Q3 2024 Nokia Oyj Earnings Call

Unknown Executive: Good morning, ladies and gentlemen. Welcome to Nokia's third quarter 2024 results call.

Good morning, ladies and gentlemen, welcome to Nokia's third quarter 2024 results call I'm, David Mulholland head of Nokia Investor Relations and today with me as Pekka Lundmark, our president and CEO, along with Mark over on our CFO before.

David Mulholland: From David Mulholland, head of Nokia Invest Relations, and today with me is Pekka Lundmark, our President and CEO, along with Marco Varen, our CFO.

David Mulholland: 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 that involve 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. We have identified such risks in the risk factor section of our annual report, the Form 20-F, which is available on our Invest Relations website. Within today's presentation, references to growth rates will mostly be on a constant currency basis, and we will refer to margins.

Before we get started a quick disclaimer. During this call we will be making forward looking statements regarding our future business proposed transactions on financial performance and these statements are predictions that involve 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, 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.

But in today's presentation references to growth rates will mostly be on a constant currency basis, and we will refer to margins it will be based in our comparable reporting.

David Mulholland: It will be based on our comparable reporting.

David Mulholland: Please note that our Q3 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.

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

David Mulholland: In terms of the agenda for today's call, Pekka will go through our key messages for the quarter. Marco will then go into more detail on our financial performance, and then Pekka will make a few comments on particular highlights from Q3.

Speaker Change: In terms of the agenda for today's call Pekka will go through our key messages for the quarter. Marco will then go into more detail on our financial performance and then Pekka will make a few comments on particular highlights from Q3, well then move to Q&A with that let me hand over to Pekka.

David Mulholland: We'll then move to Q&A.

Pekka Lundmark: Without, let me hand over to Pekka. Thank you, David, and thank you for all joining us today. Overall, the big picture is that the market is turning, but it's turning slowly. We see encouraging signs of market to cover in fixed networks and IP networks. But even if it is a bit slower than we expected earlier this year, an optical networks and mobile networks remain weaker. Fix networks grew 9% in the quarter, while IP networks grew 6%. Regionally, both saw strong growth in North America as the inventory digestion is now largely behind us, and operator deployment plans have solidified.

Pekka: Thank you David and thank you for all joining us today.

Pekka: Overall, the big picture is that the market is turning but its standing slowly we see encouraging signs of market recovery and fixed networks in IP networks, but even if it is a bit slower than we expected earlier this year in optical networks, our mobile networks remain weaker fix.

Pekka: Fixed networks grew 9% in the quarter, while IP networks grew 6%.

Pekka: Regionally both saw strong growth in North America as the inventory digestion is now largely behind us and no better deployment plans have solidified.

Pekka Lundmark: Demand trends in N.I. continue to improve with solid order in the growth and a book to build a ball one. We also saw a significant improvement in our growth margin, with all business groups contributing. We continue to take quick action on our cost savings program and have now achieved 500 million euros in run rate gross cost savings. The quarter also saw a good deal of momentum. We signed a number of important deals across all business groups, and I'll touch on some of these later in the presentation. We are making progress expanding to non-CSP customers and are increasing investments to accelerate growth opportunities in areas like the fast growing data center space in defense and in private wireless.

Pekka: Demand trends in N I continued to improve with totally new order intake growth and a book to bill above one.

Pekka: We also saw a significant improvement in our gross margin with all business groups contributing we continued to take quick action on our cost savings program and have and have now achieved 500 million euros syndrome, right gross cost savings.

Pekka: The quarter also saw a good deal momentum, we signed a number of important deals across all business groups and I'll touch on some of these later in the presentation.

Pekka: We are making progress expanding non CSP customers and our increasing investments to accelerate growth opportunities in areas like the fast growing data center space in defense and in private wireless.

Pekka Lundmark: We continue to have a year of strong free cash flow generating over 600 million euros in Q3 and 2 billion euros year to date. Our financial outlook for 2024 is unchanged, and we are currently tracking in the bottom half of the range for comparable operating profit and at the high end of the range for free cash flow conversion. Finally, we have made good progress on the infinite acquisition, receiving antitrust and CFUS approval in the US, along with infinite shareholders approving the deal a couple of weeks ago.

Pekka: We continue to have a year of strong free cash cash flow generating over 600 million euros in Q3, and 2 billion euros year to date.

Pekka: Our financial outlook for 'twenty 'twenty four is unchanged and we are currently tracking in the bottom half of the range for comparable operating profit and at the high end of the range for free cash flow conversion.

Pekka: Finally, we have made good progress on the Infinera acquisition, they saving antitrust and safe approval in the U S. Along with Infinera shareholders approving the deal a couple of weeks ago, we continue to target to close the deal in H 120 25.

Pekka Lundmark: We continue to target to close the deal in H1 2025.

Pekka: Okay.

Marco Varen: And then over to you, Marco. Okay, thank you, Pekka, and hello from my side as well from the sunny Helsinki. I was not by discussing our overall group performance, and the net sales declined of 7% in quarter three was mainly driven by mobile networks.

Speaker Change: And then over to you Michael Okay. Thank you Pekka and Hello from my side, a smaller on the Sunny Helsinki.

Michael: I will start by discussing our overall.

Michael: Yeah.

Michael Okay: And the net sales declined.

Michael Okay: 7% in quarter, three was mainly driven by mobile and Brooks.

Marco Varen: Importantly, however, we delivered significant improvement cross margin, expanding by 490 basis points during the year. And this was driven by a combination of input product, regional mix, and action to reduce product cost. Our operating module was solid at 2.5%. This was supported by a strong cross margin, continuous cost control, and benefit from the reversal of loss allowances, the certain trade receivables that was recognized in other operating. We were pleased to report a strong free cash flow of over 600 million euros, which means we ended the quarter with a net cash balance of 5.5 billion.

Michael Okay: Importantly, however, we delivered significant improvement gross margin.

Michael Okay: Spending by 490 basis points year on year.

Michael Okay: This was driven by a combination of input product.

Michael Okay: On me and excellent reduce protocols.

Michael Okay: Operating margin was solid at one 5%.

Michael Okay: This was supported by strong gross margin.

Michael Okay: We'll benefit from the reversal of allowance for.

Michael Okay: For certain trade receivables that was recognized in other operating.

Michael Okay: We were pleased to report strong free cash flow.

Michael Okay: Over 600 million euros, which means we ended the quarter with a net cash balance.

Michael Okay: Five 5 billion.

Marco Varen: Now, as I turn to discuss each business performance, it is worth noting that we have lowered the net sales assumption for each of the net programs. Considering slow pace, market recovery, and effectiveness, we have also slightly adjusted the operating margin range. Network infrastructure sales showed modest during year of growth in the quarter after 5 quarters of design. We were pleased to see growth in both fixed networks and IP networks at 60. Optical networks declined by 60% optical, but the last unit started seeing the market's flow down. And we like to be the last to recover.

Michael Okay: Now as I turn to discuss each business performance. It is worth noting and we have lowered our net sales assumption for each of the network.

Michael Okay: Considering the slow pace market.

Michael Okay: Yeah.

Michael Okay: We have also slightly changed the operating margin range.

Michael Okay: Nitzberg infectious sales showed modest year on year of growth in the quarter after five quarters of decline.

Michael Okay: We've been pleased.

Michael Okay: The growth in both fixed networks.

Michael Okay: And IP network.

Michael Okay: At 6%.

Michael Okay: Optical networks declined by 18%.

Michael Okay: Recall at the last unit and start seeing the market slowdown.

And will likely be the last to recover.

Marco Varen: We were encouraged to see double GC growth in all three businesses in North America. First margins import mainly by favorable mix between business and also improvement within IP network. Operating margin was 11.8%. And this is 100 basic points improvement driven by the higher cross margin and the reduction in operating expense. Based on our current view of the market and the slow pace recovery, we now expect network infrastructure net sales to be down 3 to 6% this year. Operating margin between 10 and 12. More by network sales declined by 17. This was mainly driven by the decreased in India as 5G deployment remained elevated in the year ago quarter.

Speaker Change: We were encouraged to see double digit growth in all three businesses.

Speaker Change: In north right.

Speaker Change: Gross margins improved mainly driven by favorable mix it would mean distancing.

Speaker Change: And also improvement within eye at Brooks.

Speaker Change: Operating margin was 11, 8%.

Speaker Change: This is 100 basis points improvement driven by the higher gross margin and a reduction in operating expenses.

Speaker Change: Based on our current view of the market.

Speaker Change: The slow paced recovery, we now expect net extra net sales be down three 6% this year.

Speaker Change: And operating margin between 10 and 12.

Speaker Change: Mobile networks sales declined by 17%. This was mainly driven by a decrease in India. As finally deployment remained elevated.

In the year ago quarter.

Marco Varen: North America also declined to reflect impact lower market share one customer. Recently, first margin increased by 500 basic points, as a result of improved product cost favorable product reach on. Operating margin was 5.3% and increased of 70 basic points, very mainly by the improvement in first margin, while operating expenses were largely stable.

North America also declined.

Speaker Change: It reflects impact lower market share one tomorrow.

Speaker Change: Pleasingly gross margin increased by 500 basis point.

Speaker Change: As a result of improved product costs favorable product regional.

Speaker Change: Operating margin was five 3% an increase of 70 basis points.

Speaker Change: So we are mainly by the improvement in gross margin, while operating expenses were all stable.

Speaker Change: Stable.

Marco Varen: The revised total consumption for mobile network net sales is now the client of 19 to 22% with an operating margin of 5.7%. Cloud and network services sales declined by 4% in the quarter, and this was mainly related to the Davis with this earlier in this year, and adjusting for this, net sales would have been stable. Operating margin improved by higher cross margin and lower operating.

Speaker Change: Our revised outlook for mobile net net sale is now decline of 19%.

Speaker Change: With an operating margin of five seven.

Speaker Change: Cloud and network services.

Speaker Change: Sales declined by 4% in the quarter. This was mainly related to the diverse.

Speaker Change: Earlier this year.

Speaker Change: Adjusting for these.

Speaker Change: Net sales would have been stable.

Speaker Change: Operating margin improved by higher gross margin and lower operating.

Marco Varen: Now updated assumption for cloud and network service net is now declined of 47% with an operating margin between 6.8%. Moving next to Nokia technology, net sales grew 36% in quarter three, mainly as a result of the smartphone license. Nokia technology is also saw higher sales from automotive and IoT, including premium with point of sale payment divided. We were also pleased to be able to know that we have now started with two video stream companies for use of our technology. This is an important step for us in this new growth area. Nokia technology's annual net sales run rate has been gradually increasing in the recent quarter, but continues to round to approximately 1.3 billion euros in quarter.

