Nokia Corporation

Good morning, ladies and gentlemen. Welcome to Nokia's fourth quarter 2024 results call. I'm David Mulholland, head of Nokia Investor Relations, and today with me is Pekka Lundmark, our president and CEO, along with Marko Beren, 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 have identified such risks in the risk factor section of our annual report on Form 20F, 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 on our comparable reporting. Please note that our Q4 report and a presentation that accompanies this call are published on our website. The report includes both reportable and comparable financial results and a reconciliation between the two. In terms of the agenda for today, Pekka will go through the key messages for the quarter, Mark 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 on to Q&A. With that, let me hand over to Pekka.

Thanks, David, and thank you all for joining us today. 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 were now clearly visible also in our net sales with 9% growth in the fourth quarter. Network infrastructure grew 17% in Q4, with all units growing and with IP networks, the standout performer, growing 24%. We also had a very strong performance in Nokia Technologies with several new deals signed, increasing our net sales run rate to now approximately between 1.3 to 1.4 billion euro. Cloud and network services also grew 7% despite a four percentage point headwind from a prior disposal. Mobile networks So its sales trends stabilize as the more challenging comparisons in India are now behind us and we saw stronger demand in Q4 in North America. The strong Q4 sales and high contribution from Nokia technologies led to a comparable gross margin of 47.2% in the quarter and an operating margin of 19.1%. This is the highest quarterly operating margin we have seen at Nokia since 2015. We also had a strong year for cash generation with a 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 through both share buybacks and dividends. 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 the improved trends from the second half of 24 are expected to sustain into 25. With that, let me hand over to Marko to go through the financials in a bit more detail.

Thanks, Pekka, and hello from my side as well. I will start by discussing our overall group performance. As Pekka mentioned, we were very pleased to see the strong end to 2024. The fourth quarter saw net sales growth of 9%, gross margin increased by 250 basis points to 47.2%, and this was due to the increased contribution from Nokia Technologies and improvements in other business groups. Our quarter four operating margin expanded 380 basis points year-on-year to 19.1%. I will now look at the performance of our business groups, starting with network infrastructure. We saw a strong finish to 24 with all units growing in quarter four. IP networks had a very strong quarter with 24% growth. Fixed networks grew 16% and optical 7%. And this growth was mainly driven by improvement trends among CSP customers. and regionally in North America and India. Cross-margin expanded 70 basis points to 45.4%, and this was mainly driven by beneficial product mix. The operator margin was very strong at 19.6% in the quarter, as we also continued our prudent cost management. And in mobile networks, net sales declined by 2% in the quarter. After some very challenging quarters, we are now seeing net sales trends to start to stabilize. Pleasingly, North American net sales increased by double digit, while India net sales stabilized. First margin declined slightly by 20 basis points, but remains at robust 38.1%. And operator margin was 7.7%, a decrease of 380 basis points versus the prior year as underlying cost reductions were offset by higher variable pay accruals. Cloud and network services net sales grew by 7% of the quarter, with strong growth in North America. And this was despite a negative impact of approximately four percentage points related to divestment earlier in 2024. Growth was mainly driven by core networks and enterprise campus edge. Cross-margin was strong, as was operator margin, which came in at 22.4% for the quarter, with profit weighted towards quarter four as is typical seasonality for this business. 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 1st, 2025. The managed services business provides outsourced network management of multi-vendor RAN networks for operators. And considering CNS is increasingly transitioning towards cloud-native software sales as a service product offerings and helping customers to monetize networks through APIs, we believe this business is more aligned and fits better with mobile networks. And based on 2024 results, This change is expected to lead to a transfer of about 430 million of net sales and approximately 40 million euro of operating profit from CNS to mobile networks. And we will provide recast financial information for 2024 reflecting this change prior to our quarter one financial results. Turning now to Nokia Technologies, net sales grew by an impressive 85% in quarter four, and this was due to a combination of the increased annual net sales run rate from new deals signed in both quarter four and earlier this year, or 2024, along with some catch-up payments related to deals signed in the quarter. that were signed included Entrention, and is a previously unlicensed mobile device vendor, and then multimedia-related agreements with HP and Samsung and other smaller deals as well. Nokia Technologies' annual net sales run rate has been gradually increasing in the recent quarters to approximately 1.3 billion to 1.4 billion euros. And this shows a good progress on the journey to achieve our midterm target of 1.4 billion to 1.5 billion euros. Let's now look at the net sales per region. The biggest contributors to the net sales growth were North America and India. In North America, we saw a meaningful improvement in demand from telecom operators supporting all of our businesses. The growth in India was mainly driven by network infrastructure and especially by fixed networks where we benefited from strong fixed wireless access demand. And in Europe, we saw a resilient market performance But the growth in the region mainly relates to Nokia technology's performance. And elsewhere, most markets were relatively stable in the fourth quarter, although the competitive environment remains challenging in Latin America. 2024 has ended as a strong year for cash generation. On the whole, it played out as we expected in many respects. 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. 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 the Infinera acquisition. And looking at our cash performance since 2020, we have a much stronger track record of cash generation. Looking forward, we forecast free cash flow conversion of between 50 and 80% in 2025. And during 2024, we returned 1.4 billion euros to shareholders in total. 710 million euros was returned through dividends and 680 million euros via buybacks. And you will recall that during 24, we accelerated the two year 600 million euro buyback program and had completed it already within one year. 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. 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 cents the year before. And with that, let me hand over to Pekka to go through some of the business highlights.

