Nokia Corp Q4 FY2024 Earnings Call

Good morning, ladies and gentlemen. Welcome to Nokia's Fourth Quarter 2024 Results Call. I'm David Mulholland, Head of Nokia Investor Relations. And today with me is Pekka Lundmark, our President and CEO, along with Marco Wiren, our CFO. Before we get started, a quick disclaimer. During this call, we will be making forward-looking statements regarding our future business, proposed transactions, and financial performance, and these statements are predictions that involve risks and uncertainties. Actual results may therefore differ materially from the results we currently expect. Factors that could cause such differences can be both external as well as internal operating factors. We have identified such risks in the risk factor section of our Annual Report on Form 20-F, which is available on our Investor Relations website. Within today's presentation, references to growth rates will mostly be on a constant currency basis, and in relation to margins will be based on our comparable reporting. Please note that our Q4 report and the presentation that accompanies this call are published on our website. The report includes both reportable and comparable financial results and a reconciliation between the two. In terms of the agenda for today, Pekka will go through the key messages for the quarter, Marco will go through our financial performance, and then Pekka will make a few comments on some particular highlights from the quarter. We'll then move on to Q&A. With that, let me hand over to Pekka.

Thanks, David, and thank you all for joining us today. I'm pleased to share with you that we finished 2024 with a strong quarter. The improved order trends we have talked about in recent quarters were now clearly visible also in our net sales with 9% growth in the fourth quarter. Network infrastructure grew 17% in Q4, with all units growing, and with IP networks, the standout performer growing 24%. We also had a very strong performance in Nokia Technologies with several new deals signed, increasing our net sales run rate to now approximately between EUR1.3 to EUR1.4 billion. Cloud and Network Services also grew 7% despite a 4 percentage point headwind from a prior disposal. Mobile Networks saw its sales trends stabilize as the more challenging comparisons in India are now behind us, and we saw stronger demand in Q4 in North America. The strong Q4 sales and high contribution from Nokia Technologies led to a comparable gross margin of 47.2% in the quarter and an operating margin of 19.1%. This is the highest quarterly operating margin we have seen at Nokia since 2015. We also had a strong year for cash generation with a free cash flow of EUR2 billion. Our year-end net cash balance was EUR4.9 billion, even after returning EUR1.4 billion to shareholders during the year through both share buybacks and dividends. I will come back to this topic, but with the momentum we are seeing in the data center space, we are accelerating investments into our IP networks business, and I'm really excited about this opportunity. We will discuss our outlook a bit later, but I'm pleased to say the improved trends from the second half of 2024 are expected to sustain into 2025.

