Nokia Oyj (NOKIA) Earnings Call Transcript

But also I believe that accountability and responsibility [ breeds ] synergies any day.

Great. thank you very much, everyone. As mentioned, we'll have additional Q&A sessions with both Raghav and Tommi. But thank you, Pekka. Thank you, Marco. And with that, I welcome Raghav to the stage for the next presentation.

Thank you, David. And welcome to everybody, and good morning, good afternoon, good evening, wherever you might be. I'll give you a quick update on CNS. But I think what is very interesting to actually see what's happening in the industry right now, the ecosystem on the consumer side continues to develop. And on the enterprise side, actually, the digitalization is still not at -- where the levels it needs to be, kind of COVID drove some of that digitalization, but that is still 30% digitalized in the industrial sector. And as if you look at all this value that is being actually created, I think 5G provides us an enormous pivot and an opportunity to actually connect these networks and become part of this ecosystem. And as the CSP market is actually experiencing some growth challenges, I think that actually creates the opportunity to actually unleash the potential of the network and connect it to the digital ecosystem and become a part of an ecosystem where value creation becomes an integral part of how we evolve as an industry. What I will do is -- for those of you who are not familiar with our business, I'm going to give you a quick overview, and I'm going to take a very simple analogy and think about building a highway actually between New York and Boston, it's a new information highway. And I'll kind of try to relate it as to how that highway gets built and how information exchange actually happens to give you a view as to how CNS operates. Our business is all about software and solutions, and this is where network meets the cloud and into the digital ecosystem and that's what I will talk about. Before I get into that, I thought what I would do is to give you a quick snapshot in terms of how our business is organized within CNS in itself. We're actually into 5 business groups. The fifth one is actually a new incubation, which is actually called network monetization. But we have these 4 business groups that are really running, which is core networks, business applications, cloud and cognitive services and the enterprise edge campus opportunities. And each one of those, as you can see down below, gives you a representation of what they represent in our business in itself. And one is the newest incubation is at the top end, which is the network monetization piece, which is what I'll delve into a little bit later, which we'll kind of give you a view as to how we will connect this network into this ecosystem that is where value is being created. And actually, based on Gartner, 82% of the value of the 5G ecosystem is actually developing in this higher level ecosystem that we have to connect to. So participating in that is going to become crucial. So for context, just to give you a sense in terms of the performance of CNS over the last 3 years, it kind of gives you on the sales growth side, it's been relatively flat in aggregate both in our growth as well as our legacy businesses, and I'll delve into that a little bit. On the gross margin side, we've seen actually expanding gross margins. And on an aggregate basis, that continues to rise. And from an operating profit when we started out in 2021, after 2020, which was unfortunately not a profitable year, we started to make progress, and we've had stable operating profit in recent years, and we are having that as we continue to invest in 3 very critical areas. One is private wireless, the other is SaaS and the third one is really on the monetization layer. So we continue to invest into these 3 new value creation engines. So to give you an analogy, here's how we want -- I want to try to make it as easy as simple as possible. And for those who obviously understand our business, this might be a little bit trivial, but I think it will give you a good picture as to how this software enables the value creation on top of the networks. You're obviously familiar with mobile networks and the network infrastructure business. And you can think of them as building very, very fast information highways on which network traffic flows. As you start to think about core networks on top of that, what core networks really does is really adds the lanes and lane markers and traffic lights to be able to prioritize actually how that traffic is routed and optimized and delivered to the other side. So it's a very important function that sits on top of the network. On top of that, we have other business applications that run things like analytics, automation as well as security. And analytics is kind of a -- what it does is really it senses how the traffic is moving, and it actually tweaks the red lights to be able to deliver a better experience to the consumer. And that is a very important piece. So it has to constantly sense what's happening in the network. On the digital automation side, what we now try to make sure is these traffic flows are truly planned and there are lanes established where there are such high-performance lanes or fast track lanes through which traffic can flow at a much faster pace as and when needed for those consumers or enterprise that need that ability. And then there's the security side of it, which is how do you make sure that in these highways or in these areas that things like traffic lights, toll boots, others are not compromised affecting the flow of traffic. And so all of the traffic that is moving all of the infrastructure that has been established is secure and running properly at all times. And then as you go over that and you've started to manage this information highway of this network, the next step really is how do you monetize in this space. And the analogy would be is you can start offering subscriptions for remote control of these vehicles. And this is how you start to create value on top of that network by participating in the ecosystem that is building. The next layer is that how do you deliver some of these services, and that's where SaaS comes in, where you can actually continue to maintain the network and the software or the highways without having to change anything. So it's constantly updated in a way that it always remains available as and when required. And then you obviously have to try to manage this entire infrastructure where you're bringing people who are building roads and facilities and so on and so forth and you need to manage this entire infrastructure and this is where our cloud and cognitive services comes into play. And this is where you take the network, which is a very powerful network and then you actually operationalize that network and connect it to the ecosystem to create value. And that is the CNS journey in terms of the software and the capabilities that it brings on top of the network. Now there's one other piece, which is extremely important is, which is the enterprise space. And we've talked about enterprise and private networks. And this is where you can really actually look at how a particular enterprise needs its own private roads to be able to manage its own private infrastructure. And this is an area which is probably the fastest evolving, and I'll get into this in a little bit later in the presentation. The value of all this infrastructure is the experience that it brings for citizens and the commerce that it enables, and that's what's important. And in our world, that means that software actually connects the network and cloud into the digital ecosystem, and that's how value creation actually occurs. So this is the story of CNS. Let's start talking about our investment for growth. If somebody can move the slide, please. Thank you. CNS is operating in a very, very fast-changing market, and I expect that acceleration will actually continue into the future in this ever-changing landscape. Not so long ago, the market was really all about connectivity and consumers. And 4G and 5G rollouts are actually changing that very much to not just connectivity but actually delivering capability of the network in addition to connectivity. And when I talk about capability, I'm talking about not just providing a way to connect, but actually taking new types of capabilities that 5G networks will enable, quality of service, insights, very specific information about consumers and enterprises and rendering that into the ecosystem so that you can start monetizing those capabilities. And today, if you look at just where -- about the 5G capabilities and the 4G capabilities are being provided, you can start to look at things like ultra-low latency massive IoT systems where machine densification -- these are kinds of things that we have to solve for in the industrial metaverse. And these are just starting to become available. So this is a very early in the cycle where value creation is starting to accelerate. And network functions also are moving to the cloud. And quite frankly, SaaS, which has developed in the IT space for a very, very long time, has started to enter the world of networks. And we believe that this is an area that we are pioneering as we go forward. So all of the things that are accelerating right now are things like artificial intelligence, automation. Pekka talked about APIs for 5G monetization. Data was the new oil. API is the new currency as we go forward. So understanding these technologies and business models that are dramatically changing in our industry, the question is how are we capitalizing on this market opportunities? What are we doing in this space? Back in 2021, we said we were going to focus on 5 key segments. This was the statement we made in 2021. What were those 5G core. It was private wireless. It was digital operations. It was AI analytics, machine learning, and it was security. These were the 5 key growth segments that we believe were going to be critical in the future of value creation. And since then, we've launched new products in those segments and have actually taken share. And as Pekka talked about, we also continue to look at other areas where we have to do active portfolio management, and we've talked about some of those, where we've entered a relationship with Red Hat and our cloud infrastructure and partnering with them and also [ disposal ] of VitalQIP as a divestment because it was not core to our strategy. Finally, I said we would digitize and simplify in terms of how we execute and this is something, from an operational model perspective, Pekka talked about it. We have become much more -- because selling software and selling other components in our business, there is a different sales cycle, there's a different domain expertise that you have to have. And that creates a deeper level of accountability and knowledge that you bring to your customers. And we've been successful to get that done. So today, we're really reaping the benefits of these market changes. We are focused on 5G core SA, which is AI-driven automation. And if you look at what is happening actually in the 5G SA space, only 15% to 20% of the CSPs around the world have actually deployed -- are fully deployed in 5G SA that is about 40 operators, and we have 17 of them. So we have 40% of the 5G SA market. We've also been awarded over 50 new customers in that space that we are working on, but we are not live, and this is above the 17 that we have. And plus, on the enterprise side, we have 125 new 5G SA networks, meaning we are probably -- well not probably, we are clearly a leader in the space in private networks as we deploy 5G and just about every analyst has confirmed our leadership position in the private wireless space. If you think about SaaS, this was new in our industry. In fact, we were one of the first to actually launch SaaS at the beginning of last year in the United States with a U.S. operator. But as we launched SaaS in 2022, today, we have 8 services that we work through SaaS. We have 31 customers that have started to use SaaS with us, and we actually have our first 5G Core-as-a-Service that we announced today with Telia. And this is a big, big move because that has never been deployed as SaaS before. And while this is in the SaaS model, the ARR is the metric that we use to drive and measure our performance, it's still modest and small because we are just in the second year of its evolution, but it is something that is starting to rapidly grow that we will see over the coming years. And more importantly, a lot of our private wireless business is also as a service model as we deploy in private wireless as well. So what's next? How do we gain and maintain technology leadership, and these are in 3 specific areas. One is going beyond connectivity. We started in private wireless to win in the enterprise connectivity space. But in 2022, we launched what is called the mission-critical industrial edge, and which is called the MXIE platform. And what this platform does is an edge platform that brings an ecosystem of devices, applications and access types together. Because when you are in an enterprise, connectivity is not the only thing that they're looking for as you have to bring an ecosystem together for them, and that's where value creation starts to happen. And this is where we have -- I'll talk a little bit more about it later. Next is Network as Code. And again, this is fundamentally the biggest challenge that the CSPs are facing, how do we monetize as we move into 5G. And we have started to solve this problem as we start to look at advanced 4G and 5G and 5G advanced APIs that are monetizable, and we'll discuss that as well. And finally, we are also investing into something new, which is not just AI, but something called observability. And this is super critical because if you want to drive autonomous operations in the network and drive extreme automation there, which is going to be very necessary in the 5G era, you have to combine AI with observability. And this is the ability where if you can't sense the network, it is impossible to automate it and secure it. And these are concepts that we're bringing and into our industry. As you can tell, I think the bet that we made 5 years -- 3 years ago, the 5 pillars that we had decided, we continue to reconfirm that these are the very pillars that are going to be critical as we go forward in terms of value creation. So if you start looking at investing for growth in CNS, I'm pretty optimistic -- the slides are not moving. So they seem to be stuck in some way. As we transition and quantify as to why I'm optimistic of the future, we know that the CSP market on an aggregate is only growing at 3%. This is on an aggregate basis. And we continue to prioritize, as you can see on the chart right now, the growth segments that we had selected and other segments, which obviously are not growing as much, and this has to do with some of the legacy portfolio. And one of the key metrics that we've been able to establish that 60% of our business right now in CNS is coming from the 5 growth segments. And when we were in 2021, I think it was around 37% to 40%. So we continue to grow in that particular space extremely well. If you look at private wireless, it is actually growing even more rapidly. It has an 18% CAGR in the private wireless space, but we break out private wireless into 2 segments. One is campus, and that's actually growing at 22%. And this has to do with campuses like mines, ports, manufacturing. These are the areas. And then there is the wide area networking piece, which is public sector, utilities, railroads, et cetera, which is growing at actually 9%. And there are obviously new opportunities that are also starting to emerge, which is where we talk about SaaS going beyond connectivity, Network as Code. These are actually growing at even a faster pace of almost 34% CAGR between '23 and '26. And if you look at it individually, you see Beyond Connectivity growing at 29%, SaaS growing at 20% and Network as Code actually growing at 188%, but yes, these are nascent markets, but this is where value creation will occur, which will connect that network into the digital ecosystem. So there's plenty