Q4 2024 Nokia Oyj Earnings Call

January 30, 2025

CEO, along with Mark <unk> our CFO.

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'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.

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

Please note that in our Q that our Q4 report and the presentation that accompanies this call are published on our website. The report includes both reportable on comparable financial results and a reconciliation between the two.

In terms of the agenda for today Pekka will gave you go through the key messages for the quarter Mark It will go through our financial performance and then Pekka will make a few comments on some particular highlights from the quarter. We'll then move onto Q&A with that let me hand over to Pekka.

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

Pekka: I'm pleased to share with you that we finished 24 with a strong quarter. The improved order trends, we have talked about in recent quarters. We're now clearly basically below say no net sales with 9% growth in the fourth quarter.

Pekka: Network infrastructure grew 17% in Q4 with all units growing and with IP networks, the standout performer growing 24%.

Pekka: We also had a very strong performance in Nokia technologies with the several new deals signed increasing our net sales run rate now approximately between one three to one 4 billion euro.

Pekka: Cloud and network services also grew 7% despite a four percentage point headwind from a prior year disposal.

Pekka: Networks.

Pekka: So it's sales trends stabilized that's the more challenging comparisons in India are now behind us and we saw stronger demand in Q4 in North America.

Pekka: The strong Q4 sales and higher contribution from Nokia technologies led to a comparable gross margin of 47, 2% in the quarter and an operating margin of 19.1%.

Pekka: This is the highest quarterly operating margin we have seen at Nokia since 2015.

Pekka: We also had a strong year for cash generation with free cash flow of 2 billion Euro our year end net cash balance was $4 9 billion euro even after returning $1 4 billion to shareholders during the year during through both share buybacks and dividends.

Pekka: I will come back to this topic, but with the momentum we are seeing in the data center space, we are accelerating investments into our IP networks business and I'm really excited about this opportunity we will discuss our outlook a bit later, but I'm pleased to say that the improved trends from the second half of 'twenty four are expected to sustain it.

Pekka: The 25 with that let me hand over to Mark to go through the financials in a bit more detail.

Mark: Thanks, Pat and Hello from my side as well.

Speaker Change: I'll start by discussing our overall group performance.

Speaker Change: As Pekka mentioned, we were very pleased to see the strong end to choose in 'twenty for.

Speaker Change: The fourth quarter, so net sales growth of 9% gross margin increased by 250 basis points to 47, 2%.

Speaker Change: And this was due to the increased contribution from Nokia technologies and improvements in other business groups.

Oh quarter, four operating margin expanded 380 basis points year on year to 19, 1%.

Speaker Change: I will now look at the performance of our business groups, starting with network infrastructure.

Speaker Change: We saw a strong finish to 'twenty four with all units growing in quarter four.

Speaker Change: Networks had a very strong quarter with 24% growth.

Speaker Change: Fixed networks grew 16% and optical 7%.

Speaker Change: And this growth was mainly driven by improvement.

Speaker Change: Trends, among CSP customers and regionally in North America and India.

Speaker Change: Gross margin expanded 70 basis points to 45 point.

Speaker Change: 4% and this was mainly driven by beneficial product mix.

Speaker Change: The operator morning margin was very strong at 19, 6% in the quarter.

Speaker Change: As we also continued our prudent cost management.

Speaker Change: And in mobile and <unk> net sales declined by 2% in the quarter.

Speaker Change: After some very challenging quarters, we are now seeing net sales strengths and it tends to start stabilize.

Speaker Change: Pleasingly North American net sales increased by double digits, while India net sales stabilized.

Speaker Change: Gross margin declined slightly by 20 basis points, but remains at robust 38, 1%.

Speaker Change: And operating margin was seven 7%.

Speaker Change: A decrease of 380 basis points.

Speaker Change: Versus the prior year as underlying cost reductions.

Speaker Change: Offset by higher variable pay accruals.

Speaker Change: Cloud and network services net sales grew by 7% in the quarter with strong growth in North America.

Speaker Change: And this was despite a negative impact of approximately four percentage points related to divestment earlier in 2024.

Speaker Change: Growth was mainly driven by core networks and enterprise campus edge.

Speaker Change: Gross margin was strong as was operating margin, which came in at 22, 4% for the quarter.

Speaker Change: With profit weighted towards quarter four as is typical seasonality for this business.

Speaker Change: And before moving to Nokia technologies I also wanted to bring to your attention. The fact that we have now moved our managed service business from cloud and network services to mobile networks as of January one 2025.

Speaker Change: The managed services business provides outsourced network management of multi vendor ran networks for operators.

Speaker Change: And considering CNS is increasingly transitioning towards cloud native software sales.

Speaker Change: As a service product offerings, and helping customers to monetize networks through api's.

Speaker Change: We believe this business is more aligned and fits better with mobile networks.

Speaker Change: And based on Tis and tuning for results. This change is expected to lead to a transfer of about $430 million of net sales.

Speaker Change: And approximately 40 million euro of operating profit from CNS to mobile networks.

Speaker Change: And we will provide recast financial information for 2024, reflecting this change.

Speaker Change: Prior to our quarter one financial results.

Speaker Change: Turning now to Nokia technologies net sales grew by an impressive 85% in quarter four.

Speaker Change: And this was due to a combination of the increased annual net sales run rate from nearly new deals signed in both quarter four and earlier this year.

Speaker Change: Well it shows in 'twenty four.

Speaker Change: Along with some catch up payments related to deals signed in the quarter.

Speaker Change: Agreements that were signed included intention and has a previously unlicensed mobile.

Speaker Change: Binds vendor.

Speaker Change: And then multi media related agreements with HP and Samsung and <unk>.

Speaker Change: Other smaller deals as well.

Speaker Change: Nokia technologies annual net sales run rate has been gradually increasing in the recent quarters.

Speaker Change: Proximately $1 3 billion to $1 4 billion euros.

Speaker Change: And this shows a good progress on the journey to achieve our midterm target of $1 4 billion to $1 5 billion euros.

Speaker Change: Let's now look at the net sales by region.

Speaker Change: The biggest contributors to the net sales growth for North America and India.

Speaker Change: In North America, we saw a meaningful improvement in demand from telecom operators supporting all of our businesses.

Speaker Change: The growth in India was mainly driven by network infrastructure, and especially by fixed networks will be benefited from strong fixed wireless access demand.

Speaker Change: And in Europe, we saw a resilient market performance.

Reflecting this change.

Prior to our quarter one financial results.

Speaker Change: But the growth in the region, mainly relates to Nokia technologies performance.

Turning now to look at the countries net sales grew by an impressive 85% in quarter four.

Speaker Change: And elsewhere, most markets were relatively stable in the fourth quarter.

Speaker Change: So the competitive environment remains challenging in Latin America.

And this was due to the combination of the increased annual net sales run rate from nearly new deal signed in both quarter four and earlier this year.

Speaker Change: Okay.

Speaker Change: 224 has ended a strong year for cash generation on the whole it played out as we expected in many respects.

Speaker Change: For 2024.

Speaker Change: Along with some catch up payments related to deals signed in the quarter.

Speaker Change: We performed a bit better on each metric.

Speaker Change: Agreements that were signed included and traction and is a previously unlicensed mobile.

Speaker Change: Our prudent cost management also helped us to manage our capex requirements in the business. This year and we put significant focus on improving our working capital position, which yielded good results and this was one of the biggest drivers of our strong cash performance.

Speaker Change: <unk> vendor.

Speaker Change: And then move the media related agreements with HP, and Samsung and other smaller deals as well.

Speaker Change: Okay technologies annual net sales run rate has been credibly, increasing in the recent quarters.

Speaker Change: And we ended the quarter with a net cash position of $4 9 billion euros, which means that we start 2025 with a strong balance sheet and will remain in a good position, even considering the impact of Infinity acquisition.

Speaker Change: <unk> left the $1 3 billion to $1 4 billion euros.

Speaker Change: And this shows a good progress on the journey to achieve our midterm target of $1 4 billion to $1 5 billion euros.

Speaker Change: And looking at our cash performance since 2022, sorry 2021.

Speaker Change: Let's now look at the net sales by region.

Speaker Change: The biggest contributors.

Speaker Change: We have much stronger track record of cash generation.

Speaker Change: The net sales growth were North America and India.

Speaker Change: In North America, we saw a meaningful improvement in demand from telecom operators supporting all of our businesses.

Speaker Change: Going forward, we forecast free cash flow conversion of between 50 and 80% in 2025.

Speaker Change: The growth in India was mainly driven by network infrastructure, and especially by fixed networks.

Speaker Change: Okay.

Speaker Change: And during 2020 for Breo returned $1 4 billion euros to shareholders in total.

Speaker Change: We benefited from strong fixed wireless access demand.

Speaker Change: 710 million euros was returned through dividends and 680 million euros via buybacks.

Speaker Change: And in Europe, we saw a resilient margin performance.

Speaker Change: But the growth in the region, mainly relates to Nokia technologies performance.

Speaker Change: And you will recall that during 'twenty four we accelerated the two year 600 million Euro buyback program and have completed already within one year.

Speaker Change: And elsewhere, most markets were relatively stable in the fourth quarter, although the competitive environment remains challenging in Latin America.

Speaker Change: In November we then announced and started a new buyback program to offset the dilutive effect of the Infinera acquisition and this program is still ongoing.

Speaker Change: 274 has ended a strong Europe for cash generation.

Speaker Change: On the whole it played out as we expected in many respects.

Given our cash performance in the year, we are pleased to announce that the board of directors is proposing a dividend authorization of 14 cents per share in respect of financial year 2024, and this is a one cent increase from the 13%.

Speaker Change: But we performed a bit better on each metric.

Our prudent cost management also helped us to manage our capex requirements in the business. This year and we put significant focus on improving our working capital position, which yielded good results and this was one of the biggest drivers of our strong cash performance.

Speaker Change: The year before.

Speaker Change: And with that let me hand over to <unk> to go through some of the business highlights.

Speaker Change: Thank you Marco.

Speaker Change: So along with our solid financial performance in 'twenty four we took some important steps to ensure Nokia as the right Foundation for future success. Most notable were the actions we took in active managing are actively managing our portfolio.

Speaker Change: And looking at our cash performance since Susan 'twenty, two sorry, 'twenty, we have much stronger track record of cash generation.

Speaker Change: You will recall that earlier this year, we announced the divestment of our submarine networks business, which they closed at the end of 2024, we also sold our device management and service management and CNS Illumina group.

Speaker Change: Looking forward, we forecast free cash flow conversion of between 50 and 80% in 2025.

