvement in net sales growth in the second half.

Pekka: Our operating margin at nine 5% was 190 basis points below the prior year. These also benefited from the accelerated revenue recognition. However, the decrease in topline negatively impacted the operating profit.

Marco Wirn: This also benefited from the accelerated revenue recognition. However, the decrease in the top line negatively impacted operating profit, then network infrastructure. Sales declined by 11% with declines across all three business lines, but we did see a sequential improvement from quarter one. The net sales decline also impacted our operating margin in the quarter, along with a somewhat higher indirect cost of sales.

Then network infrastructure.

Pekka: Sales declined by 11% with declines across all three business lines, but we did see a sequence shull improvement from quarter one.

The net sales decline also impacted our operating margin in the quarter, along with somewhat higher indirect cost of sales.

Pekka: Importantly, as we mentioned before we saw a continuation of the improving order intake trends, which support our view of the significant improvement in net sales growth in the second half.

Marco Wirn: Importantly, as we mentioned before, we saw a continuation of the improving order intake trends, which support our view of a significant improvement in net sales growth in the second half. On the basis of our current view of the market and the pace of demand recovery, we have revised our net sales planning assumption down from our prior plus 2% to 8% growth to now minus 2% to plus 3%. The operating margin assumption is 11.5 to 14.5%.

Marco Beren: On the basis of our current view of the market and the pace of demand recovery, we have revised our net sales planning assumption down from our prior plus 2% to 8% growth to now minus 2% to plus 3%. Our operating margin assumption is 11.5% to 14.5%. In full transparency, the removal of ASN from NI would have improved profitability by 100 to 150 basis points, and the underlying reduction in our margin assumption is due to the slower market recovery.

Pekka: On the basis of our current view of the market and the pace of demand recovery, we have revised our net sales planning assumption down from all prior plus 2% to 8% CRO to now minus two to plus 3%.

Pekka: Our operating margin assumption is 11.5.

14.5%.

Marco Wirn: And in full transparency, the removal of ASN from NI would have improved profitability by 100 to 150 basis points, and the underlying reduction in our margin assumption is due to the slower market recovery. Turning to mobile networks,

Pekka: And in full transparency the removal of a S. N from NII would have improved profitability by 100 to 150 basis points and the underlying a reduction in our margin assumption is due to the slower market recovery.

Marco Beren: Voney, turning to more bonnetworks, more bonnetworks, the net sales decline was mainly driven by the decrease in India, reflecting the fact that quarter two in 2023 represented the peak of the India 5G deployments. Positively, on a sequential basis, all regions increased compared with quarter one. Nokia also resolved its outstanding negotiation with AT&T in relation to our existing RAN contracts and ensuring we maintain the values originally agreed in the contract. Part of this resolution led to this 150 million of accelerated revenue recognition, which benefited both net sales and operating profit in the quarter. Based on current commitments, we expect more Bonnetworks net sales to AT&T to remain largely stable year on year in 2024, and then approximately half in 2025.

Pekka: Learning tuning to mobile networks mobile networks, a net sales decline was mainly driven by a decrease in India.

Marco Wirn: In mobile networks, the net sales decline was mainly driven by the decrease in India, reflecting the fact that quarter two in 2023 rips into the peak of the Indian 5G deployment. However, positively, on a sequential basis, all regions increased compared with quarter one, and Nokia also resolved its outstanding negotiation with AT&T in relation to our existing RAN contracts and ensured we maintain the values originally agreed in the contract.

Pekka: Reflecting the fact that quarter two in chosen twenty-three represented the peak of the India five Chi deployments.

Pekka: Positively on a sequential basis, all regions increased compared with quarter one.

Pekka: And Nokia also resolved its outstanding negotiation with AT&T in relation to our existing ran contracts and ensuring we maintain the values or regionally agreed in the contract.

Marco Wirn: Part of this resolution led to this $150 million of accelerated revenue recognition, which benefited both net sales and operating profit in the quarter. Based on current commitments, we expect mobile network net sales to AT&T to remain largely stable year on year in 2024, and then approximately half in 2025. Of course, we will continue to look to win new opportunities with AT&T that can improve this trajectory in mobile networks. And, as you know, AT&T is a very important customer overall for Nokia.

Pekka: All of these resolution led to this 150 million of accelerated revenue recognition.

Pekka: Which benefited both net sales and operating profit in the quarter.

Pekka: Based on current commitments, we expect mobile networks net sales to AT&T to remain largely stable year on year in 2024, and then approximately half in 2025.

Marco Beren: Of course, we will continue to look to win new opportunities with AT&T that can improve this trajectory in more bonnetworks, and as you know, AT&T is a very important customer overall Nokia.

Pekka: Of course, we will continue to look to win new opportunities with AT&T that can improve this trajectory and mobile networks and as you know AT&T is a very important customer overall and Nokia.

Marco Beren: As a result of the market evolution and what we have seen thus far in the first half, we have changed our net sales planning assumption from a 10 to 15% decline to now a 14 to 19% decline. However, we have increased the operating margin assumption from 1 to 4% to now 4 to 7% as we continue to take quick action on cost. And then moving to cloud and network services, the business declined 16% year on year as it continued to be impacted by the challenging environment. Additionally, the disposal of the device management and service management platform business had a 3% each point negative impact on the net sales in the quarter.

Speaker Change: As a result of market evolution and what we have seen thus far in the first half we have changed our net sales planning assumption from a 10% to 15% decline to now a 14% to 19% decline.

Marco Wirn: As a result of the market evolution and what we have seen thus far in the first half, we have changed our net sales planning assumption from a 10 to 15% decline to now a 14 to 19% decline. However, we have increased the operator margin assumption from 1% to 4% to now 4% to 7% as we continue to take quick action on cost and then move to cloud and network services. The business declined 16% year on year as it continued to be impacted by the challenging environment.

Speaker Change: However, we have increased the operating margin assumption from 1% to 4% to now 4% to 7% as we continue to take quick action on cost.

Speaker Change: And then moving to cloud and network services.

Speaker Change: The business declined 16% year on year.

Speaker Change: It continued to be impacted by the challenging environment.

Marco Wirn: Additionally, the disposal of the device management and service management platform business had a three percentage point negative impact on net sales in the quarter. Both cross and operating profits were also impacted by lower net sales. And given the market conditions, we have also adjusted our net sales assumptions for cloud and network services to minus five to zero percent from previous minus two to plus three percent, although we left our operating margin assumption unchanged at six to nine percent.

Speaker Change: Additionally, the disposal of the device management and service management platform business.

At a three percentage point negative impact on the net sales in the quarter.

Marco Beren: Both cross and operating profits were also impacted by lower net sales.

Speaker Change: Both gross and operating profits were also impacted by lower net sales.

Marco Beren: And given the market conditions, we have also adjusted our net sales assumptions for cloud and network services to minus 5 to 0% from previous minus 2 to plus 3%. Although we left our operating margin assumption unchanged at 6 to 9%. And Nokia Technologies had a solid quarter, and the run rate remains at 1.3 billion after the significant smartphone renewals we had in the first quarter. One thing to highlight in quarter two was that we signed an agreement with the video streaming platform related to our multimedia technology. And this is an early step for us in this area, but it is an area that we think can become a meaningful opportunity for Nokia.

Speaker Change: And given the market conditions. We have also adjusted our net sales assumptions are cloud and network services to minus five to zero per cent from previews minus two to plus 3%.

Speaker Change: Although we left our operating margin assumption unchanged at 6% to 9%.

Speaker Change: And Nokia technologies had a solid quarter and the run rate remains at $1 3 billion. After the significant smartphone renewals we had in the first quarter.

Marco Wirn: And Nokia Technologies had a solid quarter, and the run rate remains at 1.3 billion after the significant smartphone renewals we had in the first quarter. One thing to highlight in quarter two was that we signed an agreement with a video streaming platform related to our multimedia technology. And this is an early step for us in this area, but it is an area that we think can become a meaningful opportunity for Nokia. Then, if we turn briefly to Nokia's Net Sales Bar region. You will see here that India drove the maturity of the net sales decline in quarter two.

Speaker Change: One thing to highlight in quarter two once that we signed an agreement with a video streaming platform related to our multimedia technology.

Speaker Change: And this is an early step for us in this area, but it is an area that we think can become a meaningful opportunity for Nokia.

Marco Beren: , then if we turn briefly to Nokia's net sales barrageon, you will see here that India drove the maturity of the net sales decline in quarter two. As the year-ago quarter was to absolutely peak in the 5G deployment in India and hence the minus 69% decline in the quarter. We are pleased to see a return to growth in North America, supported by the one-off AT&T benefit, but aside from that, we also saw a return to growth in our network infrastructure business in North America. In other regions, there was softness across most markets. In quarter two, we generated solid free cash flow, which led to a net cash balance of 5.5 billion.

Speaker Change: Then if we turn briefly to Nokia's net sales by region.

Speaker Change: You will see here that India drove the maturity of the net sales decline in quarter two.

Marco Wirn: As the year-ago quarter was the absolute peak in the 5G deployment in India, hence that minus 69% decline in the quarter. We are pleased to see a return to growth in North America, supported by the one-off AT&T benefit. But aside from that, we also saw a return to growth in our network infrastructure business in North America. In other regions, there was softness across most markets.

Speaker Change: The year ago quarter, what's the absolute peak into five G deployment.

Speaker Change: In India, and hence that minus 6% to 9% a decline.

Speaker Change: Decline in the quarter.

Speaker Change: We are pleased to see a return to growth in North America supported by the one off AT&T benefit, but aside from that we also saw a return to growth in our network infrastructure business in North America.

Speaker Change: In other regions, there was softness across most markets.

Speaker Change: In quarter, two we generated solid free cash flow, which led to a net cash balance of $5 5 billion.

Marco Wirn: In quarter two, we generated solid free cash flow, which led to a net cash balance of 5.5 billion. This was driven by operating profit and changes in networking capital as the India receivables, which built up during the deployment, normalized. In addition, our cash benefited from 315 million euros of disposals, mainly related to both TD Tech and the sale of our device management and service management platform. We also returned over 300 million euros to our shareholders through dividends and share buyback.

Marco Beren: This was driven by operating profit and changes in the network in capital as the India receivables, which built up during the deployment, normalized. In addition, our cash benefited from a 315 million of disposals, mainly related to both TD Tech and the sale of our device management and service management platforms. We also returned over 300 million euros to our shareholders through dividends and share buybacks. You will also see in the release that we are now sharing the adjusted free cash flow by business group to help understand the differing dynamics of cash flow performance for each business.

Speaker Change: This was driven by operating profit and changes in net working capital as the India receivables, which built up during the deployment normalized.

Speaker Change: In addition, our <unk>.

Speaker Change: Cash benefited from a $315 million of disposals.

Speaker Change: Mainly related to both T detect and the sale of our device management and service management platforms.

Speaker Change: We also returned over 300 million euros to our shareholders through dividends and share buybacks.

Speaker Change: You will also see in the release that we are now sharing the adjusted free cash flow by business group to help understand the differing dynamics of Gaslog the formats for each business.

Marco Wirn: You will also see in the release that we are now sharing the adjusted free cash flow by business group to help understand the differing dynamics of cash flow performance for each business. We are still working to refine the process, and by our full year results, we will provide you with historical data that will allow you to better interpret the performance. And with that, I will hand it back to Pekka.

Marco Beren: We are still working to refine the process, and by our full year results, we will provide you with historical data that will allow you to better interpret the performance.

Speaker Change: We are still working to refine the process.

And by our full year results, we will provide you with historical data that will allow you to better integrate the performance.

Pekka Lundmark: And with that, let me hand it back to you.

And with that let me hand, it back to pick up.

Pekka Lundmark: Thanks a lot, Marco. So let's now look at some of the business highlights from the quarter.

Paul: Thanks, a lot markup so let's now look at some of the business highlights from the quarter.

Pekka Ilmari Lundmark: Thanks a lot, Marco. So let's now look at some of the business highlights from the quarter. On 27th June, as I'm sure you all recall, we announced the definitive agreement for Nokia to acquire Infinera in a deal we believe has strong strategic and financial rationale. We hosted a call about the transaction a few weeks ago, so I won't go again into all the detail on this. But as a quick recap, there are three main reasons for the deal.

Pekka Lundmark: On 27th of June, as I'm sure you all recall, we announced the definitive agreement for Nokia to acquire Infinera in a deal we believe has strong strategic financial rationale. We hosted a call about the transaction a few weeks back, so I won't go again into all the detail on this, but as a quick recap, there are three main reasons for the deal. First, we see a strong strategic and synergistic rationale for the transaction. There is a strong strategic fit with highly complimentary customer geographic and technology profiles between the two companies. The timing is also optimal to build on the strong momentum both businesses have had in recent years and improves our long-term growth opportunities.

Speaker Change: 27th of June as I'm sure you all recall, we announced the definite definite they've agreement for Nokia to acquire Infinera in the deal. We believe has strong strategic and financial rationale.

Speaker Change: We hosted a call about the transaction a few weeks back so I won't go again need to all the detail on this but as a quick recap there are three main reasons for the deal.

Speaker Change: First we see a strong strategic and synergistic rationale for the transaction. There is a strong strategic fit with highly complementary customer geographic and technology profiles between the two companies.

Pekka Ilmari Lundmark: First, we see a strong strategic and synergistic rationale for the transaction. There is a strong strategic fit with highly complementary customer, geographic, and technology profiles between the two companies. The timing is also optimal to build on the strong momentum both businesses have had in recent years and improves our long-term growth opportunities. From a synergy perspective, we target net run rate synergies of 200 million by 2027 at the operating profit level. Second, we believe this transaction will strongly enhance our network infrastructure business. The transaction will increase our enterprise exposure in NI, particularly when considering Infinera's recent web-scale design wins in systems and pluggables. The combined business will have over 600 million euros of annual web-scale sales in optical.

Speaker Change: The timing is also up them out to build on the strong momentum both businesses have had in recent years and improves our long term growth opportunities from a synergy perspective, we target net run rate synergies of 200 million by 2027 at the operating profit level.

Pekka Lundmark: From a synergy perspective, we target net run rate synergies of 200 million by 2027 at the operating profit level. Second, we believe this transaction will strongly enhance our network infrastructure business. The transaction will increase our enterprise exposure in NNI, particularly when considering Infinera's recent web scale design wins in systems and pluggables. The combined business will have over 600 million euro of annual web scale sales in optical. Finally, in terms of the financials, we expect the transactions to be accretive to Nokia's comparable operating profit and DPS in year one, and to deliver over 10% comparable EPS accretion in 2027, assuming the transaction closes by the first half of '25.

Speaker Change: Second we believe this transaction with strongly enhance our network infrastructure business. The transaction will increase our enterprise exposure and ni, particularly when considering Infinera recent web scale design wins in systems and plug of both the combined business will have over 600 million euro or annual web scale.

Speaker Change: Sales in optical.

Pekka Ilmari Lundmark: Finally, in terms of the financials, we expect the transaction to be accretive to Nokia's comparable operating profit and DPS in year one, and to deliver over 10% comparable EPS accretion in 2027, assuming the transaction closes by the first half of 2025. We also expect the acquisition to deliver a return on invested capital comfortably above Nokia's cost of capital. I would also just like to add, now that it has been a few weeks, the customer reaction to the deal has so far been very positive, and indeed, some excitement about what the combined business can do for them. We also announced the agreement to divest submarine networks, which were previously part of the Network Infrastructure Business Group.

