Good day, my name is Stephanie, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Nokia Third Quarter 2015 Earnings Conference Call. [Operator Instructions] Thank you. I would now like to turn the call over to Matt Shimao, Head of Investor Relations. Mr. Shimao, you may begin.

Ladies and gentlemen, welcome to Nokia's third quarter 2015 conference call. I am Matt Shimao, Head of Nokia Investor Relations. Rajeev Suri, President and CEO of Nokia, and Timo Ihamuotila, EVP and Group CFO of Nokia are here in Espoo with me today. During this call, we will be making forward-looking statements regarding the future business and financial performance of Nokia and its industry. These statements are predictions that involve risk and uncertainties. Actual results may therefore differ materially from the results we currently expect. Factors that could cause such differences can be both external, such as general economic and industry conditions, as well as internal operating factors. We have identified such risks in more detail on pages 74 through 89 of our 2014 annual report on Form 20-F, our interim report for Q3 2015 issued today, as well as our other filings with the US Securities and Exchange Commission. Please note that our results release, the complete interim report with tables, and the presentation on our website include non-IFRS results information, in addition to the reported results information. Our complete results reports with tables available on our website, includes a detailed explanation of the contents of the non-IFRS results information and a reconciliation between the non-IFRS and the reported information. With that, Rajeev, over to you.

Thank you, Matt, and thanks to all of you for joining. I would characterize Nokia's third quarter in two words, progress and performance. Progress in moving the Alcatel-Lucent transaction closer to completion, performance across all of our businesses and particularly in Nokia Networks, allowing us to raise our full-year outlook for that part of Nokia. Before I go into these areas in greater detail, however, let me touch on some information we shared in a separate press release today. First, we have updated our synergy targets for the Alcatel-Lucent transaction. We previously said we would target approximately EUR900 million of annual operating cost synergies to be achieved on a full-year basis in 2019. Our view today is that we can accelerate that work and deliver it one year earlier than originally planned. Thus, we now target approximately EUR900 million of annual operating cost synergies to be achieved on a full-year basis in 2018. We have teams hard at work on integration planning, and while there is still plenty to do, I am quite confident this is an achievable goal. It is also the right goal. Faster savings means that we will move rapidly to provide clarity to customers with questions about our future product portfolio to employees who are uncertain about their future, and to investors who are counting on us to hit our synergy goals. Second, we announced our EUR7 billion capital structure optimization program. Timo will provide more detail about this, but I think we have found an excellent balance of significant cash return to shareholders, while still ensuring we have strategic flexibility for the future. Now let me turn to the performance part. On a Nokia level, we delivered non-IFRS diluted EPS of EUR0.08, a decrease of 11% year-on-year as higher foreign exchange related losses, net interest…

Thank you, Rajeev. I would like to start my remarks by providing an update on the sale of HERE before turning to my customary discussion on our cash performance. I will then say a few words regarding the redemption of Nokia's convertible bonds, before closing with some comments on the planned capital structure optimization program and accelerated operating cost synergy targets. Turning to the sale of HERE, as you know, we announced the sale of HERE in early August to an automotive industry consortium at an enterprise value of EUR2.8 billion. Given the pending transaction, we have treated HERE as a discontinued operation for the purposes of external reporting, and this is reflected in today's press release and related materials. In Q3, HERE continued to build on its momentum in recent quarters, delivering strong year-on-year top line growth. Both year-on-year and sequentially, HERE showed strong non-IFRS operating margin improvement. The transaction is subject to customary closing conditions and regulatory approvals, and remains on track to close in Q1 2016. Upon closing, we expect to receive net proceeds of slightly above EUR2.5 billion. Additionally, we expect to book a gain on the sale and a related release of cumulative foreign exchange translation differences totaling approximately EUR1 billion as a result of the transaction, which will be booked in discontinued operations. Turning to our cash performance during Q3, on a sequential basis, Nokia's gross cash increased by approximately EUR270 million, with a quarter-ending balance of approximately EUR6.9 billion. Net cash and other liquid assets increased by approximately EUR290 million, with a quarter-ending balance of approximately EUR4.1 billion. Working down the cash flow statement that the primary drivers of movement in our net cash balance in Q3 were the following; Nokia's continuing operations adjusted net profit before changes and net working capital was EUR454 million in the third quarter, primarily driven by Nokia networks. In Q3, Nokia's continuing operations had net working capital cash outflows of approximately EUR40 million, which included approximately EUR20 million of restructuring related cash outflows at Nokia networks. Excluding the restructuring-related cash outflows, Nokia's continuing operations had net working capital -- cash outflows of approximately EUR20 million, primarily due to an increase in receivables, and a decrease in short-term liabilities, partially offset by a decrease in inventories. Nokia's continuing operations had cash inflows of approximately EUR90 million, related to other financial income and expenses, primarily related to foreign exchange hedging and balance sheet related items, and cash outflows of approximately EUR60 million related to taxes. Completing the net cash from operations picture, discontinued operations had cash inflows of approximately EUR40 million, primarily related to the strong operating performance of HERE. From an investing cash flow perspective, cash outflows of approximately EUR50 million related [technical issues] testing, testing.

