Good morning. My name is Stephanie, and I will be your conference operator today. At this time, I'd like to welcome everyone to Nokia's Second Quarter 2016 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you. I would now like to turn the call over to Matt Shimao, Head of Investor Relations. Please go ahead.

Ladies and gentlemen, welcome to Nokia second quarter 2016 conference call. I'm Matt Shimao, Head of Nokia Investor Relations. Rajeev Suri, President and CEO of Nokia; and Timo Ihamuotila, CFO of Nokia, are here in Espoo with me today. During this call, we'll be making forward-looking statements regarding the future business and financial performance of Nokia and its industry. 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, such as general economic and industry conditions as well as internal operating factors. We have identified such risks in more detail on pages 69 through 87 of our 2015 annual report on Form 20-F, our financial report for Q2 and half year 2016 issued today as well as our other filings with the U.S. Securities and Exchange Commission. Please note that our results website, 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 content of the non-IFRS 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 our Q2 results call. When I look at our results for the quarter, I would characterize them as solid, consistent with what we expected and indicative of the operational progress we are making. You will recall that on our call last quarter I said that we did not expect the typical Q1 to Q2 seasonal pattern to occur this year and that prediction proved to be correct. Group net sales were slightly up sequentially, while operating margin was slightly down; in part, reflecting a negative impact from a major customer in Latin America that is experiencing financial difficulties. While market conditions remain challenging in our Networks business, we remain focused on using our disciplined operating model to offset those conditions and to maximize value. We have no intention of losing our sharp focus on profitability, and you can see that in the gross margin of our Networks business, which was slightly up year-on-year when you exclude the negative impact from the Latin American customer that I just mentioned. As is clear from our results however, our top line performance remains challenging. We are certainly not in denial about that reality, but let me make several points to put the issue in context. First, our global view of a flattish overall market and a decline in wireless infrastructure in 2016 remains unchanged. We do not see a broad-based worsening of conditions. In fact, we believe that there are some opportunities to grow if we wanted to, but those opportunities tend to be in countries facing macroeconomic headwinds and their margins are low and financing demands are high, particularly in Eastern Europe, and the Middle East and Africa. Passing on, some of those opportunities is a conscious choice. And that gets…

Okay. Thank you, Rajeev. I will begin today by recapping the progress we have made around the Alcatel-Lucent transaction. I'll then comment on the financial performance of Nokia Technologies and Group Common and Other in Q2 before turning to a discussion on our cash performance in the quarter. And lastly, I will spend a few minutes covering our updated cost savings target and items for the remainder of 2016. So starting with our recent progress around Alcatel-Lucent transaction, when we held our previous earnings call in May, we were already very close to the 95% squeeze-out threshold. Since then, as Rajeev mentioned, we have crossed the 95% threshold by acquiring Alcatel-Lucent securities in private transactions and we are now preparing the filing of the buy-out offer. We have confirmed with AMF that we intend to file the buy-out offer in cash for the remaining of Alcatel-Lucent shares and OCEANEs in early September. After being approved by the AMF, the buy-out offer will be open for 10 trading days as per the French regulatory process for such offers, followed by a squeeze-out of any remaining untendered shares and convertibles. Thus, early October, we expect Nokia to own 100% of Alcatel-Lucent share capital, voting rights and OCEANEs convertible bonds. In the offer, the valuation of Alcatel-Lucent is expected to be based on a multi-criteria approach reflecting among other things, the company's latest business plan and the price we paid in the private transactions to acquire Alcatel-Lucent shares. As we indicated in June, the price we paid in this transactions was consistently €3.5 per share. The final offer price resulting from the multi-criteria valuation will be subject to an assessment by an independent expert as well as the AMF clearance. Moving then to my financial commentary on Nokia Technologies. Rajeev covered quite a…

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

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

Thank you for letting me on. My question is firstly to Timo regarding the guidance. Timo, you have clarified the margin guidance to be 7% to 9%. Is this the aim of this margin guidance to adjust the consensus or is this just a guidance you've given based on where you think you're going to achieve in terms of margins? And secondly, Rajeev, in terms of sales, are you talking about the second half recovery and you said that the orders are also looking positive. Can you talk about that you talked about in the first quarter, for instance the Alcatel U.S. sales have been held back because some product that you had to be changed to be sold – in Nokia production to be changed to be sold to the U.S. customer base. Has that product begun shipping? And do we expect Alcatel customers buying Nokia base stations at this point? Thank you.