of opportunity here for CNS in a very difficult CSP market, but we believe this difficulty and the advent of 5G is actually the opportunity to make this happen. So now I want to transition us to the opportunities to -- to give you an opportunity to actually give color on some of these segments -- these fast-growing segments that we are in. So if you look at core, as I talked about earlier, we continue to create new monitors of the operation because the core is what starts to expose the network. That's where the exposure starts to happen from the network that physically is built to the APIs that get generated. In AI and analytics, I think this is an area where we have strong demand for things like energy savings. Energy is a big topic here in Europe and anywhere else. And it's one of the biggest spends that our customers actually have in their own environments. And customers like Telefonica, Safaricom, Globe in the Philippines, they are actually seeing using our analytics capabilities almost up to 30% savings that they can actually bring on the energy side in their networks, and this actually lowers carbon footprint as well. In digital operations, which is really around automation, we're starting to resolve over 40% of the network incidents without human intervention. And this reduces not only cost, but it also gives subscriber satisfaction and this is something that Analysys Mason has ranked us #1 for in the industry and companies like STC in Saudi, Telstra in Australia are starting to implement these solutions. And finally, in security, which is a key part. And this is looking at the entire network security. We launched what is called cybersecurity dome, which provides automated security on a proactive basis to determine extended and detection and response to anomalies that may be seen in the network in itself. And again, once again here, we were actually ranked by GigaOm as a leader in the market in the security space. So how do these customers benefits actually translate into real value for CNS? First of all, these opportunities will not only create top line for us, but it's going to create top line for us by taking share in the marketplace. And we actually expect to grow almost 1 to 1.5x in these specific growth areas that we have in action. On in the areas of 5G SA, as I mentioned to you, we've already established over additional 50 wins that we are actually implementing and actually, once you deploy the core networks, you have the pull-through of bringing automation and slicing and all these other capabilities as a pull-through in terms of what you can bring in. There are also strategic relationships that continue to build with our customers. We are -- actually one of the things that we track is how much of our portfolio -- of our growth segment portfolio is actually sitting with our customers and more products means stickier and stronger relationships. And between '21 and '23, we saw almost 55% increase in the portion of customers with 3 or more of our growth segment products. And this is a strong testament in terms of what is securing our longer-term growth objectives. The second area is what we talked about was private wireless. And one of the key things that private wireless will actually bring is productivity improvements. To give you an example of this. If you look at Puerto Bahía in Colombia, they are tracking 20,000 vehicles with solutions that we are providing and with a local partner, Claro, which is an operator there. This is how we are bringing joint value to the industrials in creating more and more value together. One of the biggest areas that enterprises look for industrials look at is actually worker safety is the #1 reason that they are bringing in digital automation over and above productivity. And I think this is another area where leading in mines, ports, railroads, we have been providing systems to be able to increase worker safety as we go forward. The other area is actually around industrial automation. And a good example of this is Arcelik in Turkey. It's a plant where they use AGVs in their manufacturing process and they've been able to see almost 25% improvement in the efficiency of using these AGVs inside, with reducing energy consumption, and that brings a lot of value in terms of productivity. And then there's the reduced cost from complexity. There is Wi-Fi around in a lot of these industrials and sometimes Wi-Fi is not adequate enough to drive the use cases that are necessary. And actually, what we've seen is the customer actually getting a 10x benefit on the number of 4G, 5G cells that they can put to the number of Wi-Fi routers that have to be put in order to be able to get the same level of capabilities. And this is a dramatic cost drop as well as reduced complexity in building those networks to really drive better use case development. All of these are extremely attractive for our enterprise customer base, and this is how value is getting creating. And this is how we bring on our edge platform, this ecosystem together to be able to create these use cases. And for us, it's also equally attractive. If you look at how that business for us is evolving. Today, our pipeline is almost has a book-to-bill ratio of 1.6. This is the rate at which we are growing and that gives us tremendous confidence that we have the ability, while the market is growing 20% or 22% that we have the ability to grow at 25% to 30% in this market and we're seeing evidence of that. And this is also -- one of the good views of this as well is because the campus deals are as a service infrastructure deals, it gives us a much more predictable revenue stream as we go forward. And that's an important aspect. While the wide area networking deals are larger deals, they are usually done over 5, 10 years, they have a much more lumpier top line in terms of how you bring them in. But once you win enough of it, it creates more stability going -- the following years. And one of the areas that we were very, very clear about is that as we go after the enterprise space, one of the biggest ways that we will draw on coverage is through partnerships. And today, almost 60% of our business is through indirect channels. And partner development for our enterprise business is a very strong go-to-market proposition that we're implementing, not only in our -- my business and CNS, but across all businesses within Nokia. Next, if you look at Beyond Connectivity, and I talked a little bit about this, I think this is an area where when you bring an ecosystem together and when you control the edge of bringing the ecosystem together, you have the ability on that edge to bring third-party applications. And when you bring third-party applications, just like you do on your Apple phone, you have an ecosystem that is building and you have the platform edge then every time an application comes on to your platform, you have the ability to monetize on third-party applications as well. And that is something we have started to do. We've got over 20 partners now established on the industrials that are actually running on our edge and these are things like Litmus, Siemens, Crosser, Atos. And every time these things come on to our edge, we're able to monetize them. We also continue to work on things like drones, networks for inspection. This is another area that is evolving pretty fast, and there is a very interesting use case developing in Digital 20 technology. And we see this as a big thing in the industrial side, and it's fast developing. And in fact, a good example of this is a very large port in the United States that I can't unfortunately name, actually uses digital twinning technology on our edge platform to actually manage that port in itself, and this is how we are creating a leadership position. If you start to look at technology leadership in AI, actually we recently launched the only OT generative AI compliance solution in the market. And this is a huge step forward. And one of the other things that we've also been able to do is that we believe that when you create an edge platform, there are going to be many use cases in the enterprise. Many, many use cases. Some will use 5G, some will use 4G, some will use Wi-Fi. Some will use Bluetooth. And what we have built in our mission-critical industrial edge is the ability to bring this ecosystem together and connect to any access type, be it 5G, 4G, Wi-Fi, Bluetooth, LoRa fixed capabilities. And this is how value creation actually occurs. So this all actually starts to have an increasing top line impact and a positive margin impact on our business. And this is what we are really excited about is the growth not only on the CSP side, but on the enterprise side, but we also have the ability to go through partners, which are indirect channels but also the CSP, it enables new revenue streams for them, so we have an ability to work on both sides, creating this new value going after enterprises. Finally, a couple of last areas. One is SaaS. SaaS, we are 2 years into the journey. We're still progressing. We are still learning. Our customers are also learning how to put these critical network functions as a SaaS. And actually, what is interesting to see is that to deploy a core inside our network used to take 3 months. And today, within 3 hours using SaaS, we can actually deploy core. That's the advantage of putting it on SaaS. And it also reduces the number of integration times to deploy other solutions as well and this provides a short-term cost reduction of almost 60% for our customers. And the advantage of SaaS is that you do a lot of risk mitigation of rolling out services much faster without having to go through the whole deployment cycle. And so you can faster deploy, phase your investments, and these are the benefits the customer gets. What is the benefit that we get? We are still early, but we are looking to actually drive top line on what is called the triple, triple, double. And this is following industry standard benchmarks where we expect that by the end of '23, we would actually reach double-digit ARR, which will be very much in line with how the industry as customers got into SaaS started to achieve that. And this will obviously, as you start to scale, the margins will improve on this. And we believe that once we reach maturity on our SaaS business, we will be generating operating margins of greater than 25% in this particular domain. So we are seen as a disruptor here and innovative by not only customers and analysts, but even with our employees. So this is an exciting space that we continue to march on. And finally is to talk about the API world, which is what we call as Network as Code, how do you deliver the entire network as a piece of object or a code that a 19-year-old digital developer can actually consume into their applications. And once you become part of that application, every time that application is used, you monetize and that is the journey of this. And this is where we are taking advanced 4G and 5G capabilities and making it available in a very simple way to the API developer. And we've launched this platform. We started this incubation in 2022. We launched the platform 12 months later in September of this year, and the journey has started and as Pekka talked about, we've now added 6 customers in that particular journey, and that journey continues on as we go forward into 2024. So what is the benefit to us? I think first benefit is obviously we become the aggregator and we connect to the marketplace. And as such, we get direct revenue out of that. And by solving this 5G monetization piece, if we can solve this at scale, it also creates additional investments on 5G SA and slicing capabilities that the industry is talking about because now they can slice the network and deliver specific value to an enterprise or a consumer who wants that. And then, as we all know, one of the key reasons of how the hyperscalers made money was it was the platform economy that they created. And our journey in Network as Code is to create that platform economics, which will actually produce the returns once you get become the link between the ecosystem and the network. So just looking at long-term aspirations and trying to close in, I think the way I would like to summarize this that we expect beyond connectivity to almost become half of our enterprise campus revenue business by the end of this decade. We believe that that's where the ecosystem comes together and that's what our aspirations are. If you start looking at Network as Code, we expect contributions of almost over 25% of the total revenue on advanced 4G and 5G but not CPaaS, that was the legacy -- old legacy capabilities, and it was actually a very low-margin business, and very few actually made money in that business. And these revenues have actually begun but they are still very, very early, but we believe this is what's going to scale at a very, very fast pace over the coming years. SaaS and Enterprise as a Service across infrastructure, platform and software what we call this is cloud ARR and this will almost represent half of our enterprise business by the end of the decade. And that is a much more predictable revenue stream that we will be able to drive and so really, these are the areas where we believe CNS where the network really meets the cloud and software and brings this in terms of the ecosystem together. So before I close, I just want to talk about 3 key areas of technology that we continue to invest in to drive technology leadership. The first is observability, which I talked about and observability is extremely important to be able to work in this new cloud-native world to be able to understand and dynamically track performance and capabilities as we go forward. And then there's the other evolution that is happening, we are creating the edge, but really nobody has really been able to solve the real-time edge problem like we have using MXIE, and MXIE will be further extended actually to drive MicroEdge where actually on the devices itself -- the edge devices, you will be able to run algorithms and do compute right at the edge to be able to deliver certain use cases. And this is where we believe the next value creation will happen. And finally, I think you've all seen all the hype around AI and generative AI and we've incorporated this into our portfolio as well. And actually, what you do is you combine this generative AI with observability, and that's what creates autonomous operations as we go forward. So not only are we deploying these in our products, but also we are actually putting it in places like documentation and marketing and making AI and generative AI pervasive, but using it very responsibly because that's one of the challenges of the generative AI is how do you make sure that you use it responsibly. So I want to summarize and close the presentation and summarize around 5 key topics. In the target growth segments, the 5 segments that we talked about that we chose in '21, and we continue to focus on those, we are growing faster than the market and taking market share. And Enterprise and Beyond Connectivity, these are big opportunities for us. We have a unique leadership position. We have a market leadership position. The Beyond Connectivity is growing. And what we are doing in expanding into platform economics, which is where we believe new value creation will occur. And then we talked about SaaS and Network as Code. And we are seeing these as new business models that we see adoption growing. And while, again, we are seeing -- this is early, we're seeing good traction, as I talked about some of the numbers of 31 customers in SaaS, 6 in Network as Code and so on and so forth. ESG is obviously a big focus as Pekka talked about it. And I think one of the key areas that we're trying to make sure is that all the software that we build drives and addresses the ESG aspects of what our customers are looking for. And finally, we will continue to assess the portfolio. Somebody asked the question earlier. That is a constant thing that we continue to do is to make sure that in a portfolio that either we are 1 or 2 or we find a way to get to that or try to make other decisions around it. And with that, I just want to conclude my remarks and happy to take any Q&A. So thank you very much.