Stephanie, can you hear us?

I can still hear you.

Is the line working? We were understanding that the list -- okay, we are going to just -- we're going to start with the net working capital section.

Sure, okay. So we will continue from the net working capital sections. So in Q3, Nokia's continuing operations had net working capital cash outflows of approximately EUR40 million, which included approximately EUR20 million of restructuring related cash outflows at Nokia networks. Excluding the restructuring related cash outflows, Nokia's continuing operations had net working capital cash outflows of approximately EUR20 million, primarily due to an increase in receivables and a decrease in short-term liabilities, partially offset by decreasing inventories. Nokia's continuing operations had cash inflows of approximately EUR90 million related to other financial income and expenses, primarily related to foreign exchange hedging and balance sheet-related items, and cash outflows of approximately EUR60 million related to taxes. Completing the net cash from operations picture, discontinued operations had cash inflows of approximately EUR40 million, primarily related to the strong operating performance of HERE. From an investing cash flow perspective, cash outflows of approximately EUR50 million related to acquisitions of businesses, approximately EUR60 million related to the foreign exchange impact on short-term loans receivable, and approximately EUR60 million related to continuing operations capital expenditures. Finally, foreign exchange rates had approximately EUR30 million negative translation impact on net cash. Staying with balance sheet related items, I wanted to highlight our decision to exercise the option to redeem the EUR750 million, 5% convertible bonds due in 2017. A redemption notice was sent to all holders of the convertible bonds on the 8th of October, giving them the option to convert their convertible bonds into Nokia shares by no later than the close of business on November 17. If all holders of the convertible bonds would convert at the current conversion price, the maximum number of Nokia shares to be issued would be approximately 314 million shares, or 8.7% of Nokia's total number of shares outstanding. However,…

Thank you, Timo. For the Q&A session, please limit yourself to one question only. Stephanie, please go ahead.

Thank you. [Operator Instructions] And your first question comes from the line of Gareth Jenkins with UBS. Your line is open.

Yeah. Thanks for taking the question. Just a quick one, I guess on patent licensing, you said that the licensing case is coming to an end, and that's why you had lower OpEx and technologies in the quarter. From that, can we assume that the Samsung arbitration is still going to complete in 2015? And maybe just a follow-up Timo on something you mentioned on the deleveraging, I just wondered if you could give us a sense of the net interest cost savings to you from that deleveraging process? Thank you.

Okay, sure. Thanks, Gareth. So on the Samsung front, as we have said in our earlier 20-F filed this year, we continue to expect the Samsung arbitration to conclude during 2015. However as we have also said that due to the nature of arbitration proceedings, there can't be an assurance to the timing of the very final decision. Now we also said, and this was the biggest driver of our decrease in technology's OpEx, that the sequential decline in technologies non-IFRS OpEx was primarily due to procedural steps of a certain patent licensing coming to an end. So in that sense, that's where we are on the issue. And then regarding deleveraging and the costs, so we have said that we expect EUR200 million of savings for the full-year 2017. Now we are redeeming the Nokia convertible bond already this year, and of course, provided the transaction closes quicker, i.e., in the current plan timeline on Q1, 2016 and that all converts would convert, there is a possibility that some of this will likely already come in during 2016, but as said, we continue to keep guidance as EUR200 million for 2017 full year.

