Good morning, ladies and gentlemen. Welcome to Nokia's Third Quarter 2024 Results Call. I'm David Mulholland, Head of Nokia Investor Relations. And today, with me is Pekka Lundmark, our President and CEO, along with Marco Wirén, our CFO. Before we get started, a quick disclaimer. During this call, we will be making forward-looking statements regarding our future business, proposed transactions and financial performance, and these statements are predictions that involve risks and uncertainties. Actual results may therefore differ materially from the results we currently expect. Factors that could cause such differences can be both external as well as internal operating factors. We have identified such risks in the Risk Factors section of our Annual Report on Form 20-F, which is available on our Investor Relations website. Within today's presentation, references to growth rates will mostly be on a constant currency basis and we will refer to margins, it will be based on our comparable reporting. Please note that our Q3 report and the presentation that accompanies this call are published on our website. The report includes both reported and comparable financial results, and a reconciliation between the two. In terms of the agenda for today’s call, Pekka will go through our key messages for the quarter, Marco will then go into more detail on our financial performance and then Pekka will make a few comments on some of the particular highlights from Q3, and we'll move to Q&A. With that, let me hand over to Pekka.

Thank you, David, and thank you all for joining us today. Overall, the big picture is that the market is turning, but it's turning slowly. We see encouraging signs of market recovery in Fixed Networks and IP Networks, but even if it is a bit slower than we expected earlier this year, Optical Networks and Mobile Networks remain weaker. Fixed Networks grew 9% in the quarter, while IP Networks grew 6%. Originally, both saw strong growth in North America, as the inventory digestion is now largely behind us and operator deployment plans have solidified. Demand trends in NI continue to improve with solid order intake growth, and a book-to-bill above one. We also saw a significant improvement in our gross margin, with all business groups contributing. We continue to take quick action on our cost savings program and have now achieved EUR 500 million in run rate gross cost savings. The quarter also saw good deal momentum. We signed a number of important deals across all business groups, and I'll touch on some of these later in the presentation. We are making progress expanding to non-CSP customers and are increasing investments to accelerate growth opportunities in areas like the fast-growing data center space in defense and in private wireless. We continue to have a year of strong free cash flow, generating over EUR 600 million in Q3 and EUR 2 billion euros year-to-date. Our financial outlook for 2024 is unchanged, and we are currently tracking in the bottom half of the range for comparable operating profit and at the high end of the range for free cash flow conversion. Finally, we have made good progress on the Infinera acquisition, receiving antitrust and CFIUS approval in the US along with Infinera shareholders approving the deal a couple of weeks ago. We continue to target to close the deal in H1 2025. And then over to you, Marco.