Now updated Samsung or cloud and network services.

Speaker Change: It's now decline of 4% to 7%.

Speaker Change: With an operating margin between six to eight.

Speaker Change: Okay.

Speaker Change: Moving next to Nokia technologies.

Speaker Change: Net sales grew 36% in quarter three.

Speaker Change: Mainly as a result of the smartphone licensing agreements signed previously Europe.

Speaker Change: Nokia technologies also saw on your sales from automotive and Iot.

Speaker Change: Including Freeman.

Speaker Change: Point of sale payment device.

Speaker Change: We were also pleased to be able to now and we have now signed two it is.

Speaker Change: Okay.

Speaker Change: Well use of our technology.

Speaker Change: This is an important step for us in these new growth areas.

Speaker Change: And Nokia technologies annual net sales run rate is being primarily increased in the recent quarter.

Speaker Change: But unchanged it round to approximately $1 3 billion euros.

Speaker Change: Uh huh.

Marco Varen: Let's look at net sales per week. You see here that India drove the maturity of net sales in quarter three. The region still saw the heavy fire deployment in the quarter, and 43% declined. Also growth knowing was North America, a strong growth net growth infrastructure was offset by mobile net growths. Indeed, overall, the net growth sector grew 21% in quarter. Another region showed declines, with the exception of Europe, which showed 1% growth. However, this was entirely due to Nokia technology, which is fully reported in this region.

Speaker Change: Let's look at our net sales per week.

Speaker Change: You'll see here that India throw the majority of the net sales decline.

Speaker Change: Three.

Speaker Change: The regional install the heavy fiber deployment or a quarter and a 43% decline.

Speaker Change: Also worth noting was North America.

Speaker Change: We're strong growth net broke infrastructure was offset by mobile networks.

Speaker Change: Indeed overall Americas for networking Xtra grew 21% water.

Speaker Change: Other regions showing declines with exception of Europe.

Speaker Change: So 1% Roe.

Speaker Change: However, this was entirely due to launch which is fully reported.

Marco Varen: An excluding Nokia technology is net sales Europe would have declined by approximately 1.7 billion euros. Sorsen.

Speaker Change: Reeds and.

And excluding Nokia technologies net sales in Europe would have declined by approximately one 7%.

Marco Varen: And looking at our cash in 43, we saw another quarter of strong free cash flow at over 600 million euros. This was driven by solid operating profit and changes in working capital, which benefited from lower receivables. Hearing the order, we also returned 36 million euros to shareholders, to dividends and share buybacks. And we ended the order with the net gas position of 5.5 billion euros.

Speaker Change: And looking at our cashed in quarter three we saw another quarter of strong free cash flow at over 600 million euros.

Speaker Change: This was driven by solid operating profit and changes in working capital.

Speaker Change: Which benefited from lower receivables.

Speaker Change: During the quarter. We also returned 360 euros to shareholders through dividends and share buybacks.

And we ended the quarter with a net cash position of five point why.

Speaker Change: Europe's.

Marco Varen: With that, let me hand it back to my question.

Speaker Change: With that let me hand, it back to Walmart.

Speaker Change: Yeah.

Pekka Lundmark: Thank you, Marco. The first topic I want to cover in this section is the market outlook. As we started this year, we knew parts of the market would remain challenging, such as mobile networks, given the tough comparison in India after significant 5-year-olds. We were, however, optimistic in areas like IP and that areas like IP and fixed networks would start to recover in the second half of the year. As inventory dynamics would normalize, and lower interest rates could help stimulate investments. Looking at the market today, I mean, courage that we are now seeing and improving dynamic in fixed networks and IP and networks, with the inventory issues now largely behind us.

Walmart: Thank you Marco.

Walmart: The first topic I want to cover in this section is the market outlook as we started this year with new parts of the market will remain challenging such as mobile networks, given the tough comparison in India. After a significant five year rollouts.

Walmart: We were however optimistic.

Walmart: In areas like IP in that areas like IP and peaks networks would start to recover in the second half of the year as inventory dynamics would normalize and lower interest rates could help stimulate the investments.

Walmart: Looking at the market today.

Walmart: I'm encouraged that we are now seeing an improving dynamic in fixed networks and IP networks with the inventory issue is now largely behind us.

Pekka Lundmark: However, as you can see in the slide, the overall market dynamic has clearly been weaker than anyone expected at the start of the year, and this continues to impact our net sales assumptions. Our focus during this period has been on managing our cost base and executing against our strategic pillars. This means ensuring that we win deals that can expand our footprint, maintaining our pricing discipline, and investing to diversify our business and drive expansion in high-growth, non-CSP markets. Mobile networks is a good example of this. We have been seeing really good deal momentum in recent months, evidenced by wins with a wonderful idea, entity, document, Japan, and then also in Brazil, New Zealand, and Vietnam, where we have either gained or maintained market share.

However, as you can see in the slide the overall market dynamic has clearly been weaker than anyone expected at the start of the year and this continues to impact our net sales assumptions.

Walmart: Yeah.

Walmart: Our focus during this period has been managing our cost base and executing against our strategic pillars. This means ensuring that we win deals that can expand our footprint, maintaining our pricing discipline and investing to diversify our business and drive expansion in high growth non CSP markets.

Walmart: Mobile networks is a good example of this.

Walmart: We have been seeing really good deal momentum in recent months evidenced by wins with Vodafone idea NTT Docomo in Japan, and then also in Brazil, New Zealand and Vietnam.

Walmart: We have either gained or maintained market share.

Pekka Lundmark: In addition to the deals we have been winning, the team has also done an excellent job in managing their cost base. At our progress update in December of last year, don't be provided details and mobile networks revamped strategy, and how MN would rebase line its operations. Improve its go-to-market and drive productivity and efficiency through the business. You can see here on the slide that, through many of these actions, mobile networks has been able to reduce product costs, which in turn has been driving improvements in gross margin in recent quarters. MN has also been taking quick action on operating expenses, which were down approximately 6% year on year in Q3 when excluding the impact of variable pay accruals.

Walmart: In addition to the deals we have been winning the team has also done an excellent job in managing their cost base.

Speaker Change: At our progress update in December of last year don't me provided details in mobile networks revamped strategy and how M and would re baseline its operations improve its go to market and drive productivity and efficiencies through the business you can see here on the slide that through many of these actions mobile networks has been able to reduce.

Speaker Change: Product costs, which in turn has been driving improvements in gross margin in recent quarters.

Speaker Change: <unk> has also been taking quick action on operating expenses, which were down approximately 6% year on year in Q3, when excluding the impact of variable pay accruals.

Pekka Lundmark: We said last December that by 2026 we would lower the approximate net sales required to deliver double digital operating margin in mobile networks from 11.5 billion euro to 10 billion euro. We have now further lowered this required net sales level for a double digital operating margin to 9.5 billion euros over the same time frame.

Speaker Change: We said last December that by 'twenty 'twenty, six we would lower the approximate net sales required to deliver a double digit operating margin in mobile networks from 11.5 billion Euro to 10 billion Euro.

Speaker Change: We have now further lowered this required net sales level falling for a double digit operating margin to 9.5 billion euros over the same timeframe.

Speaker Change: [laughter].

Pekka Lundmark: Moving on to network infrastructure and the current market dynamics. I know Federico and his team gave you a detailed explanation recently with our progress update event this September, but I will revisit some of the key opportunities we see. In fixed networks, there remains a significant opportunity as more homes are connected with fiber. Currently, around 70% of homes excluding China do not have fiber. Operators around the globe continue to show a strong appetite to drive fiber connectivity higher. There are also significant government programs starting to take effect. We continue to expect some of our first revenue under the USB program in Q4 this year.

Speaker Change: Moving on to network infrastructure and the current market dynamics.

Speaker Change: I know Federico and his team gave you a detailed explanation recently with a progress update event in September, but I will revisit some of the key opportunities we see.

Speaker Change: In fixed networks, there remains a significant opportunity as more homes are connected with fiber currently around 70% of homes, excluding China do not have fiber.

Speaker Change: Operators around the globe continued to show a strong appetite to drive fiber connectivity higher.

Speaker Change: There are also significant government programs starting to take your pick we continue to expect some of our first revenue under the U S be it program in Q4. This year. The program has taken time to build momentum, but this is now starting to move fast with all states, having volume one approved and good progress in volume too.

Pekka Lundmark: The program has taken time to build momentum, but this is now starting to move fast, with all states having Volume 1 approved and good progress in Volume 2. We continue to see good progress in mature markets moving to upgrades with XGN and XGS and 25GPON. In addition, we see good market expansion opportunities with fixed wireless, which is ramping again in some markets, including India, and a new opportunity will call optical land. This is where enterprise customers would use passive optical equipment for in-building networks such as in offices. You can create a future-proof network supporting all the way up to 100 gigabits per second, which is also highly power-efficient and over time could take share from the campus Ethernet switching market.

Speaker Change: We continued to see good progress in mature markets moving to upgrades was sick with X G N.

Speaker Change: And X T S and 25 G PON.

Speaker Change: In addition, we see a good market expansion opportunities with fixed wireless, which is ramping again in some markets, including India and a new opportunity with quote optical Lan.

Speaker Change: This is where enterprise customers would use passive optical equipment for in building networks, such as interfaces you can create a future proof network supporting all the way up to 100 gigabit per second which is also highly power efficient and over time could take share from the campus Ethernet switching market.

Pekka Lundmark: For optical networks, we continuously talked a lot about this already back in June when we announced the Infinite acquisition. The market is clearly weak today and may take some time to recover. We feel confident about the future opportunity; however, PSC 6S has put us in a technology leadership position that continues to resonate with customers. We also look forward to the pending infinite acquisition that will significantly increase our scale in North America and exposure to web scale customers. I believe the future combined up company will be extremely well positioned for future growth and, importantly, towards new AI driven data center opportunities.

Speaker Change: For optical networks, we continuously talk there look we we obviously talked a lot about the this already back in June when we announced the Infinera acquisition. The market is clearly weak today and may take some time to recover we feel confident about the future opportunity. However, P. S. A six S as puds.

Speaker Change: I've seen the technology leadership position that continues to resonate with customers. We also look forward to the pending Infinera acquisition that will significantly increase our scale in North America and exposure to web scale customers.

I believe the future combined company will be extremely well positioned for future growth and importantly to which new AI driven data center opportunities.