Thank you, Marko. So along with our solid financial performance in 24, we took some important steps to ensure Nokia has the right foundation for future success. Most notable were the actions we took in actively managing our portfolio. You will recall that earlier this year, we announced the divestment of our submarine networks business, which then closed at the end of 2024. We also sold our device management and service management in CNS to Lumine Group. From an acquisition standpoint, there were three important deals this year, all of which strengthen our position in markets where we see significant future growth potential. 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've been making good progress with the required approvals You may have seen that we filed with the EU last week. Assuming we achieved the targeted timelines, we now expect the deal to close already during the first quarter of 2025. And internally, we are well prepared to move quickly on integration once the deal formally closes. We also acquired Phoenix 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 5G tactical radio solution in the fourth quarter. This is a longer term opportunity, of course, but we are progressing well. In November, we announced that we had acquired Rapids 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. Another of our strategic objectives has been to diversify our business and accelerate our growth outside of our traditional service provider markets. 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. 2024 was a 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 strong growth in 22 and 23, but also the broader weakness in enterprise demand that has been visible among many of our peers. Since 2017, we have sustained a 10% CAGR in enterprise. And while the sales trend was more challenging in 24, 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. This is supported by the significant order intake we saw in Enterprise Campus Edge in Q4. We won a number of key deals, for example, in IP networks with Microsoft and Nscale. We also continue to expand our go-to-market partnerships. In Q4, we announced partnerships with Kindrel and Lenovo that will increase our reach into the data center market. With these foundations and the Infinera acquisition, we will have a strong base for which to sustain growth in these markets going forward. Considering our momentum, let me now touch upon some decisions we have made regarding the potential we see in the future. 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. Nokia's IP networks products are well known in the CSP market for their quality, robustness and innovation. We will look to bring this 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 SR Linux operating system. 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 will see us deployed in over 30 countries globally. 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 hyperscaler, telco, cloud and enterprise customer segments. These investments will bolster our R&D to broaden our product offering to meet customer requirements. They will also further accelerate our go-to-market and channel expansion. I'm really excited about this significant organic value creation opportunity for Nokia. And this will, of course, be complemented by the connections that Infineira has in web scale. Then, if I touch on mobile networks, we explained to you all at the end of 2023, the actions we are taking to renew our mobile network strategy, both in terms of commercial actions and cost management. 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. 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 won 18,000 new base station sites on a net basis, including 12 wins with completely new RAN customers. We also expanded our run share with 10 customers, and this success has been across all regions globally. Now clearly, we did not win every deal, but this 18,000 sites is already considering the few instances where there has been increased competition, especially from Chinese vendors. 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 5G standalone core, although not all have deployed yet. Currently, it is a reality that only 20 to 25% of CSPs have deployed 5G standalone core. According to the GSMA, approximately 60 operators have already deployed standalone core, and we are supplying to about 45 of them. Many operators will of course have multiple suppliers, but this still shows how strong our position is in this market and how strong the traction we have in 5G core. One key growth opportunity for CNS is 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. One other focus area is helping operators to monetize their networks with our Network as Code initiative. We are now up to 48 network API partners, which includes 24 operators and a further 24 enterprise and ecosystem partners, such as Google and Infobip. As mentioned in the fourth quarter, we also acquired Rapid's technology assets and R&D team. This will bolster our R&D capacity network as code and gives us one of the largest API hubs in the world. Taken together with our autonomous networks application suite, we are enabling operators to fully automate and monetize their networks. Our progress here has also been acknowledged with both ABI and Analysis Mason recognizing Nokia as one of the clear market leaders in this field. 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. Starting with network infrastructure, we expect the improving market trends that we saw in the second half to continue in 2025. Ultimately, we see this driving strong growth for network infrastructure with supportive trends across each of the businesses. Then on mobile networks, saw some stabilization in market demand towards the end of 24, and we believe we could see some recovery in spending as we progress through 25. 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. We estimate this be an approximately four percentage point headwind to 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. 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. And then finally, on Nokia Technologies, We look to continue making progress towards our mid-term run rate target of between 1.4 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. Then moving to our formal outlook for 2025. We expect a comparable operating profit of between 1.9 and 2.4 billion euro for the full year on an organic basis excluding the infinite acquisition. 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 in 2025, despite the selected increased investments like the 100 million plan into IP. 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. With respect to free cash flow, we expect to convert 50 to 80% of comparable operating profit into cash. 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. So let me now hand over back to David for Q&A.

