Hello, and welcome to the Nokia Fourth Quarter and Full Year 2018 Earnings Conference Call. [Operator Instructions]. Please note, this event is being recorded. I would now like to do in 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 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 Espo 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 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've identified such risk in more detail on Pages 71 through 89 of our 2017 annual report on Form 20-F, our financial report for Q4 and full year 2018 issued today, as well as our other filings with the U.S. Securities and Exchange Commission. Please note that the result release, the complete interim report with tables and the presentational website include non-IFRS results information in addition to the reported results information. A 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 closed the year with a strong fourth quarter. As you will remember, our view at the start of 2018 was that Nokia's performance would strengthen in the second half of the year, that is exactly what happened. You could see momentum accelerating in Q3 and then even more in Q4. Now to be clear, it was not a perfect quarter, and I would discuss that more shortly, but we saw several positive developments. First, sales growth. Q4 constant currency sales were up nicely on a year-on-year basis. We grew 3% at the Nokia level by about 6% for Networks and by 11% in recurring licensing revenue in Nokia Technologies. Pleasingly, Q4 was the second consecutive quarter in which all of our Networks business groups delivered year-on-year constant currency growth. Full year constant currency growth sales also increased, 1% at the Nokia level, about 2% for Networks and 11% in recurring licensing revenue for Nokia Technologies. With the strong performance in Networks, we believe that we gained share in our primary addressable market in 2018 on a constant-currency basis. While the final analysis is still to come, we expect the assessment to show a 1% to 2% year-on-year decline for the market in 2018 versus roughly our 2% constant currency growth in Networks. It is too early to be precise about exactly where those gains came from, but I would point to small sales and Optical as 2 areas where we gained meaningful share. The second positive development in the quarter was profitability. Operating margin was up across the board at the Nokia level for Networks and for Nokia Technologies. Our full year profitability was dragged down by the slow first half. That said, even if it was not…

Thank you, Rajeev. Today, I will talk about the number of topics, including the financial performance on Nokia Technologies and group and another, as well as taxes, financial income and expenses and our cash performance. I will then provide some details on our new reporting structure and how new reporting standards are expected to impact our financial results as we move to 2019. And finally, I'll discuss the guidance we provided today. Nokia Technologies closed 2018 by delivering another strong quarter in Q4. Net sales in the quarter totaled €423 million, a decline of 24% compared to the year-ago quarter. The decline was due to lower onetime licensing in net sales. Excluding the onetime impacts, our recurring licensing revenues increased 11% year-on-year, reflecting solid progress signing new licensees. Operating margin for technologies was 82% in the fourth quarter, a significant improvement compared to 70% in the year-ago quarter. This improvement was driven by our exit from digital media and digital health, as well as lower litigation and business support function costs. Touching briefly on our results for Group Common and Other in Q4. Overall, net sales decreased by 16% year-on-year on a reported basis and 12% on a constant currency basis. The decrease was primarily driven by Alcatel Submarine Networks, where net sales in the year-ago quarter benefited from specific projects that were completed at the beginning of 2018. Group Common and others operating loss worsened year-on-year in Q4, primarily related to a net negative fluctuation in other income and expense and to a lesser extent by lower gross profit in ASM. Moving to Nokia level results. Our non-IFRS tax rate in Q4 was 28%, resulting in a full year non-IFRS tax rate of 31%. Looking at non-IFRS financial income and expenses in Q4, our year-on-year results mainly reflects higher…

Thank you, Kristian. [Operator Instructions]. Kerry. Please go ahead, sir.

[Operator Instructions]. The first question will come from Andrew Gardiner of Barclays.

I had one for both of you on the margin guidance for 2019. If I look at the midpoints, call it, 10.5%, that's a slight expansion from the adjusted margin you reported last year of 9.7%. You've already outlined how sort of the top line should be flat to up given flattish end market and a little bit of share again. You've got the benefit of the -- sort of the final stage of the cost-saving plan from last year as well as a little bit of savings from the second phase that you just outlined, Kristian. And so OpEx savings with a flattish to growing top line, it implies that using gross margins are flat to maybe even down depending on where we do come in the range in 2019. Rajeev, you've also highlighted sort of some of the positive trends, both product and regional that are in your favor in 2019. So can you help us sort of bridge that gap? Is pricing getting worse? What's leading you to be more cautious in terms of the gross margin progression?