I think we'll start the Q&A. I'll take one quickly from the webcast that we've already seen, which is just Raghav. Obviously, we had targeted back in the Capital Markets Day in 2021 for the CNS margin to rise to 8% to 11% and the commentary we've given this morning is obviously 7% to 10% for 2026. Can you possibly just talk about the journey, I guess some of the investments you've made that have kind of led to that situation we see today?

Yes, sure. So to -- there are -- from a margin perspective, I think our margin development has been actually quite good. But there are areas of investment that we have deliberately chosen to invest into organically. Network as Code is an organic investment. We have other options, but this is a option that we took because we believe it's a more prudent option in terms of where we want to monetize and where we want to drive. So that's a particular area that we started to invest into. As we talked about private wireless, this is a key area of growth for us and one of the areas where we have established market leadership, and we were very clear that we wanted to, again, continue to organically invest in that particular area. And finally, SaaS and these are areas that we continue to invest in while holding stable operating margin as we go forward. And once we -- a SaaS journey is usually a 5- to 7-year journey where in the initial stages you actually invest and then once you start to get scale and that's when you get the hockey stick in terms of growth in operating margins. So we see these as investment areas, which is we've added on as we've gone through our journey and we believe that the guidance that we have given going forward is thing that we will be able to. In addition to that, I think there are legacy businesses that we do also have that we continue to be very prudent on. There are some businesses that are declining. 2G, 3G, these are declining businesses as new technology comes around. And there are other businesses that we've also taken out, which is things like cloud infrastructure and others, which we have been consciously doing as well. So there you have it.

Thanks, Sami, do you want to go ahead?

Sami Sarkamies from Danske Bank. I have a general question regarding the business plan for CNS. It's not looking that straightforward because you're assuming 30% of the cost measures but then on the other hand, you should be sort of investing for future growth, and you're actually faced with pretty interesting growth opportunities. So do you think the balance is right between short-term efficiency and collect those long-term growth bits?

I think so. First of all, we have to be very prudent where we are investing. And we've made a very clear decision of the 5 investment areas, and we continue to execute on those. I believe that we needed to be efficient. And as such, we had called that out in 2021 that we had to drive for efficiency. So we're bringing more automation in the way we were structured from an R&D perspective and services perspective, which is quite heavy in our business. We looked at how do we move to better synergize our R&D in terms of location, centers and so on and so forth and bringing automation in. So I think that some of that is a very natural process that we had to product development intensity and our services intensity was not at the benchmark levels where we were when we started the business in 2021. And those were natural steps that we're taking. So I believe those are prudent steps that we should be taking, and we will continue to make those very highly efficient. But at the same time, I think we've also taken the investments and put it in the key areas and making sure, for example, in managed services, we were very, very clear that we had to manage the profitability, not in terms of growth because that was a business that was not performing extremely well. So I think our portfolio management has been very good and very clear. And we have been replying obviously investments back into the business into the growth areas as well. So we believe that the measures that we're taking in terms of taking cost out is a natural progression of bringing more automation so we can serve and deliver our services in a much more effective way, consolidating R&D, which is also -- was a cost that we were actually incurring in the past. And so those things were natural cost out areas that we have to do. And we have to keep improving our product development and services intensity. So I don't think that any one of those is constraining us at this point in time. I think we're pretty clear and prudent in terms of how we're managing the capital allocation towards our growth businesses, while taking cost out.

I'll maybe take another question from the webcast. Obviously, we've seen an announcement this week -- last week I run in an operator consolidating to viewer vendors, as we've talked about a few times today. Do you see any impact? Or is there any -- we talk about programmable networks into the future. How do you see the impact of programmability versus a mobile network that typically would have multiple vendors? Is this a dynamic that cares about how many vendors there are in the network?

