Good morning, ladies and gentlemen and welcome to Nokia's Second Quarter 2023 Results Call. I'm David Mulholland, Head of Investor Relations. And today with me is Pekka Lundmark, our President and CEO; along with Marco Wiren, our CFO. Before we get started, a quick disclaimer. During this call, we will be making forward-looking statements regarding our future business and financial performance and 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 as well as internal operating factors. We have identified such risks in the Risk Factors section of our annual report on Form 20-F which is available on our Investor Relations website. Within today's presentation, references to growth rates will mostly be on a constant currency basis. And on margins, we'll be referring to our comparable reporting. Please note that our Q2 report and the presentation that accompanies this call are published on our website. The report includes both reported and comparable financial results and a reconciliation between the two. In terms of the agenda for today's call, Pekka will give a quick overview on our financial and strategic progress in the quarter. Marco will then go into a bit more detail of some of the key factors impacting our outlook before Pekka concludes with our outlook 2023. With that, let me hand over to Pekka.

Thanks to everybody for dialing in today. We highlighted in Q1 that we were starting to see signs of the economic environment impacting customer spending. And already in the second quarter, we saw some of those signs materializing as it started to impact our sales outlook also in network infrastructure. But we still achieved flat year-on-year sales in the quarter as we continue to benefit from market share growth. Despite the regional mix headwinds that are impacting our mobile networks business, we achieved a 38.8% gross margin and an 11-point operating margin. Considering the 40% drop in North America and even adjusting for the €80 million catch-up net sales in Nokia Technologies, that was a pretty resilient result. If we look specifically at network infrastructure, you do see some divergence in the trends in the business. In IP Networks, we saw some weakness primarily related to CSP spending in North America which led to the 11% drop in net sales. In Fixed Networks, we are seeing two primary effects. Firstly, we are facing some headwinds similar -- related to our fixed wireless access business which still today remains sensitive to a small number of customers. And then secondly, as we see some inventory digestion primarily of consumer premise ONT devices. In Optical Networks, we saw a further strong performance of plus 16% as we continue to benefit from the improved competitiveness of our products and market share gains. In fact, while we are seeing weakness elsewhere, our expectations for Optical this year is one area that has actually improved since the start of the year. In summary, networks, we saw some project timing effects and revenue growth after years of substantial growth but the business remains well supported as it executes on its substantial backlog. From a profitability perspective, the business performed very well. Positive product mix, notably within fixed networks and proactive management of our costs as the sales outlook deteriorated. It meant we were still able to improve our operating margin in NII by 160 basis points to 13.1%. As we look forward, whilst we see some short-term challenges impacting the business, particularly with a softening environment for CSP spending, we remain highly confident in the opportunities ahead for our Network Infrastructure business. In Optical, we continue to believe we are gaining market share. And with the customer traction of both PSC 5 and now lately with PSC 6, we are very optimistic about the potential to continue to grow in this business. In Fixed Networks, we understand there might be some concerns that we are now seeing some slowdown in sales which is why we want to make it clear, as you see in the chart, that the decline is primarily related to fixed wireless due to its sensitivity to a small number of customers. In fiber, after 2 to 3 years of significant growth, we are now seeing some moderation in growth rates and some short-term inventory digestion but the outlook remains strong for this business with a number of government subsidy programs in both the U.S. and Europe only just starting to benefit the market. In IP Networks, while the uncertainty in CSP is impacting demand currently, we have been making great progress in expanding into enterprise and web scale which has increased from 13% to now over 20% of IP net sales. Importantly, we believe we are in a strong position to make further progress into web scale into 2024. This diversification should help improve the structural growth opportunities for our IP Networks business, given the enterprise and webscale TAM is expected to grow at around 6% CAGR compared to the 1% growth for CSP customers. Mobile Networks saw 5% growth in constant currency year-on-year as a result of the continuation of the rapid development of 5G in India, where we continue to gain market share. These were partially offset by the expected decline in North America as customers continue to evaluate their spending plans and deplete their inventories in the quarter. Gross margin declined year-on-year, reflecting the regional mix. Given the slower pace of recovery in North America, we now expect the gross margin to only improve towards the end of the year. With respect to operating margin, a decline in operating expenses, reflecting swift action and cost discipline meant that we achieved 7.9% operating margin, an improvement on Q1. During the quarter, Mobile Networks also launched a series of new products, including basebands, radios and network management and optimization solutions that will drive better performance, lower energy consumption and brings the power of artificial intelligence to Mobile Networks. Cloud and Network Services grew 2% on a constant currency basis, mainly driven by core networks and enterprise solutions. Gross margin declined slightly. However, pleasingly, operating margin improved year-on-year 290 basis points as a result of lower OpEx and other operating income items. At the end of June, Nokia reached an agreement to transfer cloud infrastructure portfolio to Red Hat. And starting in Q1 2024, we will adopt the Red Hat platform as our primary reference cloud infrastructure platform for new customers gradually transitioning existing customers over from Nokia's core networks portfolio. Over 350 Nokia employees are expected to transition to Red Hat to provide continued roadmap evolution, deployment services and support on behalf of Nokia to its customers. One thing to highlight is that just a couple of weeks ago, we signed a long-term patent license agreement with Apple. Obviously, the terms of the deal are confidential but it is one of our longest deals and we are delighted with the outcome. Nokia Technologies saw a 10% increase in constant currency net sales, driven by €80 million of catch-up sales related to deals signed in the quarter. Excluding these net sales, it would have been on a similar level to Q1. We were pleased to sign a number business deals in Q2. Considering our current base of agreements, we now see that our net sales annual run rate would be €1.1 billion from January 2024 subject to any other material developments. We also continued to renew our industry-leading patent portfolio, reaching the milestone of 5,500 patent families cleared as essential to 5G. Enterprise sales had another successful quarter, growth of 27% in constant currency, a key pillar of our strategy. We continue to make good progress towards our near-term target of having at least 10% of our sales from Enterprise which reached 9% on a last 12-month basis. We continued strong growth in both enterprise verticals and in webscale. This is particularly benefiting our IP Networks and Optical Networks businesses and we remain confident of our opportunity to grow here, as I already mentioned. We now have more than 635 customers in private wireless and added 90 new customers in Enterprise. With that, I will now handover to Marco to go into a bit more detail on our financial performance.