Okay, thank you, Pekka. And hello from my side as well from sunny Helsinki. I will start by discussing our overall group performance, and the net sales declined 7% in quarter three, mainly driven by Mobile Networks. Importantly, however, we delivered significant improvements in gross margin, expanding by 490 basis points year-on-year. This was driven by a combination of improved product, regional mix and actions to reduce product costs. Our operating margin was solid at 2.5%. This was supported by strong gross margin, continued cost control and benefits from the reversal of loss allowances for certain trade receivables recognized in other operating terms. We were pleased to report a strong free cash flow of over EUR 600 million, which means we ended the quarter with a net cash balance of EUR 5.5 billion. Now, as I turn to discuss each business performance, it is worth noting that we have lowered the net sales assumption for each of the networks. Considering the slower pace of market recovery, as Pekka mentioned, we have also slightly adjusted the operating margin range. Network Infrastructure sales showed modest year-on-year growth in the quarter after five quarters of decline. We were pleased to see growth in both Fixed Networks at 9% and IP Networks at 6%. Optical networks declined by 15%, optical was the last unit to start seeing the market slowdown and will likely be the last to recover. We were encouraged to see double-digit growth in all three businesses in North America. Gross margins improved mainly driven by favorable mix between businesses and also improvements within IP Networks. Operating margin was 11.8%, this is a 100 basis points improvement driven by the higher gross margin and a reduction in operating expenses. Based on our current view of the market and the slow pace of recovery, we now expect Network Infrastructure net sales to decline 3% to 6% this year and operating margin to be between 10% and 12%. Mobile Network sales declined by 17%. This was mainly driven by the decrease in India as 5G deployment remained elevated in the year-ago quarter. North America also declined, reflecting the impact of lower market share in customers. Recently, gross margin increased by 500 basis points as a result of improved product costs and favorable product regional mix. Operating margin was 5.3%, an increase of 70 basis points driven mainly by the improvement in gross margin while operating expenses were largely stable. The revised total consumption for Mobile Networks net sales is now a decline of 19% to 22% with an operating margin of 5% to 7%. Cloud and Network Services sales declined by 4% in the quarter. This was mainly related to the divestment we did earlier this year and adjusting for this, net sales would have been stable. Operating margin improved driven by higher gross margin and lower operating expenses. Our updated assumption for Cloud and Network Services is now a decline of 4% to 7% with an operating margin between 6% to 8%. Moving next to Nokia Technologies, net sales grew 36% in quarter three, mainly as a result of the smartphone licensing agreements signed earlier this year. Nokia Technologies also saw higher sales from automotive and IoT, including agreements with point-of-sale payments devices. We were also pleased to announce that we have now signed with two video streaming companies for the use of our technology. This is an important step for us in this new growth area. Nokia Technologies’ annual net sales run rate has been gradually increased in the recent quarter, but continues to round to approximately EUR 1.3 billion in the third quarter. Let's look at the net sales per week. You see here that India threw the majority of net sales decline in quarter three, as the region still saw the heavy 5G deployment in the third quarter, hence the 43% decline. Also worth noting was North America, where strong growth in Network Infrastructure was offset by Mobile Networks. Indeed, overall, Americas Core Network Infrastructure grew 21% in the quarter. Other regions showed declines with the exception of Europe, which showed 1% growth. However, this was entirely due to Nokia Technologies, which is fully reported in this region. Excluding Nokia Technologies, net sales in Europe would have declined by approximately 7%. Looking at our cash in quarter three, we saw another quarter of strong free cash flow at over EUR 600 million. This was driven by solid operating profit and changes in working capital, which benefited from lower receivables. During the quarter, we also returned EUR 360 million to shareholders through dividends and share buybacks. We ended the quarter with a net cash position of EUR 5.5 billion. Let me hand it back over to Pekka.