Thank you, Pekka and Marco, for the presentations. Before we move to the Q&A session, just a quick comment on our plans for investor events this year. 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 possible. 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? Janet, could you please give the instructions?

Thank you. We will now begin the question and answer session. If you are also viewing the webcast, please remember to mute the audio on your computer before asking your question, as there is a 30-second delay. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. I will now hand the call back to Mr. David Mulholland.

Thank you. We'll take our first question today from Joachim Canel from D&B. Joachim, please go ahead.

Thank you. So I know you don't guide on gross margin specifically, and you also have some divisional market dynamics comment here, but what looks to be, I mean, when it comes to the guide for 2025, the deviation versus the consensus appears to be mainly mobile networks driven. So can you just comment a bit here on a group that you don't guide on sales? Does this mean that you still expect fairly low visibility for the full year 2025? And is there anything that you can say with regards to mobile networks gross margin for 2025 in relation to the 38% you showed here in Q4? Thank you.

Okay, thank you. That's actually several questions you are asking. So Let me try to take that piece by piece. If I take first the visibility question, I would say that as we start 2025, 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 customers is now more robust, and we are optimistic about our opportunity to grow in addition to CSPs on the enterprise markets, including the data center. I would not say that we have lower visibility. You are of course right that we are not providing the 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 NI, we expect growth in CNS, and we expect stable sales in MN, despite a four percentage point headwind from AT&T. So the The reason this is more than that in a dynamic market, which now seems to be changing to the better, it's very hard to gauge exactly what the pace of recovery will be. But the signs we see are clearly encouraging for the top line of 25. And we also need to remember that, of course, we will be adding Infineira after closure. And of course, once Infineira closes, then we will be for the first time in a position to comment also their outlook. And then finally, the mobile networks gross margin, they were also here, as you remember, some one-offs that we need to understand in 2024. So the underlying performance we have had in 2024 has been 38% to 39% in mobile networks gross margin, excluding those, for example, the AT&T settlement in Q2. So looking into 2025, the real question will be around the regional dynamics, but I would not make a clear comment either way at this point. The underlying last year was 38% to 39%, which is pretty much what we saw in Q4.

Thank you, Joachim. We'll take our next question from Simon Leopold from Raymond James. Simon, please go ahead.

Great. Thanks for taking the question. I wanted to see if we could maybe double-click a bit on the trends with the hyperscalers in particular. I appreciate the 2028 outlook regarding sort of that 1 billion target. I think what I'm looking for is something a little bit more shorter term and what you're seeing in the next year or year plus in terms of that group of customers. And then I've got a quick follow-up.