No. First of all, I want to be extremely clear is that we work in a highly competitive environment, and we invest into technology leadership. And if you look at we have a very, very strong presence in the United States with all the major operators around in the U.S. And then when you start thinking about also the stickiness that we have with them, as I mentioned, we have now a 55% increase in terms of the portfolio that are being used by these operators. So I think the stickiness is becoming. So we're not -- at this point in time, we're not that -- we don't see the impact there. But if you look at whether they have a single vendor, dual vendor, triple vendor, in a software world, you have to be agnostic to the network and the components underneath that. It has to be agnostic. It can -- because you will have various permutations and combinations of components that actually sit on the network. And the very nature of building best-in-class software, it has to be able to adapt to any kind of infrastructure on the southbound side. And so we have built software that can have a Nokia network, can have a Samsung network, can have Huawei network, could have any under transport network, it doesn't really matter because software -- you cannot have software that is dedicated to a particular network type, then you're not in the software business. So we've been very, very clear that all of our software is agnostic to cloud, any cloud vendor, any network vendor, any hardware vendor. And that's when you have true software because otherwise, you're going to limit the ability to actually your customers to monetize or use them to manage their networks in itself.

Will take a final question from Joachim. We're running short in time. But go ahead, Joachim.

Joachim Gunell from DNB. So can you just talk a bit about the puts and takes when it comes to your organic approach to a network as a code? And also with regards to that, what gives you what assures you that you're taking a lead here when it comes to Ericsson and Vonage?

First of all, I think this is the strategy we believe is the right strategy. And why do we believe this is the right strategy is because we believe the real opportunity exists in 4G advanced in 5G and going forward, not on the legacy CPaaS market, which until today has really not made money. So we believe that this is the right approach that we should be taking. In addition to that, we see actually the monetization of this coming in 2025 and beyond. This market is still nascent and developing. And we want to be extremely prudent in our approach as to the timing of this value creation and to make sure that we time investments and opportunities and everything. And so we are being more thoughtful in our process. We do not want to bring legacy forward. We've already signed 6 customers this year and we will continue to sign a lot more. And as we sign this and as we learn through this, we will reprioritize what investments we have to make. So we believe that this is a more prudent approach based on the opportunity developing underneath us. And this is why we feel that we're not carrying any legacy, and this is a huge thing because in that legacy, you're going to -- it's actually going to drag you and pull you down. And the legacy was all about connectivity. It was about voice, video and text. This is about capability where you're taking network capabilities, APIs that are emerging in the 5G space and trying to monetize them. And that world was a world that where an aggregator showed up in the middle between us and the ecosystem and separated us from the ecosystem. We want to participate, and we want our customers to participate in the value chain and not just be relegated to a connectivity player. So that is why we chose the approach we did, and that is paying huge dividends in terms of how we are approaching the market.

Great. Thanks, Raghav, and thank you all for the attention so far. We'll now take a short 10-minute break. If anyone wants to stretch the legs for those on the webcast, we'll stay on the same connection, but we'll be back at half past to continue with timing here. Thank you, Raghav. [Break]

The last presentation on mobile networks. And so I'd like to welcome Tommi Uitto to the stage. Tommi?