Speaker Change: From an acquisition standpoint.

Speaker Change: We're three important deal for this year all of which.

Speaker Change: Okay.

Speaker Change: To strengthen our position in markets, where we see a significant future growth potential.

Speaker Change: And during 2020 for Breo returned $1 4 billion euros to shareholders in total.

Speaker Change: We announced our intention to acquire Infinera, which will both strengthen our position in optical networking and accelerate our growth opportunities in the data center market we.

Speaker Change: 710 million euros was return through dividends and 680 million euros via buybacks.

Speaker Change: We have been making good progress with the required approvals you may have seen that we filed with the EU last week, assuming we achieved the targets. The timelines. We now expect the deal to close or ready during the first quarter of 2025 and internally we are well prepared to move quickly on integration once the deal formerly closes.

Speaker Change: And you will recall that during 'twenty four we accelerated the two year 600 million Euro buyback program and have completed already within one year.

Speaker Change: In November we then announced.

Speaker Change: <unk> started a new buyback program to offset the dilutive effect of the Infinera acquisition and this program is still ongoing.

Speaker Change: We also acquired Phenix in order to strengthen our position in the defense industry, adding their innovative broadband tactical communications products. The acquisition closed in May 2024, and we have moved quickly to accelerate product roadmaps, even now launching a <unk> tactical radio solution in the fourth quarter.

Speaker Change: Given our cash performance in the year, we are pleased to announce that the board of directors is proposing a dividend authorization of 14 <unk> per share in respect of financial year 2024.

Speaker Change: And this is a 1% increase from the 13%.

Speaker Change: This is a longer term opportunity of course, but we are progressing well.

Speaker Change: Before.

Speaker Change: In November we announced that we had acquired rapid technology and R&D units. This acquisition gives us the world's largest API hub used by thousands of developers globally, along with strengthening our R&D capabilities.

Speaker Change: And with that let me hand over to <unk> to go through some of the business highlights.

Speaker Change: Thank you Marco.

So along with our solid financial performance in 'twenty four we took some important steps to ensure Nokia the right Foundation for future success. Most notable were the actions we took in active managing are actively managing our portfolio.

Speaker Change: Yeah.

Speaker Change: Another of our strategic objective has been to diversify our business and accelerate our growth outside of our traditional service provider markets as.

Speaker Change: You will recall that earlier this year, we announced the divestment of our submarine networks business, which closed at the end of 2024. We also sold our device management and service management and CNS Illumina group.

Speaker Change: As we have highlighted before this includes a number of different growth areas for Nokia and we intend to frame. This better for you at our capital markets Day later this year two.

Speaker Change: 2024, or some more challenging year for our enterprise sales and we ended with a 4% decline in constant currency. This was partly due to lumpiness that we see in some of the web scale deals. After the strong growth in 'twenty two 'twenty three but also the broader weakness in enterprise demand that that's been visible among many of our peers.

Speaker Change: From an acquisition standpoint.

Speaker Change: There were three important deal for this year all of which.

Speaker Change: To strengthen our position in markets, where we see a significant future growth potential.

Speaker Change: We announced our intention to acquire Infinera, which will both strengthen our position in optical networking and accelerate our growth opportunities in the data center market.

Speaker Change: 2017, we have sustained a 10% CAGR in enterprise and while the sales trend was more challenging than 'twenty. Four we took a number of steps that I believe will keep us on a double digit growth trajectory in the years to come including 2025.

Speaker Change: This is supported by the significant order intake we saw in enterprise campus edge in Q4.

Speaker Change: We've won a number of key deals for example, and IP networks with Microsoft and scale. We also continue to expand our go to market partnerships in Q4, we announced partnerships with Kindle and Lenovo that will increase our reach into the data center market.

Speaker Change: We also acquired Phenix in order to strengthen our position in the defense industry, adding there in Nevada, the broadband tactical communications products. The acquisition closed in May 2024, and we have moved quickly to accelerate product roadmaps, even now launching a five <unk> tactical radio solution in the fourth quarter.

Speaker Change: With these foundations and to the Infinera acquisition, we will have a strong base for which the sustained growth in these markets going forward.

Speaker Change: This is a longer term opportunity of course, but we are progressing well.

Speaker Change: Considering our momentum let me now touch upon some decisions we have made regarding the potential we see in the future.

Speaker Change: In November we announced that we had acquired rapid technology and R&D unit. This acquisition gives us the world's largest API hub used by thousands of developers globally, along with strengthening our R&D capabilities.

Speaker Change: We decided in Q4 that we will accelerate our investment in our IP networks business, we will invest up to an additional 100 million euro of annual operating expenses with a view to generating incremental net sales of 1 billion euro by 2028.

Speaker Change: Another of our strategic objective has been to diversify our business and accelerate our growth outside of our traditional service provider market.

Speaker Change: Nokia networks products are well known in the CSP market for their quality and robustness and innovation, we will look to bring the strong and proven reputation for quality to the data center market and combine it with new market, leading automation capabilities from our event driven automation solutions and our.

Speaker Change: As we have highlighted before this includes a number of different growth areas for Nokia and we intend to frame. This better for you at our capital markets Day later this year.

Speaker Change: 2024, or some more challenging year for our enterprise sales and we ended with a 4% decline in constant currency. This was partly due to lumpiness that we see in some of the web scale datasets. The strong growth in 'twenty two 'twenty three but also the broader weakness in enterprise demand that that's been visible among many of our peers.

Speaker Change: S or Linux operating system.

Speaker Change: A notable example of this is the agreement with Microsoft After three years of working with them on Sonic we are now increasingly being deployed across Microsoft data centers and the deal we announced in Q4, we will see is deployed in over 30 countries globally.

Speaker Change: Since 2017, we have sustained a 10% CAGR in enterprise and while the sales trend was more challenging than 'twenty. Four we took a number of steps that I believe will keep us on a double digit growth trajectory in the years to come including 2025.

Speaker Change: Given the encouraging response to our products, we are doubling down on our investment in this technology in order to be able to address the hyper scaler telco cloud and enterprise customer segments. These investments will bolster our router, India to broaden our product offering to meet customer requirements. They will also further accelerate I'll go to.

Speaker Change: This is supported by the significant order intake we saw in enterprise campus edge in Q4.

Speaker Change: We won a number of key deals for example, and IP networks with Microsoft and scale. We also continue to expand our go to market partnerships in Q4, we announced partnerships with kindred and Lenovo that will increase our reach into the data center market.

Speaker Change: Market and channel expansion.

Speaker Change: I'm really excited about the significant organic value creation opportunity for Nokia and this will of course be complemented by the connections that infinera has in web scale.

Speaker Change: With these foundations and to the Infinera acquisition, we will have a strong base for which the sustained growth in these markets going forward.

Speaker Change: Then if I touch on mobile networks, we explained to you.

Speaker Change: At the end of 2023 the actions we are taking to renew our mobile network strategy. Both in terms of commercial actions on cost management.

Speaker Change: Considering our momentum let me now touch upon some decisions we have made regarding the potential we see in the future.

Speaker Change: We decided in Q4 that we will accelerate our investment in our IP networks business.

Speaker Change: I spoke to you last quarter about how quickly we have moved on the cost piece and you're already seeing some of the benefits of that in our second half performance.

Speaker Change: We will invest up to an additional 100 million euro of annual operating expenses with a view to generating incremental net sales of 1 billion euro by 2028.

Speaker Change: From a commercial perspective, we have had a highly successful year in terms of deal traction, while maintaining our commercial and pricing discipline. Since the start of 2024, we have 118000, new base business sites on a net basis, including 12 wins with completely new ramp customers. We also expanded our run.

Speaker Change: Nokia networks products are well known in the CSP market for their quality and robustness and innovation, we will look to bring the strong and proven reputation for quality.

Speaker Change: Sure with 10 customers and this success has been across all regions globally.

Speaker Change: The data center market and combine it with new market, leading automation capabilities from our event driven automation solutions and our ESR Linux operating system.

Speaker Change: Now clearly we did not win every deal but this 18000 sites is already considering the few instances, where there has been increased competition, especially from Chinese vendors.

Speaker Change: We have seen good deal momentum in cloud and network services, which we believe will continue into 2025, we now have 117 customers for our five standalone core although not all have deployed yet currently.

Speaker Change: Given the encouraging response to our products, we are doubling down on our investments.

Speaker Change: Hyper scaler telco cloud and enterprise customer segments. These investments will bolster our R&D to broaden our product offering to meet customer requirements.

Speaker Change: Reality is that only 20% to 25% of Csp's have deployed five Standalone Corp.

Speaker Change: According to the GSA may approximately 60 operators have already deployed standalone core and we are supplying to about 45 of them.

Speaker Change: I will also further accelerate our go to market and channel expansion.

Speaker Change: I'm really excited about the significant organic value creation opportunity for Nokia and this will of course be complemented by the connections that infinera has in web scale.

Speaker Change: Many operators will of course have multiple suppliers, but they still shows how strong our position is in this market and how strong the traction we have in <unk>.

Speaker Change: Then if I touch on mobile networks, we explained to you.

Speaker Change: One key growth opportunity for CNS in private wireless we now have over 850 private wireless customers up from 710, a year ago and these are covering a range of industries from energy and transport to public sector and manufacturing.

Speaker Change: At the end of 2023 the actions we are taking to renew our mobile network strategy. Both in terms of commercial actions on cost management.

Speaker Change: I spoke to you last quarter about how quickly we have moved on the cost piece and you're already seeing some of the benefits of that in our second half performance.

Speaker Change: One other focus area is <unk>.

Speaker Change: Helping operators to monetize their networks with our network is code initiative.

Speaker Change: We are now.

Speaker Change: Up to 48 network API partners, which includes 24 operators and a further 24 enterprise and ecosystem partners, such as Google and info beep.

Speaker Change: As mentioned in the fourth quarter. We also acquired rapid technology assets and R&D team. This will bolster our R&D capacity and network is code and gives US one of the largest API hubs in the world.

Speaker Change: Sure with 10 customers and this success has been across all regions globally.

Speaker Change: Now clearly we did not win every deal but this 18000 sites is already considering the few instances, where there has been increased competition, especially from Chinese vendors.

Speaker Change: Taken together with our autonomous networks application suite, we are enabling operators to fully automate and monetize their networks.

Speaker Change: Our progress here has also been acknowledged with both Abi and Analysys Mason, recognizing Nokia as one of the clear market leaders in this field.

Speaker Change: We have seen good deal momentum in cloud and network services, which we believe will continue into 2025, we now have 117 customers for our <unk> stand alone core although not all have deployed yet currently.

