Hello and welcome to the Nokia first quarter 2018 Earnings Results Conference Call. All participants will be in a listen-only mode. 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 first quarter 2018 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 71 through 89 of our 2017 Annual Report on Form 20-F, our financial report for Q1 2018 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 today. Nokia's first quarter was mixed but underlying those results were some upbeat developments that give us considerable confidence in our ability to meet our guidance for full year 2018. In fact we see an improvement in market conditions from what we shared last quarter. We believe that Nokia is well positioned to outperform in that strength in the market and expect that the mix of issues that impacted our gross margin in the fourth quarter is largely temporary in nature and expect it to improve in the second half of 2018. At a group level, our net sales were approximately flat year-on-year while Networks was down by 2.7% both on a constant currency basis. Nokia Technologies had a stellar quarter driven by recurring licensing revenue with sales up 49% year-on-year also on constant currency. Non-IFRS group operating profit was 4.8% in the quarter down 150 basis points from one year ago. Underlying this was weak profitability in Networks offset partially by considerable strength in Nokia Technologies. Pleasingly, Networks order intake and backlog were excellent in the quarter, particularly in North America. In fact both were among the best that I can recall. We also saw further progress in our diversification efforts as momentum continued with large enterprise and webscale customers. To put our Q1 performance in more perspective, I would like to focus the rest of my remarks on three key topics. First, market developments particularly related to 5G. Second, our Networks gross margin performance, and third, progress on executing our strategy. Let me start with market development and you will have seen that we shared an improved view of market conditions in our earnings report. We also said we expect our Networks business to outperform the market. The…

Thank you, Rajeev. I will start today by spending a few minutes on the financial performance of Nokia Technologies then a few words on taxes and financial income and expense. Next, I will take you through our cash performance in Q1 and key cash items for Q2. And finally, I will walk you through our guidance. Starting with Nokia Technologies, we delivered strong performance in the business in Q1 with net sales up 49% year-on-year at constant currency and operating profit up 136% with growth reflecting very strong execution by our licensing team over the past quarters. And we believe we are well-positioned to extend our track record and deliver on our long-term guidance. On a sequential basis, our recurring net sales increased, primarily based on earlier signed agreements kicking in. You can calculate that we are now at an annual recurring net sales level of approximately €1.4 billion. The operating margin for Technologies reached 75% in the first quarter, driven primarily by higher net sales as well as a decrease in operating expenses. In addition to continued efforts to optimize costs related to our patent portfolio, R&D expenses benefited from the reduced investments in digital media. SG&A expenses also declined, mainly due to the absence of the litigation costs related to Apple, which impacted the year ago quarter. As Rajeev said, we have announced that we put our digital health business under strategic review, which is ongoing. In Nokia Technologies, we are continuing to operate with a very disciplined approach, keeping a close eye on ensuring appropriate investment levels. Moving on to taxes and financial income and expense. As you may remember, we have been involved in a long-standing tax dispute in India related to our legacy devices and services business. The Indian and Finnish governments reached a resolution…

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

Thank you. Our first question comes from Alexander Peterc of Société Générale. Please go ahead. Alexander Peterc - Société Générale SA (UK): Yes. Hi. Thanks for taking the question. I'm just wondering on 5G, do you see primarily the U. S. market accelerating here or pushing for faster rollouts or are there other regions going the same way that primary to 2019? And also will these first rollouts be for stand-alone 5G networks or non-stand-alone? Thanks.

Thanks, Alex. So, let me give some color here and expand on this properly. So we see U.S. doing commercial rollouts beginning in the second half of this year, but we're talking large meaningful commercial rollouts. And in the U.S., the operators will make use of whatever spectrum assets they have. Millimeter wave in case of Verizon and AT&T, some other low band spectrum AT&T might have, T-Mobile 600 MHz, Sprint 2.5 gigs, so the spectrum they have. And then after that, we see, of course, that expanding in 2019. And then in early 2019, we see South Korea that will do a nationwide 5G build. Japan that will get its spectrum in the mid-band around first quarter of 2019 and then will start to build basically in time for Summer Olympics in 2020. Then you'll get China starting in around mid-2019 with tendering activity happening in the first quarter of 2019, so rollouts begins in mid-2019, that will continue in 2020. Then you have Middle East around the same time in 2019 as well, so many advanced countries in the Middle East, Saudi Arabia, Qatar and so on. Nordic countries; Finland, Sweden, Denmark. And then, you'll get a second wave of 5G happening when the mid-band is allocated in the U.S. as well and that will happen around sort of late 2019 and so on. So that's how we see the lay of the land. Then after that will be India because the capacity needs there are becoming quite extreme, say in 2020, and Europe around that same timeframe and then 2021 onwards, the rest of the world.