Thanks, Pekka and good morning from my side as well. Looking at our net sales performance by region driven again by the rapid ramp-up sales in India which increased significantly year-on-year in Mobile Networks but also saw growth in Network Infrastructure. In Europe, sales grew by 11%, even excluding the increase in Tech which is recorded in Europe and we had strong profitable business growth. And the growth in Middle East and Africa were mainly driven by Cloud and Network Services and Network Infrastructure. There were declines in Asia Pacific, Latin America and Greater China with mixed performance across the business growth. And then the 40% decline in North America was a result of declines across all business groups as inventory digestion continued and CSPs reevaluated their spending plans. So in summary, Q2 reflected the trends we had expected to see with rapid India ramp-up being offset by a slowdown in North America. And if we now move to our P&L performance in the quarter. Our comparable operating margin declined 120 basis points year-over-year. And as expected, we saw the negative impact from regional mix continued in the quarter as India sales grew strongly and North America continued to be weak. However, overall margins were rather resilient, benefiting from both quick actions and cost discipline that we took across the businesses as well as the Nokia Technologies catch-up net sales. We also saw a year-on-year increase in operating income. This was mainly related to hedging in addition to income from the sale of certain digital assets in the quarter. And if we now turn to the operating margin performance by business. As we already mentioned, we were pleased to see the margin performance given the headwinds of growth and regional mix. While Pekka already touched upon many of the drivers, the increases in Nokia Cloud and Network Services and Nokia Technologies were offset by the decline in Mobile Networks margins. Group Common was a net negative on a year-on-year basis, though this is mainly related to venture fund positive that we had last year of €40 million coming to a negative revaluation of €10 million this year. Moving to our cash flow performance in the quarter. We ended quarter two with €3.7 billion of net cash, sequential decline of roughly €600 million. Our free cash flow in the quarter was negative €380 million. As you can see on this slide, the main driver for the cash burn in the quarter was related to performance-related employee variable pay which included in the liabilities line within net working capital. Otherwise, there were small movements in both receivables and inventories within net working capital. We also returned €250 million of capital to shareholders through our increased dividend and our ongoing share buyback program. And perhaps most importantly, we believe our strong balance sheet, including the €3.7 billion net cash provides us with a firm foundation dedicated to this period of uncertainty. And the final slide for me before Pekka updates you on our outlook for 2023, I wanted to revisit a slide that we showed at the start of the year around our cash conversion. So we continue to expect the end of the year with a free cash flow conversion of 20% to 50% of comparable operating profit. However, through the first half, we have seen some slight adjustments within this envelope that we wanted to point out. The two main items are: Net working capital which has continued to be a use of cash this year, reflecting the large 5G deployments in India and their impact, both receivables and inventories. The second item is around the gap between Nokia Technologies operating profit and cash which is also reported in net profit. Originally, we expected this to be slightly positive in 2023. And given the deals that we have signed thus far in 2023, we now expect cash flows to be meaningfully higher than operating profit. Some of the new deals we've signed are coming with some modest prepayments for what would have otherwise been received in 2024. And considering there are still a number of details to broke out here, we will give you a more quantitative outlook later in the year. Our long-term vision to have greater alignment between operating profit and cash remains unchanged and we would expect to move towards much greater alignment from 2025 and onwards. So beyond this year, we continue to expect significantly strong cash flow in 2024 as we work towards our longer-term target of 55% to 85% conversion. And with that, let me pass it back to Pekka to go through our revised outlook.

