Matt Shimao - Nokia 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) Kai Korschelt - Bank of America Merrill Lynch Robert Sanders - Deutsche Bank AG Avi Silver - CLSA Americas LLC Pierre C. Ferragu - Sanford C. Bernstein & Co. LLC Richard Kramer - Arete Research Services LLP Timothy Patrick Long - BMO Capital Markets (United States)

Good morning. My name is Stephanie, and I will be your conference operator today. At this time, I'd like to welcome everyone to Nokia's Second 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 Matt Shimao, Head of Investor Relations. Please go ahead. Matt Shimao - Nokia: Ladies and gentlemen, welcome to Nokia second quarter 2016 conference call. I'm Matt Shimao, Head of Nokia Investor Relations. Rajeev Suri, President and CEO of Nokia; and Timo Ihamuotila, CFO of Nokia, are here in Espoo with me today. During this call, we'll be making forward-looking statements regarding the future business and financial performance of Nokia and its industry. These statements are predictions that involve risks and uncertainties. Actual results may therefore differ materially from the results we currently expect. Factors that could cause such differences can be both external, such as general economic and industry conditions as well as internal operating factors. We have identified such risks in more detail on pages 69 through 87 of our 2015 annual report on Form 20-F, our financial report for Q2 and half year 2016 issued today as well as our other filings with the U.S. Securities and Exchange Commission. Please note that our results website, 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 includes a detailed explanation of the content of the non-IFRS information and a reconciliation between the non-IFRS and the reported information. With that, Rajeev over to you. Rajeev Suri - Nokia Oyj: Thank you, Matt, and thanks to all of you for joining our Q2 results call. When I look at our results for the quarter, I would characterize them as solid, consistent with what we expected and indicative of the operational progress we are making. You will recall that on our call last quarter I said that we did not expect the typical Q1 to Q2 seasonal pattern to occur this year and that prediction proved to be correct. Group net sales were slightly up sequentially, while operating margin was slightly down; in part, reflecting a negative impact from a major customer in Latin America that is experiencing financial difficulties. While market conditions remain challenging in our Networks business, we remain focused on using our disciplined operating model to offset those conditions and to maximize value. We have no intention of losing our sharp focus on profitability, and you can see that in the gross margin of our Networks business, which was slightly up year-on-year when you exclude the negative impact from the Latin American customer that I just mentioned. As is clear from our results however, our top line performance remains challenging. We are certainly not in denial about that reality, but let me make several points to put the issue in context. First, our global view of a flattish overall market and a decline in wireless infrastructure in 2016 remains unchanged. We do not see a broad-based worsening of conditions. In fact, we believe that there are some opportunities to grow if we wanted to, but those opportunities tend to be in countries facing macroeconomic headwinds and their margins are low and financing demands are high, particularly in Eastern Europe, and the Middle East and Africa. Passing on, some of those opportunities is a conscious choice. And that gets me to my second point, which is, that we will not pursue business that has no chance of ever delivering value. Our business model has never been about growth for the sake of growth alone. Rather, our goal is to maintain or gain share over time, as operating leverage certainly doesn't matter but not at any cost. Thus, we are willing to walk away from deals that make no sense and we certainly did that in the first half of the year. Third, as we have said consistently, 2016 is a year of transition for us, particularly the first half. Our focus is on successfully integrating Alcatel-Lucent and building a strong foundation for the future and there we are making good progress. As we noted in our press release today, we expect continued improvement in net sales and operating margin over the course of the next two quarters. Finally, we saw a shorter impact to our sales in the first part of the year from the normal, even if unfortunate uncertainty related to our large and complex integration. As the execution of our integration plan has proceeded, we have reduced that uncertainty and ensured that our sales team are focused. They have the right incentive targets and the necessary go-to-market training and support for selling our expanded portfolio. Progress is being made and our sales efforts are regaining momentum. In short, our work is not done, but I am confident that our overall execution remains firmly on track and we continue to make fast and successful progress in the integration of Alcatel-Lucent and the execution of our strategies. In two other significant updates, we are narrowing the full-year Networks operating margin guidance to a range and increasing our cost-saving goal. In addition, we're also continuing our work to address potential non-core businesses. At this point, we expect the full-year 2016 Networks operating margin range of 7% to 9% versus our earlier guidance for an operating margin of more than 7%. And if we execute well, we could clearly land above the midpoint of our guidance range. In terms of cost savings, we have identified new areas where we can improve efficiency as our granular visibility into the business has improved. Thus, we are now targeting €1.2 billion of total annual cost savings to be achieved in full-year 2018 versus our previous savings target of above €900 million of net operating cost synergies for that same period. The new figure covers both transaction-related cost savings and other efficiencies that we believe we can achieve. This is good progress but we are not stopping. We're always looking for more ways to improve productivity and efficiency and we will not hesitate to take out even more costs. Finally, we have continued the strategic review of our submarine cable business to determine the best long-term resolution for it and our increasing internal scrutiny of selected other parts of our portfolio. On the Nokia Technologies side, we continue to see momentum in our licensing business in the second quarter as well as in our strategic entries into digital health and digital media. While we saw a dip in TECH's operating margin year-over-year we certainly expect that to improve as we start to see the positive impact of the expanded licensing agreement with Samsung in the third quarter. With that as a high-level perspective, let me now turn to some additional detail on integration and our segments. Starting with integrations, pleasingly, we