Hello, and welcome to the Nokia Fourth Quarter and Full Year 2017 Earnings Conference Call. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Mr. Matt Shimao, Head of Investor Relations. Sir, you may begin.

Ladies and gentlemen, welcome to Nokia's Fourth Quarter and Full Year 2017 Conference Call. I'm Matt Shimao, Head of Nokia Investor Relations. Rajeev Suri, President and CEO of Nokia; and Kristian Pullola, 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 67 through 85 of our 2016 annual report on Form 20-F, our financial report for Q4 and full year 2017 issued today as well as our other filings with the U.S. 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 financial report 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.

Thanks, Matt. And thanks to all of you for joining. There are three key topics that I would like to cover today, first, a high-level overview of our fourth quarter and full year 2017 performance; second, an update on some select parts of our company strategy; and third, expected market conditions between now and 2020 and how we expect Nokia to perform in those conditions. I will do my best to be concise in each of these so we have time for Q&A as well. So jumping right into it, let me start with Q4. And I was pleased with our strong performance in the quarter as well as with the fact that we delivered on our guidance for the year. At a group level, Q4 sales were up 5% in constant currency year-on-year. Group-level operating margin was 15%, up 1 percentage point. Group gross margin was a solid 41.4%. As you will recall, we said that net sales in our Networks business will decline in line with our primary addressable market. For the full year, we ended with a year-on-year decline in Networks sales of 4% in constant currency versus an estimated market decline of a roughly similar magnitude. We said that we will deliver a Networks operating margin of 8% to 10% for full year 2017, and we landed at 8.3%. While we would have preferred to be closer to the high end of the range, we were constrained by a number of factors, namely robust competition in China and increased investments we are making due to the opportunity provided by the accelerated time frame of 5G deployments. We said that we will deliver €1.2 billion in structural cost savings in full year 2018, and we remain on track to do just that. In the fourth quarter, our…

Thank you, Rajeev. There are four main topics that I intend to cover today, first, cash and capital structure; second, taxes; third, a few words on financial income and expense and the value of our venture fund investments. And fourth, I'll walk you through our guidance. Starting with our cash performance in the fourth quarter. On a sequential basis, Nokia's net cash and other liquid assets increased by approximately €1.8 billion, with a quarter-end balance of €4.5 billion. Our good performance in Q4 helped us achieve slightly positive free cash flow in the full year when we exclude the one-off cash flow items related to Apple, the German tax case and the premiums related to our bond renewals, as we have guided for. On a net basis, these one-off items generated a positive cash flow of approximately €1.3 billion in the full year 2017. In Q4, Nokia's operating activities resulted in an increase in net cash of approximately €2 billion. This was primarily due to an approximately €1.2 billion decrease in net working capital. As I discussed last quarter, we heightened our focus on working capital in Q4 by introducing clear additional controls and governance; and this led to improved performance in receivables, inventories and liabilities. First, on the decrease in receivables. We sharpened our focus on overdue collections and increased the sale of receivables from an exceptionally low level in Q3. As a result, we managed to bring our overdue receivables to their lowest levels since the closing of the Alcatel Lucent acquisition. In addition, we also received the payment related to the LG arbitration in Q4, which we highlighted as a headwind in Q3. Second, the decrease in inventories. Focus on customer-specific inventories and industry seasonality drove inventories in the fourth -- drove inventories down in the fourth…

Thank you, Kristian. [Operator Instructions]. Nicole, please go ahead.

[Operator Instructions]. Our first question comes from Andrew Gardiner of Barclays.

Mine is really around your 2020 assumptions, specifically in Networks and on the revenue side of things. The guidance you've given for this current year, 2018, clearly takes into account the final stage of the cost savings and the increase in 5G-related spending you've mentioned, so it seems like the margin improvement you're looking for over the next 2 years to 2020 is almost entirely driven by the revenue growth. And you guys are sounding a lot more confident there today than you did back in October or certainly at the Capital Markets Day sort of 15 months ago and again in stark contrast perhaps to how Ericsson framed things yesterday, so I'm just wondering about your own visibilty there. Is this your view on the market? Is it related to visibility on contracts? Are you getting a better idea as to deployment time lines from a broader range of customers, better idea on pricing for 5G? What is it that's underlining that confidence that you're presenting today?