Okay. Okay. Simon, thank you. This is, of course, one of the most important questions we are also internally focusing on because because hyperscalers and data centers, they are clearly one of the best growth opportunities that we will have, and that's why we decided to double down from investment point of view, because we see so big growth opportunities there. We have had good deal traction, and I just mentioned to Microsoft and Nscale that we both published in Q4. Then 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 servers will be increasingly connected through optical technologies. Something that Infineira is particularly strong on. Looking at the big picture in data centers, of course, the reality is that we are still today, compared to the dominant players in that industry, 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 and Meta results last night, where both gave CapEx guidance for very strong growth in 2025. 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. There will be also lower cost alternatives available, which should increase the application possibilities for AI and consequently data centers, for example, in an industrial application, in edge compute applications for various workloads. So overall, we are strongly optimistic when it comes to comes to this market, both web scalers for the plans of telcos and enterprises, and the additional investment that we are making together with the Infinera acquisition will strengthen our capabilities here. This is one area where we will definitely focus on in the upcoming capital market day later this year, and that is also the reason both the pending Infinera situation and the upcoming capital market 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 through the $100 million additional investment that we are making in IP.

Thanks. And then as the follow-up, a 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.

Yes, thanks. That's another highly relevant question. And there have been some announcements, even I just referred to the T-Mobile announcement where they are talking about the acceleration of their AI strategy. And we are one of the partners that they are working on together. I mean, obviously, there are some obvious things, telcos, customer service and network management and network security and intrusion detection, et cetera, where AI is already now making a big impact. But then the bigger strategic question for telcos going forward is that how they are going to position in terms of other workloads than their traditional own workloads. And here the sweet spot, which also will be in a way a battleground between telcos and hyperscalers and enterprises own cloud is going to be the edge compute market and many of the telcos are currently thinking to what extent they should be in a way providing workload processing capabilities at the edge of the networks combining potentially their presence through the base station network and offer edge compute capabilities for enterprise industrial workloads. So That edge will be a highly dynamic part of the market going forward, and there will be many different entrepreneurs that 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 hyperscalers, and we are increasingly working also direct with enterprise customers to go after that opportunity.

Thank you, Simon. We'll take our next question from Artem Beletsky from SEB. Artem, please go ahead.

Yes, thank you for taking my question, and congrats on strong profitability. In Q4, I would like to ask about the growth trajectory when it comes to NI segments. So could you maybe comment on sub-segment level, or basically IP opticals fixed, what kind of development you see there for this year, and maybe just when it comes to double-digit growth, what you are talking about. Sorry, not double-digit, but strong growth, what you are talking about. Is it double digit growth in your books or not?

Of course, since we did not attach a number to that double, not double digit, but strong, you are putting words in my mouth now, which I did not want to do. But when we said strong growth, we decided not to put a number, a clear figure on it. Of course, 17% growth that we saw in Q4 that would be more than just strong growth. But we are not going to be more specific than that. We see clearly opportunities in all three segments of NI, very much including in optical, 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 IP. We expect these trends to continue, and then also optical picking up. And then, of course, And once Infinera closes, that will then boost our optical capabilities a lot. So yes, market trends to continue that we are now seeing into 2025 expect strong growth, further boosted by optical, but we are not at this stage going to put a clear figure on this.

Did you have a quick follow-up, Artois?

Yes, I do. That is actually related to the technologies segment. And could you maybe a bit more talk about multimedia space? So now you have done two deals in the quarter. How meaningful opportunity do you see on that front? And just challenging you that you have only 100 million euros lacking to reach mid-term target. Isn't the opportunity bigger when it comes to new growth areas, what you're addressing right now?

Thank you, Artem. And we definitely see opportunities in the new growth areas, as we call them, including automotive, IoT, multimedia, and as we said, specifically also video streaming side. And we are already in 2022. We had two video streaming contracts that we announced. And then also in quarter four, we had on the device side, video device side, we had HP and Samsung. So automotive also has been tracking extremely well, and we see good opportunities in these new growth areas. And we haven't updated, but last time we updated was December 23. And then we sent that these new growth areas, top line of sales was about 150 million euro for the previous 12 months period. And we will provide you an update figure for this segment or these segments later this year as well. And specifically in the capital markets, they will give much more information about this. But we believe that we are continuing to make very good progress here, and we also see that there's plenty of untapped opportunities.