Thank you Gareth. Stephanie, we'll take the next question please.

Your next question comes from the line of Kulbinder Garcha with Credit Suisse. Your line is open.

Thank you for my question, it's kind of quite broad, it's aimed at, Rajeev and Timo. I applaud the accelerated restructuring timeline on the capital return. Something tells me that both these should be significantly large, and here's what I'm thinking Timo, for you on the capital returns side. You've probably got $6 billion to $7 billion of pro forma net cash at closing, I think, maybe I'm wrong. You're going to generate probably at least $2 billion a year, and you're going to payout $4 billion over the next two years. So you’re going to probably end up at $6 billion to $7 billion again in two years' time, and are you telling us that's how much net cash the new Nokia-Alcatel combined entity requires? Because I always thought it would be somewhat lower than that. So just any thoughts around is this the initial capital return that gets revised as you guys get more experience with the company? And then Rajeev, the same thing with you on the structuring side, EUR900 million to be brought earlier I think is something that we thought might happen, but I also would have thought there would have been scope to find more synergies as well. And the same thing applies, are we moving here, as you get the experience of running this company and revising those potentially higher over time? Thanks.

Thanks, Kulbinder. Just on the capital structure optimization, so I first of all I want to say that I think it is very good that, as was the case, after the Microsoft transaction that our Board is making these decisions, I would say, quickly. And of course we are basing this as we have said today to certain assumptions, I am assuming that the HERE transaction closes, converts convert, and also that the Alcatel-Lucent transaction closes. So in that sense, I think that at this point in time, this capital structure optimization program strikes a very good balance with the returns to shareholders on the deleveraging of the company, while making sure that we have the needed investment capacity to be really competitive in this industry, and finally on our long-term target to get to an investment credit rating. Of course, if you look some years down the road, I mean, this is also a bit of a dynamic equation.

Yes, on the synergies, we have accelerated I think I said, a reflection of the fact that we're saying we can close early, but also the fact that our execution integration planning has been quite strong and robust. So I won't comment on whether we can expand the synergies. At the moment, we have said we accelerated 2018. Naturally as we get underway, we will continue to find more opportunities with deploying the full strength of the Nokia operational model onto the combined company.

Thank you, Kulbinder Garcha. Stephanie, we will take our next question, please.

Certainly. Your next question comes from the line of Alexander Peterc with Exane BNP. Your line is open.

Hi, thanks for taking the question. I was just wondering, as you issued today an updated guidance with the reduced expectations for core networking, which is partly, but not entirely offsetted by a better performance in access. With this in mind, do you still think it looks better to buy all of A-Lu, and not just the wireless access business? It seems to have a little bit of a better momentum here. And aren't you worried of a potentially protected [ph] core networking weakness that's compromised in your group's overall performance or if this software [ph] momentum, or on the contrary, you are just having a really easy base to compare yourself to once the new activity is formed? Thanks.

Thank you, Alexander. So, as we have always said, this deal is more about scope than scale. We're already seeing, due to the expanded portfolio, that our relevance and even access to most of the converged operators is increasing. And that’s what we expected and we're already seeing that happen. AT&T Domain 2.0 announcement is just one example of that. Now, if you step back and say, we have said that the mobile infrastructure and services market is flat or flattish, but we also said that the combined portfolio allows us to address a much larger market, but also a market that’s growing at something like 3.5% CAGR long-term. That means that this growth is driven primarily by the IP optical networks group, and applications and analytics. And finally, I think, the fact that we have this combined portfolio is the only reason we will be able to target new markets such as cloud players, web scale players, but also extra-large enterprises, and this would happen only due to the combined portfolio we have. So no doubt in my mind that this scope rather than scale is more relevant and the combined company is the right portfolio.