Maybe I'll start, and Rajeev can then complement. So we do -- as I said in my prepared remarks, we do see that the improvement in our Networks margin '18 to 2020 comes from three factors, one, the growth expectations we have for the business; two, the greater R&D productivity that we see as we implement new ways of working and cut down the number of legacy platforms; and three, by lower support function costs.

Yes. Thanks, Andrew. I'll just add. So we have a good working sense of what will happen with regard to 5G in what countries. Yes, it will start with the lead countries U.S., China, Japan, South Korea, Nordics. Some parts of Europe will follow, but we're getting a good sense of what that is going to be like. It is clear that demand is there on the basis of capacity increase. It is also clear that the demand is there from the B2B environment because, industrial companies, utilities, transportation companies, they're really asking our operators to give them 5G capability given capacity latency requirements and so on. Now of course, we look at it differently from another peer or some other peers because we have an end-to-end portfolio. This really is a reinvention of the network as we know it. Our operators, if they go end-to-end with us, will get the benefit of a lower TCO, the total cost of ownership; a higher throughput at the network level, not just at the radio level but at the network level. Think about ReefShark and FP4. And all that being provided together, it will give higher throughput, higher gains, higher user experience to their customers, higher capability to manage this emerging capacity and traffic but also much lower power consumption across the network. I'll give you another quick example in terms of the real opportunity for operators, network slicing. There will be thousands and thousands of network slicing, perhaps millions in the future. And our operators will be able to tap into the demand of an SLA-based business that they can give slices to industrials, a group of clinics and hospitals and so on both regionally and globally for some of the global operators. And we would be able to slice a network at the network level. Somebody else who doesn't have the end-to-end portfolio would only be able to supply, do that at the core network of the radio; and that's just simply not good enough.

Our next question comes from Robert Sanders of Deutsche Bank.

My question is just really around a bit more on 5G, I'm afraid. You say that you think you can increase share in 5G versus 4G, but your 4G share was already pretty high. So it's clearly number one already, so I'm just trying to reconcile that ambition with the idea that China could be a much bigger part of 5G versus 4G in the near term, probably around 50% of the market by 2022 too by subscribers. So are you gaining in China? Or do you think you're just going to be the dominant player in markets like Korea, Japan and the U.S.?

Of course, U.S. will be fairly big in that same time frame. There will be Japan. There will be South Korea, where as you know we have a strong presence. And also the fact that Nordics and some of the European markets are also going to step up to 5G. But your question about market share gain, we're not trying to look at 5G radio market share alone. This is a real opportunity perhaps much more than any technology in the past, 4G or others, to get a higher share of wallet with these customers by giving them that end-to-end network architecture benefit, of which I gave a couple of examples just with the last question. It's a real opportunity. It's much different from 4G. We're already getting all that cross-selling with 4G in many markets, but I'm looking at share-of-wallet increase with key customers that will move into 5G.

Our next question comes from Sandeep Deshpande of JPMorgan.

My question is regarding this transition to 5G as well. We've seen your competitor being very aggressive in the market. They have put out some press releases in the last quarter on share gains. Do you see that it's a repeat of the scenario that occurred from 2010 to 2012? There was a lot of price-based competition in the market, and that caused a significant margin impact to all the companies in the space. And secondly, does this have an impact on your gross margin?

Thanks, Sandeep. It's all a question of balance. So we don't want to lead with price. We will lead with our end-to-end portfolio, again and to the point we just made earlier. And this is really compelling. We'll read -- lead with FP4, ReefShark because ReefShark, this chipset that's coming later in the year, gives very tangible benefits. For instance, massive MIMO antennas will be halved in size, which means you can do volume massive MIMO antennas that you can't do today. So of course, it's a question of balance. We have this pricing discipline. We've got a centralized limit to the party. Yes, it is true. In some markets it could happen with a new technology that, every time you go in, it could get aggressive in some parts. Having said that, we have to remember that, 4G and 3G and other technologies, as they mature at this stage, margins expand because there isn't that same competitive intensity in that business. So it's a question of using the end-to-end, the 4G-5G balance, but you know that we will not take share at any cost. We have to be very disciplined there.

Our next question comes from Richard Kramer of Arete Research.