Maybe just to add one thing, Artem, to what Marko said, and we need to remember that the definition of the run rate when we are communicating is really that that is, in a way, the annualized value of the contract base that we currently have. And what we... then all we typically have is then some catch-up payments in new deals, which then explain the difference between the realized 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 more than 400 million catch-ups that we had in. And as we did say, there were some catch-ups also in Q4, which explains the difference between Q4 and then the run rate that we are talking about. And of course, there could be catch-up payments also in the future. But we feel that it's important to communicate in the way the base, the contract base value that we currently have at hand.

Thank you, Orson. We'll take our next question from Sami Sarkemius from Danske Bank. Sami, please go ahead.

Hi, thanks. I wanted to revisit your data center growth plans and expectations related to that area. Do I understand it right that you're 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. Can you also perhaps elaborate a bit on the split between R&D and go-to-market investments? And what is roughly the starting position for your data center sales today, including Infinero?

Thanks, Sami. We have not... yet put a figure on our existing data center sales. These are going to be capital market day comments. The reason we are waiting with that is that we want to get Infinera closed because that's going to be such a fundamentally important piece of all of this. There has been growth in data centers. 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, we are still a small player. 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, and then keep it there. So roughly speaking, the numbers that you quoted are in the right ballpark. And absolutely, yes, this additional investment is targeted to deliver additional 1 billion of sales in the year 2028. Sorry, I forgot the other part of your question, which was the split between the 100 million between different items. It will be both R&D and then go to market and channel expansion. Both are going to be important, but also here we are not providing this split at the moment. It is important to do both. And again, because the market opportunity is so large, it absolutely is going to be a good investment to also increase our R&D expenditure in this segment. As you know, we've been taking out a lot of costs from our 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, one of the biggest, if not the biggest growth opportunity is data centers.

Did you have a quick follow-up, Sami?

Well, maybe I just want to double check that if we also consider the 200 million euro synergy target for Infinero acquisition, should we assume a cost base in 2027 that is higher than today?

Also, that is purely to comment. We maintain what we said about the 100 million additional investment and then than the 200 million synergy target in Infinera by 2027. Of course, we have to remember that there will be no more cost inflation. And then where exactly we put the investment levels, it will have to be balanced with the size of the opportunity and the market development forward. So it's a bit premature to draw the conclusion on that detailed level as you just did.

Thanks, Ami. We'll take our next question from Sandeep Deshpande from JP Morgan. Sandeep, please go ahead.

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. Where is this business? I mean, how would you call it, Pekka, that the business is now properly turned around? This will take you to where it needs to go. And do you need to take more new contracts there? Do you need to adjust the costs there? What will make you 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 going to be the question of how to drive top line in the future. We have now a very strong base in terms of our technology competitiveness confirmed by the customer traction that we have had this year. 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 significant growth market. There will be most likely some small recovery in the market, overall market this year. And again, when we are guiding largely stable sales for this year, it means that when AT&T is expected to decline for on the MN level, it means that then the other customers will grow. X AT&T will grow 4%. So that is showing that the market is turning and we are taking our share of that turn. But still the reality is that looking between today and 2028, 29, 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 platforms, private networks, and then other segments like public safety, authorities networks, and very importantly, the defense sector, because again, the defense spending in the world, unfortunately, is going up pretty much everywhere. And we are now in a very exciting position when we launched our 5G based tactical radio solution in Q4. We are offering 5G as a fundamental communications platform for the military, including for tactical battlefield communications systems. In many cases today, when you look at military communications, the capabilities of those systems are close to what we would call 3G capabilities, both in terms of speed and quality and security and so on. There is a significant opportunity to upgrade through 4G and especially 5G. And we are seeing increased traction in this market. And we believe that the acquisition of Phoenix was extremely well-timed. As I have said several times, this business take some patience because sales cycles are really, really long, but hopefully not too distant the future, we will be able to come with new concrete announcements on our progress in this segment. This is a significant part of MN strategy. So you need to keep both CSPs flat to slow growth market, enterprise private wireless, strong growth market and defense going to be a strong growth market. They all are important elements in our MN strategy.