Thank you, Alex Peterc. Stephanie, next question, please?

Certainly. You next question comes from the line of Kai Korschelt with Merrill Lynch. Your line is open.

Yeah, thanks for letting me ask the question. I just had a quick question on the comments you made on the pipeline, which I think you said is up. I mean, should we interpret it as that you have decent visibility that 2016 will not be a down year on a constant currency basis? And then the second question was just really on the high-level industry. I mean if I had together yours and Alcatel's and Ericsson's constant FX numbers, clearly the industry seems to be declining low single digits. Does that not make you more aggressive on the deal synergies potentially if the industry continues to stay in that low single digits decline? So should we look at your synergy target as sort of dependent on what is happening on the top line, or is the synergy number the synergy number, and it's sort of independent of how things are shaping up? Thank you.

Thanks, Kai. So let me just give some reflection and some color on sort of the market for next year. While it could be that the market could decline, it's probably less relevant for us because that would be only part of the segments we are in, right, because we are looking at a combined portfolio. But from a regional dynamic point of view, I think the markets that will be healthy next year will be Middle East and Africa, North America, India, as the primary ones. I think also Latin America is stabilizing, notwithstanding the earlier comments that I made. Then with regard to what we've seen in Q3, on a constant currency basis, with all the peers, financially we are going to continue with this continuous improvement cost structure that we already have in place. We said it at the Q1 call, we’ve continued with that, and you have seen the results come through in Q3 more robustly and to some extent in Q2. And that is not going away. That for us is extremely important, our operational model and the high performance culture that we will continue to find these areas of more and more efficiency driven by automation and driven by new techniques and quality and so on and so forth, and that applies to the whole company as well. That is why I say that we will apply the full strength of the operational model to the combined company. You must keep one thing in mind for Q3, of course, that China is a big part of the market so there is a bit of an aberration that if you exclude China the market is most sort of different than when you include it.

Maybe a quick comment on the synergy numbers, okay, the synergy number is EUR900 million what we are targeting for the combined entity for the full-year 2018. However, as part of this continuous cost optimization program which Rajeev mentioned as well, actually during Q3 we announced this is now separate for the networks business savings program, which will save EUR50 million for the full-year 2016 already and we also announced related restructuring cost as well as the related cash charge, so we are continuously doing this work, and this is just an example of that.

Thank you, Kai. Stephanie, next question please?

Your next question comes from the line of Andrew Gardiner with Barclays. Your line is open.

Good afternoon. Thank you. Just to follow up, Rajeev, on what you were just talking about there regarding China. You mentioned that there is an aberration in the quarter. Certainly you guys saw very strong trends quarter-on-quarter, and Alcatel looks like it was up as well, but yet Ericsson was down quite significantly. I know there were some timing issues and differences within the country in terms of the timing of the rollout, but could you just speak to your visibility in terms of where we are in terms of 4G deployments in China, what's likely to happen as we hit the end of the year, and how you're starting to think about next year in that country? Thank you.

Thanks, Andrew. When I said aberration, I just meant to say that of course we’ve seen big market growth in the market size in China. And that of course sort of plays into a different mix in the total market where the foreign vendors don't get enough of shares beyond a certain number. Now your question then being about what I see China looking forward, now we’ve seen China being robust for us for the past few quarters. I think it's down to our competitiveness, also down to the fact that we invested more in TD-LTE early on because we really figured this will be a meaningful technology and that just made us more competitive in the marketplace. So we are number one non-Chinese vendor. Apart from that, we have been able to get a new customer that we didn't have. The China Telecom is not a customer we had in the past, we got a new customer in the scope of the last few quarters, but we also expanded market share with that customer as well, alongside doing well with the others. So we haven't seen a difference in Q3 from that perspective. Having said that, as I said, there are reasonable expectations to assume maybe next year that the market will slow down, because the big network rollout will of course slow, but there are some countervailing forces as well because Unicom and Telecom have not invested enough on LTE relative to Mobile. China Mobile has got a lot of market share right now. Of course, the others may catch up and then there is the broadband for rural access program that the country's talking about, plus the focus on the innovation-focused economy. So it’s not a slam dunk that the market will decline in China, it could.