Speaker Change: Before turning to our full year outlook I wanted to provide some color on how we see the market dynamics for each of our business groups as we enter 2025 star.

Speaker Change: Reality is that only 20% to 25% of Csp's have deployed five standalone core.

Speaker Change: Starting with network infrastructure, we expect the improving market trends that we saw in the second half to continue in 2025.

Speaker Change: According to the CSMA approximately 60 operators have already deployed Standalone core and we are supplying to about 45 of them.

Speaker Change: Ultimately, we see this driving strong growth for network infrastructure with supportive trends across each of the businesses.

Speaker Change: Many operators will of course have multiple suppliers, but they still shows how strong our position is in this market and how strong the traction.

Speaker Change: Then on mobile networks, we saw some stabilization in market demand towards the end of 'twenty four and we believe we could see some recovery in spending as we progress through a 25.

Speaker Change: We have in <unk>.

Speaker Change: One key growth opportunity for CNS and private wireless we now have over 850 private wireless customers up from 710, a year ago and these are covering a range of industries from energen transports to public sector and manufacturing.

Speaker Change: Let me remind you that we will face a bit of a headwind this year in North America from a customer decision made in 2023.

Speaker Change: We estimate this be on approximately four percentage point headwind.

Speaker Change: So the business this year, but even considering this we expect net sales to be largely stable for mobile networks. This year, meaning of course that the rest of all our customers will compensate for that four percentage point drop with that one customer.

Speaker Change: One other focus area is helping operators to monetize their networks with our network is code initiative.

Speaker Change: We are now.

Speaker Change: Up to 48 network API partners, which includes 24 operators and a further 24 enterprise and ecosystem partners, such as Google and info base.

Speaker Change: I just mentioned we are also seeing good momentum in cloud and network services as we enter 2025, particularly in core networks and enterprise campus edge. These trends should drive overall growth in cloud and network services. This year.

Speaker Change: And then finally on Nokia technologies, we look to continue making progress towards our midterm run rate target of between one four to $1 5 billion euro, particularly in our growth areas. We are targeting to deliver approximately $1 1 billion Euro operating profit for this business in 2025.

Speaker Change: Taken together with our autonomous network application suite.

Speaker Change: We are enabling operators to fully automate and monetize their networks.

Speaker Change: Our progress here has also been acknowledged with both Abi and Analysys Mason, recognizing Nokia as one of the clear market leaders in this field.

Speaker Change: Then moving to a formal outlook for 'twenty five.

Speaker Change: We expect the comparable operating profit of between one nine and $2 4 billion Euro for the full year on an organic basis, excluding the Infinera acquisition. If you consider the onetime items that benefited 2024 by over 700 million, which were mostly in the <unk>.

Speaker Change: Before turning to our full year outlook I wanted to provide some color on how we see the market dynamics for each of our business groups as we enter 2025 star.

Speaker Change: Starting with network infrastructure, we expect the improving market trends that we saw in the second half to continue in 2025.

First half of the year this guidance would imply a strong improvement in our comparable operating profit and 25. Despite the selected increased investments like the $100 million planning to IP.

Speaker Change: Ultimately, we see this driving strong growth for network infrastructure with supportive trends across each of the businesses.

Speaker Change: As a reminder, these one time items include the exceptional catch up contribution in Q1 24 in Nokia technologies. The settlement, we had with AT&T in Q2, and then some other provision reversals in Q3.

Speaker Change: Let me remind you that we will face a bit of a headwind this year in North America from a customer decision we made in 2023.

Speaker Change: With respect to free cash flow, we expect to convert 50% to 80% of comparable operating profit into cash.

Speaker Change: We estimate this be on approximately four percentage point headwind.

Speaker Change: The business this year, but even considering this we expect net sales to be largely stable for mobile networks. This year, meaning of course that the rest of all our customers will compensate for that four percentage point drop with that one customer.

Speaker Change: So in summary, we are pleased with the strong end to 2024 in terms of profitability and cash. In addition, we have made some important strategic steps, which we believe will position us well for growth in the future and finally and most importantly, we are encouraged to see the sales momentum we saw in Q4 continue into 2025.

Speaker Change: As I just mentioned we are also seeing good momentum in cloud and network services as we enter 2025, particularly in core networks and enterprise campus edge. These trends should drive overall growth in cloud and network services. This year.

Speaker Change: Right.

Speaker Change: So let me now hand.

Speaker Change: Over back to David for Q&A.

David: Thank you Pekka on market for the presentations before we move to the Q&A session. Just a quick comment on our plans for events investor events. This year and we are working as we mentioned last quarter to confirm dates for the capital markets day, We will look to confirm this to you as soon as we as soon as possible.

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

Speaker Change: Then moving to a formal outlook for 'twenty five we expect the comparable operating profit of between one nine and $2 4 billion Euro for the full year on an organic basis, excluding the Infinera acquisition.

Janet: Thank you we will now begin the question and answer session. If you are also given the webcast. Please remember to mute to mute the audio on your computer before asking your question answer is a 32nd delay to ask a question you May Press Star then one on your telephone keypad. If you are using a speakerphone. Please pick up your <unk>.

Speaker Change: If you consider the one time items that benefited 2024 by over 700 million, which were mostly in the first half of the year. This guidance would imply a strong improvement in our comparable operating profit and 25. Despite the selected increased investments like the $100 million planning to IP.

Janet: Handset before pressing the keys to withdraw your question. Please press Star then two I will now hand, the call back to Mr. David Mulholland.

Speaker Change: As a reminder, these one time items include the exceptional catch up contribution in Q1 24 in Nokia technologies.

Speaker Change: Thank you we'll take our first question today from Joachim <unk> from Dnb European. Please go ahead.

Janet: Thank you.

Speaker Change: Edelman, we had with AT&T in Q2, and then some other provision reversals in Q3.

Speaker Change: I know you don't guide on gross margin specifically.

Nicolas: You also have some division Nicolas.

Speaker Change: With respect to free cash flow, we expect to convert 50% to 80% of comparable operating profit into cash.

Speaker Change: Market dynamics comments here, but.

Speaker Change: What looks to be I mean, when it comes to the guide for 'twenty to 'twenty five the deviation versus the consensus appears to be mainly.

Speaker Change: Mobile networks, driven so can you just comment a bit here.

Speaker Change: On a group travel that you don't guide on sales does this mean that you still expect a fairly low visibility for the full year trend transpired.

Speaker Change: Is there anything that you can save with regards to mobile networks gross margin for trend to turn to five in relation to the search as a percentage of showed here in Q4. Thank you.

Speaker Change: So let me now hand.

David: Over back to David for Q&A.

Pekka: Thank you Pekka on market for the presentations.

Pekka: Before we move to the Q&A session just a quick comment on our plans for that.

Speaker Change: Okay. Thank you that's actually actually several questions. If you are asking so let me try to take take that piece by piece. So if I take first the visibility question I would say that as we start 25, our visibility is much better than it was a year ago. Our order backlog has continued to grow through the year.

Pekka: Peter to confirm date for the capital markets day, we will look to confirm this to you as soon as we as soon as possible.

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

Speaker Change: And the Capex commentary from our customers is now more robust.

Speaker Change: And we are optimistic about our opportunity to grow in in addition to <unk> on the enterprise markets, including the data center. So I would not say that we have lower visibility.

Pekka: Thank you we will now begin the question and answer session. If you are also given the webcast. Please remember to mute to mute the audio on your computer before asking your question answer is a 32nd delay to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone please pick up your.

Speaker Change: You're of course, right that we're not providing that level of explicit net sales assumptions yet that we provided last year for our businesses, but we did say however that we expect strong growth in Eni.

Pekka: Handset before pressing the keys to withdraw your question. Please press Star then two.

Speaker Change: We expect the growth in CNS.

Speaker Change: I'll now hand, the call back to Mr. David Mulholland.

Speaker Change: And we expect stable facing MN. Despite a four percentage point headwind from AT&T. So the reason they say it's more than that that in a dynamic market, which is now seems to be changing to the better it's very hard to gorge exactly if that's what the pace of recovery will be about the signs we see are clearly encourage.

Speaker Change: Thank you we'll take our first question today from Joachim <unk> from Dnb. Please go ahead.

Joachim: Thank you.

Speaker Change: I know you don't guide on gross margin specifically.

Speaker Change: You also have some division on the call.

Speaker Change: Market dynamics commentary.

Speaker Change: Jim for the top line of 25, and we also need to remember that that of course, we will be adding infinera after closer and of course once the infinera closer than we will be for the first time in a position to comment comment or so their outlook.

Speaker Change: What looks to be I mean, when it comes to the guide for 'twenty to 'twenty five the deviation versus the consensus appears to be mainly.

Speaker Change: Mobile networks, driven so can you just comment a bit here.

Speaker Change: And then finally in the mobile networks gross margin.

Speaker Change: On the group travel that you don't guide on sales does this mean that you still expect fairly low visibility for the full year trend transpired.

Speaker Change: They were also here as you remember some one offs that we need to need to understand in 2024. So the underlying performance. We have had in 24 has been 38% to 79% in mobile networks crush margin. Excluding those for example, AT&T a settlement in Q2, so looking into 'twenty five the real question will be around the regional.

Speaker Change: Is there anything that you can say with regards to mobile networks gross margin for <unk> five in relation to the search as a percentage of showed here in Q4. Thank you.

Speaker Change: Okay. Thank you that's actually okay.

Speaker Change: Several questions. If you are asking so let me try to take take that piece by piece. So if I take first the visibility question I would say that as we start 2005, our visibility is much better than it was a year ago. Our order backlog has continued to grow through the year and the capex commentary from our.

Speaker Change: Dynamics, but I would not make a clear comment either way. It at this point the underlying last year was 38% to 39%, which is pretty much what we what we saw in Q4.

Speaker Change: Thank you you can we will take our next question from Simon Leopold from Raymond James Simon. Please go ahead.

Speaker Change: Customers is now more robust.

Speaker Change: And we are optimistic about our opportunity to grow in in addition to <unk> on the enterprise markets, including the data center. So I would not say that we have lower visibility.

Simon Leopold: Great. Thanks for taking the question I wanted to see if we could maybe double click a bit on the.

Speaker Change: The trends with the hyperscale or in particular.

Speaker Change: The 2028 outlook regarding sort of that $1 billion target I think what I'm looking for something a little bit more shorter term and what youre seeing in the next year or year plus in terms of of that group of customers.

Speaker Change: You're of course, right that we're not providing that level of explicit net sales assumptions that we provided last year for our businesses, but we did say however that we expect strong growth in Eni.