are now in a position to reach 100% ownership of Alcatel-Lucent during October. Timo will comment more on this topic, so I will just note that full ownership will allow us to eliminate the complexity and cost of maintaining two separate corporate structures. As I said in our Q1 call, we look at our integration from four aspects; customers and portfolio; synergy delivery; operational capability; and people-related topics. While we are progressing well in all of these areas, I already talked about the increase in our cost savings goals and for the sake of time we'll limit my further comments to customers and portfolio. The fast progress that I talked about last quarter in reaching agreement with customers on portfolio transitions has continued. We are now in a position where we have made all of the key product transition decisions, align those with customers and are now moving fully to execution mode. As that work progresses, we continue to optimize the costs associated with transitioning customers to our go-forward portfolio in order to create long-term value. You will remember that on our last call I said that we were considering an elevated level of such transition costs or swaps. While that remains true, our current view is that our spending will be nowhere near the billions that were spent in earlier deals. We are very focused on limiting swaps to a small number of key customers, particularly in the United States and China, so that we are well-positioned for future capacity expansions, upgrades and other upsell opportunities. In addition, moving customers faster to our go-forward portfolio allows us to accelerate R&D reductions for overlapping portfolio license. The largest of those is related to the former Alcatel-Lucent 4G portfolio and as we reduce in that area we can both save money and shift our attention even more to 5G. In short, we are willing to spend on swaps for select customers in cases where that spending allows us to accelerate near-term cost reductions and target future sales. But we look at each case and if the value is not there we will not do it, simple as that. Also just a reminder, cost related to swaps will be treated as non-IFRS exclusions and will therefore not impact our non-IFRS operating results. During this time, we have continued to track our performance in customer perceived value and methodology that we use to assess backward-facing satisfaction and future looking alignment and likelihood to buy. We have continued our long journey of improvement and earlier this year we moved into the top slot for the first time ever, surpassing all of our major competitors. This is great progress even if we know that we cannot rest for a moment if we want to maintain that position in the future. With that, let me turn to our three reportable segments: Ultra Broadband Networks, IP Networks and Applications; and Nokia Technologies. In Ultra Broadband Networks, net sales were 12% lower year-on-year or 9% on a constant currency basis. Within this, Mobile Networks was down 14% versus one year-ago, while Fixed Networks was up 7%. Gross margin was flat year-on-year and operating margin was down 120 basis points, reflecting the lower sales level. Fixed Networks had another excellent quarter overall and I'm extremely pleased with the combination of execution, innovation, product leadership and operational efficiency I'm seeing from this business. While it is very strong in its core business, we're also moving fast to diversify our fixed business into new areas. We closed our acquisition of Gainspeed at the end of July and that deal will help accelerate our progress with cable operators. We launched a smart phone solution that has received terrific early interest from customers. Our passive optical LAN solution, which we also announced in the quarter is ideal to help hospitals, hotels and businesses of all kinds improve network performance, lower costs and offer new services. Then on to Mobile Networks, which had another disappointing if not unexpected top line decline in the quarter. Given the size of that decline, let me spend a few minutes giving some perspective. Mobile Networks is facing significant market headwinds as well as some challenges unique to Nokia. Competitive intensity has continued and we're also seeing the decline in the wireless infrastructure market that has been widely predicted, driving by a slowdown in large 4G rollout for new coverage. To be clear, however, 4G is far from finished. After all, the underlying demand for capacity and speed remains strong and is not simply on hold waiting for 5G to happen. Thus, 4G will have to continue to develop even as the focus starts to move towards 5G. Let me pause in this topic for a moment, as there is a lot of discussion in the industry about the transition from 4G towards 5G. Our view at a high-level is that 5G will be rolled out relatively quickly in a small number of countries, in particular the United States, China, Japan and Korea. In other countries, 4G and evolutions of 4.5G, in particular, will prevail for some time. Even for those countries that move fast, however, 4G is not going anywhere just yet. 5G radio will not be fully standardized for some time and even when it is, it will be a complement to 4G, not a full replacement as we have seen in previous generations. Additionally, early 4G systems were not built to support features such as multiple carrier aggregation that are already in demand today. This means that modernization of both hardware and software will need to take place in many networks prior to large-scale 5G deployment. Products like our 5G-ready AirScale radio access platform are ideally suited to this environment and give operator the tool to meet capacity demands today, while also being ready for the 5G world of tomorrow. Thus, when we look at the overall picture, it is clear that while there will be a dip in the market during the transition from one technology generation to the next, some of that will likely be mitigated by one or more additional waves of 4G evolution. Also, 5G is not only about radio, it is actually about full network evolution. We're already working with customers to help them move to 5G-ready architecture that cover core, software-defined networking, cloud and more. To some extent, the sales decline in Mobile Networks in the quarter also reflects our relatively slow start in Q1 in terms of order intake. But we are starting to see early signs of renewed momentum, with stronger order intake across all of our Networks businesses in the second quarter and more potential deals in the €100 million-plus range. While no one should assume that this will result in a fast return to year-on-year growth, we do expect sequential sales improvement over the course of the remaining two quarters this year, as I already noted. We're also seeing traction in some growth areas of Mobile Networks. Small cells are now becoming a meaningful and fast-growing business, and we see more and more opportunities in areas like public safety, private