HarborOne Bancorp Q4 2024 Earnings Call Transcript

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January 30, 2025
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David Mulholland
Head - Investor Relations at Nokia

Good morning, ladies and gentlemen. Welcome to Nokia's 4th Quarter 2024 Results Call. I'm David Mulholland, Head of Nokia Investor Relations. And today with me is Pekka Lundmark, our President and CEO along with Marco Baren, our CFO. Before we get started, a quick disclaimer.

David Mulholland
Head - Investor Relations at Nokia

During this call, we will be making forward looking statements regarding our future business, proposed transactions and financial performance, and these statements are predictions that involve risks and uncertainties. Actual results may therefore differ materially from the results we currently expect. Factors that could cause such differences can be both external as well as internal operating factors. We have identified such risks in the Risk Factors section of our Annual Report on Form 20 F, which is available on our Investor Relations website. Within today's presentation, references to growth rates will mostly be on a constant currency basis and in relation to margins will be based on our comparable reporting.

David Mulholland
Head - Investor Relations at Nokia

Please note that in our Q4 report and a presentation that accompanies this call are published on our website. The report includes both reportable and comparable financial results and a reconciliation between the 2. In terms of the agenda for today, Pekka will go through the key messages for the quarter, Marco will go through our financial performance, and then Pekka will make a few comments on some particular highlights from the quarter. We'll then move on to Q and A. With that, let me hand over to Pekka.

Pekka Lundmark
President & CEO at Nokia

Thanks, David, and thank you all for joining us today. I'm pleased to share with you that we finished 2024 with a strong quarter. The improved order trends we have talked about in recent quarters were now clearly visible also in our net sales with 9% growth in the 4th quarter. Network infrastructure grew 17% in Q4 with all units growing and with IP networks the standout performer growing 24%. We also had a very strong performance in Nokia Technologies with several new deals signed increasing our net sales run rate to now approximately between €1,300,000,000 to €1,400,000,000 Cloud and network services also grew 7% despite a 4 percentage point headwind from a prior disposal.

Pekka Lundmark
President & CEO at Nokia

Mobile Networks saw its sales trends stabilize as the more challenging comparisons in India are now behind us and we saw stronger demand in Q4 in North America. The strong Q4 sales and high contribution from Nokia Technologies led to a comparable gross margin of 47.2% in the quarter and an operating margin of 19.1%. This is the highest quarterly operating margin we have seen at Nokia since 2015. We also had a strong year for cash generation with a free cash flow of €2,000,000,000 Our year end net cash balance was €4,900,000,000 even after returning €1,400,000,000 to shareholders during the year during through both share buybacks and dividends. I will come back to this topic, but with the momentum we are seeing in the data center space, we are accelerating investments into our IP Networks business, and I'm really excited about networks business and I'm really excited about this opportunity.

Pekka Lundmark
President & CEO at Nokia

We will discuss our outlook a bit later, but I'm pleased to say that the improved trends from the second half of twenty twenty four are expected to sustain into twenty twenty five. With that, let me hand over to Marco to go through the financials in a bit more detail.

Marco Wirén
CFO at Nokia

Thanks, Pekka, and hello from Maesert as well. I will start by discussing our overall Group performance. As Pekka mentioned, we were very pleased to see the strong end to 2024. The 4th quarter saw net sales growth of 9%, gross margin increased by 250 basis points to 47.2%, and this was due to the increased contribution from Nokia Technologies and improvements in other business groups. Our quarter 4 operating margin expanded 380 basis points year on year to 19.1%.

Marco Wirén
CFO at Nokia

I will now look at the performance of our business groups starting with Network Infrastructure. We saw a strong finish to 24 with all units growing in quarter 4. IP Networks had a very strong quarter with 24% growth. Fixed Networks grew 16% and Optical 7%. And this growth was mainly driven by improvement trends among CSP customers and regionally in North America and India.

Marco Wirén
CFO at Nokia

Gross margin expanded 70 basis points to 45 point 4%, and this was mainly driven by beneficial product mix. The operator margin was very strong at 19.6% in the quarter as we also continued our prudent cost management. And in Mobile Networks, net sales declined by 2% in the quarter. After some very challenging quarters, we are now seeing net sales trends to start stabilize. Pleasingly, North America net sales increased by double digit, while India net sales stabilized.

Marco Wirén
CFO at Nokia

Gross margin declined slightly by 20 basis points, but remains at robust 38.1%. And operator margin was 7.7%, a decrease of 3 80 basis points versus the prior year as underlying cost reductions were offset by higher variable pay accruals. Cloud and Network Services net sales grew by 7% in the quarter with strong growth in North America. And this was despite a negative impact of approximately 4 percentage points related to divestment earlier in 2024. Growth was mainly driven by Core Networks and Enterprise Campus Edge.

