Matt Shimao - Nokia Oyj Rajeev Suri - Nokia Oyj Timo Ihamuotila - Nokia Oyj

Sandeep Sudhir Deshpande - JPMorgan Securities Plc Achal Sultania - Credit Suisse Securities (Europe) Ltd. Gareth Jenkins - UBS Ltd. (Broker) Francois A. Meunier - Morgan Stanley & Co. International Plc Robert Sanders - Deutsche Bank AG Kai Korschelt - Bank of America Merrill Lynch Avi Silver - CLSA Americas LLC Pierre C. Ferragu - Sanford C. Bernstein & Co. LLC Vincent Maulay - Oddo & Cie SCA (Broker)

Good morning. My name is Stephanie, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Nokia First Quarter 2016 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you. I would now like to turn the call over to Mr. Matt Shimao, Head of Investor Relations. You may begin. Matt Shimao - Nokia Oyj: Ladies and gentlemen, welcome to Nokia's first quarter 2016 conference call. I'm Matt Shimao, Head of Nokia Investor Relations. Rajeev Suri, President and CEO of Nokia is joining us today from New York. Timo Ihamuotila, CFO of Nokia, is here in Esbo with me today. During this call, we'll be making forward-looking statements regarding the future business and financial performance of Nokia and its industry. These statements are predictions that involve risks and uncertainties. Actual results may therefore differ materially from the results we currently expect. Factors that could cause such differences can be both external, such as general economic and industry conditions, as well as internal operating factors. We have identified such risks in more detail on pages 69 through 87 of our 2015 Annual Report on Form 20-F, our interim report for Q1 2016 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 results reports with tables available on our website include 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. Rajeev Suri - Nokia Oyj: Thank you. Matt, and thanks to all of you for joining. As you are all aware, today is the first time we are reporting results for the combined operations of Nokia and Alcatel-Lucent since we came together as one company in early January. As I go through my remarks, whenever I talk about year-on-year comparison, I will be using the recast combined company results for 2015 that include Alcatel-Lucent unless I note differently. Those recast figures were released on April 22 and can be found on our website. So, to the quarter, which I would characterize as solid, given that Q1 is typically seasonably weak, market conditions remain difficult and we are in the midst of the complex integration of Alcatel-Lucent. Despite these conditions, we were able to deliver a 25% year-on-year increase in Nokia-level non-IFRS operating profit. Our combined non-IFRS diluted earnings per share was down from Nokia's standalone EPS from one year ago. The decline was driven by multiple factors, including a higher share count and higher tax. From a top line perspective, we saw a Nokia level net sales decline from €6.1 billion last year to €5.6 billion this year. This 9% deterioration is a disappointing result, even if not surprising, and I will come back to this topic when I discuss Mobile Networks where we saw the majority of that decline. Looking beyond financial performance, I am confident that our integration work is proceeding well, that we continue to innovate and target new areas of future growth, and that we are executing well against our strategy for our Networks business as well as for Nokia Technologies. Given the progress we are making, we now have the confidence to say that we expect to deliver a full-year 2016 non-IFRS operating margin in our Networks business of more than 7%. While that sets a flow that is lower than our 2015 performance, I think the reason for that is clear. 2016 is a year of transition for Nokia, a year where we have extensive integration and improvement activities underway. This is particularly true for the first half of the year where we do not expect the typical seasonal pattern of a weak Q1 followed by a stronger Q2. Of course, our long term ambition has to be well above the 7% that we see as the flow for this year. We are also sufficiently confident in our progress to have adjusted our guidance on cost synergies related to Alcatel-Lucent. As you will recall, in October Nokia announced an accelerated target of approximately €900 million of annual operating cost synergies to be achieved on a full-year basis in 2018, one year earlier than planned. Now we are saying that we will deliver cost synergies above €900 million on a full-year basis in 2018. I know that many of you will have questions about how much more, but we are not ready to provide that level of detail. We need to still solidify our plans and we will come back to this topic in coming quarters. With that as an introduction, let me share a bit more detail on our integration progress and then turn to provide some color about our segments. On a broad level, we look at our integration process from four perspectives: customers and portfolio, operational capability, synergy delivery and people-related topics. In all four, we are tracking well, even if there is plenty of hard work still to be done. Let me give some more detail, starting with customers and portfolio. Not only have we moved fast to make decisions about our go-forward portfolio plans, but we've also engaged very deeply with our top customers. As part of that, we have shared detailed migration plans, and many of those plans are already agreed, with more to be locked down during this quarter. Despite the complexity of this undertaking, we are well ahead of what took place in earlier deals, and I'm extremely pleased with the work that the teams have done in this area. As we work through these plans, we are considering a slightly elevated amount of swaps in cases where doing so would put us in a position to accelerate R&D synergies, or move faster to additional sales of the go-forward portfolio. We are maintaining tight control of these cases and are evaluating each based on the potential for long term value creation. Even where swaps might be necessary, we expect in many cases to limit that to baseband units while managing the former Alcatel-Lucent radio installed base by using Common Public Radio Interface, otherwise known as CPRI, or CPRI which I have mentioned on earlier calls. We talked about the importance of CPRI when we announced the Alcatel-Lucent transaction, and we now have clear evidence that it is enabling faster and lower cost portfolio integration. We will share more about the expected costs of these activities in coming quarters as plans become more firm. Second, operational capability. We are rigorous in tracking our performance against a few milestones and are rapidly heading to a point where we can shift our focus from the stabilization of company systems, tools and processes to optimization, from simply ensuring things work across the combined company to ensuring that they work well and efficiently. Lessons from earlier integrations have clearly served us well as have the disciplined, execution-focused culture we have built. Third, on the synergy front, as I just mentioned, we have now changed our guidance to say that we will deliver cost synergies in 2018 above what we originally envisaged when we announced the Alcatel-Lucent transaction. Many of you will have seen that we have already taken action to reduce personnel in a number of countries. While some of these reductions take time, given negotiation processes, others can move quite quickly. In fact, we expect employees in several countries to start moving off payroll towards the end of May. Of course, personnel reductions are just part of our synergy efforts. I will give a few other examples. With our new scale and clear position as an industry leader, we see opportunities to reduce costs across almost all areas of our €13 billion in annual procurement spend. To deliver on this promise, we have over 540 efficiency projects identified with Nokia's top suppliers. 