LTE networks, high-density stadium solutions and more. So, while the top line decline in Mobile Networks is real and something we take extremely seriously, we have continued to strengthen our leadership position and operational foundation in this business group. Now on to IP Networks and Applications, which includes our IP/Optical Networks and our Applications & Analytics business groups. Net sales were 11% lower year-on-year. Within this, IP/Optical Networks was down 7% versus one year ago, while Applications & Analytics was down by 20%. Gross margin for IP Networks and Applications were down year-on-year by 210 basis points and operating margin by 680 basis points, again driven largely by lower fees. Let me also provide some color on this performance with a particular focus on A&A. First though, IP/Optical Networks. As you know, we are reducing the sale of third-party routing products and when you adjust for that impact, we would have delivered sequential growth in IP routing even if still down on a year-on-year basis. Softness in North America and Japan had a negative impact, although we are seeing good performance and future opportunities in Asia-Pacific outside of Japan, partly driven by leveraging Nokia's strong presence in the region to sell former Alcatel-Lucent products to new customers. We're also gaining momentum with some of the big web-scale players, where the market is growing, although we are starting from a much smaller position than more established companies. In IP routing, our strong technology and common operating system that spans across our product line continue to help us win with both existing and new customers. Traction in our 7950 XRS IP Core router remained solid, with three new wins during the quarter, bringing our total number of core routing customers to 60. Optical was also down, largely as a result of the timing of certain projects that shifted to Q3, a tough year-on-year compare, and following sharp growth in the first quarter. Overall, we believe our Optical portfolio is very strong and well-suited to helping us expand to web-scale players in particular. Then Applications & Analytics. Strategically, we see good long-term growth and profit opportunities in this business and are taking steps to tap that opportunity. In addition to our integration activities, we are working to create a true software business with a stand-alone portfolio that can be scaled across multiple vertical markets. That transition will take some time, but I'm confident that we have the right actions underway. We are building a dedicated software sales capability, improving overall go-to-market efforts and transforming R&D where we are targeting to have all of our strategic product lines built on a common software platform. In the near-term, we saw a large number of software licenses sold in North America at the end of 2015 and that is putting a drag on our sales this year. In addition, a portion of the A&A business remains attached to mobile equipment and as such its performance was impacted by overall mobile market conditions. So that explains part of the decline. Our own transition has also had an impact, as have an evolution in our customers, where CIOs and CMOs are playing a greater role in this kind of software purchase decisions. We are typically less strong with those buyers, but are hard at work to fix that. As we go through this journey, we will maintain out typical discipline, constantly assessing whether we are meeting the right performance levels before adding incremental investment. Despite the ongoing transitions, A&A is not missing a step on the innovation front. In Q2, we launched IMPACT, our new IoT platform and the Nokia Dynamic Diameter Engine, a cloud-based solution built to meet new network signaling needs. We're also seeing good momentum in self-organizing networks, where our strong product gives us a competitive advantage, and in the high-value area of customer experience management and cloud solutions. Now on to the regions. Like last quarter, I will not cover all the regions and comment on just three. First, China, where sales were up 18% sequentially, although down 5% year-on-year. There is no doubt that last year's torrid pace has come to an end and the market is contracting, but that contraction is less severe than we had originally expected. Price competition in China remains tough, but that is hardly new. While the overall trend of the slowing in LTE rollout continues, we are incrementally more positive on China than at the start of the year. Second, North America, where the market overall is also contracting. We saw our sales declined 12% in the quarter compared to last year. Despite that outcome, we saw some encouraging signs in our order intake and strong interest in many of our recently launched innovations. Third, Europe, which remained disappointingly soft across all of our Networks business groups. At this point, we do not believe this is related to Brexit, but rather the fact that there are simply limited near-term catalysts for growth in the market given underlying macroeconomic conditions. Operator conservatism and a discouraging regulatory environment also continue to limit European potential. Now to our third reportable segment, Nokia Technologies. While sales fell 11% year-on-year, if you exclude the impact of non-recurring items from one year ago, the business actually grew by 10%. The major news related to Nokia Technologies is what you already know, that just after the quarter ended we announced an expansion of our cross-licensing agreement with Samsung that covers additional patent portfolios. This deal expands the Samsung arbitration outcome we announced in February and reinforces the power and value of Nokia's intellectual property portfolio. With this expansion, Nokia expects a positive impact to net sales starting in Q3 and annualized patent and brand licensing sales to grow to a run rate of around €950 million by the end of 2016. We have said in recent months, Nokia's IPR licensing opportunities extend well beyond Samsung including new segments and we are of course continuing discussions with other device vendors about new licensing agreements. That also move the ball forward in both our digital health and digital media ambitions. We closed our acquisition of Withings, an early leader in the growing digital health world sooner than expected in Q2 and launched the Withings Body Cardio which allows people to manage their weight and can give a daily snapshot of cardiovascular health. We also took the significant move of licensing our brand in a way that will bring the Nokia name back to mobile phones and tablets. Not in an attempt to create what once was but in a relatively low risk high margin brand and intellectual property licensing deal with HMD Global for the next 10 years. With this model, we get financial upside without a direct reentry into a market that is competitive and commoditizing. 