Thank you, Marco. I want to start by discussing the market outlook. As we began this year, we anticipated certain sectors would be challenging, particularly Mobile Networks, due to tough comparisons in India following a significant 5G rollout. Despite this, we were optimistic that areas like IP and Fixed Networks would begin to recover in the latter half of the year as inventory issues normalized and lower interest rates potentially encouraged investment. Currently, I am pleased to see positive developments in Fixed Networks and IP Networks, with inventory problems largely resolved. However, as illustrated in the slide, the overall market conditions have been weaker than expected at the year's beginning, affecting our net sales forecasts. Our focus during this time has been on managing our costs and aligning with our strategic goals. This involves securing deals that expand our presence, maintaining our pricing discipline, and investing to diversify and grow in high-potential non-CSP markets. For example, we have observed strong deal momentum in Mobile Networks, evidenced by successes with Vodafone Idea, NTT Docomo in Japan, as well as in Brazil, New Zealand, and Vietnam, where we've gained or retained market share. Alongside these wins, our team has excelled at managing costs. During our progress update last December, Tommi shared details of a revamped strategy for Mobile Networks, including how MN would reshape its operations, enhance its go-to-market strategy, and boost productivity and efficiency across the business. As shown in the slide, these initiatives have allowed Mobile Networks to reduce product costs, thus improving gross margins in recent quarters. MN has also acted swiftly on operating expenses, achieving approximately a 6% year-on-year reduction in Q3, excluding variable pay accruals. Last December, we indicated that by 2026, we would reduce the required net sales needed to achieve a double-digit operating margin in Mobile Networks from EUR 11.5 billion to EUR 10 billion. We have now lowered this threshold even further to EUR 9.5 billion over the same period. Moving on to Network Infrastructure and the current market dynamics, I know Federico and his team provided a detailed overview during our September progress update, but I want to highlight some key opportunities. In Fixed Networks, there is a significant opportunity as more homes gain fiber connectivity, with about 70% of homes, excluding China, still lacking it. Operators worldwide continue to show strong interest in increasing fiber connectivity. Additionally, many government programs are beginning to yield results, and we expect our first revenue from the USB program in Q4 this year. This initiative has taken time to gain traction but is now accelerating, with all states having approved Volume 1 and good progress made on Volume 2. We are also seeing positive movement in mature markets through upgrades to XGS and 25 GPON. Furthermore, we see growth opportunities with fixed wireless, which is picking up in several markets, including India, as well as a new opportunity termed Optical LAN, which allows enterprise customers to utilize passive optical equipment for in-building networks like offices. This enables the creation of a future-ready network capable of supporting up to 100 gigabits per second, offering high power efficiency and potentially capturing share from the commercial Ethernet switching market. Regarding Optical Networks, we've addressed this in depth prior to our June announcement of the Infinera acquisition. Although the market is currently weak and might take time to recover, we remain confident about future opportunities. The PSE-6s has positioned us as a technology leader that clients are responding positively to. We are also eager to finalize the Infinera acquisition, which will significantly scale our presence in North America and enhance our access to webscale customers. I believe the future combined entity will be exceptionally poised for growth, particularly in new AI-driven data center opportunities. In IP Networks, we maintain a strong position in service provider edge routing through our leading FP5 and FPcx products. Recently, we have seized growing opportunities within the enterprise and webscale markets, securing important deals. We are augmenting our investments in this area as we see significant potential to diversify our IP Networks business into mission-critical networks and the data center sector. Various estimates suggest the total addressable market in these areas is approximately EUR 20 billion, providing a substantial growth opportunity. To give context, we project our service provider total addressable market is around EUR 84 billion currently. This would add significantly to our total addressable market as we move ahead. As for concrete steps in diversifying IP into enterprise and webscale, we are making notable progress in this strategic area. CoreWeave, an AI hyperscaler, will implement our IP routing and optical transport products globally as part of a large backbone build-out with immediate deployment across their data centers in the US and Europe. This is a significant win, and we are excited to embark on this partnership. We also recently introduced the Event-Driven Automation platform or EDA, which enables automation of the entire data center network lifecycle from design to deployment and operation. This simplifies the management of multi-vendor networks and complements our SR Linux network operating system. In Cloud and Network Services, while the markets remain challenging, we have seen excellent progress in 5G Core. We continue to lead in the 5G Core market, with Nokia at the forefront of live 5G Core Networks globally. Our key edge lies in our ability to drive the cloud-native transformation, offering operators flexibility in network deployment. This shift to cloud-native architecture is critical for fostering more programmable and automated networks in the future. We have supported this push by launching the first telecom network using a 5G standalone core on AWS and have since rolled out 5G Core Networks on public clouds with several partners, including O2 Telefónica, Deutschland, Comcast, and Telenet. We commemorate the one-year anniversary of our network as Code platform this September, concluding the quarter with over 20 network API partners globally, including leading CSPs like British Telecom, Orange Telefónica, and Deutsche Telekom, along with ecosystem partners such as Infobip and Google. Our outlook for comparable operating profit remains unchanged. Although we have lowered our net sales projections for our business segments, we are compensated by robust gross margins and progress in cost savings. We are currently positioned within the lower half of the comparable operating range while tracking at the upper end of our free cash flow expectations. In summary, as discussed, while the overall market has shown weakness this year, there are emerging signs of improvement, particularly within Fixed Networks and IP, as well as stabilization in Cloud and Network Services. We are encouraged by the strong gross margins across all business segments, reflecting favorable regional and product mixes, along with the impacts of our previously announced cost savings measures. Notably, we have experienced strong deal momentum in Mobile Networks, securing new business in Brazil, India, Japan, Vietnam, and New Zealand. Our strong cash performance has resulted in a net cash position of EUR 5.5 billion at the end of the quarter, and we have also accelerated our share buyback program. As previously shared, we are on track within the ranges set for the full fiscal year.