Marco Wirén
CFO at Nokia

Gross margin was strong as was operating margin, which came in at 22.4% for the quarter with profit weighted towards quarter 4 as is typical seasonality for this business. And before moving to Nokia Technologies, I also wanted to bring to your attention the fact that we have now moved our managed service business from cloud and network services to mobile networks as of January 1, 2025. The managed services business provides outsourced network management of multi vendor RAN networks for operators. And considering CNS is increasingly transitioning towards cloud native software sales, as a service product offerings and helping customers to monetize networks through APIs, we believe this business is more aligned and fits better with mobile networks. And based on 2024 results, this change is expected to lead to a transfer of about €430,000,000 of net sales and approximately €40,000,000 of operating profit from CNS to mobile networks.

Marco Wirén
CFO at Nokia

And we will provide recast financial information for 2024 reflecting this change prior to our quarter 1 financial results. Turning now to Nokia Technologies. Net sales grew by an impressive 85% in quarter 4, and this was due to a combination of the increased annual net sales run rate from newly new deals signed in both quarter 4 and earlier this year or 2024, along with some catch up payments related to deals signed in the quarter. Agreements that signed were signed included Entrance and is a previously unlicensed mobile device vendor and then multimedia related agreements with HP and Samsung and other smaller deals as well. Nokia Technologies annual net sales run rate has been gradually increasing in the recent quarters to approximately €1,300,000,000 to €1,400,000,000 And this shows a good progress on the journey to achieve our midterm target of €1,400,000,000 to €1,500,000,000 Let's now look at the net sales by region.

Marco Wirén
CFO at Nokia

The biggest contributors to the net sales growth were North America and India. In North America, we saw a meaningful improvement in demand from telecom operators, supporting all of our businesses. The growth in India was mainly driven by network infrastructure and especially by fixed networks, where we benefited from strong fixed wireless access demand. And in Europe, we saw a resilient market performance, but the growth in the region mainly relates to Nokia Technologies performance. And elsewhere, most markets were relatively stable in the 4th quarter, although the competitive environment remains challenging in Latin America.

Marco Wirén
CFO at Nokia

2024 has ended as a strong year for cash generation. On the whole, it played out as we expected in many respects, but we performed a bit better on each metric. Our prudent cost management also helped us to manage our CapEx requirements in the business this year, and we put significant focus on improving our working capital position, which yielded good results, and this was one of the biggest drivers of our strong cash performance. And we ended the quarter with a net cash position of €4,900,000,000 which means that we start 2025 with a strong balance sheet and will remain in a good position even considering the impact of Infinera acquisition. And looking at our cash performance since 2022 sorry, 2020, we have much stronger track record of cash generation.

Marco Wirén
CFO at Nokia

Looking forward, we forecast free cash flow conversion of between 50% 80% in 2025. And during 2024, we returned 1 point €4,000,000,000 to shareholders in total, €710,000,000 was returned through dividends and €680,000,000 via buybacks. And you will recall that during 2024, we accelerated the 2 year €600,000,000 buyback program and had completed it already within 1 year. In November, we then announced and started a new buyback program to offset the dilutive effect of the Infinera acquisition, and this program is still ongoing. Given our cash performance in the year, we are pleased to announce that the Board of Directors is proposing a dividend authorization of $0.14 per share in respect of financial year 2024.

Marco Wirén
CFO at Nokia

And this is a $0.01 increase from the $0.13 the year before. And with that, let me hand over to Pekka to go through some of the business highlights.

Pekka Lundmark
President & CEO at Nokia

Thank you, Marco. So along with our solid financial performance in 2024, we took some important steps to ensure Nokia has the right foundation for future success. Most notable were the actions we took in active managing our actively managing our portfolio. You will recall that earlier this year we announced the divestment of our submarine networks business, which then closed at the end of 2024. We also sold our device management and service management in CNS to Lumine Group.

Pekka Lundmark
President & CEO at Nokia

From an acquisition standpoint, there were 3 important deals this year, all of which strengthen our position in markets where we see significant future growth potential. We announced our intention to acquire Infinera, which will both strengthen our position in optical networking and accelerate our growth opportunities in the data center market. We've been making good progress with the required approvals. You may have seen that we filed with the EU last week. Assuming we achieved the targeted timelines, we now expect the deal to close already during the Q1 of 2025 and internally we are well prepared to move quickly on integration once the deal formally closes.

Pekka Lundmark
President & CEO at Nokia

We also acquired Pfenex in order to strengthen our position in the defense industry adding their innovative broadband tactical communications products. The acquisition closed in May 2024 and we have moved quickly to accelerate product roadmaps even now launching a 5 gs tactical radio solution in the Q4. This is a longer term opportunity of course, but we are progressing well. In November, we announced that we had acquired RAPIDS Technology and R and D Unit. This acquisition gives us the world's largest API hub used by thousands of developers globally along with strengthening our R and D capabilities.

Pekka Lundmark
President & CEO at Nokia

Another of our strategic objectives has been to diversify our business and accelerate our growth outside of our traditional service provider markets. As we have highlighted before, this includes a number of different growth areas for Nokia and we intend to frame this better for you at our Capital Markets Day later this year. 2024 was a more challenging year for our enterprise sales and we ended with a 4% decline in constant currency. This was partly due to lumpiness that we see in some of the webscale deals after strong growth in 2022 and 2023, but also the broader weakness in enterprise demand that has been visible among many of our peers. Since 2017, we have sustained a 10% CAGR in enterprise.