Thank you, Alex.

Sorry, I didn't answer your non-stand-alone. Let me finish that. So most of the deals we're looking at right now, most of the activity is non-stand-alone, but there is discussion on stand-alone. Stand-alone 5G will come later, particularly for network slicing for industrial use cases.

Okay. Now thank you, Alex. Nicole, please go ahead with the next question.

Our next question comes from Sandeep Deshpande of JPMorgan. Please go ahead.

Yes. Thank you for letting me on. Rajeev, you talked about how you see the orders into the second half of the year in 5G, but you've had low visibility on orders in the rest of the business, 3G, 4G over the last couple of years. So how do we get some sense of your view into these orders and how they're going to progress through the year? Because if you do get strong 5G orders, but in the others at this point there's still some risk.

Yeah. Thanks, Sandeep. I think in a typical year, a more normal year, you get your ups and downs. You look at your order intake, backlog and book-to-bill and that gives you some limited form of visibility. What's different in this year is right at the start of the year we have large, commercial, build-oriented 5G contracts that are in the bag at this point in time. We're actually moving from converting those orders to starting to execute, get the supplies in motion, prepare the services. So that is really different that we have these large contracts already in the U.S. which we know will clearly be there in second half and then we'll start to expand in 2019.

Thank you, Sandeep. Nicole, next question please.

Our next question comes from Richard Kramer of Arete Research. Please go ahead.

Hi. Thanks very much. Just following on from that. We've now seen three quarters in a row where North America orders are down or sales, sorry, are down 20% to 30%, in some cases against declines in previous year, and you're mentioning this large orders. I guess, the bigger question is, are you looking for the recovery to be a sort of mean revision where you get back to previous levels? Or do you think when you look at your order book within both carriers and webscale players and others that they are large incremental bits of business for you to go after either in areas that you weren't present before or where you will take material share. And I guess, for the same notion in China, do you think there is an opportunity for given Nokia Shanghai Bell that you can take materially higher share or get incremental business that you simply weren't seeing before? Or is this just a return to the spending levels we were seeing a couple of years ago? Thanks.

Thanks, Richard. So just at the highest level, I think I will say that the end-to-end portfolio is resonating with customers, particularly in the world of 5G, because 5G is such a reinvention of the network and end-to-end matters much more now than before. Second, I will say that we are well positioned even this year to gain share in mobile, and IT and optical. And in the case of mobile, I see it coming from essentially 5G. And of course, with 5G there's always a bit of acceleration that happens in carrier aggregation LTE-advanced 4G. And then, in the case of IP, routing and optical, it's because of doing well in the service provider space, but also because of our success in enterprise and webscale. So I'll leave it there at the highest level. Of course, china we'll see when the opportunity comes.

Thank you, Richard. Nicole, we'll take the next question, please.

Our next question comes from Andrew Gardiner of Barclays. Please go ahead.

Good afternoon. Thank you. So another one on the 5G side of things, specifically, on the raise in OpEx related to the trials going from €100 million to €200 million. Can you give us any more detail in terms of what has changed relative to January, February time when you first gave that number? Is it in a particular region relative to sort of how you described things in the first question? Or can you give us an idea of how many trials you're working on and how that's increased since earlier this year, just sort of driving the incremental expense?

Yeah. Thanks, Andrew. I think first thing to say is that, we are kind of creating the market here. We see ourselves as really driving the adoption of 5G. For me, it's a good thing that there is more trial activity because it will be a temporarily expense in cost of sales and OpEx, but will drive the long-term super cycle that we're so eagerly waiting for. So we are now doing about 55 trials in about 17 countries, as I said earlier. So that's really what's driving the incrementally high expenses. So I think we will fuel the adoption as needed but, of course, we'll optimize our trial expenses to the extent possible.