Speaker Change: Finally in terms of the financials, we expect the transaction to be accretive to Nokia is compatible up at an appropriate and D. P. S. In year, one and two deliver over 10% comparable EPS accretion in 2027, assuming the transaction closes by the first half of 'twenty five.

Pekka Lundmark: We also expect the acquisition to deliver a return on invested capital, comfortably above Nokia's cost of capital. We know that it has been a few weeks; the customer reaction to the deal has so far been very positive; indeed, even some excitement about what the combined business can do for them.

Speaker Change: We also expect the acquisition to deliver a return on invested capital comfortably above Nokia cost of capital.

Speaker Change: I would also just like to add now that the.

Speaker Change: It does being a few weeks the customer reaction to the deal has so far been very positive indeed, even some excitement about what the combined business can do for them.

Speaker Change: We also announced the agreement to divest submarine networks, which is previously being part of the network infrastructure business group and.

Pekka Lundmark: We also announce the agreement to divest Summary Networks, which has previously been part of the Network Infrastructure business group. And going forward, that means that then I will be built on three market-leading pillars. Six Networks continues to be well positioned to benefit from strong demand in the fiber market. This is evident in markets where fiber is not yet highly penetrated, and in more mature markets where customers are starting to upgrade to XGS PON or 25G PON. Elsewhere, government funding projects are expected to start towards the end of this year, and Nokia was the first vendor to announce the availability of biomedical-compliant products.

Pekka Ilmari Lundmark: And going forward, that means that ENNA will be built on three market-leading pillars. Six networks continues to be well positioned to benefit from strong demand in the fiber market. This is evident in markets where fiber is not yet highly penetrated and in more mature markets where customers are starting to upgrade to XGS PON or 25G PON. Elsewhere, government funding projects are expected to start towards the end of this year, and Nokia was the first vendor to announce the availability of Biomedical Compliant products.

And going forward that means that and I will be built on three my market leading pillars.

Speaker Change: Networks continues to be well positioned to benefit from strong demand in the fiber market. This is evident in markets, where fiber is not yet highly penetrated and in more mature markets, where customers are starting to upgrade do X G. S porno twenty-five jeep on a.

Speaker Change: Elsewhere government funded projects are expected to start towards the end of this year and Nokia was the first vendor to amounts the availability of biomedical compliant products, given these dynamics and opportunities with target mid single digit growth for fixed networks.

Pekka Lundmark: Given these dynamics and opportunities, we target mid single-digit growth of Xnetworks. Our IP networks business continues to see the ramp of FP5 and FPC X routing products and the expansion into new markets like data center switching. It has been showing continued momentum in expanding its presence beyond CSPs into the enterprise and web scale markets, and we expect this to continue in the business in this business. We are also targeting mid single-digit growth with respect to our newly strengthened position in optical. We believe this now has at least a mid single digit growth opportunity and now a compelling path to a mid teams operator margin.

Pekka Ilmari Lundmark: Given these dynamics and opportunities, we target mid-single-digit growth for fixed networks. Our IP networks business continues to see the ramp-up of FP5 and FPCX routing products and the expansion into new markets like data center switching. It has been showing continued momentum in expanding its presence beyond CSPs into the enterprise and web scale markets, and we expect this to continue. In this business, we are also targeting mid-single-digit growth.

Speaker Change: Our IP networks business continues to see the ramp up will be five in F. B C X routing products and the expansion into new markets like data center switching it has been showing continued momentum in expanding its presence B O N E. S. P as into the enterprise and web scale markets and we expect this to continue in the business in this business. We are also target.

Speaker Change: Mid single digit growth.

Pekka Ilmari Lundmark: With respect to our newly strengthened position in optical, we believe this now has at least a mid-single-digit growth opportunity and now a compelling path to a mid-teens operating margin. These businesses, combined, will give us a unique position in network infrastructure. On a pro forma basis for the two transactions in 2023, Network Infrastructure would be an 8.4 billion euro revenue business that targets mid single-digit net sales growth with margins that would pro forma be around 12%, but we believe can expand over time to mid to high 10.

Speaker Change: With respect to our newly strengthened position in optical we believe this now has at least a mid single digit growth opportunity and now a compelling path to a mid teens operating margin.

Pekka Lundmark: These businesses combined will give us a unique position in network infrastructure. On a pro forma basis for the two transactions in 2023, network infrastructure would be on 8.4 billion euro revenue business that targets mid single digit net sales growth with margins that would pro forma be around 12%.

Speaker Change: These businesses combined.

It will give us a unique position in network infrastructure on a pro forma basis for the two transactions in 2023 network infrastructure would be an 8.4 billion euro revenue business that targets mid single digit net sales growth with margins that would pro photo might be around 12%, but we believe can expand over time.

Pekka Lundmark: But we believe can expand over time to mid to high teams. One other topic I wanted to discuss is how customer momentum in mobile networks. Clearly, as you know, we had a setback in December with AT&T's decision to actually single-source their network, their radio network to a different vendor for commercial reasons. Now, as Mark mentioned, we have concluded negotiations with AT&T related to our existing run contracts, which gives us clarity on the path forward. But more importantly, if we take a step back and look at the overall development, we continue to make significant progress with customers in our mobile network business.

Speaker Change: <unk> to mid to high teens.

Speaker Change: One other topic I wanted to discuss is our customer momentum in mobile networks clearly as you know we had a setback in December with At&t's decision to watch Lee single source their network their radio network to a different vendor for commercial reasons.

Pekka Ilmari Lundmark: One other topic I wanted to discuss is our customer momentum in mobile networks. Clearly, as you know, we had a setback in December with AT&T's decision to largely single-source their network, their radio network, to a different vendor for commercial risk. Now, as Marco mentioned, we have concluded negotiations with AT&T related to our existing grant contracts, which gives us clarity on the path forward, but more importantly, if we take a step back and look at the overall deployment, we continue to make significant progress with customers in our mobile networks business. Since 2019, we have won a total of 55 new RAN customers, and we have increased our share by another 33 customers.

Speaker Change: Now if article mentioned, we have concluded negotiations with AT&T are related to our existing rent contracts, which gives us clarity on the path forward.

Speaker Change: But more importantly.

Speaker Change: If we take a step back and look at the overall deploy development.

Speaker Change: We continue to make significant progress with customers in our mobile networks business. Since 2019, we have won a total of 55, new ramp customers and we have increased our share at another 33 customers. This drove the significant increase in market share that we saw between 'twenty one 'twenty three.

Pekka Lundmark: Since 2019, we have won a total of 55 new run customers, and we have increased our share at another 33 customers. This drove the significant increase in market share that we saw between 21 and 23. We have won a significant number of deals this year, including completely new customers such as Mio in Portugal and maintaining our position at other key operators in Europe, as there has been a lot of customer tendering activity. I continue to firmly see the AT&T decision was a very customer-specific situation. We have a compelling product offering for customers that is resonating and helping us to build a stronger future for our mobile networks business.

Pekka Ilmari Lundmark: This drove the significant increase in market share that we saw between 21 and 23. We have won a significant number of deals this year, including completely new customers, such as Mio in Portugal, and maintaining our position at other key operators in Europe, as there has been a lot of customer tendering activity. I continue to firmly believe that the AT&T decision was a very customer-specific situation.

Speaker Change: We have won a significant number of deals this year, including completely new customers, such as MEO in Portugal, and maintaining our position at the other key operators in Europe as there has been a lot of customer attending tendering activity.

Speaker Change: Our continuous to family see the AT&T decision was a very customer specific situation.

Speaker Change: We have a compelling product offering for customers that it that is resonating and helping us to build a stronger future for our mobile networks business. We're also making strong progress with our opened Redmond cloud ran projects and we remain the most open vendor in the market that as I highlighted last quarter.

Pekka Ilmari Lundmark: We have a compelling product offering for customers that is responding and helping us to build a stronger future for our mobile networks business. We are also making strong progress with our Open RAN and Cloud RAN projects, and we remain the most open vendor in the market, as I highlighted last quarter. In Q2, we partnered with Vodafone to introduce Open RAN into their network in Italy. With SDC, we completed the world's first trial of an O-RAN-based private 5G network using Microsoft's Azure Operator Nexus.

Pekka Lundmark: We are also making strong progress with our open-run and cloud-run projects, and we remain the most open vendor in the market, as I highlighted last quarter. In Q2, we partnered with Vodafone to introduce Open-Run into their network in Italy. With STC, we completed the world's first trial of an urban-based private 5G network using Microsoft as you operate their Nexus, and finally, our solutions have been validated with an ecosystem of leading industry partners across hardware and software. I would note that this continues to be a highly competitive market, and we see intense competition in regions that Chinese vendors are still able to compete in, but we have continued to win deals.

Speaker Change: In Q2, we partnered with Vodafone to introduce open ran into their network in Italy with S. D. C. We complete the the world well its first trial of in Oran based private five G network, using Microsoft Azure or operate their nexus and finally.

Pekka Ilmari Lundmark: And finally, our solutions have been validated with an ecosystem of leading industry partners across hardware and software. I would note that this continues to be a highly competitive market, and we see intense competition in regions that Chinese vendors are still able to compete in. But we have continued to win deals. We will remain disciplined on pricing, however, as we have done in recent years, and that has helped us to significantly improve our gross margin on mobile networks, particularly on a relative basis.

Speaker Change: Our solutions have been validated with an ecosystem of leading industry partners across hardware and software.

Speaker Change: I would note that this continues to be a highly competitive market and we see intense competition and reagents that Chinese vendors are still able to compete in but we have continued to win deals. We will remain disciplined on pricing. However, as we have done in recent years and that has helped us to significantly improve our <unk>.

Pekka Lundmark: We will remain disciplined on pricing, however, as we have done in recent years, and that has helped us to significantly improve our growth margin in mobile networks, particularly on a relative basis.

Gross margin in mobile networks, particularly on a relative basis.

Speaker Change: Turning to cloud and network services, where we continued to make great progress on network as code. This is the business. We are building organically to help Csp's monetize network Kpis and help developers access new network capabilities for their applications.

Pekka Lundmark: Turning to Cloud Run network services, where we continue to make great progress on network as code, this is the business we are building organically to help CSPs monetize network APIs and help developers access new network capabilities for their applications. This is an ecosystem play, and we are proud to now have 16 signed agreements with partners across the ecosystem. This includes new CSP partners such as Orange, Telefonica, and Turksell. Importantly, we signed agreements in Q2 with Infobip and Google; both of those partnerships enable access to a wider range of developers, consequently driving demand and usage of network APIs through our platform.

Pekka Ilmari Lundmark: Turning to cloud and network services, where we continue to make great progress on network as code. This is the business we are building organically to help CSPs monetize network APIs and help developers access new network capabilities for their applications. This is an ecosystem play, and we are proud to now have 16 signed agreements with partners across the ecosystem. This includes new CSP partners such as Orange, Telefonica, and Turkcell.

Speaker Change: This is an ecosystem play and we are proud to now have 16 signed agreements with partners across the ecosystem. This includes new CSP partners, such as Orange Telefonica and Toric. So importantly, we signed agreements in Q2 with info beep and Google both of those partnerships will enable access to.

Pekka Ilmari Lundmark: Importantly, we signed agreements in Q2 with InfoBip and Google. Both of those partnerships will enable access to a wider range of developers, consequently driving demand and usage of network APIs through our platform. On that topic, we continued to make good R&D progress on the platform itself, and in Q2, we launched the Network Exposure Platform to empower CSPs to expose their network capabilities to the ecosystems of their choice. We look forward to sharing more exciting news over the course of the year.

A wider range of developers, consequently, driving demand and usage of network kpis through our platform.

Pekka Lundmark: On that topic, we continue to make good R&D progress on the platform itself, and in Q2 we launched the network Exposer platform to empower CSPs to expose their network capabilities to the ecosystem of their choice. We look forward to sharing more exciting news over the course of the year. Additionally, within Cloud Run network services, we have been seeing recent traction around core networks, particularly in Europe. This is evidenced by announcements we have made, including with O2, Telefonica, and Germany, with the deployment of 5G stand-alone course software, R&D web services, as well as other deals with Norillucine of Denmark and Air Networks in Spain.

Speaker Change: On that topic, we continue to make good R&D progress on the platform itself and in Q2, we launched the network exposure platform to empower csp's exposed to their network capabilities through the ecosystem so that choice.

Speaker Change: We look forward to sharing more exciting news over the course of the year.

Pekka Ilmari Lundmark: Additionally, within cloud and network services, we have been seeing recent traction around core networks, particularly in Europe. This is evidenced by the announcements we have made, including with O2 Telefonica in Germany, with the deployment of 5G standalone core software on Amazon Web Services, as well as other deals with Norlös of Denmark and Air Networks in Spain.

Speaker Change: Additionally, within cloud and network services, we had been seeing recent traction around core networks, particularly in Europe. This is evidenced by announcements we have made including with O. Two telefonica in Germany with the deployment of five G Standalone quarter software in Amazon Web services as well as other deals with no dilution.

Mark: Mark and air networks in Spain.

Pekka Lundmark: Next, I wanted to highlight some of the results of the fast-paction we have taken to reduce our cost base. As a reminder, in October, we announced a target to lower our cost base on a gross basis by between 800 million and 1.2 billion euro by the end of 26. This represented a 10-15% reduction in our personnel expenses. You can see in the slide the progress we have made so far on the October program. We have already actioned 400 million euro of savings by Q2, and we will continue to make further progress in the second half to reach the 400 million euro of in-year savings we have committed to.

Mark: Next I wanted to highlight some of the results of the fast action, we have taken to reduce our cost base.

Pekka Ilmari Lundmark: Next, I wanted to highlight some of the results of the fast action we have taken to reduce our cost base. As a reminder, in October, we announced a target to lower our cost base on a gross basis by between 800 million and 1.2 billion euros by the end of this year. This represented a 10 to 15 percent reduction in our personnel expenses.

Speaker Change: As a reminder, in October we announced a target to lower our cost base on a gross basis by between 800 million and $1 2 billion Euro by the end of 2006. This represented a 10% to 15% reduction in our personnel expenses.

Pekka Ilmari Lundmark: You can see on the slide the progress we have made so far on the October program. We have ordered the action. 400 million euros of savings by Q2, and we will continue to make further progress in the second half to reach the 400 million euros of in-year savings we have committed. The program is expected to lead to a 72,000 to 77,000 employee organization compared to 86,000 employees Nokia had when the program was announced. As of the end of June, our headcount was just under 80,000.

Speaker Change: You can see in the slide the progress we have made so far on the October program, we have already action.

Speaker Change: 400 million Euro of savings by Q2, and we will continue to make further progress in the second half to reach the 400 million euro of in year savings, we have committed to.

Speaker Change: The program is expected to lead to a 72 to 77000 employee organization compared to 86000 employees Nokia headwind the program was announced.

Pekka Lundmark: The program is expected to lead to a 72-77,000 employee organization compared to 86,000 employees Nokia had when the program was announced.

Pekka Lundmark: John St. As of the end of tune, our head count was just under 80,000. Please remember that these numbers are on a like-for-like basis and do not reflect the recent announcements regarding ASN and Infinite. So we are making good progress on this program, and we'll continue to do so as we navigate the current market environments.