Pekka Lundmark
President & CEO at Nokia

And while the sales trend was more challenging in 2024, we took a number of steps that I believe will keep us on a double digit growth trajectory in the years to come, including 2025. This is supported by the significant order intake we saw in Enterprise Campus Edge in Q4. We won a number of key deals for example in IP networks with Microsoft and N Scale. We also continue to expand our go to market partnerships. In Q4, we announced partnerships with Kyndryl and Lenovo that will increase our reach into the data center market.

Pekka Lundmark
President & CEO at Nokia

With these foundations and the Infinera acquisition, will have a strong base for which to sustain growth in these markets going forward. Considering our momentum, let me now touch upon some decisions we have made regarding the potential we see in the future. We decided in Q4 that we will accelerate our investment in our IP Networks business. We will invest up to an additional €100,000,000 of annual operating expenses with a view to generating incremental net sales of €1,000,000,000 by 2028. Nokia's IP Networks products are well known in the CSP market for their quality, robustness and innovation.

Pekka Lundmark
President & CEO at Nokia

We will look to bring this strong and proven reputation for quality to the data center market and combine it with new market leading automation capabilities from our event driven automation solutions and our SR Linux operating system. A notable example of this is the agreement with Microsoft. After 3 years of working with them on Sonic, we are now increasingly being deployed across Microsoft data centers and the deal we announced in Q4 will see us deployed in over 30 countries globally. Given the encouraging response to our products, we are doubling down on our investment in this technology in order to be able to address the hyperscaler telco cloud and enterprise customer segments. These investments will bolster our R and D to broaden our product offering to meet customer requirements.

Pekka Lundmark
President & CEO at Nokia

They will also further accelerate our go to market and channel expansion. I'm really excited about this significant organic value creation opportunity for Nokia and this will, of course, be complemented by the connections that Infinera has in webscale. Then if I touch on mobile networks, we explained to you all at the end of 2023 the actions we are taking to renew our mobile network strategy, both in terms of commercial actions and cost management. I spoke to you last quarter about how quickly we have moved on the cost piece, and you're already seeing some of the benefits of that in our second half performance. From a commercial perspective, we have had a highly successful year in terms of deal traction, while maintaining our commercial and pricing discipline.

Pekka Lundmark
President & CEO at Nokia

Since the start of 2024, we have won 18,000 new base station sites on a net basis, including 12 wins with completely new RAN customers. We also expanded our RAN share with 10 customers RAN share with 10 customers and this

Pekka Lundmark
President & CEO at Nokia

success has been across all regions globally.

Pekka Lundmark
President & CEO at Nokia

Now clearly, we did not win every deal, but this 18,000 sites is already considering the few instances where there has been increased competition, especially from Chinese vendors. We have seen good deal momentum in cloud and network services, which we believe will continue into 2025. We now have 117 customers for our 5 gs standalone core, although not all have deployed yet. Currently, it is a reality that only 20% to 25% of CSPs have deployed 5 gs standalone core. According to the GSMA, approximately 60 operators have already deployed standalone core and we are supplying to about 45 of them.

Pekka Lundmark
President & CEO at Nokia

Many operators will of course have multiple suppliers, but this still shows how strong our position is in this market and how strong the traction we have in 5 gs core. One key growth opportunity for CNS is in private wireless. We now have over 850 private wireless customers up from 7.10 a year ago and these are covering a range of industries from energy and transport to public sector and manufacturing. One other focus area is helping operators to monetize their networks with our network as code initiative. We are now up to 48 network KPI partners, which includes 24 operators and a further 24 enterprise and ecosystem partners such as Google and Infobip.

Pekka Lundmark
President & CEO at Nokia

As mentioned in the Q4, we also acquired Rapid's technology assets and R and D team. This will bolster our R and D capacity in network as code and gives us one of the largest API hubs in the world. Taken together with our autonomous networks application suite, we are enabling operators to fully automate and monetize their networks. Our progress here has also been acknowledged with both ABI and analysis Mason recognizing Nokia as one of the clear market leaders in this field. Before turning to our full year outlook, I wanted to provide some color on how we see the market dynamics for each of our business groups as we enter 2025.

Pekka Lundmark
President & CEO at Nokia

Starting with Network Infrastructure, we expect the improving market trends that we saw in the second half to continue in 2025. Ultimately, we see this driving strong growth for network infrastructure with supportive trends across each of the businesses. Then on mobile networks, we saw some stabilization in market demand towards the end of 2024 and we believe we could see some recovery in spending as we progress through 2025. Let me remind you that we will face a bit of a headwind this year in North America from a customer decision made in 2023. We estimate this be an approximately 4 percentage point headwind to the business this year.