Thank you, Marco. Let me start by talking about how we see the dynamics unfolding in our market in 2023. We have mentioned a few times already that we see the current macro uncertainty really impacting customer demand this year as inflation and rising interest rates create a greater focus within CSPs on short-term cash flow. This is primarily impacting our Network Infrastructure and Mobile Networks addressable markets. So I want to be clear that this is an industry-wide challenge we face right now and particularly within CSPs and the changes we have made are primarily related to North America. We now forecast 1% constant currency growth in our Network Infrastructure addressable market down from plus 4%, minus 2% in Mobile Networks market, also down from plus 4%. And our outlook for CNS addressable market remains unchanged at plus 3%. So while we have clearly seen a deterioration in the outlook for our markets in 2023, it should be remembered that there are a number of dynamics that clearly support the need to invest in many of our key end markets which I wanted to revisit. For all of the short-term uncertainty, one thing remains clear, data consumption growth will continue. According to Bell Labs Consulting study, data consumption is forecast to grow at between 20% and 30% CAGR through the end of the decade. Considering all of the data reach applications we see, such as generative AI and also new augmented reality devices coming, we see data consumption growth is a demand. Second, if we look at how 5G has been deployed on mid-band sites across the world, excluding China, we still see plenty of potential. Approximately only 25% of sites now have 5G mid-band deployed on them. While penetration rates vary by region, even in markets like North America, where significant deployments have already been made, the region is only 55% complete. Other regions like Europe, Latin America and Middle East and Africa are still in the very early stages. So still significant investments needed around the world. Then looking at fiber penetration, you will see that there is still a substantial amount of fiber that needs to be deployed around the world. And perhaps even more importantly, once that fiber is laid, investments will continue for that same fiber for many years to continually drive higher capacity on these lines. Then turning to our full year outlook that we revised last week. We reduced our net sales outlook for 2023 to €23.2 billion to €24.6 billion from the prior €24.6 billion to €26.2 billion. Proactive action by our business groups to manage cost is largely mitigating the impact to our operating margin and hence, we only narrowed the range to 11.5% to 13% from the prior 11.5% to 14%. You can also see in our report, we have also revised the assumptions by business group for 2023. The main driver here has been around the macro challenges that I've already explained in my commentary. In the second half, we expect these trends to continue to impact our business, meaning we now see second half net sales broadly similar to the first half in both Network Infrastructure and Mobile Networks with some sequential improvement visible into Q4.

Thank you, Marco and Pekka. With that, let's start the Q&A. As a courtesy to others in the queue, could you please limit yourself to one question and a brief follow-up. Maria, could you please give the instructions?

[Operator Instructions] I will now hand the call back to Mr. David Mulholland.

Thank you, Maria. We'll take our first question today from Alex Peterc from Societe Generale.

I hope you can hear me well.

Yes.

Yes.

Excellent. So my first question would be on the good OpEx discipline that you demonstrated in your second quarter that protected margins very well. Do you have any specific new restructuring measures in place? And if so, are there any upfront costs that we should be aware of? Or are you using previously planned and provision restructuring budgets? And do you see from here any need for more comprehensive new restructuring plans in the coming quarters? That will be the first one. And then I have a follow-up.