40 of these projects are completed, 200 more are in progress, and the remainder will be largely initiated over the course of this quarter. We are consolidating our real estate footprint with the aim of exiting more than 100 locations by 2018. Work is already underway with several sites closed in the first quarter and another 30 sites targeted to be shuttered in the second quarter. All of this is being managed using the color book process that served us so well in our earlier restructuring. I'm sure that many of you have heard me talk about this methodology in the past, but essentially we maintain different books, such as gray for contractor management, green for real estate, and so on, that provide a direct link between cost reductions and specific lines in our P&L. They also give us the granular information needed to make fast and effective decisions and the ability to track progress against our targets. I will also note that in addition to our synergy efforts, we continue with the ongoing transformation programs that have been so important to our success in recent years. Price erosion is a fact of life in our sector and constantly reducing the cost of designing, building and servicing our products is simply a necessary to remain competitive. Finally, people, where we have made some excellent progress in appointing leaders and managers across the company, and mapping employees to the current themes. We're now taking steps to limit organizational layers, and increase the span of control of any manager. In customer operations, we have also put strong focus on organizing our roughly 2,500 frontline sales account managers by business group and by market, and by putting in place big specific targets and incentive goals, including order intake. This approach not only gives us clarity and focus for stronger sales efforts, but also helps develop sales teams, including systematic efforts toward competence development, account planning, and performance management. With that, let me turn to our segments. And as you will recall, our new financial reporting has three reportable segments. Two of those are in the networks arena: Ultra Broadband Networks and IP Networks and Applications. Nokia Technologies is the third segment. For Ultra Broadband Networks, which includes our mobile and fixed business groups, profitability was certainly an improvement over last year. Gross margin was up by 250 basis points and operating margin jumped from 4% to 6.3%. These results reflect good overall execution, including a high focus on bringing in software sales in the quarter. Sales in the segment were down 12% year-on-year. Behind that number, however, is very strong 13% growth in Fixed Networks, which had a terrific quarter, and a 15% decline in Mobile Networks. Given the size of the Mobile Networks net sales decline, let me pause and make several comments to put the situation in perspective. Although we now have a much broader portfolio than in years past, wireless remains a very large part of our business, and you can see that reflected in our results. So, three key points. First, we have consistently flagged concerns about market conditions in the mobile sector, and even more specifically, in the radio element of that market. There are fewer mega deals available today, and the pricing environment continues to be tough. That said, we have no reason to believe that the competitive situation is getting worse than in earlier quarters. While we have the financial strength to be more aggressive in strengthening our top line, we remain firm in our belief that a strategy focused on a relentless pursuit of growth simply for the sake of growth is not the best way to create shareholder value. Second, given the speed at which we are making portfolio decisions and agreeing on transition plans with customers, we have seen a small number of customers take a pause in purchasing. This is particularly true in North America, and particularly related to the former Alcatel-Lucent portfolio. We do not believe that this will have any meaningful impact on our overall footprint, but there is a time lag for spending to shift from old portfolio to new. Third, as you will recall from our fourth quarter results announcement in February, I noted that the unusually robust growth in the Alcatel-Lucent wireless business, 14% year-on-year, with plenty of healthy high margin software included, will likely have a negative impact on our first quarter at least. I think it is fair to say this cautionary note will turn out to be true for the first half of this year Despite the heavy focus on integration, we continued to innovate in the quarter. Let me share two examples, starting with our 5G-ready AirScale radio access family, which is designed to replace our game-changing flexi base station. This is arguably one of the biggest innovations from Nokia in the past decade. And I do not think we could have delivered on the timing that we did without the technical backing of our former Alcatel-Lucent colleagues. AirScale includes a new base station with future-ready baseband and next-generation RF elements. It supports any radio technology, uses 60% less energy than even the best-in-class flexi, can chain resources to create virtually unlimited capacity and connectivity, and is designed for openness, flexibility and speed. Nokia has long been an innovation leader in the radio world, and with AirScale, I believe we are set to maintain that leadership in 5G and beyond. The second innovation is XG-FAST, from our Fixed Networks group. This is a Bell Labs-developed extension of Nokia's G.fast technology. In recently completed trials, XG-FAST generated data throughput speeds of more than 10 gigabits-per-second, or about 200 times faster than the average residential broadband connection. XG-FAST is a critical technology for using the vast installed base of copper to deliver ultrafast speeds. Now on to IP Networks and Applications, which includes our IP/Optical Networks and Applications and Analytics business groups. Profitability in the segment was strong, with year-on-year gross margins up more than 500 basis points, and an operating margin that more than doubled. This reflects in part efficiencies we are driving in products and services, and is something we are encouraged by as we continue to build our software operations. Sales in the segment were up slightly from the same quarter last year, within this, IP/Optical Networks sales rose 4% to €1.1 billion. Applications and Analytics, which had a tough year-on-year compare given a large project in Q1 last year, saw sales drop 7%. That said, we continue to see considerable opportunity in this business, and to tap that opportunity, we have been investing in a stronger software sales capability, both through external hires and internal development. In IP/Optical Networks, optical sales posted strong double-digit growth, confirming the traction of our WDM portfolio. Net sales of our own IP routers grew year-on-year, but were offset by the lower resale of third party IP routers, which resulted in a slight decrease for total IP sales. This substitution of re-sales with our own product is the right thing to do, but the transition will