Pekka Lundmark
President & CEO at Nokia

But even considering this, we expect net sales to be largely stable for mobile networks this year, meaning of course that the rest of all our customers will compensate for that 4 percentage point drop with that one customer. As I just mentioned, we are also seeing good momentum in cloud and network services as we enter 2025, particularly in core networks and enterprise Compose Edge. These trends should drive overall growth in cloud and network services this year. And then finally, on Nokia Technologies, we look to continue making progress towards our mid term run rate target of between 1 point €4,000,000,000 to €1,500,000,000 particularly in our growth areas. We are targeting to deliver approximately €1,100,000,000 operating profit for this business in 2025.

Pekka Lundmark
President & CEO at Nokia

Then moving to our formal outlook for 2025. We expect the comparable operating profit of between €1,900,000,000 and €2,400,000,000 for the full year on an organic basis, excluding the Infinera acquisition. If you consider the onetime items that benefited 2024 by over €700,000,000 which were mostly in the first half of the year, this guidance would imply a strong improvement in our comparable operating profit in 2025,000,000 despite the selected increased investments like the €100,000,000 plan into IP. As a reminder, these one time items include the exceptional catch up contribution in Q1 2024 in Nokia Technologies, the settlement we had with AT and T in Q2 and then some other provision reversals in Q3. With respect to free cash flow, we expect to convert 50% to 80% of comparable operating profit into cash.

Pekka Lundmark
President & CEO at Nokia

So in summary, we are pleased with the strong end to 2024 in terms of profitability and cash. In addition, we have made some important strategic steps, which we believe will position us well for growth in the future. And finally, and most importantly, we are encouraged to see the sales momentum we saw in Q4 continue into 2025. So let me now hand over back to David for Q and A.

David Mulholland
Head - Investor Relations at Nokia

Thank you, Pekka and Marco for the presentations. Before we move to the Q and A session, just a quick comment on our plans for investor events this year. We are working, as we mentioned last quarter, to confirm dates for the Capital Markets Day. We will look to confirm this to you as soon as we as soon as possible. But with that, let's start with the Q and A.

David Mulholland
Head - Investor Relations at Nokia

As usual for the Q and A session, as a courtesy to others in the queue, could you please limit yourself to one question and a brief follow-up. Janet, could you please give the instructions?

Operator

Thank you. We will now begin the question and answer session. I will now hand the call back to Mr. David Mulholland.

David Mulholland
Head - Investor Relations at Nokia

Thank you. We'll take our first question today from Joakim Kanell from DNB. Joakim, please go ahead.

Joachim Gunell
Equity Research Analyst at DNB Markets

Thank you. So I know you don't guide on gross margin specifically. And there you also have some divisional, I'll call it, market dynamics comment here. But what looks to be I mean, when it comes to the guide for 2025, the deviation versus the consensus appears to be mainly mobile networks driven. So can you just comment a bit here on the group level that you don't guide on sales, does this mean that you still expect fairly low visibility for the full year 2025?

Joachim Gunell
Equity Research Analyst at DNB Markets

And is there anything that you can say with regards to mobile networks gross margin for 2025 in relation to the 38% you showed here in Q4? Thank you.

Pekka Lundmark
President & CEO at Nokia

Okay. Thank you. That's actually several questions you are asking. So let me try to take that piece by piece. So if I take first the visibility question, I would say that as we start 2025, our visibility is much better than it was a year ago.

Pekka Lundmark
President & CEO at Nokia

Our order backlog has continued to grow through the year and the CapEx commentary from our customers is now more robust. And we are optimistic about our opportunity to grow in addition to CSPs on the enterprise markets including the data center. So I would not say that we have lower visibility. You're of course right that we are not providing the level of explicit net sales assumptions yet that we provided last year for our businesses. But we did say however that we expect strong growth in NI.

Pekka Lundmark
President & CEO at Nokia

We expect the growth in CNS and we expect stable sales in MN despite a 4 percentage point headwind from AT and T. So the reason this is more than that in a dynamic market, which is now seems to be changing to the better, it's very hard to gauge exactly that what the pace of recovery will be. But the signs we see are clearly encouraging for the top line of 2025 percent and we also need to remember that of course we will be adding Infinera after closure and of course once Infinera closes then we will be for the first time in a position to comment also their outlook. And then finally in the Mobile Networks gross margin, they were also here as you remember some one offs that we need to understand in 2024. So the underlying performance we have had in 2024 has been 38% to 39% in mobile networks gross margin excluding those, for example, the AT and T settlement in Q2.

Pekka Lundmark
President & CEO at Nokia

So looking into 2025, the real question will be around the regional dynamics, but I would not make a clear comment either way at this point. The underlying last year was 38% to 39%, which is pretty much what we saw in Q4.

David Mulholland
Head - Investor Relations at Nokia

Thank you, Joakim. We'll take our next question from Simon Leopold from Raymond James. Simon, please go ahead.

Simon Leopold
Simon Leopold
Managing Director at Raymond James Financial

Great. Thanks for taking the question. I wanted to see if we could maybe double click a bit on the trends with the hyperscalers in particular. I appreciate the 20 28 outlook regarding sort of that $1,000,000,000 target. I think what I'm looking for is something a little bit more shorter term and what you're seeing in the next year or year plus in terms of that group of customers?