Thanks, Becca. I mean, just a quick follow-up on Nokia Technologies. I mean, you've had some major, you know, deals signed with Video recently. Is this, I mean, you've talked about the new end markets like autos, et cetera, that you are targeting, but is this new, the new IP, not new IP, but, you know, old IP and updated IP that you have now begun licensing, is this going to be a major opportunity for Nokia?

Yeah, thank you, Sandeep. As I said earlier as well, we definitely believe that there are growth opportunities in those new areas that we are targeting and we continue to invest in R&D in these areas. And just like you mentioned, video streaming is one of those areas. but also we see more opportunities in IoT, consumer electronics, and even automotive. And here we definitely believe that going forward, if you look at the Nokia technologies, to be able to reach also the run rate that we have targeted, but also beyond that, because that run rate that we have, it doesn't mean that we will stop there, but we will continuously invest in new areas, R&D, and capture those opportunities by our technologies.

Thank you, Sandeep. We'll take our next question from Daniel Gerberg from Handelsbanken. Daniel, please go ahead.

Thank you, David, and hi, Pekka and Marco. A question for me on your mobile networks. You comment to have won 18,000 additional base station sites net in 2024. I was wondering if you possibly could give us a gross number and possibly also talk about this from a geographical point of view and perhaps also comment on the ASB trend you see on BCS year over year on these 18,000.

Thank you. Thank you. We had actually, if you go back to the presentation, so there, there was a regional split on the, both the new CSP customers that we have won and also the customers with which, with whom we had increased market shares. 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, and, and we continue to be encouraged on the, on the ongoing deal momentum, uh, as well. Uh, That 18,000, what does it really mean? It's in a way a net run rate 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 gross amount. That's confidential. Of course, we have also lost footprint with some customers, but clearly, clearly we have won much more than we have earned. we have lost and most of those losses that we had, which were not many, by the way, they had to do with the extremely aggressive pricing, typically from Chinese customers in those markets where they are continuing to compete. And we just want to be prudent with our pricing. We are not... participating in the most aggressive price wars, it would not make sense. But despite having this prudent strategy when it comes to pricing, we had a highly successful year in terms of increasing our footprint on a net basis, run rate basis with 18,000 sites.

Perfect. May I have a follow-up? On cloud and network services, strong momentum, return to growth, etc. You mentioned 5G core being solid, and you mentioned 20-35% of CSPs now being deployed 5G standalone. Can you comment a bit on if they just touched their toes into this, are they talking about a fully built 5G standalone, or is it still only deployed 5G? parts of the network, i.e. that we'll see a substantial build-out expansion also with these that have started 5G standalone and in part.

In general, one of the things that has gone differently than at least I personally thought a few years ago is the pace at which 5G standalone has expanded. It has gone more slowly than anyone expected, but the momentum is picking up and As I said, 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 CNS will have good growth opportunities in the coming years. And our relative position and our relative strength in that market is strengthening. We have won several deals recently. recently where we have displaced our competitors in the core network and this momentum is really a healthy one. Still commenting another thing which is highly relevant for CNS is the enterprise campus edge business which includes our 5G private wireless for enterprises. That is also looking strong. We had some weakness in that business earlier in the year, but now looking at the order intake we had especially in Q4, we expect strong growth in that business heading into 2025. So CNS is not only about the core network, it's very much also about the enterprise campus edge. Now when we are transitioning managed services to mobile networks, it actually creates a more clean cut software business portfolio for cns which i hope will be good for the transparency and visibility of that business in the future thank you daniel we'll take our next question from ulrich rath from bernstein ulrich please go ahead yeah thanks very much my main question is whether you have any comments at this point about

the changes that are on the horizon from the new US administration's approach to China could improve your competitive situation. The reality is that the Chinese suppliers are better in terms of relative product quality according to third-party surveys than would have been expected since the US started these efforts in 2018. Now there may be more efforts and do you think something could happen there in terms of the competitiveness of your product versus the Chinese product?