Thank you, Alex. I want to point out also that the 5% reduction on year-on-year in OpEx is mainly coming from FX. And excluding the FX, it is largely stable despite, of course, the income deflation environment where we are. In terms of the actions, I just want to highlight that we have taken different actions on short term, when it comes to hiring, travel and also the supply chain costs. And considering the change in our outlook, we also have seen benefit from lower variable pay accruals. But of course, the discipline continue into second half of this year. And I also want to point out that the operational model that we have with decentralized responsibilities, the different businesses, the business leaders in these entities are seeing and taking actions whenever they are seeing a need for that. So the speed of actions are fast in this new model that we have. What comes to any future restructurings, we will obviously continue to evaluate our cost saves in light of the demand outlook that we have.

Do you have a follow-up, Alex?

Yes. It's very clear. My follow-up would be on the achieving problem at the U.S. fixed operators in the last-mile copper network that we heard about in recent days. Now I'd just like to hear your take on the situation. Is this a big liability with a lot of cleanup and legal costs from major operators in North America that may put a pressure on their ability to spend on CapEx? Or is it on the contrary, in your view, a catalyst for total fixed access overall that should be beneficial to you as the market leader in this geography in this market area?

Yes. Thanks, Alex. I mean, I'm, of course, aware of this reporting and we've been following that story. But, however, we don't have enough information to really be able to comment your question. Of course, environmental impact must always be a priority. And also note that the companies mentioned in the reporting have issued robust statements in response but a specific answer to your question in terms of the impact should really come from the U.S. operators and not from us. We cannot comment that.

We will take our next question from Francois Bouvignies from UBS.

So I have two quick one and one is very high level. So Pekka, you mentioned in the video and in fairness, you're not the only one. Ericsson as well your competitors talking about this data traffic as a driver of demand and investment in the future and you have this chart as well of data traffic. Now if we take a step back and look in the past, I mean the data traffic has been quite strong and yet the revenues has been barely growing for Nokia as a whole at the group level. Of course, you have different mix but you saw differences of data traffic. And revenues basically grows. And it's true as well for Ericsson, in fairness. So is it the right way to look at data traffic as a growth driver for the business? Or maybe what could change in the future that you could monetize more the data traffic? Maybe that's my first question.

Okay. I mean, obviously, monetizing the data traffic is a highly significant question for operators. And through that, also for us. And it is fair to say that operators have not been particularly good in monetizing the data traffic growth in the past. And now, of course, there are new tools available like 5G slicing and different types of industrial applications. We certainly hope and we work with operators to help them to monitor it better this time. But then there is another angle to this question, too which actually does not have that much to do with the monetization itself. If simply the data traffic continues to grow, operators, if they want to stay in the business, they will have to continue to invest. And this is the reason why we believe that this slowdown in investments in some parts of the world, especially in North America, has to be primarily a question of timing because if one particular operator would not continue to invest, their competitors would. And this is a highly relevant question, both in Mobile Networks and also in Fixed Access. Now in North America, especially when the new funding is available for the broadband for all programs, there will be even more competition between operators who are scrambling to offer new services as quickly as possible once the funding gradually gets available. So the monetization question is a relevant one but we believe that investments will be driven by the growing data traffic even in the case which would be unfortunate where operators would not be able to significantly better monetize the growth in the future.

Do you have a follow up?

Yes. Very clear, Pekka. And the second one is on the 25% of 5G deployed on the mid-band, again, very consistent with what your competitors are saying. Now you have this interesting chart about the penetration by regions and North America seems to be more than 50%. So we would assume that most of the deployment would be from -- excluding North America, India, Middle East, Africa, Latin America which, as we see this year, is the mix seems to be negative on the margin side, the ex North America. So does it mean that from a mix perspective, as we look going forward, this negative mix should continue in the medium term as the growth is coming from other than North America?

Well, if you assume that the end result would be that every market would be at x percent, of course, this will not go to 100% but it will go much higher compared to where it is today. Of course, if the end result would be the same everywhere, then your conclusion would be correct. But we are suggesting that even the North American market is far from complete. So that's why we are expecting a recovery also in that market, at the same time, when the deployment will continue in other parts of the world.