With that, let me hand over to David for Q&A. Thank you, Pekka and Marco. Before we move to the Q&A session, just a quick comment on some of our plans in terms of investor events. We are planning to hold a Capital Markets Day in 2025 after the Infinera deal has closed. And obviously, there's still a bit of uncertainty around the timing on exactly when that will be, so we don't have an exact date yet, but we'll communicate it as soon as we're able to. So with that, let's start with the Q&A. As usual for the Q&A session, as a courtesy to others in the queue, please limit yourself to one question and a brief follow-up. Alice, could you please give the instructions?

I will now hand the call back to Mr. David Mulholland.

Thanks, Alice. We'll take our first question from Joachim Gael from D&B.

Thank you for that, David. So can you just help us understand here how much of this considerable gross margin improvement stemmed from structural actions, supply chain utilization, and telco as opposed to geographic needs? And just comment a bit whether this one-off AR benefit is actually impacting the gross margin or is it more on the operational level.

Thank you, Joachim. I started with the reversal of the allowance of trade receivables. And just to be very clear, that did not impact the gross margin. We always booked those in other operating income and expenses. And concerning gross margin performance in the quarter, I would say that it's quite equal in terms of product mix and regional mix, as well as the product cost reductions that we have.

Did you have a follow-up, Joachim?

Yes, very briefly. So on the order intake momentum across your different NI units and the quarter-to-sequential lowered net sales assumptions, can you just discuss the trajectory here with a unit basis where you see incremental strength and weakness? Thank you.

Well, first of all, as I already said, the overall trajectory is turning. But of course, we recognize that we continue to have a top line challenge. The good thing is that since now Q4 last year, we have had positive momentum in orders with a book-to-bill of more than one. So that means that the order backlog is building. It is building now, especially in fixed and IP, more so than in optical. From a geographical point of view, an extremely encouraging sign is that the momentum is picking up strongest in North America, because that was also the first market that started to weaken when the cycle turned about a year and a half, two years ago. Now it seems to be driving growth as well. We actually had double-digit growth in North America in all units of NI. So that's where the growth is coming from. An additional comment there, another positive thing is the momentum in NI is picking up with Tier 1 operators also in North America.

We'll take our next question from Simon Leopold from Raymond James.

Thank you very much for taking the question. I wanted to follow up on this announcement you had in the quarter regarding the CoreWeave win as I think a good reference for gaining some exposure to AI. I'm wondering if you could elaborate on how you see opportunities like this evolving in your business and then more broadly how to think about the longer-term strategy of evolving the customers away from the telco base into more enterprise-like opportunities. Thank you.

Yes, thanks Simon. This is obviously in the very core of our strategy, this whole question. As I said earlier, our telco TAM is EUR 84 billion, while data center TAM is currently at EUR 20 billion, albeit we are not yet able to address all of it but we are gradually getting towards that goal. That EUR 84 billion, even though the telco TAM is expected to recover somewhat next year, we have to be realistic; telco TAM will never be a significant growth market. The only way to grow there will be through taking market share, which we are targeting, but it's not a growth market. Datacenters will be our number one growth target for the coming years. There will be others as well, but that will be the number one. We already have references like Apple and Microsoft in this space, but the reason why CoreWeave is so important is that they are now the leading GPU as a service company. They have now taken pretty much our entire portfolio, both on the IP side and optical side. AI is driving new business models, and one of the business models is clearly GPU as a service. If you look at what even some of the operators like T-Mobile did in their Capital Markets Day, they are talking about an opportunity to look into GPU as a service as an add-on to their business. There is also the significant hyperscaler opportunities and smaller data center opportunities. This particular application is going to drive significant growth opportunities for us. Mike talked about this in our recent NI event in September. What we plan to do going forward is that once we get the Infinera deal closed, we will arrange a Capital Market Day where we will then do a deep dive into our growth segments outside of telcos. It goes without saying that this will be the number one target for that opportunity because we are already today quite well exposed to datacenters on the IP side. The Infinera deal will significantly increase our exposure also on the optical side. It will help us to get more and more inside the data center fabric because the role of optics will increase, not only in connections between datacenters, but gradually also inside datacenters when we connect servers to each other, and once we get there, that market will be of extremely high volumes. But again, I know that we will need to get more tangible on this and talk about concrete targets and revenue targets and so on. That's what we will be doing when we get Infinera close and then arrange a Capital Market Day for this purpose.