Pekka Lundmark: Finally, in IP networks, our market position in service provider edge routing remains strong with our market-leading FP5 and FPC X-based products. We have seen a growing opportunity in the enterprise and web scale markets, having signed some important deals recently. We are increasing investments in this space as we see a significant opportunity to diversify our IP networks business with mission critical networks and also into the data center. We are investing to expand our product portfolio to accelerate these opportunities. Various estimates put the TAM in these areas at about 20 billion euro, so it's a great opportunity for us to grow into.

Speaker Change: Finally in IP networks.

Speaker Change: Our market position in service provider edge routing remains strong with our market leading F. B five an F. B C X based products, we have seen a growing opportunity in the enterprise and web scale markets, having signed some important deals recently.

Speaker Change: We are increasing investments in this space as we see a significant opportunity to diversify our IP networks business with mission critical networks and also into the data center, we are investing to expand our product portfolio to accelerate these opportunities various estimates put the etame in D. C areas at about 20.

Speaker Change: Billion Euro so it's a great opportunity for us to grow into and just as a reminder to put that 20 billion in perspective, we estimate that our service provider Tammy surround 84 billion euro at the moment. So this will be a significant addition to our Tam.

Pekka Lundmark: And just as a reminder to put that 20 billion in perspective, we estimate that our service provider TAM is around 84 billion euro at the moment. So this will be a significant addition to our TAM when we move forward.

Speaker Change: When we when we when we move forward.

Pekka Lundmark: In terms of some more tangible elements of our progress on the diversification of IP into enterprise and web scale, we can see on this slide some of the progress we have made in this strategic pillar. Korgweev is an AI hyperscaler and will deploy our IP routing and optical transport portfolios globally as part of an expensive backbone build-out, with immediate rollout across Korgweev's data centers in the U.S. and Europe. This is an important win for us, and we are excited to start on this journey with them. We also recently announced the new product with the launch of our event-driven automation platform, or EDA.

Speaker Change: In terms of some more tangible elements of our progress on the diversified diversification of IP into enterprise and web scale. We can see on this slide some of the progress we have made in this strategic pillar.

Speaker Change: Core we have is an AI hyperscale or and will deploy our IP routing and optical transport bulk portfolios globally as part of an expensive backbone build out extensive backbone buildout with immediate rollout across core waifs data centers in the U S and Europe.

Speaker Change: This is an important win for us and we are excited to start on this journey with them well.

Speaker Change: We also recently announced a new product with the launch.

Speaker Change: Of our event driven automation platform or E. D. A with EDA you can automate the entire data center network life's lifecycle from design to deployment and into operation.

Pekka Lundmark: With EDA, you can automate the entire data center network lifecycle from design through deployment and into operation. This abstracts a lot of the complexity of managing multivendor networks and really complements our SR Linux network operating system.

Speaker Change: This abstract so lot of the complexity of managing multi vendor networks and really complements our ESR Linux network operating system.

Pekka Lundmark: In cloud and network services, the market remained challenging, but we have seen excellent momentum in 5G core. We continue to drive our leadership position in the 5G core market, and today Nokia leads the world in 5G live core networks. Our key differentiator, one key differentiator for us, is in how we are driving the cloud native transformation, giving operators flexibility in how they want to deploy their network. This transition to cloud native is a critical enabler of the desire to create more programmable and automated networks in the future. We have supported this wireless with the launch of the first Telco network using 5G standalone core on AWS and have since also deployed 5G core networks on public clouds with O2, Telefonica Deutschland, Comcast, and Telnet to name a few.

Speaker Change: In cloud and network services the market remained challenging, but we have seen excellent momentum in five G core.

Speaker Change: We continue to drive our leadership position in the five G core market them today Nokia leads the world in five July quarter networks, our key differentiator one key differentiator for US is in how we are driving the cloud native transformation, giving operators flexibility in how they want to deploy their networks.

Speaker Change: This transition to cloud native is.

Speaker Change: He is a critical enabler of the desire to create more programmable and automate their networks in the future.

Speaker Change: We have support the dish wireless with the launch of the first telco you net telco network using five G. A standalone core on AWS and have seen also deployed five G core networks in public clouds with O two Telefonica Deutschland com.

Speaker Change: Comcast and Telenet to name a few.

Pekka Lundmark: We mark the one year anniversary of the launch of our network as code platform in September, ending the quarter with more than 20 network API partners globally, including many of the world's leading CSPs, for example, British Telecom, Orange, Telefonica, and Deutsche Telekom Germany, as well as ecosystem partners such as Infobip and Google.

Speaker Change: We mark the one year anniversary of the launch of our network is code platform in September ending the quarter with more than 20 network API partners globally, including many of the world's leading Csp's for example, British Telecom Orange, Telefonica, and Deutsche Telekom, Germany, as well as ecosystem partners.

Speaker Change: Such as info and Google.

Pekka Lundmark: Regarding our comparable operating profit outlook, this remains unchanged. While we have lowered the net sales outlook assumptions for our business groups, this is being compensated for by high gross margins and the progress we are making of cost savings. We are currently tracking within the bottom half of comparable operating range and at the high end of our free cash flow range.

Speaker Change: Regarding our comparable operating profit outlook. This remains unchanged, while we have lowered the net sales outlook assumptions for the base for our business groups. This is being compensated for by high gross margins and the progress we are making a cost savings. We're currently tracking with them bottom half of compare.

Speaker Change: <unk> operating range and at the high end of our free cash flow range.

Pekka Lundmark: So in conclusion, as we have outlined, the overall market weakness that has characterized this year showed some signs of improvement, with growth in both fixed networks and IP, and stabilization in cloud and network services. We are pleased to see strong gross margin across all business groups, reflecting positive regional and product mix, as well as the impact of the cost savings measures we announced earlier. Positively, we saw some good deal momentum, particularly mobile networks, where we have been winning new business in Brazil, India, Japan, Vietnam, and New Zealand. Our strong cash performance means that we have 5.5 billion euro net cash at the end of the quarter, and if you recall, we have also accelerated the share buyback program.

Speaker Change: So in conclusion as we have outlined the overall market weakness that has characterized this year showed some signs of improvement with growth in both fixed networks, and IP and stabilization in cloud and network services.

Speaker Change: We are pleased to see strong gross margin across all business groups, reflecting positive regional and product mix as well as the impact of the cost savings measures, we announced earlier.

Speaker Change: Positively we saw some good deal momentum, particularly mobile networks, where we have been winning new business in Brazil, India, Japan, and Vietnam and New Zealand.

Speaker Change: Our strong cash performance means that we have $5 5 billion Euro net cash at the end of the quarter and if you recall, we have also accelerated the share buyback program. Finally, as we just shared we are tracking within the ranges we set for the full year with that let me hand over to David for Q&A.

Pekka Lundmark: Ram. Finally, as we just shared, we are tracking within the ranges we set for the full year.

David Mulholland: With that, let me hand over to David for Q&A. Thank you, Pekka and Marco.

Thank you Pekka and Marco before we move to the Q&A session. Just a quick comment on some of our plans in terms of investor events, and we are planning we need to hold a capital markets day in 2025 after the Infinera deal has closed.

David Mulholland: Before we move to the Q&A session, just a quick comment on some of our plans in terms of investor events. We are planning to hold a capital markets day in 2025 after the Infinity deal has closed. Obviously, there's still a bit of uncertainty around the timing on exactly when that will be, so we don't have an exact day yet, but we'll communicate such as soon as we're able to.

David: Obviously, there's still a bit of uncertainty around the timing on exactly when that will be so we don't have an exact date, yet, but we'll communicate such as soon as we're able to.

Alice: So, with that, let's start with the Q&A. As usual, for the Q&A session, as a courtesy to others in the queue, please limit yourself to one question and a brief follow-up.

David: So with that let's start with the Q&A as usual for the Q&A session as a courtesy to others in the queue. Please limit yourself to one question and a brief follow up Alex could you. Please give the instructions.

Alice: Alice, could you please give the instructions? We will now begin the question and answer session. If you are also using the webcast, please remember to mute the audio on your computer before asking your question. As the base of 30 seconds delay to ask a question, you may press star, then one on your telephone keypad. If you are using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two.

Alex: We will now begin the question and answer session. If you you're also using viewing the webcast. Please remember to mute the audio on your computer the fast can your question. That's the basis that he second today to ask a question. You May question Star then one on your testing keypad. If you are using a speakerphone. Please pick up your handset before pressing the keys to it.

Alex: Your question. Please press Star then two I will now hand, the call back to Mr. David Mulholland.

Joachim Gunell: I will now hand the call back to Mr. David Moholand. Thanks, Alice. We'll take our first question from Joachim Gnell from BNP, or D&D. Joachim, please go ahead. Thank you for Dr. David. So can you just help us understand here how much of this considerable growth margin improvements done from structural actions, supply chain, utilization, and total, as opposed to geographic mix? And just comment on whether this one of AR benefits actually impact the growth margin, or is it more on the OPEC side? Thank you.

David Mulholland: Thanks, Alex we'll take our first question from Joachim Gunnell from BNP are Dnb Jochen. Please go ahead.

Joachim Gunnell: Thank you for death of it. So can you just help us understand here how much of the considerable gross margin improvements coming from structural actions supply chain utilization.

Joachim Gunnell: Sell apparel as opposed to geographic mix.

Speaker Change: Just a comment that it is what it is.

Speaker Change: One of our benefits actually impact the gross margin or is it more.

Speaker Change: Thank you.

Marco Varen: Thank you, Joachim.

Michael Okay: Thank you Joachim.

Marco Varen: And I started with the reversal of the allowance of trade receivables. And just to be very clear, that did not impact the growth margin. We always booked those in other operating income and expenses. And what comes to the growth margin performance in the quarter, I would say that it's quite equal what comes to product mix and regional mix, and also the product cost reductions that we have.

Speaker Change: And I start with the reversal of the allowance.

Michael Okay: Allowance.

Speaker Change: Trade receivables and just to be very clear that did not impact the gross margin. We always book those in other operating income and expenses.

Speaker Change: And what comes to gross margin performance.

Speaker Change: In the quarter.

I would say that it's quite equal what comes to your product mix and regional mix.

Speaker Change: And also the product cost.

Speaker Change: Reductions that we have.

Joachim Gunell: Did you have a follow-up, Joachim? Yes, very briefly. So on the order intake moment because you're different NIH units, and could it be sequentially lowered net sales functions? Can you just discuss the trajectory here on a unit basis, where is the incremental strength and weakness?