Thank you, Andrew. Stephanie, next question, please?

Your next question comes from the line of Mark Sue with RBC Capital Markets. Your line is open

Thank you. As you focus on the continuous operational improvements and drive towards your structural cost advantage with scale [indiscernible] perhaps you can discuss the concurrent migration to do more in software. You are doing a lot of software already. The carriers want to be more flexible in terms of their software model. Ericsson has been on a multi-year journey towards more software. How might Nokia take some lessons learned and accelerate the pace towards more software?

Thanks, Mark. We are also on this multi-year journey on software in terms of, you think about the number of people that do software in our R&D, it is a great 90%, so we are very focused on software development, software quality, but also on new pricing schemes in software that will be relevant for the industry going forward. Now if you look at our portfolio in the future, of course that will be driven more by applications and analytics, and by mobile networks, particularly the converged core part of that business. So there is a lot of focus on software. We'll also look at new approaches such as software-as-a-service, which we can only do with the new portfolio that we have. It's a meaningful part of our mobile broadband business and the focus will only grow on software, ultimately we are going to be a software and services company, because that’s where the value is.

Thank you Mark. Stephanie, next question, please?

Your next question comes from the line of Robert Sanders with Deutsche Bank. Your line is open.

Yeah, hi guys. Just more of a process question. Let's say you close the deal in Q1, I was just wondering if you could give you early thoughts on when you think you will begin to lay out pro forma targets for the combined entity by division. Is that something we can expect before April, May, or is it going to be a bit later than that? Thank you.

Timo here, thanks, Robert, for the question. I think this is really too early to answer at this point in time. So how this will work out is that likely after the first closing, we will consolidate Alcatel-Lucent to Nokia, but Alcatel-Lucent will also, unless we would get to 95 right away, continue to report its own numbers and really getting into full pro forma. Of course the faster we get into a full control situation, the faster we will get there. And of course then, in the meantime, we will look at how we will start reporting these different – four different business groups separately and which line items and how do we set the targets, but it’s too early to talk about that at the moment in more detail.

Okay. Thanks for your question, Robert. So, Stephanie, next question, please?

Your next question comes from the line of Sandeep Deshpande with JPMorgan. Your line is open.

My question is again, Rajeev, regarding China. I mean, you talked about – you’ve had a very strong quarter in China. Does this strong third quarter in China impact your normal seasonality into the fourth quarter and given the strength that you are seeing in, I mean you’ve seen this significant strength in China because of the work you have done in China, but if you've seen over the last few years, I mean a few years ago you had seen significant strength in Korea and Japan. Do these countries come back on LTE Advanced or anything in the next couple of years, or is what you have said about India, Middle East and Latin America being the drivers over the next couple years?

Yeah. So let me go with Japan and Korea first. I think we have seen a big burst of coverage there, right, if you think of population coverage in Japan and Korea, it's 98% to 100% in LTE for the big coverage that has happened. The next wave that we would looking forward to is of course carrier aggregation, so LTE Advanced, which is not only coverage, but it's more of a software business. And then you'll see small cells coming in as well. It will be one of the first markets that will do that. But I don't see next year in terms of Japan and Korea being sort of returning to strength as a market. So I think it will be soft for a while, Japan and Korea. However, I can't say because there can be countervailing forces that one or the other party wants to do greater aggression in the marketplace and that spurs the market and contradicts that. And I think on China, the question was – is going to be more to what will we see in Q4. So I won't necessarily guide to what we will see in Q4, but I will say that we have not seen any contract phasing or anything like that in Q3 which was special. It’s been normal for us for the last few quarters as the LTE network deployment continues.