Okay. Thanks, Sandeep. Maybe I'll start with the guidance question. So, as I said a couple of minutes ago, this is really not meant to be an upgrade or a downgrade to the guidance and we are simply giving a bit more precision here. As we said after Q1, we really wanted to establish the floor as we were just coming together with Alcatel-Lucent or started the integration. Now we think we have good control of the situation regarding integration, little bit better visibility and we were just wanted to give bit more precision. And as Rajeev said, if we execute well, we expect to be clearly above the midpoint of this guidance range.

And thanks, Sandeep, on the U.S. question and overall on portfolio, so we have made all the portfolio decisions. We have got alignment with a majority of customers and some of these projects of swaps or migration will last one year, some will be longer even up to two years. So that is going to be an ongoing process. But even though, we're just six months into this very large-scale integration, I believe our execution continues to improve rapidly, right? And this also applies to the U.S., so I see a better second half there as well. So even if the market does not improve, we think we have clear potential to improve our financial results as we proceed through the quarter this year. So, when we've said the slight sequential growth in net sales from Q2 to Q3, another way to interpret that will be that it will be slightly improving our year-on-year trend in Q3. And the significant sequential growth in the seasonally strong fourth quarter, that can be interpreted as driving a more clear improvement in our year-on-year net sales trend in Q4. So, slight in Q3 and clear improvement in Q4 on a year-on-year basis, also applies to North America.

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

Your next question comes from the line of Achal Sultania with Credit Suisse. Your line is open. Achal Sultania - Credit Suisse Securities (Europe) Ltd.: Hi. Good afternoon, guys. A question on cost savings guidance, obviously now you're guiding for €1.2 billion, can you just help us understand what was your thinking behind the process? Like, is it a reaction to a worse demand environment than what we were actually all expecting when we started the year? Or is it more a question of you're trying to find more areas of savings as we go deep into the integration process? And also can you clarify us, how much of this €1.2 billion we've already seen in H1, if any, and what should we expect for the full-year 2016 in terms of savings?

Thank you. So, let me just say there are three areas. So, one is the fact that we have made these roadmap decisions and got alignment with the majority of customers means that on wireless former Alcatel-Lucent R&D, that faster progress means that we can reduce the R&D investments in that former product line earlier. So that of course, success in integration has obviously helped our visibility there. Second, overall in the combined company, we are getting deeper and more granular and getting better visibility on where the opportunities forecast in continuous improvement lie. Third, I have said before in a couple quarters regularly that there is something called Smarter Network Program, which is an ongoing efficiency and cost savings program and ongoing transformation, examples of that, reduction of costs in services in the regions, procurement cost reductions, using robotics, using automation, so all these things to me are continuous improvement. So, you combine the two and you have a fixed saving goal of €1.2 billion.

Yeah. And maybe on your question on how much we have seen already first half, so actually very little. So, when you start the program, the first impact is on procurement, and I think that has impacted that we have been able to hold our gross margin pretty well in the Networks business. Then when you go to second half, we will start to see some OpEx impact as well. But as we said after Q1, we expect 2016 really to be a transition year and the majority of the savings start to then come in during 2017 and 2018.

Thank you, Achal. Stephanie, we'll take our next question, please.

Your next question comes from the line of Gareth Jenkins with UBS. Your line is open.

Thanks. Just have a couple of follow-ups on the guidance, if I could. I just wondered whether when you talk about significant Q4, is that over and above normal seasonality? So, you're expecting a seasonably abnormally strong quarter in Q4? And secondly in terms of the margin progress from the Q2 level with the Networks, is that based on the 7% excluding the issues in Brazil? Or is that including? Thank you.

Okay. Thanks, Gareth. Timo here. Maybe I'll take a crack at it. First of all, on the significance to Q4, so when we give drivers to the guidance we really try to have some meaning to them, and in that sense, and I think Rajeev alluded to this as well on his previous answer, so we really think that the pace of the year-on-year decline in the overall Networks business will start to ease first slightly in Q3, and then more in Q4. And that means that when we compare to the combined company historical seasonality from Q3 to Q4, we are expecting it to be a bit better now going into Q4. And then the margin comparison, so we really need to do, the comparison point after 6% both non-IFRS and operating margin, which was the margin we really predicted during the quarter.

Thanks, Gareth. Stephanie, next question, please.