Thanks, Pekka, and hello from my side as well. I will start by discussing our overall growth performance. As Pekka mentioned, we were very pleased to see the strong end to 2024. The fourth quarter saw net sales growth of 9%, gross margin increased by 250 basis points to 47.2%, and this was due to the increased contribution from Nokia Technologies and improvements in other business groups. Our quarter four operating margin expanded 380 basis points year-on-year to 19.1%. I will now look at the performance of our business groups, starting with network infrastructure. We saw a strong finish to 2024 with all units growing in quarter four. IP networks had a very strong quarter with 24% growth. Fixed Networks grew 16% and optical 7%. And this growth was mainly driven by improvement trends among CSP customers and regionally in North America and India. Gross margin expanded 70 basis points to 45.4%, and this was mainly driven by beneficial product mix. The operating margin was very strong at 19.6% in the quarter, as we also continued our prudent cost management. And in mobile networks, net sales declined by 2% in the quarter. After some very challenging quarters, we are now seeing net sales trends to start to stabilize. Pleasingly, North America net sales increased by a double digit while India net sales stabilized. Gross margin declined slightly by 20 basis points, but remains at robust 38.1%. And operating margin was 7.7%, a decrease of 380 basis points versus the prior year as underlying cost reductions were offset by higher variable pay accruals. Cloud and Network services net sales grew by 7% in the quarter with strong growth in North America. And this was despite a negative impact of approximately 4 percentage points related to divestment earlier in 2024. Growth was mainly driven by core networks and enterprise campus edge. Gross margin was strong, as was operating margin, which came in at 22.4% for the quarter, with profit weighted towards quarter four as is typical seasonality for this business. And before moving to Nokia Technologies, I also wanted to bring to your attention the fact that we have now moved our managed service business from Cloud and Network services to mobile networks as of January 1st, 2025. The managed services business provides outsourced network management of multi-vendor RAN networks for operators. And considering CNS is increasingly transitioning towards cloud native software sales as-a-service product offerings and helping customers to monetize networks through APIs, we believe this business is more aligned and fits better with mobile networks. And based on 2024 results, this change is expected to lead to a transfer of about EUR430 million of net sales and approximately EUR40 million of operating profit from CNS to mobile networks. And we will provide recast financial information for 2024, reflecting this change prior to our quarter one financial results. Turning now to Nokia Technologies, net sales grew by an impressive 85% in quarter 4, and this was due to the combination of the increased annual net sales run rate from newly signed deals in both quarter four and earlier this year, along with some catch-up payments related to deals signed in the quarter. Agreements that were signed included Transsion, a previously unlicensed mobile device vendor, and then multimedia-related agreements with HP and Samsung, along with other smaller deals as well. Nokia Technologies' annual net sales run rate has been gradually increasing in recent quarters to approximately EUR1.3 billion to EUR1.4 billion, which shows good progress on the journey to achieve our mid-term target of EUR1.4 billion to EUR1.5 billion. Looking at the net sales per region, the biggest contributors to the net sales growth were North America and India. In North America, we saw a meaningful improvement in demand from telecom operators supporting all of our businesses. The growth in India was mainly driven by network infrastructure, especially fixed networks, where we benefited from strong fixed wireless access demand. In Europe, we saw a resilient market performance, but the growth in the region mainly relates to Nokia Technologies' performance. Elsewhere, most markets were relatively stable in the fourth quarter, although the competitive environment remains challenging in Latin America. 2024 has ended as a strong year for cash generation. On the whole, it played out as we expected in many respects, but we performed a bit better on each metric. Our prudent cost management also helped us to manage our CapEx requirements in the business this year. We put significant focus on improving our working capital position, which yielded good results. This was one of the biggest drivers of our strong cash performance. We ended the quarter with a net cash position of EUR4.9 billion, which means that we start 2025 with a strong balance sheet and will remain in a good position, even considering the impact of the Infinera acquisition. Looking forward, we forecast free cash flow conversion of between 50% and 80% in 2025. During 2024, we returned EUR1.4 billion to shareholders in total. EUR710 million was returned through dividends and EUR680 million via buybacks. You will recall that during 2024, we accelerated the EUR600 million buyback program and had completed it already within one year. In November, we then announced and started a new buyback program to offset the dilutive effect of the Infinera acquisition and this program is still ongoing. Given our cash performance in the year, we are pleased to announce that the Board of Directors is proposing a dividend authorization of EUR0.14 per share in respect of financial year 2024. This is a EUR0.01 increase from the EUR0.13 the year before. Let me hand over to Pekka to go through some business highlights.