Speaker Change: We expect the growth in CNS.

Speaker Change: Got a quick follow up okay. Okay, sorry, I'm on the thank you. This is of course one of the most important questions. We are also internally focusing focusing on because because hyperscale or some data centers. They are they are clearly.

Speaker Change: We expect stable facing them men, despite a four percentage point headwind from AT&T.

Speaker Change: The reason this is more than that in a dynamic market, which is now seems to be changing to the better. It's very hard to go out you exactly if that's what the pace of recovery will be about the signs. We see are clearly encouraging for the top line of 25, and we also need to remember that that of course, we will be adding infinera. After.

Speaker Change: One of the best growth opportunities, that's where it will have on that's why we decided to double down from an investment point of view and because we see it so big growth opportunities there.

Speaker Change: We have had good deal traction and I, just mentioned to Microsoft dynamics scale that were both published and in Q4 than Infinera will of course add a lot of capabilities for the optical side. Both for data Center interconnect and then inside the data Center also where the service will be increasingly connected through.

Speaker Change: Closer and of course once Infinera closely is then we will be for the first time in a position to comment comment, though so their outlook.

Speaker Change: And then finally in the mobile networks gross margin.

Speaker Change: They were also here as you remember some one offs that we need to need to understand in 2024. So the underlying performance. We have had in 'twenty four has been 38% to 39% in mobile networks crush margin. Excluding those for example, the AT&T a settlement in Q2, so looking into 'twenty five the real question will be around the regional.

Speaker Change: Optical technologies.

Speaker Change:

Speaker Change: Something that Infinera is particularly stronger than <unk>.

Speaker Change: Looking at the Big picture in data centers of course, the reality is that we are still today compare to the dominant players in that industry. We are we are a fairly small challenger, which means that this is definitely on the opportunity side for us and all you need to do is to for example look at the Microsoft handmade met our results last night, where both gave capex guidance.

Speaker Change: Dynamics, but I would not make a clear comment either way. It at this point the underlying last year was 38% to 39%, which is pretty much what we what we saw in Q4.

Speaker Change: Thank you you can we will take our next question from Simon Leopold from Raymond James Simon. Please go ahead.

Speaker Change: For very strong growth in 2020.

Speaker Change: Five so this market is clearly accelerating then of course the recent announcements we saw on the new lower cost platforms. They will most likely increase competition in data centers. They will be also lower cost alternatives available, which should increase the application possibilities for AI and consequently.

Simon Leopold: Great. Thanks for taking the question.

Simon Leopold: Wanted to see if we could maybe double click a bit on the.

Simon Leopold: The trends with the hyperscale or in particular.

Simon Leopold: <unk> 2028 outlook regarding sort of that $1 billion target I think what I'm looking for something a little bit more shorter term than what youre seeing in the next year or year plus in terms of that group of customers that I've got a quick follow up.

Speaker Change: Data centers for example in an industrial application is in edge compute applications for various workloads. So overall, we are we are we are strongly optimistic when it comes to comes to this market both hoi up scaling for the plants of telcos.

Speaker Change: Okay, Okay, sorry, I'm on the thank you. This is of course one of the most important questions. We are also internally focusing focusing on because it goes hyperscale or some data centers. They are they are clearly.

Speaker Change: And enterprise sales and the additional investment that we're making together with the Infinera acquisition of Wheeler.

Speaker Change: One of the best growth opportunities, that's where it will have on that's why we decided to double down from an investment point of view and because we see big opportunities there.

Speaker Change: To strengthen our capabilities here. This is one area, where we will definitely focus on in the upcoming.

Speaker Change: The capital market day later this year and that is also the reason both the pending infinera situation at the upcoming capital market day, why we are not yet, giving more chat tangible targets for this year or next year. We just wanted to give you. The highlight of that 1 billion additional revenue that we are targeting two a day.

Speaker Change: We have had good deal traction and I, just mentioned to Microsoft and scale that were both published and in Q4 than Infinera will of course add a lot of capabilities for the optical side. Both for data Center interconnect and then inside the data Center also where the service will be increasingly connected.

Speaker Change: $100 million investment additional investment that we're making in IP.

Speaker Change: The optical technologies.

Speaker Change:

Speaker Change: Thanks, and then as the follow up.

Speaker Change: Something that Infinera is particularly stronger than.

Speaker Change: Very much related question is what are your telco customers, saying to you about the impact of AI on their business and what that might mean for Nokia. Thank you.

Speaker Change: Thanks.

Speaker Change: Another highly relevant relevant question in.

Speaker Change: They asked me and some announcements even I just referred to the T mobile announcement, where it where they are.

Speaker Change: Talking about the acceleration of their AI strategy and we are one of the partners.

Speaker Change: Guidance for very strong growth in 2020.

Speaker Change: Five so this market is clearly accelerating then of course the recent announcements we saw on the new lower cost platforms. They will most likely increase competition in data centers that will be also lower cost alternatives available, which should increase the application possibilities for AI and consequently.

Speaker Change: Partners that they are working on together.

Speaker Change: I mean, obviously there are some obvious things.

Speaker Change: Telcos cuts.

Speaker Change: Customer service and network management and.

Speaker Change: Network.

Speaker Change: Security and intrusion detection et cetera, where where AI is already now.

Speaker Change: Data centers.

Speaker Change: Making making a big impact, but then the biggest strategic question for telcos going forward is that how they are going to position in terms of other workloads than their traditional own workload and hit the sweet spot, which also will be in a way a battleground between telcos and hyper scaler and enterprises' own.

Speaker Change: For example in an industrial application is in edge compute applications for various workload. So overall, we are we are we are strongly optimistic when it comes to comes to this market both the way up scaling for the plants of telcos.

Speaker Change: And enterprise sales and the additional investment that we're making together with the Infinera acquisition of Wheeler.

Speaker Change: Cloud is going to be at the edge compute market.

Speaker Change: To strengthen our capabilities here. This is one area, where we will definitely focus on in the upcoming.

Speaker Change: Many of the telcos are currently thinking to what extent they should be in a way providing a workload processing capability at the edge of the networks combining potentially their presence through the base station network and offer edge compute capabilities for enterprise industrial.

Speaker Change: The capital market day later this year and that is also the reason both the pending infinera situation at the upcoming capital markets day, why we are not yet, giving more tangible targets for this year or next year. We just wanted to give you. The highlight of that 1 billion additional revenue that we are targeting two a day.

Speaker Change: <unk> workloads.

Speaker Change: So that edge will be a highly dynamic part of the market going forward and there will be many different entrepreneurs that will go will want to go after that market and the good thing for Nokia. Obviously is that we are working with telcos. We are working with Hyperscale and we are increasingly working also direct with enterprise customers.

Speaker Change: $100 million investment additional investment that we're making in IP.

Speaker Change: Thanks, and then as the follow up.

Speaker Change: Very much related question is what are your telco customers, saying to you about the impact of AI on their business and what that might mean for Nokia. Thank you.

Speaker Change: To go after that opportunity.

Simon Leopold: Thank you Simon will take our next question from Artem <unk> from Seb Artem. Please go ahead.

Speaker Change: Thanks.

Speaker Change: Another highly relevant relevant question in.

Speaker Change: Yes.

Speaker Change: He asked me some announcements even I just referred to the T mobile announcement, where they are.

Artem: Thank you for taking my question and congrats on strong strong profitability.

Artem: In Q4, I would like to ask about the growth trajectory what comes to analyze segment. So could you maybe comment on sort of sub segment level of basically IP optical speaks.

Talking about the acceleration of their AI spread that you know we are one of the partners.

Partners that they are working on together.

Speaker Change: I mean, obviously there are some obvious things.

Artem: What kind of development that you see for this year and maybe just what comes to double digit growth. What you are talking about is it oh, sorry, no double digit but strong growth youre talking about is it double digit growth in your books or not.

Speaker Change: Telco.

Speaker Change: Customer service and network management and.

Speaker Change: Network.

Speaker Change: Security and intrusion detection et cetera, where where AI is already now.

Artem: [laughter].

Artem: Of course.

Of course, since we did not.

Artem: That's a number to that the double.

Artem: Double digit but strong you are putting words in my mouth, now, which I did not want to want to do but the but when we said strong growth we have decided not to put the number a clear figure.

Artem: On it of course, 17% growth that we saw in Q4.

Speaker Change: Cloud is going to be at the edge compute.

Speaker Change: Market and many of the telcos are currently thinking to what extent they should be in a way providing.

Artem: That would be more than just the strong growth, but we are not going to be more specific than that we see clearly opportunities in all three segments.

Speaker Change: Workload processing capability at the edge of the networks, combining potentially their presence through the base station network and offer edge compute capabilities for enterprise industrial AR.

Artem: Ni.

Artem: Very much, including an optical which which typically and we've been talking about this earlier is the last one to recover you already saw strong recovery in both fixed and and IPA. We expect these trends to continue and then also optical picking up and then of course, one C. Infinera closes that will then boost our.

Speaker Change: Workloads.

Speaker Change: So that edge will be a highly dynamic part of the market going forward and there will be many different entrepreneurs that will go will want to go after that market and the good thing for Nokia. Obviously is that we are working with telcos. We are working with hyper scaler and we are increasingly working also direct with enterprise customers.

Artem: Optical capabilities.

Artem: So yes.

Artem: Market trends to continue that we are now seeing into twenty-five expect strong growth further boosted by by optical but we are not at this stage going to put a clear figure on this.

<unk> to go after that opportunity.

Speaker Change: Thank you Simon will take our next question from Artem <unk> from Seb Artem. Please go ahead.

Artem: Did you have a quick follow up or something.

Yes, I do.

Speaker Change: Yes.

Speaker Change: That is actually related to the technologies segment and could you maybe a bit more talk about.

Artem: Thank you for taking my question and congrats on strong strong profitability.

Artem: In Q4, I would like to ask about the growth trajectory what comes to the energy segment. So could you maybe comment on sort of sub segment level basically IP optical speaks.

Speaker Change: <unk> media space until now you have done two deals in the quarter, how meaningful opportunity on that front, then just challenging to do that.

Speaker Change: You have only 100 million euros lacking to reach our midterm target using opportunity bigger what comes to new growth areas. What's your interest in right now.

Artem: Or what kind of development you see zero for this year and maybe just what comes to double digit growth. What you are talking about Oh, sorry, no double digit but strong growth youre talking about is it a double digit growth in your books or not.

Speaker Change: Thank you Tim and.

Speaker Change: We definitely see opportunities in in the new growth areas as we call them, including automotive Iot multimedia.