Great. We're looking forward to that. And as a quick follow-up, could you talk about your outlook beyond the fourth quarter for the Indian market, particularly considering the Vodafone Idea award you also announced recently?

Of course, happy to do that. Just as a quick reminder, in 2022, our Indian top line was about EUR 1.3 billion. Last year, we had significant growth to EUR 2.8 billion because of the 5G rollout. We said then that last year was an exception, but we are building a new normalized run rate that will be above what we had in 2022, and that's exactly what is happening. We have been talking about this EUR 1.5 billion to EUR 2 billion, and we are currently tracking closer to the lower end of that scale. Nevertheless, we will be clearly above the 2022 levels. The good news is that we are expecting meaningful growth next year. Vodafone Idea is obviously a new deal for us. The investments of the two other leading operators in India this year have been significantly lower than last year. There are reasons to believe that they would also start recovering. India will be one of our growth drivers next year.

We'll take our next question from Sami Sarkamies from Danske Bank.

Yes, hi, thanks. I would like to continue on Mobile Networks. Your sales this year will be below EUR 8 billion, including about EUR 0.5 billion from AT&T. I guess you need to find about EUR 2 billion of additional sales in order to reach your goals. Can you elaborate on how much of this is covered by the number of deals that you have announced during the third quarter, and when will these new deals start to be visible in your financials?

Well, Sami, of course, as is typical for Mobile Networks deals, you sign a deal and then those revenues will start coming in gradually during the future quarters and years. It’s not something that when you sign a deal, you have much revenue in the next quarter. I mean, they are taking us in the right direction, but we obviously need more deals than this; this is not yet enough. There is now a general expectation, including by market analysts, that the mobile networks market that declined significantly this year will start to recover next year. Let’s see how quickly that comes, but the expectations are there. After the AT&T decision, which obviously was a big negative for us, we have been winning much more than what we have lost. So in relative terms, the new deals have kept increasing our market share ex-AT&T. That is a promising sign. But again, the deals that we have signed in Q3 are not yet going to be enough. More will be needed. Very importantly, we continue to work on the non-CSP segments. Private wireless, where we are a market leader, we currently have almost 800 customers in that segment, which is fast growth. A little bit more in the mid to long term, the second half of the 2020 story, will increasingly be the defense industry where we have promising traction. We'll talk more about this at the upcoming Capital Markets Day. We are integrating the offering of Phoenix with Nokia's 5G platform. The reason we are doing this is that despite the long sales cycles in the defense market, once you are in, you are in for the long term. Much importance there is promising. That's why we feel that strategically it is important to get additional coverage for the EUR 2 billion annual R&D investment that we are putting into mobile networks. Part of the volume targets there will increasingly be in the non-CSP segments, even though we do expect the CSP market to somewhat recover next year.

Did you have a follow-up, Sami?

Maybe one on the cost savings program; you're still talking about EUR 1 billion savings target, even though the recovery is happening much slower than anticipated. Why haven't you stepped up to EUR 1.2 billion already?

Yes, thank you, Sami. I must say that we are quite happy with how fast we've been able to get traction and results on the cost-saving programs. As we said, the run rate in cost savings is now EUR 500 million. We definitely see that the pace of the program has been extremely satisfactory. If you look at the number of employees, at the end of quarter three, we had 78,000 employees, down from 86,000 when we announced the program. This is rapid development. As you remember, about 60% of the total cost-saving program of EUR 800 million to EUR 1.2 billion is from mobile networks, and then 30% in CNS, with the remaining part from NI and corporate functions. The target range that we have for the number of employees is 72,000 to 77,000. After we divested ASM, they have about 2,000 employees, so we will adjust the targets accordingly after we close the deal. The main reason why we have an interval or range in the cost savings between EUR 800 million to EUR 1.2 billion is that we can fast change and adjust based on what we see in the market. We have started this program extremely fast now.

To add just one small but important thing to what Marco said, we are not yet done with this program. I believe we are getting very close to the upper end of that range. We've always said that this is an ‘N 26 target, and we have executed extremely fast now. Where we will ultimately end will depend on the pace of the market recovery. But so far, we have been executing extremely fast. As additional proof, we have today announced our intention to reduce another 350 jobs in Europe, which serves as one more proof that we are not yet done with this program.