take some time. We saw good innovation in this segment as well. To cite just one example, we launched new optical solutions that quadruple fiber capacity while enabling unprecedented flexibility. Advances like this are, and will continue to be, essential for meeting surging data demand. In addition, we continue to sharpen our focus on the evolving Internet of Things. While much of our current IoT-related work is with our telco operative customers, we will also expand our activities in select vertical markets: connected utilities, connected cities, connected safety, connected automotive, and connected health, building on the strong software assets we have in our applications and analytics business group. It is clear to us that there are profit pools outside of our traditional customer base where we can add value not just through basic connectivity, but also through device management, security, service enablement and more. Interestingly, in the quarter, Nokia clinched a smart city deal in Dubai and just after the first quarter ended, we signed one in Jeddah, Saudi Arabia. While I will not go into great detail on all of our key regions for the sake of time, I do want to provide some quick perspective on North America and China, as well as activities in the enterprise space. I would certainly be happy to take questions about other regions in the Q&A session. In North America, sales were down 17% in the quarter compared to last year, driven by Mobile Networks. This may be a surprise to some of you, given the performance of one of our competitors, but we think the difference is largely down to different year-on-year compare. The former Alcatel-Lucent had a very strong Q1 2015 in North America, and down to the portfolio transition activity that I mentioned earlier. We do not believe the year-on-year decline is a reflection of any structural issues or lack of competitiveness in North America. In fact, we believe we are well positioned in the market, with deeper customer relationships and a stronger portfolio, thanks to the Alcatel-Lucent acquisition. Greater China saw net sales dip about 5% year-on-year, in line with the general slowing of LTE rollouts. The decline was slightly less than we anticipated, and we continue to win new deals in the region. That said, we continue to expect some decline in the overall market in China this year, and similar to what I mentioned earlier about North America, we are seeing a near-term pause in purchasing, particularly in the former Alcatel-Lucent wireless portfolio. Again, we do not currently believe that this will significantly impact our share in the market over time, just that there is a time lag as migration plans are finalized. Work also remains underway in China to finalize our joint venture related to the former Alcatel Shanghai Bell. In terms of enterprise, we are gaining additional market traction as the demand for large high performance networks grows from customers like banks, utilities, large technology companies and others. While still small compared to our core business with telco operatives, we are seeing double-digit growth in some segments. In general, I expect enterprise customers to become a more meaningful part of our customer mix in the coming years. Now to Nokia Technologies. Net sales fell by 27% from the year ago period, but hurt by a variety of nonrecurring items, including adjustments to accrued net sales from existing agreements. Without those year ago nonrecurring items, net sales would have increased year-on-year by about 10% from higher intellectual property licensing income. We continued to make progress in the quarter to execute on our strategy to expand in both digital health and digital media. After the quarter ended, we announced plans to acquire Withings S.A. of France, a deal that gives us an early position in a large market and an opportunity to build future licensing income. In terms of our digital media strategy, we began shipping our OZO virtual reality camera in the quarter, and have continued to receive rave reviews of the product. OZO is now available in Europe and can be purchased or rented through authorized reseller partners in the U.S. and Canada. We also signed, just after the quarter ended, a deal with Disney that will see OZO support the creation of virtual reality experiences in Disney theatrical releases. Finally, to round out Nokia Technologies, we continued licensing discussions with Samsung in the quarter, as a follow-on to the arbitration outcome with Samsung that was announced in February. These discussions are a big priority for us and receive considerable focus from myself and others on the senior management team. One last comment, and that is that we are planning our 2016 Capital Markets Day to be held in Barcelona on November 15. I hope to see you all there. With that, let me now hand the call over to Timo and then we can turn to your questions. Timo, the floor is yours. Timo Ihamuotila - Nokia Oyj: Thank you, Rajeev. I would like to start my remarks today by recapping the progress we have made around the Alcatel-Lucent transaction. I'll then walk you through Nokia's new reporting structure, along with financial commentary on Nokia Technologies and Group Common and Other in Q1. I will then turn to my typical discussion on our cash performance in the quarter, and lastly, I will spend a few minutes covering our outlook for 2016. Starting with the progress we have made around Alcatel-Lucent transaction since our previous earnings call. As you know, through the initial and reopened public exchange offer for Alcatel-Lucent Securities, and following the conversion of all of the OCEANE extended into the offer, Nokia attained approximately 91.5% ownership of the share capital and voting rights of Alcatel-Lucent. We have been working our way towards the squeeze-out threshold, enabling Nokia to squeeze out the remaining Alcatel-Lucent Securities. The Alcatel-Lucent ADR program was terminated on February 25, which enabled us to acquire a significant number of Alcatel-Lucent shares. As a result, Nokia now owns approximately 94.6% of share capital and voting rights of Alcatel-Lucent. This corresponds to approximately 91.6% of Alcatel-Lucent shares on a fully diluted basis. While we are not yet at the squeeze-out threshold, we remain confident that we'll reach this target. As I mentioned last quarter, we have a number of options available to us in order to reach out to the squeeze-out threshold, which we have detailed in the documentation for the public exchange offer. Given the obvious importance of this and to avoid any unnecessary distractions, we will not specify our next steps more explicitly at this stage. Moving then to our new reporting structure, we published the comparable combined company historicals in our new reporting structure for the new Nokia last month. The structure has been designed to support Nokia's strategic objectives, and reflect the way we evaluate Nokia's operational performance and also allocate capital and resources. We are reporting two segments for Nokia's Networks business, Ultra Broadband Networks is composed of the Mobile Networks and Fixed Networks business groups. These two business groups share many similarities due to the trend towards the convergence of mobile and fixed networking technologies. Secondly, IP Networks and Applications is composed of the IP and Optical Networks and Applications and Analytics business groups. When looking towards future growth opportunities, we see that networks are becoming increasingly software defined and virtualized. The strategic