Yes, thanks, Andrew. Maybe I'll start here. So I think, everything you laid out in your question makes sense. So maybe I'll focus on the puts and takes on gross margin as we see it. Yes, there are some positives, but then on the other hand, we are going through a technology cycle here where its normal that the early deals will be competitive and thus, they will be some kind of margin pressure coming from that. Also, when the new technology cycle starts to ramp up the early deliveries, there will be a higher content of hardware and services, which also then has a slightly negative mix. On the other hand, you then have kind of current technologies, where investment levels are going down, where you will have an offsetting impact coming from that. Overall, we are not seeing a change in the pricing dynamics or the competitive nature. So there are some puts and calls here on gross margin as we work through the early phases of the 5G cycle.

Thank you, Andrew. We'll take the next question, please.

Next question will be from David Mulholland of UBS.

So just following off the last question, but looking more 2020. And you've obviously all of your group level and targets. But we have the same visibility on the kind of underlying elements of technology is and networks. So I wonder if you can just comment on whether there has been in a shift in your expectations either size of technologies and profit there versus Networks margins as you roll forward to 2020? And what -- reiterating those group targets would be really helpful?

Yes, I think maybe I'll start and Rajeev can chip in. So clearly going from '19 to '20, we see the 5G delivery is not only being kind of lead markets, but lead market being in volume and then the next markets coming on board. So that's why we see improved market conditions and from that improved growth prospects for the company, which will help on creating scale and operating leverage. On top of that, we see our efforts in software as well as in enterprise further yielding growth opportunities and thus, additional margin. In addition to that, as I said, the full impact from the €700 million cost saving programs that we are currently executing will be seen in that 2020 time frame and that will then further improve our profitability and help us deliver towards the margin guidance that we have for 2020.

Thanks, David. There's not much more to add. Kristian covered it quite comprehensively. I guess, the only thing I'll remind is as I said in my prepared remarks, this virtuous investment cycle will take hold that I mentioned from Optical to macro radio, for coverage of fixed wireless access to network software to IP routing upgrades back to Optical for front haul and then macro capacity and then small and millimeter for densification. So all this will take hold. And as countries into 5G rollouts in 2020, we would get more benefit from this virtuous investment cycle. And then to say that's Phase II will kick in, which is the private wireless thing 5G as well as 4G for industrial IoT option.

And then the licensing opportunities around technology, there is still people to go to get into the paying family. And we have additional Chinese, we have the auto, we have the industrial IoT devices and so on. And that will help us drive also growth together with the brand licensing activities for Nokia Technologies.

Thank you, David. Kerry, we'll take our next question, please.

The next question will be from Sandeep Deshpande of JP Morgan.

Rajeev, my question to you is, I mean, you've changed your commentary for this -- the market progression into 2019. At the same time, you are indicating that you should see improved market conditions in 2019 versus 2018 and that's potentially Nokia will grow in 2019. I mean, can you answer this? I mean, what has changed in terms of -- has there been any change in terms of your view on Nokia market share into 2019? And secondly, with regard to Nokia product and does that remain fully competitive? And that essentially as you said in an opening remarks that there are some puts and takes in terms of how the rollout is occurring. If the rollout was to be faster from your customers, then essentially things might be better during the year overall?