Thank you, David. And thank you, everyone, for being with us today. And for those of you who traveled to Finland, welcome to my warm home country. So today, I will be sharing how mobile networks is revamping its strategy. We have begun to rebaseline our operation for resilience and profitability while maintaining our unwavering commitment to technology leadership and protecting our R&D output. These cost reductions and other profitability improvements and net working capital rotation improvements are expected to be completed by 2026. And the profitability improvements and cost reductions are expected to lower or reduce the net sales level required for delivering double-digit operating margins from approximately EUR 11.5 billion to approximately EUR 10 billion or by EUR 1.5 billion in the current scope of business. We will be accelerating our offerings to the faster-growing segments. So private wireless for enterprise, private wireless for defense, Cloud RAN and Open RAN and this acceleration means in R&D, sales channel development and potential bolt-on acquisitions. We will also see further opportunities to win completely new CSP customers because of the improved competitiveness of our products and services as well as some geopolitical opportunities. Today, we also share 3 exciting pieces of news publicly. Now many of you are, of course, interested in AT&T and some questions have been asked already. We will be addressing this topic during my presentation in some points as well as during the Q&A. But I would like to highlight upfront that AT&T recognizes our leadership in mobile networks. So here's a quote from Chris Sambar, Chris is the EVP of Networks. And as he wrote to me about the decision, which was driven by very AT&T-specific financial reasons. He proposed AT&T go on record with what they think about our competitiveness in RAN in the products and services as well as the engagement quite unusual in this type of situations. AT&T decision, of course, is a disappointment, but it's one paragraph in the book that we are writing. The reality is that there will continue to be strong demand for wireless networks, high-capacity radio networks. We have tremendous capabilities in this technology. We are the #2 in 3GPP wireless even after the AT&T decision. We have been taking lots of market share. Our portfolio is more competitive than ever and there are exciting opportunities in 5G, 5G advanced, private wireless for enterprise, private wireless for defense, geopolitical opportunities, Open RAN, Cloud RAN as well as, of course, finally 6G. So let me tell you about the strategy going forward. We will start by looking at the market dynamics, the market size, the growth, the different undercurrent in this market. We will look at our progress since we last spoke in mobile networks since London and since the late 2020 Capital Markets Day as well as how are we positioned in this market based upon our capabilities and market presence. And then we move on to the revamped strategy to capture the long-term opportunities in this market. And we wrap up with the key takeaways before the Q&A. So regarding the market dynamics, of course, this business is cyclical, like Pekka Lundmark said. We have this 2023 decline after the 5G deployment peaked in North America, Japan, South Korea, for instance, some of the inventory normalization in North America as well as high interest rates and some of the macroeconomic impacts that have -- that our operators have experienced. We foresee modest growth in the addressable market from 2023 to 2028 and again, some acceleration when we move to 6G by 2030. But within this modest growth, there's continued strong growth in private wireless by 21% CAGR from '23 to '28. You may have seen 18% in Raghav's presentation, but that was a slightly different time frame up to 2026. Now 5G is driving CSP investments in most markets for mobility voice and mobile broadband and in some markets also for fixed wireless access as well as private wireless. 5G will continue to be deployed in Europe. Any slowdown in Europe would be temporary and primarily driven by the macroeconomic situation, delaying project time lines, but not canceling the 5G deployment. Europe is seriously behind in 5G. You remember our KPI of the penetration of mid-band wide carrier 5G where Europe is trailing behind the average of the world. 5G will also continue to be deployed by many richer countries in Middle East. 5G deployment in India is expected to slow down in '24 after a very strong high-speed deployment in '23, yet our sales -- if we look at our sales rather than the addressable market, our sales are expected to say -- stay at the level higher than we had back in '21 or '20 because we won Reliance Jio, we have our 45% market share with Bharti Airtel and almost half of the Reliance Jio deployment. So we have a much bigger presence in India now in 5G than we had in 4G. 5G deployment is basically just starting in most countries in Latin America and Africa, many countries in APAC, Eurasia and in Eastern Europe. And 5G deployment will, of course, continue well into the 2030s, even after 6G has been introduced, just like we are still deploying 4G even many years after 5G was first introduced. the oldest 5G equipment that was deployed back in 2018, '19, '20, will start to enter the technology or the hardware refresh cycle driven by higher performance of new base station technologies or new base station platforms, feature support for 5G advanced energy efficiency, automation. So there will be a refresh cycle where our competitiveness will, again, give us the opportunity to grab some share. Another undercurrent will be the geopolitically motivated changes in supply policy because as Pekka said, we have already won some 50% of all the value that was moved away from the so-called high-risk vendors but there will be further countries, further governments who will be banning or restricting the market share of the high-risk vendors and operators who will be reducing their exposure because of the technology competitiveness due to access to silicon, leading silicon in 5-nanometer and later 3-nanometer technology. If we look at the traffic growth, the traffic growth that we see requires new spectrum, and it will require 6G by 2030. So mobile network Traffic is expected to grow fivefold by 2030 or 20% to 30% per year CAGR. And this is excluding the private wireless or the enterprise traffic. So simply the CSP traffic. This growth is organic in mobility voice and mobile broadband plus there is the fixed wireless access traffic and then AR and VR traffic. And in the 2030s, consumer metaverse at scale or consumer metaverse for masses once the end-user device is something that is highly attractive. Now if you look at the graph on the right-hand side, it's interesting to see, actually, they work together. You see that 4G without 5G would have already run out of capacity by now. So on average globally, 4G already does not have enough capacity, which is why 5G has been required. But 5G mid-band with an average 100-megahertz carrier, which is the typical mid-band with Massive MIMO in [indiscernible] 3 or 5 gigahertz, that will also run out of capacity around 2028 with this type of traffic growth that we see. So even if you have 4G, 5G, refarming of previous spectrum into 5G, eventually 6G will be needed. And 6G will be needed at least for 2 reasons. You have this traffic growth, so you simply need more capacity. And then in XR, VR or for metaverse at scale, 5G and 5G advanced will not have enough of operating capacity or short enough latency. So these are the 2 main reasons why 6G will be required. Sometimes in this industry, you nowadays hear the discussion of do we need 6G at all? The answer is very simple. With this traffic growth, you are going to need some new spectrum because the existing spectrum is congested. There will be a new spectrum now decided by the human kind in the World Radio Conference as we speak during the month of November and now December, and the human kind will decide on the new spectrum to be used in the future for having more capacity. New spectrum means new radios will have to be deployed. New radios will be deployed. And then the question is what technology will we deploy? Will we deploy only 5G or 5G advanced? Or will we deploy the most spectrally efficient and energy-efficient technology that scientists and engineers have been able to figure out, which is 6G and the answer is obvious, it will be 6G because it is just better economically. So let's look at the Mobile Networks progress and positioning since we last spoke. And here's some good progress for you. This is the Dell'Oro data. But if you look at the data from Infonetics or Omdia or LightCounting or Mobile Experts, it gives you a consistent picture. Over the last 2 years, we have increased our market share in 5G, excluding Mainland China. We have increased our market share from 23% to 29%. And that's more than any other supplier has been able to achieve, both relatively and in absolute terms. And if you recall, the way how this works is that the top 5, 3 of which you see here are Ericsson -- and this is excluding China, Ericsson, Nokia, Huawei, Samsung, ZTE and then the rest, far behind. And even after the AT&T setback, we will be in a better position than we were back in 2021 because of this market share increase that we have experienced or achieved. Thanks to our improved competitiveness with the products and services as well as some geopolitical tailwinds. So behind this curve is that we have won 47 completely new CSP customers that we didn't have back in 2019 and actually also almost 700 private wireless customers with Raghav but we'll come back to that. Another reason is that 31 of our old CSP customers decided to award us more market share than they had in the past. Yet another reason for the market share is that, of course, the market mix has helped us a bit with India as we control almost half of the market in India. And as I said, we have won these cases because of the competitiveness of our products and services as well as some geopolitical reasons. So some of this share has been won from Huawei and ZTE, some from Ericsson and Samsung, and then some -- there's a couple of greenfield cases on this list as well. And I'll tell you, many companies are showing this type of charts or slides with logos when it's a proof of concept or a trial or they've had a discussion with the customer. I can assure you that behind these logos, there's an agreement for wide area commercial network deployment for radio access networks, okay? Behind the logos and then the country flags in cases where we have not been allowed to share the customer name. So let's move to the enterprise. So Raghav was already alluding to this as one of the key areas where CNS is playing. And we, of course, provide the radio access networks piece for this. So we have already sold more than 675 enterprise customers, selling private wireless in all kinds of different industry verticals. So you have manufacturing and warehousing, you have mining, airport operators, seaport operators, public safety, utility companies, smart agriculture, all kinds of different places. And it's just a super exciting area because we keep learning so much. I mean the obvious things are what Raghav was saying about worker safety. You have the productivity improvements, speed, quality, cost and these type of things. But we're actually learning a lot of stuff like Raghav was referring to this Arçelik, a Turkish manufacturer of domestic appliances. They used to run their AGVs using WiFi in their factories. When they change the 4G LTE due to the high OpEx that they had with the maintenance of the AGVs, they saw 30% -- 25% reduction in the maintenance OpEx and the downtime of the AGV simply because 4G LTE is a higher-performance wireless technology than WiFi. Or in the mines, we thought that it's only about automating the mining vehicles, having better access control and that sort of things but actually using private wireless, eliminating the need to have human beings in the mines or at least in some corners of the mines, it reduces the need to invest in the air exchange and the air conditioning in the mines. So now with these almost 700 customers, we have lots of learning, which we can leverage with more and more and more customers. It becomes like a flywheel because that we accumulate the experience and the learning from all of these cases, what works, what doesn't work, and that's then available to all of our customers. Now architecture-wise, you can say that there's 2 different segments here. There's a campus wireless which as the name would suggest, is local by nature, a few, maybe 10, maybe 20 base stations, often small cells. And that's where we have agreed with Raghav that CNS is the lead business group leading the charge, and we supply the radio access network. Point being that in many of these cases, it's not really a connectivity play. It's rather about the convergence of IT operations technology, or OT and then wireless with, for instance, the NDAC, the Nokia Digital Automation Cloud platform and the Mix8 platform, the home for the for the OT applications from the ecosystem that CNS had. And we are proud to provide the radios to these campus wireless cases or enterprise cloud edge cases like we sometimes call. In the wide area networks, Mobile Networks is the lead business group because this is more of a CSP paradigm. So this is typically utility companies, big electricity, gas, water type of companies, public safety companies, which obviously need to be with a wide area of seller coverage. And that's where we are the lead business group. Here, the number of base stations is then rather in the hundreds or even thousands and more of a CSP paradigm. What's remarkable about this almost 700 is that already more than 145 of them have 5G. Why is that remarkable? It's remarkable because this is just plain vanilla 5G, just mobile broadband. There is no -- there are no URLLC capable IoT modules yet and RedCap or eMTC will be part of 5G advanced only. So think about the potential of private wireless when we can actually support a very large number of low-power, low-cost IoT sensors with RedCap or wireless robotics with URLLC. I mean, so far, 5G is used here only because, well, better uplink speed for, say, video -- video quality or because these people know that they will eventually go to 5G. So why not go to 5G immediately or in some cases, due to spectrum reasons. But this is really a high-growth segment for us and our sales, as we have said, is actually growing faster here than the market and we have a very good market share in this segment. So let's move on. So we continue to invest, of course, in R&D. We have an unwavering commitment to maintain and develop further our technology leadership. What we worked so hard to develop back in 2019, 2021 when we turned around Mobile Networks. So in '23, we launched a lot of new great products and solutions. So to have rock Massive MIMO radios, wider occupied bandwidth, instantaneous bandwidth, smaller size, lighter weight, lower power consumption. We were already in a good place with Osprey Massive MIMO in 32 TRx high output power category, the market smallest. Now with Habrok, we tick the box in 64 and are in the lead. We have our MantaRay SON, self-optimizing network solution with AI and ML and this is the market leader if you ask any industry analyst in self-optimizing networks. Some diehard customers of my competition are using this solution to optimize the energy efficiency of my competitors' radio access networks. Then in the baseband side, we launched Ponente , Levante and Lodos, very high capacity, high connectivity baseband boards. This is about the cell connectivity, subscriber connectivity, data through, scalability, also power consumption for that matter. And we were already the market leader in baseband, and this will just extend our leadership on the baseband side. AI and ML has also come, not just in the MantaRay SON product or in our own operations but also in our R&D but also in our services, processes and tools together with digital twinning. Wavence, our microwave radio product family happens to be the best microwave that we have had in my 28 years in this company. I started in microwave radios on this campus back in 1996. We've never had this good of microwave radio product. The best ratio of output and input power or the best energy efficiency, the longest distances with e-band integration with base stations, integration with the network management system, it's just a fascinating product. Then as energy efficiency is so important, not just in the base station or in the microwave radio, we have also worked on the energy efficiency improvements of the site solutions. So instead of having many separate cabinets, we have all-in-one super energy-efficient cabinets as well as zero footprint sites with no cabinet whatsoever. And then finally, we have the anyRAN collaborative advantage where we started working with the leading hyperscalers, AWS, Google Cloud, Microsoft as well as the server makers Dell and HPE to make our Cloud RAN work like a dream in their data centers, in their private or public clouds as well as the servers in case the CSPs or the enterprise want to build Cloud RAN using these data centers or servers. So a couple of examples or demonstrations of the leadership, just a little tidbits from here and there. Of course, we take great pride in beating competition with carrier aggregation because that has been such a big topic in 5G, it impacts the throughput, the overall sales capacity. We have had this lead now since, what '21, in the marketplace. So we were the first to introduce 5 component carrier aggregation or 5 CCA across 5 TDD and FDD carriers in sub-6 gigahertz. In the millimeter wave, we have extended the call range to 11 kilometers, reaching still 2 gigabits per second, which is great for those cases where operators need more than a few hundred meters or want to use millimeter wave for fixed wireless access. For fixed wireless access use case, you either need to have ideally a dedicated spectrum band or a very wide band where you can then play with that for fixed wireless access and mobility customers or if you don't have that, then or if you run out of capacity in such mid-band TDD, then you might want to go to millimeter wave. So this again, helping our customers to make the most out of 5G. And then last, already, I mentioned this 12 kilometers e-band microwave radio distance. So moving on to ESG. We have been recognized as one of the World's Most Ethical Companies by Ethisphere, now 7 times in a row. And this is something that not all of our competition can claim. Nothing similar can be claimed by some of our competition. With Orange and the United Nations Industrial Development Organization, we've been working on recycling circularity, equipment refurbishment in Africa. Our Oulu base station factory has been able to increase their capacity by 250% without increasing energy consumption. Most of our manufacturing is done by EMS partners but we have 2 factories of our own, the Oulu and the Bangalore factory, which is where we hone the product for volume -- or the design for the volume production by our -- for our EMS