Simon Leopold
Simon Leopold
Managing Director at Raymond James Financial

Then I've got a quick follow-up.

Pekka Lundmark
President & CEO at Nokia

Okay. Okay, Simon. Thank you. This is, of course, one of the most important questions we are also internally focusing on because hyperscalers and data centers, they are clearly one of the best growth opportunities that we will have. And that's why we decided to double down from investment point of view and because we see so big growth opportunities there.

Pekka Lundmark
President & CEO at Nokia

We have had good deal traction and I just mentioned to Microsoft and N scale that we both published in Q4. Then Infinera will of course add a lot of capabilities for the optical side both for data center interconnect and then inside the data center also where the servers will be increasingly connected through optical technologies something that Infinera is particularly strong on. Then looking at the big picture in data centers, of course, the reality is that we are still today compared to the dominant players in that industry, we are a fairly small challenger, which means that this is definitely on the opportunity side for us. And all you need to do is to, for example, look at the Microsoft and Meta results last night where both gave CapEx guidance for very strong growth in 2025. So this market is clearly accelerating.

Pekka Lundmark
President & CEO at Nokia

Then of course the recent announcements we saw on the new lower cost platforms, they will most likely increase competition in data centers. There will be also lower cost alternatives available, which should increase the application possibilities for AI and consequently data centers, for example, in an industrial application, in edge compute applications for various workloads. So overall, we are strongly optimistic when it comes to this market both for web scalars for the plans of telcos and enterprises. And the additional investment that we are making together with the Infinera acquisition will strengthen our capabilities here. This is one area where we will definitely focus on in the upcoming Capital Market Day later this year.

Pekka Lundmark
President & CEO at Nokia

And that is also the reason both the pending Infinera situation and the upcoming Capital Market Day, why we are not yet giving more tangible targets for this year or next year. We just wanted to give you the highlight of that SEK 1,000,000,000 additional revenue that we are targeting through the SEK 100,000,000 investment additional investment that we are making in IP.

Simon Leopold
Simon Leopold
Managing Director at Raymond James Financial

Thanks. And then as

Simon Leopold
Simon Leopold
Managing Director at Raymond James Financial

a follow-up, very much related question is, what are your telco customers saying to you about the impact of AI on their business and what that might mean for Nokia? Thank you.

Pekka Lundmark
President & CEO at Nokia

Yes, thanks. That's another highly relevant question. And there has been some announcements even I just referred to the T Mobile announcement where they are talking about the acceleration of their AI strategy. And we are one of the partners that they are working on together. The I mean, obviously, there are some obvious things, telcos, customer service and network management and network security and intrusion detection, etcetera, where AI is already now making a big impact.

Pekka Lundmark
President & CEO at Nokia

But then the biggest strategic question for telcos going forward is that how they are going to position in terms of other workloads than their traditional own workloads. And here the sweet spot, which also will be in a way a battleground between telcos and hyperscalers and enterprises own cloud is going to be the edge compute market. And many of the telcos are currently thinking to what extent they should be in a way providing workload processing capabilities at the edge of the networks combining potentially their presence through the base station network and offer edge compute capabilities for enterprise industrial workloads. So that edge will be a highly dynamic part of the market going forward. And there will be many different entrepreneurs that will go will want to go after that market.

Pekka Lundmark
President & CEO at Nokia

And the good thing for Nokia obviously is that we are working with telcos, we are working with hyperscalers and we are increasingly working also direct with enterprise customers to go after that opportunity.

David Mulholland
Head - Investor Relations at Nokia

Thank you. Simon, we'll take our next question from Artem Beletsky from SEB. Artem, please go ahead.

Artem Beletski
Analyst at SEB

Yes. Thank you for taking my question and congrats on strong profitability. In Q4, I would like to ask about the growth trajectory when it comes to NI segment. So could you maybe comment on sub segment level or basically IP optical fixed? What kind of development you see there for this year?

Artem Beletski
Analyst at SEB

And maybe just when it comes to double digit growth, what you are talking about, is it sorry, not double digit, but strong growth, what you are talking about? Is it double digit growth in your books or not?

Pekka Lundmark
President & CEO at Nokia

Of course, since we did not attach a number to that double not double digit, but strong. You are putting words in my mouth now, which I did not want to do. But when we said strong growth, we decided not to put the number a clear figure on it. Of course, 17% growth that we saw in Q4, that would be more than just strong growth. But we are not going to be more specific than that.

Pekka Lundmark
President & CEO at Nokia

We see clearly opportunities in all three segments of NI, very much including in optical, which typically and we've been talking about this earlier is the last one to recover. You already saw strong recovery in both fixed and IP. We expect these trends to continue and then also optical picking up. And then of course, once Infinera closes that will then boost our optical capabilities a lot. So yes, market trends to continue that we are now seeing into 2025 expect strong growth further boosted by optical, but we are not at this stage going to put a clear figure on this.

David Mulholland
Head - Investor Relations at Nokia

Did you have a quick follow-up, Arsen?