Thank you, Marco. Along with our solid financial performance in 2024, we took some important steps to ensure Nokia has the right foundation for future success. Most notable were the actions we took in actively managing our portfolio. Earlier this year, we announced the divestment of our submarine networks business, which then closed at the end of 2024. We also sold our device management and service management in CNS to Lumine Group. From an acquisition standpoint, there were three important deals this year, all of which strengthen our position in markets where we see significant future growth potential. We announced our intention to acquire Infinera, which will both strengthen our position in optical networking and accelerate our growth opportunities in the data center market. We've been making good progress with the required approvals. You may have seen that we filed with the EU last week. Assuming we achieve the targeted timelines, we now expect the deal to close during the first quarter of 2025. We're also well prepared to move quickly on integration once the deal formally closes. We also acquired Phoenix to strengthen our position in the defense industry, adding their innovative broadband tactical communications products. The acquisition closed in May 2024, and we have moved quickly to accelerate product roadmaps, launching a 5G tactical radio solution in the fourth quarter. This represents a longer-term opportunity, of course, but we are progressing well. In November, we announced that we had acquired Rapid’s technology and R&D unit. This acquisition gives us the world's largest API hub used by thousands of developers globally, along with strengthening our R&D capabilities. Another of our strategic objectives has been to diversify our business and accelerate our growth outside of our traditional service provider markets. This includes several different growth areas for Nokia, and we intend to frame this better for you at our Capital Markets Day later this year. 2024 was a more challenging year for our enterprise sales, and we ended with a 4% decline in constant currency. This was partly due to lumpiness in some of the web-scale deals after strong growth in 2022 and 2023, but also the broader weakness in enterprise demand visible among many of our peers. Since 2017, we have sustained a 10% CAGR in enterprise, and while the sales trend was more challenging in 2024, we took several steps that I believe will keep us on a double-digit growth trajectory in the years to come, including 2025. This is supported by the significant order intake we saw in Enterprise Compass Edge in Q4. We won key deals, for example, in IP networks with Microsoft and Nscale. We also continue to expand our go-to-market partnerships. In Q4, we announced partnerships with Kyndryl and Lenovo that will increase our reach into the data center market. With these foundations and the Infinera acquisition, we will have a strong base to sustain growth in these markets going forward. Considering our momentum, let me touch upon some decisions we have made regarding the potential we see in the future. We decided in Q4 that we will accelerate our investment in our IP networks business. We will invest up to an additional EUR100 million of annual operating expenses with a view to generating incremental net sales of EUR1 billion by 2028. Nokia's IP networks products are well known in the CSP market for their quality, robustness, and innovation. We will look to bring this strong and proven reputation for quality to the data center market and combine it with new market-leading automation capabilities from our event-driven automation solutions and our SR Linux operating system. A notable example of this is the agreement with Microsoft. After three years of working with them on Sonic, we are now increasingly deployed across Microsoft data centers, and the deal we announced in Q4 will see us deployed in over 30 countries globally. Given the encouraging response to our products, we are doubling down on our investment in this technology to be able to address the hyperscalers, telco cloud, and enterprise customer segments. These investments will bolster our R&D to broaden our product offering to meet customer requirements. They will also further accelerate our go-to-market and channel expansion. I'm really excited about this significant organic value creation opportunity for Nokia, and this will, of course, be complemented by the connections that Infinera has in web scale. From a mobile networks perspective, we explained to you all at the end of 2023 the actions we are taking to renew our mobile network strategy, both in terms of commercial actions and cost management. I spoke to you last quarter about how quickly we have moved on the cost side, and you're already seeing some of the benefits of that in our second-half performance. From a commercial perspective, we had a highly successful year in terms of deal traction while maintaining our commercial and pricing discipline. Since the start of 2024, we have won 18,000 new base station sites on a net basis, including 12 wins with completely new RAN customers. We also expanded our RAN share with 10 customers, and this success has been across all regions globally. Now clearly we did not win every deal, but these 18,000 sites already consider the fewer instances where there has been increased competition, especially from Chinese vendors. We have seen good deal momentum in Cloud and Network Services, which we believe will continue into 2025. We now have 117 customers for our 5G standalone core, although not all have deployed yet. Currently, it is a reality that only 20% to 25% of CSPs have deployed 5G standalone core. According to the GSMA, approximately 60 operators have already deployed standalone core, and we are supplying about 45 of them. Many operators will, of course, have multiple suppliers, but this still shows how strong our position is in this market and how much traction we have in 5G core. One key growth opportunity for CNS is in private wireless. We now have over 850 private wireless customers, up from 710 a year ago, covering a range of industries from energy and transport to the public sector and manufacturing. Another focus area is helping operators monetize their networks with our Network as Code initiative. We are now up to 48 network API partners, which include 24 operators and a further 24 enterprise and ecosystem partners, such as Google and Infobip. In Q4, we also acquired Rapid’s technology assets and R&D team. This will bolster our R&D capacity in Network as Code and gives us one of the largest API hubs in the world. Combined with our autonomous networks application suite, we are enabling operators to fully automate and monetize their networks. Our progress here has also been acknowledged with both ABI and Analysys Mason recognizing Nokia as one of the clear market leaders in this field. Before turning to our full-year outlook, I wanted to provide some color on how we see the market dynamics for each of our business groups as we enter 2025. Starting with network infrastructure, we expect the improving market trends that we saw in the second half to continue in 2025. Ultimately, we see this driving strong growth for network infrastructure with supportive trends across each business. On mobile networks, we saw some stabilization in market demand towards the end of 2024 and we believe we could see some recovery in spending as we progress through 2025. Let me remind you that we will face a bit of a headwind this year in North America from a customer decision made in 2023. We estimate this to be approximately 4 percentage points headwind to the business this year, but even considering this, we expect net sales to be largely stable for mobile networks this year. As I just mentioned, we are also seeing good momentum in Cloud and Network Services as we enter 2025, particularly in core networks and Enterprise Compass Edge. These trends should drive overall growth in Cloud and Network Services this year. Finally, on Nokia Technologies, we look to continue making progress towards our midterm run rate target of between EUR1.4 billion and EUR1.5 billion, particularly in our growth areas. We are targeting to deliver approximately EUR1.1 billion operating profit for this business in 2025. Moving to our formal outlook for 2025, we expect a comparable operating profit of between EUR1.9 billion and EUR2.4 billion for the full year on an organic basis, excluding the Infinera acquisition. If you consider the one-time items that benefited 2024 by over EUR700 million, mostly in the first half of the year, this guidance implies a strong improvement in our comparable operating profit in 2025, despite the increased investments like the EUR100 million plan into IP. As a reminder, these one-time items include the exceptional catch-up contribution in Q1 2024 in Nokia Technologies, the settlement we had with AT&T in Q2, and then some other provision reversals in Q3. With respect to free cash flow, we expect to convert 50% to 80% of comparable operating profit into cash. In summary, we are pleased with the strong end to 2024 in terms of profitability and cash. Additionally, we have made some important strategic steps that we believe will position us well for growth in the future. Finally, and most importantly, we are encouraged to see the sales momentum we saw in Q4 continue into 2025. Let me now hand over back to David for Q&A.