partners. And then, of course, we have this, the Habrok and the new baseband, Levante, Lodos, and Ponente cutting the power consumption or improving the energy efficiency, but cutting power consumption by 50%. And then last, it's about the safety because in our business, there's work at height in the towers. There's travel to the sites, distance sites or traffic. And then, of course, working with electricity. So we have to be particularly prudent about how we manage the safety, especially with our Scope 3 responsibility. We have made 120 senior leader safety tours this year against a target of 40. Personally, I made my 2 trips to 2 sites in the outskirts of Bangalore. It was just fascinating to meet the rigorous, audit their safety equipment, the harness, see their digital tools, see all their certification and documentation is just -- it's just fascinating to be on the ground. So here's just some leading analyst firms quotes on what they think about our portfolio. I'm not going to read this out for you. This is about the RAN overall, the radios, the baseband, the chips, and they all say that we've been taking market share because of the strength of this portfolio. Let's keep up the pace because time is running and we get to the revamped strategy to capture the long-term opportunities after the basis that we have been built. So we have been revamping our strategy, re-baselining our operations for the new market reality, taking action to protect the profitability as well as the R&D output. This is one of the most important slides that I have today. So bear with me. So we've been re-baselining the operations for this new market reality by focusing, especially, we started planning this when we saw that the market decline this year is going to be steeper than anybody thought. This is about focusing mainly on the support functions, headcount reduction and cost reduction in the support functions. In SG&A, if you take G&A, it's just about everything. It's finance, it's HR, it's IT, it's real estate, it's really everything. In S&M, it's marketing where we can be a lot more efficient on the marketing side. And in sales, and I'll come back to the operating model change, it's about management, reducing management layers, reducing all the sales internal support functions. And what we'd rather do is we protect the frontline account managers and have better resource allocation of the account managers and then, of course, also better incentivization as opposed to 1 size fits all across all of Nokia. I'll come back to that. And 80% of all of this cost reduction is expected to be achieved by end of '25. And even in R&D, there is some reduction but it's really focused on the R&D internal support functions. There's a lot of R&D internal support function where we can streamline and also balance some of the -- between some of the competence areas and R&D sites without really impacting the R&D output. So what we do is we protect the capacity we have in people writing specifications, developing chips, developing rest of hard work, coding software, integrating hardware and software, testing the products. That's the hard core. That's what you should really do. It's like anybody else, they better help these people or not be there. And it's not only about the cost reduction but also in our services and R&D operation and actually across the board, we expect to get further productivity improvements with further digitalization, amortization in the case of services delivery, further use of digital tools, the digital end-to-end landscape and in R&D with GenAI. Very important. We've had interesting trials running across a couple of hundred people exploring the usability of -- and the benefits of using GenAI in our R&D operation. And then we have the supply chain cost efficiency, especially now in the aftermath of the semiconductor supply crisis and the supply constraints and all of the inflationary things across freight and logistics and everything else that you might have. And that's also part of the net working capital rotation improvement, which is part of the program. It's not the only part, though. Moving to the third pillar. So we are integrating now the sales force from our customer experience to the Mobile Networks business group. Fundamentally important. So far, we have had a shared sales force. And this really marks the last step in this transformation of the operating model for this part -- were the latest step, I should say, because the other one is the autonomy but this marks the point -- one of the development items after Pekka and Marco came on board, and we moved away from the matrix organization to rather P&L responsible business groups, which are organized and whose scope is based upon how our customers are actually buying. So what we do here is we basically bring customers and salespeople closer to the product people and vice versa. So the aim is to improve customer intimacy, speed up decision-making, make better quality decisions, may be able to make better contracts, be able also to accelerate our strategy implementation when we diversify from CSP customers to the non-CSP segments, meaning the enterprise and the defense. And we know we're going to get higher sales and marketing efficiency here. And then as the last one, it's the commercial capability. So increased focus on profitability, terms and conditions, all the different things that impact our net working capital rotation capabilities and being able to also price based upon the portfolio value. When you have competitive products and services, you don't have to discount just to be in the race, which was perhaps the case back in 2018 or even 2019. So let's move then on and look at R&D. This might be a familiar slide to you from our previous webcast and here's an update. So what you may remember is that over the years, we have been increasing 5G R&D headcount. But not only that, we have increased dramatically the productivity in our 5G R&D, meaning that we got a huge boost in the overall R&D capacity, R&D output, which helped us accelerate and catch-up competition. And by the way, there's a certain limit to how far you can go because this industry, to some extent, is governed by the semiconductor or the silicon technology. So you can't really have 1 nanometer when there's only 3-nanometer chip available or the 3GPP standard. You cannot make some of the features before they have actually been standardized in 3GPP. So what you have to do is you have to be in the lead in this but you can't get too far ahead. Now what you can also see that we have had some headcount reduction. We have led the attrition run and we've done some active balancing between the competence areas in R&D sites because of the fact that we started to see the weakening of the addressable market during this year. You remember this was part of one of the earlier presentations, we thought still entering this year in Q4 '22 that MN's addressable market would grow by 5% and MN sales more than that because we knew we're going to be taking share. And now the latest view has been that this market is declining by 9%. We declined less than that because we are taking share but quite a dramatic difference and it sure paid off to be prudent here and manage the cost -- manage the headcount and the cost in R&D. And going forward, we expect, like I said, to achieve further productivity gains with GenAI, in particular, in product development. So let's get to the next point, which is about this cost reduction and profitability improvement program, which is reducing the level or the volume of sales required to develop to yield double-digit operating margin from EUR 11.5 billion to EUR 10 billion. So back in '21 and '22, the Mobile Networks turnaround program had led to sales in the range of 10% and -- sorry, EUR 10 billion, an operating margin of 8% and 9%. So that was back in '21 and '22. The rolling fourth quarter operating margin achieved 9.6% in the third quarter of '22. In '23, the market declines. As I said, our sales decline as well but less than the market. And then there's also a significant change in the mix this year. So less North America, more India, all of which then led to the most recent guidance that we gave, which is 6% to 8% operating margin this year. With this normalized cost structure of 2023, we would require EUR 11.5 billion of sales to achieve at least 10% operating margin. And with the cost reduction and other profitability improvements that we have started to implement, this would now come then to EUR 10 billion, so down by EUR 1.5 billion. This is, of course, important because of the market decline in '23, the modest growth, the 1% CAGR that I said about the MN addressable market going forward, as well, of course, in order to cope with this AT&T decision. So then if we look at how we serve our customers. So we are, of course, helping our customers secure their user experience when 4G networks are congested. So offload traffic to 5G. We are helping them densify the networks, improved coverage, improved indoor coverage. We help them with 5G stand-alone also to improve coverage, shorten the latency, enable them to launch new services, which would be required in 5G advanced, of course, Voice over New Radio or VoNR would help reduce the call setup times. Then there's the refarming of using the old spectrum for 5G because it's more spectrally efficient, more energy efficient. There's network slicing, which is about protecting the user experience of both the mobility customers and the fixed wireless access customers, if you have FWA deployed or to guarantee the network performance for the enterprise customers in cases where they will be competing for network resources with the rest of the customers. And then there's 5G advanced, which has XR improvements. There's URLLC and RedCap, like I said, there's drone improvements, very important, there's AI and ML improvements, non-terrestrial network improvements, which is a fascinating area where we work, for instance, AST SpaceMobile backed by AT&T and Vodafone and others. And then what is not even on the slide, is what Raghav was talking about, which is Network as Code, programmable networks. The reason why it's not here, it's in Raghav's patch. It's his business but it helps me because it helps operators better monetize their investments in Mobile Networks. It's probably -- it's one of the hottest, if not the hottest topic that we discussed with our operators nowadays, Network as Code, the API exposure, which like Raghav says is not really a business to consumer like the CPaaS, but rather business-to-business and it's a tremendous opportunity for the operators to be better in monetizing these networks if they just play it right. And of course, we want to be part of creating the technology to help them do exactly that. So then we have some news for you. So private wireless. As I said, campus wireless led by CNS, WAN led by Mobile Networks. And the sort of base and a very solid base for all of this is really that we lead private wireless in both segments with the Nokia end-to-end solution. And with all those capabilities of converging OT and IT and wireless for the benefit of our customers. So that's the basis. But then we also started to work with the server makers and hyperscalers because we foresaw that it's conceivable that there will be enterprise who will want to run on-prem or in some private cloud, OT and IT with, say, AWS, for instance, in the private cloud. But if they do that, and they have private wireless, then we should have cloud running in that same AWS Outpost server as an example. Or if you have enterprise who are building the networks with themselves or with a systems integrator probably, then if they want to use servers from HP or Dell, our Cloud RAN needs to run like a dream. So that was the second step. And the third step is here. This is new. We're expanding our customer reach in private wireless in the following way. We were approached separately at different time by industry leaders, formidable companies like Cisco -- or specific, not like, specifically, Cisco, Microsoft Azure and HPE, who made their Athonet acquisition. And they say that they have customers who need private wireless and customers who want to work with Cisco or HPE or Microsoft but they need high performance RAN from a Tier 1 supplier. So that's where we come to play. So we have now struck partnership deals with them. We are developing the go-to-market with them and their MSPs, the managed service providers, the VARs, the value-added resellers, the system integrators, their sales channel. And we have progressed very well with interoperability testing so far. We're ramping the sales channel, the sales capabilities, the supply chain and the pipeline is developing quite nicely. So this will augment our access to the private wireless market with the enterprise, very important. So -- and by the way, not in any particular order, these are all formidable companies with great capabilities, great customer base, great technologies. They have positioned themselves extremely well in this space. They are not in the same basket, it's just that we are super proud that we have been selected by all 3. Another piece of news is what we're doing in the defense segment. So you can say that there's 3 domains in communication networks in the military, in the defense. You have the strategic infrastructure, which is the big home bases, you have the operative basis, the deployed forward basis, which -- and then you have the tactical connected operations. So 3 layers in the hierarchy or the architecture, if you will. And traditionally, Nokia has been deployed -- has been supplying IP/MPLS, IP routing, optical networks or microwave radios to the strategic, the big home base, big military bases. Lately, we have also started with a private wireless for both the strategic and the operative segments. But now we are expanding to the tactical communications. And expanding to tactical, it basically means that it's doubling the addressable market in defense communications for Nokia because 1/2 of the market is in strategic and operative and 1/2 of the market is in tactical. And today, we announced the acquisition of Fenix Group who is specializing in this type of tactical communications, and we have a nice complementary nature of our base station technologies, our 3GPP technologies and what they can bring to this equation. So -- and it's very interesting that the military or the departments of defense, the ministries of defense, they see the performance gap and the cost gap between the traditional military solutions or proprietary communication systems and 3GPP in wireless. So they see the big gap in the performance. It's not realistic to assume that we could replace all of that technology with the 3GPP wireless but it's a complement. 3GPP wireless, which has been honed for cost efficiency and performance for the past 30 years, is a good complement to the existing systems. Moving on, another piece of news. So we're back in Germany. Some of you may remember that we lost this account somewhere during our dark days, must have been 2016, somewhere there. And -- but when we started the Mobile Networks turnaround program, I went to Bonn to Deutsche Telekom head office, and I promised to keep them up to date about our progress. And 1 year ago, we announced that we are working on a commercial trial with Deutsche Telekom or T-Mobile in Germany. Now this is about the wide area commercial network. And why is this remarkable. It's remarkable in many ways. First of all, T-Mobile of Germany has the biggest radio access network in all Europe, all Europe. Second, it tells you something about the competitiveness of Nokia's portfolio and capabilities because this was a competitive process. Third, this is a true Open RAN deployment where we work with Fujitsu using some of their radios. And then this is a true multivendor network. Don't forget that in the recent years, Deutsche Telekom has been using Ericsson and Huawei in the German network. And fourth, of course, it's a win back. So we started working on this already in 2019. Moral of the story, you never give up, and you can win back customers that you once lost. So starting to -- no, actually, we still have the Open RAN piece. So yes, I mean we have obviously been a leader in commercializing high-performance, Open RAN all these years. I mean, with DOCOMO, who is our biggest Open RAN customer to date, we have -- we passed the system acceptance. We're deploying Open RAN, we're connecting to Fujitsu and NEC. This is the combination of the different configurations. We have contributed more to the Open RAN specifications than any other company. We still co-chair 3 of the 10 working groups. We have collaborated with all the companies that you see in the middle of the key server makers, hyperscalers, the founders of Open RAN, the CAS software suppliers, if it's Open RAN and Cloud RAN, the CAS layer should be an open one like Red Hat or VMware, OpenStack and not the supplier's proprietary CAS layer, like you see in some cases. And we have already connected our DU and CU to 5 different suppliers, radio units. That's more than anybody else has done. 5 different radio units on Fujitsu, Mavenir, Samji from South Korea and 2 more. And now, of course, the landmark deal with Deutsche Telekom. So coming to the end, the key takeaways, and it looks like, again, Mobile Networks is keeping its budget or staying ahead of the schedule. This is what we do in R&D nowadays. We are rather ahead of the schedule. So despite the short-term challenges in the market, the long-term demand for high-performance radio access networks remains, and we have tremendous capabilities in this domain in this technology. We are investing in the new growth areas and in new growth in especially the private wireless for enterprise, for defense, Cloud RAN and Open RAN. The cost reduction and the other profitability improvements reduced the sales volume required for us to deliver 10% operating margin to EUR 10 billion. It's not like we want to be at EUR 10 billion but if you just look at how this market declined this year and you look at the modest estimate for the coming years, 1% CAGR, you better do that. That's the right thing to do because we are certainly committed to achieving that 10% in the long term. You heard that our 2026 guidance is 6% to 9%. But the long term after that has to be, of course, 10%. And as the number 2 supplier in 3GPP wireless, we are, of course, strongly positioned to make the most out of this market with all its peculiarities, and in particular, in these particular segments that we were talking about. So it's about the strategy pillar of Nokia. Number 1, where we take share in the CSP space, we've done some of that. Number 2, we want to increase the share of enterprise to reduce the dependence on a few large CSPs, if you will. It's about actively managing the portfolio, which is about the bolt-on acquisition that we made with Fenix Group and on and on and on, and I have the ESG there as the last one because I wanted to say that as it is important to us, not only because it would be good for the planet or the human kind, but because we believe it's good for the shareholders. So thank you for listening, and I think we are now good for some Q&A.