Artem: Okay.

Artem: Of course.

Artem: Of course, since we did not at that number to that the double.

Speaker Change: Double digit but strong you are putting words in my mouth, now which I.

Speaker Change: And and as Bill said, specifically also video streaming.

Speaker Change: What to do but the but when we said strong growth we have decided not to put the number a clear figure.

Speaker Change: Good.

And we are already in 2010 and two we had two video streaming contracts that will be announced.

Speaker Change: Of course, 17% growth that we saw in Q4.

Speaker Change: And then also in quarter four we had on the device side.

Speaker Change: That would be more than just the strong growth, but we are not going to be more specific than that we see clearly opportunities in all three segments.

Speaker Change: Video device side we.

Speaker Change: We had an HP and Samsung.

Speaker Change: So automotive would also it has been tracking extremely well and we see good opportunities in these new growth areas.

Speaker Change: Of Ni.

Speaker Change: Very much, including an optical which which typically and we've been talking about this earlier is the last one to recover you already saw strong recovery in both fixed and an IPA.

Speaker Change: We haven't updated but.

Speaker Change: Last time, we updated was December 23.

Speaker Change: And then we sense that these new growth areas top top line on sales was about 150 million euro.

Speaker Change: We expect these trends to continue and then also picking up and then of course.

Speaker Change: One is the Infinera closes that will then boost our optical capabilities. So yes.

Speaker Change: For the previous 12 months period.

Speaker Change: And.

Speaker Change: We will provide you an updated figure for this segment. These segments later this year as well and specifically in the capital markets day will give much more information about this but we believe that we are continuing to make very good progress here.

Speaker Change: Market trends to continue that we are now seeing into 25, we expect strong growth further boosted by by optical but we are not at this stage going to put a clear figure on this.

Speaker Change: Did you have a quick follow up or something.

Speaker Change: And we also see is there's plenty of untapped opportunities.

Speaker Change: Yes, I do.

Speaker Change: That is actually related to technologies segment and could you maybe a bit more talk about multimedia space until now you have done two deals in the quarter, how meaningful opportunity to speak on that front, then just challenging to us.

Speaker Change: Maybe just to add one one thing at a time to devote Morocco, Morocco sat down and we need to remember that the definition of the run rate. When we are communicating is Israeli that that is the day.

Speaker Change: In a way the annualized value of the of the contract base that we currently are.

Speaker Change: You have only 100 million euros lacking to reach our midterm target using the opportunity bigger when it comes to new growth areas. What's your interest in right now.

Speaker Change: Have and.

Speaker Change: What we then always.

Speaker Change: Typically have.

Speaker Change: Then some catch up payments in new deals, which then explain the difference between the realized.

Thank you Tim and.

Speaker Change: We definitely see opportunities in in the new growth areas as we call them, including automotive Iot multimedia.

Speaker Change: Sales in any given year and the run rate that we've been communicating and of course 24 was exceptional from this point of view because of the.

Speaker Change: And.

Speaker Change: The more than $400 million catch ups that we had in Q.

Speaker Change: As we said specifically also video streaming side than we are.

Speaker Change: Q1, and as we did say there were some catch up so sell in in Q4, which explains the difference between between Q4 and then the run rate that we are talking about.

Speaker Change: Already in 2010, and two we had two video streaming contracts that will be announced.

Speaker Change: And then also in quarter four.

Speaker Change: On the device side.

Speaker Change: Device side.

Of course, there could be catch up payments also also in the future, but we feel that it's important to communicate in the way the base the contract base value that way that we currently have a tenant.

Speaker Change: We had HP Samsung.

Speaker Change: So automotive would also it has been tracking extremely well and we see good opportunities in these new growth areas.

Speaker Change: Thank you we'll take our next question from Sami Sarcomere from Danske Bank Sammy. Please go ahead.

Speaker Change: We haven't updated but.

Speaker Change: Last time, we updated once December 'twenty, three and then we sense that these new growth areas top top line on sales was about 150 million Euro.

Speaker Change: Yeah.

Sami Sarcomere: Hi, Thanks, I wanted to revisit your data center growth plans and expectations related to that area.

Speaker Change: For the previous 12 months period.

Speaker Change: That is right that you are planning to grow operating expenses by 300 million euros over a three year period and you expect this to translate into an additional 1 billion euros of annual sales.

Speaker Change: And.

Speaker Change: Can you also perhaps elaborate a bit on the split between R&D and go.

Speaker Change: And we also see is there is plenty of untapped opportunities.

Speaker Change: Go to market investments and what is roughly the starting position for your data center sales today.

Speaker Change: Maybe just to add one one thing at a time to devote Morocco, Morocco sat down and we need to remember that the definition of the run rate. When we are communicating is.

Speaker Change: <unk> Infinera.

Speaker Change: Thanks, Sami we have not.

Speaker Change: Israel is that that is the.

Speaker Change: Yet put a figure on our existing data center sales days, our days are going to be a capital market day comments.

Speaker Change: In a way the annualized value of the of the contract base that we have currently.

Speaker Change: Uh huh.

Speaker Change: Jason we are waiting with that is that we want to get the infinera close because thats going to be such such a fundamentally important piece of all of this.

Speaker Change: Typically have.

Speaker Change: And.

Speaker Change: Then some catch up payments in new deals, which then explain the difference between the realized.

Speaker Change: Sales in any given year and the run rates that we've been communicating and of course 24 was exceptional from this point of view because of the.

Speaker Change: There has been growth in data centers, we have a we have a very interesting starting position, but the reality is that in the big scheme of things compared to the giants that sell billions and billions to this market a market we are still a small player.

Speaker Change: The more than $400 million catch ups that we had in.

Speaker Change: Q1, and as we did say there were some catch up so.

Speaker Change: In Q4, which explains the difference between between Q4 and and then the run rate that we are talking about.

Yes, the $100 million it will gradually ramp during this year and we expect to reach that $100 million run rate towards the end of the year.

Speaker Change: Of course, there could be catch up payments also also in the future, but we feel that it's important to communicate in the way the base the contract base value that way that we currently have.

And then than keep it there so.

Speaker Change: So roughly speaking the numbers that you quoted or are in the right ballpark and absolutely yes.

Speaker Change: Thank you we'll take our next question from Sami Sarcomere from Danske Sammy. Please go ahead.

Speaker Change: Additional investment is targeted.

Speaker Change: Deliver additional $1 billion of sales in the year of 2028.

Sami Sarcomere: Hi, Thanks, I wanted to revisit your data center growth plans and expectations related to that area.

Speaker Change: And then sorry I forgot.

Speaker Change: Do I understand it right that you are planning to grow operating expenses by 300 million euros over a three year period.

Speaker Change: The other part of your question, which was.

Speaker Change: The split between the $100 million.

Speaker Change: Between different different.

Speaker Change: And you would expect this to translate into an additional 1 billion euros of annual sales.

Speaker Change: <unk>.

Speaker Change: It will be both R&D.

Speaker Change: And then go to market and channel expansion, both are going to be important but the but also here we are not providing the split at.

Speaker Change: Can you also perhaps elaborate a bit on the split between R&D and.

Speaker Change: Go to market investments and what is roughly the starting position for your data center sales today.

Speaker Change: At the moment it is important to do both then and again because the market opportunity is so large it absolutely is.

Speaker Change: <unk> Infinera.

Speaker Change: Thanks, Sami we have not.

Speaker Change: It's going to be a good investment to also increase our R&D expenditure in this segment.

Speaker Change: Yet put a figure on our existing data center sales days, our days are going to be a capital market day comments.

Speaker Change: As you know we've been take.

Taking out a lot of cost from our.

Speaker Change: The business during the last four to five quarters, it's very important to keep in mind that going forward. This is not going to be only about cost reduction we need to reallocate some of that reduced cost into growth opportunities and again in today's world 111 of the biggest if not the biggest growth.

Speaker Change: Jason we are waiting with that is that we want to get the infinera close because thats going to be such such a fundamentally important piece of all of this.

Speaker Change: The opportunity is data centers.

Speaker Change: Did you have a quick follow up suddenly.

Speaker Change: Well it may be.

Speaker Change: Wanted to double check that if we also consider the 200 million euros synergy targets for Infinera acquisition should we assume our cost base.

Speaker Change: Yes, the $100 million it will gradually ramp during this year and we expect to reach that $100 million run rate towards the end of the year.

Speaker Change: In 2007 that is higher than today.

Speaker Change: And then keep it there.

Speaker Change: So roughly speaking.

Speaker Change: Also that is too early to comment we maintain what we said about the $100 million additional investment and then then the $200 million synergy target and Infinera by 'twenty.

Speaker Change: Number that you quoted or are in the right ballpark and absolutely. Yes. This additional investment is targeted to deliver additional $1 billion.

Speaker Change: 27 of course, we have to remember that there will be a normal cost inflation, and then where exactly we put the investment levels.

Speaker Change: Oh I forgot.

Speaker Change: The other part of your question, which was.

Speaker Change: It will have to be balanced with the size of the opportunity and the market development forward. So so it's a bit premature to to draw the conclusion on that date that level as suggested.

Speaker Change: The split between the $100 million.

Speaker Change: Between different a different.

Speaker Change: <unk>.

Speaker Change: It will be both R&D.

Speaker Change: And then go to market and channel expansion, both are going to be important but the but also here we are not providing the split at.

Speaker Change: Thanks, Tommy we'll take our next question from Sandeep Deshpande from Jpmorgan Sandeep. Please go ahead.

Sandeep Deshpande: Yeah, Hi, Thanks for letting me on my question is going back to the mobile networks business I mean, you've had some challenges in the business you've guided to a flattish trend. Despite some parts of the business declining.

Speaker Change: At the moment it is important to do both then and again because the market opportunity is so large it's absolutely.

Speaker Change: It's going to be a good investment to also increase our R&D expenditure in this segment.

Speaker Change: Yeah.

Speaker Change: Where is this business I mean, how do you would you call. It back in the business is now properly turnaround this will.

Speaker Change: As you know we've been take.

Speaker Change: Taking out a lot of cost from our.

Speaker Change: Business during the last four to five quarters, it's very important to keep in mind that that going forward. This is not going to be only about cost reduction we need to reallocate some of that reduced cost into growth opportunities and again in today's world 111 of the biggest if not the biggest growth.

Speaker Change: Take you to where it needs to go and do you need to take more new contracts. There do you need to adjust the cost and what will make you.

Speaker Change: I believe that the market is on a stable trajectory going from here or is it already there and I have a quick follow up.