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: Okay. Thank you, Rajeev. I will begin today by recapping the progress we have made around the Alcatel-Lucent transaction. I'll then comment on the financial performance of Nokia Technologies and Group Common and Other in Q2 before turning to a discussion on our cash performance in the quarter. And lastly, I will spend a few minutes covering our updated cost savings target and items for the remainder of 2016. So starting with our recent progress around Alcatel-Lucent transaction, when we held our previous earnings call in May, we were already very close to the 95% squeeze-out threshold. Since then, as Rajeev mentioned, we have crossed the 95% threshold by acquiring Alcatel-Lucent securities in private transactions and we are now preparing the filing of the buy-out offer. We have confirmed with AMF that we intend to file the buy-out offer in cash for the remaining of Alcatel-Lucent shares and OCEANEs in early September. After being approved by the AMF, the buy-out offer will be open for 10 trading days as per the French regulatory process for such offers, followed by a squeeze-out of any remaining untendered shares and convertibles. Thus, early October, we expect Nokia to own 100% of Alcatel-Lucent share capital, voting rights and OCEANEs convertible bonds. In the offer, the valuation of Alcatel-Lucent is expected to be based on a multi-criteria approach reflecting among other things, the company's latest business plan and the price we paid in the private transactions to acquire Alcatel-Lucent shares. As we indicated in June, the price we paid in this transactions was consistently €3.5 per share. The final offer price resulting from the multi-criteria valuation will be subject to an assessment by an independent expert as well as the AMF clearance. Moving then to my financial commentary on Nokia Technologies. Rajeev covered quite a bit on TECH already, so I'll just highlight some additional key points. Starting with Samsung, since the expanded agreement was a Q3 event, we did not record any revenue related to this in Q2. We expect the expanded agreement to have a positive impact to Nokia Technologies starting from the third quarter of 2016. As we said in July, we expect our new annualized patent and brand licensing net sales to grow to a run rate of €950 million at the end of Q4. It is good to note, however, that licensing agreements expire unless renewed at term with a possible impact on licensing run rate. License agreements which currently contribute approximately €150 million to the annualized net sales run rate are set to expire before the end of 2016. If we do not renew these license agreements, nor sign any new licensing agreements, the annualized net sales run rate would be approximately €800 million in early 2017. Of course, we are focused on both renegotiations and finding new licensees. While we are not providing annual net sales forecast due to the difficulty of predicting licensing negotiations, we believe there is substantial long-term growth potential in this business. Then on our brand licensing deal with HMD, I mentioned last time that brand licensing was the last building block missing from Nokia Technologies strategy. With the HMD deal, we now have all of the major elements for technologies business strategy execution in place. And moving to Withings, since the acquisition of Withings was closed relatively late in Q2, the business had a small impact on the financial performance of Nokia Technologies in the quarter. The business that Withings brings to Nokia Technologies is different in nature compared to the high margin IPR licensing that has previously generated virtually all of Nokia Technologies top line. Looking to the second half of this year, we expect Withings to generate approximately €50 million of net sales in the second half overall with strong Q4 seasonality. Withings quarterly OpEx is currently approximately €15 million and we expect Withings to deliver slightly negative operating profit in the second half of 2016. Turning to the performance of Group Common and Other in Q2, the overall revenue that we report under Group Common and Other increased by approximately 7% year-on-year. The growth was primarily driven by Alcatel Submarine Networks, which recorded another strong quarter. It is clear that this is a well-run business with good potential to create value. In order to define the best path forward for ASN and our shareholders we are continuing the strategic review of the business. Unlike ASN, the Radio Frequency Systems continued to suffer from weak market conditions with its sales dropping year-on-year. This weighed on the results of Group Common and Other, compared to the year-ago quarter. As I said on our previous earnings call, we continue to drive operational efficiencies in RFS to get the business back on sustainable track. Next, I would like to spend a few minutes commenting briefly on couple of recent events that our investors have been interested in. First on the UK's referendum on its EU membership. Although, we don't disclose our exposure to sterling or the UK as a market in our quarterly publications, I would this time like to provide further detail. From the FX exposure point of view, we are fairly well naturally hedged for the sterling with approximately 2% of our revenues and approximately 2% of our costs being sterling denominated. Furthermore, during the first half of this year approximately 3% of the sales of Nokia Networks business came from the UK highlighting the fairly limited direct exposure that we have to this market. Secondly, in the second quarter of 2016, there were a lot of headlines about a customer in Latin America experiencing financial difficulties and Nokia's Networks business was adversely affected by this customer. Given the situation, we moved to cash-based accounting for this customer, deferring revenue recognition until cash is collected, while the related costs of sales are expensed as incurred. In addition to this, we made certain provisions to reflect the risk of asset impairment. Excluding the impact of the above, the gross margin of Nokia's Networks business would have been approximately 38%, while the operating margin would have been nearly 7%. Overall, our overdue receivables are well under control and down from Q1 levels, so we currently view this as an isolated event. Continuing then with our cash performance during the second quarter, on a sequential basis, Nokia's gross cash decreased by approximately €1.5 billion with a quarter ending balance of approximately €11 billion. Net cash and other liquid assets decreased by approximately €1.2 billion sequentially with a quarter end balance of approximately €7.1 billion. The difference in the sequential change between gross cash and net cash was primarily due to the acquisition of Alcatel-Lucent convertible bonds. On a sequential basis, Nokia's net cash and other liquid assets were affected by net cash outflows of approximately €890 million related to working capital and approximately €120 million related to income taxes. The cash outflows were partially