importance of growth is shared between both business groups within IP Networks and Applications. The Nokia Technologies business group forms its own reportable segment. Beginning from first quarter 2016, the majority of net sales and the related cost and expenses attributable to licensing the previous separate patent portfolios of Nokia's Networks business and Bell Labs are now also recorded in Nokia Technologies. In addition to the three reportable segments, we are disclosing segment level data for Group Common and Other. Starting from the first quarter 2016, Group Common and Other includes the Alcatel Submarine Networks and Radio Frequency Systems businesses, which are both being managed as separate operations. In addition, the operating expenses of Bell Labs as well as certain corporate level and centrally managed operating expenses are reported in Group Common and Other. The OpEx of Bell Labs is almost entirely R&D, and represents the majority of the R&D expenses of Group Common and Other. Then turning to financial commentary on Nokia Technologies. Excluding the non-recurring items, which benefited the top line in the year ago quarter, Nokia Technologies delivered net sales growth of 10% year-on-year. In Nokia Technologies, we continue to focus our research investments towards digital media and digital health and our SG&A investments on ramping up the business. Rajeev spoke earlier about our intention to acquire Withings, in order to accelerate Nokia's entry into digital health. The acquisition is expected to be an all-cash transaction and priced at €170 million. As we have stated numerous times, digital health is an area of notable interest to Nokia and we regard the acquisition as a natural step that will enable us to accelerate our strategy execution. The main building blocks of Nokia Technologies strategy are now in place with the exception of brand licensing. Going forward, we will continue to apply our structured gated investment process that is designed to allowing our spending with our progress, as well as the market opportunities. Moving then to the performance of Group Common and Other in Q1. The overall revenue that we report under Group Common and Other increased by 16% year-on-year. The growth was driven by Alcatel Submarine Networks, which saw its net sales surge as the business benefited from the strong pipeline of orders that had been built. Improved sales mix and acquiring full ownership of ALDA Marine on March 18, 2015, boosted ASN's gross margin compared to the year ago quarter, benefiting the results of Group Common and Other in Q1. Radio Frequency Systems, which is a smaller business, on the other hand, suffered from weak demand in its addressable market as its sales dropped significantly compared to Q1 2015. This weighted on the results of Group Common and Other compared to the year ago quarter. We cannot be happy with the performance of RFS, and we plan to drive operational efficiencies across this business. Next I would like to spend a few minutes discussing taxes. As you well know, the former Alcatel-Lucent had a very different geographic footprint compared to the former Nokia, which is also why the two companies make such a great complementary fit. However, from a tax perspective, as Nokia now runs its operations mainly via three tax jurisdictions, Finland, France and the U.S., there has been an unfavorable change in our regional profit mix. We now have a strong presence in the U.S., where the local corporate tax rate is high compared to Finland. In addition, despite recording a loss in France in Q1, we did not record a tax benefit as we have a history of losses in France and do not, at this point, have a clear line of sight to be able to utilize the unrecognized deferred tax assets in the country. As a result, we had a significantly higher effective tax rate of 50% in Q1 compared to the former standalone Nokia structure. However, please note that we expect our cash taxes to be lower than our P&L taxes for some time, as we utilize previously recognized deferred tax assets. We provided guidance for cash taxes in 2016 to be approximately €400 million, and for our effective long term non-IFRS tax rate to be clearly below the full-year 2016 level. I will discuss our new tax guidance in a more detail later in my remarks. In note 9 of our earnings release, we disclosed information on Nokia's deferred tax assets. The recognized deferred tax assets totaled approximately €5.3 billion at the end of Q1. Of this, approximately €2.1 billion related to the U.S. and approximately €2 billion related to Finland. Based on our recent (27:46) profitability in the U.S. and Finland, and forecast of our future financial performance, we expect to be able to utilize these tax assets over time. In addition to the recognized deferred tax assets, Nokia had approximately €12 billion of unrecognized deferred tax assets at the end of Q1. The majority of this being in France and in the U.S. While some of the unrecognized deferred tax assets may be available to us at later stage, it is important to acknowledge that most of the unrecognized tax assets in the U.S. are expected to expire before being utilized, partly due to the limitations arising from the ownership change in Alcatel-Lucent acquisition. Turning next to our cash performance during Q1. On a sequential basis, Nokia's gross cash increased by approximately €2.6 billion, with a quarter end balance of approximately €12.5 billion. Net cash and other liquid assets increased by approximately €470 million, sequentially, with a quarter-ending balance of approximately €8.2 billion. The sequential increase in Nokia's net cash and other liquid assets in the first quarter relate primarily to approximately €2 billion of acquired net cash and other liquid assets of Alcatel-Lucent. These positive cash inflows were partially counterbalanced by a negative change in Nokia's net working capital of approximately €1.4 billion, driven primarily by a decrease in short-term liabilities, an increase in inventories, and an increase in receivables. In addition, cash outflows related primarily to previous restructuring programs had a negative impact of approximately €180 million on Nokia's net working capital in Q1. Looking at working capital in more detail. First, on short-term liabilities. The cash outflow in Q1 was approximately €1.1 billion, and was primarily due to decline in accounts payable of approximately €650 million, of which approximately €350 million related to our actions to harmonize working capital processes and practices, particularly in the area of payables. In addition, we had approximately €280 million of cash outflows related to the termination of Alcatel-Lucent's license agreement with Qualcomm and approximately €200 million of cash outflows related to the decline in accrued expenses and other short-term liabilities. Second, on inventories, the cash outflow was approximately €220 million related to a seasonal increase in inventories. And thirdly, on receivables. The cash outflow in Q1 was approximately €40 million, and was primarily due to a reduction in the sale of receivables for approximately €1 billion in accordance with our capital structure optimization program, almost completely offset by cash inflows related to a seasonal decline in receivables and cash inflows related to catch-up payment... (30:49-31:09)

I'm sorry for the interruption. We are currently experiencing technical difficulties, so one moment while we resume. Timo Ihamuotila - Nokia Oyj: Okay. Are we good to go? Matt Shimao - Nokia Oyj: Stephanie, can we continue?