Speaker Change: Did you have a follow up Jonathan.

Speaker Change: Yes, very briefly so on the order intake momentum across your different in our units in the quarter to sequentially lower net sales assumptions can you just the stuff.

Trajectory here.

Speaker Change: With a unit basis, where were you seeing incremental strength in the business. Thank you.

Pekka Lundmark: Thank you. First of all, as I already said, the overall trajectory is turning. But of course, we recognize that we continue to have a top one challenge. The good thing is that since now, Q4, last year, we have had positive momentum in orders and book to bill more than one. So that means that the order backlog is building. It is building now, especially in fixed and IP, more so than in optical. And then, from a geographical point of view, an extremely encouraging sign is that the momentum is picking up strongest in North America, because that was also the first market that started to weaken when the cycle turned about a year and a half, two years ago.

Speaker Change: First of all as I already said the overall trajectory is S. Sterling, but of course, we recognized that we continue to have a habit of topline.

Speaker Change: <unk> are the good thing is that the.

Speaker Change: Since now.

Speaker Change: Q4 last year, we have had positive momentum in orders and book to Bill more than one so the order, but that means that the order backlog is is building.

Speaker Change: It is building now, especially in fixed and IP more show that then in optical and then from a from a geographical point of view.

Speaker Change: And extremely encouraging sign is that the momentum is picking up strongest in North America. Because that was also the first market that that started to weaken when the cycle turned about a year and a half two years ago.

Pekka Lundmark: And now it seems to be driving growth also. We actually had double-digit growth in North America in all units of NIH. So that's where the growth is coming in. Additional comment there, another positive thing is that now the momentum in NIH is picking up with tier one or there's also no. from America.

Speaker Change: And now it seems to be driving our growth also we actually had double digit growth in North America and all.

Speaker Change: It's of of Eni, So that's whether that's where the growth is coming at additional comment there.

Speaker Change: Another positive thing is that now the momentum in NII is picking up with tier one operators also in North America.

Simon Leopold: Thank you. We'll take our next question from Simon Leopold from Remy James. Simon, please go ahead. Thank you very much for taking the question. I wanted to follow up on this announcement you had the quarter, regarding CoreWeave win, as I think a good reference for gaining some exposure to AI.

Speaker Change: Thank you Jeff Thank you.

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 I wanted to follow up on this announcement you had the quarter regarding our core we win.

Simon Leopold: As I think a good reference for gaining some exposure to AI.

Pekka Lundmark: I wonder if you could elaborate how you see opportunities like this evolving in your business, and then more broadly, how to think about the longer-term strategy of evolving the customers away from the telco base into more enterprise-like opportunities. Thank you. Yeah, thanks, Simon. This is obviously in the very core of our strategy. This whole question, as I said earlier, our telco time is 84 billion data center. Time is currently at 20 billion, albeit we are not yet able to address all of it, but we are gradually getting towards that goal. That 84 billion, even though the telco time is expected to recover somewhat next year.

Simon Leopold: Wonder if you could elaborate how you see opportunities like this evolving in your business and then more broadly how to think about the longer term strategy.

Simon Leopold: Strategy of evolving the customers await the telco base into more enterprise like opportunities. Thank you.

Yeah. Thanks. Thanks, Simon this is obviously in the very core of our strategy of this whole question I thought I said daily Arrow with Telco Tammy say 84 billion a data center Tam is currently at 20 billion, albeit we are not yet able to address all of it but we are gradually getting towards that.

Simon Leopold: The goal that 84 billion, even though the telco Tam is expected to recover.

Pekka Lundmark: But we have to be realistic. I mean, telco time will never be a significant growth market. So the only way to grow there will be through taking market, which we of course targeting, but it's not the growth market. Data centers will be our number one growth target for the coming years. There will be others as well, but that would be the number one. And we already have references like Apple and Microsoft in this space, but the reason why Corviv is so important is that they are now the leading GPU as a service company, and they have now taken pretty much our entire portfolio, both on the IP side and optical side.

Simon Leopold: Somewhat next year, but we have to be realistic I mean, telco Tam will never be a significant growth market. So the only way to grow there will it be through taking market share, which we of course targeting but it's not the growth market data centers.

Simon Leopold: We'll be our number one growth targets for the coming years, there will be others as well, but that will be the number one and we already have reference tastes like Apple and Microsoft in this space, but the reason why core wave is so important is that they are now the leading G. P. U S. S service.

Simon Leopold: Company and and they have now taken pretty much our entire portfolio both on the IP side and optical side.

Pekka Lundmark: And as we know, AI is driving new business models, and one of the business models is clearly GPU as a service. If you look at what's even some of the operators like Team Mobile did in their capital markets, they are talking about an opportunity to look into GPU as a service. In as an add on to their business, and then of course there is the significant hyperscaler opportunities and smaller data center opportunities. So this is something that this particular application is going to be driving significant growth opportunities for us.

Simon Leopold: And as we know AI is driving new business models and one of the business model is east clearly J P. U S service. If you look at what's even some of the the operators like T. Mobile did in their capital markets day. They are talking about an opportunity to look into J P. USA service.

Simon Leopold: In as an adjunct to their business and then of course. There is there is the significant hyperscale or opportunity of DSM smaller data center opportunity. So this is something that this particular application is going to be driving significant growth opportunities for us watching Mike talked about this in our recent there now.

Pekka Lundmark: Watch and Mike talked about this in our recent I event in September, and what we plan to do then going forward is that once we get the once we get the infinite real closed, we will arrange a capital market day where we will then do a deep dive into our growth segments outside of telcos, and obviously it goes without saying that this will be the number one target for that. Opportunity because we are already today quite well exposed to data centers on the IP side, but then the infinite deal will significantly increase our exposure also on the optical side and it will help us to get more and more inside the data center fabric because the role of optics will increase also not only in connections between data centers but gradually also inside data centers.

Simon Leopold: Event in September and what we plan to do then going forward is that once we get the once we get the Infinera deal closed we will arrange.

Simon Leopold: A capital market day, where we will then do a deep dive into our growth segments outside of telco Shannon.

Simon Leopold: Obviously, it goes without saying that this will be the number one target for that for that.

Simon Leopold: Opportunity because we are already today.

Simon Leopold: Right well exposed to that.

Simon Leopold: <unk> on the IP side, but then the Infinera a deal will significantly increase our exposure also on the optical side and it will help us to get more and more inside the data center fabric because the role of optics will increase also not only in connections between data centers, but but.

Simon Leopold: Ideally also inside data centers, when we are connecting service to each other and once we get there.

Pekka Lundmark: When we are connecting service to each other, and once we get there, that market will be of extremely high volumes. But again, I know that we will need to get more tangible on this and talk about concrete targets and revenue targets and so on. That's what we will be doing when we get infinite a closed and then then arrange a Capital Market Day for this. Stappis, great for looking forward to that.

Simon Leopold: That market will be of extremely high volumes, but again I know that are that we will need to get more tangible on this and talk about a concrete target center revenue.

Simon Leopold: Revenue targets also and that's what we will be doing when we get the Infinera close and then they're in a range of capital market day for this purpose.

Speaker Change: We're looking forward to that and as a quick follow up.

Pekka Lundmark: As a quick follow-up, could you talk about your outlook beyond the fourth quarter for the Indian market, particularly considering the Vodafone Idea award you also announced recently? Of course, happy to do that. Just as a quick reminder, in 2022, our Indian top line was about 1.3 billion. And then last year we had significant growth to 2.8 billion because of the 5G rollout. We said already then that last year was an exception, but we are building in a way a new, new normalized trend rate that will be above what we had in 2022. And that's exactly what is, what is happening.

Speaker Change: Could you talk about your outlook beyond the fourth quarter.

Speaker Change: For the Indian market, particularly considering the Vodafone idea award you also announced recently.

Speaker Change: Of course.

Speaker Change: To do that.

Speaker Change: That's a quick reminder in.

Speaker Change: In 2022, our Indiana topline was about $1 3 billion.

Speaker Change: And then last year, we had significant growth to 2.8 billion because showed the five G. Five G rollout, we said already than that last year was an exception, but we are building in a way a new new normalized run rate that will be above what we had in 2022 and that's exactly what is what is happening we have.

Pekka Lundmark: We have been talking about this 1.5 to 2 billion. We are currently tracking closer towards the lower end of that scale, but nevertheless, we will be clearly above the 22 levels.

Speaker Change: <unk> been talking about this one five to 2 billion. We are currently tracking closer to watch the the lower end of that scale, but nevertheless, we will be clearly above the 22 levels and the good news is that we are expecting meaningful growth next year waterfall an idea obviously.

Pekka Lundmark: And the good news is that we are expecting meaningful growth next year. Vodafone Idea, obviously, is a new deal for us. And also, the investments of the two other leading operators in India this year have been significant, lower than last year. And there are reasons to believe that they would also start recovering. So clearly, India will be one of our growth drivers next year.

Speaker Change: It's a new deal.

Speaker Change: For us and also the investments of the two other leading operators in India. This year have been significantly lower than last year and there are reasons to believe that that they would also start recovering so clearly India will be one of our growth drivers next year.

Sami Sarkamies: Thank you, Simon. We'll take our next question from Sami Sarkamis from Danske Bank. Sami, please go ahead. Hi, thanks. I would like to continue on mobile networks. Your sales this year will be below 8 billion, including about half a billion from AT&T. I guess you need to find about 2 billion euros of additional sales in order to reach your goals. Can you elaborate on how much of this is covered by the number of deals that you have announced during the third quarter? And when will these new deals start to be visible in your financials? Well, Sami, of course, as it's typical to mobile networks deals, you sign a deal, and then those revenues will start coming in gradually during the future quarters and years.

Speaker Change: Thank you Simon will take our next question from somebody Sarcomere from Danske Goodbye Sammy. Please go ahead.

Sammy: Oh, hi, Thanks, I would like to continue on mobile it for.

Sammy: Your sales team this year will be below 8 billion, including about half a billion from AT&T.

Speaker Change: I guess you need to find about 2 billion euros of additional sales in order to reach your goals can.

Speaker Change: Can you elaborate on how much of this is covered by the number of deals that you have announced during the third quarter and when will these new deals start to be vehicle in your financials.

Speaker Change: Well, Sam we of course as as is typical to mobile networks DLC you sign a deal and then when those revenues will start coming in gradually.

Speaker Change: During the future quarters and.