Speaker Change: As of the end of June our headcount was just under 80000.

Speaker Change: Please remember that these numbers are on a like for like basis and do not reflect the recent announcements regarding a S N and infinera.

Pekka Ilmari Lundmark: Please remember that these numbers are on a like-for-like basis and do not reflect the recent announcements regarding ASN and Infinera. So we are making good progress on this program and will continue to do so as we navigate the current market environment. Then on to our, We believe the industry is stabilizing and giving the order intake seen in recent quarters. We expect a significant acceleration in net sales growth in the second half.

Speaker Change: But we are making good progress on this program and we'll continue to do so as we navigate the current market environment.

Speaker Change: Then two then onto our outlook, we believe the industry is stabilizing and giving the order intake seen in recent quarters, we expect a significant acceleration in net sales growth in the second half.

Pekka Lundmark: Then to then onto our outlook. We believe the industry is stabilizing, and given the order intake seen in the recent quarters, we expect a significant acceleration in net sales growth in the second half. However, the net sales recovery is happening somewhat later than we previously expected, impacting our business group net sales assumptions for 2024, which Marco highlighted in his commentary. Despite this, we remain solidly on track to achieve our outlook for 2024, supported by the quick actions we have taken to reduce our costs. We are now trending towards the midpoint or slightly below the midpoint of the operating range operating profit range of 2.3 to 2.9 billion euro and towards the higher end of the cash conversion range of 30 to 60%.

Pekka Ilmari Lundmark: However, the net sales recovery is happening somewhat later than we previously expected, impacting our business group net sales assumptions for 2024, which Marco highlighted in his commentary. Despite this, we remain solidly on track to achieve our outlook for 2024, supported by the quick actions we have taken to reduce our costs. We are now trending towards the midpoint or slightly below the midpoint of the operating profit range of 2.3 to 2.9 billion euros and towards the higher end of the cash conversion range of 30 to 60 percent. So, in conclusion. The weak market environment has continued.

Speaker Change: However, the net sales recovery is happening somewhat later than we previously expected impacting our business group net sales assumptions for 2024, which Michael highlighted in his commentary. Despite this we remain solidly on track to achieve our outlook for 2024 supported by the quick actions, we have taken to reduce our costs.

Michael: We are now trending towards the midpoint or slightly below the midpoint of the operating range operating profit range of 23 to $2 9 billion euro and towards the higher end of the cash conversion range of 30% to 60%.

Pekka Lundmark: So, in conclusion, the weak market environment has continued. However, we have seen a third quarter of order intake momentum, and we expect to see net sales growth in H2 weighted towards Q4. We have also seen; we have also been encouraged by the level of customer engagement and tendering activities across all business groups. We have moved quickly on the cost savings program, which we announced in October of last year, and this continues to support our outlook, which we have reiterated this quarter. The quarter saw another period of strong cash flow generation, ending the quarter with the net cash balance of 5.5 billion euro.

Michael: So in conclusion.

Pekka Ilmari Lundmark: However, we have seen a third quarter of order intake momentum, and we expect to see net sales growth in H2 weighted towards Q4. We have also been encouraged by the level of customer engagement and tendering activities across all businesses. We have moved quickly on the cost savings program which we announced in October of last year, and this continues to support our outlook, which we have reiterated this quarter. The quarter saw another period of strong cash flow generation, ending the quarter with a net cash balance of 5.5 billion euros.

Speaker Change: The weak market environment has continued however, we have seen a third quarter order intake momentum and we expect to see net sales growth in H two weighted towards Q4.

We have also seen we have also been encouraged by the level of customer engagement and tendering activities across all business groups. We have moved quickly on the cost savings program, which we announced in October of last year and this continues to support our outlook, which we have reiterated this quarter the quarter saw another period of strong cash flow generation.

Speaker Change: Ending the quarter with a net cash balance of $5 5 billion Euro.

Pekka Lundmark: The board intends to accelerate the previously announced buybacks, which will now be executed by the end of 24, year ahead of the original schedule.

Pekka Ilmari Lundmark: The board intends to accelerate the previously announced buybacks, which will now be executed by the end of 24, a year ahead of the original schedule. Thank you. And with that, I think we can now move on to your questions. Thank you, Pekka and Marco. Before we move to the Q&A session, please let me give you one date for your diary.

Speaker Change: The board intends to accelerate the previously announced buybacks, which will now be executed by the end of 'twenty four.

Speaker Change: <unk> ahead of the original schedule.

Pekka Lundmark: Thank you.

Speaker Change: Thank you and with that I think we can now move on to your questions.

David Mulholland: And with that, I think we can now move on to your questions. Thank you, Peca and Marco.

David Mulholland: We're planning to hold our next business group progress update on our network infrastructure business on Tuesday, the 3rd of September. We plan to hold the event virtually, and we will send out a save the date in the coming days. We hope you'll all be able to join us. As usual for the Q&A session, as a courtesy to others in the queue, could you please limit yourself to one question and a brief follow-up? Alice, could you please give me the instructions?

Speaker Change: You Pekka on Marco before we move to the Q&A session. Please let me give you one day for your dairy we're planning to hold our next business group progress update on our network infrastructure business on Tuesday, the third of September we plan to hold the event virtually and we will send out a save the date in the coming days, we hope you'll be able to join us as usual.

David Mulholland: Before we move to the Q&A session, please let me give you one date for your diary. We're planning to hold our next business group progress update on our network infrastructure business on Tuesday, the 3rd of September. We plan to hold the event virtually, and we will send out a save the day in the coming days. We hope you will all be able to join us.

Unknown Executive: As usual, for the Q&A session, as a courtesy to others in the queue, could you please limit yourself to one question and a brief follow-up? Alice, could you please give the instructions? We will now begin the question and answer session. If you are also viewing the video broadcast, please remember to mute the audio on your computer, the phone asking your question, as there is a 30-second delay. To ask a question, you may press star, then one on your telephone keyboard. If you are using a speaker phone, please pick up your handset before pressing the keys.

Speaker Change: A Q&A session as a courtesy to others in the queue could you. Please limit yourself to one question and a brief follow up Alex could you. Please give the instructions.

Speaker Change: We will now begin the question and answer session. If you also get into video webcast. Please remember to mute the audio on your computer. This one asking your question as the visit secondly to ask a question you May Press Star then one on your telephone keypad.

Operator: We will now begin the question-and-answer session. If you are also viewing the video webcast, please remember to mute the audio on your computer before asking questions. To ask a question, you may press star then 1 on your telephone. If you are using a speakerphone, please pick up your handset before pressing the button.

Speaker Change: Using a speakerphone please pick up your handset before pressing the keys.

Operator: To withdraw your question, please press star 10. I will now hand the call back to you. Thanks, Alice.

Unknown Executive: To withdraw your question, please press star, then two.

Speaker Change: Withdraw your question. Please press Star then two.

David Mulholland: I will now hand the call back today to Dave Maholand.

I'll now hand, the call back to David today's new Holland.

David Mulholland: Thanks, Alice.

Didier Scemama: We'll take our first question from Francois Bouvinier from UBS. Francois, please go ahead. Thank you very much. So my question would be about network infrastructure specifically. So when we look at your fiscal or full year EBIT margins for NI and the group EBIT margin, if we assume it's a similar Q2 versus Q3 based on what you said about the seasonality, this would imply NI EBIT margins in the high single digit 10% range in Q3.

David: Thanks, Alastair we'll take our first question from Francois <unk> from UBS Francois. Please go ahead.

Francois Bivini: We'll take our first question from Francois Bivini, from UBS. Francois, please go ahead. Thank you very much. So my question would be on the network infrastructure specifically. When we look at your fiscal or full-year EBIT margins for NI, and the group EBIT margin, if we assume it's a similar Q2 versus Q3 based on what you said on the seasonality, this would imply NI EBIT margins on the high-single GT 10% range in Q3, and to get to full-year, to get to your 11-plus EBIT margins for NI, you would need 20% plus of margins in Q4 with a very, very high top-line growth.

Francois: Thank you very much. So my question would be on the on the network infrastructure, specifically, so when we look at you.

Speaker Change: On a full year EBIT margins.

Francois: For you.

Francois: And the group EBIT margin, if we assume a similar Q2 versus Q3 based on what you said on the seasonality. This would imply a know your EBIT margins on the high single digit 10% range in Q3 and to get to school year to get to your 11, plus EBIT margins fully Nye you would.

Didier Scemama: And to get to full year, to get to your 11 plus EBIT margins for NI, you would need like 20% plus of margins, EBIT margins in Q4 with a very, very high top line growth. So maybe you can explain to us, you know, how can we model such a steep recovery when in H1 you had, you know, 6% NI EBIT margins and we need to put like mid-teens to 20% in the second half of the year? That would be my first question.

Francois: Need like 20% plus of our margins EBIT margins in Q4 with a very very high.

Speaker Change: Top line growth. So maybe can you explain if you know.

Francois Bivini: So maybe can you explain to us how can we model such steep recovery when in H1 you did the 6% NI EBIT margins, and we need to put like meetings to 20 in the second half of the year.

How can we model such steep recovery when you had when you did the 6%.

Speaker Change: And EBIT margins and we need to put like mid teens to 20 in the second half of the year.

Marco Beren: That would be our first question. Thank you, Francois Avia, and as we mentioned also in the release, the quarter three margin is a balance between a weaker, more bonnetsprix margin, and we won't have the benefit of the accelerated revenue integration due to the AT&T deal resolution that we had in quarter two, and then, of course, good improvement in network infrastructure. So, then yes, we agree.

Speaker Change: That's my first question.

Marco Wirn: Thank you, Francois-Javier. And as we mentioned in the release, the quarter three margin is a balance between a weaker mobile network margin, and we won't have the benefit of the accelerated revenue regulation due to the AT&T deal resolution that we had in quarter two. And then, of course, good improvement in network infrastructure. So then, yes, we expect a very strong quarter four, primarily driven by leverage from the sales volume we expect in the quarter. Thank you. Thank you, Francois. We'll take our next question from Sandeep Deshpande from J.P. Morgan. Sandeep, please go ahead.

Thank you Oh, sorry, Javier and as we mentioned also in the release.

Speaker Change: Quarter three margin is a balance between a weaker mobile networks margin and we won't have the benefit of the accelerated revenue recognition.

Speaker Change: Due to the AT&T deal resolution that we had in quarter two.

Speaker Change: And then of course.

Speaker Change: Good improvement in our in network infrastructure. So then yes, we expect a very strong quarter four primarily driven by leverage from the sales volume we expect in the quarter.

Marco Beren: We expect the very strong quarter four, primarily driven by leverage from the sales volume we expect in the quarter.

Sandeep Deshpande: Thank you. Thank you, Francois. We'll take our next question from Sandeep Deschlander from JP Morgan. Sandeep, please go ahead. Yeah, hi, thanks for letting me on. My question is, you're talking about this very strong again, back again to the strong revival in the second half, better than normal seasonal. Is there a reason for this much better-than-normal seasonal behavior in the second half? Is it just a revival, or is it new projects, or is it anything else, which is causing the better-than-seasonal Q3 and Q4 top lines. Thanks.

Thank you.

Thank you Francois will take our next question from Sandeep Deshpande from Jpmorgan. Please go ahead, yes.

Sandeep Deshpande: Yeah, hi, thanks for letting me on. My question is, you're talking about this very strongly again, back again to the strong revival in the second half, better than normal seasonal. Is there a reason for this much better than normal seasonal behavior in the second half? Is it just a revival?

Sandeep Deshpande: Yes, hi, Thanks for letting me on my question is are you talking about this very strong getting back again to the strong revival in the second half better than normal seasonal.

Speaker Change: Is that a reason for this is much better than normal seasonal behavior, let's take it off is it just the revival on new projects or is it.

Pekka Ilmari Lundmark: Or is it new projects? Or is it anything else which is causing the better than seasonal Q3 and Q4 top line? Well, first of all, you have to remember that the comparables, of course, get significantly easier because last year was a bit of an exception.

Speaker Change: Anything else, which is causing the better than seasonal Q3, and Q4 top line. Thanks.

Pekka Lundmark: Well, first of all, you have to remember that the comparables, of course, get significantly easier because last year was a bit of an exception when you look at seasonality. That beginning of the year was strong, and then the end of the year was weak. This year, we are expecting this whole thing to reverse itself. And again, I mean, we have had now three quarters of strong order intake, which has been building order backlog. And that's what we are modeled into the into the forecast. Of course, it still requires that the good momentum in orders will continue in Q3 because there will be especially network infrastructure will be orders that will be needed in Q3 and to be delivered in Q4.

Speaker Change: Well first of all you have to remember that the Comparables of course gets significantly easier because last year wasn't debated about an exception when you look at seasonality that beginning of the year were strong and then the end of the year was weak. This year. We are expecting at this halo thing to reverse itself and again I mean, we have had now three quarters of strong order intake.

Pekka Ilmari Lundmark: When you look at stationality, the beginning of the year was strong, and then the end of the year was weak. This year, we are expecting this whole thing to reverse itself. And again, I mean, we have had now three quarters of strong order intake, which has been building an order backlog. And that's what we have modelled into the forecast. Of course, this still requires that the good momentum in orders will continue in Q3, because there will be, especially in network infrastructure, orders that will be needed in Q3 and to be delivered in Q4. So it's not yet in the order backlog, but it is supported by the existing order backlog, the funnel that we have across the businesses, and then the expected delivery times.

Speaker Change: Which has been building building order backlog and and that's what we have modeled into that into the forecast of course, they still requires that the that the good momentum in orders will continue in Q3, because there will be a especially in network infrastructure will be orders that will be needed in the in Q3 and to be ideal.

Speaker Change: We've already.

Speaker Change: In Q4, so it is not yet in order backlog, but it is supported by the existing order backlog the funnel that we have across the businesses and then they expect the deliberate deliberate.

Pekka Lundmark: So it's not yet in order backlog, but it is supported by the existing order backlog. The funnel that we have across the businesses and then the expected delivery delivery times. This is also supported by when you look at kind of the general comments from our competitors and market analysts that are all highlighting that yes, the market is starting to recover. Most of them are also saying that even though it recovers, the recovery is more slow, slow than we originally thought, which you can see in us taking down the assumptions for for this year. And then the assumption is that the market recovery will continue into 2025.

Times are they.

Pekka Ilmari Lundmark: This is also supported when you look at the kind of general comments from our competitors and market analysts that are all highlighting that, yes, the market is starting to recover. Most of them are also saying that even though the recovery is slower than we originally thought, which you can see in us taking down the assumptions for this year. And then the assumption is that the market recovery will continue into 2025.

Speaker Change: It is also supported by by when you look at kind of the general comments from our competitor of sand.

Speaker Change: And market.

Speaker Change: Analysts.

Speaker Change: That are all highlighting that.

Speaker Change: Yes, the market is starting to recover most of them also saying that.

Speaker Change: Even though it recovers the recovery is more slowly slow than we originally thought which you can see in us taking down the assumptions for for this year and then the assumption is that that the market recovery will continuing into 2025, so as a summary, the Q4.

Pekka Ilmari Lundmark: So as a summary, Q4 is not there yet in terms of order backlog. It requires that the good order momentum continues in Q3, but that is what we are expecting based on the funnel that we have. Thank you.

Pekka Lundmark: So, as a summary, the Q4, it's not there yet in terms of order backlog; it requires that the good order momentum continues in Q3. But that is what we are expecting based on the funnel that we have.