Rajeev, the logic of buying Alcatel nearly three years ago was both to add products and customer footprint. And I think you can accept that even for us analysts it's been a confusing picture and a lot of fits and starts. Can you now back up your sort of apparent confidence by committing to having a reckoning of the Alcatel deal not just as a defensive move but proving the sort of positive case for the acquisition, balancing the swaps and the restructuring costs which have gone up but also reflecting, maybe by the end of the year, at a CMD, what you see as the expected cash flows and the opportunities in routing and optics and also specifically to the way in which you've added to your radio footprint, especially in North America?

Yes, thanks, Richard. So perhaps Kristian can add, but we have seen a lot more cross-sell now. ALTÁN Redes was a case that was truly end-to-end. It is an example of someone that goes in and starts holding network, that end-to-end is beneficial. So we got full end-to-end in the areas we're present in. We're seeing in Japan, recently won a meaningful fixed deal on the back of being there in mobile. The NTT DOCOMO 5G business that we are doing, we are providing transport. We are providing routing. And then we see fixed opportunities in South Korea, where we've been very strong in mobile. And again, India is already demonstrating with its smart deal, Reliance and others that our end-to-end is gaining more traction. And as I said, given that 5G is a fundamental reinvention, the opportunity becomes greater in that case as well. And then of course, we are getting expansion into webscale. That's a real opportunity in terms of cloud providers with the IP Routing business as you go into FP4. And then there's also the enterprise opportunity, where we're doing well with 21% growth in Q4, 13% overall last year. So we are now well positioned for structurally attractive market expansion. And some of the hassles we've had around the mobile network road map that I've talked about in the past, we are significantly making progress. The AirScale product that's out there in the field is getting much better throughput, uplink and downlink. And the migration is on full swing. So when we get to the other side of the hump, we will have a lot more capacity in our Indian mobile alone just to compete with everybody else in the marketplace too.

No, I think you said it pretty well. So clearly kind of the truly global footprint now gives us scale. The end-to-end portfolio gives us that competitive advantage going into 5G. It enables us to go after the adjacencies and leverage the R&D spend that we do for the operator customers outside of that customer's space when connectivity becomes more relevant also for enterprises in general. And clearly the first years of the integration has also happened in a market environment which has been much slower than what we anticipated when going into the deal. And with 5G, we do expect that, that will reverse some -- to some extent.

Our next question comes from David Mulholland of UBS.

So just to change tack a little bit into the technologies business. Obviously, the first time you're giving a more longer-term comment on the growth in the licensing side of it from €1.3 billion to grow 10% per annum. Can you maybe just help us to understand the building blocks of that in terms of what of the €1.3 billion base needs to be renewed at some stage? What of it might be expiring and not returning? And how much of it is kind of new opportunities that gives you the confidence in growth over that time horizon?

Yes, thanks, David. I will just start with giving you the road map first. So we have made our first entries into China with Xiaomi and then Huawei. We see more licenses to be signed up in China, players that are growing fast in the mobile devices space. India is next, again similar sort of opportunities with moving into mobile device players. India is smaller than China, of course. And then there is the automotive sector, where we've already started to do a lot of groundwork. And then comes the IoT, consumer electronics, broadcast, that sort of space. And then there's brand licensing. So that's the overall road map.

And again, I think, as we said in our guidance, the 10% CAGR takes into account the fact that, as Rajeev said, it's about the new deals, but it's also about renewing the ones that will expire during that time period. So there are some that will expire and there are some that will not expire. We have decided not to go into detail on when our deals expire and where not.

Our next question comes from Simon Leopold of Raymond James.

I wanted to shift to the IP Networks and Applications segment and see if we can get a better understanding of the longer-term trends in light of the fact that routing was a bit weaker in the fourth quarter but optical much better. I don't want to necessarily make the assumption that 4Q paints the picture for the next 2 years. Can you help us understand how you see those 2 particular business units trending in '18 and what the drivers are? Wondering when routing returns to year-over-year growth.