Thank you, Tommi. So on to move to the Q&A session, again, and I think we're going to welcome another table back on stage for Tommi.

The silent table.

A silent that just appears. But we'll take the first question from Andrew. Andrew, please go ahead.

Very interesting presentation, Tommi. I'm struck by sort of the level of investment you've made and the progress you made in terms of the product portfolio over the last how many years. And sort of just interested in terms of the customer side of it. Clearly, a few years ago, we were talking about the Verizon loss, which is a big frustration to you at the time but you weren't able to compete in terms of the product. You fixed that. You've lost AT&T and yet they're taking the unusual step of giving you a quote to plug in your presentation, and you're making the very clear point that it wasn't technology driven or anything. It was AT&T, I think you said commercial considerations, so price. And yet further on in your presentation, you're saying, well, we've invested in the product. We've got great technology. We don't have to give this away anymore. We can value -- price based on the value of the product. Doesn't the AT&T decision show that, that's actually not the case? And how does this industry sort of stop just sort of going down that slippery slope now that one of the biggest CSPs in the world has made this decision?

I wouldn't draw a corollary there. And again, the reasons of AT&T decision are very specific to AT&T, like Pekka said, financial, you said price, but I would say financial. I mean, again, a lot has been said about this topic. But if you look at the network that they have today, 1/3 is supplied by Nokia, 2/3 by Ericsson. It needs to be modernized. 5G needs to be expanded. We all know that the U.S. is still has a way to go in 5G. And if an operator ends up or concludes -- ends up in a situation or concludes that they have to go a single supplier, then with that split, what do you think is going to happen. So -- and I wouldn't draw the conclusion then as to what will this mean for the rest of the market or the competitiveness or the competitive nature of this market. I think Pekka said it well that radio access networks market has always been competitive, and it will remain competitive. If you look at the big picture, we're actually 7 different base station makers that came together, Nokia, Siemens, Motorola, Alcatel, Lucent, Panasonic and a little bit of Nortel as well. We have been the consolidator because of the new competition that came from Huawei and ZTE and not always completely symmetric and fair, but okay, life is not fair. So that was the consolidation. Now we have a situation where many countries have banned or restricted the market share of the so-called high-risk vendors and there will be more of that we can expect. There will also be the impact of restrictions or sanction -- restrictions to access to silicon -- leading silicon, which will impact product performance and characteristics. So this will give an opportunity to us. And at the same time, I think it's fair to say that some of the smaller Open RAN challengers have had less progress than people would have thought 5 years ago. And all this put together, I believe that we will be in a better position going forward to sell at good prices or better prices than we were in the past, if you put all of this together. But then you have things like market mix and market size and all these things that ultimately impact the operating margin. Today, it's too early to comment on that beyond what we said.

Okay. Do you want to go ahead, Felix?

Tommi, Felix Henriksson from Nordea. I think in the past Nokia Investor Days, the group sort of taken pride in requiring the return on capital employed to be greater than the cost of capital for each business could justify their position as a part of the group. So my question is that do you think that threshold will be met in the coming years once the AT&T loss will be a drag for your profitability?

I think it's too early for me to comment on the ROCE of Mobile Networks today. We will probably come back to that topic then in conjunction with the Q4 earnings. It's too early today to say that. But I will say that we have been -- as we turn around Mobile Networks, we have been meeting the requirement. Looks like Marco wants to add.

Yes, I just want to comment. You're totally right, and that requirement stays as well. So going forward, and this is one reason why Tommi and his team has taken a lot of decisive actions now when it comes to cost base and also aiming for double-digit operating margin going forward. So we haven't given up that requirement.

Tommi, we'll go to Sami next.

Sami Sarkamies, Danske Bank. I think you've been very open today. Thanks for that. I would have a bit more housekeeping issue. We know that you still have 2.5 years left with your contract with AT&T. So how do you see that phasing out? Any sort of forward-looking comments you can give on how that customer relationship will develop in the future years?