offset by Nokia's adjusted net profit before changes in net working capital of €394 million in Q2. Excluding the payment of incentives related to 2015 and restructuring related cash outflows, net working capital would have been approximately flat on sequential basis. Additionally, Nokia had net cash outflows of approximately €280 million from investing activities in Q2, primarily related to the acquisitions of Withings (29:54) as well as capital expenditures. Net cash outflows from financing activities in Q2 were approximately €140 million, primarily related to the purchase of Alcatel-Lucent shares and the equity component of the OCEANE convertible bonds. And lastly, foreign exchange rates had approximately €90 million negative impact on Nokia's net cash in the quarter. Looking further on to the second half of 2016, due to the later timing of our Annual General Meeting this year, the dividend payout took place in early July, which will impact our cash flow and net cash in Q3 by approximately €1.5 billion. Along with the dividends, our AGM also approved a share buyback program. As a reminder, we announced last October a €7 billion capital structure optimization program, which includes €1.5 billion of share repurchases. As I said earlier, we are already very close to the 100% ownership of Alcatel-Lucent. To ensure that we complete the Alcatel-Lucent transaction as smoothly and quickly as possible, we now plan to commence the share buybacks in Q4. This will enable us to avoid unnecessary risks, which is important, given the complex regulatory environment we operate in regarding the squeeze-out. It is good to note that by acquiring the remaining Alcatel-Lucent securities in cash through the buy-out offer and following squeeze-out we won't be increasing Nokia share count. Hence following the completion of the squeeze-out, Nokia share count is expected to remain unchanged at approximately 5.8 billion shares. Had we used Nokia shares to acquire all of Alcatel-Lucent securities, our share count would have grown to about six billion shares instead. Continuing with our updated cost savings target and guidance for the second half of the year, we have made very good progress and as our integration advances, we continued to discover and learn more. Hence, as Rajeev indicated earlier, we have today updated our guidance for the total annual cost savings in full-year 2018, excluding Nokia Technologies, to reach €1.2 billion. In conjunction, we expect the related charges to go up to €1.2 billion, of which approximately €600 million was recorded in the second quarter. We now expect the restructuring related cash outflows to total approximately €1.65 billion overall, which includes the remaining balance of expected restructuring cash flows related to previous Nokia and Alcatel-Lucent progress. Then very quickly on swaps, which Rajeev already covered comprehensively. I would like to reemphasize that the charges related to network equipment swaps will be recognized as non-IFRS exclusions, as we see the swap costs as transaction and integration related, not impacting our ongoing underlying business and therefore the charges will not affect Nokia's non-IFRS operating profit. Moving to Nokia's Networks business, today we updated our guidance for the full-year 2016 operating margin to 7% to 9%. This is not intended as an upgrade or downgrade to our guidance, but rather just to give a bit more precision. Lastly on Nokia Technologies, as I mentioned earlier, in conjunction with the expanded cross license agreement with Samsung, we expect the Nokia Technologies' annualized net sales related to patent and brand licensing to grow to a run rate of approximately €950 million by the end of 2016. And finally, I would like to remind you on our upcoming Capital Markets Day that we will be hosting in Barcelona on November 15. Invitations to the event were sent out two weeks ago. If you haven't received one, please let Matt and our Investor Relations team know. And with that, I'll hand over to Matt for Q&A. Matt Shimao - Nokia: Thank you, Timo. For the Q&A session, please limit yourself to one question only. Stephanie, please go ahead.

Your first question comes from the line of Sandeep Deshpande with JPMorgan. Your line is open. Sandeep Sudhir Deshpande - JPMorgan Securities Plc: Thank you for letting me on. My question is firstly to Timo regarding the guidance. Timo, you have clarified the margin guidance to be 7% to 9%. Is this the aim of this margin guidance to adjust the consensus or is this just a guidance you've given based on where you think you're going to achieve in terms of margins? And secondly, Rajeev, in terms of sales, are you talking about the second half recovery and you said that the orders are also looking positive. Can you talk about that you talked about in the first quarter, for instance the Alcatel U.S. sales have been held back because some product that you had to be changed to be sold – in Nokia production to be changed to be sold to the U.S. customer base. Has that product begun shipping? And do we expect Alcatel customers buying Nokia base stations at this point? Thank you. Timo Ihamuotila - Nokia Oyj: Okay. Thanks, Sandeep. Maybe I'll start with the guidance question. So, as I said a couple of minutes ago, this is really not meant to be an upgrade or a downgrade to the guidance and we are simply giving a bit more precision here. As we said after Q1, we really wanted to establish the floor as we were just coming together with Alcatel-Lucent or started the integration. Now we think we have good control of the situation regarding integration, little bit better visibility and we were just wanted to give bit more precision. And as Rajeev said, if we execute well, we expect to be clearly above the midpoint of this guidance range. Rajeev Suri - Nokia Oyj: And thanks, Sandeep, on the U.S. question and overall on portfolio, so we have made all the portfolio decisions. We have got alignment with a majority of customers and some of these projects of swaps or migration will last one year, some will be longer even up to two years. So that is going to be an ongoing process. But even though, we're just six months into this very large-scale integration, I believe our execution continues to improve rapidly, right? And this also applies to the U.S., so I see a better second half there as well. So even if the market does not improve, we think we have clear potential to improve our financial results as we proceed through the quarter this year. So, when we've said the slight sequential growth in net sales from Q2 to Q3, another way to interpret that will be that it will be slightly improving our year-on-year trend in Q3. And the significant sequential growth in the seasonally strong fourth quarter, that can be interpreted as driving a more clear improvement in our year-on-year net sales trend in Q4. So, slight in Q3 and clear improvement in Q4 on a year-on-year basis, also applies to North America. Matt Shimao - Nokia: Thank you, Sandeep. Stephanie, next question, please.