On an underlying basis, Simon, IP Routing grew in Q4, if you exclude the third-party resale that we've been winding down; and also grew in Q3. So we've now had two quarters of growth in constant currency excluding third party. Optical was stronger in Q4. So for IP Routing for us, FP4 now gives an opportunity. And of course, when FP4 is out there, FP3 also gains momentum because you would now have a competitive offering. So we see cloud players as the option really for co-routing, in particular with FP4. We see enterprise, so utilities, transportation, public sector, these are all areas we're getting traction, larger enterprises that use technology as a competitive advantage. Think banks or financial institutions, then of course service providers. And as I commented, mobile backhaul, edge routing access, all of that will get a possible tailwind when 5G comes on stream. And this comment is a little bit beyond 2018. On software, Nokia Software, which is A&A, which is the other part of IP Networks and Applications, there we have a good order backlog. We've had good growth recently. The Comptel portfolio is really helping. The software sales force is in place. The quality of that sales force is high. And the fact also that this -- we are putting all of our software portfolio in that business unit on a common software foundation, which makes the product faster to sell and also more capable to deliver, and all of these things will help that business, especially with a stronger order backlog.

I think then, on the optical side, clearly good quarter in Q4. It's still a business where we drive for further scale to drive up the profitability. It is a market which will benefit from the investments needed for 5G. It's also on market where we feel good about the competitiveness of the product offering that we have. And it's those two things that help to execute a good fourth quarter.

Our next question comes from Sébastien Sztabowicz of Kepler Cheuvreux. Sébastien Sztabowicz: A question on Networks margin. You targeted in the past in Networks a 10% to 15% clean operating margin for the midterm. Is it still a valid target or a valid objective beyond 2020? And also, on 5G fixed wireless access technology, have you noticed any cannibalization impact from this technology on your traditional fixed access business and notably in the U.S. where one big operator will deploy this kind of technology in the coming months?

Yes, so the 10% to 15% of -- yes, absolutely, that remains a long-term objective. We have been specific about 2020 in terms of guidance, but we will continue to aim for more. On the fixed wireless access, no. In fact, we think that 5G will provide momentum to fixed business in general, fixed wireless access as well. We have actually a combined fixed wireless product in that space. It's a new portfolio for us to diversify into. And then if you look at fixed, we are fortunate to have multiple forms of backhaul. PON is an interesting way to do backhaul, especially in countries like Japan. And then there's optical, and then there's microwave. And by the way, also the IP Routing portfolio has mobile backhaul, so -- and then there's fronthaul with optical as well. So all of those could get momentum with the oncoming expansion into 5G.

Our next question comes from Achal Sultania of Crédit Suisse.

Just one clarification on the technologies or rather licensing targets for 2020. So if I understand this right, you got €1.3 billion of revenues last year which is nonrecurring in licensing. Probably €150 million of that is Microsoft, which is all paid for, for the next, like, few years. So like, to grow 30% from that base in spite of a huge FX headwind, you probably need to grow like the -- almost like 40%, which is like another €400 million, €500 million on top of €1.1 billion. So I'm just trying to understand that -- given you've already signed deals with almost like top 6, 7 brands in handsets who account for like maybe 70%, 75% of industrial revenues, like what gives you that kind of visibility that -- especially that we haven't seen instances of a licensing model work in consumer electronics or IoT or automotive so far, like are you already in advanced stages with some of these customers or negotiations which gives you that kind of confidence?

Yes, let me just start by making sure that we are talking about the same numbers. So you're right that the 10% growth guidance in -- is on top of that €1.3 billion number. That includes Microsoft now and is expected to include Microsoft also in 2020 because, if you recall, the Microsoft deal is the only one where we have been very specific on the term. And it was a 10-year deal at the time of the sale of the devices business to Microsoft. So that's going to be included in both numbers, both the base as well as the number in 2020. And then as Rajeev said, the growth we see coming from additional opportunities with the Chinese vendors, from India, from automotive, from IoT and consumer devices as well as then the opportunity we see in brand licensing.

And it is true that, when automotives get connected, the connected car opportunity is in -- is there. And I think there's we have momentum to prove that there will be a clear opportunity to sign up those licensees in due course.

Our next question comes from Aleksander Peterc of Societe Generale.

I'd just like to have a little update on CapEx. This is the second consecutive hike. Could you tell us where this extra funding is going? Because we previously had, like, €500 million run rate. We're now at €700 million for this year, so it's quite substantial. So if you could be -- could we be a bit more precise on that? And just a quick update as well on FirstNet, what's your share there in the U.S.? Is it going to make a meaningful impact in 2018?