Pekka Lundmark: So that is something that is not something that when you sign a deal that then all of a sudden in the next quarter, you have watched revenue. I mean, they are taking us to the right direction, but obviously we need more deals than this; this is not yet enough. And there is now, as you know, a general expectation, including by the market analysts, that the mobile network market that declined significantly this year will start to recover next year. Let's see how quickly that comes, but expectations are there. We have, after the AT&T decision, which of course was a big negative to us, after that we have been winning much more than what we have lost.

Speaker Change: Yes, so that is something that is not something that when you sign a deal that then all of a sudden into next quarter. You have you have watch.

Speaker Change: Revenue I mean, they are taking us to the right direction, but obviously, we need more deals than this is this is not yet enough and there is now a.

Speaker Change: As you know a general expectation, including by the market analysts that the mobile networks market that declined significantly this year, we'll start to recover.

Speaker Change: Next year.

Speaker Change: Let's see how quickly that comes but our expectations are there we have after the AT&T edition, which of course was a big negative to us after that we have been winning much more than what we have lost so in daylight. The temps in the new deals we have kept increasing our market share ex AT&T. So that is a promise.

Pekka Lundmark: So in relative terms in the new deals, we have kept increasing our market share X AT&T.

Pekka Lundmark: So that is a promising sign, but again the deals that we have signed in Q3 are not yet going to be enough; more will be needed.

Speaker Change: Sign but again the deals that we have signed in Q3 are not yet going to be enough more will be needed and then of course very important is that in mobile networks.

Pekka Lundmark: And then, of course, very important is that in mobile networks, we continue to work on the non-CSP segments, private wireless, where we are a market leader. We have almost 800 customers in that segment at the moment. Fast growth. And then a little bit longer, more longer term, mid to mid to long term, kind of second half of the 2020 story, increasingly important will be the defense industry where we have promising traction. We'll talk more about this at the upcoming capital markets day. We are integrating the offering of Phoenix with Nokia 5G platform. And of course, the reason why we are doing this is that despite the fact that in the defense market sales cycles are long, but once you are in, you are in for a long term.

Speaker Change: We continue to work on the non CSP segments private wireless where we are a market leader, we have almost 800 customers in that segment at the moment fast growth.

Speaker Change: And then.

Speaker Change: Little bit a longer more longer term mid to mid to long term, it's kind of second half of the 'twenty 'twenty story increasingly important will it be the defense index. The way we have promising traction we'll talk more about this at the upcoming capital markets day, we are integrating the offering of feed.

Speaker Change: Next with the Nokia five G platform and of course. The reason why we are doing is that despite the fact that in the defense market sales cycles are long, but once you are in you are in and you are in for a long time and of course, a much important until there is a it's a promising so that's why.

Sami Sarkamies: And of course, my important, so there is is promising. So that's why we feel that strategically it is extremely important to get additional coverage for the two billion annual R&D investment that we are putting in in mobile networks. And part of the volume targets there obviously will increasingly be non-CSP segments even though we do expect also the CSP market to somewhat recover. Thank you.

Speaker Change: We feel that that theoretically it is extremely important to get additional coverage for the $2 billion annual R&D investment that we are putting in in mobile networks and a part of the volume targets. There obviously will the will increasingly be non CSP segments.

Speaker Change: Even though we do expect also the CSP market to somewhat recover next year.

Pekka Lundmark: Did you have a follow-up, Sami? Maybe one on the course savings program. You're still talking about one billion euro savings target, even though the recovery is happening much slower than anticipated. Why haven't you stepped up to 1.2 billion already?

Speaker Change: Did you have a follow up Tony.

Maybe one on the cost savings program, you're still talking about a 1 billion euros savings target, even though the recoveries happening yeah.

Speaker Change: A much slower than anticipated why why haven't you step up to $1 2 billion already.

Pekka Lundmark: Yeah, thank you, Sami. I'm going to say that we are quite happy how fast we've been able to get actually traction and results on the cost saving programs. So, as we said also, that run rate in cost savings is now 500 million and so far this year. And we would definitely see that the pace of the program has been extremely satisfactory. And if you look also at a number of employees, at the end of quarter three, we had 78,000 employees. And this is down from 86,000 that we had when we announced the program. So very rapid development here.

Speaker Change: Yeah. Thank you Sammy.

Speaker Change: I'm, just saying that we are quite happy how fast we've been able to he had actually traction and results on the cost saving programs.

Speaker Change: We said also that our run rate in cost savings is now 500 million.

Speaker Change: And so far this year.

Speaker Change: And we definitely.

Speaker Change: See that that.

Paying something.

Speaker Change: The program has been extremely and satisfactory.

Speaker Change: And if you look also number of employees.

Speaker Change: At the end of quarter, three we had 78000 employees.

Speaker Change: And this is down from 86000 that we had when we announced the program.

Speaker Change: So very rapid development here and as you remember about 60% of the telecast saving program of 800 to $1 2 billion.

Pekka Lundmark: And as you remember, about 60% of the cost saving program of 800 to 1.2 billion is from more money. And then 30% in CNS and the remaining part is from NIN and corporate functions. And the target range that we have becomes the number of employees is 72 to 77%. But of course, when after we have divested ASM, they have about 2,000 employees. So we will adjust the targets after we have closed the deal as well accordingly. But the main reason why we have an interval or range in the cost savings between 800 to 1.2 is that we can fast change and adjust based on what we see on the market.

Speaker Change: Is at for mobile networks.

Speaker Change: And and then 30% in CNS and the remaining part of from an eye on and corporate functions.

Speaker Change: And at the target range that we have with comes to number of employees is similar to the 77%.

Speaker Change: Allison but of course, when after we have divested a S. N. They have about 2000 employees. So we will adjust the targets after we have close.

Speaker Change: Close to the last wall Accordingly, but the main reason why we have an interval wall or a range in the cost savings between 800 to one to ease that we can fast.

Speaker Change: Changed and just based on what we see in the market.

Pekka Lundmark: And as I said, we have started extremely fast this program now. And maybe to add just one small but important thing to what Marko said, obviously we are not quite even yet within the range. Target is range. We are getting very close to the upper end of that range. But we have always said that it will then ultimately remember this is an end 26 target, and we have executed extremely fast now. And where we will ultimately end will depend very much on the pace of the market market recovery. But so far we have been executing extremely fast, and just as an additional proof point, we have today announced to the employee representatives an intention to reduce another 350 jobs in Europe.

Speaker Change: And as I said, we have started extremely fast this program now.

Speaker Change: And maybe to add just one small but important I think to what Marco Marco said, obviously, we are not quite even yet within the range target range. We are getting very close to the upper end of that range, but we have always said that it will then ultimately remember this is an end 26 target then we have executed it extremely fast now and where we will out.

Speaker Change: Italy and will depend very much on the pace.

Speaker Change: <unk> of the market a market recovery, but so far we have been executing extremely fast and just then that's an additional proof point, we have a we have today announced today.

Speaker Change: To the <unk>, Inc.

Speaker Change: Employee representatives and intention to dip reduce.

Speaker Change: Another 350.

Speaker Change: 50 jobs are in Europe that is just one additional proof point that.

Pekka Lundmark: That is just one additional proof point as to that we are not yet done with this program.

Speaker Change: We are not yet done with this program.

Speaker Change: Thanks, Tommy and we'll take our next question from Artem <unk> from Seb Artem. Please go ahead.

Artem: Yes, hi, and thank you for taking my question. So I would like to ask you about API strategy and progress on that front could you maybe talk about this topic. It has been more in focus recently, given annoys JV between Ericsson and some 12 global CSP sent a what do you think about this type of development.

Pekka Lundmark: So what do you think about this type of developer? Yes, thank you, Artem. This is obviously another extremely important question, and first of all, I have to say that I'm happy to see that joint venture announcement because what it will do to the market, that in addition to the actions that we are taking, it will accelerate the API economy because ultimately, ultimately, why is this important? It will boost operating operators' ability to monetize their investment, and the faster that ecosystem develops and the better we are able to open up network capabilities and the network resources to application developers, the better for operators, and ultimately, that will support operator investments into the network.

Speaker Change: Yes, Thank you Tim.

Speaker Change: This is obviously another extremely important question there first of all I have to say that.

Speaker Change: I'm happy to see that.

Speaker Change: The joint venture announcement, because what it will do to the market is that in addition to the actions that we're taking it will accelerate the API economy, because ultimately ultimately why is why is this important.

Speaker Change: It will boost operators.

Speaker Change: The ability to monetize their investment in the faster that ecosystem divvy.

Speaker Change: Develops and the better we are able to open up network capabilities and their network resources to.

Speaker Change: <unk> developers are the better for operators and ultimately that will support our operator investments into the network now we have of course taken a slightly different approach.

Pekka Lundmark: Now, we have, of course, taken a slightly different approach than our competitor. We have developed all of this organically. We came to a conclusion that we do not need to acquire a legacy-based player to enter this market. We have developed this organically and with pretty good progress. We announced this initiative a year ago, and we are currently having more than 20 partners across the ecosystem, including 16 CSPs, including names like British Telecom, Telefonica, Orange, Dutch Telecom, and others. We are able to offer an extremely attractive base of networks to the developers who want to use our APIs.

Speaker Change: And our competitor we have develop all of this organically.

Speaker Change: We came to a conclusion that we do not need to acquire a sea bass leg associate best player to.

Speaker Change: Enter this market we have developed this organically and with pretty good progress we announced.

Speaker Change: This initiative a year ago and we are currently are currently having more than 20 partners.

Speaker Change: Across the ecosystem, including.

Speaker Change: <unk> 16, CSP is including names like British Telecom.

Speaker Change: Telefonica Orange.

Speaker Change: Deutsche Telekom.

Speaker Change: And others.

Speaker Change: So we are able to offer extremely attractive base of networks to the developers who want to use our Apis. So overall this is a good thing to the industry.

Pekka Lundmark: Overall, this is a good thing to the industry. Then another thing that is important to keep in mind.

Speaker Change: Then another thing that is important to keep in mind I mean, it will take quite a long time before revenues through a P. Ice will be a meaningful business. We are talking multiple years, but what is in relative terms, even more important right now.

Pekka Lundmark: It will take quite a long time before revenues through APIs will be a meaningful business. We are talking multiple years, but what is in relative terms even more important right now from a business perspective is what's happening in the core network itself. And that is something where I'm extremely pleased with the position that we have. We have taken the lead in the cloudification of the core network. IE, moving the core network software to CNS Cloud Native functions. We want to make the entire core network cloud native. And why is this important? Because cloud nativeness will ultimately enable efficient automation of the network functions without going fully cloud native.