Of course this is still very early days for the new administration and we need to see that what the actions really will be but of course the reality is that in the US the share of Chinese suppliers is already very This question is much more relevant for the other parts of the world. And then, of course, how the overall tech war is going. But that's another question. But if we look at the position of the Chinese suppliers, they are strongly in play in many European markets still today. This is something that the European Commission will, of course, be discussing the question of the 5G 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 5G, as we have suggested. And then, of course, the crucially important question also is that what will then happen in the rest of the world, Latin America, Africa, Middle East, significant parts of Southeast Asia, uh, Asia, where, uh, where, uh, the Chinese vendors are, uh, competing, uh, very strongly, uh, today that, uh, 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 political questions and, uh, we are not the political actor. We are just observing the outcomes of these discussions.

Thank you, Ulrich. In the interest of time, we'll move to our next question. A quick one, if you have one, Ulrich.

Yeah, the follow-up would only be, you answered it mainly 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 the Chinese suppliers actually producing product that seems to be performing from a technology perspective rather well. I mean, the deployment restrictions are an entirely sort of different part of this Pinsir movement.

Yeah, you are absolutely right, of course. These are two fundamentally different questions, and this will very much depend on what type of access the Chinese vendors will have to the latest silicon, what type of restrictions on chips will there be in the future and then what type of capabilities they will have inside China. Currently, the situation is that when it comes to the latest silicon that require EUV, They do not have access, but it's too early to speculate what type of actions the new US administration will take in many cases together with the allies. This is not only a US 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 the internal development capabilities of China will be in the future.

Thank you, Ulrik. We'll take our next question from Rob Saunders from Danche Bank. Rob, please go ahead.

Yeah, 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 either 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 take advantage of yourself? And I have a follow-up. Thanks.

I have no... No comment to that speculation. That is not for us to comment. But on a general level, of course, always when there is M&A activities, that creates opportunities for 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 dramatic there. But we now just need to see what the outcome is. outcome of that situation will be.

Got it. And just as a follow-up, on the 100 million investment, is that primarily on R&D or is there an effort to sort of build out a channel and a sales force to leverage your tech advantage?

Thanks. It's both. It's clearly both. There is going to be increased R&D, but then a meaningful portion of that additional investment will also go to market and channel and partnership programs.

Thank you, Rob. We'll take our next and potentially last question from Felix Henriksen from Nordea. Felix, please go ahead.

Hi, guys. Thanks for squeezing me in. I wanted to touch on the fully rebate guidance and the different scenarios that you've baked into the, one could say, relatively wide guidance range of 1.9 to 2.4. So what, in your eyes, has to go well for you to get to the upper end and the On the contrary, what happens if you get to the lower end of that glider straight? Is it mainly related to the top line recovery or are there other puts and takes?

Thanks. Yeah, thank you, Felix. And as always, when we provide a range, we take into account what we know and understand today of the market development. And the market is a clear one driver and how this will evolve over the coming quarters. And what we see currently is that the improving trends that we've seen in the second half of 2024 should continue into 2025 as well. And this is supportive of the underlying improvement.

Did you have a quick follow-up, Felix?

Yeah, just quickly on how you consider the outlook for BEAD in the U.S. and for fiber as the dominant technology is following Trump's election as the president. Just curious to hear your thoughts about that.

We have to remember that one key reason why the BEAD program was put together in addition to accelerating broadband development in less populated parts of the U.S., was really the connection between BEAD and the requirement for local manufacturing. And of course, all indications are that the new administration is even more keen, if possible, to attract US manufacturing. And that's exactly what we did. We started the 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 the suggestion with BEAD is that that we have seen that the money has been more or less allocated to the 56 states and territories. They have received approval for their initial proposals. We have received orders from three customers during Q4, and this is expected to gradually pick up. Then, if there will be some additional slowness in the process or not because of the administration change, we have not seen that that would happen. 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 there would somehow be a complete reversal of this program.

Thank you, Felix. Thank you all for the questions today. 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 that involve risks and uncertainties. Actual results may therefore differ materially from the results currently expected. Factors that could cause such differences can be both external as well as internal operating factors. We have identified such risks in the risk factor section of our annual report on Form 20F, which is available on our investor relations website. Thank you all.

the conference has now concluded thank you for attending today's presentation you may now disconnect