Yeah. And maybe to add to this regarding China, so we actually spoke after Q1 about the strategic entry deals, and as we discussed earlier, so the margin levels of the strategic entry deals, they were, I would say, more healthy already Q2 and they have stayed in a fairly healthy level now Q3 as well, so that is also an important thing regarding China for us.

And [indiscernible] if you think about the 4G network coverage in a population we’ve reached 83% in China. But the penetration of 4G, i.e. the 4G connections is only about 17%, so one would say that there is more coverage to happen, but also perhaps more capacity to come.

Thank you, Sandeep. Stephanie, next question, please?

Your next question comes from the line of Francois Meunier with Morgan Stanley. Your line is open.

Yes, question is about seasonality on the margin. I think everyone has been surprised by the weakness in Q1 this year, and then a pretty steep recovery. By the way, well done on OpEx this quarter, that's quite amazing. How should we be concerned about next year regarding this seasonality is the first question. The second question is the target for the EUR900 million cost saving for the merged entity. Is this number a net of any accounting differences between Nokia and Lucent?

Okay, thanks, Francois. Accounting differences, okay, so on the first question, we are really not giving any margin guidance for 2016 at this point in time, so we increased our full-year operating margin guidance for the networks business to be at or slightly below the high end of 8 to 11 range, and in that sense, from that, you can at least get the feel on how we see Q4 playing out. Maybe mentioning a couple of things, so operating leverage would be slightly higher going into Q4. On the other hand, we had an FX tailwind on Q3, and that kind of thing of course is difficult to estimate. So that’s really what I can say on that topic. Then on the accounting differences, I wonder if you would be thinking about R&D capitalization. I can't really think of anything else which would be there, but maybe we can take the offline, but clearly the 900 is a net operating synergy number, which we target to achieve for the full-year 2018.

Thank you, Francois. Stephanie, we'll take our next question, and can you please limit yourself to one question only, because we still have many people in the queue.

Your next question comes from the line of Alexander Duval with Goldman Sachs. Your line is open.

Yes, many thanks. Alex Duval from Goldman Sachs. Just one quick question. I wonder if you could expand a little on the US as a region. You did see some declines in network revenues in the quarter in that region, and I wondered if you could help us think about the conclusions we can draw, maybe as we look forward to the next quarter. And you did actually talk about 2016 seeing strength there, so maybe just expand a little on that would be very helpful. Many thanks.

Yeah, so – of course, we had a difficult compare because last year, we had a big network deployment with one US customer that commenced in earnest in Q3 last year, and we didn’t see that same thing happen this year, that's why our numbers are down in terms of net sales. But what do I see about the market in North America? I see this as a healthy market next year, so investments have been a little bit volatile during the course of this year, in terms of the market size, but next year this will be returning to a healthy level. Now of course, for us, we are not a fringe player, we're just T-Mobile and Sprint. We have become a far more relevant player in the US with all of the big operators, all five operators we have in our mix, particularly the big two. So for us the game is quite different next year.

Thank you Alex. Stephanie, next question please?

Your next question comes from the line of Avi Silver with CLSA. Your line is open.

Yes, hi good morning. A follow-up question on share repurchases, maybe for Timo. If there is a large cash payment related to Samsung, or if cash flow is stronger for the company, where at the end of the day, you have excess cash, would you prioritize share repurchases or some type of increase, or special dividend? I realize this would be a Board decision, but they would obviously seek your input, so would love to know how you think about the balance between the two. Thank you

Yeah, I am happy to answer the question. So first of all, the capital structure optimization program, we said while it is conditional to HERE closing, closing we said Q1 in this case, and then also the converged, so we didn't say anything about assumption or any other possible such events, and in that sense, we have not factored that at this point in time, given where we are in the process. And then regarding my own view on the matter, so I would refer share repurchases to any further special dividend in such situation, but as you said, correct, this is really a Board decision.

Thank you, Avi. Stephanie, next question, please?

Your next question comes from the line of Pierre Ferragu with Bernstein. Your line is open.