We'll take our next question from Artem Beletski from SEB.

Yes, hi, and thank you for taking my question. I would like to ask you about API strategy and progress on that front. Could you maybe talk about this topic? It has been more in focus recently, given the joint venture between Ericsson and some 12 global CSPs, and what do you think about this type of development?

Yes, thank you, Artem. This is obviously another extremely important question. First of all, I'm happy to see that joint venture announcement because what it will do to the market is that in addition to the actions that we are taking, it will accelerate the API economy. Why is this important? It will boost operators' ability to monetize their investments. The faster that ecosystem develops and the better we are able to open up network capabilities and the network resources to application developers, the better for operators. We have taken a slightly different approach than our competitor. We have developed all of this organically. We came to the conclusion that we do not need to acquire a legacy player to enter this market. We have developed this organically and have made pretty good progress. We announced this initiative a year ago, and we currently have more than 20 partners across the ecosystem, including 16 CSPs, with names like British Telecom, Telefónica, Orange, Deutsche Telekom, and others. We can offer an attractive base of networks to the developers who want to use our APIs. Overall, this is a good thing for the industry. It will take quite a long time before revenues through APIs become a meaningful business; we are talking about multiple years. What is even more important right now is what's happening in the core network itself. I'm extremely pleased with the position that we have. We lead in the cloudification of the core network, i.e., moving the core network software to CNFs, cloud-native functions. We want to make the entire core network cloud-native. This is important because cloud-native will enable efficient automation of network functions. Without being fully cloud-native, you cannot operate efficiently. We are working with multiple customers with extremely good feedback. Once we make the core network cloud-native, it enables automation, which allows operators to reduce their operational costs. That will make it easier for them to launch new services. Full automation will be needed to reap all the benefits from the API ecosystem as well. This is not only about introducing APIs; it is very much a comprehensive strategy as to what to do to the entire core network to make the resources available to the ecosystem.

Thanks, Artem. Did you have a quick follow-up?

Yes, a quick one on India's profitability; how should we think about it with respect to gross margin and the EBIT margin impacts, given that it should be showing quite nice growth next year.

Thank you, Artem. As we've said earlier, different countries buy different things, and based on what they buy, the margins could vary along with how much they drive additional R&D. We are quite pleased with the margins we have in India, and we haven't specified exactly what levels they are, but they have been developing well and compared to other markets, they are at a decent level.

We'll take our next question from Daniel Djurberg from Handelsbanken.

Thank you so much. I would like to ask a little bit on enterprise; the revenue represented 12%, up from 10% of total revenues in Q3 and also up to 9% year-over-year. Still down 5% for the last 9 months. Can you talk a little bit about what you see in terms of book-to-bill for enterprise and if you should expect this renewed momentum to stay on for a while and also if you can comment a little bit on the profitability level seen in enterprise. Thanks.

On a full year level this year, obviously because of the weak first half of the year, it's clear that our enterprise top line ambitions will not meet our targets. The good thing is that the momentum is turning here as well. We have good progress in both orders and the fact that we had 11% growth in the non-CSP segments in this quarter, which is much better than what we had in the beginning of the year, is encouraging. The pipeline is promising, and I was talking about datacenters earlier; we also have the upcoming closing of the Infinera acquisition which will give us a significant boost to non-CSP businesses as well. In relative terms this year, enterprise or non-CSP businesses will perform much better top-line-wise than the service provider business. But in absolute terms, what we will achieve this year we are not happy with. We expect an acceleration next year as well in enterprise, and the pipeline clearly supports that.

Building on what Pekka said, remember also that this is a little lumpy business based on when we sign larger deals with webscalers, and that's why it goes up and down a little bit. That's why the trend is extremely important to follow here.

Perfect. May I have a follow-up? And that would be a little bit done if you can give a lesson learned on your new organization that you implemented and disclosed for some 10 to 12 months ago, a bit more siloed and so on. Also, if you see any pros and cons, if you should do for example an IPO with Mobile Networks and give it to the shareholders because then you can run okay with net debt while mobile network with net cash.