We will take our -- from Sébastien Sztabowicz from Kepler Cheuvreux. Sébastien Sztabowicz: What are the assumptions behind your guidance for 2023? And notably on the margin front, do you assume to resign the licensed Chinese smartphone OEM that you have there to reach your margin guidance for this year? And could you please make an update on your litigation today with OPPO and Vivo, where you are standing? And the second question is on the pricing condition. On the pricing, do you see any change in pricing dynamics now that the market is getting a little bit weaker? Or you still see roughly stable pricing condition?

What comes to OPPO and Vivo litigation and negotiations, those are continuing and we remain confident that we will have a positive outcome on those as well. And of course, we are working on to resolve these disputes as soon as possible. And as you've seen also, there's been several court cases like Germany, U.K., India, Brazil and Netherlands which have ruled in our favor in the past year. So the trend is quite clear here. And what comes to our current outlook assumptions, we see in the -- for the technology part that we expect largely stable operating profit in 2023. And this is assuming that we will close this piece also. And -- but that said, we will continue to prioritize protecting a value of our intellectual property of achieving a certain time line. But remember also that we will have cash-up payments in this -- when these are solved. At the same time, we are very confident that we see opportunities in the new growth areas in the Technologies, live video streaming and audio and IoT and automotive and so on.

When it comes to pricing, I mean in our market, there are always some case-by-case basis. Cases where there are irrational pricing actions by some competitors. But in the big picture, no, we have not seen such. And what I would like to point out is that we actually have an interest to increase pricing discipline in our industry in order to not only protect our gross margins but also to push them up and at least make sure that all the inflationary rapid costs are due to prices then gradually structurally improve them also going forward.

We'll take our next question from Artem Beletski from SEB.

I would like to ask about North America and this 40% decline in Q2 year-over-year. Could you maybe provide some color whether there has been any significant differences between main segments, so basically Mobile Networks or NI? And just looking at the past quarter, has there been any significant shift what comes to the pace of decline in the region?

Thank you, Artem. The weakness was clearly visible in both businesses but the decline was slightly greater in Mobile Networks. And in Network Infrastructure, slightly less. So when we talk about the -- and this is Q2. And then when we talk about the outlook, we see -- as I said, we see some recovery in the second half of the year but it will be slower than previously expected. And while I already discussed the reasons that customer spending plans are increasingly impacted by high inflation, rising interest rates. And what we are clearly seeing and you can see this in operators' public statements also, is that they have strong actions going on to optimize their free cash flow for this year, often connected to their financial covenants and so on. And one lever that they are pulling is their short-term CapEx which is not connected to the mid- to long-term investment needs as we see them. So after a few years of heavy investment in North America, it is natural in these conditions to expect one and see some normalization. But we do continue to believe that it is a question of timing. And once again, slightly more on the Mobile Network side, slightly less on the NI side.

Did you have a follow-up Artem?

Yes. And I would continue on the regional discussion. So when it comes to this astonishing growth in India, what you also recorded in Q2, have you any insight when do you expect the Indian market to peak in terms of basically investment activity?

Yes. I mean, of course, 355% growth is not something that you should expect to continue forever. It has been an incredible growth period in India. Of course, the investments continue but we would expect there to be the moderation in the second half. And the overall result, I guess, will be that 2023 will be an exceptional year in India for sure. We will see some normalization in 2024. But we have to remember, if you compare this to the past that we have taken market share because we broke into big time into Reliance Jio which was 100% Samsung previously. So despite the fact that there will, of course, be normalization in 2024, we believe that in a way the new normal, the new run rate that we will see for our business is India will be clearly higher than what was the case before.

We'll take our next question from Daniel Djurberg from Handelsbanken.

Yes, a question on, you can say, other early high-margin 5G countries, such as Japan and South Korea, et cetera. What do you see there in the outlook? Looking at KDDI, for example, it seems that they are doing some kind of 5G 2.0 rollout, for me at least. And also if you can comment a bit on Western Europe and the trend in the replacement of Chinese gear would be interesting.