You're back on the line. Timo Ihamuotila - Nokia Oyj: Okay. I will continue on the cash flow section. So, in addition, Nokia had cash outflows of approximately €130 million related to income taxes and cash outflows of approximately €170 million related to net interest. And lastly, foreign exchanges had an approximately €110 million positive impact on Nokia's net cash in the quarter. Looking further into 2016, the bonuses paid under the incentive programs of both Nokia and Alcatel-Lucent will have a negative impact on Nokia's cash flow in Q2. Please note that, due to the later timing of our Annual General Meeting this year, the dividend payout is expected to take place in early July, impacting our cash flows only in Q3. In addition, we expect the restructuring related cash outflows to become more material as our restructuring progresses. Moving then to a detailed overview of our guidance for the year, starting with Nokia's Networks business. In February, when we reported the Q4 2015 earnings, we felt that the acquisition of Alcatel-Lucent was too recent to provide annual operating margin targets for the Networks business. Now that we have had a few months of operational and integration experience as a combined company, we feel more comfortable to comment on the full year. As Rajeev said in his remarks, we are expecting a transition year ahead. In addition to a challenging market environment, we are focusing significantly on the integration of Alcatel-Lucent in 2016, particularly in the first half of the year. While our visibility into the year is still not as good as we would like, we believe Nokia's Networks business will be able to deliver non-IFRS operating margin above 7% for the full year 2016. Then on Nokia Technologies. As we said last quarter, we don't see that it would be appropriate to provide annual targets for net sales for fiscal year 2016. As a consequence, we do not intend to provide an outlook for the Technologies business in our quarter reporting during 2016. And finally, on the Nokia group level targets, in February, when we announced Q4 earnings, we accelerated our annual interest expense reduction target of approximately €200 million by one year, to 2016. In the first quarter of 2016, non-IFRS financial income and expenses were a net expense of €67 million, and we can now say that the annual run rate interest expense savings was approximately €300 million exiting Q1. Achieving and greatly exceeding the interest expense reduction target demonstrates the determination and pace at which we have begun to address the synergies. It is with the same determination that we have begun to execute the operating cost synergies. We have already started the process to reduce overlapping personnel worldwide. In addition, we have also begun concrete actions in the areas of real estate and procurement. As we execute and learn more, our visibility continues to improve. We are pleased with our progress so far, and have now a better understanding on the level of cost savings that is achievable to us. Hence, we have today updated our guidance for the net operating cost synergies in full year 2018 to reach above €900 million. Our plan is to provide you with quarterly updates on our progress towards the €900 million and above, starting from Q2. On non-IFRS financial income and expenses, we expect this to be approximately €300 million in the full year of 2016. It's good to note that the figure includes primarily net interest expenses related to interest-bearing liabilities and gross cash interest costs related to the defined benefit pension and other postemployment benefit plans, as well as the impact from changes in foreign exchange rates on certain balance sheet items. This outlook may vary, subject to changes in the above listed items. Next, on taxes. In the financial year of 2016, we expect Nokia's effective non-IFRS tax rate to be above 40% for the full year. The increase in the non-IFRS tax rate for the combined company, compared to Nokia on a standalone basis, is primarily attributable to an unfavorable change in the regional profit mix as a result of the acquisition of Alcatel-Lucent. Note that this outlook is for the full year 2016. Our quarterly non-IFRS tax rate is expected to be subject to volatility, primarily influenced by fluctuations in profit made by Nokia in different tax jurisdictions. We will optimize the tax setup of Nokia after reaching 100% ownership of Alcatel-Lucent. In the long term, we expect Nokia's effective non-IFRS tax rate to be clearly below the full year 2016 level. Our intention is to provide further commentary on this later in 2016. Furthermore, aided by significant amount of deferred tax assets, we expect annual cash outflows related to taxes in the full year 2016 to be approximately €400 million. As with the effective tax rate, it is important to note that the cash tax figure may vary due to fluctuating profit levels in different tax jurisdictions, and the amount of licensing income subject to withholding tax. Lastly, on CapEx, which is primarily attributable to Nokia's Networks business, we expect the CapEx in the full year 2016 to be approximately €650 million, as we begin to accelerate investments in 5G, IoT, digitalization and other areas where we see long term opportunities. Finally, I would like to remind you that we will be hosting our upcoming Annual General Meeting in Helsinki on June 16. As Rajeev already mentioned, we are also planning a Capital Markets Day later this year, on November 15 in Barcelona. We held the last CMD back in 2014, shortly after embarking on Nokia's transformation into a global leader in the technologies that connect people and things after selling substantially all of the devices and services business to Microsoft, and acquiring Siemens' stake in NSL. We have continued our remarkable transformation since 2014, and at the CMD this year we want to provide you with a comprehensive update on the progress we have made, especially around the ongoing integration and synergy execution. I hope to see many of you in Barcelona. And with that, I'll hand it over to Matt for Q&A. Matt Shimao - Nokia Oyj: Thank you, Timo. For the Q&A session, please limit yourself to one question only. Stephanie, please go ahead.