Speaker Change: It's not.

There yet in terms of order backlog it requires that the good order momentum continued in Q3, but that is what we are expecting based on the funnel that we have.

Speaker Change: Okay.

Marco Wirn: Just a quick follow-up to Marco on the cost. You've talked about this 400 million in cost cutting which you have now implemented. Is this being implemented mostly on gross margin or operating margin? Where is it being implemented?

Marco Beren: Just a quick follow-up to Marco on the cost. You've talked about this 400 million of the cost cutting, which is now you have implemented. Yeah, and remember the 400 that we mentioned is a run rate basis, and as we said originally that 130 is coming on the sales, cost of sales, and two thirds is coming from OPEX, so this would be our still estimating that that's the way that we are going to go forward as well. We have now, just like Pekka mentioned in his presentation. While taking down a number of employees, more than 6000 since we started this project and our program, we have been very fast in taking these actions, so we are quite confident that we are in the right track when it comes to the cost saving program.

Speaker Change: Okay.

Speaker Change: And just quick follow up tobacco Arden the costs, you've talked about this 400 million off the call a couple who which is now you have implemented.

Speaker Change: That's been implemented most of the gross margin operating margin ready for being there and then we'll begin to see it in your mind you. That's that's it.

Marco Wirn: So when will we begin to see it in your margin as such? Yeah, and remember, the 400 that we mentioned is on a run rate basis. And as we said originally, that one third is coming from sales, and cost of sales, and two thirds is coming from OPEX. So this is what we are still estimating that that's the way that we are going to go forward as well. We have now, just like Pekka mentioned in his presentations, taken down a number of employees, more than 6000 since we started this project and our program, and we have been very fast in taking these actions.

Speaker Change: Yeah, and remember the 400 that we mentioned this is a run rate.

Speaker Change: Macy's.

Speaker Change: And as we said originally that one third is coming on the sales.

Cost of sales and two thirds is coming from Opex. So these would be our.

Steel.

Speaker Change: Estimating that that step.

Speaker Change: The way that we're going to go forward as wall. We have now just like Pekka mentioned in his his presentation is wall, taking down a number of employees more than 6000 since we started.

Speaker Change: This project.

Pekka: Our program and we have been very fast.

Marco Wirn: So we are quite confident that we are on the right track when it comes to the cost-saving program, and I'll maybe just add one comment on the year-on-year challenge that we obviously had much lower variable pay accruals in Q2 last year that are more normal this year, and that also influences the year-on-year comparison. But thank you, Sandeep. We'll take our next question from Jenardin Menon from Jeffreys. Jenardin, please go ahead.

In taking these actions. So we are quite confident that we are on right track what comes to the cost saving program.

Marco Beren: And I'll maybe just add one comment on the year and year challenge that we obviously had much lower variable pay our cruells in Qt last year that are more normal this year, and that also influences the year and year comparison.

And I'll, maybe just add one comment on the year on year challenge that we obviously had much lower variable pay.

Pay accruals in Q2 last year that are more normal this year and that also influences the year on year comparison.

Janardan Menon: But thank you, Sunday. We'll take our next question from Jenardin Menon from Jeffries. Jenardin, please go ahead. Hi, good morning. Thanks for taking the question. I have a similar sort of question on your second half, but this time more on the cloud and network services division, because, as you say, the other divisions had lower seasonality in the last year into the second half of the year, and so they have some benefit on the growth side.

Pekka: Thank you Sunday, we'll take our next question from Janardhan Menon from Jefferies Janardhan. Please go ahead.

Jenardin Menon: Hi, good morning. Thanks for taking the question. I have a similar sort of question about your second half, but this time more on the cloud and network services division. Because, as you say, the other divisions had lower seasonality last year into the second half of the year, and so they have some benefit on the growth side.

Unknown Executive: Hi, good morning, Thanks for taking the question I.

Unknown Executive: I have a similar sort of question on the second half, but this time more and more on the cloud and network services Division.

As you say the the other divisions had.

Unknown Executive: Lower seasonality in the in last year and into the second half of the year until they have some benefit on the on the growth side.

Janardan Menon: But this division did quite well toward the third and fourth quarters of last year, and if I look at your current guidance for cloud and network services at minus five to zero, which is your updated guidance, you still need, in my calculation, more than 50% growth from Q2 to Q4 to achieve something like that. Just wondering what what what is driving that? Is it to the core network winds that you talked about in Europe that you alluded to in your opening remarks. And similarly, will that increase in sales lead to an improvement in gross margin as well on a year or near comparison given that you had, you know, sort of good gross margins in the second half of last year? Would it meaningfully improve from that as well.

Marco Wirn: But this division did quite well in the third and fourth quarters of last year. And if I look at your current guidance for cloud and network services at minus five to zero, which is your updated guidance, you still need, in my calculation, more than 50% growth from Q2 to Q4 to achieve something like that. Just wondering, what is driving that?

Unknown Executive: But this division did quite well toward the third and fourth quarters of last year.

Speaker Change: And and if I look at your your.

Speaker Change: Current guidance for for cloud and network services.

Speaker Change: At minus five to zero, which is your updated guidance you still need in my calculation more than 50% growth from Q2 to Q4 to achieve something like that.

Speaker Change: Just wondering what what what is driving that is it to the core network wins that you talked about.

Marco Wirn: Is it the core network wins that you talked about in Europe that you alluded to in your opening remarks? And, similarly, will that increase in sales lead to an improvement in gross margin as well on a year-on-year comparison, given that you had good gross margins in the second half of last year? Would it meaningfully improve from that as well? Thank you.

Speaker Change: In Europe that you alluded in your opening remarks.

Speaker Change: Emily.

Speaker Change: That will lead to increasing in sales lead to an improvement in gross margin as well.

Speaker Change: On a year on year comparison, given that you had you know sort of good gross margins in the second half of last year.

Emily: It meaningfully improved from that as well thanks.

Marco Beren: Thanks.

Marco Wirn: Well, when you look at the seasonality of the CNS business this year, unlike in NI, in CNS, this year's seasonality will be similar to the previous years. We had pretty much the same situation last year that the full-year result was made during Q4. And that's what we are expecting this year, as well. Then we, if you get into the fine detail, of course, now, the effect of the disposal is like three percentage points on the top line, which needs to be taken into account in the comparison. But this is supported by the deal momentum that we have had. Core networks is an interesting market at the moment. This is part of the dynamics.

Speaker Change: Well when you look at the seasonality of the CNS business this year will.

Marco Beren: Well, when you look at the seasonality of the CNS business, this year will, unlike in N I in CNS, this year's seasonality will be similar to the previous years. We had pretty much the same chase and last year that the full year result was made during Q4, and that's what we are expecting this year as well. Then we, if you get into the fine detail, of course, now the effect of the disposal is like 3% each points on top line, which needs to be taken into account in the in the comparison. But this is supported by the deals deal momentum that we have had. Core networks is an interesting market at the moment.

Speaker Change: Unlike in N I N CNS this year's seasonality will be a similar to the previous year.

Speaker Change: Yes, we had pretty much the same situation last year that the full year result was made during Q4 and that's what we are expecting this year as.

Emily: As well.

Emily: Then if you get into the fine detail of course now the effect of the disposal. It's like three percentage points on top line, which needs to be taken into account in the in the comparison, but this is supported by the deals deal momentum that we have had a core network system.

Marco Wirn: So I mentioned traction in core networks in Europe. The core network market is consolidating; you may have seen the Microsoft announcement that they are reconsidering a meta switch, i.e., their core network approach. It is a market where also, even in those countries that have not restricted specifically Chinese out, they are making moves on the core network in terms of high-risk vendors.

Emily: Testing.

The market at the moment. This is part of the dynamics. So I mentioned, our traction in core networks in Europe.

Marco Beren: This is part of the dynamics. I mentioned traction in core networks in Europe. The core network market is consolidating. You may have seen the Microsoft announcement that they are, they are reconsidering affirmed a meta switch, IE their core network approach. Core network is a market where, also, even in those countries that have not restricted specifically Chinese out, they are making moves on the core network in terms of high-risk vendors. So this should be actually driving the core network to a trace and where there will be a smaller number of vendors, and clearly this is one of our strengths.

Emily: The core network market is consolidating you may have seen the Microsoft announcement that they are they are reconsidering affirmed I met us which idea there coordinate work approach.

Marco Wirn: So this should actually be driving the core network to a situation where there will be a smaller number of vendors. And clearly, this is one of our strengths. And we are starting to see this in the deal in the recent deal momentum. Now, the thing about core networks, when you look at the whole CNS, which makes the comparison always challenging, is that we have had a strong position in 3G core networks, which has still been there in CNS numbers because of its software revenue.

Emily: Gordon Network USA market. We're also even in those countries that have not restricted specifically Chinese out.

Emily: They are making moves on the core network.

Emily: In terms of high risk vendors.

Emily: So they should be actually driving the core network to a stress and where there will be a smaller number of vendors and clearly this is one of our strengths and we are starting to see this in the deals in the recent deal momentum now the Athenian coordinate works when you look at the whole CNS, which makes the comparison always challenging is that we have.

Marco Beren: And we are starting to see this in the deal in the recent deal momentum. Now the thing in core networks when you look at the whole CNS, which makes the comparison always challenging, is that we have had a strong process and in 3G core network, which has still been there in CNS numbers because it's software revenue. The market is declining quickly, and that is being gradually replaced then by the 5G core network market. That is the reason why even though the 5G core network has been increasing rapidly, it has been compensated then by the loss of the 3G market.

Emily: Had a strong preseason and three J core network, which are still being there in CNS numbers, because it's software revenue that market is declining quickly and that is being gradually replace then buy the five <unk> core network market and that that is the reason why even though the <unk> core network has been increasing rapidly it is being compensate.

Marco Wirn: That market is declining quickly, and that is being gradually replaced by the 5G core network market. And that is the reason why, even though the 5G core network has been increasing rapidly, it has been compensated for by the loss of the 3G market. And that is the reason why you have not really seen growth in CNS in the last two to three years.

Emily: Yeah, Dan by the loss of the <unk> market that is the reason why why you have not really seen growth.

Marco Beren: That is the reason why you have not really seen growth in CNS in the last two to three years. But again, we continue to believe in a very strong Q4 also this year in CNS. Yes, and just a very follow. Sorry, sorry, continue. Yeah, of course.

Emily: In CNS in the last the last two to three years, but again, we continue to believe in a very strong Q4 also this year in in CNS.

Marco Wirn: But again, we continue to believe in a very strong Q4 also this year in CNS. And just a brief follow-up, sorry. [inaudible] Yeah, thank you.

Speaker Change: And just a brief follow up sorry.

Speaker Change: Sorry continue.

Go ahead.

Marco Beren: Your next question, General. Yeah, just on the AT&T contract resolution, see, you said it's a portion of our contract resolution. So how could you give us an idea how much of the total this was and when we can expect any further payments from AT&T? Yeah, thank you. We have still the agreement that we signed in 21, which ends by end of 25.

Speaker Change: Your next question gentlemen, yeah, just on the on the AT&T contract resolution fee.

Speaker Change: You said, it's a portion of our contract resolution.

Speaker Change: So home, but could you give us an idea of how much of the total this was in when we can expect any further.

Speaker Change: Payments from AT&T.

Yes. Thank you.

Marco Wirn: We still have the agreement that we signed in 21, which ends by the end of 25. And what we have now concluded with AT&T, how will we deliver those services and software upgrades and whatever they need from us during this period? And this 150 million was more acceleration of the revenue recognition that would otherwise happen later. So we continue to deliver as we go until the end of 25.

Speaker Change: We have still the agreement that we signed in 'twenty, one, which he and by end of 'twenty five.

Marco Beren: And would we have now concluded with the AT&T? How will we deliver those services and software upgrades and whatever they need from us during this period? And this 150 million was more acceleration of the revenue recognition that would otherwise happen later. So we continue to deliver as we go until the end of 25, but just like we guide us while that this year will be approximately at the same level as last year, while next year will be about the half of the volume that we have this year. And then then to follow up on continuing build on that after 25 AT&T mobile networks will definitely not go to zero because there is ongoing indoor base station and microwave radio business in them and AT&T and then depending on how for how long time there will be continued to operate the operation on Nokia base stations in the network.

Speaker Change: And.

Speaker Change: What do we have now.

Speaker Change: Including with AT&T, how will how will we.

Speaker Change: Deliver those services and software upgrades and whatever they need from us during this period and this 150 million was more acceleration of the revenue recognition that would otherwise happen later so.

Speaker Change: We continued to deliver as we go.

Speaker Change: Until the end of 'twenty five, but just like we guide us wall that this year will be approximately at the same level as last year, while next year will be about the half of the volume that we have this year.

Marco Wirn: But just like we guide as well that this year will be approximately at the same level as last year, while next year will be about half of the volume that we have this year. And then to follow up on continue and build on that after 25 AT&T mobile networks will definitely not go to zero because there is an ongoing indoor base station and microwave radio business in M&N, AT&T, and then depending on how for how long time they will be continued to be operational Nokia base stations in the network. So what that means is that we will be able to realize the original full value of the contract until the end of 25. But this acceleration, in a way, reduces 25 and increases 24.

And then to follow up on continuing to build on that.

Speaker Change: After twenty-five AT&T mobile networks will definitely not go to zero because there is ongoing.

Speaker Change: Indoor base station and microwave radio Bearishness in there man.

Speaker Change: <unk> AT&T and then depending on how for how long time, there will be continued operation be operational Nokia base stations and the network that is not for us to comment what that basis, but assuming that there will be also Nokia base. This is the network. After 28 26 that will continue to generate some revenue for us.

Marco Beren: That is not for us to comment what that base is, but assuming that there will be also Nokia base stations, the network after 2026 that will continue to generate some revenue for us. So it will drop to about half, as Marco said, in 25 this year, about the same level as last year. Significant drop next year and then another drop in 26, but definitely not to zero.

Michael: So it will drop to about half as Michael said in 25. This year about the same level as last year significant drop next year and then another drop in 'twenty six but definitely not this hero and still just to be 100% clear on that acceleration are so so.

Marco Beren: And still just to be 100% clear on that acceleration. So what that means is that we will be able to realize the original full value of the contract until the end of 25, but this acceleration, in a way, reduces 25 and increases 24. That's what's good to happen there. And just building also that what comes to 26 and forward there, of course, there's new opportunities that we definitely are fighting for and secure that we will get a good opportunity to win those as well. So it doesn't mean that that ends there.

Speaker Change: So what that means that that we will be able to realize the original full value of the contract until the end of 'twenty five but the effects elevation in a way. It reduces 25, an increase of 24, that's what that's what's going to happen there and just building also that what comes to the 20th thank them for what and of course, those new opportunities.

Marco Wirn: That's what that's going to happen there. And just building also that what comes to 26 and forward, then, of course, there are new opportunities that we definitely are fighting for and ensuring that we will get a good opportunity to win those as well. So it doesn't mean that that ends there. So the $150 million is the acceleration fee to compensate for the sharp decline into next year? No, it's not a fee.

Speaker Change: That we definitely are fighting for and secure that we will.

Alastair: And a good opportunity to windows as well so it doesn't mean that and that Alastair.