Okay. Thank you, Daniel. If I take the Asia Pacific question first. I mean, we are in a strong position in many of the operators there including KDDI and we are seeing some improvements in the outlook over the next 12 months. Too early to quantify, of course but it is going to the right direction. In Europe, we did have pretty good growth. And there, we are taking market share. And I think we have all the possibilities to continue to take market share in Europe. We have to remember that, of course, there is always a connection to the overall economic activity. Some of the operators in Europe are not that strong in terms of their financial strength at the moment which is clearly affecting their investments at the moment but we are taking market share. Fundamentals in Europe, if we compare that to the other parts of the world is the fact that Europe is significantly behind 5G rollout compared to many other parts of the world. So sooner or later, if and when Europe wants to take care of its competitiveness, Europe will have to start investing more in 5G. This is also something that I believe Brussels have understood very well and we would assume that the various regulatory and other discussions would develop to a direction where more investments would be encouraged going forward because this is clearly something that Europe would need big time.

I agree. May I have a follow-up on IP networks? I think you said that they expect to grow with 6% with cyberscale -- hyperscale as well some roughly flattish or 1% with CSPs. Can you comment a bit on the competitive differences between these segments, i.e., your ability to get gross margins out of those two?

The -- obviously, the different segments operators, hyperscalers and then various enterprise verticals in terms of IP routing, they vary. Our focus has clearly been traditionally in CSP routing and namely within CSP routing in CSP edge routing. So now we have two trends which is then also connected to our R&D priorities. One thing is that we are kind of leveraging our natural strength to expand from edge routing to core routing in CSP networks and we have some really promising traction here. Sales cycles are often fairly long here. But with the help of FP5 and the other new stuff that we have, I believe that we have good possibilities there because in edge routing, our market share is in the high 20s. In core routing, it is single digit. So there is a lot of opportunities to improve there; so this is one thing. Then the other thing is then webscalers where we where we see a lot of traction. We are investing a lot in that in our R&D to not only increase our differentiation but also increase our added value. In relative terms so far in webscalers, we have been using a larger share of merchant components compared to tailored silicon. We are investing a lot in this development at the moment. And gradually, we target to increase our share also in conventional enterprise routing. Also, they are starting from larger enterprises where carrier grade quality, carrier grade flexibility and security is required. And the good thing for this is that, looking at how the data security demands are growing in these networks, there is a trend in demand towards more carrier rate equipment which is clearly supporting our growth ambition. As I showed in that chart in the presentation, enterprise now represents 20% of our IP sales, while it was only 10% sometime ago. And this is, of course, a big difference when we compare ourselves to some of the key routing competitors that we have. They are much more enterprise driven and that is clearly the direction we also want to take in this business.

We'll take our next question from Simon Leopold from Raymond James.

Great. First, I wanted to discuss the longer-term expectations for operating margin. I think you've talked about getting 14% or higher. And I wonder if you could give us maybe a bridge sort of like what you have on your Slide 12 as to what are the primary elements that help you get to that in terms of issues like resolving your IPR issues, geographic mix, product mix. If you could help us sort of walk to that what gets you to 14% or higher.

Okay. Thank you. This is, of course, a very large question and it should -- I mean it is worth a deeper discussion that is what is possible right here. But as a starting point, I would refer to the progress update that we provided in Q4 where we provided you with the aspirations we have for the operating margins across each of our businesses. So hopefully, that provides you with some context. But then in terms of the bridge, if I comment the four businesses just very briefly and then I'm sure that there is an opportunity to go deeper later. But in MN, we have already meaningfully improved our product cost and general technology competitiveness. And that is, of course, fundamental to all of this. And that has been clearly going to the right direction. We are now receiving significantly better feedback from our customers compared to a couple of years ago. So now utilizing both the improved technology competitiveness and cost position. We have a clear ambition to gain market share and improve our scale and of course, remaining disciplined on cost. And these factors combined with the maturing 5G product with gross margins, typically improving as this each generation matures gives us a foundation for going after the double-digit margin target that we have for MN. In Network Infrastructure, we are very much focused on growth. We have strong product position, even in the challenging year we are seeing in 2023, as you can see from our margin assumption which is 12% to 14% after 12.2% last year. We are hoping to see some improvement. So beyond that, it really comes down to achieving further scale and commercial discipline, especially in areas like Optical and Submarine Networks. In addition to that, I already -- as part of the previous answer, I talked about the strategy to expand in IP networks. So NI, clearly going to the right direction despite the short-term challenges we are seeing with some large customers, especially in North America this year. CNS, we have been working through our portfolio rebalancing efforts. The latest one you now saw which was the partnership with Red Hat. And this is putting us on a path to improve our margins in the business. And of course, we have strong margin improvement targets going forward as we communicated as part of the Q4 result. CNS obviously is a software business which is developing towards new business models such as Software as a Service. And then finally, Technologies. Obviously, we plan to get back to the €1.4 billion to €1.5 billion run rate. We have to remember that this is 100% gross margin business. So there is a direct contribution from any additional sales. And as Marco mentioned, what we need to get to that €1.4 billion to €1.5 billion, remembering that we are currently at €1.1 billion now after the latest deals that we have signed €1.1 billion from the beginning of '24, what we really need to get there is to finalize the smartphone renewal cycle, including finalizing the -- or solving the ongoing litigations with OPPO and Vivo and their expected continued progress in some of the growth segments where we have really promising stuff going on as well. This would take us to the €1.4 billion to €1.5 billion. So, roughly -- I mean, these are the elements in the bridge that would take us to that at least 14% group margin but I understand there is a lot more detail that we could discuss; but unfortunately, we have to do that another time.