Speaker Change: From business perspective is what's happening in the core network itself.

Speaker Change: And that is something where I'm extremely pleased with the position that we have we have taken the lead in the modification of the core network I E moving the core network.

Speaker Change: Software to CNS clouding it cloud native functions, we want to make the entire core network cloud native and why is this important because cloud native and this will ultimately enable efficient automation of the network functions without going fully cloud native you will not be able to do that in an efficient way.

Pekka Lundmark: You will not be able to do that in an efficient way. So this is where we are leading at the moment. We are working with multiple customers with extremely good feedback. And once we are cloud making the core network cloud native, as I said, that enables automation that enables operators to push down their operational costs. That will make it easier for them to launch new services. And ultimately, full automation will be needed in order to be able to reap all the benefits from the API ecosystem as well. So that's why this is not only about introducing APIs.

Speaker Change: So this is where we are leading at the moment.

Speaker Change: We are working with multiple customers with extremely good feedback and once we are cloud, making the coordinate with cloud native as I said that enables automation that enables operators to push down there.

Speaker Change: There are operational costs that will make it easier for them to launch new services and ultimately a full automation will be needed in order to be able to reap all the benefits from the API ecosystem as well. So that's why this is this is not only about introducing a P is this.

Pekka Lundmark: This is very much a comprehensive strategy as to what to do to the entire core network to make the resources available to the EG.

Speaker Change: Is very much a comprehensive strategy as to what to do to the entire core network to make the resources available to the ecosystem.

Pekka Lundmark: Sartam, did you have a quick follow-up? Yes, a Greek one on India's profitability, so how we should think about it has a picture change and not what comes to gross margin and the EBIT margin impacts, given the fact that it should be showing quite nice growth next year. The margins could vary, and also how much they drive R&D, additional R&D. What comes to India, we are quite pleased with the margins we have in India, and we haven't specified exactly what levels they are, but they have been developing well, and in comparison to other markets, they are in decent level as well.

Speaker Change: Thanks, Artem did you have a quick follow up.

Speaker Change: Yes, a Greek one on India's profitability. So how we should think about it has the picture changed what comes to gross margin and the EBIT margin impacts given the fact that it should be showing quite nice growth next year.

Speaker Change: Yeah, Thank you out of them.

Speaker Change: As we've said earlier as well that that Oh, yeah.

Speaker Change: Different countries buying different things in and based on what they buy the margins could vary and also homeless they dry and R&D additional R&D team.

Speaker Change: At what camps to India, we are quite pleased with the margins. We haven't we have in India, and we haven't specified exactly what level they are at.

Speaker Change: But they have been developed.

Speaker Change: Developing well and.

Speaker Change: In comparison to other markets.

Speaker Change: And they are in a decent level as well.

Speaker Change: Yeah.

Pekka Lundmark: Thank you, Arthur.

Speaker Change: Thanks, George So we'll take our next question from Daniel Djurberg from Handelsbanken, Daniel Please go ahead.

Daniel Gerbert: We will take our next question from Daniel Gerbert from Handelswanken. Daniel, please go ahead. Thank you so much. I would like to ask a little bit on enterprise. The revenue represented 12% up from 10% of total revenues in Q3 and also up 9% year of year. Still down 5%; lost 9 months. I can talk a little bit on what to see in terms of book to build for enterprise and if you should expect this renewed momentum to stay on for a while and also if you can comment a little bit on the profitability level seen in enterprise.

Daniel Djurberg: Thank you so much I would like to ask a little bit on enterprise revenue represented 12%.

Speaker Change: Up from 10% of total revenues in Q3 on those up 9% year over year.

Speaker Change: Still down 5% the last nine months.

Daniel Djurberg: Can you talk a little bit on the what you see in terms of book to Bill for empty price and if this should expect this renewed momentum to stay on for a while and also if you can comment a little bit on the profitability level seen in enterprise.

Pekka Lundmark: Thanks.

Speaker Change: Thanks.

Pekka Lundmark: On a full year level this year, obviously because of the week 1st half of the year, it is clear that our enterprise top line ambitions will, our results will not meet our ambition. The good thing is that the momentum is turning here as well. We have a good progress in both orders and the fact that we had 11% growth in the non-CSB segments in this quarter, which is much better than what we had in the beginning of the year, is encouraging. Pipeline is promising, and again, I was talking about data centers earlier that we will have the upcoming closing of the Infinite acquisition, which will give us a significant boost to the non-CSB businesses as well.

Speaker Change: The I mean.

Speaker Change: On a full year level this year.

Speaker Change: Obviously because of the weak first half of the year, it's clear that the that our enterprise top line ambitions well of all our results will not meet meet our ambition and the good thing is that the momentum is turning.

Speaker Change: Here as well we have a good progress in both orders and the fact that we had 11% growth in the non CSP.

Speaker Change: Segments in this quarter of which is much better than what we had in the beginning of the year.

Speaker Change: Is encouraging pipeline is promising and again I was talking talking about data centers earlier than.

Speaker Change: Then we will have the upcoming closing of the Infinera acquisition, which will give us a significant boost to the non CSP businesses as well. So overall in relative terms this year and the price of.

Pekka Lundmark: Overall, in relative terms this year, enterprise or non-CSB businesses will be performing much better, top line-wise than the service provider business. But in absolute terms, what we will be achieving this year, we are not happy with, and we expect an acceleration next year also in enterprise, and the pipeline that we have is clearly supporting that. I am just building on what Becca said. Remember also that this is a little lumpy business, also based on when we sign larger deals with web scalers, and that's why it goes up and down a little bit. That's why the trend is extremely important to follow here.

Speaker Change: Or non CSP businesses will be performing much better topline wife's then then the service.

Speaker Change: Wider business, but in absolute terms are what we will be achieving this year, we are not happy with and we of course.

Speaker Change: Specced in acceleration.

Speaker Change: Next year also in enterprise and the pipeline that we have is clearly supporting that.

Speaker Change: And just building on on on what Pekka said remember also that this is limited lumpy business also based on when we sign larger deals with them web scale or something and that's why it goes up and down a little bit that's why the trend is extremely important to follow here.

Pekka Lundmark: Perfect.

Pekka Lundmark: I have a follow up, and that would be a little bit on if we can give a lesson learned on your organization that you implement in this close for some 10 to 12 months ago, a bit more siloed and so on. And also if you see any pros and cons, if you should do, you know, for example, Lexus and IPO with mobile networks and give it to the shareholders because then you can run OK with a net depth while mobile network with a net cash. Well, that second question is not something that I will start commenting. That's, of course, a massive strategy question for the whole company.

Speaker Change: Perfect.

Speaker Change: Follow up.

Speaker Change: And that would be a little bit on if you can give a lesson learned on your you.

Speaker Change: And that you are implementing and disclosed for some time 12 months ago, a bit more siloed and so on and also if youll see and the pros and cons.

Speaker Change: If you should do you know what.

Speaker Change: For example, lets us see an IPO would mobile networks and gave it to the shareholders.

Speaker Change: Because then you can run Nokia with enough depths to world mobile network with that cash.

Speaker Change: What will that second second question is not something that I believe that the comment.

Speaker Change: Commenting that's of course, a massive a strategy question for the for the whole company. We have said multiple times that we are fully committed to mobile networks and we see a lot of opportunities there.

Pekka Lundmark: We have said multiple times that we are fully committed to mobile networks, and we see a lot of opportunities there. The operational model is clearly taking us to the right direction. In any model, there are pros and cons. In our model, we are giving the businesses more freedom than before to do independent maneuvers, including in the customer interface, and that is increasing the speed and agility, and that is increasing their ability to go after new customer segments such as defense and data centers, etc. When they do not need to negotiate about sales resources, they can make basically their own decisions on sales resources and sales incentives and sales priorities, and that is showing good result.

Speaker Change:

Speaker Change: The operational model is clearly taking us to the right direction in.

Speaker Change: In any model there are pros and cons.

Speaker Change:

Speaker Change: In our model, we are giving the businesses.

More freedom than before to do independent maneuvers, including the customer interface and that is increasing the speed and agility.

Speaker Change: And that is increasing their ability to go after new customer segments, such as defense and data centers et cetera, when they do not need to negotiate about sales resources. They can make basically their own decision of some sales resource.

Speaker Change: Losses on sales incentives and sales priorities and that is showing good result, I mean again I mean, our issue issue. This year has not been that that we would not have momentum are in.

Pekka Lundmark: Again, I mean our issue this year has not been that we would not have momentum in pipeline creation or in order intake. The real issue in relation with the market, the real issue and the top line challenge that we have, is that general market weakness that hopefully is now finally, finally starting to turn. The every any model has also also then then downsides that you need to mitigate, and obviously obviously there the risk to be siloed in the customer interface is something that you have to mitigate. We are doing that well. We have for each key customer an account executive team which is responsible for the overall relationship management with the customer, and those teams are also then coordinating all cross business matters.

Speaker Change: In our pipeline creation are in order.

Speaker Change: Integrity real issue in Delhi in relation with the market the real issue and the top line challenge that we have that.

Speaker Change: That is general market weakness that hopefully is now finally finally starting to turn.

Speaker Change: That.

Speaker Change: Any model has hope. So also then then downsides that you need to mitigate and obviously, obviously there are risks to be siloed in the customer interface is something that you have to meet they get we are doing that well we have four H K customer we have a account actually execute their team, which which is responsible for the overall.

Speaker Change: Relationship management with the customer and those teams are also then coordinating all cross business matters to the extent they exist in the customer. So we are taking care of both relationship management mall type business deals with the customers and then very importantly, we have several solutions.

Pekka Lundmark: So we are taking care of both relationship management multi-business deals with the customers and then very importantly we have several solutions on the market where there are components from multiple businesses and a very important part of the model is that every time when there is a multi-business solution there is always a lead business that owns the solutions engineering and also takes the lead in sales. So I'm pleased with the progress with the new model, and again, every model has its pros and cons, but I believe that the pros of this model clearly outweighed its cons.

Speaker Change: On the market, where there are components from multiple business isn't a very important part of the model is that every time when there is a multi basin. This solution. There is always a lead business that owns the solutions engineering and also takes the lead in.

Speaker Change: In sales so I'm pleased with the progress with their new model and again every model has its pros and cons, but I believe that the approach of this model clearly outweigh the cons and remember we started.

Pekka Lundmark: And remember we started the new brace on model already 2021, and we have seen very clearly that speed, agility, and accountability are definitely giving the results that we expected.