Yes, thanks, Sandeep. A couple of things of -- but overall the big picture is the same, right? So '19 will be better than '18, '20 will be better than '19. We see growth in '20 of 5G. Every major customary is thinking and talking about 5G. 5G is under way. It's going to happen. Private wireless is also going to happen in the enterprise side. I guess, couple of things I would say. One, the market is flat or flattish in '19 because it is country rollout in 5G. Lead countries start due for the full year. North America would be the full year. The other countries starting midway during the year. Second, the 5G ecosystem is still evolving. It is stable, but it is evolving. And it will evolve more and more during the year. And allow me to just spend little bit more time on explaining this because what happens with the 5G ecosystem is, first, hardware need to be available. We've got plenty of hardware largely in place today in many markets, which will be upgrade to 5G. Second, standard into locked in. Some elements of the standards are still moving, not for the first part of mobile broadband or enhanced mobile broadband, but more for the network slicing, part will come a bit later. Third, chipsets devices need to be available. The chipset baseline has being moving until quite recently. And fourth, of course, the software ready to be devices in testing and all that's under development right now. Hence, '19 being staggered and then first half -- second half commentary that we talked about. Having said that, we've also talked about some upsides, maybe North America could get better, maybe Japan will get a better than currently anticipated and then maybe China could start a more accelerated rollout than kind of 5G.

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

The next question will come from Achal Sultania from Crédit Suisse.

Rajeev, you mentioned about 70 5G trials in your remarks. Can you just maybe talk -- help us understand how you're doing in terms of customer acceptances? How easy has been the path of upgradability from 4G to 5G? How competitive your product is versus Ericsson and Hawaii, in general? Any feedback from customers and what you're seeing would be helpful?

Thanks, Achal. First, our 4G product is out there, the product. We're getting fantastic feedback on the 4G product. I mean, with the migration in North America, but also elsewhere, the throughput, the capacity, the uplink, the downlink is meaningfully better than our competition. So kudos to our team for putting on a product that customers is just commenting favorably every other day. Second, that product is upgradeable to 5G, right? And you remember the ReefShark and so on ReefShark waveband chipsets have already been shipping. The other part of the family of the ReefShark will start shipping later in '19 and '20. And then I think it cannot be underestimated this virtuous investment cycle and upgrade multiple domains and how well positioned we are end-to-end as the only player that plays on a global basis. And we've seen evidence of that. We've seen us benefit from routing compared to our peers from 5G, obviously also from the enterprise side, but notably from the 5G. We've seen Optical. We've gained meaningful share in '18 because of the fact that optical growth first because you start putting radio, and so on. So both on the whole, as well is in the as good as anybody else.

Thank you, Achal. Kerry, next question, please.

The next question will come from Sébastien Sztabowicz from Kepler. Sébastien Sztabowicz: Your addressable market broadly stable this year. Could you provide a little bit more granularity by end markets? Where do you see some growth opportunity in the market in your different segment? And where do see some downward pressure?

The overall market flattish, primarily just market, which regions upright.

Right, right. We see, of course, 5G rolling out fully in in North America. So that would well be a growth opportunity. We see that Japan could offer upside as I commented, especially because we work with all the operators. Korea could offer that. Latin America did very well in 2018. So we'll have bit of a tough compare, but the momentum is there Middle East and Africa, partially Middle East, some of the 5G activity will start. So that will be beneficial. Lots of Asia Pacific will -- are weak, Southeast Asia and sort of countries are not a very strong. India has been quite -- done quite well, but the compare will become in '19. And then you have Nordics that will accelerate 5G, so that could provide a boost. China, bit hard to say in terms of exact timing for 5G. I will say that in China, we would be prudent given the profitability challenges when we look at 5G because it could be a reasonable investment, and we will have our focus squarely on the long-term as we make those decisions in China. Nokia Software has growth momentum, but I want to remind you Nokia Software will now have the Applications business, which is all about BSS OSS, policy, charging, analytics, customer experience management. And now we're moving to core there. And core will go through a transition of moving from bare metal to cloud and that will be a drag on a Nokia Software to some extent, but the Applications business I see ongoing momentum. Enterprise, I'm very convinced that momentum is strong and rock solid. Sébastien Sztabowicz: Europe?

Europe has -- of course, we had a good trend in Europe last year, with increased probability as well as flattish -- it depends a bit on the 5G timing, which we can't say with 100% conviction yet beyond Nordics. There a couple of other countries looking at 5G too. But in terms of routing and the pre-5G things, Optical and so on, we have good momentum there.

Thank you, Sébastien. Kerry, next question, please.

The next question will come from Alexander Peterc of Societe Generale.