Did you have a quick follow-up?

Yes, quick follow-up, please. In terms of the IP routing segment relative shortfall this quarter and tough comp to last year, what do you attribute that to in terms of issues like customers absorbing inventory, customer concentration or changes in the competitive environment?

It is not -- the last one, it is not a change in the competitive environment. If anything, our relative competitiveness has increased in that. We have an issue with customer concentration. I think it's fair to say that we are still in this business. We are too dependent on a small number of large customers. And then when you see investment slowdowns in a particular region like North America and the largest operators there, the result is the one that you now see in the IP numbers. This is why it is crucially important for the future outlook for the IP business that we do exactly what I was explaining earlier that we need to diversify the customer base to enterprise verticals to webscalers. What we need in that business is a larger number of customers and with a smaller concentration of -- or dependence on a small number of large customers.

Our next question from Joseph Zhou from Redburn.

I have two questions. I'll go one at a time. So firstly, for North America which had a huge decline. And can you compare the current customer inventory level for Mobile Networks comparing that to the Fixed Networks side and also specifically within the Fixed Networks, the FWA versus fiber? And I think one of your peers suggested that for the mobile side, the CSPs, their inventories have come down from up to 4 quarters at a peak to 1 to 2 quarters which is historical average now. And are you seeing the same? Are you seeing the inventory level at these customers at the kind of historical level now or not yet? That's the first question.

If I comment Mobile Networks, so first, of course, we have been seeing the same trend. We saw progress in there in inventory digestion during the second quarter. At some customers, we believe they have returned to more normal inventory levels already [Technical Difficulty] which will impact the second half outlook. So this is clear but we do not believe that we are there yet. Then the fixed side, of course, we have to remember when you go back in history, 2022, you would have seen extremely strong numbers in Fixed Networks. So that's why it's natural to expect some normalization in spending and that's exactly what we are seeing right now. One of the main drivers in the presentation, you saw the chart which kind of highlighted the relative contribution of different product segments in Fixed Access, is clearly fixed wireless access. And in our case, that has been highly sensitive to a very small number of customers. And now especially in North America, now when those deployments are significantly more slow, there is inherently some volatility here. But overall, the demand for fiber is outlook is healthy across the world for fiber. That is clearly one of our strongest segments. We are a market leader in [indiscernible]. And over the coming years, we will start to see the benefit from government funding. And I already referred to earlier, for example, to the bid program that the U.S. government is putting in the investment of tens of billions that will benefit these investments.

Did you have a quick follow-up, Joseph?

Yes. Just a quick follow-up on the OPPO, Vivo situation and there has been a recent quarter ruling by the Indian Delhi High Court against OPPO. It has ordered OPPO to pay the India portion of the last patent licensing fees. And do you expect this to materialize? And what's the timing of this? Can you talk about the implications?

Yes. Thank you, Joseph. Yes, that's correct. There was a positive outcome from Indian court. And as I said earlier, we remain confident about that we will have a positive outcome of OPPO and Vivo negotiations and litigations and we are working to resolve these disputes with both companies. And I mentioned also earlier that not only India but other courts in different parts of the world have had positive outcomes for our part. So we hope that the more we get this positive outcomes, the more clearer [ph] that we are filling [indiscernible].

I think it's really important what Marco said here to understand that when it comes to OPPO and Vivo, we are not asking anything more than what we are asking some other customers. And the deals that we have made this year with Samsung and Apple are on those levels which we have assumed as healthy targets when we put together this €1.4 billion to €1.5 billion target for run rate for mobile -- not mobile but for technology. So those -- both of those deals R&D level that support those targets and we feel that it's fair to require similar levels from OPPO and Vivo as well.