Speaker Change: The new operational model already Susan 'twenty, one and we have seen very clearly that speed agility and accountability.

Speaker Change: Definitely yeah.

Speaker Change: Giving the results that we expected.

Jacob Bluestone: Thank you, Daniel. We'll take our next question from Jacob Bluestone from BNP Paribas. Jacob, please go ahead. Thanks for taking the question, so just getting back to network infrastructure and if you can maybe just expand a little bit on what where is the area that sort of continues to disappoint the thing if I read between the lines it sounds like it's optical, which continues to undershoot. And then maybe also link to that if you can just expand a little bit on the North American strength and is that just coming from B door or what you say it's kind of more broad based in terms of the recovery there.

Speaker Change: Thank you Daniel we'll take our next question from Jacob Bluestone from BNP Paribas Jacob. Please go ahead.

Jacob Bluestone: Thanks for taking the question.

Jacob Bluestone: So to start getting back to network infrastructure and if you can.

Jacob Bluestone: Maybe just expand a little bit on what.

Jacob Bluestone: Where's the area that sort of continues to disappoint I think if I read between the lines. It sounds like its optical which continues to undershoot.

Jacob Bluestone: And then maybe also linked to that if you can just expand a little bit on the north American strength.

Jacob Bluestone: Is that just coming from from bead or would you say, it's kind of more broad based.

Jacob Bluestone: In terms of the recovery there. Thanks.

Pekka Lundmark: Thanks. Yes, sure. I mean, the good news is that the strength we now see in N.I. North America is there even though there is very little or almost nothing from be it yet in those numbers. So be it will be will be an upside opportunity to what we are already seeing. But it knows that it's coming more slowly than people were hoping a year or two years ago. The US administration is acknowledging it. They have been there been slow in the allocation of the funds. But now the news is that it is happening. I think the number of states that have opened the grant window is now six.

Speaker Change: Sure I mean, the good news here is that our that the strengths. We now see an ni in North America.

Jacob Bluestone: <unk>.

Jacob Bluestone: Is there even though there is there is very little or almost nothing from be it yet in those numbers. So be it be it will be will be an upside opportunity to what we are already seeing.

B it is coming.

Jacob Bluestone: Everybody knows that it's coming more slowly than people were hoping a year or two years ago. The U S administration is acknowledging it they have been.

Jacob Bluestone: They have been slow in the.

Jacob Bluestone: Allocation of of the funds, but now the good news here that are that.

Jacob Bluestone: It is happening I think the number of states that have opened a grant window is now six.

Pekka Lundmark: All states have this so-called Volume One approved. Most states have also Volume Two approved. And then the next step is that they open the grant windows. And, as I said, six windows have done it. And it currently seems, in case you are interested in details, that Louisiana will be the state that will be first moving to really releasing the funds. And once the funds get released, that's when there is an opportunity for us to convert that into order intake. And we believe that we start seeing some of that in Q4 and most likely some initial small deliveries already in Q4.

Jacob Bluestone: All states have these so-called volume one approved.

Jacob Bluestone: Most states have also volume two approved and then the next step is that they opened the grant windows and as I said six windows have done it.

Jacob Bluestone: And.

Jacob Bluestone: It currently seems in case you are interested in detail assist that Louisiana will be the state that will be first moving to.

Jacob Bluestone: Really.

Jacob Bluestone: Releasing the finance and once the funds get released that's when then there is.

Jacob Bluestone: There is an opportunity for us to convert that into order intake and we believe that we start seeing some of that in Q4 and most likely some initial small delivery is already in Q4, but then very much. This will be a story of 25 and 26 and it will start providing upside on top of.

Pekka Lundmark: But then very much this will be a story of 25 and 26, and it will start providing upside on top of what we are seeing. But I mean your observation was absolutely correct. Inside NI, optical is weaker. One reason is that we are weaker in optical in North America. And this is exactly within the infinite acquisition will come in because they are strong in optical North America. And, and that's when we then finally expect also us to be able to reap all the benefits of the North American recovery, which we are currently seeing more on the IP IP and fix site.

Jacob Bluestone: What we are seeing but I mean, Europe service and was absolutely correct the inside.

Jacob Bluestone: Ni.

Jacob Bluestone: Optical is weaker.

Jacob Bluestone: One reason is that that we are weaker in optical in North America and this is exactly within the Infinera acquisition will come come in because they are strong in optical in North America and that's when we then finally expect also ought to be able to reap all the benefits of their north American.

Jacob Bluestone: Recovery, which we are currently seeing more on the IP IPM fixed site.

Jacob Bluestone: Did you have a follow-up, Jacob?

Speaker Change: Did you have a follow up Jacob.

Pekka Lundmark: Yeah, if I can just follow up on an earlier point, I mean you've talked a bit about the growth in non-CST enterprise, you talked about the core we've contracted and sort of shifted more into data centers.

Jacob Bluestone: Yeah, if I can just follow up on the earlier point I mean, you've talked a bit about the gross non CSP enterprise you talked about the <unk> contract and sort of the shift more into data centers.

Pekka Lundmark: Now just interested in understanding how does the profitability look in the non-CSP segment versus your more sort of traditional business. So is this a credo for what dilute is to your margins that you're kind of making the toast? A lot will, of course, ultimately depend on the volumes achieved, but absolutely, as an additional business opportunity, it will be driving our operating profit and also our operating margin. That's absolutely our goal.

Jacob Bluestone: I'm just interested in understanding how does the profitability.

Jacob Bluestone: And the non CSP segment.

Jacob Bluestone: <unk> versus your more traditional business. So is it accretive or dilutive to your margins, but you're kind of making the tilt.

Jacob Bluestone: Okay.

Speaker Change: A lot will of course, ultimately depend on the volumes achieved but but absolutely as an additional business opportunity.

Speaker Change: It will be it will be driving our operating profit or not and also our operating margin. That's absolutely. Our our goal then it's too early to comment now in case. There are large single deals that how the gross margin of each deal would would look like but when you look at the data center market in <unk>.

Pekka Lundmark: Then it's too early to comment now in case there are large single deals that how the gross margin of each deal would would look like, but when you look at the data center market in general, maybe one thing to look at this is the current leading vendors to that market and what type of profitability they have. And you will see that in general in an I segments, the non service provider, non telco segments are offering to vendors much better profit opportunities than the telco.

Speaker Change: Maybe one thing to look at this is the the current.

Leading vendors to that market and what type of profitability. They have and you will you will see that.

Speaker Change: In general.

Speaker Change: Ni segments, the non service provider non telco segments, our offering to vendors are much better.

Speaker Change: Better profit opportunities than than the telco market.

Sbastien Sztabowicz: Thank you, Jacob. We'll take our next question from Sbastien Sztabowicz from Kapel Szyber. Sbastien, please go ahead. Yeah, hello everyone, and thanks for taking my question. On the AT&T 5G contract, you had already a negative back in Q3, and if I remember, you were more forecasting more downside, moving it to 2025. Could you help us understand a little bit the dynamic of the AT&T 5G contract done in the coming quarters? Should we expect a bigger step back step done in 2025? Yeah, thank you. Yeah, you're correct.

Speaker Change: Thank you Jacob we'll take our next question from Sebastian <unk> from Kepler server Sebastien. Please go ahead.

Sebastian: Yeah, Hey, everyone and thanks for taking my question.

Speaker Change: G T and T strategy contract you had the regime.

Speaker Change: But in Q3, and if you remember where you were muffled.

Speaker Change: The inside moving into Twitch 25 could you help us understand their needs to beat the Dania Beach of Aegean Chief E G.

Speaker Change: I'm Tycho I'm done.

Speaker Change: Many quarters should we expect to be just about done in 2025.

Speaker Change: Yeah. Thank you.

Marco Varen: Just like you mentioned, we've seen the impact of AT&T, and if you look at how we see the AT&T contract development going forward, we've said that this year, thanks to the accelerated revenue recognition that we did in Q2, we will be about the same level that we were in last year. These 150 million acceleration came from basically next year, and that's why we're also saying that next year's volumes will be about half of this year's volumes to watch the AT&T.

Speaker Change: Yeah. You are correct just like you mentioned, we we've seen impact of AT&T and if you look game.

Speaker Change: And how we.

Speaker Change: See the AT&T contract development going forward.

Speaker Change: We've sent that this year, thanks to the accelerated and revenue recognition than we did in quarter two.

Speaker Change: We will be about the same level and we were in last year and these 150 million acceleration came from.

Claim neck.

Speaker Change: Next year and that's why we are also saying that next year's volumes will be about the half of this year's Williams to wash the AT&T.

Marco Varen: Okay, yeah, follow up on the CNS and 5G core. You mentioned excellent momentum on 5G core, output traction and so on, but the CNS division is still slat-ish like for like in Q3. Could you explain a little bit the dynamic behind CNS today, what is driving the business not to grow despite free traction on 5G core. Thank you. Yeah, thank you. The reason is actually very simple. There are legacy segments inside CNS where the market is declining significantly. For example, 3G core, where we were a big player, that has been a significant component in CNS and that is rapidly declining.

Speaker Change: Okay.

Speaker Change: Yeah for the work on the CNS and the <unk> call you mentioned the accidents moment terminal five jacquot traction.

Speaker Change: Traction in Salon position this division.

Speaker Change: Flattish like for like you know Q3 could you spend needed to be the dynamic behind Sheerness to date, what are you driving the business not to grow despite citrix shouldnt five G cool. Thank you.

Speaker Change: Yeah. Thank you. The the reason is actually very simple there are.

Speaker Change: The legacy segments inside CNS, where the where the market is.

Speaker Change: It's a declining significantly for example, <unk>, where we were a big player that has been a significant component in the CNS and that is a rapidly declining then there is a number of other legacy applications that are declining as well, but the strategic growth segments in <unk>.

Marco Varen: Then there is a number of other legacy applications that are declining as well. But the strategic growth segments in CNS, including 5G core and including campus wireless and edge compute solutions. They are all growing heavily and with a very healthy rate. So that is the kind of challenge in CNS that when we then create the overall CNS result.

Speaker Change: S, including five G core.

Speaker Change: And including combos.

Speaker Change: Kampusch wireless and edge compute solutions they are all growing.

Speaker Change: Heavily and then with a very healthy rate. So that is the kind of challenge in CNS that that's when we then create the overall CNS result, it's a combination of these legacy segments, our strategy segments strategic segments, and we will be looking looking in the future.