Marco Beren: So the 150 million is the acceleration fee to compensate for the sharp decline into next year. No, it's not a fee. It's it's it's based on the contract that we have with AT&T that 150 million would have been recognized later. And we, because we concluded the negotiations, according to IFRS, have to take that 150 million part already in quarter two instead of later periods. Understood.

Speaker Change: So the $150 million is the exit is the acceleration fee to compensate for the sharp decline into next year no. It's not a fee.

Marco Wirn: It's based on the contract that we have with AT&T that $150 million would have been recognized later. Got it. But because we concluded the negotiations, according to IFRS, we have to take that $150 million hard already in quarter two instead of later. Simon Leopold, Raymond James, Thank you very much for taking the question.

Speaker Change: It's <unk>.

Speaker Change: Based on the contract that we have with AT&T that 150 million would have been recognized later got and all we of course, we concluded the negotiations. According to Ifr is we have to take that 150 million audit already in quarter two instead of later periods.

Speaker Change: Understood. Thank you.

Simon Leopold: Thank you. We'll take our next question from Simon Leopold from Raymond James. Simon, please go ahead. Thank you very much for taking the question. First one I wanted to ask you about your interpretation and thoughts of the news out of Germany regarding the government taking some action against Chinese vendors. How do you see that opportunity, and is it your interpretation that it's limited to mobile core? Or does this present an opportunity for accelerating RAN replacement in Germany? Thank you, thank you. Yeah, thank you. Obviously, we have noted the news in Germany. I mean, there are some clear parts in the announcement, and then there is also some ambiguity, which we are still trying to understand what it means.

Speaker Change: We'll take our next question from Simon Leopold from Raymond James Simon. Please go ahead.

Simon Leopold: Thank you very much for taking the question.

Simon Leopold: First of all, I wanted to ask you about your interpretation and thoughts of the news out of Germany regarding the government taking some action against Chinese vendors. How do you see that opportunity? And is it your interpretation that it's limited to mobile core? Or does this present an opportunity for accelerating RAN replacement in Germany? Thank you.

Simon Leopold: First one I wanted to ask you about your interpretation and thoughts of the news out of Germany regarding the government, taking some action against the Chinese vendors, how do you see that opportunity and is it your interpretation that it's limited to the mobile core or does.

Speaker Change: This presents an opportunity for accelerating ran replacement in Germany. Thank you.

Pekka Ilmari Lundmark: Obviously, we have noted the news in Germany. I mean, there are some clear parts in the announcement, and then there is also some ambiguity, which we are still trying to understand what it means. The mobile core part is pretty, pretty clear.

Yeah. Thank you obviously, we have noted noted the news in Germany, I mean, there are some clear parts in the announcement and then there is also some we acuity, which we are still trying to understand what it means to the mobile core part is pretty pretty clear.

Pekka Lundmark: The mobile core part is pretty pretty clear. On the other hand, the market share of Chinese players in mobile core has been fairly limited also so far, so that is not a huge needle mover as such. But, of course, it means that there will be no opportunities for them to enter the mobile core, as that market will, of course, be a highly important market when they are moving to 5G standalone core and so on.

Speaker Change: On the other hand, the market share of Chinese players in mobile core has been has been fairly limited oh. So so far so that is not a huge needle mover as such but of course it <unk>.

<unk> that that there will be no opportunities for them to enter the mobile core as that market will will of course be a highly important very important to market. When they are moving to five standalone core and so on.

Pekka Ilmari Lundmark: On the other hand, the market share of Chinese players in the mobile core has been fairly limited so far, so that is not a huge needle mover as such. But of course, it means that there will be no opportunities for them to enter the mobile core as that market will, of course, be a highly important, very important market when they are moving to 5G standalone core, and so on. Then the RAN part, that's where the ambiguity is.

Pekka Lundmark: Then the run part, that's where the ambiguity is, and we still need more information on what exactly those statements will mean in terms of management software and what it will mean or will not mean to base station hardware and base station software. We do not yet have enough information to make a definitive assessment, so we need to get back to this one.

Speaker Change: Then they ran part that's where the ambiguity is and we are we still need more information on what exactly those statements will mean in terms of management software and what it will mean or will not meet debase station hardware and <unk> base station software, we do not yet have enough information to make a definitive assessment. So we need to get back to this one.

Pekka Ilmari Lundmark: And we still need more information on what exactly those statements will mean in terms of management software and what they will mean or will not mean to base station hardware and base station software. We do not yet have enough information to make a definitive assessment. So we need to get back to this.

Pekka Lundmark: Great. And just follow up is I'd like to see if you could update us on the progress and efforts to diversify, particularly into enterprise and including the hyper scale. Thoughts on where that stands and how you're thinking about that prospect. Thank you. That's obviously continues to be a key key element in our strategy. When you look at the second quarter, known CSB business was now or enterprise net sales, where 11.6% of group net sales. So that's been trending continuously up. Of course, now enterprise has not been immune to the general market weakness, but when you look at the kind of the delta between our top line trajectory and enterprise and then CSB, there has been.

Speaker Change: Great and just.

Pekka Ilmari Lundmark: Yeah, follow-up is, I'd like to see if you could update us on the progress and efforts to diversify, particularly into enterprise and including hyperscale. Thoughts on where that stands and how you're thinking about that prospect. Thank you.

Speaker Change: Yes follow up is I I'd like to see if you could update us on the progress and efforts to diversify.

Speaker Change: Particularly into enterprise and including the Hyperscale.

Speaker Change: On on where that stands and how youre thinking about a prospect. Thank you yeah.

Pekka Ilmari Lundmark: That obviously continues to be a key element in our strategy. When you look at the second quarter, non-CSP business, or enterprise net sales, were 11.6% of group net sales. So that's been trending continuously upward. Of course, now, enterprise has not been immune to the general market weakness. But when you look at the kind of delta between our top line trajectory in enterprise and then CSP, there has continued to be a significant difference in Q2. I think that was pretty much 20 percentage points, that top line trajectory difference.

Speaker Change: Yeah. Thank you. That's obviously it continues to be a key key element in our strategy.

Speaker Change: When you look at the second quarter non C. S. P. A business worse now or in the price net sales were 11, 6% of group net sales. So that's been trending continuously up of course now enterprise has not been immune to the general market weakness, but when you look at the kind of the delta between our top line trajectory.

Speaker Change: Enterprise and then then CSP there has been a continued to be a significant difference in Q.

Pekka Lundmark: They continue to be a significant difference in Q Q to I think that was pretty much 20 percentage points that top line trajectory difference.

Speaker Change: Q2, I think that was well.

Speaker Change: Pretty much 20 percentage points that top line.

Speaker Change: Trajectory difference.

Artem Beletski: So this continues to be a key part; we are making good progress. And a very important thing, of course, is that the Q4 acquisition of Phoenix is targeted to accelerate the defense business that we have. And then the Infinera acquisition is targeted to accelerate our web scale business, and especially the data center business, which, of course, unlike the core CSP business. The data center market will be an attractive growth market for many years to come, and that's what we will get into much more strongly through the Infinera acquisition.

Pekka Lundmark: So this continues to be a key part; we are making good progress, and the very important thing, of course, is that the Q for acquisition of Phoenix is targeted to accelerate the defense business that we have. And then the infinite acquisition is targeted to accelerate our web scale business and especially the data center business, which of course, unlike the core CSB business, the data center market will be an attractive growth market for many years to come. And that's what we would get in what we would do get into much more strongly through the infinite acquisition.

Speaker Change: So this continues to be a key part we are making good progress.

Speaker Change: And a very important thing of course is that that.

Speaker Change: The Q4 acquisition of Phoenix is targeted to accelerate the defense business that we have and then the Infinera acquisition is targeted to accelerate our web scale business and especially the data center.

Speaker Change: Business, which of course, unlike the quarter C. S P a business.

Speaker Change: The datacenter market will be a an attractive growth market for many years to come and that's what we would get in what way, but we do get into much more strongly through the Infinera acquisition. So we are looking forward to these opportunities and of course, we continue to look for additional opportunities some of which we are working on organic.

Artem Beletski: So we are looking forward to these opportunities, and, of course, we continue to look for additional opportunities, some of which we are working on organically, including the data center switching opportunities in our IP networks of NI. Thanks, Simon. We'll take our next question from Artem Beletski from SEB. Artem, please go ahead.

Pekka Lundmark: So we are looking forward to this opportunities, and of course we continue to look for additional opportunities, some of which we are working on organically, including the data centers, switching opportunities in our IP networks of NI.

Speaker Change: <unk>.

Speaker Change: Including the data center switching opportunities in our IP networks of.

Speaker Change: Ni.

Pekka Lundmark: Thanks a lot.

Ron: Thanks, Ron.

Artem Beletski: Thank you for your next question from Artem Beletski from S.E.B.

Timberlands ski: Our next question from our Timberlands ski from Seb Artem. Please go ahead.

Artem Beletski: Artem, please go ahead. Yes, hi, and thank you for taking my question. Actually, I would like to ask on N.I.

Pekka Ilmari Lundmark: Yeah, there is no huge difference between the three segments in terms of the revised outlook, but we continue to have good order momentum in all of them. We had good orders for fixed broadband in Q2, particularly in North America, which is a promising sign because we have now received the first bid-related orders in North America. Hence, we have made already in the previous quarter kind of optimistic comments about the fixed networks outlook. And then, of course, the bid will be much more a 25-26 story. But really, to answer the main question that you had, it's fairly balanced between the three units in NI.

Yes, hi, and thank you for taking my question.

Timberlands ski: Actually I would like to ask on NII and could you maybe provide some color on pace of recovery.

Marco Beren: and could you maybe provide some further color on pace of recovery, business off segment as you, for example, made some comments in accordance with Q1 results and what comes to lower revenue outlook for the business, where from it is predominantly coming. And then I have all of them.

Speaker Change: Segment as you know for example, maybe some comments in accordance with Q1 results and what comes to the lower revenue outlook for the business.

Speaker Change: After all meet these predominantly coming or what will be our key puts and takes there and then I have a follow up.

Marco Beren: There is no huge difference between the three segments in terms of the revised outlook. We continue to have good orders momentum in all of them. We had good orders actually in fixed broadband in Q2, particularly North America, which is a promising sign because we received now the first bid-related orders in North America. Some of which will be already supporting Q4 revenue, although it will not be a huge needle mover yet in Q4, as we have said earlier. But we will get some order this year. I believe that we will be the first one to benefit.

Speaker Change: There is no no huge difference between the three three segments in terms of the revised outlook. We continue to have good order momentum.

Speaker Change: In all of them, we had the good orders actually in fixed it peaks broadband in.

Speaker Change: In Q2, particularly in North America.

Speaker Change: Which is a promising sign because we received the first.

Speaker Change: Be it related orders in North America some.

Speaker Change: Some of which will be already supporting Q4 revenue all though it will not be a huge needle mover yet in Q4 as we have said earlier, but we will get some already this year I believe that we will be the first one to benefit.

Marco Beren: Hence, we have made already in the previous quarter kind of optimistic comments about fixed networks also.

Speaker Change: Hence we have made already in the previous quarter panel.

Speaker Change: Optimistic comment the comments about the fixed networks also can then of course the be it will be much more a 'twenty five 'twenty.

Marco Beren: And then, of course, the bid will be much more a 25, 26 story. But really, to answer the main question that you had, it's fairly balanced between the three units in N.I.

Speaker Change: 26 story, but really to answer the main question that you had it it's fairly balanced between the three units and Eni.

Marco Beren: OK, the clear and maybe just a quick follow-up on the buyback program and acceleration decision being done there or to be done. What is actually driving it is purely strong gas position, what they have in place or is it already preparation for infinite ordeal completion of speed less than amount of shares is likely to increase.

Speaker Change: Okay, that's clear and maybe just a quick follow up on the buyback program at the exploration decision.

Pekka Ilmari Lundmark: Okay, that's clear. And maybe just a quick follow-up on the buyback program and acceleration decision being done there or to be done. What is actually driving it?

The season being dumped there ought to be done.

Speaker Change: What is actually driving it is purely a strong cash position what you have in place or is it the idea of preparation.

Marco Wirn: Is it purely a strong cash position? What do you have in place? Or is it already a preparation for infinite ideal completion, so to speak, as the amount of shares is likely to increase? And then there is also this stage by the board in terms of its continuation beyond 24. Yeah, as you remember, we introduced a share buyback program at the beginning of this year, and the ambition was that 300 million would be done this year and 300 additional next year.

Speaker Change: For Infinera deal completion, so to speak.

Speaker Change: Sure. He is likely to increase and then you're sort of at this stage by supporting them so well.

Marco Beren: And any sort of this stage by the board in terms of its continuation looking beyond 24. Yeah, as you remember, we introduced in the beginning of this year a share buyback program that the ambition was that 300 million will be done this year and 300 additional next year. But the board of directors decided that we've been accelerating that program and now do the whole 600 in 2024. And these, of course, based on the share distribution policy and the strength and cash position that we have. And would come to the infinite era remember as well that ambition is that we will finance this totally from our cash on hands.

It's continuation what can be on 24.

Speaker Change: Yeah as you remember we introduced in the beginning of this year share buyback program.

Marco Wirn: But the board of directors decided that we would accelerate that program and now do the whole 600 in 2024. And this is, of course, based on the shareholder distribution policy and the strength and cash position that we have and Woodcamps Infiniera.

Speaker Change: The ambition was to 300 million will be done this year and 300 additional and next year.

Speaker Change: The board of directors decided that we've been accelerating that program and now do the whole 600 inches in 'twenty four and this is of course based on the shareholder distribution policy and our strengthened cash position that we have.

Marco Wirn: Remember as well that our ambition is that we will finance this totally from our cash on hand, and we have also said when we presented the deal that we will acquire additional shares or buy additional shares to secure that there will not be any dilution because of these deals, and after the stakeholder meeting in Infinera, we know exactly what the amount of shares that we need to buy back as well. So that means that whatever the Infinera dilution will be, that will be executed through buybacks on top of the 600 million program? Yeah, Thank you, Artem. We'll take our next question from Joseph Zhou from Barclays. Joseph, please go ahead.

Speaker Change: And what comes to Infinera remember as well that.

Speaker Change: Ambition is that we will finance these.

Speaker Change: Totally.

Speaker Change: From our cash on hands.

Marco Beren: And we have also said in when we present the deal that we will acquire additional shares or buy additional shares to secure that they will not be any dilution because of these deals. And after the stakeholder meeting in Infinite Era, we know exactly what is the amount of shares that we need to buy back as well. So that means that whatever the infinite or delusion will be that will be executed through buybacks on top of the 600 million program.

Speaker Change: And we have also said in when we presented the deal that we.

Speaker Change: We will.

Speaker Change: Acquire additional shares or by original insurers to secure that they will not be any dilution.

Speaker Change: Because of these deals and after the shareholder meeting and Infinera, We know exactly what is the amount of shares that we need to buyback.

Speaker Change: Buy back as well so that means that whatever they are.

Speaker Change: Infinera dilution will be that will be executed through buybacks on top of the 600 million program.

Joseph Zhou: Thank you, Artem. We'll take our next question from Joseph Z from Barclays. Joseph, please go ahead. Hi, morning, or thank you for taking my questions. I have one, and then the full up. So my question is on AT&T and thanks for the clarification about impact now. Now we got much better visibility, but just to understand one is, do you actually get any conversation from AT&T at all? And number two is the, the courtly phasing of the AT&T contribution or wrong rate, how do we think about it? I did you recognize a normal revenue from AT&T in Q1 and then you're over or recognized 150 million in Q2?