Well the key thing in mobile networks is really really going to be the question of how to drive top line in the future we have now.

Speaker Change: The opportunity is data centers.

Tony: Did you have a quick follow up Tony.

Tony: Well maybe.

Speaker Change: Wanted to double check that if we also consider the 200 million euros synergy targets for Infinera acquisition should we assume our cost base.

Speaker Change: Very strong base in terms of our technology competitiveness.

Speaker Change: Firmed by the customer traction that we have had this year, but that.

Speaker Change: That we had last year and we expect to continue this year, but the reality in mobile networks is that the service provider market will not be.

Speaker Change: In 2007 that is higher than today.

Speaker Change: Also that is too early to comment we maintain what we said about the $100 million additional investment in then.

Speaker Change: Significant growth market.

Speaker Change: There will be most likely some small recovery in the market overall market this year.

Speaker Change: The $200 million synergy target and Infinera by 'twenty.

Speaker Change: And again when we are guiding.

Speaker Change: 27% of course, we have to remember that there will be a normal cost inflation, and then where exactly we put the investment levels.

Speaker Change: Largely stable sales for this year it means that when when AT&T is expected to decline for <unk>.

Speaker Change: It will have to be balanced with the size of the opportunity on the market development forward. So so.

Speaker Change: Present on the <unk> level. It means that then the other customers will grow ex AT&T will grow 4%. So that is showing that that the market is turning and we are taking our share of that turn but still the reality is that looking between today and 22028 2009.

Speaker Change: It's a bit premature to draw the conclusion on that date that level lessee adjusted.

Speaker Change: Thanks, Tommy we'll take our next question from Sandeep Deshpande from Jpmorgan Sandeep. Please go ahead.

Sandeep Deshpande: Yes, hi, Thanks for letting me on my question is going back to the mobile networks business I mean, you've had some challenges in the business you guided to a flattish trend. Despite some parts of the business declining.

Speaker Change: This will not be a big growth market for operators. That's why it is so important to go after the growth segments, which obviously are private wireless.

Speaker Change: Private networks.

Speaker Change: And then.

Speaker Change: Other segments like public safety authority, its networks and very importantly, the defense sector because.

Speaker Change: I mean, where.

Where is this business I mean, how do you would you call. It back in the business is now properly turnaround this will.

Speaker Change: Again.

Speaker Change: Take you to where it needs to go and do you need to take more new contracts. There do you need to adjust the cost and what will make you.

Speaker Change: The defense spending in the World Unfortunately is going.

Speaker Change: Pretty much everywhere and we are now in a very exciting position when we launched our <unk> based tactical radio solution. In Q4, we are offering <unk> as a fundamental communications platform for the military including four tactical Battle Battlefield Communications.

Speaker Change: I believe that the market is on a stable trajectory going from here or is it already dead and I have a quick follow up.

Speaker Change: Well the key thing in.

Speaker Change: Really really going to be the question of how to drive top line in the future we have now.

Speaker Change: Systems.

Speaker Change: In many cases today when you look at military communications the capability of those systems are close to what we would call <unk> capability is both in terms of.

Speaker Change: A very strong base in terms of our technology competitiveness confirmed by the customer traction that we have had this year.

Speaker Change: Or that we had last year and we expect to continue this year, but the reality in mobile networks is that the service provider market will not be a.

Speaker Change: Of speed and.

Speaker Change: Quality and security there so on.

Speaker Change: Significant growth market.

Speaker Change: There is a significant opportunity to upgrade through the through <unk>, and especially <unk> and we are seeing increased traction in this market.

Speaker Change: There will be most likely some small recovery in the market overall market this year.

Speaker Change: And again when we are guiding.

Speaker Change: We believe that the acquisition of Phoenix was extremely well timed.

Speaker Change: Largely stable sales for this year it means that when when AT&T is expected to decline for <unk>.

Speaker Change: Said several times.

Speaker Change: This business.

Speaker Change: Present on the <unk> level. It means that then the other customers will grow ex AT&T will grow 4%. So that is showing that that the market is turning and we are taking our share of that and but still the reality is that looking between today and 'twenty 'twenty 'twenty eight 'twenty nine.

Speaker Change: Take some patients because sales cycles are really really long, but hopefully not too distant future, we will be able to come with new new concrete announcements on our progress progress in this this segment. This is a significant part of <unk> strategy. So you need to keep both CSP.

Speaker Change: This will not be a big growth market for operators. That's why it is so important to go after the growth segments, which obviously are private wireless.

Flat to slow growth market enterprise private wireless.

Speaker Change: Loan growth market and defense going to be a strong growth market. They all are important elements in our M N strategy.

Speaker Change: Private networks.

Speaker Change: And then.

Speaker Change: Other segments like public safety authority, its networks and very importantly, the defense sector because.

Speaker Change: Thanks, Nick I mean, just a quick follow up on Nokia technologies, I mean, you've had from a major Ah.

Speaker Change: Deal signed with we deal recently is this I mean, you've talked about the new end markets like autos et cetera that you're targeting but is this new the new IP, new IP, but you know all the IP and in our updated IP that you have now begun licensing is this going to be a major opportunity for Nokia.

Speaker Change: Then.

Speaker Change: The defense spending in the World Unfortunately is going.

Speaker Change: Up pretty much everywhere and we are now in a very exciting position when we launched our <unk> based tactical radio solution. In Q4, we are offering <unk> as a fundamental communications platform for the military including four tactical Battle Battlefield Communications.

Sandeep Deshpande: Yeah. Thank you Sandeep.

Sandeep Deshpande: As I said earlier as well, we definitely believe that there are growth opportunities.

Speaker Change: Our systems.

Speaker Change: In many cases today when you look at military communications the capability of those systems.

Sandeep Deshpande: In in those new areas that we're targeting and we continue to invest in R&D in these areas.

The what we would call <unk> capability is both in terms of.

Sandeep Deshpande: And.

Speaker Change: Just like you mentioned video streaming is one of those areas, but also we see more opportunities in them.

Speaker Change: Of speed.

Speaker Change: The quality and security there so.

Sandeep Deshpande: Consumer electronics and even automotive.

Speaker Change: There is a significant opportunity to upgrade through the trip before gn, especially <unk> and we are seeing increased traction in this market.

Sandeep Deshpande: And.

Sandeep Deshpande: Here, we definitely believe that.

Sandeep Deshpande: Going forward, if we look at the Nokia technologies to be able to reach also.

Speaker Change: And we believe that the acquisition of Phoenix was extremely well timed.

Sandeep Deshpande: The run rate that we have targeted but also beyond that because that run rate that we have it doesn't mean that we must stop there, but we will continuously invest in new areas.

Speaker Change: Said several times.

Speaker Change: This business.

Speaker Change: Take some patients because sales cycles are really really long, but hopefully in not too distant future, we will be able to come with new new concrete.

Sandeep Deshpande: R&D and.

Sandeep Deshpande: And capture those opportunities by our.

Speaker Change: <unk> on our progress progress in this this segment. This is a significant part of <unk> strategy. So you need to keep both csp's flat to slow growth market enterprise private wireless.

Sandeep Deshpande: Technology is.

Speaker Change: Thank you we'll take our next question from Daniel Djurberg from Handelsbanken Sanyo. Please go ahead.

Okay.

Speaker Change: Thank you, David and pick on Mako and Yeah. A question for me on your mobile networks.

Speaker Change: Loan growth market and defense going to be a strong growth market. They all are important elements in our M&A strategy.

Your comment to have on the 18th.

Speaker Change: Some additional base stations sites in 'twenty to 'twenty four I was wondering if you, possibly could give us a gross number and possibilities to talk about.

Speaker Change: Thanks, Nick I mean, just a quick follow up on Nokia technologies, I mean, you've had some immediate.

Speaker Change: Deal signed with we deal recently is this I mean, you've talked about the new end markets like autos et cetera that you're targeting but is this new the new IP are not new IP, but you know all the IP and updated IP that you have now begun licensing is this going to be a major opportunity for Nokia.

Speaker Change: As for my Yoga ethical point of view, perhaps also comment on the ASP trend Youll see bts.

Speaker Change: Year over year from this 800000.

Speaker Change: Thank you. Thank you we had to actually if you go back to the presentation. So there were say a regional split on the both the new CSP customers that we are born diagnosed with <unk>.

Speaker Change: Thank you Sandeep.

Speaker Change: As I said earlier as well, we definitely believe that there are growth opportunities.

Speaker Change: Which with whom we had increased market share. So more details than that we are not going to go into and of course, you will have seen some of the deal announcements that we that we have made and we continue to be encouraged on the on the ongoing deal momentum as well.

Speaker Change: In those new areas that we're targeting and we continue to invest in R&D in these areas.

Speaker Change: And.

Speaker Change: Just like you mentioned video streaming is one of those areas, but also.

Speaker Change: That 18000.

Speaker Change: We see more opportunities in Iot.

Speaker Change: What does it really really mean it it's in a way a net run rate.

Speaker Change: Iot consumer electronics and even automotive.

Speaker Change: And.

Speaker Change: Change so you win some deals in terms of your market position and then you lose some and this is the net amount we are not publishing the garage.

Speaker Change: Here, we definitely believe that.

Speaker Change: Going forward, if we look at the Nokia technologies.

Speaker Change: Gross amount that's a confidence so of course, we have also won or lost footprint with some customers, but clearly clearly we have one much more than we have a we have locked in most of those losses that we had which were not many by the way they had to deal with the extremely aggressive.

Speaker Change: To be able to reach also.

Speaker Change: The run rate that we have targeted but also beyond that because that run rate that we have it doesn't mean that we must stop there, but we will continuously.

Speaker Change: Investing in new areas.

Speaker Change: R&D and and capture those opportunities by our.

Speaker Change: <unk> technologies.

Speaker Change: Pricing.

Speaker Change: Typically from our Chinese customers in those markets, where where are they are continuing.

Speaker Change: Thank you we'll take our next question from Daniel Djurberg from Handelsbanken, Daniel Please go ahead.

Speaker Change: Continuing to compete and we we just want to be prudent with our pricing. We are we are not participating in the in the most aggressive price wars, it would not make sense, but despite having this this.

Speaker Change: Yeah.

Thank you David and pick on Mako question for me on your mobile networks.

Speaker Change: Can you comment on some additional base station side not in 'twenty to 'twenty four I was wondering if you possibly could gave us a gross number and possibly also talk about.

Speaker Change: <unk> said that when it comes to pricing we had a highly successful year in terms of increasing our our footprint on a net basis run rate basis with 18000 sites.