Certainly. Our first question comes from the line of Sandeep Deshpande with JPMorgan. Your line is open. Sandeep Sudhir Deshpande - JPMorgan Securities Plc: Yeah, hi, Rajeev. My question is regarding this decline in sales in Q1 in the wireless business. There was a comment from Timo as well as from somebody at Alcatel, which said that there is some level of one-off element in these sales because there will be aggregation of portfolio from Nokia and Alcatel. Do you expect to see some of these sales come back later in the year? And if the sales don't come back later in the year, can we, under your cost-cutting plan, expect to go to that kind of 10% sort of margin that Nokia Networks used to have? Thank you. Rajeev Suri - Nokia Oyj: Thank you Sandeep. So the decline in Mobile Networks sales is largely attributed to the transition issue that we are facing, particularly in the first half, because we have moved really fast on the portfolio migration plans, better than we expected, in the first instance and in negotiating and discussing this with large customers. So we've seen that in North America, and to a certain extent also in China where the overlap is there. It is important to note that there is no loss of footprint, and, of course, we are squarely focused on the fact that there should be no loss of footprint as we migrate to the future portfolio. And then we'll also have seen in North America that one customer that was pending in TD-LTE compared to a year ago on both Alcatel-Lucent and Nokia footprint are not spending the same amount sort of this year. So it is reasonable to expect if we don't have a loss of footprint when we migrate to the future portfolio that that market share will be retained, and that is an important goal that we are focused on. On the cost plans, naturally, our synergy we have said that we expect above €900 million. We're tracking quite well. I gave a comprehensive update on where integration is and our synergies are progressing, so we continue to see better visibility on cost opportunities as we move forward. Timo Ihamuotila - Nokia Oyj: (41:03) the 10% margin question, which I wasn't quite sure if it's related to sort of this year or some longer term, but on the margin, first of all, we have now guided that we expect the non-IFRS operating margin for the Networks business to be above 7% for 2016. We think that that's a realistic number, given our current visibility and also believe we can come above 7% with solid execution. Now, then, if the question was more sort of related to long term, we are simply not kind of like saying anything else that this 7% is really related to 2016 which we see is a transition year with lot of integration ongoing, and we don't feel that that should be used as a basis for any kind of longer-term margin analysis. Matt Shimao - Nokia Oyj: Thank you, Sandeep. Stephanie, we'll take our next question, please. Please limit yourself to one question only.

Your next question comes from the line of Achal Sultania with Credit Suisse. Your line is open. Achal Sultania - Credit Suisse Securities (Europe) Ltd.: Hi, thanks. And just a couple of questions. First one, you're talking about sub-seasonal improvement in the business in Q2, and basically it's related to the demand situation and potential integration issues ahead. But at the same time you are also increasing the cost synergies target. So I'm just trying to think, is the incremental savings beyond €900 million, should we assume this to be a minor number, or the integration issues in Q2, like the cost of swaps out or the top line is something which is creating uncertainty around Q2 profitability? And then I have a follow-up as well. Timo Ihamuotila - Nokia Oyj: Okay, so Timo here. Thanks, Achal. Maybe I'll start this. So, I would really decouple the Q2 from the higher synergy estimates which we gave today. Of course, we are now in the midst of planning of getting the synergy benefits out, and as Rajeev said, we have a lot better plans now ongoing, but of course, executability of this has started after Q1. We are just going to see maybe the first personnel reductions during later part of Q2, maybe in some countries a little earlier. And so that €900 million is not really having much impact on Q2. What we are talking about Q2 really here is that the transition will continue and we will have likely some of the similar characteristics as we are having in Q1, and that simply means that we have called – that we are not expecting kind of like the more normal seasonal pattern where Q2 would be clearly higher both on top line and margin than Q1. Matt Shimao - Nokia Oyj: Thank you, Achal. We'll take your follow-ups off line. Stephanie, next question, please.

Your next question comes from the line of Gareth Jenkins with UBS. Your line is open. Gareth Jenkins - UBS Ltd. (Broker): Yeah. Thanks. I appreciate that you're not setting revenue targets for the year, but I think in the past, Rajeev, you've talked about a declining RAN market being offset by fixed assets that you've acquired. Is that commentary still valid for the year? Do you feel that you can get back to a position of stability by year-end in the business given what you're seeing in radio access in terms of swap outs et cetera? Thank you. Rajeev Suri - Nokia Oyj: Thanks Gareth. So we have said consistently that we expect the wireless market to be softer this year, in particular in radio, and that we continue to maintain. Now, you take a long term view of our opportunity given the expanded sight of the portfolio, the end-to-end nature of the company, clearly there are segments such as Applications and Analytics, IP and Optical, and even Fixed, which is going through a secular trend due to the ability particularly in areas such as Europe to supercharge copper on the back of DSL deployments with G.fast and XG-FAST. So there are businesses that have multi-year growth opportunities, and there are others that would be sort of managed more for efficiency yet within those such as public safety and LTE, small cells, there are opportunities of growth even within Mobile Networks, as densification starts to take hold before LTE evolution or 4.5G, before 5G comes around. So that's the way I see it. But when it comes to maintaining share, that's something we're focused on, but we will not try to grow top line for the sake of top line by sacrificing gross margin in a competitive environment. Matt Shimao - Nokia Oyj: Thank you, Gareth. Stephanie next question, please.