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. Good afternoon, guys. A question on cost savings guidance, obviously now you're guiding for €1.2 billion, can you just help us understand what was your thinking behind the process? Like, is it a reaction to a worse demand environment than what we were actually all expecting when we started the year? Or is it more a question of you're trying to find more areas of savings as we go deep into the integration process? And also can you clarify us, how much of this €1.2 billion we've already seen in H1, if any, and what should we expect for the full-year 2016 in terms of savings? Rajeev Suri - Nokia Oyj: Thank you. So, let me just say there are three areas. So, one is the fact that we have made these roadmap decisions and got alignment with the majority of customers means that on wireless former Alcatel-Lucent R&D, that faster progress means that we can reduce the R&D investments in that former product line earlier. So that of course, success in integration has obviously helped our visibility there. Second, overall in the combined company, we are getting deeper and more granular and getting better visibility on where the opportunities forecast in continuous improvement lie. Third, I have said before in a couple quarters regularly that there is something called Smarter Network Program, which is an ongoing efficiency and cost savings program and ongoing transformation, examples of that, reduction of costs in services in the regions, procurement cost reductions, using robotics, using automation, so all these things to me are continuous improvement. So, you combine the two and you have a fixed saving goal of €1.2 billion. Timo Ihamuotila - Nokia Oyj: Yeah. And maybe on your question on how much we have seen already first half, so actually very little. So, when you start the program, the first impact is on procurement, and I think that has impacted that we have been able to hold our gross margin pretty well in the Networks business. Then when you go to second half, we will start to see some OpEx impact as well. But as we said after Q1, we expect 2016 really to be a transition year and the majority of the savings start to then come in during 2017 and 2018. Matt Shimao - Nokia: Thank you, Achal. Stephanie, we'll take our next question, please.

Your next question comes from the line of Gareth Jenkins with UBS. Your line is open. Gareth Jenkins - UBS Ltd. (Broker): Thanks. Just have a couple of follow-ups on the guidance, if I could. I just wondered whether when you talk about significant Q4, is that over and above normal seasonality? So, you're expecting a seasonably abnormally strong quarter in Q4? And secondly in terms of the margin progress from the Q2 level with the Networks, is that based on the 7% excluding the issues in Brazil? Or is that including? Thank you. Timo Ihamuotila - Nokia Oyj: Okay. Thanks, Gareth. Timo here. Maybe I'll take a crack at it. First of all, on the significance to Q4, so when we give drivers to the guidance we really try to have some meaning to them, and in that sense, and I think Rajeev alluded to this as well on his previous answer, so we really think that the pace of the year-on-year decline in the overall Networks business will start to ease first slightly in Q3, and then more in Q4. And that means that when we compare to the combined company historical seasonality from Q3 to Q4, we are expecting it to be a bit better now going into Q4. And then the margin comparison, so we really need to do, the comparison point after 6% both non-IFRS and operating margin, which was the margin we really predicted during the quarter. Matt Shimao - Nokia: Thanks, Gareth. Stephanie, next question, please.

Your next question comes from the line of Alex Duval with Goldman Sachs. Your line is open. Alex Duval with Goldman Sachs, you line is open. Matt Shimao - Nokia: Let's come back to Alex. Stephanie, we'll take our next question.

Your next question comes from the line of Kai Korschelt with Merrill. Your line is open. Kai Korschelt - Bank of America Merrill Lynch: Yeah. Good afternoon, gents. Thanks for taking the question. The first one was on cash flow, so the free cash flow was very poor in the first half, I think you had highlighted that for quite some time. So, I'm just wondering as we look into the second half and then into next year, should we expect basically the cash generation to normalize from here? That's my first question. And then just a brief follow-up on the phasing of the synergies, roughly between 2017 and 2018, of the €1.2 billion, which of the years will see the larger portion? Thank you. Timo Ihamuotila - Nokia Oyj: Yeah. Thanks, Kai. So first of all, on the cash flows, as we noted during Q1, we did significant reduction about €1 billion or even bit more of receivables discounting. So that clearly had a big impact, and as I said, if we exclude from our working capital now the incentive payments and the about €100 million restructuring charge, then our net working capital would have been approximately flat. So in that sense, operating cash flow generation is working, as we would have expected. Then if you look at second half, so we clearly have the €1.5 billion dividend, which will impact net cash during Q3, and then we said today that related to both this cost savings program, €1.2 billion as well as the previous programs, we are still expecting about €1.6 billion of cash outflows; so that should give some tools. Traditionally, our operating cash flow has improved during the second half without extraordinary items. And then looking at the phasing of the synergies, I don't think I can give much more here, as I said, we expect some start to come in during second half of this year and then majority in 2017 and 2018. Matt Shimao - Nokia: Okay. Thanks, Kai. Stephanie, next question.

Your next question comes from the line of Robert Sanders with Deutsche Bank. Your line is open. Robert Sanders - Deutsche Bank AG: Yeah, hi there, good afternoon. I just had a question around the swap-outs. I understand that there is no swap-out cash outflow in the €1.65 billion cash outflow figure. It would be good to get some clarity on what the likely cash outflow would be including swap-outs? And second question would just be, if you give some commentary around pricing? You talked about walking away from deals, has that changed in any way in the last six months? Have you started to walk away from more deals? That would be good to get some clarity. Thank you very much.