Your next question comes from the line of Alex Duval with Goldman Sachs. Your line is open. Alex Duval with Goldman Sachs, you line is open.

Let's come back to Alex. Stephanie, we'll take our next question.

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

Yeah. Good afternoon, gents. Thanks for taking the question. The first one was on cash flow, so the free cash flow was very poor in the first half, I think you had highlighted that for quite some time. So, I'm just wondering as we look into the second half and then into next year, should we expect basically the cash generation to normalize from here? That's my first question. And then just a brief follow-up on the phasing of the synergies, roughly between 2017 and 2018, of the €1.2 billion, which of the years will see the larger portion? Thank you.

Yeah. Thanks, Kai. So first of all, on the cash flows, as we noted during Q1, we did significant reduction about €1 billion or even bit more of receivables discounting. So that clearly had a big impact, and as I said, if we exclude from our working capital now the incentive payments and the about €100 million restructuring charge, then our net working capital would have been approximately flat. So in that sense, operating cash flow generation is working, as we would have expected. Then if you look at second half, so we clearly have the €1.5 billion dividend, which will impact net cash during Q3, and then we said today that related to both this cost savings program, €1.2 billion as well as the previous programs, we are still expecting about €1.6 billion of cash outflows; so that should give some tools. Traditionally, our operating cash flow has improved during the second half without extraordinary items. And then looking at the phasing of the synergies, I don't think I can give much more here, as I said, we expect some start to come in during second half of this year and then majority in 2017 and 2018.

Okay. Thanks, Kai. Stephanie, next question.

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

Yeah, hi there, good afternoon. I just had a question around the swap-outs. I understand that there is no swap-out cash outflow in the €1.65 billion cash outflow figure. It would be good to get some clarity on what the likely cash outflow would be including swap-outs? And second question would just be, if you give some commentary around pricing? You talked about walking away from deals, has that changed in any way in the last six months? Have you started to walk away from more deals? That would be good to get some clarity. Thank you very much.

Excuse me, this is the operator. We are currently experiencing technical difficulties. Please standby. Please resume.

Okay. So, the question from Rob was some clarity on the swaps. And in terms of pricing, walking away, have we changed behavior in the last six months, so we'll answer those questions now.

Okay. So, thanks, Robert. Timo here. So, first on the swap-outs. So, it is correct to assume that the cash outflows and also the non-IFRS exclusions, which would happen as part of cost of goods sold, are not part of the €1.2 billion, but as we have said very clearly, we are not expecting any kind of level of swaps like what happened in the Nokia-Siemens transactions. We are not expecting billions, nothing like that, and we are still assessing the situation. We are estimating now that the swap cost would be somewhat higher than was in our original case, but as these swap costs will come mainly during 2017 and 2018 and as we now have a good understanding of the overall situation of what needs to be swapped, but we do not yet have a good calculation on how we will do that. Because of course, we'll try to take this cost down as much as possible. I mean do we need one site visit, two site visit? Those kind of things are still working progress and that's why we are at this point in time saying that they will run through our numbers, we will be very clear about what they are, but we are not giving an overall number at this point. But, absolutely not billions or anything like that.

And, thanks, Robert. On the pricing question, the competitive intensity has not changed. It remains as it was when we first talked about a change in Q1 of 2015, no significant change there. But we are seeing some isolated incidents of places where there is macro-economic pressure, that financing requests surface and from some operators also in Eastern Europe, or the pricing is just not worth chasing down. So, we'll walk away from this, because they're not strategic and doesn't make sense. So again, I would say isolated incidents, but the point was more to make that we will not just chase down these for the sake of it, and our business model remains what we are wedded to.

Thank you, Rob. Stephanie, we'll take our next question.

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

Hi, good morning. Thanks for taking my question. I wanted to understand what you mean when you say slight improvement to revenue and margin sequentially in 3Q? First on revenue, you mentioned that you expect the year-on-year declines to abate in the second half of the year, and where do you see the trends in different product segments and geographies? If I do a little bit of math and assume slight is plus 3% to 4% growth that still suggests declines in the Networks business of 10% to 11% year-on-year, which is not much of an improvement of what we saw on the first half. So, is the word slight meant to imply something closer to the mid or high single-digits? And then similarly on margins, you're guiding to Networks margins increasing sequentially slightly from the 6% in 2Q. I guess I'm a little surprised that margins increased only slightly sequentially from that level, if the true adjusted operating margin is 7% adjusted for the Brazil bankruptcy, shouldn't margins increase from that 7% level in 3Q, especially with revenue increasing and synergies starting to kick in? Thank you.