Your next question comes from the line of Francois Meunier with Morgan Stanley. Your line is open. Francois A. Meunier - Morgan Stanley & Co. International Plc: Yes, thank you. I'm quite amazed actually by the performance in Networks regarding the gross margins. So volumes went down, but gross margin is up 340 bps year-on-year that's extremely remarkable given the industry conditions and what's going on. So maybe could you quantify what happened between Q1 this year and Q1 last year? Is it because you had more software sales this year, maybe less reselling of low margin Juniper product? Or is it just because maybe pricing improved a bit or you've done some operational improvement? I just would like to understand a bit this large positive move. Thank you. Rajeev Suri - Nokia Oyj: Thank you, Francois, for the question. So first we saw Mobile Networks. We saw higher software sales compared to Nokia's standalone results in Q1 2015. We saw higher gross profit from the Fixed business within the Ultra Broadband Networks segment. Yes, we did see less third party router sales which come with lower gross margins, so the impact of that (47:18) improved gross margin for the IP/Optical Networks business group, but we saw also both IP/Optical Networks as well as Applications and Analytics have increased gross profit compared to last year. And then within Mobile Networks, you know that we have talked previously about our smarter transformation plans, which is an ongoing cost improvement, continuous improvement plan in products and services that affect COGS, including purchasing benefit COGS as well. So I think all of these are buckets that contributed to better gross margin in Q1. I will say that we are more of a software company than we were even previously, given that Applications and Analytics is largely a software business. Timo Ihamuotila - Nokia Oyj: And maybe one quick note, Rajeev, from my side, on this side of the pond. So basically, when we look at the proportionate size of these businesses and when you have the Ultra Broadband declining and the IP and Applications going up, and IP and Applications having clearly higher, like 8, 9 points high gross margin, that's also, of course, having an impact on the total. Matt Shimao - Nokia Oyj: Thank you, Francois. Stephanie, we will take our next question, please.

Your next question comes from the line of Robert Sanders with Deutsche Bank. Your line is open. Robert Sanders - Deutsche Bank AG: Yeah, hi. Thanks for taking my question. Maybe if we could just deep dive a bit more on the routing business, what is your outlook for the year? I know you touched on it a bit earlier, but clearly the decline was a bit of a disappointment relative to my expectations at least, even with Juniper's warning. So if you could just talk a bit about the outlook for the year that would be great. Thank you. Rajeev Suri - Nokia Oyj: Thanks, Robert. We are not giving outlook per se for the year for the IP business. We saw strong growth in Optical. We saw IP routing grow with the exception of the Juniper, the third party routers sales coming off, and that's by design. That is a strategy. We have our own portfolio and we want to substitute with our own portfolio. So what happens is you start to exit some of the deals of the third party routers, and then it takes some time to transition to the inflection point when we get our own routers in place in some of those deals, which we are focused on. So I will say long term I see that IP/Optical Networks is a growth opportunity for Nokia. IP routing also is a growth opportunity for Nokia. And remember that while we've done quite well in the past in edge routing, in core routing, we continue to win deals and that's somewhere where we can continue to take share based on our solid platform. Matt Shimao - Nokia Oyj: Thank you, Rob. Stephanie, next question, please.

Your next question comes from the line of Kai Korschelt with Merrill Lynch. Your line is open. Kai Korschelt - Bank of America Merrill Lynch: Yeah. Afternoon. Thanks for taking my question. So I just had a slightly high level question. So it looks like your Networks revenue will be down a few percent this year. I reckon that will cost you a few hundred million euros in profit. So there is obviously risks that it starts to neutralize some of the deal synergies that you were planning last year when you announced the deal, and back then you probably weren't expecting such a decline in demand. So, I just really want to clarify the net synergy number that you give us. Should we think about it as the starting point being last year? We had the 10% operating margins. Or this year where we're probably going to be somewhat below because it obviously doesn't make quite a difference in terms of the margin and profit target that you're aspiring to on a 2018, 2019 basis? Thank you. Timo Ihamuotila - Nokia Oyj: Yeah, thanks, Kai. Timo here. So, Kai, as I said in the previous, one of the previous questions, first of all, I said specifically that this above 7% is something which we see as 2016-specific number, and in that sense, we don't feel that that should be used as a basis for any kind of longer-term analysis. As you well know, we have not really given a long term guidance. So I can't sort of go here and say that this is our target base number, but as I said, the 7%, or above 7%, should not be really used for that, but I don't think there is much else we can give here. Matt Shimao - Nokia Oyj: Thank you, Kai. Stephanie next question, please.

Your next question comes from the line of Avi Silver with CLSA. Your line is open. Avi Silver - CLSA Americas LLC: Hi, good morning. Thanks for taking my question. Given the weaker Networks guidance for margin, how much of the operating margin pressure, on a year-on-year basis, is going to come from gross margin versus OpEx? As part of that, can you help bridge the difference between the 10.1% Networks margin last year and the 7%, above 7% for this year, and also, how much of the impact is coming from swaps that some of your customers seem to be asking for? Thank you. Timo Ihamuotila - Nokia Oyj: Okay, thanks. So why don't I talk a little bit about the puts and takes here. So first of all, the 10.1% number, of course, was a, I would say, super strong number which was partly impacted by, at least somewhat, over-strong fourth quarter in the Alcatel-Lucent and in their Mobile Networks business. So I don't think that 10.1% is maybe like a – let's call it like a total going concern comparable. And then, when we look at the market dynamics for this year, so I said we are seeing mobile networks market down. So that is going to cause some decrease in operating leverage. At this point in time, we are not seeing any massive change in competitive environment, but we are building into our outlook, let's say, a bit of cautiousness on that as well, because sometimes or often, when the market is down, there can be a bit more pressure on the deals, and that could impact the gross margin. So those are really the main points, what we are thinking about here when we are talking about that above 7% overall guidance for 2016. I also think it's fair to say that we have a totally new sales setup. We have a new systems (54:00) environment with which we are bringing the estimates for the two companies together really, and our visibility is not as good, of course, as we would like it to be, and it's not kind of yet on an, I'll say, overall going concern level, which is having a bit of an impact as well here. Matt Shimao - Nokia Oyj: Thanks, Avi. Stephanie, next question, please.