Speaker Change: Thank you art and we will take our next question from Joseph Zhou from Barclays. Joseph Please go ahead.

Joseph Zhou: Hi, Good morning. Thank you for taking my questions I have one and then a follow up. So my question is on H N T and thanks for the clarification about impact now now we got much better visibility, but just to understand one days.

Joseph Zhou: Hi morning, all. Thank you for taking my questions. I'll have one question and then a follow-up. So my question is about AT&T. And thanks for the clarification about the impact now. Now we have much better visibility. But just to understand, one is, do you actually get any conversation from AT&T at all? And number two is the, just you know, the quarterly phasing of the AT&T contribution or run rate. What do we think about that? I.e.

You actually get any compensation from AT&T at all and number two.

Speaker Change: The interesting or the quarterly phasing of the AT&T.

Speaker Change: Contribution or run rate, how do we think about it I E did you recognize a normal revenue from AT&T in Q1, and then in Europe. The overall recognized $150 million in Q2, and how should we think about Q3 and Q4 casinos the AT&T revenue run rate.

Marco Wirn: Did you recognize normal revenue from AT&T in Q1, and then you over-recognized $150 million in Q2? And how should we think about Q3 and Q4 to see the AT&T revenue run rate? Yeah, thank you.

Joseph Zhou: And how should we think about Q3 and Q4 crossing the AT&T revenue, wrong rate? Yeah, thank you. Yeah, we have the underlying contract is stipulating how we, what we deliver at AT&T, and based on that delivery is what we do, we recognize just like training at a customer's wall. And the 150 million is acceleration only because of the accounting rules that we have to do it in Q2. When we concluded the new amendment to the deal that we have already with AT&T. So we go, as we go, we recognize the revenue based on what they buy and what we deliver them.

Yeah. Thank you.

Marco Wirn: Yeah, the underlying contract is stipulating what we deliver to AT&T. And based on that delivery, what we do, we recognize, just like training our customers as well, and the 150 million is acceleration only because of the accounting rules that we have to do it in quarter two when we concluded the new amendment to the deal that we have already with AT&T. So as we go, we recognize revenue based on what they buy and what we deliver.

Speaker Change: Yeah, we have the underlying contract stipulating.

Speaker Change: How we what we deliver to AT&T and based on that deliveries would we.

Speaker Change #100: We recognize just like joining our customers' wall and $150 million acceleration only because of the accounting and all of a sudden and we have to do it.

Speaker Change #100: In quarter, two when we concluded the.

Speaker Change #100: The knee amendment to the deal that we have already with AT&T. So we go.

Speaker Change #100: As we go we will recognize the revenue based on what they buy in and.

Speaker Change #100: And what we deliver to them.

Marco Wirn: Okay, thank you. So it's a normal kind of round rate in the second half, but Q3 and Q4 based on AT&T. Just like any other customers, whatever they buy, so we recognize the revenue based on that.

Joseph Zhou: Okay, thank you. It's a normal kind of a round rate in the second half, but Q3 and Q4 based for AT&T. Just like to any other customers, whatever they buy, so we recognize the revenue based on that. Okay, thank you. That's clear.

Speaker Change #101: Okay. Thank you so it's a normal kind of a run.

Speaker Change #101: Run rate in the second half, but Q3 and Q4 Rebased for AT&T.

Speaker Change #101: Just like any other customers whatever they buy so we recognize the revenue based on that.

Joseph Zhou: That's clear. And my follow-up question is really on Vodafone Idea. Obviously, you took a small stake, an exit stake in Vodafone Idea, and I believe it was partly to help them finance the 5G route, which they have yet to deploy in India. And just to understand, one is, what's the kind of expected margin on that project compared to the normal kind of India margin that you saw last year? And also the timing of it?

Speaker Change #102: Okay. Thank you.

Speaker Change #103: Clear and then my follow up is really on a Vodafone idea. Obviously you took a small stake exit stake in Vodafone idea and I believe part of leads you to help them finance, the <unk> router, which they have yet.

Joseph Zhou: And then my follow-up is really on a vote of an idea. Obviously, you took a small stage, exit stake in a vote of an idea. And I believe partly to do have the finance defied you around which day they have yet to deploy it in India. And just to understand one is what's the kind of an exciting margin of that project compared to the normal kind of a India margin that you saw last year. And also the timing of it are we expecting to see the start of the road out at the end of the year or next year or second half of the next year, etc.

India and just to understand one is what's the kind of are expecting margin of that project compared to the normal kind of.

Speaker Change #104: India margin that you saw last year and also the timing of it are we expecting to see the solid rolled out at the end of the year with next year.

Marco Wirn: Are we expecting to see the start of the road out at the end of the year or next year or the second half of the next year, etc.? Thank you. Yeah, we never comment on specific margins per customer. And just like Pekka mentioned earlier as well, that our ambition is to have a good margin on all deals that we do. So this is the goal we have.

Speaker Change #104: For second half of the next year et cetera.

Marco Beren: Thank you. Yeah, we never comment specific margins per customer, and just like Peck mentioned earlier as well, that our ambition needs to have good margins on all deals that we do. So these are the ambitions we have and what a fun idea or any other customer is you know specific contract and margins vary always depending what they buy and different other conditions in the agreements, but our ambition is always to make deals that we believe are supporting the shareholder value creation, and based on that we make the decisions on each deal. I mean, the key thing in India, in addition to Barti and Reliance Geo, is really that what a phone idea have made progress on their financing.

Speaker Change #104: Yeah.

Speaker Change #105: Yeah, we never.

Speaker Change #106: Comment specific margins per customer.

Speaker Change #106: And just like Pekka mentioned at all.

Pekka: Earlier this morning.

Speaker Change #107: Oh ambition needs to June.

Pekka: Have a good margins on all deals that we do so southeast ambition we have.

Speaker Change #108: And what if one idea or any other customer is is you know a specific contract.

Speaker Change #109: Margins, Mary always depending what they buy in and.

Marco Wirn: And what if an idea or any other customer is, you know, specific contracts and margins always vary depending on what they buy and, and, and different other conditions in the agreements. But our ambition is always to make deals that we believe are, Supporting shareholder value creation. And based on that, we make the decisions on each deal. I mean, the key thing in India, in addition to Party and Reliance Jio, is really that the Vodafone idea has made progress on its finance, and the deal to convert some of the debt to shares, which we did in the same way as some others, was obviously part of their capital structure development. We do not intend to become an operator in India.

Speaker Change #109: And different other conditions in the agreements, but our ambition is always to make them.

Speaker Change #109: Deals that we believe are at.

Speaker Change #110: Supporting the shareholder value creation and based on that we make the decisions on each deal I mean, the key thing in India. In addition to about it Andrew Alliance G O S. Israeli that.

Speaker Change #110: That would have an idea have made progress on their financing.

Marco Beren: And the deal to convert some of the debt to shares, which we did in the same way as some others, was obviously part of their capital structure development. We do not intend to become an operator in India; that small share that we have in them, there is a lock-up period, but after that we will be free to do whatever we want with that. So that is purely, in a way, a tactical move from us. But then the key thing for our future in India will be to understand that how much will what a phone idea be investing in their network, especially in their 5G expanse.

Speaker Change #110: And the deal to convert some of the debt due to shares which we did in the same way as some others. What's obviously part of part of their capital structure development, we do not intend to become an operator in India that.

Marco Wirn: That small share that we have in them, there is a lock-up period, but after that, we will be free to do whatever we want with that. So that is, purely, a tactical move from us. But then the key thing for our future in India will be to understand how much Vodafone Idea will be investing in their network, especially in their 5G expansion, and that is clearly an opportunity for us.

Speaker Change #110: Small share that we have in them.

Speaker Change #110: There is say look up period, but after that we.

Speaker Change #110: We will be free to do whatever we want.

With that so that is purely a in a way a tactical move from us, but then the key thing for our future in India will be to understand that.

Speaker Change #111: How much we'll what a phone.

Idea be investing in their network, especially in their <unk> expansion.

Speaker Change #111: Expansion and that is clearly an opportunity for us.

Sami Sarkamies: And that is clearly an opportunity for us, assuming that they get their funding arranged. And as I said, there is now promising progress on that. Assuming that that really happens, there is good potential for us for revenue in their 5G going forward. Thanks, Joseph.

Speaker Change #111: Assuming that they get their funding.

Marco Wirn: Assuming that they get their funding arranged, and as I said, there is now promising progress on that, and assuming that that really happens, there is good potential for us for revenue from their 5G going forward. Thanks, Joseph. We'll take our next question from Sami Sarkamies from Danske Bank. Sami, please go ahead.

Speaker Change #111: And as I said, there's now promising progress on that assuming that that really happens there is good.

Speaker Change #111: Good potential for us for revenue.

Speaker Change #111: <unk> going forward.

Speaker Change #112: Thanks, Joseph will take our next question from Sami Sarcomere from Danske Bank Sammy. Please go ahead.

Sami Sarkamies: We will take our next question from Sami Sarkamese from Danske Bank.

Marco Beren: Sami, please go ahead. Hi, you have increased margin guidance for mobile networks by three percentage points. If this revision is fully explained by the 80th settlement. And do you assume more high-margin revenues in the second half of the year or next year? Sure. It is really a combination of that 150 million, which you can mathematically, of course, calculate how much that is. But it is not only that; it is also good progress on the cost side. It is a combination of these two. Okay.

Sami Sarkamies: Oh hi.

Sami Sarkamies: Hi, you have increased margin guidance for mobile networks by 3% points. Is this revision fully explained by the AT&T settlement? And do you assume more high-margin revenues in the second half of the year or next year? It's really a combination of that 150 million, which you can mathematically, of course, calculate how much that is. But it's not only that; there is also good progress on the cost side. It's a combination of these two.

Speaker Change #114: You have to increase the margin guidance for mobile networks by three percentage points. If this relation fully explained by the AT&T settlements.

Sami Sarkamies: And do you see more high margin revenues in the second half of the year or next year.

Speaker Change #115: So it's really a combination of Av.

Speaker Change #116: Of that $150 million, which you can mathematically of course calculated how much that is but it's not only that it's also also good progress on the cost side. It's a combination of these two.

Speaker Change #116: Yeah.

Speaker Change #117: Okay. Thanks, and then I would ask about that youll sinking regarding portfolio management.

Pekka Ilmari Lundmark: Okay, thanks. And then I would ask about your thinking regarding portfolio management. Are you interested in making additional bolt-on acquisitions for Infinera? And why did you think it was a good time to divest ASN now? Well, if I take ASN now, first, obviously, it's a well-known fact that we've been contemplating that divestment for a long time. And, Fact number one.

Pekka Lundmark: Thanks. And then I would ask about your thinking regarding portfolio management. Are you interested in making additional bolt-on acquisitions to in the Finaira?

Are you interested in making additional bolt on acquisitions to Infinera and why do you view infrastructure could be time to divest ASN now.

Pekka Lundmark: And why do you think it was a good time to divest ASN now? Well, if I take ASN now, first obviously it's a well-known fact that we've been contemplating that divestment for a long time. And fact number one, fact number two, as part of the original Alcatel-Lucent acquisition deal in 2016. And the French state has had a right on a number of strategic decisions, which then always limited our freedom to maneuver the business. So we just now were able to finally find a solution with the French state that now is a good time for them to acquire the business.

Speaker Change #118: Well, if I take a S. N now first the obviously, it's a well known fact that.

That.

Speaker Change #119: We have been contemplating that divestment for a long time.

Speaker Change #118: And.

Speaker Change #118: Fact number one in fact number two as part of the original Alcatel Lucent acquisition deal in 2016.

Pekka Ilmari Lundmark: Fact number two, as part of the original Alcatel-Luzent acquisition deal in 2016, the French state had a veto right on a number of strategic decisions, which then always limited our freedom to maneuver the business. So we just now were able to finally find a solution with the French state that now is a good time for them to acquire the business. It was more tactical that we were now, after quite lengthy discussions, we were able to find each other on the terms and conditions. There's not more than that into that.

Speaker Change #118: The French state has had a veto right on a number of strategic decisions, which then always limit the adult freedom to maneuver.

Speaker Change #118: The business.

Speaker Change #118: So we just now we're able to finally find a solution with the French are states that are that now it is a good time for them to acquire a debased.

Speaker Change #118: The business.

Pekka Lundmark: It was more tactical that we were now after quite lengthy discussions. We were able to find each other on the terms and conditions.

Speaker Change #120: It was more tactical that we were now after quite lengthy discussions we were able to find each other on the terms and conditions.

Pekka Lundmark: There's not more than that into that. We are pleased with the acquisition price, especially when you look at the profit multiple, which is a good multiple. And also keeping in mind that it's a capital-intensive business that requires cash flow to be invested in capital. X, and remembering that if you want to significantly increase the revenue in the future, that of course then requires outgoing CapEx into capacity builds.

Pekka Ilmari Lundmark: We are pleased with the acquisition price, especially when you or the divestment price, especially when you look at the profit multiple, which is a good multiple. And also, keeping in mind that it's a capital-intensive business that requires cash flow to be invested in Capex, and remembering that if you want to significantly increase revenue in the future, that, of course, then requires outgoing capex into capacity build. So we believe that, considering everything considered, it was both a good time for the divestment and also a good price that we received. Then when it comes to additional deals, I mean, we continue to be extremely prudent.

It's there's not more that that enter into that we are pleased with the acquisition price, especially when you or the divestment price, especially when you look at the when you look at the appropriate multiple which is which is a good multiple.

Speaker Change #120: And also keeping in mind that.

Speaker Change #120: It's a capital intensive business that requires.

Speaker Change #120: Cash flow to be invested in capex.

Speaker Change #121: And remembering that if you want to Cigna.

Speaker Change #120: Significantly increase the revenue in the future that of course then requires.

Speaker Change #120: Growing capex in capex into into capacity builds so we believe that everything consider it was both a good timing for the divestment and and also a good price that we received then when it comes to additional.

Pekka Lundmark: So we believe that everything considers it was both a good timing for the divestment and also a good price that we received.

Pekka Lundmark: Then when it comes to additional deals, I mean we continue to be extremely prudent. There could be bolt-on acquisitions, but any acquisitions would have to follow extremely strong and compelling industrial logic, strong synergies, strong logic. I mean that will always be a prerequisite for any acquisition as we are now seeing in the infinite case with 200 million synergies and exceptionally strong customer and market position complementarity.

Pekka Ilmari Lundmark: There could be bolt-on acquisitions, but any acquisitions would have to follow extremely strong and compelling industrial logic, strong synergies, and strong logic. I mean, that will always be a prerequisite for any acquisition, as we have now seen in the Infinera case with 200 million synergies and exceptionally strong customer and market position complementarity. Thanks Sami. We'll take our next question from Jakob Bluestone from BNP Partybag Zone. Jakob, please go ahead.

Speaker Change #120: Deals I mean, we continue to be extremely prudent.

Speaker Change #120: There could be a bolt on acquisitions, but any acquisitions would have to follow extremely strong and compelling industrial logic strong synergies strong logic, I mean that will always be a prerequisite for any any acquisition as we have now.

Speaker Change #122: You need the Infinera case with 200 million seen adjacent exceptionally strong.