I think, on the CapEx side, I don't think there is any drama on that. I think we do see that CapEx and depreciation is going to be at equal levels. Then you have some kind of annual uptick there from time to time. Now we have an additional €100 million planned for this year which is not in then the longer-term €600 million number but nothing specific.

Yes. And on FirstNet, Aleksander, that one, yes, it's -- it could have an impact in 2018. All states are opting in, so that's good news. And effectively, we would get our typical market share with AT&T, at least that's our target, as those things progress.

Our next question comes from Tim Long of BMO Capital Markets.

Rajeev, just wanted to ask on the stand-alone software business. I think that's one of the goals, to get that business ramping a little bit more. Could you talk a little bit about the investment needed or the go to market that might need to shift to get that business to become more relevant? And do you have all the technologies in house that you need to make that business successful?

Thanks, Tim. Yes, clearly we have spent much of 2017 to put that sales force in place; to get the right talent from outside, from companies like Oracle and Amdocs and NICE Systems; and so on. So we're in the right space. These people go and sell to CMOs and CIOs in the operator community, not just to the CTO. And of course, we have that end channel. So that's in place. And we continue to renew and refresh that talent to -- where needed, to ensure that it's of the right quality. So I'm feeling good about the software sales force. And then of course, what's very important for us is the common software foundation so that all of our portfolio can fit on that one common software foundation. That's what best-in-class software companies do, and we are well on track to get all of our portfolio on that software foundation. And yes, so it's looking good. The order backlog was good, as I said. We came with a growth in Q4 again. There are bolt-on-type acquisitions we might look at in that space to continue to fill the portfolio. We have seen more interest in OSS transformation deals. We are seeing interest in IoT; platform-plus-application enablement type deals both towards verticals as well as towards operators. We've seen BSS transformation deals. So our portfolio is in good shape. And the Comptel acquisition actually has really moved the opportunity. The pipeline is pretty strong, with regard to Comptel, on the base of our customers that Comptel didn't have.

Our next question comes from Amit Harchandani of Citigroup.

Amit Harchandani from Citi. My question relates to your 2020 outlook. I was curious to understand what are the assumptions you have made with respect to the customer landscape or the landscape for communication service providers as you take this vision out to 2020. Or what are your assumptions around potential efficiency measures, potential consolidation activity? I know it's a difficult ask, but I'm just trying to understand the level of conservatism baked in at the 12% versus optimism baked in at 16%, so your latest thoughts on the consumer landscape would be helpful.

Yes. So again, I think it's a relevant question. It's one of the things that we have looked at when thinking about kind of who will we sell to in that time frame. That's where also the strategy comes in. There are, of course, assumptions baked in when it comes to how much of the overall connectivity spend will be done by operators and done by enterprise and webscale outside of that, as well as then in which markets we will see what type of moves. But that's kind of a put-and-take assessment and part of the overall assumptions that we've used. I don't think we can go into much more specifics there.

Okay, well, in that case, thank you for your questions today. And I'd like to turn the call back to Rajeev for closing comments.

Thank you, Matt and Kristian. And thank you to all of you for your questions. To briefly summarize. I'm pleased with where Nokia landed in Q4 and closed the year. The fact that we were able to turn-around the net working capital issues that we experienced in the third quarter demonstrates the execution power of Nokia, as does the speed at which we have addressed the portfolio integration challenges in Mobile Networks. 2018 will be another challenging year, and tapping the opportunity of 5G requires additional near-term investment. I am confident, however, that our investment will deliver the right future results. We are not interested in investments without returns, nor in gaining share without profits. That approach is embedded in our DNA, so while we will compete aggressively and expect to continue to win more than our fair share of deals, we will always stay focused on creating real value for our shareholders. And we believe the value is there to be created and have a high degree of confidence that the guidance we gave for 2020 is achievable. Now we will go and get it done. With that, Matt, back over 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 are -- 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 67 through 85 of our 2016 annual report on Form 20-F, our financial report for Q4 and full year 2017 issued today as well as our other filings with the U.S. Securities and Exchange Commission. Thank you.

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