Great. Thank you, Andrew. Nicole, next question please.

Our next question comes from David Mulholland from UBS. Please go ahead.

Hi. Thanks so much. Just coming back on the gross margin point. You did quite a good job of answering what's happened in Q1, but if we look back over, say, the last five or six quarters. It's been on a bit of a downward trajectory even before this quarter. Can you just help us understand what's been going on over the last 18 months? And just to clarify, on the commentary you're giving on on improving, how should we think about Q2 specifically? You've been pretty clear on H2 improving, but does that already start moving in the right direction in Q2 as well?

I think, David, on your question. First of all, I'm not sure if I fully agree with your analysis. We have seen kind of mix shifts that have also earlier driven gross margin for us. Now as Rajeev said in his prepared remarks, we had a bit of a perfect storm when it comes to both regional as well as business mix, impacting the gross margin. As I said, I think some of the revenue and mix dynamics that we saw in Q1 we also expect to continue going into the second quarter. But then with the 5G acceleration and that happening in North America, we do see things kind of improving going into the second half. I think it's clear also that this continues to be a competitive industry in which deal discipline as well as continuous cost execution is important. We do need to continue to design for serviceability. We need to continue to take product cost out in the business to be able to maintain the good margin performance we've had also in the future.

Thank you, David. Nicole, next question please.

Our next question comes from Alexander Duval of Goldman Sachs. Please go ahead.

Yes. Hi, everyone. Many thanks for question. Just want to ask a question on the competitive landscape. There've been some news reports about ZTE being subject potentially to ban receiving some components and now also about the possibility of Huawei being subject to restrictions driven by the U.S.? I wonder to what degree that could open up any opportunities for Nokia either from a share gain or profitability perspective as we look forward? Many thanks.

Thanks, Alex. We want to focus on our strengths. We believe we are the only player that has an end-to-end portfolio that operates in a scale way in all markets around the world. And as I've said earlier, really, really think that with 5G end-to-end matters much more, because it is really end-to-end solution. You can't go to 5G just with radio, if we don't do mid-haul and backhaul and fronthaul. You need to able to access fixed wireless access. There are multiple ways to do it. You could do with a fixed proposition like we have called FastMile or with 5G or with 60G-PON solutions and so on. So I think end-to-end will matter much more. It's too early to say what will happen with these sanctions, the impact from our competitors. Having said that, we're a company focused very much on trust and security that's our branding, and we do see longer-term potential opportunities, especially where we compete with them in areas such as optical and fixed and mobile.

Thank you, Alex. Nicole, we will take of a next question please.

Our next question comes from Achal Sultania of Credit Suisse. Please go ahead. Achal Sultania - Credit Suisse Securities (Europe) Ltd.: Hi, thanks. Just Rajeev, one clarification on the outlook comment. So I guess you're talking about losing like 1% to 3% decline in your primary TAM. And basically, if I compare that to your European competition, they're also talking about similar levels. And then, both companies are saying that they're basically going to outgrow the end markets. So I'm just trying to tie this up that are you basically trying to imply that like the European companies are going to take share versus the Chinese? And is it – or is it a function of the fact maybe as you go through the year the demand being much stronger, and we end up seeing a situation where market shares are flat, but the end demand, actually, ended up being much, much better? Thank you.

Thanks, Achal. So what we see at the moment based on our contracts we have for 5G and particularly this North American contract base that we're talking about that will kick in the second half, I would say that we are well positioned to take share in 4G, to take share in 5G, in IP routing as well as in optical. And in the case of optical, it's driven by 5G and webscale. In the case of IP routing, it's driven by, to some extent by 5G, but also by webscale and enterprise, and of course, 4G and 5G is fueled by radio itself. And we have notably, if you look at the Dell'Oro reports, of course our own internal analysis suggest that we actually took share in all of these portfolios in the recent quarters as well. So then, of course, it depends upon who is taking from whom, but I think we've been taking share. And I think we're well positioned to continue to take share. We will outperform.