That second question is not something that I will start commenting on. That's obviously a massive strategy question for the whole company. We have said multiple times that we are fully committed to mobile networks, and we see a lot of opportunities there. The operational model is clearly taking us in the right direction. In any model, there are pros and cons. In our model, we are giving the businesses more freedom than before to do independent maneuvers, including in customer interfaces, and that is increasing the speed and agility and their ability to go after new customer segments such as defense and datacenters, etc. They do not need to negotiate about sales resources; they can make their own decisions on sales resources and sales incentives and priorities, and that is showing good results. Again, our issue this year has not been that we do not have momentum in pipeline creation or order intake; the real issue in relation to the market is the general market weakness. The real issue and the top-line challenge we have is that general market weakness that hopefully is finally starting to turn.

Remember, we started the new operational model already in 2021, and we have seen very clearly that speed, agility, and accountability are definitely giving the results we expected.

We'll take our next question from Jakob Bluestone from Exane BNP Paribas.

Thanks for taking the question. Just getting back to network infrastructure, can you expand a little bit on areas that continue to disappoint? If I read between the lines, it sounds like it’s optical, which continues to undershoot. If you could also link it to the North American strength, is that just coming from BID, or would you say it's more broad-based in terms of recovery there? Thanks.

The good news is that the strength we are now seeing in North America is there, even though there is very little or almost nothing from BID yet in those numbers. So BID will be an upside opportunity to what we are already seeing. BID is coming; everybody knows that it's coming more slowly than people were hoping for a year or two years ago. The U.S. administration is acknowledging it, and they have been slow in the allocation of funds. The good news is that it is happening. I think the number of states that have opened a grant window is now six. All states have Volume 1 approved; most states have also Volume 2 approved. The next step is that they open the grant windows. Six windows have already done it. It looks like Louisiana will be the first state to start releasing the funds. Once the funds become available, there is an opportunity for us to convert that into order intake and we believe that we will see some of that in Q4, with initial small deliveries. This will mainly be a story for ‘25 and ‘26, and it will start providing upside on top of what we are seeing. Your observation was absolutely correct; inside NI, optical is weaker. One reason is that we are weaker in optical in North America. This is where the Infinera acquisition will come in, as they are strong in optical North America. We then expect to reap all the benefits of the North American recovery, which we are currently seeing more on the IP and fixed side.

Did you have a follow-up Jakob?

Yes, if I could just follow up on an earlier point. You’ve talked a bit about the growth in non-CSP enterprise. You talked about the CoreWeave contract and sort of the shift more into datacenters. I’d be interested in understanding how profitability looks in the non-CSP segment versus your more traditional business. Is this accretive or dilutive to your margins that you are tilting towards?

A lot will ultimately depend on the volumes achieved, but as an additional business opportunity, it will absolutely drive our operating profit and also our operating margin. That’s our goal. It’s too early to comment now in case there are a lot of single deals that may impact the gross margin of each deal. Generally, in NI segments, the non-service provider, non-telco segments offer vendors much better profit opportunities than the telco market.

We'll take our next question from Sebastien Sztabowicz from Kepler Chevreux.

Yes, hello everyone, and thanks for taking my question. On the AT&T 5G contract, you had already a negative back in Q3, and if I remember correctly, you were forecasting more downside moving into 2025. Could you help us understand a little bit of the dynamics of the AT&T 5G contract as we move into the coming quarters? Should we expect a bigger step back in 2025?

Yes, thank you. Yes, you're correct; just like you mentioned, we've seen the impact of AT&T. If you look at how we see the AT&T contract development going forward, we've said that this year, thanks to the accelerated revenue recognition we did in Q2, we will be about the same level that we were in last year. This EUR 150 million acceleration came mainly from next year, and that’s why we are also saying that after this year's volumes, AT&T's will be about half of this year's volumes next year.

Did you have a follow-up?

Yes, a follow-up on the CNS and the 5G Core. You mentioned excellent momentum on the 5G Core, outage traction and so on, but the CNS division is still flat like for like in Q3. Could you explain a little bit the dynamics behind CNS today, what is driving the business not to grow despite the traction in 5G Core? Thank you.