So we'll take our next question from Richard Kramer from Arete.

Pekka, you clearly had visibility of the mix shift in mobile towards India and what that has done to the gross margin. But one thing we haven't heard you talk about is the extent to which the new product portfolio you announced will bake in cost reductions that support a return or a resumption of the kind of gross margins we saw last year. In other words, is the gross margin recovery in mobile dependent on regional mix? Or is there a product element to it with the new portfolio that you announced? And then I've got a quick follow-up on it.

Yes, there is absolutely also a product in this. There is procurement cost and procurement actions, obviously, there is fundamental R&D actions. And of course, the new product generations that we have launched, they will continue to improve our cost position. But I don't think that this regional differences in margin profiles will go away. So the geographical component will also be there but it's definitely not the only component.

Okay. And then my follow-up is on -- you've talked before about the book-to-bill. Can you talk about where that stands in the enterprise side, given that you're still growing but lapping good growth numbers from a year ago and you're increasing customer numbers? I'm just conscious that maybe these private wireless customers that you're announcing are much smaller deals but maybe the book-to-bill extends much further into the future.

We have a healthy pipeline of opportunities and a good backlog. Of course, like in any business, there can be some swings up and down. We saw really, really strong, as you remember, Q1 in terms of enterprise. Now we saw some normalization. But this is the business that we expect to continue to grow and our goal is to see continued double-digit growth in Enterprise to reach at least double-digit percent of our sales. And as you saw the rolling -- in the rolling 12-month graph that we had, we are pretty close already to that. And that's what we announced as a short-term target last January. And then I think the way I put it in the presentation in January was that, first, we wanted to go to 10% and then to 20% and then to 30%. So this actual growth is definitely expected to continue going forward.

We'll take our last question from Sami Sarkamies from Danske Bank.

Just wanted to get some color on the product segments for Network Infrastructure. We are now estimating 100% market growth and sales growth below the group average. Do you expect sales growth in any of the segments on a full year basis? And at which segments should we expect a material decline relative to last year? I think you mentioned, for example, that you have become more positive on Optical Networks.

Yes. I mean, we don't really give a detailed guidance for the full year on the subsegment level. But what I can say is that, if we look at how our expectations have changed during this year and also from Q1, our expectations for Optical have increased while the macro environment has led to a deterioration in the outlook for IP and fixed. So there is a structural change in our expectations within the NI business.

Did you have a quick follow-up, Sami?

Yes. Maybe regarding the new IPR deals that were recorded in Q2. How come this didn't sort of impact the IPO run rate?

Yes. Thank you, Sami. We signed a number of deals during the quarter and different deals has a difference starting point as well. And that's why we are now saying that the annual run rate would be €1.1 billion, considering the deals that we have signed during the quarter instead of the €1 billion that we had in the end of quarter one. And that's how we -- of course, this is not considering additional deals that we haven't signed yet.

Yes. But okay, I'm just maybe wondering this €80 million catch-up payment that -- did that actually result in higher IPR run rate during the second quarter relative to what you had in Q1?

Yes, this is a catch-up. So this is referring to previous periods or other sales. So that's why we are seeing that it's the deals that we signed in the quarter that is affecting the €1.1 billion run rate that we have now starting from January because of the different timings.

So some of the €80 million is excluded from the run rate. That is the point here.

Yes, I understand that but I meant that did you have somewhat higher run rate in Q2 than in Q1?

Yes. Based on the new deals that we signed in quarter two, the new run rate from 1st of January next year would imply that the new run rate is €1.1 billion. And as I said, we have different starting points and different agreements and that's why we are referring to 1st of January. Of course, our ambition is higher than €1.1 billion and that's why we are saying that this is subject to any other material developments such as closing some of the outstanding litigation and renewal discussions that we have.

Thank you, Sami and thank you, everyone, for joining the call today and for Pekka and Marco for your time. Ladies and gentlemen, this does conclude today's call. I would like to remind you that during the 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 as well as internal operating factors. We have identified such risks in the Risk Factors section of our annual report on Form 20-F which is available on our Investor Relations website. Thank you all for joining us today.

Thank you.

Thank you.

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