Okay. Thanks, Avi. So, maybe I'll start with that. So, as we said, we are purposely saying a slight improvement to Q3. We are also saying a slight improvement in the, let's call it, base of the net sales decline. So, I don't want to contest your math here in any way, but that's really what slight means to us. And again as I said we are expecting some more impact from the restructuring program or cost savings program to kick in during the second half, but of course, that will also be a bit backend loaded as the programs kick in. There are many areas in Europe especially where the head count reduction simply will not happen yet in Q3 and we are not getting that much operating leverage given the slight increase in top line, so that's really what we are saying. And then we are also saying that we expect significant improvement then going into Q4, and as we said, even a bit more than normal seasonality in that.

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

Your next question comes from the line of Pierre Ferragu with Bernstein. Your line is open. Pierre C. Ferragu - Sanford C. Bernstein & Co. LLC: Hi. Thank you for taking my question. On the slight improvement you just talked about and you expect for the second half, I was wondering how much of what you see today is really related to Nokia and Alcatel-Lucent specifically, and things improving because you're making progress in the slow business you saw in the first half really related to the specifics of you guys working on integrating Alcatel-Lucent and with specific clients having like a lower level of spending related to that. And how much of that is more related explicitly from the wider business and just operators as a whole spending a bit more? And then maybe very quickly on synergies, so you sound like an additional €300 million of synergies which is great. If you could give us a bit of color on where you found this additional synergies. What could you discover getting better access to the members and to the operations of Alcatel-Lucent? Where did you find more to go after? That would be very helpful.

Thanks, Pierre. So let me start. So, it is primarily to do with our execution improving. So even if the market conditions may not improve in the near-term, we believe that we have clear potential to improve our financial results as we proceed through the course of this year, as we said, slight and significant in Q3 and Q4. So, I'm not expecting that there is a strengthening of the market per se, but we are expecting that our own performance based on sales momentum, better order intake, and better handle on the whole company, better portfolio migration plan and so forth will result in better execution even if the market does not improve.

And then on synergies, so this is really broad-based, so it is really in all the areas where we are operating on, so this has to do both with OpEx as well as cost of goods sold. And as Rajeev said earlier, we really have this continuous improvement mindset and we are now adding some of these Smarter Program tools to the original synergy execution. But if I give some examples, so we have now visibility to be able to close even more some of the smaller sites we have. We are combining more of those. We have also better visibility now to what kind of attrition rates, for example, we are starting to see in the company when we are putting some locations together, and then we are driving even more efficiency through tools like automation, even certain robotics, systems in software robotics and those kind of things. So, it really comes from multiple areas. But we are very granular on how we look at this. We're also very granular on how we measure it. So, for example, in the COGS, we are really counting in only the real synergy savings. We have a specific tool with which we follow that. So, it's not like, if our business activity goes down and the COGS goes down, then we've done savings. No, that's not how we look at it.

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

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

Thanks very much. I'm not going to ask about guidance. Rajeev, your principal Western competitor has just entered a period of substantial uncertainty over its management and direction. Do you see material opportunities to take market share in the many Tier 1 accounts where the two of you essentially either split the business or split the business with your principal Chinese competitor? And a question for Timo, you've accomplished the €3.3 billion savings of deleveraging, but you still have €3.5 billion of debt paying around 6% interest costs, which seems rather high in the current environment. Do you see material opportunities to reduce that? And would that have to wait for the remaining squeeze-out to complete and then you could consider refinancing? Thanks.

Thanks, Richard. So, I think two things. One is the broader portfolio. That is really resonating with many, many customers. So, of course, in my discussions with the CEOs, but also borne through what we call the customer perceived value surveys and index that comes through. Like I said, we are right now, highest on that in the sector. So, it's borne through statistical evidence that customers in the majority are telling us that this is going to be a long-term, competitive advantage; having fixed, having IP, having transport, having software layers on top of it. This is the strength of ours, particularly compared to the competitor you just mentioned. Second, yes, we do see some opportunities when there is some uncertainty at a competitor to take some share, and I think in part it's not something we've seen now. It has been something that's been a bit coming, because again the CPV or the customer perceived value is also higher because our product roadmaps, our quality and our features are best-in-class and better than some of the other players. So, I'd say it's looking good from a portfolio standpoint.