Hi, thank you for taking my question. Rajeev, I would like to come back to the comments you made at the beginning of the call on competitive pressure. I'm still trying to figure out what’s happening here, because we haven't seen much traces of big deals like big deal announcements or the usual news flow we see in the industry not that intense, at least in social news. It was totally like most large key rollouts has been awarded, so what I am wondering is where in the world in terms of geographies, on what kind of deals do you feel the pressure? Is that for large rollouts, and in that case, that much less however, is that on smaller follow-on or different deals that you see this pressure? Any additional color to help us reconcile all that would be very helpful.

Thank you, Pierre. I think you have pointed to an important point when you were sort of asking the question, and that’s probably or precisely the answer that we are not seeing that many big deals in the marketplace. So then what happens in a situation like that is that people start to price aggressively for deals that don't merit that strategic rationale, because people are going after less deals, and that’s what we have seen this year. Now, I am a believer in the long run that consolidation will help. It always has. If you go back to the previous round when consolidation happened in the sector, us doing Motorola, Ericsson during the autumn, we saw robust gross margins come up. Long run, I am a believer in that. Tactically at this point in time, the competitive intensity has not changed from what I said in the first quarter. And it is sporadic from region to region, so there's no particular theme I can point to, Pierre, on regions as much.

Thank you, Pierre. Stephanie, we’ll take our next question, please.

Your next question comes from the line of Tim Long with BMO Capital Markets. Your line is open.

Thank you. I want to go back to the technologies group. Can you talk a little bit about kind of new deals in the pipeline? I'm just curious, were there any customers added in the quarter? What's it going to take to start to see some more deals announced? Will a resolution with Samsung, could that help? Or what -- just talk to us a little bit about timing of seeing some of the unlicensed people becoming licensees. Thank you.

Thanks for the quick question. Maybe I'll start. So we had four small new licensees come in during the quarter, so of course we are building programs in other areas than handset SAPs as well. LG we licensed during Q2, so there wasn't really any, call it a big licensing announcement for this quarter, and as we have said, we have prepared now a team, which can go after different cases simultaneously. So that is good, but also as we have said often from the start of the negotiation into some kind of outcome, it can easily take 18 to 24 months. First negotiation, then you decide how you move forward, you go to arbitration, is there a legal means to move forward, and so forth. So rest assured that we are not sort of sitting still on here when we look at the pipeline.

Thank you, Tim. Stephanie, next question please.

Your next question comes from the line of Richard Kramer with Arete. Your line is open.

Thanks very much. Alcatel had itself tied up in knots for years in China with the Alcatel Shanghai Bell joint venture in terms of trapped cash and minority profit and leakage, and you mentioned that you're going to inject Nokia-China into the Huaxin JV coming up. What do you expect you will be paid, if anything, for the contribution of what's a fairly sizable portion of your networks business, and can you give us any sense of the profitability of that business, since I assume like Alcatel Shanghai Bell, half of that profitability will be paid back to the JV partners? Thanks.

Okay, why don't I start here Richard, Timo here. So when we look at the industry compared to ASP, so we announced an MoU on the topic, and a very important complement of that MoU is first that all transactions, which would happen in the new construct will happen on their market values. And then second, we are not grandfathering any previous operating model, so this will be a new set-up, which will be negotiated, and then we will move forward with that. But I think those two components are very important. So again all asset transfers will happen on fair market values. And second, we are not grandfathering any previous set up.

I will add Richard that we will – this JV will allow us to position ourselves better for areas such as converged core, IP, security, and the broader core networking space. So I think that’s going to be a benefit to us being the only foreign JV in the country.

Thank you, Richard. Stephanie, next question please.

Your next question comes from the line of Jan Dworsky with Handelsbanken. Your line is open.

Thank you. I wonder if you could elaborate a little bit more on the situation in Western Europe, if you expect that to continue into next year, in relation to the mergers, and then the hesitation [ph] related to that?