Marco Varen: It is a combination of these legacy segments and strategy segments, and we will be looking in the future to opening this up a little bit more so that you can see that where the growth is actually coming from. But clearly 5G core is growing at the moment. Thanks, Sebastian.

Speaker Change: Opening this up a little bit a little bit more so that you can see that's where the growth is actually coming from but clearly <unk> Croatia five G core is growing at the moment.

Rob Sanders: We will take our next question from Rob Sanders from Deutsche Bank. Rob, please go ahead. Yeah, I just had a question on the mobile networks business. Ericsson seems to be delivering with AT&T quite significant cost and capex savings that they are now using as a reference design to other operators, including outside the US. And that is obviously with a single vendor approach. I was just wondering, like, are you working on similar types of reference designs, and do you have reference designs that you can go and demonstrate similar kind of TCO savings like they are doing right now.

Speaker Change: Thanks, Sebastian we'll take our next question from Rob Sanders from Deutsche Bank. Please go ahead.

Rob Sanders: Yeah, Hi, I just had a question on the mobile networks business.

Rob Sanders: Ericsson seems to be delivering with AT&T quite significant cost and capex savings that they are now using as a reference design to two other operators, including outside the U S.

Rob Sanders: And that's obviously with a single vendor approach I was just wondering like are you working on similar types of reference designs and do you have reference design that you can go and demonstrate similar kind of T. C. L savings like they are doing a right.

Pekka Lundmark: Thank you.

Rob Sanders: Right now thank you.

Pekka Lundmark: Absolutely, we have such reference designs, and actually a significant, not the only, but an important part of that is what I was earlier talking about: the qualification of the core network, which is a significant part of improving operators' TCO and overall efficiency. And of course we are tying, tying then the whole mobile ecosystem into that thinking.

Speaker Change: Absolutely, we have such reference designs and actually a significant not the only but an important part though that this is what I was earlier talking about the qualification.

Speaker Change: Of the core network, which is a significant part of our improving operators D. C. O N overall efficiency and and of course, we are dying tying then the whole mobile ecosystem into into that thinking.

Pekka Lundmark: What I should say though, is that if even though we also have some customers where we are the only vendor at the moment, we are currently not seeing that going with a single vendor would in any way be becoming a new trend with operators. On the contrary, most of the recent deals, if not all of the recent deals, that we have seen in the future have confirmed that operators want to stick with typically with two vendors. We have a couple of cases where we have been able to defend our 100% market share successfully, but again, these cases where there is only one vendor seem to be more of an exception than a rule.

Speaker Change: What I should say, though is that even though we also have some customers where we are the only vendor at the moment.

Speaker Change: We are currently not seeing that going with.

Speaker Change: With a single vendor would in any way be becoming a new trend with operators on the contrary.

Speaker Change: Most of the recent deal see if not all of the recent deals.

Speaker Change: That we have seen in the future have confirmed that the operators want to stick with typically with the two vendors. We have a we have a couple of cases, where we have been able to defend our.

Speaker Change: 100% market share successfully but.

Speaker Change: Again these are cases, where there is only one vendor.

Speaker Change: Seem to be more of an exception than a rule and I believe that everything we are seeing currently is pointing to the direction that that's how it will remain.

Pekka Lundmark: And I believe that everything we are seeing currently is pointing to the direction that that's how it will remain.

Speaker Change: Great.

Pekka Lundmark: Yeah, just a quick follow-up, just on network infrastructure. You've had positive book-to-bill, I think, for three or four quarters now. And yet, you know, your Q4 sales guide has come down. Is the turns business an issue? Is that because of distributor stock? Is there any particular reason why your backlog duration seems to keep on going up, but your turns business seems to keep on disappointing.

Speaker Change: Yeah, just a quick follow up just on the network infrastructure, you've had positive book to Bill I think for three or four quarters now.

Speaker Change: And yet your Q4 sales guidance come down is the turns business an issue is that because you're a distributor stock is there any particular reason why your backlog duration seems to be keep on getting up but you'll you'll turn business seems to keep on disappointing and when does that sort of at.

Pekka Lundmark: And when does that sort of become less of an issue? Thanks. Yeah, thank you. As we said that the recovery is slower than we expected, and it takes a longer time now for our customers to convert those orders into sales. So they don't issue the purchase orders in as fast a pace as perhaps we and they thought in the beginning. And just like you mentioned as well, we have had book to bill, but one for four quarters in a row now. An auto intake has been increasing four quarters in a row as well in an eye.

Speaker Change: Becomes less of an issue.

Speaker Change: Yeah. Thank you.

Speaker Change: As we said that that the recovery is slower than we expect to see them and it takes a long time now and.

Speaker Change: For our customers to convert those orders into sales.

Speaker Change: Sales. So so they don't issue the purchase orders in as fast paced as perhaps we and they thought in the beginning and and and just like you mentioned as well we have had a book to Bill Bill one for four quarters in a row now and ordering tank has been increasing four corners enrollments.

Speaker Change: All in NII. So we definitely see that that market is strengthening but steel due to macroeconomic uncertainties and our customers are very careful.

Pekka Lundmark: So we definitely see that the market is strengthening, but still due to macroeconomic uncertainties. Our customers are very careful, and they just are very slow on, you know, issuing those purchase orders, but this gives a good platform for going forward and swallowing in for the next year.

Speaker Change: And <unk>.

Speaker Change: And they they just all very slow one.

Speaker Change: Issuing those purchase orders, but this gives us a good platform for going forward and swollen in for the next year.

Pekka Lundmark: And also, I mean, just to be clear, even though we are not going to start publishing our order intake or order backlog numbers, but the N I order backlog at the moment is clearly on a higher level than it was a year ago.

Speaker Change: And also I mean, just to be clear, even though we are not going to start publishing our order intake or order backlog numbers, but the ni order backlog.

Speaker Change: At the moment is clearly on a higher level than it was a year ago.

Alex DeVal: Thank you.

Marco Varen: We will take our last question from Alex DeVal from GoldmanTax. Alex, please go ahead. Yes, thank you very much for squeezing me in here. Just a question on the one-off, I think you said to an earlier caller that this didn't benefit gross margin; it looks like this might be sitting in other income and expenses. Could you just quantify how much the EBIT benefit is from that?

Speaker Change: Thank you we'll take our last question from Alex Duval from Goldman Sachs. Alex. Please go ahead.

Alex Duval: Yes. Thank you very much for squeezing me in here just a question on the one offs I think he said to an earlier caller that this didn't benefit gross margin.

Alex Duval: It looks like this might be sitting in other income and expenses can you just quantify how much the EBIT benefited from that and then secondly, you talk about right sizing the cost base.

Pekka Lundmark: And then secondly, you talk about right-sizing the cost base, so as to be able to hit double-digit operating margins on a lower revenue level of 9.5 billion. I just wondered to what extent that's a function of a worse outlook for next year if your addressable markets, you know, clearly last time there was a big cost change that was then followed by a down-take in the market. So just curious how you're thinking about the outlook for next year, given we're nearly in November. Really appreciate any colour, many thanks. If I take that second part, the market takes the first part, so you should not connect that to next year's outlook.

Alex Duval: So as to be able to hit double digit operating margins on.

Alex Duval: Our revenue level of non 4 billion just wanted to what extent that's a function of.

Alex Duval: The worst outlook for next year, if your addressable markets.

Alex Duval: Clearly last time, there was a big.

Alex Duval: Cost change that was then followed by a downtick in the market.

Alex Duval: So just curious how you're thinking about the outlook for next year, given where million November really appreciate any color.

I take that second part there medical takes the first part so you should not connect that to next year's outlook I mean, that's our own preparedness. That's how we are resetting the cost base and we just wanted to say that we have we have made even more progress than we originally target theater on the cost base reset and we are now.

Pekka Lundmark: I mean, that's our own preparedness that how we are resetting the cost base, and we just wanted to say that we have made even more progress than we originally targeted on the cost base reset. And we are now targeting to create a cost base for mobile networks that would be able to deliver double-digit profitability at 9.5 billion top line instead of the earlier targeted 10 billion. This has nothing to do with next year's outlook, and as I said, there is a general expectation that after this really, really weak market in mobile networks in 2024, we would see a market recovery next year.

Alex Duval: Now now now targeting to create a cost base for mobile networks that would be able to deliver double digit profitability at $9 5 billion top line instead of the earlier targeted 10 billion. This has nothing to do with next year's outlook and as I said, there is a general expectation that after this really really weak.

Alex Duval: Market in mobile networks in 'twenty 'twenty, four we would see a market recovery next year.

Marco Varen: And that also, if you look at the third-party analyst firms, they, in their figures, show growth for next year in mobile networks markets. And what comes to the reversal of the trade receivables, as we said earlier, as well, very clearly that it's not impacting profit or gross margins. This is spoke in other operating income and expenses, and you can see also we haven't specified the level. Of course, we have other items in the other operating income and expenses as well, but you can see both at group level, but also in a mobile networks level that there's a positive.

Alex Duval: And that that is also if we look at the third party analyst firms. They in their figures and he's shown growth for next year in mobile and enterprise markets and what comes to the.

Alex Duval: Reversal of the trade receivables.

Alex Duval: As we are.

Alex Duval: Earlier, a small very clear that it's not impacting gross profit or gross margins.

Alex Duval: This is booked in other operating income and expenses and.

Alex Duval: You can see also we havent specifying the level of course, we have other items in the other operating income and expense and a small but you can see both at group level, but also in a mobile announce bronx level that there is a positive.

Marco Varen: Other operating income in quarter three. And these, of course, the same thing when we book a customer expected customer loss, we booked that in in other operating income expenses as well.

Alex Duval: Operating income in quarter three.

Alex Duval: And these of course.

Alex Duval: The same thing when we book.

Alex Duval: Customer expected customer loss.

Alex Duval: We booked that in in other operating income expenses Paul.

Marco Varen: Thanks, Alex.

Paul: Thanks, Alex Ladies and gentlemen, this concludes today's call I'd like to remind you that cheering Nicole we've made a number of forward looking statements involve risks and uncertainties.

David Mulholland: Ladies and gentlemen, this concludes today's call. I'd like to remind you that during the call, we've made a number of forward-looking statements, some of our 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 and Form 20-F, which is available on our investor relations website.

Paul: Our 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 factor section of our annual report on form 20-F, which is available on our Investor Relations website.

Unknown Executive: The conference has not concluded. Thank you for attending today's presentation.

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

Unknown Executive: You may now disconnect. Thank you.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Yes.

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Speaker Change: Yes.

Speaker Change: Yeah.

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