Speaker Change: This from my Yoga ethical point of view, perhaps also comment on the ASP trend you see bts.

Speaker Change: That's perfect.

Speaker Change: Year over year from this April.

Speaker Change: Yep.

Speaker Change: Yes, cloud and network services strong momentum or return to growth et cetera.

Speaker Change: Thank you. Thank you we had actually if you go back to the presentation. So there was a regional splits on the both the new CSP customers that we are born diagnosed.

Speaker Change: You mentioned, if I recall being solid.

Speaker Change: Mentioned, 20% to 5% for CSP snow being deployed towards the Standalone.

Speaker Change: With which with whom we have increased market share. So more details than that we're not going to go into and of course, you will have seen some of the deal announcements that we that we have made and we continue to be encouraged on the on the ongoing deal momentum as well.

Speaker Change: Can you comment a bit on if they're just touch their toes into <unk>.

Speaker Change: Are they talking about fully build up five to standalone or is it still only deployed.

Speaker Change: Parts of the network.

Speaker Change: That 18000, what does it really really mean it it's in a way.

Speaker Change: You'll see a substantial build out the expansion also with these that helps both the standalone and important.

Speaker Change: Net run rate change.

Speaker Change: Sure.

Speaker Change: Change so you win some deals in terms of your market position and then you lose some and this is the net amount we are not publishing the garage.

Got it.

Speaker Change: In general one other things that are that has gone differently than at least I personally thought a few years ago is the pace at which five just standalone has expanded it has gone more slowly than anyone.

Speaker Change: Gross amount that's a confidence so of course, we have also one last footprint with some customers, but clearly clearly we have one much more than we have a we have launched in most of those losses that we had which were not many by the way they had to deal with the extremely aggressive.

Speaker Change: One <unk>.

Speaker Change: Expected, but the momentum is picking up and as I said, we have a we have a really strong position in that but from overall market point of view as I said also in my remarks, only a small part of the market is standalone today, which is one key reason why we do expect that that CNS.

Speaker Change: Pricing.

Speaker Change: Typically from our Chinese customers in those markets, where where they are are continuing.

We will have good growth opportunities in the coming years, and our relative position in a relative strength in that market is strengthening we have won several deals recently, where we have where we have displaced by competitors in the core network and this momentum is.

Speaker Change: Continuing to compete then we we just want to be prudent with our pricing. We are we are not.

Speaker Change: Participating in the in the most aggressive price wars, it would not make sense, but despite having this as a prudent step that you when it comes to pricing we had a highly successful year in terms of increasing our our footprint on a net basis run rate basis with.

Speaker Change: Really a healthy one.

Speaker Change: Commenting another thing, which is highly relevant for <unk>.

Speaker Change: CNS is the enterprise Cabozantinib business, which.

Speaker Change: Includes our flagship private wireless for enterprises that is also looking looking strong we had a we.

Speaker Change: 18000 sites.

Speaker Change: Perfect and then I have a follow up.

Speaker Change: Up.

Speaker Change: Yes.

Speaker Change: We had some weakness in that business earlier in the year, but now looking at the order intake we had especially in the in Q4, we expect strong growth in that business heading into into 2025. So CNS is not only about the core network. It's very much also about.

Speaker Change: The network services strong momentum or return to growth et cetera.

Speaker Change: You mentioned, if I recall being solid.

Speaker Change: Mentioned, 20% to 25% just ESP now being deployed by the Standalone.

Speaker Change: Can you comment a bit on if they just touch their toes into the SRU.

Speaker Change: Enterprise campus edge now when we are transitioning.

Speaker Change: Are they talking about you know with all the build those type of Standalone or is it still.

Speaker Change: Managed services.

Speaker Change: Mobile networks, it actually creates a more clean.

Speaker Change: Only deployed in parts of the network.

Speaker Change: You'll see a substantial build out the expansion also with these that is bolstered by the stand alone <unk>.

Speaker Change: Clean cut software business portfolio for CNS, which I hope will be good for the transparency and visibility of that business in the future.

Speaker Change: Sure.

Speaker Change: In general one other things that are that has gone differently than at least I personally thought a few years ago is the pace at which <unk> stand alone has expanded it has gone more slowly than anyone.

Speaker Change: Thank you Daniel we'll take our next question from Rick Rath from Bernstein. Please go ahead.

Rick Rath: Yeah. Thanks very much my main question is.

Speaker Change: Whether you have any comments at this point about.

Speaker Change: One <unk>.

Speaker Change: Expected, but the momentum is picking up and <unk>.

Speaker Change: The changes that are on the horizon from the new U S administration's approach to China.

Speaker Change: As I said, we have a we have a really strong position in that but from overall market point of view as I said also in my remarks, only a small part of the market. The Standalone today, which is one key reason why we do expect that that CNS will have good growth opportunities in the coming years.

Speaker Change: Improve your competitive situation I mean, the reality is that the Chinese suppliers have held up better in terms of relative product quality. According to third party surveys.

Speaker Change: I would have been expected since you started this efforts in 2019.

Speaker Change: And our relative position on a relative strength in that market is strengthening we have won several deals recently, where we have where we have displaced by competitors in the core network and this momentum is.

Speaker Change: Now that may be more efforts and do you think something could happen there in terms of the.

Speaker Change: The competitiveness of your product versus the Chinese product.

Speaker Change:

Speaker Change: Of course.

Speaker Change: This is still very early days for the new administration and we.

Speaker Change: Really a healthy one.

Speaker Change: Commenting on other thing, which is highly relevant for.

Speaker Change: We need to see if that's what the actions really rarely will be but of course, the reality is that that that in the U S. A.

Speaker Change: CNS is the <unk>.

Speaker Change: Enterprise Cabozantinib business, which <unk>.

Speaker Change: Includes our flagship private wireless for enterprises that is also looking looking strong we had a.

Speaker Change: The share of our Chinese suppliers is already very small. This question. This is <unk>.

Speaker Change: Much more relevant for the other parts of the World and then of course, how the overall Tech War.

Speaker Change: It's growing but that's that's another question, but if we'd look at the position of the Chinese suppliers. They are are strongly in play in many European markets still today. This is something that you.

Speaker Change: Enterprise campus edge now when we are transitioning Manny.

Speaker Change: European Commission will of course be discussing the.

Speaker Change: Managed services.

Speaker Change: Mobile networks, it actually creates a more clean.

Speaker Change: Question of a of the five <unk> toolbox in Europe, how it will be applied in the future whether or not it will be expanded to cover also other parts of the network. Besides five G.

Speaker Change: Clean cut.

Speaker Change: Software business portfolio for CNS, which I hope will be good for the transparency and visibility of that business in the future.

Speaker Change: As we have suggested and then of course.

Speaker Change: Thank you Daniel we will take our next question from Rick Rath from Bernstein. Please go ahead.

Speaker Change: The Crucell important question also is that what will then happen in the rest of the World Latin America Africa Middle East significant parts of southeast.

Rick Rath: Yeah. Thanks very much my main question is.

Rick Rath: Whether you have any comments at this point about.

Speaker Change: Asia, where our where the Chinese vendors are.

Rick Rath: The changes that are on the horizon from the new U S administration's approach to China.

Speaker Change: Competing are.

Speaker Change: Very strongly today that are that will there be attempts by the U S administration to change the situation in these parts of the World. This is not for us to speculate this will be a political questions and we are not the political actor. We had just observing the outcomes of these discussions.

Rick Rath: Could improve your competitive situation I mean, the reality is that the Chinese suppliers have held back to a better in terms of relative product quality. According to third party surveys than I would've been expected. Since you started this effort in 2019.

Speaker Change: In the interest of time that mature next question a follow up.

Rick Rath: Now that may be more efforts and do you think something could happen there in terms of.

Speaker Change: A quick one if you have one.

Rick Rath: The competitiveness of your product versus the Chinese product.

Speaker Change: Yes, the follow up would only be your answer to it than that.

Rick Rath: Hmm.

Rick Rath: Of course.

Rick Rath: This is still very early days for the new administration and we.

Speaker Change: And with regards to deployment restrictions, but I was talking about the competitiveness of the product, which has something to do with the technology sanctions and the ability of.

Rick Rath: We need to.

Rick Rath: See that's what the actions really really will be.

Rick Rath: But of course, the reality is that that are that in the U S. A.

Rick Rath: The share of our Chinese suppliers is already very small this question is.

Speaker Change: The Chinese suppliers actually producing product that seems to be performing from a technology perspective, rather well I mean, the deployment restrictions in an entirely different part of the spin. Some movement. Yes, you are absolutely right of course, they started fundamentally different a different question of sand and this will very much depend depend on.

Rick Rath: Much more relevant for the other parts of the World and then of course, how the overall Tech War.

Rick Rath: Is going but that's that's another question, but if we'd look at the position of the Chinese suppliers. They are are strongly in play in many European markets still today. This is something that the <unk>.

Speaker Change: On what type of access.

Speaker Change: The Chinese vendors will have to the latest silicon what type of.

Rick Rath: European Commission will of course be discussing the AR.

Speaker Change: The restrictions on chips will there be in the future and then what type of capabilities.

Rick Rath: Question of a of the <unk> toolbox in Europe, how it will be applied in the future whether or not it will be expanded to cover also other parts of the network. Besides <unk>.

Speaker Change: They will have inside China.

Speaker Change: China.

Speaker Change: Currently the situation is that the that the when it comes to the latest silicon that require <unk>.

Rick Rath: As we have suggested and then of course.

Rick Rath: Crucially important that question also is that what will then happen in the rest of the World Latin America Africa Middle East significant parts of southeast.

Speaker Change: Do not have access, but but it's too early to speculate what type of actions the new U S administration will take in many cases together with the allies. This is not only a U S question European Union will also have a lot to say on this and then of course the question that I'm not at all going to speculate on is that what's the internal development capability.

Rick Rath: Asia, where we're.

Rick Rath: Chinese vendors are.

Rick Rath: Competing.

Rick Rath: Very strongly today.

Rick Rath: That's that.

Rick Rath: Will there be attempts by the U S administration to change the situation in these parts of the World. This is not for us to speculate this will be a political questions and we are not the bullet. The collector, we had just observing the outcomes of those discussions.

Speaker Change: So China will be in the future.

Speaker Change: We'll take our next question from Rob Sanders from Deutsche Bank. Please go ahead.

Speaker Change: Yes, hi, there's some reports that the Doj is investigating the juniper deal I was just wondering if that deal do you think creates opportunities for you.

Speaker Change: Thank you Laurie in the interest of time that mature next question a follow up.

Rick Rath: A quick one if you have one.