Yes. Thanks, Jan. Yes, consolidation I believe will continue, we’ve seen some good signs of consolidation. Of course, we’ve also seen a setback in one market, but overall I think consolidation has to happen in Europe, and will continue. And it brings some near-term uncertainties in terms of CapEx, but ultimately it is good for the market long-term. Now, how do I see Europe? So again, I will give you some data points. The 4G network coverage by population in Europe is 68%. When you compare that with China, 83% North America, US 98%, Japan and Korea about 99%, 100%. So there is more room to grow the LTE coverage. Then if you look at the connections again in Europe, it’s about 13% in Europe, so the actual penetration of 4G. Again more room to grow that piece as well. I think the issue though is one of regulation, because regulation does make it less pro-investment and so it's changing potentially with the digital single market policy, but we're not there yet. And all of this is reflected ultimately and if you take revenue as a proxy of the operators, and you take ARPU, it is about one-third of the US, and it’s about half of Japan and Korea, so that tells you that given the lack of pro investment, you're not monetizing data traffic enough by the operator. So it’s a mixed question. I think there will be some stress in the marketplace, but it is down – it’s more a business question that a technology question, but there is a countervailing trend that you need to do more LTE coverage, and you need to do more capacity as well.

Thank you, Jan. Stephanie, next question please.

Your next question comes from the line of Simon Leopold with Raymond James. Your line is open.

Thank you very much for taking my question. I wanted to see if you could talk a little bit about your philosophy on your product pricing. And what I am trying to get at is that I believe Nokia has a reputation for pricing discipline, and I think this has been evident in your operating margins, whereas Alcatel-Lucent, at least by reputation, has been much more aggressive on pricing its products. And I want to -- understanding of post deal, how you think about applying your philosophies in the past, and if you consider what I’ve described reasonable? Thank you.

Thanks, Simon. So without a doubt, we will expand our pricing ballroom approach. Our limits of authority decision-making bodies, the formal structure that we put in place for pricing. I think pricing is a big lever in this marketplace, and a focus on it right from the CEO is absolutely important. I expect my four Presidents and networks to be hands-on, and that I expect to continue to be hands-on in that space as well. That will be expanded. We are already looking at how we will do that, and that will happen from day one.

Stephanie, I think we have time, oh thank you, Simon. Stephanie, I think we have time for one last question for today.

Certainly, your last question comes from the line of Frederik Nielsen with Danske Bank. Your line is open.

Thank you for taking the questions. Just a final one then. Can you talk about sort of the business mix in networks in Q3, if you have a good software quarter again in Q3 that helped margin, or was this sort of a seasonally normal situation in terms of software sales in the quarter? Thank you.

Software sales, as we said was elevated in Q2, but more at the normal level in Q3, good, but normal. And then between mobile broadband, and global services, we had 55% mobile broadband and 45% global services. So those were the numbers.

Great. So with that, I would like to the call back over to Rajeev for closing remarks.

Thank you, Matt, and thanks again to all of you for joining. I would like to close with a couple of thoughts. First, we are proceeding quickly in finalizing how Nokia will operate once the deal with Alcatel-Lucent closes, which we currently expect to happen in the first quarter of next year, ahead of our originally anticipated timetable. The nominated leaders are already putting their team plans in place, and we are firmly committed to ensuring a flawless transition to Nokia's new operating model once the deal closes. We continue to plan with urgency and purpose. Second, our results show that we have built a resilient and strong organization and culture, with a lean cost structure and excellent execution capabilities. As the closing of the Alcatel-Lucent deal approaches, we believe this puts us in good stead to take the next step as a company, to be the vendor of choice for our customers, and to meet the competition head on and win. Overall, it was a good quarter. We are squarely focused on delivering our full-year results. With that, thank you very much for your time and attention, and Matt, back to you.

Ladies and gentlemen, this concludes our conference call. I would like to remind you that during the conference call today we have made a number of forward-looking statements that involve risk and uncertainties. Actual results may therefore differ materially from the results currently expected. Factors that could cause such differences can be both external such as general economic and industry conditions, as well as internal operating factors. We have identified these in more detail on pages 74 through 89 of our 2014 annual report on Form 20-F, our interim report for Q3 2015 issued today, as well as our other filings with the US Securities and Exchange Commission. Thank you.