Artem Beletski
Analyst at SEB

Yes, I do. That is actually related to Technologies segment. And could you maybe a bit more talk about multimedia space? And so now you have done 2 deals in the quarter. How meaningful opportunity to see on that front?

Artem Beletski
Analyst at SEB

And just challenging you that you have only €100,000,000 slack in to reach mid term target. Isn't the opportunity bigger when it comes to new growth areas, what you're addressing right now?

Marco Wirén
CFO at Nokia

Yes. Thank you, Artem. And we definitely see opportunities in the new growth areas as we call them, including Automotive, IoT, Multimedia and as Pete said, specifically also video streaming side. And we already in 2022, we had 2 video streaming contracts that we announced. And then also in quarter 4, we had on the device side video device side, we had HP and Samsung.

Marco Wirén
CFO at Nokia

So automotive also has been tracking extremely well, and we see good opportunities in these new growth areas. And we haven't updated, but last time we updated was December 23, and then we said that these new growth areas, top line of sales was about €150,000,000 for the previous 12 months period. And we will provide you an update figure for this segment all these segments later this year as well. And specifically in the Capital Markets Day, we'll give much more information about this. But we believe that we are continuing to make very good progress here, and we also see that there's plenty of untapped opportunities.

Pekka Lundmark
President & CEO at Nokia

Maybe just to add One thing, Artem, to what Marco said, and we need to remember that the definition of the run rate when we are communicating is really that, that is the in a way the annualized value of the contract base that we currently have. And what we then always typically have is then some catch up payments in new deals, which then explain the difference between the realized sales in any given year and the run rate that we've been communicating. And of course, EUR 24,000,000 was exceptional from this point of view because of the more than €400,000,000 catch ups that we had in Q1. And as we did say, there were some catch ups also in Q4, which explains the difference between Q4 and then the run rate that we are talking about. And of course, there could be catch up payments also in the future, but we feel that it's important to communicate in the way the base, the contract base value that we currently have at hand.

David Mulholland
Head - Investor Relations at Nokia

Thank you, Orson. We'll take our next question from Sami Sarkomis from Danske Bank. Sami, please go ahead.

Sami Sarkamies
Head of TMT & Equity Research at Danske Bank

Hi, thanks. I wanted to revisit your data center growth plans and expectations related to that area. Do I understand it right that you're planning to grow operating expenses by €300,000,000 over a 3 year period and you expect this to translate into an additional €1,000,000,000 of annual sales. Can you also perhaps elaborate a bit on the split between R and D and go to market investments? And what is roughly the starting position for your data center sales today, including Infinera?

Pekka Lundmark
President & CEO at Nokia

Thanks, Sami. We have not yet put a figure on our existing data center sales. These are going to be capital market. Their comments, the reason we are waiting with that is that we want to get Infinera closed because that's going to be such a fundamentally important piece of all of this. There has been growth in data centers.

Pekka Lundmark
President & CEO at Nokia

We have a very interesting starting position, but the reality is that in the big scheme of things compared to the giants that sell 1,000,000,000 and 1,000,000,000 to this market. We are still a small player. Yes, the EUR 100,000,000, it will gradually ramp during this year, and we expect to reach that EUR 100,000,000 run rate towards the end of the year and then keep it there. So roughly speaking, the numbers that you quoted are in the right ballpark. And absolutely, yes, this additional investment is targeted to deliver additional SEK 1,000,000,000 of sales in the year 2028.

David Mulholland
Head - Investor Relations at Nokia

Did you have a question?

Pekka Lundmark
President & CEO at Nokia

And then sorry, I forgot the other part of your question, which was the split between the EUR 100,000,000 between different items. It will be both R and D and then go to market and channel expansion. Both are going to be important, but also here we are not providing this split at the moment. It is important to do both. And again, because the market opportunity is so large, it absolutely is going to be a good investment to also increase our R and D expenditure in this segment.

Pekka Lundmark
President & CEO at Nokia

As you know, we've been taking out a lot of cost from our business during the last 4 to 5 quarters. It's very important to keep in mind that going forward, this is not going to be only about cost reduction. We need to reallocate some of that reduced cost into growth opportunities. And again, in today's world, one of the biggest, if not the biggest growth opportunity is data centers.

David Mulholland
Head - Investor Relations at Nokia

Did you have a quick follow-up, Sami?

Sami Sarkamies
Head of TMT & Equity Research at Danske Bank

Well, maybe I just wanted to

Sami Sarkamies
Head of TMT & Equity Research at Danske Bank

double check that if we also consider the €200,000,000 synergies target for Infinera acquisition, should we assume a cost base in 27,000,000 that is higher than today?

Pekka Lundmark
President & CEO at Nokia

Also that is too early to comment. We maintain what we said about the EUR 100,000,000 additional investment and then the EUR 200,000,000 synergy target in Infinera by 20 27. Of course, we have to remember that there will be normal cost inflation. And then where exactly we put the investment levels, it will have to be balanced with the size of the opportunity and the market development forward. So it's a bit premature to draw the conclusion on that detailed level as you just did.