Speaker Change: Already or perhaps in the future just because of the disruption that could come with that deal and because of perhaps partnerships that juniper previously had that maybe you could now.

Rick Rath: Yes.

Rick Rath: The follow up would only be you answer to it than that mainly in retail and with regards to two deployment restrictions, but I was talking about the competitiveness of the product, which has something to do with the technology.

Speaker Change: Take advantage of yourself and I have a follow up thanks.

Speaker Change: I have I have no no comment to that.

Speaker Change: Sanctions and the ability of.

Speaker Change: The Chinese suppliers actually producing product that seems to be performing from a technology.

Speaker Change: Speculation that it's not for us to comment, but on a general level of course always when there is M&A activities.

Speaker Change: Specter of rather well I mean, the deployment restrictions in an entirely different part of the spin some movement, yes, you're absolutely right of course, they started fundamentally different a different question of sand and this will very much depend depend on on what type of access the Chinese vendors will have.

Speaker Change: That creates opportunities for our competitors we of course try to take advantage of that and I know that when we are in M&A situations. Our competitors are trying to get advantage of that so there is nothing nothing dramatic there but.

Speaker Change: We now just need to see what the outcome outcome of that Oh, if that situation will be.

Speaker Change: To the latest silicon.

Speaker Change: What type of risk.

Speaker Change: Got it and just as a follow up on the 100 million investment is that primarily an R&D or is there an effort to sort of build out a channel.

Speaker Change: Restrictions.

Speaker Change: Chips will there be in the future and then.

Speaker Change: What type of capabilities.

We'll have inside.

Speaker Change: And our sales force to leverage Youll take advantage.

Speaker Change: China.

Speaker Change: Currently the situation is that the.

Speaker Change: It's both it's clearly both so there is an increase going to be increased R&D. But then then a meaningful portion of that additional investment will also go to go to market and channel and partnership partnership programs.

Speaker Change: When it comes to the latest silicon that require <unk>.

Speaker Change: I do not have access but.

Speaker Change: But it's too early to speculate what type of actions the new U S administration will take in many cases together with the allies. This is not only a U S question European Union will also have a lot to say on this and then of course the question, but I'm not at all going to speculate on is that what's the internal development capabilities of China will be in the future.

Speaker Change: Thank you we'll take our next then potentially last question from Felix Henriksen from Nordea Felix. Please go ahead.

Felix Henriksen: Hi, guys. Thanks for squeezing me in I wanted to touch on the full year EBIT guidance and the different scenarios that you've baked into the one could say relatively wide wide guidance range of $1 49 to $2 four so what in your eyes has to go well for you to get to the upper end and.

Speaker Change: Thank you we'll take our next question from Rob Sanders from Ghansham I wrote. Please go ahead.

Yes, hi, there's some reports that the Doj is investigating the juniper deal I was just wondering if that deal do you think creates opportunities for you.

Speaker Change: On the contrary.

Speaker Change: The how fast if you get to the lower end of that that <unk> is just mainly related to the topline recovery or are there other puts and takes.

Felix Henriksen: Yeah. Thank you Felix.

Speaker Change: <unk>.

Speaker Change: As always when we provide a range we take into account would be no and interesting today off the market development.

Speaker Change: Take advantage of yourselves and I have a follow up thanks.

Speaker Change: I have I have no no comment to that.

Speaker Change: And.

Speaker Change: The marketing is a clear one driver and how this will evolve over the coming quarters.

Speaker Change: Speculation that there's not a for us to comment but on a general level of course always when there is M&A activities.

And what we see currently is that the improving trends that we've seen in the second half of 2024 should continue into 2025 first wall.

Speaker Change: That creates opportunities for our competitors we of course try to take advantage of that and I know that's when we are in M&A situations. Our competitors are trying to get advantage of that so there is nothing nothing dramatic there but.

Speaker Change: This is supportive of the underlying improvement.

Speaker Change: Did you have a quick follow up here.

Speaker Change: We now just need to see what the outcome outcome of that that situation will be.

Speaker Change: Yeah, just quickly on how you consider the outlook for bead in the U S and for fiber as the dominant technology always following you know trumps election as the precedent just curious to hear your thoughts about that.

Speaker Change: Got it and just as a follow up on the 100 million investment is that primarily an R&D or is there an effort to sort of build out our channel and our sales force to leverage Youll take advantage.

Speaker Change: We have to remember that that one key reason why the bed program was put together in addition to accelerating broadband development.

Speaker Change: In a less populated parts of the U S.

Speaker Change: That's really the connection between bid and the requirement for local manufacturing and of course, all indications are that the new administration is.

Speaker Change: Thank you we'll take our next then potentially last question from Felix Henriksen from Nordea Felix. Please go ahead.

Speaker Change: It's even more kian.

Speaker Change: If possible to attract U S manufacturing so.

Felix Henriksen: Hi, guys. Thanks for squeezing me in I wanted to touch on the full year EBIT guidance and the different scenarios that you've baked into the one could say relatively wide wide guidance range of $1 90 to $2 four so what in your eyes has to go well for you to get to the upper end.

Speaker Change: That's exactly what we did we started manufacturing of broadband equipment in Wisconsin. So we believe that this type of actions that we have taken will be favored by the New administration, then theres, Jason with be it is that.

Speaker Change: That we are we have seen that the money has been more or less allocated to to the 56 states and territories. They have received approval for their initial proposals.

Speaker Change: On the contrary.

Speaker Change: Happens if you get to the lower end of that that <unk> is just mainly related to the top line recovery or are there other puts and takes.

Speaker Change: We have.

Speaker Change: Yeah. Thank you Felix.

Speaker Change: Received orders from three customers during Q4 and this is expected to gradually pick up then if there will be some slowness additional snow slowness in the process or or not because of the administration change we have not seen that that would happen.

Speaker Change: <unk>.

Speaker Change: As always when we provide a range we take into account would be no and interesting today after market development.

Speaker Change: The marketing is a clear one driver and how this will evolve over the coming quarters.

Speaker Change: And what we see currently is that the improving trends that we've seen in the second half of 2024 should continue into 2025 first wall and this is supportive of the line underlying improvement.

Speaker Change: But of course, it's very difficult to speculate on something that you don't know, but I would be highly surprised if somehow after the money already has been allocated to the states that they would somehow be a complete reversal of this program.

Speaker Change: Did you have a quick follow up.

Speaker Change: Thank you.

Speaker Change: Yeah, just quickly on how you consider the outlook for bead in the U S and for fiber as the dominant technology. Following trumps election as the precedent just curious to hear your thoughts about that.

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

Speaker Change: We have to remember that that one key reason why the <unk> program was put together in addition to accelerating broadband development.

Speaker Change: Section of our annual report on form 20-F, which is available on our Investor Relations website. Thank you will.

Speaker Change: In less populated parts of the U S.

Speaker Change: It's really the connection between <unk> and the requirement for local manufacturing.

Speaker Change: And of course, all indications are that the new administration is it's.

Speaker Change: It's even more keen if.

Speaker Change: If possible to attract U S manufacturing so.

Speaker Change: That's exactly what we did we started manufacturing of broadband equipment in Wisconsin. So we believe that this type of actions that we have taken will be favored by the new administration than that Theres, Jason with be it is that.

Speaker Change: That we are we have seen that the money has been more or less allocated to a tip of the 56 states and territories. They have received approval for their initial proposals.

Speaker Change: We have.

Speaker Change: Thank you.

Speaker Change: Identified such risks in the risk factor section of our annual report on form 20-F, which is available on our Investor Relations website. Thank you will.

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

Speaker Change: [music].

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Speaker Change: Good morning, ladies and gentlemen, welcome to Nokia as fourth 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 <unk> our CFO.

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

Speaker Change: 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.

Speaker Change: <unk> identified such risks in the risk factor section of our annual report on form 20-F, which is available on our Investor Relations website.

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

Speaker Change: Please note that in our Q4 report and the presentation that accompanies this call are published on our website. The report includes both reportable on comparable financial results and a reconciliation between the two.

Speaker Change: In terms of the agenda for today Pekka will give you go through the key messages for the quarter, Mark who will go through our financial performance and then Packer will make a few comments on some particular highlights from the quarter. We'll then move onto Q&A with that let me hand over to Pekka.

Speaker Change: Thanks, David and thank you all for joining us today.

Speaker Change: I'm pleased to share with you that we finished 24 with a strong quarter. The improved order trends, we have talked about in recent quarters. We are now clearly visible also in our net sales with 9% growth in the fourth quarter.

Speaker Change: Network infrastructure grew 17% in Q4 with all units growing and with IP networks, the standout performer growing 24%.

Speaker Change: We also had a very strong performance in Nokia technologies with several new deals signed increasing our net sales run rate now approximately between one three to $1 4 billion Euro.

Speaker Change: Cloud and network services also grew 7% despite a four percentage point headwind from a prior year disposal.

Speaker Change: Mobile networks.

Speaker Change: So it's sales trends stabilized that's the more challenging comparisons in India are now behind us and we saw stronger demand in Q4 in North America.

Speaker Change: The strong Q4 sales and higher contribution from Nokia technologies led to a comparable gross margin of 47, 2% in the quarter and an operating margin of 19, 1%.

Speaker Change: This is the highest quarterly operating margin we have seen at Nokia since 2015.

Speaker Change: We also had a strong year for cash generation with free cash flow of 2 billion Euro our year end net cash balance was $4 9 billion euro even after returning $1 4 billion to shareholders during the year during through both share buybacks and dividends.

Speaker Change: I will come back to this topic, but with the momentum we are seeing in the data center space, we are accelerating investments into our IP networks business and I'm really excited about this opportunity.

Speaker Change: We will discuss our outlook a bit.

Speaker Change: Later, but I'm pleased to say the improved trends from the second half of 'twenty four are expected to sustain into 'twenty five.

Speaker Change: With that let me hand over to Mark to go through the financials in a bit more detail.

Mark: Thanks, Pat and Hello from my side as well.

Mark: I'll start by discussing our overall group performance.

Pekka Lundmark: Pekka mentioned, we were very pleased to see the strong end to 2020 for the.

Pekka Lundmark: The fourth quarter, so net sales growth of 9% gross margin increased by 250 basis points to 47, 2%.

Pekka Lundmark: And this was due to the increased contribution from Nokia technologies and improvements in other business groups.

Pekka Lundmark: Quarter, four operating margin expanded 380 basis points year on year to 19, 1%.

Pekka Lundmark: I will now look at the performance of our business groups starting with network.

Q4 2024 Nokia Oyj Earnings Call

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