Yes, thank you. The reason is actually quite simple. There are legacy segments inside CNS where the market is declining significantly, for example, the 3G Core, where we were a big player; this has been a significant component in CNS and that is rapidly declining. There are also a number of other legacy applications that are declining as well. The strategic growth segments in CNS, including the 5G Core, Compass Wireless, and Edge Compute Solutions, are all growing heavily and at a healthy rate. This is kind of the challenge in CNS; when we then create the overall CNS result, it’s a combination of these legacy segments and strategy segments. We will look to open this up more so that you can see where the growth is actually coming from, but clearly, 5G Core is growing at the moment.

We'll take our last question from Rob Sanders from Deutsche Bank.

Yes, hi. I just had a question on the mobile networks business. Ericsson seems to be delivering with AT&T quite significant cost and CapEx savings that they are now using as a reference design to other operators, including outside the US. I was just wondering, are you working on similar types of reference designs? Do you have reference designs that demonstrate similar TCO savings like they are doing right now? Thank you.

Absolutely, we have such reference designs and actually a significant, not the only, but an important part of that is what I mentioned earlier regarding the qualification of the core network, which is a significant part of improving operators' TCO and overall efficiency. Although we also have some customers where we are the only vendor at the moment, we are currently not seeing a single vendor approach become a new trend with operators. On the contrary, most recent deals, if not all, have confirmed that operators want to stick with typically two vendors. We have a couple of cases where we have been able to successfully defend our 100% market share, but again, these cases where there is only one vendor seem to be more of an exception than a rule and everything we are currently seeing points to the direction it will remain.

Did you have a follow-up?

Yes, just a quick follow-up; just on network infrastructure, you've had positive book-to-bill I think for three or four quarters now, and yet your Q4 sales guide has come down. Is the turn business an issue? Is that because of distributor stock? Is there any particular reason why your backlog duration seems to keep going up but your turns business is continuously disappointing, and when does that become less of an issue? Thanks.

Yes, thank you. As we said, the recovery is slower than we expected and it takes a longer time now for our customers to convert those orders into sales. They don't issue the purchase orders as fast as we and they thought in the beginning, and just like you mentioned, we have had book-to-bill above one for four quarters in a row now, and order intake has been increasing for four quarters in a row as well in NI. We definitely see that the market is strengthening, but still due to macroeconomic uncertainties, our customers are very careful and very slow on issuing those purchase orders. Nevertheless, this gives a good platform for going forward as well for next year.

To be clear, even though we are not going to start publishing our order intake or order backlog numbers, the NI order backlog at the moment is clearly at a higher level than it was a year ago.

We'll take our last question from Alex Duval from Goldman Sachs.

Yes, thank you very much for squeezing me in here. Just a question on one-offs. I think you said to an earlier caller that this didn't benefit gross margin. It looks like this might be sitting in other income and expenses. Could you just quantify how much the EBIT benefit is from that? And secondly, you talk about rightsizing the cost base so as to be able to hit double-digit operating margins on a lower revenue level of $9.5 billion. Just wondered to what extent that's a function of a worse outlook for next year for your addressable markets. Clearly, last time there was a significant cost change, that was followed by a downtick in the market. Curious how you're thinking about the outlook for next year, given we're nearly in November. Really appreciate any color. Many thanks.

If I take that second part and Marco takes the first part. You should not connect that to next year's outlook; that’s our own preparedness. That’s how we are resetting the cost base. We just wanted to say that we have made even more progress than we originally targeted on the cost base reset. We are now targeting to create a cost base for mobile networks that would be able to deliver double-digit profitability at $9.5 billion topline instead of the earlier targeted $10 billion. This has nothing to do with next year's outlook; there’s a general expectation we would see a recovery next year after this weak market in mobile networks in 2024.

Yes, and if you look at the third-party analyst firms, they in their figures show growth for next year in mobile networks markets. Regarding the reversal of the trade receivables, as we said earlier, it is very clear that this does not impact gross profit or gross margins. This is booked in other operating income and expenses. You can see both at group level and in mobile networks that there’s a positive other operating income in quarter three. This is the same when we book an expected customer loss.

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

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