I would just like to come back a little bit on how growth will phased throughout 2019. You are highlighting a particularly weak Q1, but you don't provide much color. So maybe you could give us more granularity there? I mean, you'll end up at plus 6% like-for-like constant in Networks, which is pretty good. So are we going to go into the clients into the early part of the year, and then more meaningful growth in the second half? And just generally, are we going see the same split of H2 versus H1 as in 2018? And then just secondly, if you could just touch upon the slowdown smartphone market you have licensed this has issued meaningful warnings and our revenue on the reporting of revenue. So is this going to any consequence for your licensing? Or have enough of your new licenses being up?

And I think maybe on the first part of your question. So as we said in our release today and in the prepared remarks, we do anticipate a similar pattern during '19 as we saw during '18. So weaker first half, particularly Q1 and then a stronger -- stronger second half. As Rajeev said, it's partly driven by the fact that 5G rollouts will be staggered. It's will -- it's partly driven by the fact that 5G ecosystem is evolving. And as said in the prepared remarks, that will then mean that getting the software out and getting software asked substances will happen mode during the latter half of the year. I think when it comes to your second question, I think, it's fair to say that a big portion of that licensee is that we -- we have done our utmost fixed term in nature then just as a reminder, many of those licenses are also paid up from a cash point of view to a big extent at the time when the deal is done. So in a similar way as we haven't seen a lot of movement up with a stronger smartphone market, we don't expect that a slower smartphone market would have a meaningful impact on the revenues of Nokia Technologies.

Thank you, Alex. We'll take our next question, please, Kerry?

The next question will be from Paul Silverstein of Cowen.

I was hoping you could give some quantification of the beneficial impact as enterprise grows on your margin structure in quantification will be appreciated?

Thanks, Paul. I think the point is about enterprise margins, right? I don't break out gross margins, except to say that basically margins are for us.

Thank you, Paul. We will move onto the next question, Kerry.

The next question will come from Stefan Slowinski of Exane BNP.

Just wanted to question on your dividend policy. Just saw that, that's been changed wondering what is going to be delivered quarterly? And will be paying first quarterly dividend after the AGM? And does this mean that the fourth installment will actually come in the beginning of 2020?

Yes, so it maybe I'll take that. So first of all, our dividend policy has not been changed. We continued to target a growing dividend. We continued to target a growing dividend by aiming to pay 40% to 70% of non-IFRS EPS taking into account the cash position and our cash flow. What we have changed through on the one hand deliver more continuous return to shareholders as well as to improve the company capital and liquidity management position as a well as it went to align more with our peers particularly our U.S. peers is the payment pattern of that dividend policy. You are right we will now be on a quarterly basis the first installment will be paid after the AGM. And the last installment of the year will be paid thus in the first quarter. So you will be receiving a dividend from Nokia each quarter throughout the year and the last one related to the 2018 dividend will be paid in the first quarter of 2020.

Thank you, Stephan. Karey, next question, please.

The next question will come from a Amit Harchandani of Citigroup.

Amit Harchandani from Citi. I'm trying to better understand the pricing dynamics at this stage. I note that on one hand in your release you have talked about price erosion exiting cost erosion in some of your key geographies, including North America. At the same time, we have heard some customers talk about the fact that any potential action against the Chinese could trigger a price inflation within the industry. So I guess, I'm just trying to understand how do you think about offsetting this balance of price erosion and cost erosion. In terms of how you plan to address it particularly when I look at the margins that you talk about in 2019 and more importantly, the margin jump that seems to be baked into 2020 ambition. So any comments around pricing would be much appreciated?

Thanks, Amit. I think I'll start here. So first of all, we are very data-driven in terms of measuring or pricing, but backwards and as well as what contracts and assigning about what we're approving on a forward basis for predictions. And so the overall pricing environment has not changed so it stable at neutral. I think what we commented last year was that we had some -- price erosion North America do with a solution of 5G with the wanted to accommodate with us in CapEx. Our target has always for cost related to exceed price erosion, of course. So no change overall is what I would say. You would see some situations where because of the new technology inflection point that there might be some aggression from market to market but overall, it's not change. On the China topic, not something that the right time for us to comment on. The situation is still very much in flux and outcome is for the government decided not Nokia. Of course, customers ask for support we will give it at this time, we are closely watching above it.