Thank you, Pekka and Marco for the presentations. Before we move to the Q&A session, just a quick comment on our plans for investor events this year. We are working, as we mentioned last quarter, to confirm dates for the Capital Markets Day. We will look to confirm this to you as soon as possible. But with that, let's start with the Q&A. As usual for the Q&A session, as a courtesy to others in the queue, could you please limit yourself to one question and a brief follow-up? Yannick, could you please give the instructions?

Thank you. We will now begin the question and answer session. If you are also viewing the webcast, please remember to mute the audio on your computer before asking your question, as there is a 30-second delay. I will now hand the call back to Mr. David Mulholland.

Thank you. We'll take our first question today from Joachim Gunell from DNB. Joachim, please go ahead.

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

Okay, thank you. That's actually several questions you are asking. So, let me try to take that piece by piece. If I take first the visibility question, I would say that as we start 2025, our visibility is much better than it was a year ago. Our order backlog has continued to grow through the year, and the CapEx commentary from our customers is now more robust. We are optimistic about our opportunity to grow in addition to CSPs in the enterprise markets, including the data center. So, I would not say that we have lower visibility. You are of course right that we are not providing the level of explicit net sales assumptions yet that we provided last year for our businesses. However, we did say, we expect strong growth in Network Infrastructure, we expect growth in Cloud and Network Services, and we expect stable sales in Mobile Networks, despite a 4 percentage point headwind from AT&T. The reason this is more than that, is that in a dynamic market, which now seems to be changing for the better, it's very hard to gauge exactly what the pace of recovery will be. But the signs we see are clearly encouraging for the top line of 2025, and we also need to remember that, of course, we will be adding Infinera after closure. Once Infinera closes, we will, for the first time, be in a position to comment on their outlook. Finally, regarding mobile networks gross margin, there were also here some one-offs that we need to understand in 2024. The underlying performance we had in 2024 was 38% to 39% in mobile networks gross margin, excluding those, for example, the AT&T settlement in Q2. So, looking into 2025, the real question will be around the regional dynamics, but I would not make a clear comment either way at this point.