Your next question comes from the line of Pierre Ferragu with Bernstein. Your line is open. Pierre C. Ferragu - Sanford C. Bernstein & Co. LLC: Hey, thank you for taking my question. I have a question on your guidance. So you have like a very unusual way of guiding with open-ended ranges, more than 7% instead of a range, and decline instead of a range as well for currency, and I was trying to understand the rationale behind that, if you say (54:50) it's difficult to interpret the reason for that. I could imagine you don't expect margins to be way above 7%, or the revenue decline to be like in double-digits or something like that, so why not a range, more than this open-ended approach? And then very quickly, on synergies, did you ever comment on how much of that would come from OpEx and how much would come from (55:11) That would be helpful. Thanks. Timo Ihamuotila - Nokia Oyj: Okay. Thanks, Pierre. So, as I said, we think that the 7% is a realistic number, and naturally, we believe we can come above 7% with a solid execution. So that's our thinking. But why we are sort of giving a floor is exactly the point that, again, as I said earlier, we don't have quite the visibility, at least I would like to have at this point, on the overall setup we have, two very different system environments which we are integrating, and it will simply take time to get sort of proper going concern estimation, visibility. We are like three months, four months into the integration here, and I, of course, appreciate that everybody would like to be in a situation where you can give sort of full solid range type of guidance. We felt that this was the right way to go for us (56:08) at this point in time ,and we will continue to evaluate during the year when we learn more. And then, regarding the €900 million, or above €900 million synergy target, we have actually not split it between OpEx and other items, because I said this is a net number, and our plan is then to give more granular information on this, hopefully after Q2, where we can then start to talk about how big would be the charges, when we would take them, how big would be the expected cash outflows and so forth. Matt Shimao - Nokia Oyj: Okay. Thank you, and we have time for one last question, Stephanie.

Your last question comes from the line of Vincent Maulay with Oddo. Your line is open. Vincent Maulay - Oddo & Cie SCA (Broker): Yeah, thanks. (56:57) how to read the discrepancy between Alcatel-Lucent and Nokia Newco growth in China in Q1, both quarter-on-quarter and year-on-year? Does it mean the Newco doesn't lose any market share, but you already swapped former Alcatel-Lucent hardware? In this case, do we have to expect the negative drag on operating profit still pending? Rajeev Suri - Nokia Oyj: Thanks, Vincent. So, I think your question is related to China decline, particularly in the former Alcatel-Lucent sales. And again, as we said, this is related to our transition. So if you step back, we have moved quite fast on our migration plans. We've agreed this with the majority of customers where there is overlap, particularly in North America and China, but also beyond, where there are other customers that they (57:55) smaller level of overlap. And this is a huge achievement in the first quarter itself, and within this quarter, we expect to nail down these agreements. That means that there a pause in purchasing related to the older portfolio simply because customers expect that you are going to move fast to the new portfolio. And that, I think, makes sense because they wouldn't sink money into an old portfolio which only have to be sort of swapped or relegated in the future. Now, having said that, let's also remember that when we talk about swaps, we have been able to prove that the vision of CPRI has come true. So we are not going to be swapping radio units. We are going to be swapping only baseband units, which is a lower level of swap compared to the massive swap that we have to undertake without the CPRI interface, even though we see a little bit of elevated level of swaps where value creation can be there in a quick point of time. So I think it's all related to transition, and it's particularly in the first half of this year. Timo Ihamuotila - Nokia Oyj: Yeah, maybe, Rajeev, if you allow sort of a higher level comment on the same topic. So, overall, I would say that our integration of the two roadmaps is going faster than we expected. We are integrating and getting on the road by faster than expected, thus, it is also having maybe a bit quicker impact on the transition top line during this early integration period which we have discussed that 2016 is a transition year, and, in particular, the first half of 2016. But I think on the other side of that, there is a massive amount of very well done work on really getting to common plans for all of these key customers. I don't know, Rajeev, if you... Rajeev Suri - Nokia Oyj: Yeah, absolutely. Matt Shimao - Nokia Oyj: So thank you, Vincent, and thank you all for your questions. With that, I'd like to turn the call back to Rajeev for closing remarks. Rajeev Suri - Nokia Oyj: Thanks Matt and Timo and thanks again to all of you for joining. I'd like to close with a few words. There is no doubt that 2016 is a year of transition. Not only are we in the midst of a major integration but we're also seeing market headwinds, particularly in Mobile Networks. Despite these challenges, however, I remain confident that we are doing the right things in the right way. Retaining our operational discipline by targeting new opportunities in IP and technology licensing, enterprise, the Internal of Things, digital health and digital media. And all this will give us the right platform for the future, a platform that we fully intend to use to create further shareholder value. With that, thanks for your time, for your questions, and thanks for your attention. Matt, back to you. Matt Shimao - Nokia Oyj: Ladies and gentlemen, this concludes our conference call. I would like to remind you that during the conference call today, we have made a number of forward-looking statements that involve risks and uncertainties. Actual results may, therefore, differ materially from the results currently expected. Factors that could cause such differences can be both external, such as general economic and industry conditions, as well as internal operating factors. We have identified these in more detail on pages 69 through 87 of our 2015 Annual Report on Form 20-F. A report for Q1 2016 issued today as well as our filings with the U.S. Securities and Exchange Commission. Thank you.

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