Okay. And then on the finance cost question, so you are absolutely correct that we have about €3.5 billion of bonds outstanding, long-term debt with fairly high coupon. And we basically have called all bonds which had that availability, i.e., which had that kind of documentation. And all these bonds which we have remaining have been issued when either Alcatel-Lucent or Nokia had investment-grade credit rating and thus they have quite typical investment-grade documentation. So, we will take a look at this after we have executed the squeeze-out and then we'll of course work deeper into the capital structure. But I just want to highlight that these are not bonds which we could call, so they would really need to be refinanced as you say. But I agree that in current market environment that is something what we should look at. They also have a pretty long duration still, many of them, so need to take all those components into account.

Thank you, Richard. Stephanie, for today, we are ready to take our last question.

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

Thank you for squeezing me in. Just want to ask about the Technologies business. Timo, you mentioned, I'm assuming the €150 million at risk for the deal that's expiring at the end of the year is largely one customer. Could you just talk a little bit about that? What you think for timing, and given your experience with Samsung is that something that could ultimately be a better number for Nokia? Or is that unlikely? And then just what else, if we look at the handset world, who else should we look to for potential new licensees to drive this line? Should it be Chinese companies or expansions with others? Thank you very much.

Thanks, Tim. So, as you would expect that we are negotiating with those licensees where deals will expire, so that's an ongoing process. Second, I will say that Samsung is the first deal that we've done in the new mode of operations, i.e. we're not in the handset business and we're not in the cross-licensing regime, so it is about sole licensing, primarily. So that means it does point to the fact that has been a good result. I'm very comfortable about the sales plans that we've got in place, not just with some of the Chinese players where we are in discussions with, but also other players. So, as we said, roughly half of the device players don't license from us and that is an ongoing set of negotiations. And if we ultimately don't get to the right agreements then we will trigger arbitrations or litigation, as the case may be. In parallel, we've also expanded our sales team to start discussing with the automotive players, with some of the consumer electronics players, with broadcast, and also some IoT segments such as, take the example of building security, fleet management and so on. So, I want to make sure that while we are focused on the ongoing device players, we also want to start extending because the portfolio is quite rich. And clearly when these other segments get connected, there is a clear opportunity.

And maybe just a technical comment on the €150 million, so you asked kind of is there more opportunity on that €150 million going forward? And I would answer exactly as Rajeev said, so Samsung is the first licensing agreement we have done in this new setup. And in that sense, yes, I would say that when I look at the opportunity which relates to that €150 million going forward, it is clearly a positive opportunity, clearly a positive opportunity. But of course, we don't know how and when that would ultimately play out.

Thank you, Tim. And thank you all for your good questions. And with that, I'd like to turn the call back to Rajeev for closing remarks.

Thanks, Matt and Timo, and thanks again to all of you for joining. I'd like to close with a few words. Clearly, we are facing challenges in some parts of our addressable market. That is not a surprise and we have been flagging for some time our expectation that the overall market would be flattish, while the wireless infrastructure market would be down. In the context of those conditions, however, I am confident that we remain well-positioned. Our focus on disciplined management, tight pricing control and a relentless drive to constantly lower costs gives us an advantage that is not easy to replicate in the near-term. Our integration work is proceeding well and we are continually finding ways to improve productivity and deliver further cost savings. Our customer relationships are strong as shown by the customer perceived value score that I mentioned. And we're making good progress in targeting new customers such as web-scale players and new vertical markets. Our innovation engine continues to deliver breakthroughs that matter to our customers that allow us to maintain product leadership in many areas. And our unique portfolio is a powerful asset. In virtually every conversation I've had with customers about the topic, it has been clear that the like the extraordinary scope of what we have. Given the relatively long sales cycles in our sector, we are only now starting to see cross-selling opportunities become a reality. But it is clear that those opportunities are there and we have a growing pipeline of end-to-end deals that leverage products and services for multiple businesses. So in summary, we continue to move forward with focused determination and confidence. And I look forward to seeing you all at our Capital Markets Day in November. With that, thank you very much for your time and attention. 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 risks 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 69 through 87 of our 2015 annual report on Form 20-F, our financial report for Q2 and half year 2016 issued today, as well as our other filings with the U.S. Securities and Exchange Commission. Thank you.

This concludes today's conference call. You may now disconnect.