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

Great, thanks for taking the question. I wanted to see if we could double-click a bit on the trends with the hyperscalers in particular. I appreciate the 2028 outlook regarding sort of that EUR1 billion target. What I'm looking for is something a little bit more shorter term and what you're seeing in the next year or year plus in terms of that group of customers? Then I've got a quick follow-up.

Okay, Simon, thank you. This is, of course, one of the most important questions we are also internally focusing on since hyperscalers and data centers are clearly one of the best growth opportunities that we will have. That's why we decided to double down from an investment point of view, because we see such big growth opportunities there. We have had good deal traction. I just mentioned Microsoft and Nscale, which we both published in Q4. Infinera will, of course, add a lot of capabilities for the optical side, both for data center interconnect and then inside the data center, where the servers will be increasingly connected through optical technologies, something that Infinera is particularly strong on. Looking at the big picture in data centers, the reality is that we are still, today, compared to the dominant players in that industry, a fairly small challenger. This means that this is definitely an opportunity for us. You only need to look at Microsoft's and Meta's results, where both gave CapEx guidance for strong growth in 2025. This market is clearly accelerating. The recent announcements we saw regarding the new lower-cost platforms will likely increase competition in data centers. There will be lower-cost alternatives available, which should increase the application possibilities for AI, consequently data centers, for example, in industrial applications or edge computing for various workloads. So overall, we are strongly optimistic when it comes to this market, both web scalers for the plans of telcos and enterprises. The additional investment we are making, together with the Infinera acquisition, will strengthen our capabilities here. This is one area where we will focus on in the upcoming Capital Market Day later this year. This is also the reason for both the pending Infinera situation and the upcoming Capital Market Day that we're not yet giving more tangible targets for this year or next year. We just wanted to highlight that EUR1 billion additional revenue that we target through the EUR100 million additional investment we are making in IP.

Thanks. And then as the follow-up, very much related question is, what are your telco customers saying to you about the impact of AI on their business and what that might mean for Nokia? Thank you.

Yes, thanks. That's another highly relevant question. There have been some announcements, even I just referred to the T-Mobile announcement where they are talking about the acceleration of their AI strategy. We are one of the partners that they are working on together. Obviously, there are some clear areas where AI is making a big impact, such as customer service, network management, and network security and intrusion detection. However, the biggest strategic question for telcos is how they will position themselves in terms of workloads beyond their traditional ones. The sweet spot, which will become a battleground between telcos and hyperscalers, as well as enterprise cloud, is the edge compute market. Many telcos are currently thinking about how extensively they should provide workload processing capabilities at the edge of their networks, potentially combining their presence through the base station network to offer edge compute capabilities for enterprise industrial workloads. The edge will be a highly dynamic part of the market going forward, with many different entrepreneurs interested in it. The good thing for Nokia is that we are working with telcos, hyperscalers, and increasingly directly with enterprise customers to go after that opportunity.

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

Yes, thank you for taking my question and congrats on strong profitability in Q4. I would like to ask about the growth trajectory when it comes to the NI segment. Could you comment on sub-segment levels, or basically IP, optical, fixed? What kind of development do you see there for this year? And talking about strong growth, are you referring to double-digit growth or not?