And I think it's good to note that when we and our European competitor talks about the market, we talk about the different market because our product portfolios address different markets. Their market is more the RAN market. When we talk about our primary addressable market, it is the full market of fixed routing, optical and mobile and the related services. So take that also into account when you do make comparisons between our comments.

Thank you Achal for your question. Nicole, we'll take the next one.

Our next question comes from Mike Walkley of Canaccord Genuity. Please go ahead.

Great, thanks. Just a question about internally developed silicon such as ReefShark. Can you share with us kind of customer feedback? How margins might be impacted when the new product ship, is ReefShark is still in track for the second half of the year and is somewhat – could it be possible some customers waiting for the new architecture creating a much stronger second half versus first half of the year? Thank you.

Thanks, Mike. Customer feedback is fantastic both on this as well as the new chipset in optical PSE-3 because this makes massive MIMO much more relevant because massive MIMO then can be rolled out in the scale sort of way because it reduces the power consumption quite meaningfully by almost half, but also the size of the massive MIMO antenna size that you can actually carry it on the top of the tower as opposed using cranes and so on. So, of course, everything changes with that sort of massive MIMO antenna because then you can really scale it. So, great feedback. It will improve the cost structure over the long term. That's the point of having a competitive cost base product. It will not stop AirScale deployments because AirScale deployments are continuing to grow. And when this comes, which it will still be on track for the second half, this will only help scale it even further with massive MIMO and 4G as well as 5G.

Thank you, Mike. Nicole, next question please.

Our next question comes from Simon Leopold of Raymond James. Please go ahead. Simon M. Leopold - Raymond James & Associates, Inc.: Great. Thanks for taking my question. I appreciate the remarks about the strategic shift to diversify away from telco into markets like enterprise, webscale and cable TV. I am hoping we could get some aspect of quantification of what percentage of your overall sales have come from these verticals historically, where we are today, to help us assess the progress in this diversification effort. Thank you.

Thanks, Simon. So I'll just give you a couple of data points. We said that we grew around 20% this quarter in that business. We grew about 21% in Q4 last year. Overall, last year, we had double-digit growth sort of in the range of about 13% for the full year, last year. So of course, momentum is continued to build. And we did say in Q4 that this was around 5% of our overall Networks revenue.

Right. Small, but growing fast. Thank you, Simon. Nicole, next question please.

Our next question comes from Sébastien Sztabowicz of Kepler Cheuvreux. Please go ahead. Sébastien Sztabowicz - Kepler Cheuvreux SA: Yeah. Hello. One question on AT& T because they target to replace 60,000 third-party routers with their own white box routers notably running on their own operating system. Do you know what kind of routers are we talking about there? And is this something that could impact negatively your IP routing business going forward?

Thank you, Sébastien. I think, I don't know the exact detail of that, but they're probably smaller routers, so they don't typically compete with the kind of stuff that we put to market. So I don't see an impact there.

Okay. Sébastien. We'll maybe follow-up with you in more detail later on that one. And Nicole, we'll take the next question, please.

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

Thank you. Just following on the routers. Rajeev, you mentioned a lot of trials for the new routing platform. Can you talk a little bit about the timing there? And I know you think it's going to help move the webscale and enterprise business. If you could just talk a little bit about routing and also as you move optical in there more, so what do you think margin impact for those businesses will be? Will there be a little cost to get in and then also those customers are known to be difficult on the profitability front? Thank you.

Thanks, Tim. So we are doing about 60 trials, as I said, with FP4. The first part of the routers in FP4 or FP4-based routers have already started shipping in December, the 7750 SR-1 routers. So all on track there, very good customer feedback. Fortunately, this FP4 has also provided a tailwind to our FP3 product set because we have a competitive portfolio and hence we've seen more momentum in the current business as well. If you observe over the last quarters, including this latest one, we are taking share relative to our peers and overall because I think the last two quarters we were just about flat. This time, we were flat on an underlying basis. It's all going well with the portfolio, great feedback on that. In optical, great momentum with webscale. As I said, we've seen now two quarters of extremely good growth in webscale. I would say overall, if you look at enterprise and webscale, they are structurally more attractive on the whole, i.e., higher margin potential in the long-term as well as higher growth.