Speaker Change #120: Customer.

Speaker Change #120: And market position complementarity.

Jacob Bluestone: Thanks, Tommy. We'll take our next question from Jacob Bluestone from BNP Paribas. Jacob, please go ahead.

Speaker Change #123: Thanks, Amy we'll take our next question from Jakob Bluestone from BNP Paribas Zone. Jacob. Please go ahead.

Jakob Bluestone: Thanks, David.

Jakob Bluestone: Thanks, David. I had a question on your cash flow. You cut your CapEx from 600 to 550. So, if you could maybe just talk us through that, would you?

Jacob Bluestone: Thanks, David. A question on your cash flow: you cut your CapEx from 600 to 550, so if you can maybe just talk us through that, and then I'll set a follow-up on the AT&T impact.

Jakob Bluestone: Question on your cash flow and you cut your Capex from 600 to 550. So if you can maybe just talk us through that and then also just had a follow up on the AT&T impact.

Marco Beren: Can you maybe just comment on the cash flow as opposed to P&L impact of the 150 million accelerated revenue recognition? Is it correct that that would lead to a negative working capital movement? And if so, if you can maybe just comment around your working capital, which was plus 100 million in the quarter, so without a burden plus 260 kind of X, AT&T, thank you. Yeah, what comes to 150 million, we revenue now and that payment will come accordingly as well when, when, according to those payment terms that we have.

Speaker Change #126: Can you maybe just comment on the cash flow as opposed to P&L impact of the 150 million accelerated revenue recognition.

Speaker Change #125: Correct that would be.

Speaker Change #127: Leads to a negative working capital movement.

Speaker Change #128: So if you can maybe just comment around your working capital, which was plus $100 million in the quarter. So would that have been close to 60 kind of ex AT&T. Thank you.

Marco Wirn: And then also, just had a follow up on the AT&T impact. Can you maybe just comment on the cash flow, as opposed to P&L, impact of the $150 million accelerated revenue recognition? Is it correct that that would lead to a negative working capital movement? And if so, could you maybe just comment on your working capital, which was plus 100 million in the quarter? So would that have been plus 260 kind of x AT&T?

Speaker Change #129: Yeah, what comes to $150 million, we recognize that revenue now and and and that payment will come accordingly, as well one one.

Marco Wirn: Thank you. Yeah, what comes to 150 million, we recognize that revenue now, and that payment will come accordingly as well when according to those payment terms that we have. Cashflow has been extremely good in the first half, as you've seen, thanks to the, first of all, normalization of net broken capital and also the India payments that we have received, but also due to the actions that we have taken internally to secure that we have optimized net broken capital and improved the processes within the company.

Speaker Change #130: According to those payment terms that we have.

Marco Beren: Cash flow has been extremely good in the first half, as you've seen, thanks to the first of all normalization of networking capital and also the India payments that we have received. But also do the actions that we have taken internally to secure that we have optimization of the networking capital and improve the processes within the company. So we've seen the rotation days improving in networking capital, and that's resulting all of these different actions and reasons resulted very clear cash generation in the first half year.

Speaker Change #131: Cash flow.

Speaker Change #132: Has been extreme occurred in the first half as you've seen.

Speaker Change #133: Thanks to them.

Speaker Change #134: First of all a normalization networking capital.

Speaker Change #134: And also on the India payments that we have received.

Speaker Change #134: But also due to the actions that we have taken internally to secure that we have.

Speaker Change #134: Optimization of the.

Speaker Change #134: Networking capital and unimproved.

Speaker Change #134: The processes within the company.

Marco Wirn: So we've seen the rotation days improving in networking capital, and that's resulting all of these different actions and reasons have resulted in very good cash generation in the first half year. I guess just to confirm the cash flow impact, so you'll have a cash, a working capital outflow in or had a working capital outflow in Q2, and then we'll have working capital inflows. Subsequently, is that correct? Now we have a very good positive impact on working capital. And what it comes to, if you look closely, the rest of the year.

Speaker Change #134: So we've seen the rotation days, improving and networking capital.

Speaker Change #134: And that's that's resolving.

All of these different actions and reasons, resulting very good cash generation in the first half year.

Speaker Change #134: Yes.

Marco Beren: I guess just confirm the cash flow impact, so you have a cash a working capital outflow in or how to work in capital outflow in Q2 and then we'll have working capital inflows subsequently, is that correct? Now we have had a very good positive impact of working capital and and what comes to if you look rest of the year specifically in a quarter four, when we have a huge sales increase estimates estimated. Then of course that is tightening up accounts receivables and will let, of course, impact the cash generation in the fourth quarter.

Speaker Change #135: I guess just to confirm the cash flow impact. So you have a cash working capital outflow.

Speaker Change #135: We had a working capital outflow in Q2, and then we will have working capital inflows.

Speaker Change #136: Subsequently is that correct.

Speaker Change #137: No we have we had a barracuda.

Speaker Change #138: The positive impact of working capital.

Speaker Change #139: And what comes to if you look at rest of the year.

Speaker Change #139: Yeah.

Jakob Bluestone: Specifically, on quarter four, when we have a huge sales increase estimate estimated, then of course, that is Tidying up accounts receivables and will, of course, impact the cash generation in the fourth quarter. Thank you, Jacob. We'll take our next question from Daniel Djurberg from Handelsbanken. Daniel, please go ahead.

Speaker Change #139: Quarter four when we have a huge sales inquiries estimates estimated.

Speaker Change #139: Cause that is tying up accounts receivables and will of course impact the.

Speaker Change #139: Cash generation in the fourth quarter.

Daniel Djurberg: Thank you, Jakob Bluestek. Our next question is from Daniel Djurberg from Handelsbanken. Daniel, please go ahead. Thank you, David, and hi, Pekka, Marco. I would like to ask a little bit on the growth and except for India, that's done for two thirds of the weakness and also other weak markets.

Speaker Change #139: Thank you Jacob looks like our next question from Daniel Djurberg from Handelsbanken, Daniel Please go ahead.

Daniel Djurberg: Thank you, David and Hi, Pekka, Marco I would like to ask a little bit on.

Daniel Djurberg: Thank you David, and hi Pekka and Marco. I would like to ask a little bit about growth and, except for India, that stands for two-thirds of the weakness and also other weak markets. You also have this reduction, I think you said 6000 so far, planning for 9000 to 14000 versus the initial 86000. So my question is really this also and the new organizational structure: how much of the impact on the revenue decline comes from this, i.e. Rightsizing?

Speaker Change #141: Ah the growth the except for India Ah that's done for two thirds of them.

Speaker Change #141: Weakness.

Speaker Change #142: And that was sort of weak markets. You also have this a reduction I think you said 6000, so far plenty for 9014th out some versus the initial eight to 6000. So my question is really on this also on the new organizational structure, how much of the <unk>.

Pekka Lundmark: You also have this reduction, I think you said 6,000 so far, planning for 9,000 to 14,000 versus the initial 8,000. So my question is really this: also under new organizational structure, how much of the impact on the revenue decline comes from this, I write sizing. Thank you. I would not say that there is any negative revenue impact from the organization change or downsizing. This is really, I mean, this is the market and this is the funnel. I mean, we are fully competitive in terms of our offering, and we are fully resourced when it comes to sales and customer interface.

Speaker Change #142: The impact on the revenue decline comes from.

Speaker Change #143: From this I E right right sizing thank.

Speaker Change #143: Thank you.

No I would I would not say that there is any negative revenue impact from the organization change our or downsizing. This is really I mean this is the market and this is the funnel I mean, we are fully competitive in terms of our offering we are fully.

Pekka Ilmari Lundmark: Thank you. No, I would not say that there is any negative revenue impact from the organization change or downsizing. This is really, I mean, this is the market, and this is the funnel. I mean, we are fully competitive in terms of our offering, and we are fully resourced when it comes to sales and customer interface. So this is not the reason. And if I may make a small correction, you said that two-thirds of the revenue decline would come from India. It was actually three quarters.

Speaker Change #143: Resource when it comes to sales and customer interface. So this is not the reason and if I may.

Pekka Lundmark: So, this is not the reason.

Pekka Lundmark: And if I may, the small correction: you said that two thirds of the revenue decline would come from India; it was actually three quarters that came from India. So almost, almost all was India related, but definitely not related to the operational model change. We are pleased with the pace, as I said, on the cost cuts and the over 6,000 reduction in headcount, especially when you look on the relative terms. It has been a fast pace, but that is not the reason for the revenue hit. And India is just building that. Last year, India had a huge and very rapid deployment of 5G network, and our team for in quarter two last year.

Speaker Change #144: They're small correction you said that two thirds of the revenue.

Speaker Change #145: Decline would come from India, It was actually three quarters.

Speaker Change #145: Came from India. So almost almost all was India related but definitely not related to the operational model change. We are pleased with the pace as I said on the cost cuts and and.

The over 6000 a reduction.

Speaker Change #145: In head count.

Speaker Change #145: Especially when you look on a relative.

Tim's ESPN, a fast pace, but.

That's not that is not the reason for the revenue hit.

Marco Wirn: and India is just building on that. Last year, India had a huge and very rapid deployment of 5G networks, and our peak was in quarter two last year.

Speaker Change #145: In India, It's just building on that last year, India had a huge.

Speaker Change #145: And very rapid deployment of five G network and.

Speaker Change #145: Our Pam four in quarter two last year.

Pekka Lundmark: And of course, this year they have been normalizing their deployment and slow down as well, quite heavily. And that's why we see this huge difference in quarter two. India chose to confirm the numbers, which are of course in the report, but so that you pay attention to them. So we had revenue acceleration in India and Q2 sequentially. We had 329 million in India in Q1, and we have 600 million year to date. But important is that we continue to expect what we earlier said that have fully revenue in India between 1.5 to 2 billion euro.

Speaker Change #145: And of course this year there have been normalizing their deployment of <unk> and <unk>.

Speaker Change #145: Slow down as well quite heavily and that's why we see it as huge difference in quantity here in India.

Speaker Change #146: India has to confirm the numbers, which are of course in the report that showed that.

Speaker Change #146: Pay attention to them. So we had.

Speaker Change #147: We had revenue acceleration in India in Q2 sequentially, we had $329 million in India in Q1, and we have $600 million year to date, but the important is that we continue to expect what we earlier said that have full year revenue in India between one and a half to 2 billion Euro and this is not only a mobile game in it.

Pekka Lundmark: And this is not only a mobile game in India, this is also also network infrastructure. And just as one proof point, is a contract that will start delivering significant revenue in Q4. And that is a fixed wireless contract that we have with an operator in India, which we actually announced earlier. We were talking about an APEC fixed wireless contract, but we can now confirm that it is with an Indian operator. Yeah. So perfect.

Speaker Change #148: Yeah. This is also also network infrastructure and just one proof point. This is a contract that will start.

Speaker Change #148: Delivering significant revenues in Q4 and that is a fixed wireless contract that we have with an operator in India, which we actually announced.

Marco Wirn: And, of course, this year, they have been normalizing their deployment and slowing down as well quite heavily. And that's why we see this huge difference in quarter two. Earlier, we were talking about an APAC fixed wireless contract, but we can now confirm that it is with an Indian operator. Yeah, so may I have a short follow-up? Sure, go ahead, Daniel.

Speaker Change #148: Earlier weighted we're talking about in APAC fix.

Speaker Change #148: Fixed wireless contract, but we can now confirm that did this with an Indiana right now so.

Daniel Djurberg: May I have a short follow up? Sure. Yeah.

May I have a short follow up too.

Speaker Change #148: Sure.

Daniel Djurberg: Yeah, yeah, and that's a little bit on EMEA and future RAN opportunities. You touched upon Vodafone Win in Italy, for example. How should we look at the opportunities within, for example, Vodafone in this spring procurement? I guess they have 100,000 sites in Europe, of which 30% should go to Open RAN or something. Any indication of this being happening now, or any news? Well, regardless of how much of it would be open or any other run, there's a lot of different permutations on the network architecture development. We are ready. I mean, we can do an open run, we can do a cloud run, we can do any run.

Speaker Change #148: Oh, yeah, yeah, and that is a little bit on the EMEA and the future opportunities should touched upon Vodafone win in Italy for example.

Pekka Lundmark: And that is a little bit on the media and the future on opportunities to touch upon the phone win in Italy, for example. So how should we look at the opportunities within, for example, with a phone this spring procurement. I guess they have one on 1,000 sites in Europe, which 30% should go with Open RAN or something. And an indication of this being happening now and in use. Well, regardless of how much of it would be open or any other run run, there's a lot of different permutations on the network. Architecture development, we already, I mean we can do open run, we can do cloud run, we can do any run.

Speaker Change #149: How should we look at the opportunities would be on the for example, Vodafone spring procurement I guess, they have 1000 sites in Europe of which 30 central goal would open ran or something and they are any indication of this.

Speaker Change #150: <unk> happening now in the news.

Speaker Change #150: Well, the regardless, whether regardless of how much of it would be open or any other run.

Speaker Change #150: Right now there's a lot of different permutations on the network.

Speaker Change #151: Architecture development, we already I mean, we can do open round weekend do cloud ran we can do any run.

Pekka Ilmari Lundmark: We have, of course, a high ambition level in terms of Spring 6, but it is an ongoing project at the moment, so I am not in a position to give any kind of comments as to how it looks or anything like that, other than that, of course, we are participating. Thanks, Daniel. We'll take our next question from Andrew Gardiner from Citi. Andrew, please go ahead. Thank you, David. Good morning, all.

Pekka Lundmark: We have, of course, a high ambition level in terms of Spring Six, but it is an ongoing, ongoing project at the moment. So I am not in a position to give any kind of comments as to how it looks or anything like that other than that. But of course, we are participating.

We have of course.

Speaker Change #151: A.

Speaker Change #151: High ambition level in terms of spring sakes, but it is an ongoing our ongoing.

Speaker Change #151: Ongoing project at the moment, so I am not in a position to give any kind of comments as to how it looks or anything like that like that other than that of course, we are participating.

Andrew Gardiner: Thank you. Thanks, Daniel.

Speaker Change #151: Thanks, Tony will take our next question from Andrew Gardiner from Citi. Andrew. Please go ahead.

Andrew Gardiner: We'll take our next question from Andrew Gardiner from City. Andrew, please go ahead. Thank you, David. Good morning, all. I was interested in your perspective on the order intake and what that's going to mean in terms of the ultimate sales trajectory. I mean, Pekka, you talked about how you've had all the momentum there for three straight quarters, so clearly improving and across the business units. Yet, they're not translating into quite as much revenue as you would have hoped in the second half of this year.

Andrew Gardiner: I was interested in your perspective on the order intake and what that's going to mean in terms of the ultimate sales trajectory. I mean, Pekka, you've talked about how you've had all the momentum now for three straight quarters, so things are clearly improving and across the business unit. Yet they're not translating into quite as much revenue as you would have hoped in the second half of this year, in terms of what you're hearing from the customers what they're actually ordering is that because the deals are you know outright smaller in magnitude than you'd anticipated or is it sort of a timing issue and actually you know the ramps are a little bit slower so fine second half is is a bit weaker than you'd hope but you know ultimately you're going to win some of that back or not win but you know you it will just take longer to achieve it you'll see more of it in 2025.

Andrew Gardiner: Thank you David good morning.

Andrew Gardiner: I was interested in your perspective.