Of course, since we did not attach a number to that strong growth, you are putting words in my mouth, which I did not intend to do. When we said strong growth, we decided not to specify a clear figure on it. Of course, the 17% growth that we saw in Q4 is more than just a strong growth, but at this stage, we are not going to give a specific number. We see opportunities in all three segments of NI, very much including in optical, which typically is the last one to recover. You already saw strong recovery in both fixed and IP. We expect these trends to continue, and once Infinera closes, it will boost our optical capabilities significantly. So yes, the market trends we are now seeing into 2025 expect strong growth, further boosted by optical, but at this stage, we are not going to provide a clear figure.

Did you have a quick follow-up, Artem?

Yes, I do. That is actually related to the technologies segment, and could you maybe talk a bit more about the multimedia space? Now you have made two deals in the quarter — how meaningful do you see the opportunity on that front? And just challenging you that you have only EUR100 million lacking to reach your mid-term target. Isn't the opportunity bigger regarding the new growth areas you are addressing right now?

Yes, thank you, Artem. We definitely see opportunities in the new growth areas, including automotive, IoT, multimedia, and specifically also the video streaming side. Back in 2022, we had two video streaming contracts that we announced. In Q4, we also had announcements on the device side regarding video, with HP and Samsung. Automotive has been tracking extremely well, and we see good opportunities in these new growth areas. We haven't updated, but last time we updated, in December 2023, we indicated that these new growth areas generated approximately EUR150 million in sales over the past 12-month period. We will provide you with an updated figure for these segments later this year as well, and specifically during the Capital Markets Day, we will present much more information about this. We believe we are continuing to make very good progress here and see plenty of untapped opportunities.

Just to add one thing, Artem, to what Marco said: we must remember that the definition of the run rate when we communicate is really the annualized value of the contract base that we currently have. We typically have some catch-up payments in new deals, explaining the difference between realized sales in any given year and the run rate we communicate. 2024 was exceptional from this perspective, due to over EUR400 million in catch-ups we had in Q1. As we mentioned, there were some catch-ups also in Q4, which explains the difference between Q4 and the run rate we are discussing. There could be catch-up payments in the future as well, but we feel it's important to communicate the contract base value that we currently have at hand.

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

Hi, thanks. I wanted to revisit your data center growth plans and expectations related to that area. Do I understand it right that you're planning to grow operating expenses by EUR300 million over a three-year period, and you expect this to translate into an additional EUR1 billion in annual sales? Can you elaborate a bit on the split between R&D and go-to-market investments and what is roughly the starting position for your data center sales today, including Infinera?

Thanks, Sami. We have not yet specified our existing data center sales. These will be comments for the Capital Market Day. The reason we're waiting is that we want to get Infinera closed first, as it will be a key element in all of this. Growth has been observed in data centers, and we have an interesting starting position, but in the grand scheme of things, compared to the giants selling billions in this market, we're still small. Yes, the EUR100 million will gradually ramp during this year, and we expect to reach that EUR100 million run rate by year's end and maintain it. So, the numbers you quoted are roughly in the right ballpark. This additional investment targets delivering an extra EUR1 billion of sales by 2028.

Do you have a quick follow-up? Just to double-check that if we consider the EUR200 million synergy target for Infinera acquisition, should we assume a cost base in 2027 that is higher than today?

It's too premature to comment. We maintain what we said about the EUR100 million additional investment and then the EUR200 million synergy target with Infinera by 2027. We have to remember that there will be no more cost inflation, and exactly where we put the investment levels will have to be balanced with the size of the opportunity and market development. It's a bit premature to draw that conclusion at such a detailed level.

Thank you, Sami. We'll take our next question from Sandeep Deshpande from J.P. Morgan. Sandeep, please go ahead.

Hi, thanks for letting me on. My question is going back to the mobile networks business. You've had some challenges in the business. You've guided to a flattish trend despite some parts of the business declining. Could you clarify whether you call this business properly turned around? Do you need to secure more contracts there? Do you need to adjust costs? What will make you believe the market is on a stable trajectory from here, or is it already there? I've got a quick follow-up.