David Mulholland
Head - Investor Relations at Nokia

Thanks, Ami. We'll take our next question from Sandeep Deshpande from JPMorgan. Sandeep, please go ahead.

Sandeep Deshpande
Sandeep Deshpande
Service Desk Team Lead at JPMorgan Chase

Yes. Hi. Thanks for letting me on. My question is going back to the mobile networks business. I mean, you've had some challenges in the business.

Sandeep Deshpande
Sandeep Deshpande
Service Desk Team Lead at JPMorgan Chase

You've guided to a flattish trend despite some parts of the business declining. Where is I mean, where is this business? I mean, how do you would you call it Pekka that the business is now properly turned around? This will take you to where it needs to go and do you need to take more new contracts there? Do you need to adjust the costs there?

Sandeep Deshpande
Sandeep Deshpande
Service Desk Team Lead at JPMorgan Chase

What will make you believe that the market is on a stable trajectory going from here as such? Or is it already there? And I have a quick follow-up.

Pekka Lundmark
President & CEO at Nokia

Well, the key thing in mobile networks is really going to be the question of how to drive top line in the future. We have now a very strong base in terms of our technology competitiveness confirmed by the customer traction that we have had this year, but that or that we had last year and we expect to continue this year. But the reality in mobile networks is that the service provider market will not be a significant growth market. There will be most likely some small recovery in the market overall market this year. And again, when we are guiding largely stable sales for this year, it means that when AT and T is expected to decline 4 percent on the MN level, it means that then the other customers will grow ex AT and T will grow 4%.

Pekka Lundmark
President & CEO at Nokia

So that is showing that the market is turning and we are taking our share of that turn. But still the reality is that looking between today and 2028, 2029, this will not be a big growth market for operators. That's why it is so important to go after the growth segments, which obviously are private wireless, private networks, and then other segments like public safety, authorities networks and very importantly the defense sector because again the defense spending in the world unfortunately is going up pretty much everywhere and we are now in a very exciting position when we launched our 5 gs based tactical radio solution in Q4. We are offering 5 gs as a fundamental communications platform for the military, including for tactical battlefield communications systems. In many cases today, when you look at military communications, the capabilities of those systems are close to what we would call 3 gs capabilities, both in terms of speed and quality and security and so on.

Pekka Lundmark
President & CEO at Nokia

There is a significant opportunity to upgrade through 4 gs and especially 5 gs. And we are seeing increased traction in this market. And we believe that the acquisition of Pfenex was extremely well timed. As I have said several times, this business takes some patience because sales cycles are really, really long. But hopefully in not too distant the future, we will be able to come with new concrete announcements on our progress in this segment.

Pekka Lundmark
President & CEO at Nokia

This is a significant part of M and strategy. So you need to keep both CSPs flat to slow growth market, enterprise private wireless, strong growth market and defense going to be a strong growth market. They all are important elements in our M and S strategy.

Sandeep Deshpande
Sandeep Deshpande
Service Desk Team Lead at JPMorgan Chase

Thanks, Becca. I mean, just a quick follow-up on Nokia Technologies. I mean, you've had some major deals signed with Wideo recently. Is this I mean, you've talked about the new end markets like autos, etcetera, that you are targeting. But is this new the new IP not new IP, but old IP and updated IP that you have now begun licensing.

Sandeep Deshpande
Sandeep Deshpande
Service Desk Team Lead at JPMorgan Chase

Is this going to be a major opportunity for Nokia?

Marco Wirén
CFO at Nokia

Yes. Thank you, Sandeep. As I said earlier as well, we definitely believe that there are growth opportunities in those new areas that we are targeting, and we continue to invest in R and D in these areas. And just like you mentioned, video streaming is one of those areas, but also we see more opportunities in IoT, consumer electronics and even automotive. And here, we definitely believe that going forward, if we look at Nokia Technologies to be able to reach also the run rate that we have targeted, but also beyond that, because that run rate that we have, it doesn't mean that we will stop there, but we will continuously invest in new areas, R and D and capture those opportunities by our technologies.

David Mulholland
Head - Investor Relations at Nokia

Thank you, Sandeep. We'll take our next question from Daniel Gerberg from Handelsbanken. Daniel, please go ahead.

Daniel Djurberg
Senior Equity Analyst - Technology at Handelsbanken Capital Markets

Thank you, David, and hi, Pekka and Morko. A question for me on your mobile networks. You comment to have on 18,000 additional base station site net in 2024. I was wondering if you possibly could give us Per Ost number and possibly also talk about this from a geographical point of view and perhaps also comment on the ASP trend you see on BCS year over year on this A1000?

Pekka Lundmark
President & CEO at Nokia

Thank

Pekka Lundmark
President & CEO at Nokia

you. We had actually if you go back to the presentation, so there was a regional split on the both the new CSP customers that we have won and also customers with which with whom we had increased market share. So more details than that we are not going to go into. And of course, you will have seen some of the deal announcements that we have made. And we continue to be encouraged on the ongoing deal momentum as well.