Excuse me, this is the operator. We are currently experiencing technical difficulties. Please standby. Please resume. Rajeev Suri - Nokia Oyj: Okay. So, the question from Rob was some clarity on the swaps. And in terms of pricing, walking away, have we changed behavior in the last six months, so we'll answer those questions now. Timo Ihamuotila - Nokia Oyj: Okay. So, thanks, Robert. Timo here. So, first on the swap-outs. So, it is correct to assume that the cash outflows and also the non-IFRS exclusions, which would happen as part of cost of goods sold, are not part of the €1.2 billion, but as we have said very clearly, we are not expecting any kind of level of swaps like what happened in the Nokia-Siemens transactions. We are not expecting billions, nothing like that, and we are still assessing the situation. We are estimating now that the swap cost would be somewhat higher than was in our original case, but as these swap costs will come mainly during 2017 and 2018 and as we now have a good understanding of the overall situation of what needs to be swapped, but we do not yet have a good calculation on how we will do that. Because of course, we'll try to take this cost down as much as possible. I mean do we need one site visit, two site visit? Those kind of things are still working progress and that's why we are at this point in time saying that they will run through our numbers, we will be very clear about what they are, but we are not giving an overall number at this point. But, absolutely not billions or anything like that. Rajeev Suri - Nokia Oyj: And, thanks, Robert. On the pricing question, the competitive intensity has not changed. It remains as it was when we first talked about a change in Q1 of 2015, no significant change there. But we are seeing some isolated incidents of places where there is macro-economic pressure, that financing requests surface and from some operators also in Eastern Europe, or the pricing is just not worth chasing down. So, we'll walk away from this, because they're not strategic and doesn't make sense. So again, I would say isolated incidents, but the point was more to make that we will not just chase down these for the sake of it, and our business model remains what we are wedded to. Matt Shimao - Nokia: Thank you, Rob. Stephanie, we'll take our next question.

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. I wanted to understand what you mean when you say slight improvement to revenue and margin sequentially in 3Q? First on revenue, you mentioned that you expect the year-on-year declines to abate in the second half of the year, and where do you see the trends in different product segments and geographies? If I do a little bit of math and assume slight is plus 3% to 4% growth that still suggests declines in the Networks business of 10% to 11% year-on-year, which is not much of an improvement of what we saw on the first half. So, is the word slight meant to imply something closer to the mid or high single-digits? And then similarly on margins, you're guiding to Networks margins increasing sequentially slightly from the 6% in 2Q. I guess I'm a little surprised that margins increased only slightly sequentially from that level, if the true adjusted operating margin is 7% adjusted for the Brazil bankruptcy, shouldn't margins increase from that 7% level in 3Q, especially with revenue increasing and synergies starting to kick in? Thank you. Timo Ihamuotila - Nokia Oyj: Okay. Thanks, Avi. So, maybe I'll start with that. So, as we said, we are purposely saying a slight improvement to Q3. We are also saying a slight improvement in the, let's call it, base of the net sales decline. So, I don't want to contest your math here in any way, but that's really what slight means to us. And again as I said we are expecting some more impact from the restructuring program or cost savings program to kick in during the second half, but of course, that will also be a bit backend loaded as the programs kick in. There are many areas in Europe especially where the head count reduction simply will not happen yet in Q3 and we are not getting that much operating leverage given the slight increase in top line, so that's really what we are saying. And then we are also saying that we expect significant improvement then going into Q4, and as we said, even a bit more than normal seasonality in that. Matt Shimao - Nokia: Thank you, 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: Hi. Thank you for taking my question. On the slight improvement you just talked about and you expect for the second half, I was wondering how much of what you see today is really related to Nokia and Alcatel-Lucent specifically, and things improving because you're making progress in the slow business you saw in the first half really related to the specifics of you guys working on integrating Alcatel-Lucent and with specific clients having like a lower level of spending related to that. And how much of that is more related explicitly from the wider business and just operators as a whole spending a bit more? And then maybe very quickly on synergies, so you sound like an additional €300 million of synergies which is great. If you could give us a bit of color on where you found this additional synergies. What could you discover getting better access to the members and to the operations of Alcatel-Lucent? Where did you find more to go after? That would be very helpful. Rajeev Suri - Nokia Oyj: Thanks, Pierre. So let me start. So, it is primarily to do with our execution improving. So even if the market conditions may not improve in the near-term, we believe that we have clear potential to improve our financial results as we proceed through the course of this year, as we said, slight and significant in Q3 and Q4. So, I'm not expecting that there is a strengthening of the market per se, but we are expecting that our own performance based on sales momentum, better order intake, and better handle on the whole company, better portfolio migration plan and so forth will result in better execution even if the market does not improve. Timo Ihamuotila - Nokia Oyj: And then on synergies, so this is really broad-based, so it is really in all the areas where we are operating on, so this has to do both with OpEx as well as cost of goods sold. And as Rajeev said earlier, we really have this continuous improvement mindset and we are now adding some of these Smarter Program tools to the original synergy execution. But if I give some examples, so we have now visibility to be able to close even more some of the smaller sites we have. We are combining more of those. We have also better visibility now to what kind of attrition rates, for example, we are starting to see in the company when we are putting some locations together, and then we are driving even more efficiency through tools like automation, even certain robotics, systems in software robotics and those kind of things. So, it really comes from multiple areas. But we are very granular on how we look at this. We're also very granular on how we measure it. So, for example, in the COGS, we are really counting in only the real synergy savings. We have a specific tool with which we follow that. So, it's not like, if our business activity goes down and the COGS goes down, then we've done savings. No, that's not how we look at it. Matt Shimao - Nokia: Thank you, Pierre. Stephanie, we'll take our next question, please.