The key thing in mobile networks is the question of how to drive topline growth in the future. We have now a strong base regarding our technology competitiveness, confirmed by the customer traction we had last year, and we expect that to continue this year. However, the reality in mobile networks is that the service provider market will not be a significant growth market. There will likely be some small recovery in the market overall this year. When we guide for mostly stable sales this year, it means that given AT&T is expected to drop by 4% on the mobile networks level, the remaining customers will grow to compensate for AT&T's decline. This indicates that the market is turning, and we are capturing our share of that turnaround. Still, the reality is that looking ahead to 2028 or 2029, this will not be a big growth market for operators. That's why it's crucial to pursue growth segments, including private wireless networks, public safety, authorities' networks, and particularly the defense sector, where global defense spending is rising significantly. We are now in a more favorable position as we launched our 5G-based tactical radio solution in Q4. We provide 5G as an essential communications platform for the military, including for tactical battlefield communications systems. Today, military communication systems often possess capabilities similar to what we would consider 3G, in terms of both speed and quality. There is a considerable opportunity to upgrade through 4G and especially 5G, and we are seeing increasing traction in this market. I believe that acquiring Phoenix was well-timed. This business requires patience, as sales cycles are lengthy, but I hope to offer concrete announcements about our progress in this segment shortly. This will be a significant element of our mobile networks strategy.

Thanks, Pekka. Just a quick follow-up on Nokia Technologies. You've signed major deals in video recently. Are these the updated old IP? Is this going to be a significant opportunity for Nokia?

Yes, thank you, Sandeep. We believe there are growth opportunities in these new areas we target, and we continue to invest in R&D. Video streaming is one such area, but we also see opportunities in IoT, consumer electronics, and even automotive. We believe that moving forward, we can reach and perhaps exceed our targeted run rate.

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

Thank you David, and hi Pekka and Marco. Yes, a question on your mobile networks. You mentioned having 18,000 additional base station sites net in 2024. I was wondering if you could provide a gross number and perhaps also talk about this from a geographical point of view. Additionally, could you comment on the ASB trend you see year-over-year with these 18,000?

Thank you. If you go back to the presentation, there was a regional split on both the new CSP customers we won and those with increased market share. More details than that we will not disclose, and of course, as you would have seen, we made some deal announcements. We continue to be encouraged by the ongoing deal momentum. That 18,000 represents a net change; it's the outcome of winning deals but losing some as well. We do not publish the gross number as it's confidential. We won and lost some footprint with various customers, but we clearly won more than we lost. Most of the losses we experienced had to do with aggressive pricing from Chinese competitors in markets where they continue to compete. We just want to remain prudent with our pricing; entering the aggressive price wars does not make sense. However, having said that, we had a successful year in terms of increasing our footprint on a net basis with those 18,000 sites.

Did you have a quick follow-up, Daniel?

Yes, on Cloud and Network Services, you mentioned strong momentum returning to growth. You referred to 5G core being solid and discussed that 20% to 35% of CSPs are now deploying via standalone. Can you comment whether these operators are still testing or deploying fully across their networks, i.e., will there be substantial build-out expansions with those who started with standalone? Just your thoughts on that.

In general, one aspect that has gone differently than expected is the pace of 5G standalone expansion, which has been slower than anticipated. However, momentum is building, and we have a very strong position in that regard. From a market point of view, only a small part of the market is standalone at present, which is a significant reason we expect CNS to experience solid growth opportunities in the coming years. Our relative position in this market is improving as well. We recently won multiple deals where we displaced competitors in core networks, and this momentum is very healthy. Additionally, another crucial aspect for CNS is the Enterprise Compass Edge business, which includes our 5G private wireless for enterprises; this business looks promising. Earlier in the year, we experienced some weakness, but with the strong order intake in Q4, we expect remarkable growth heading into 2025. CNS isn't solely about core networks; it's also significantly about Enterprise Compass Edge. As we transition managed services to mobile networks, it creates a clearer software business portfolio for CNS, which should enhance transparency and visibility of that business in the future.

Thank you, Daniel. We'll take our next question from Ulrich Rathe from Bernstein. Ulrich, please go ahead.