Speaker Change #153: Take that's going to mean in terms of the ultimate sales trajectory.

Speaker Change #154: Alright packing you've talked about.

Ned: At the moment to Ned for three straight quarters.

Speaker Change #156: Clearly improving and across the business units.

Speaker Change #157: Yes, they are not translating into points as much revenue as you would've hoped in the second half of this year.

Pekka Lundmark: In terms of what you're hearing from the customers, what they're actually ordering, is that because the deals are, you know, like smaller and magnitude than you'd anticipated, or if it's a tiny issue and actually the ramps are a little bit slower, so fine, second half is a bit weak in a new type, but, you know, ultimately you're going to win some of that back or not win, but, you know, it will just take longer to achieve it. You'll see more of it in 2025.

Speaker Change #158: In terms of what Youre hearing from the customers, but they are actually ordering is that because the deals are.

Speaker Change #158: Smaller in magnitude than you'd anticipated.

Speaker Change #158: So a timing issue and actually the ramp.

Speaker Change #158: Little bit slower so far in second half.

But ultimately you got to.

Speaker Change #158: Some of that back.

Speaker Change #158: It will just take longer to achieve it you'll see more of it in 2025.

Andrew Gardiner: Yeah, this is exactly the two sides of the same coin that we are seeing that while we are saying that order intake has been good now for three quarters, but we did say after Q1 that the full year revenue outlook required really strong order intake in Q2 and also Q3. So while Q2 order intake was good, it was still not good enough so that we would have been able to maintain the full year outlook. And remember, very importantly, part of the order intake that we are now receiving or will receive in Q2 is already going to be recognized as revenue in 2025, not this year. Thanks, Andrew. Thank you.

Pekka Lundmark: This is exactly the two sides of the same coin that we are seeing, that while we are saying that the order intake has been good now for three quarters, but we did say after Q1 that the full year revenue outlook requires really strong order intake in Q2 and also Q3 for that matter. So while Q2 order intake was good, but it was still not good enough. So that we would have been able to maintain the full year outlook, and remember, very importantly, part of the order intake that we are now receiving or received in Q2 is already going to be recognized as revenue in 25, not in this year.

Speaker Change #159: Now this is exactly the peer side. So the same coin that we are seeing that while we are saying that the order intake.

Speaker Change #159: <unk> has been good now for four three quarters, but we did say after Q1 that the full year a.

Full year.

Speaker Change #159: Revenue outlook.

Speaker Change #159: It requires really strong order intake in Q2, and also Q3 for that matter. So while Q2 order intake was good but it was still not good enough.

Speaker Change #159: So that we would have been able to maintain the full year outlook and remember very importantly, part of the order intake that we are now receiving or received in Q2 is already going to be recognized as revenue in 25 not in this year.

Pekka Lundmark: Thanks. Thank you.

Thanks, Peter Thank you.

Pekka Ilmari Lundmark: I suppose related to that, does it make you rethink the cost saving program? You've got a fairly wide range around that $800 million to $1.2 billion. Does that make you think the slower ramp here makes you keen to hit the top end of that range as opposed to the lower or midpoint?

Pekka Lundmark: I suppose related to that, and does it make you rethink the cost-serving program? You've got a fairly wide range around about 800 million to 1.2 billion. Does that make you think you actually slow a ramp here, making you keen to hit the top end of that range as opposed to the lower or midpoint? Well, what we have actually done is that we have accelerated the program, and when you look at, I mean, we were not, when we started the program, we did not expect to be under 80,000 employees by the end of Q2. So we have executed extremely quickly.

Speaker Change #160: It was related to that I mean does it make you.

Speaker Change #161: The cost saving program.

Speaker Change #161: Wide range around that 800 million to $1 2 billion.

Speaker Change #161: Yeah.

Speaker Change #162: Does that make you think your action.

Speaker Change #161: Slower ramp here.

Keen to hit the top end of that range as opposed to the midpoint.

Pekka Ilmari Lundmark: Well, what we have actually done is that we have accelerated the program. And when you look at, I mean, we were not, when we started the program, we did not expect to be under 80,000 employees by the end of Q2. So we have we have executed extremely quickly, then how it will continue and we are now and just as a reminder we are targeting 72 to 77 000 employees at the end of 26 and where we are going to go from here after this acceleration we'll be following very carefully now the market pace of the market recovery and it's clear that if that recovery is fast and if our market share development is good then of course it's likely that we would end up closer to the the upper end of that employee range but we are very kind of prepared if needed to go to the lower end of that range also should the market recovery be or continue to be very slow.

Speaker Change #164: Well, what we have actually done is that we have accelerated the program and when you look at I mean, we were not when we started the program. We did not expect to be under 80000 in place by the end of Q2. So we have we have executed extremely quickly.

Pekka Lundmark: Then how it will continue, and we are now, and just as a reminder, we are targeting 72,000 to 77,000 employees at the end of 26. And we are going to go from here after this acceleration. We'll be following very carefully now the market pace of the market recovery. And it's clear that if that recovery is fast, and if our market share development is good, then of course it's likely that we would end up closer to the upper end of that employee range. But we are very kind of prepared if needed to go to the lower end of that range also should the market recovery be, or continue to be very slow.

Speaker Change #164: Then how it will continue and we are now just as a reminder, we are targeting 72 to 77000 employees at the end of 'twenty six.

Speaker Change #161: And where we are going to go from here. After this actually collateral acceleration will will be following very carefully now the the market through pace of the market recovery and it's clear that our.

Speaker Change #161: If that recovery is fast and if our market share development. This is good.

Speaker Change #161: Then of course, it's likely that we would end up closer to the.

Speaker Change #161: Upper end of that the employee range, but we are we are very kind of prepared if needed to go to the lower end of that range also should be.

Speaker Change #161: Market recovery Beep beep or continues to be very slow we are targeting in <unk>.

Pekka Lundmark: We are targeting in kind of a general comment; we are currently still targeting in our planning as a base assumption somewhere around the midpoint of that, but we have prepared to move either up or down depending on how the market and our share develops.

Speaker Change #163: No vessel General comment we are currently still targeting in our planning as a base assumption somewhere around the midpoint of that what we are prepared to move either up or down depending on how the market and our share develops.

Pekka Ilmari Lundmark: We are targeting, kind of, as a general comment. We are currently still targeting in our planning as a base assumption somewhere around the midpoint of that, but we are prepared to move either up or down depending on how the market and our share develops. We'll take our last question from Richard Kramer from Arete Research. Richard, please go ahead. Thanks very much.

Richard Kramer: We'll take our last question from Richard Kramer from Aratae Research.

Speaker Change #163: We will take our last question from Richard Kramer from Arete Research Richard Please go ahead.

Richard Kramer: Richard, please go ahead. That's one part of the answer. Then the other part of the answer is that, despite the importance of software, we continue to believe that the importance of silicon continues to be extremely important and domain-specific compute, as we are seeing in NIS, we are seeing in cloud, will be extremely important going forward also in networks. So the stronger we are in silicon, the stronger IPR we have in domain specific compute for things like L1 processing in radio, packet forwarding in routing, and so on, the stronger potential we have for margin margins. Then another part of the answer is that this is to do with the general kind of reduction of the importance of the dependency of large CSPs.

Richard Kramer: Thanks, very much a couple of things that maybe haven't been touched on yet.

Richard Kramer: A couple of things that maybe haven't been touched on yet. Pekka, my wider question would be on the operating model. Both yourselves and your peers have talked a lot about moving to software, more enterprise sales. You have an extensive, fabulous chip design effort in NI.

Richard Kramer: My my wider question would be on the operating model, both yourself and peers have talked a lot about moving to software more enterprise sales you have an extensive fabless chip design effort.

Speaker Change #166: N N I, but the gross margin profile of the business that we see excluding Tac is still stuck in this sort of mid thirties, what is it about product pricing or your cost structure, where Nokia can start showing the kind of margin profile, let's say 50, or 60% gross margin and higher operating margins.

Pekka Ilmari Lundmark: But the gross margin profile of the business that we see, excluding tech, is still stuck in the sort of mid-30s. What is it about product pricing or your cost structure where Nokia can start showing the kind of margin profile, let's say a 50 or 60% gross margin and higher operating margins that the software and fabulous chip design would imply your business model should be showing? That's a very good question.

Speaker Change #167: The software and Fabulous Chip design would imply your business model should be showing.

Speaker Change #168: Now that's a very good question and we have some examples in our portfolio, where we are getting to that type of margins margin.

Pekka Ilmari Lundmark: And we have some examples in our portfolio where we are getting to that type of margin already today. But when it comes to large-scale infrastructure project margins, that's where the drag has really been. I mean, a key part of the answer is that we need to move more and more value to software. We need to move to the cloud. We need to move to software as a service models gradually in our business, of course, first in CNS and then gradually also in the other businesses. That's one part of the answer.

Speaker Change #169: Already today, but.

When it comes to large scale infrastructure project margins, there, that's where the drag has really been I mean key part of the answer is that that we need to more more more and more value to software.

Speaker Change #169: We need to move to cloud, we need to move to software as a service model.

Speaker Change #169: Our models are gradually neuro business of course first in CNS and then gradually also oh, sorry, and the other in the other businesses. That's one part of the answer then the other part of the answer is that.

Pekka Ilmari Lundmark: Then the other part of the answer is that, Despite the importance of software, we continue to believe that the importance of silicon continues to be extremely important, and domain-specific compute, as we are seeing in NI, as we are seeing in the cloud, will be extremely important going forward, also in networks. So the stronger we are in silicon, the stronger IPR we have in domain-specific compute for things like L1 processing in radio, packet forwarding in routing, and so on, the stronger potential we have for margins, a general kind of reduction in the importance of the dependency of large CSPs.

Speaker Change #169: <unk>.

Speaker Change #170: Despite the importance of software we continue to believe that the importance of silicon content continues to be extremely important.

Speaker Change #170: And domain specific compute as we are seeing in N. I S. We are seeing in cloud will be extremely important going forward also in.

In networks. So the stronger we are in silicon the stronger IPR, we have in domain specific compute for things like Yale one processing in radio.

Speaker Change #170: Packet forwarding in our in App routing and so on the stronger potential we have for margin margins than another part of the answer is that they said is.

This has to do with them.

Speaker Change #170: General.

Speaker Change #171: Kind of reduction of the importance of of the dependency of lots Asp's. There are other segments, where the margin profile by their very nature are better there are enterprise segments, where that is clearly the case and then.

Pekka Lundmark: There are other segments where the margin profiles, by their very nature, are better. There are enterprise segments where that is clearly the case, and then gradually also the defense sector. That is a sector where there is significantly better margin profile potential compared to large scale system projects with CSPs. The challenge in the whole margin discussion is really large scale system projects with CSPs where there is a specification coming from somewhere, and then the CSPs make you and your competitors compete on price.

Pekka Ilmari Lundmark: There are other segments where the margin profiles, by their very nature, are better. There are enterprise segments where that is clearly the case. And then gradually also the defense sector. I mean, that is a sector where there is a significantly better margin profile potential compared to large-scale system projects with CSPs. The challenge in the whole margin discussion is really large-scale system projects with CSPs where there is a specification coming from somewhere, and then the CSPs make you and your competitors compete on price.

Speaker Change #171: Gradually also the defense sector I mean that is a sector, where there is significantly better margin profile potential compared to compared to large scale system project with with Csp's. There that the challenge in the whole margin discussion Israeli large scale system projects with Csp's, where there.

Speaker Change #171: There is a specific case in coming from somewhere and then the Csp's make you and and and your competitors.

Pekka Ilmari Lundmark: We need to reduce our relative dependency on that type of project alone. Okay, and then a quick, very quick follow-up on IPR and tech. I mean, we've heard Jenny talk about non-smartphone IPR deals and autos and consumers and so forth. But we don't really see the run rate moving up. Maybe Marco, you want to answer that? Are these deals simply not yet materializing into real income?

Speaker Change #171: Compete on price, we need to reduce our relative dependency on that type of projects alone.

Pekka Lundmark: We need to reduce our relative dependency on that type of projects alone.

Marco Beren: Okay, and then a quick very quick follow-up on IPR and tech. I mean, we've heard Jenny talk about non-smartphone IPR deals and autos and consumer and so forth, but we don't really see the run rate moving up. Maybe, Marco, you want to answer that.

Speaker Change #172: Okay, and then a quick very quick follow up on an IPR intact. I mean, we've heard Ginny talk about non smartphone IPR deals in autos and consumer and so forth, but we don't really see the run rate moving up maybe Marco you want to answer that where are these deals simply not yet materializing into into real income or.

Marco Wirn: Or is there something in the pipeline that we can look for where that, you know, super-high-margin tech revenue starts to accelerate a little bit? My ambition is that we will continue to gain traction in this new area. Thanks, Richard.

Marco Beren: Are these deals simply not yet materializing into real income, or is there something in the pipeline that we can look for where that, you know, super high margin tech revenue starts to accelerate a little bit. Thank you. We were very pleased to sign a first video streaming deal in quarter two, and this is definitely an area that we believe that this could be a good opportunity for Nokia going forward as well. If you look in December, we gave you a run rate as well. We said that on the new growth areas, the run rate was 150 million.

Is there something in the pipeline that we can look for where that you know hop Super high margin Tac revenue starts to accelerate a little bit.

Yeah. Thank you we were very pleased to sign.

First video streaming deal in quarter two.

Speaker Change #173: And this is definitely an area that we believe that this could be.

Speaker Change #174: Good opportunity for for Nokia going forward Us wall.

Speaker Change #175: If you look in December we gave your run rate is what we said that on the new growth areas. The run rate was $150 million.

Marco Beren: And of course, there is some that we are following quite well. Hopefully, and ambition is that we will continue to gain traction in these new areas.

Speaker Change #174: And.

Speaker Change #174: Of course, there is some that we are following quite carefully and ambition is that we will continue to gain traction in these new areas.

Marco Beren: Thanks, Richard.

Richard Kramer: Thanks Richard.

David Mulholland: Ladies and gentlemen, this concludes today's call. I would like to remind you that during the call today, we made a number of forward-looking statements that involve risks and uncertainties. The actual results may therefore differ materially from the results currently expected. Factors that could cause such differences can be both external as well as internal operating factors.

David Mulholland: Ladies and gentlemen, this concludes today's call. I would like to remind you that during the call today, we've made a number of forward-looking statements that involve risks and uncertainties. Actual results may therefore differ materially from the results currently expected. Factors that could cause such differences can be both external, as well as internal operating factors. We have identified such risks in the risk factor section of our annual report on Form 20-F, which is available on our investor relations website.

Speaker Change #176: Ladies and gentlemen, this concludes today's call I would like to remind you that during the call. Today. We've made a number of forward looking statements that involve risks and uncertainties actual results may therefore differ materially from the results currently expected factors that could cause such differences can be both external as well as internal operating factors. We've identified such risks in the risk factors section of our.

David Mulholland: We have identified such risks in the risk factor section of our annual report on Form 20-F, which is available on our Investor Relations website. Thank you all for joining us today. The conference has now concluded. Thank you for attending today's presentation.

Speaker Change #176: Our annual report on form 20-F, which is available on our Investor Relations website. Thank you all for joining us today.

David Mulholland: Thank you all for joining us today. The conference has not concluded. Thank you for attending today's presentation. You may not disconnect.

Speaker Change #177: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Speaker Change #177: [music].