Thank you, Tim. Nicole, next question, please.

Our next question comes from Douglas Smith of Agency Partners. Please go ahead.

Yeah. Hi, there. You've kept your guidance for 2018 exactly the same in terms of earnings. But within that, considering the report today, has the shift of earnings tilted more towards Nokia Technologies and away from Nokia Networks? Or when all is said and done at the end of the year, will the balance of Networks and Technologies be the same as the assumptions at the start of the year?

So I don't think the shift between the businesses is anything to comment here. I think what has happened, as you saw from the change in our guidance is that we do see that on the Networks side the top line performance will be slightly better than what we guided for previously. But then to offset that impact, we also see that to drive the early adoption of 5G there will be more investment going into trials and so on which then kind of means that there was nothing to update on the profitability and EPS level for the year.

Thank you, Doug. Nicole, next question, please.

Our next question comes from Daniel Djurberg of Handelsbanken. Please go ahead.

Thank you very much. Most questions are answered, but I will ask you about the Nokia Software down 3% in Q1 at constant currency including Comptel. Could you give us the organic growth number at constant currency? And also perhaps comment a bit on the ongoing transmission in this segment? Also if you do have ambition for the enterprise, webscale in this rebuild, and also if you are again interested in looking into the BSS side after exiting the business in 2013? Thanks.

I think maybe first on the organic. So we didn't break it out, but it would have been somewhat more of a decline than the 3%.

Yeah, thanks, Daniel. On the question of the portfolio, so the strategy is working. Yes, there was a speed bump in terms of the financial results in Q1. Having said that, the order intake was quite strong. We're moving with a good backlog. We have been putting a lot of our assets on common software foundation because that will give us agility. It'll also give us a better cost base. We can come quickly with new products and new features and customers like that. Great feedback from customers. It's basically an agile DevOps way of operating. We have built a good sales capability that can target chief marketing officers and CIOs and that's starting to work. So overall, I think the strategy is tracking well, although of course I'm not pleased about Q1 in itself. In terms of BSS, in many of these BSS transformation cases, OSS transformation cases, a lot of our portfolio is in use and then we partner with other players on a select basis and that seems to work well in deal making.

Thank you, Daniel. Nicole, I think we have one more question in the queue. So we'll take that.

Our next question comes from Josep Bori of Berenberg Bank. Please go ahead. Josep Bori - Joh. Berenberg, Gossler & Co. KG (United Kingdom): Hi, good afternoon. Thanks for squeezing me in. One last question here. Ask you if you could provide a bit of an update on what level of demand you're seeing for your routers based on the FP4 chip? Specifically, could you provide some sort of maybe anecdotal evidence of success with your petabyte class router, I think it's the Nokia 7950. Is this being looked at by webscalers or is this pretty much a big telco type of sale? Thank you.

Thanks, Josep. Yes, it is being looked at by webscale players. And of course, a lot of the large operators such as even British Telecom that was there with us on stage when we launched the product, very interested in that product. So I think both on the telco service provider side, but also on the webscale side there is clear interest. This is the sweet spot product for exactly the webscale.

So thank you, everyone, for your questions today. I'd like to now turn the call back to Rajeev.

Thinks, Matt, and thanks, Kristian. And thanks to all for the good questions. I would like to close on a note of optimism, tempered with the reality of some hard work to come, a need to run fast and execute superbly. The reason for optimism is clear, improved market conditions this year as well Nokia's ability to outperform in those improved conditions. We are at the start of a 5G-driven cycle, and there is plenty of opportunity ahead of us. For 2018, we need to run at full tilt to the end of the year. Customer demands will be high and meeting that demand will require tight alignment between our product groups, manufacturing, delivery and services. Of course, these are the kinds of challenges we like, challenges coming from an upswing in the market and strong demand for our excellent products and services. In fact those challenges are really opportunities, and we intend to seize as many of those opportunities as we possibly can. Thanks, again, to all of you for joining and have a great day. With that, Matt, back over to you.

Ladies and gentlemen, this concludes our conference call. I'd 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 71 through 89 of our 2017 Annual Report on Form 20-F, our financial report for Q1 2018 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 your line.