Your next question comes from the line of Richard Kramer with Arete Research. Your line is open. Richard Kramer - Arete Research Services LLP: Thanks very much. I'm not going to ask about guidance. Rajeev, your principal Western competitor has just entered a period of substantial uncertainty over its management and direction. Do you see material opportunities to take market share in the many Tier 1 accounts where the two of you essentially either split the business or split the business with your principal Chinese competitor? And a question for Timo, you've accomplished the €3.3 billion savings of deleveraging, but you still have €3.5 billion of debt paying around 6% interest costs, which seems rather high in the current environment. Do you see material opportunities to reduce that? And would that have to wait for the remaining squeeze-out to complete and then you could consider refinancing? Thanks. Rajeev Suri - Nokia Oyj: Thanks, Richard. So, I think two things. One is the broader portfolio. That is really resonating with many, many customers. So, of course, in my discussions with the CEOs, but also borne through what we call the customer perceived value surveys and index that comes through. Like I said, we are right now, highest on that in the sector. So, it's borne through statistical evidence that customers in the majority are telling us that this is going to be a long-term, competitive advantage; having fixed, having IP, having transport, having software layers on top of it. This is the strength of ours, particularly compared to the competitor you just mentioned. Second, yes, we do see some opportunities when there is some uncertainty at a competitor to take some share, and I think in part it's not something we've seen now. It has been something that's been a bit coming, because again the CPV or the customer perceived value is also higher because our product roadmaps, our quality and our features are best-in-class and better than some of the other players. So, I'd say it's looking good from a portfolio standpoint. Timo Ihamuotila - Nokia Oyj: Okay. And then on the finance cost question, so you are absolutely correct that we have about €3.5 billion of bonds outstanding, long-term debt with fairly high coupon. And we basically have called all bonds which had that availability, i.e., which had that kind of documentation. And all these bonds which we have remaining have been issued when either Alcatel-Lucent or Nokia had investment-grade credit rating and thus they have quite typical investment-grade documentation. So, we will take a look at this after we have executed the squeeze-out and then we'll of course work deeper into the capital structure. But I just want to highlight that these are not bonds which we could call, so they would really need to be refinanced as you say. But I agree that in current market environment that is something what we should look at. They also have a pretty long duration still, many of them, so need to take all those components into account. Matt Shimao - Nokia: Thank you, Richard. Stephanie, for today, we are ready to take our last question.

Certainly. Your last question comes from the line of Tim Long with BMO Capital Markets. Your line is open. Timothy Patrick Long - BMO Capital Markets (United States): Thank you for squeezing me in. Just want to ask about the Technologies business. Timo, you mentioned, I'm assuming the €150 million at risk for the deal that's expiring at the end of the year is largely one customer. Could you just talk a little bit about that? What you think for timing, and given your experience with Samsung is that something that could ultimately be a better number for Nokia? Or is that unlikely? And then just what else, if we look at the handset world, who else should we look to for potential new licensees to drive this line? Should it be Chinese companies or expansions with others? Thank you very much. Rajeev Suri - Nokia Oyj: Thanks, Tim. So, as you would expect that we are negotiating with those licensees where deals will expire, so that's an ongoing process. Second, I will say that Samsung is the first deal that we've done in the new mode of operations, i.e. we're not in the handset business and we're not in the cross-licensing regime, so it is about sole licensing, primarily. So that means it does point to the fact that has been a good result. I'm very comfortable about the sales plans that we've got in place, not just with some of the Chinese players where we are in discussions with, but also other players. So, as we said, roughly half of the device players don't license from us and that is an ongoing set of negotiations. And if we ultimately don't get to the right agreements then we will trigger arbitrations or litigation, as the case may be. In parallel, we've also expanded our sales team to start discussing with the automotive players, with some of the consumer electronics players, with broadcast, and also some IoT segments such as, take the example of building security, fleet management and so on. So, I want to make sure that while we are focused on the ongoing device players, we also want to start extending because the portfolio is quite rich. And clearly when these other segments get connected, there is a clear opportunity. Timo Ihamuotila - Nokia Oyj: And maybe just a technical comment on the €150 million, so you asked kind of is there more opportunity on that €150 million going forward? And I would answer exactly as Rajeev said, so Samsung is the first licensing agreement we have done in this new setup. And in that sense, yes, I would say that when I look at the opportunity which relates to that €150 million going forward, it is clearly a positive opportunity, clearly a positive opportunity. But of course, we don't know how and when that would ultimately play out. Matt Shimao - Nokia: Thank you, Tim. And thank you all for your good questions. And 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. Clearly, we are facing challenges in some parts of our addressable market. That is not a surprise and we have been flagging for some time our expectation that the overall market would be flattish, while the wireless infrastructure market would be down. In the context of those conditions, however, I am confident that we remain well-positioned. Our focus on disciplined management, tight pricing control and a relentless drive to constantly lower costs gives us an advantage that is not easy to replicate in the near-term. Our integration work is proceeding well and we are continually finding ways to improve productivity and deliver further cost savings. Our customer relationships are strong as shown by the customer perceived value score that I mentioned. And we're making good progress in targeting new customers such as web-scale players and new vertical markets. Our innovation engine continues to deliver breakthroughs that matter to our customers that allow us to maintain product leadership in many areas. And our unique portfolio is a powerful asset. In virtually every conversation I've had with customers about the topic, it has been clear that the like the extraordinary scope of what we have. Given the relatively long sales cycles in our sector, we are only now starting to see cross-selling opportunities become a reality. But it is clear that those opportunities are there and we have a growing pipeline of end-to-end deals that leverage products and services for multiple businesses. So in summary, we continue to move forward with focused determination and confidence. And I look forward to seeing you all at our Capital Markets Day in November. With that, thank you very much for your time and attention. Matt, back to you. Matt Shimao - Nokia: 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, our financial report for Q2 and half year 2016 issued today, as well as our other filings with the U.S. Securities and Exchange Commission. Thank you.

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