And maybe to your question on how the pricing link to the 2020 targets, I would say that achieving the 2020 targets is not pricing driven. It's more driven by us benefiting from the 5G cycle as I discussed earlier. As executing on our strategy regarding software and enterprise as well as us getting the benefit from the cost reduction that we are driving. And that will improve margins from '19 to '20 in addition to then the growth that we expect in Nokia Technologies.

Okay, thank you, Amit. Kerry, next question, please.

The next question comes from Simon Leopold of Raymond James.

Maybe following up on the China question. I certainly can appreciate that any shared ships outside of China from Hawaii would take some time. But I'd like to hear your perspective on what you're hearing from your customers and your engagement. And if customers would opt to move away from Huawei particularly those customers outside of China and United States. How long would do such a process it take to play out?

Thank you, Simon. I'm just going to repeat that. We're watching gross development observation is very much in flux and when the time comes we will be there to help our customers.

Thank you, Simon. Kerry, next question, please.

The next question will come from Tim Long of BMO Capital Markets.

Just wanted to ask about kind of the enterprise as well as the cloud players particularly, I guess, as it relates to the newer routers of products that we can you just give us an update on how you are developing with some of the larger cloud players and maybe how you think you can get execute and grew more in some of the larger enterprises as well.

Routing overall, we are deviating in terms of performance from some of our peers in a positive way. The product has very strong momentum, we will now have a year of full availability in terms of the product the supply chain issues that plagued ask during 2018 Art much behind. In terms of large enterprise, we are doing well with our IP routing product particularly with private entity type deals. But also rather large technology enterprises. With Webscale we have been a successful with Apple and show me with the others are still working progress. We have been super successful in optics with the Webscale players. At the foothold, but I have before to move work to do also let's keep in mind that there is sort of moving architecture somewhat closer to switching. And then, of course, you didn't ask the question, but I would say from a 5G point of view, we see potential tailwind they'd as well. Very pleased with the product innovation, the road map and the GAAP that we have in terms of being advanced compared to some of our competitors.

Thank you, Tim. And Kerry, we are ready to take our final question for today.

Your final question will come from Pierre Ferragu of.

I'd like to get back to China I completely understand the on the political situation. I would be more interested in on understanding what happened underground right now. When I see Global year-on-year down 8%. I'd understand what type of shift in is your competitor like new footprint. How can I understand the difference?

We struggled to give you a little, but I question was about progress in China on the ground, correct. Yes

Yes.

China has been slow this year somewhat, we have been successful with Webscale, et cetera, but in terms of the operators given that the massive rollout in the 4G, it's been a been slower to 5G comes on a stream. 5G will be coming on stream I think the spectrum is being awarded, the decision will start to happen at some point in Q2. And then Q3 on what's in the rollout for all the 3 operators. And then we'll have to see prudently how much of shared we want to take a given the profitable challenges that we look at.

Great. Thank you for questions today. I'd now like to turn the call back to Rajeev.

Thank you, Matt, thank you, Kristian, and thank you, all for your questions. I would add to close with two brief thoughts. First, while our 2018 had shared challenges, I think the for the full year underscores the Nokia capacity for pulling through and meeting our commitments to our shareholders and customers. Second, we are focused on the right areas. Capping the full opportunities of 5G and investing in a way to ensure competitiveness. Expanding and software and the enterprise, driving out cost and maximizing productivity and efficiency, leveraging the power of our portfolio and optimizing our organization to strengthen customer focus. All of these actions and many more are helping us to re-energize our operational foundation and put us in a strong position to support our customers and the fact that many market opportunities that lie in front of us. With that thank you, ever so much for time and attention and an umbrella Matt.

Ladies and gentlemen, this concludes our conference call. I would add to remind you that during the conference call today we have made a number of forward-looking statements that involve risks and uncertainties. After results of a million euros for 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 Q4 and full year 2018 issued today, as well as our other filings with the U.S. Securities and Exchange Commission. Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines. Have a great day.