Yes, I cannot go to the detail of what we are discussing with AT&T but good catch. I mean, it is less than 5 years ago since we signed a 5-year contract with AT&T. And we are still in negotiation with AT&T as to how to execute the contract to the end. So that's still being negotiated, too early to make any assumptions. One thing I can add while the microphone is being passed is that, of course, we -- for Mobile Networks, we also supply things other than 5G to AT&T. Microwave radio links and then [ FEM ] to access points, the AT&T Cell Booster and AT&T Cell Booster Pro. So it's -- of course, the biggest part of the business is macro one.

Emil Immonen from Carnegie. Could you help us understand, is the customer behavior different between CSPs and enterprise and in defense? So do they appreciate different things in your hardware and software?

It is very different because and of course, it's fundamentally different because it's not their business. I mean for CSPs, the business -- from my perspective, the business is mobile connectivity, enabling people to call one another or access Internet using wireless devices. So that's their business. That's not the business of the enterprise. The enterprise are in mining or manufacturing or whatever they do. And for them, private wireless is an enabler. It's part of the machinery. And it's a very different nature. They want solutions that work and they don't have organizations that want to make science out of slicing and dicing the network to the smaller cube and trying to run e-auctions, reverse e-auctions on the cubes. So it's -- they value relatively speaking -- relatively speaking, they value more quality and performance and the outcome than the purchasing process.

And you believe this is a sector where you are even more competitive then?

Yes, we are. We are definitely more competitive there for a number of reasons. It's a question of the trusted networks. It's a question of, again, as they want solutions and they don't have the purchasing or engineering organization to buy the different pieces from all over the place. This is where the end-to-end actually works. So you have our core, our RAN, our IP switches, you have the end-to-end actually works there, better than it works with the CSPs.

We'll take our next question from Artem.

Yes, Artem Beletski from SEB. Maybe a question regarding to AT&T and or evolution, so to speak. Do you think that going forward, for example, big operators would be opting in O-RAN world for 1 -- basically single main supplier and then look at some additional components to it?

Yes, good question. Now we have -- obviously, after this decision and by AT&T, we have been talking to our customers, starting from the biggest ones and moving on. And frankly, they have been surprised. Most of them don't understand. Why? And some people say that there's a dichotomy. So in going sole supplier in Open RAN. And the reality, if you look at how this works is Open RAN is about supplier diversity. It's primarily about being able to combine 1 supplier's DU and CU with another supplier's RU. There have been some other aspirations of splitting CU into 2 parts and DU into 2 parts and all kinds of things but that's the primary thing. And that's rather about introducing more suppliers than less. And there's no need to go sole supplier today in order to start working on Open RAN. So it's a bit unusual. If you look at this, the way how operators behave in these big access networks, wireless access or radio access networks or even fixed for that matter. In the very largest networks, actually, in China, the biggest networks in the world, they have 4 or 5 suppliers of radio in the same network. In the very biggest networks outside of China, they typically have 3 suppliers or 2. You get into the medium size and then it's 1 or 2. And then when you get to the small operators, then it's 1. Point being that there's a balance you have to strike between the fixed cost element of having several suppliers to manage. And then the commercial benefits that you get through competition and suppliers being on their toes and that sort of thing. So that's why the small guys typically have only 1 supplier. And I don't think this to -- I don't think this will really change with Open RAN. If anything, Open RAN will give the capability to then rather use the best of breed in any of these categories, be it radio unit or the DU and CU. I mean, we've seen cases where there are some very exotic radio unit or antenna systems that we don't have a business case for. The volume is too small. We don't want to do it, but there's a supplier in the market who does that so by us combining forces, it's actually innovation, and it helps. But I don't think the overall policy will change.

Thank you, Tommi. Any other questions in the room? Joseph, maybe would like to say.

It's Joseph Zhou from Barclays. And just a question on your guidance for '26. And I think you clearly mentioned that now you target to reach a double-digit margin and with EUR 10 billion of sales. And clearly, your guidance, the 6% to 9% margin, it's not double digit, so which means you're quite far from the EUR 10 billion in '26. I just wonder what is your kind of top line assumption for '26 to reach that 6% to 9% and what are the different scenarios? And maybe in answering it another way, what's your assumption for the business growth other than AT&T because I don't know whether you consider that as part of your TAM to see underlying assumption for '26 guidance if it was?

Unfortunately, it is not possible yet to give any specific guidance on the top line or revenue for 2026. So what we have said is that the operating margin is -- would be 6% to 9%. And then the long-term target, then 10% or double digit. So at least 10%. And what we think is that this AT&T decision is pushing out this 10%, achieving double-digit operating margin by 1 or 2 years or up to 2 years. Too early to say about the '26. By the way, it's not like we would want to be at EUR 10 billion. It's okay to be more than that, okay. To be more than EUR 10 billion and be better than 10%, so totally allowed. But it's just that we are committed to getting to the double-digit operating margin in Mobile Networks. Might just not happen yet by '26.

And I'll take a few questions from the webcast. So what does the loss of AT&T mean for your pricing leverage or other U.S. customers like T-Mobile? What does the advent of larger deployments of O-RAN mean for the stickiness of your future contract wins in RAN?

Yes. So the first one, obviously, I'm not going to comment other than saying that it was, of course, interesting to see that T-Mobile U.S. CEO, Mike Sievert, what kind of statement he made about how T-Mobile U.S. values, it's 2 radio access network suppliers and how they believe in their supplier strategy. What was the second question?

Do you think increasing -- seeing larger deployments of O-RAN will impact the stickiness of the RAN business going forward?

Yes. It -- yes, a complicated question. I mean, the thing is that if you play this right, if you invest in technology leadership, if you have the capabilities, and we do both in the DU and CU, which defines most of the system functionality, system performance and in the RU, which is a little bit different ballgame, it's about -- it's very difficult actually to make high-performance MIMO radio units and Massive MIMO radio units that are cost efficient, energy-efficient, have those bandwidths and all of this. If you're competitive in both, that helps you with the stickiness. And I'm confident this was always the strategy that first, we have to catch up competition and fix the base competitiveness of our 5G offering. In parallel, we worked on Open RAN because of the DOCOMO and our heritage of being the only established supplier who was supporting Open RAN when it was founded. So -- but we always thought that once you fix your competitiveness in baseband and RU separately, then you are ready for the big fight in Open RAN and because Open RAN will happen with us or without us, let's just face it. And our strategy in Open RAN is very simple. We need to win more and we will win more from those companies who don't embrace Open RAN than we lose to the Open RAN suppliers when we opened the interfaces. So the net impact has to be positive. Otherwise, why would we do it? So that's the strategy.

And final question I'll take from the webcast. Obviously, there's been a lot of rumor and speculation around the competitiveness of Nokia's products over the last 10 days. And questions, particularly around the cooling systems that we use. I thought you might like to address it head on, Tommi.

Yes. So I mean, the article on fans, that was the canard of the year, has nothing to do with AT&T's decision. Nothing. And I think I've said enough about the competitiveness of the -- well, I have said what I have said, but look at what Chris Sambar says. Ask anyone in AT&T what they think about our products and their competitiveness.

Thank you, Tommi. I think, ladies and gentlemen, that largely concludes today. I'm just going to welcome Pekka back up on stage just to make a few final remarks.

Thank you, David. I'll be very, very brief. First of all, thank you very much for joining us today, both here in Espoo and wherever you are. I actually wanted to leave you with one final message and that is connected to what we have been going through today. I mean, as you can see, we are -- there are many things that we are proud of. There's a lot of achievements. There's a lot of things that have gone to the right direction. And hopefully, we have been able to shed some lights on -- light on the plans going forward. I may be stating the obvious but I think it is important to say that there is one thing that we are definitely not proud of, and that is obviously the share price development. I'm not happy with it. My management team is not happy with it, my Board of Directors is not happy with it. We believe that this company has to be worth much more than the share price currently indicated. And I hope that the actions that we have been presenting today will gradually start addressing this question. This operational model development is obviously a very important part of it because in addition to creating more agile businesses that will then execute faster and diversify faster to new segments, reducing our dependency on a limited number of -- the bulkiness of the limited number of large service providers. Obviously, the other extremely important part of that is the increased transparency that we will be providing to investors. And if you take a business-like NI, over EUR 1 billion operating profit, a promising outlook, good, stable cash conversion. We really would like to ask the question that, okay, what should that type of business? How should it be valued? Technology, once we close the Chinese deals, we are looking at their business that has a stable good outlook also over EUR 1 billion profit per year. So that means that we will have 2 businesses in our hands with stable over EUR 1 billion profit per year with good and predictable cash conversion. and then to slightly more complicated cases from this straightforwardness point of view, which is why we have the deep dives, both in CNS and MN today. So this is the final thought I wanted to leave you with. We are not happy with the share price. We will not rest before we have been able to deliver better value to shareholders. Thank you so much for joining us today. And those of you who are here in the room today, hopefully, you still can stay for a while and have a glass of wine with us. Thank you very much.

Thank you, Pekka. Thank you, everyone, for joining.