Thanks very much. My main question is whether you have any comments at this point about the changes that are on the horizon from the new U.S. administration's approach to China, and whether it could improve your competitive situation. The reality is that the Chinese suppliers have held better product quality than would have been expected since the U.S. started this effort in 2018. Do you think something could happen there in terms of the competitiveness of your product versus the Chinese product?

Of course, this is still very early days for the new administration, and we need to see what the actions will be. However, the reality is that in the U.S., the share of Chinese suppliers is already very small. This question is much more relevant for other parts of the world. The situation for Chinese suppliers remains strong in many European markets. This will be an ongoing discussion for the new European Commission regarding the 5G toolbox in Europe and whether it will apply to other parts of the network beyond 5G. The critical question is what will happen in the rest of the world—Latin America, Africa, the Middle East, and significant parts of Southeast Asia—where Chinese vendors are competing strongly today. We cannot speculate on these political questions; we merely observe the outcomes of those discussions.

Thank you, Ulrich. In the interest of time, we'll move to our next question. Please keep your question brief.

Yes, my follow-up relates to deployment restrictions, but I'm asking whether you think the competitiveness of the product has improved in connection with technology sanctions and how well Chinese suppliers can innovate under such constraints.

Yes, you are right; these are two fundamentally different questions, and it depends on the kind of access Chinese vendors have to the latest silicon. What type of restrictions will exist on chips in the future and what capabilities they will have internally in China? Currently, when it comes to the latest silicon that requires EUV, they do not have access, but it's too early to speculate about how the new U.S. administration will proceed in partnership with allies. This is not just a U.S. issue; the European Union will have significant input on this as well, and we cannot speculate on the internal development capabilities of China in the future.

Thank you, Ulrich. We'll take our next question from Rob Sanders from Deutsche Bank. Rob, please go ahead.

Yes, hi. There's some reports that the DOJ is investigating the Juniper deal. I was just wondering if that deal creates opportunities for you either already or perhaps in the future due to the disruption that could come with that deal and partnerships that Juniper previously had that you could now take advantage of?

I have no comment on that speculation; it's not for us to comment. However, generally, M&A activities create opportunities for competitors, and we try to take advantage of that. Of course, while in M&A situations, our competitors are also trying to do the same, so this isn't anything dramatic. We just need to observe the outcome of that situation.

Got it. As a follow-up, on the EUR100 million investment, is that primarily in R&D, or is there an effort to build out a sales force and channels to leverage your tech advantage?

It's both. There's an increase in R&D investment, but a significant portion will also be allocated to go-to-market and channel partnership initiatives.

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

Hi guys, thanks for squeezing me in. I wanted to touch on the full-year guidance and the scenarios baked into the relatively wide guidance range of EUR1.9 billion to EUR2.4 billion. What in your eyes needs to go well for you to achieve the upper end? Conversely, what happens if you end up at the lower end of that range? Is it mainly related to top line recovery, or are there other factors at play?

Thank you, Felix. When we provide a range, we consider what we know and understand today about market development, which is a clear driver for how this will evolve over the coming quarters. Currently, we see the improving trends from the second half of 2024 continuing into 2025, supporting our underlying improvement.

Just quickly, how do you view the outlook for BEAD in the U.S. and fiber as the dominant technology following Trump's election as President? I'm just curious about your thoughts on that.

One key reason the BEAD program was initiated was to accelerate broadband development in less populated U.S. areas and to connect it with local manufacturing requirements. The indications suggest that the new administration is eager to attract U.S. manufacturing, which is exactly what we've begun. We've started the manufacturing of broadband equipment in Wisconsin. We believe these initiatives will resonate well with the new administration. Regarding the BEAD situation, we've seen funds allocated to the 56 states and territories, and they have obtained approval for their initial proposals. We've received orders from three customers this past Q4, and we expect order volume to gradually increase. While there could be potential delays due to the administration change, we haven't seen significant signs of this so far. I'd be surprised if there were to be a complete reversal after the funds have already been allocated.

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

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