Pekka Lundmark
President & CEO at Nokia

That 18,000 what does it really mean? It's in a way a net run rate change. So you win some deals in terms of your market position and then you lose some and this is the net amount. We are not publishing the gross amount. That's confidential.

Pekka Lundmark
President & CEO at Nokia

Of course, we have also won I mean lost footprint with some customers, but clearly, clearly we have won much more than we have lost. And most of those losses that we had, which were not many by the way, they had to do with extremely aggressive pricing typically from Chinese customers in those markets where they are continuing to compete. And we just want to be prudent with our pricing. We are not participating in the most aggressive price wars. It would not make sense.

Pekka Lundmark
President & CEO at Nokia

But despite having this prudent strategy when it comes to pricing, we had a highly successful year in terms of increasing our footprint on a net basis run rate basis with 18,000 sites.

Daniel Djurberg
Senior Equity Analyst - Technology at Handelsbanken Capital Markets

Perfect.

David Mulholland
Head - Investor Relations at Nokia

May I have a follow-up?

Daniel Djurberg
Senior Equity Analyst - Technology at Handelsbanken Capital Markets

Yes. On cloud and network services, strong momentum, return to growth, etcetera. You mentioned 5e core being solid.

Daniel Djurberg
Senior Equity Analyst - Technology at Handelsbanken Capital Markets

And you mentioned 20% to 35% of CSPs now being deployed 5 gs standalone. Can you comment a bit on if they just touch their toes into this, I. E, are they talking about a fully build of 5 gs standalone? Or is it still only deployed in parts of the network, I. E.

Daniel Djurberg
Senior Equity Analyst - Technology at Handelsbanken Capital Markets

That we'll see a substantial build out expansion also with these that has started 5 gs standalone and in part to network. Just your thoughts on that?

Pekka Lundmark
President & CEO at Nokia

In general, one of the things that has gone differently than at least I personally thought a few years ago is the pace at which 5 gs standalone has expanded. It has gone more slowly than anyone expected. But the momentum is picking up. And as I said, we have a really strong position in that. But from overall market point of view, as I said also in my remarks, only a small part of the market is standalone today, which is one key reason why we do expect that CNS will have good growth opportunities in the coming years.

Pekka Lundmark
President & CEO at Nokia

And our relative position and our relative strength in that market is strengthening. We have won several deals recently where we have displaced our competitors in the core network. And this momentum is really a healthy one. Still commenting another thing, which is highly relevant for CNS is the enterprise campus edge business which includes our 5 gs private wireless for enterprises. That is also looking strong.

Pekka Lundmark
President & CEO at Nokia

We had some weakness in that business earlier in the year, but now looking at the order intake we had especially in Q4, we expect strong growth in that business heading into 2025. So CNS is not only about the core network, it's very much also about enterprise campus edge. Now when we are transitioning managed services to mobile networks, it actually creates a more clean-cut software business portfolio for CNS, which I hope will be good for the transparency and visibility of that business in the future.

David Mulholland
Head - Investor Relations at Nokia

Thank you, Daniel. We'll take our next question from Ulrik Rath from Bernstein. Ulrik, please go ahead.

Ulrich Rathe
Director at Bernstein

Yeah, thanks very much. My main question is, whether you have any comments at this point about the changes that are on the horizon from the new U. S. Administration's approach to China could improve your competitive situation. I mean, the reality is that the Chinese suppliers have held better are better in terms of relative product quality according to 3rd party surveys than would have been expected since the U.

Ulrich Rathe
Director at Bernstein

S. Started these efforts in 2018. Now there may be more efforts and do you think something could happen there in terms of the competitiveness of your product versus the Chinese product?

Pekka Lundmark
President & CEO at Nokia

Of course,

Pekka Lundmark
President & CEO at Nokia

this is still very early days for the new administration and we need to see that what the actions really will be. But of course, the reality is that in the U. S, the share of Chinese suppliers is already very small. This question is much more relevant for the other parts of the world. And then of course, how the overall tech war is going, but that's another question.

Pekka Lundmark
President & CEO at Nokia

But if we look at the position of the Chinese suppliers, they are strongly in play in many European markets still today. This is something that the new European Commission will of course be discussing the question of the 5 gs toolbox in Europe, how it will be applied in the future, whether or not it will be expanded to cover also other parts of the network besides 5 gs, as we have suggested. And then of course, the crucial important question also is that what will then happen in the rest of the world, Latin America, Africa, Middle East, significant parts of Southeast Asia, where the Chinese vendors are competing very strongly today that will there be attempts by the U. S. Administration to change the situation in these parts of the world.

Pekka Lundmark
President & CEO at Nokia

This is not for us to speculate. This will be political questions. And we are not a political actor. We are just observing the outcomes of these discussions.

David Mulholland
Head - Investor Relations at Nokia

Thank you, Ulrik. In the interest of time, we'll move to our next question. Follow-up. A quick one if you have 1, Ulrik.

Ulrich Rathe
Director at Bernstein

Yes. The follow-up would only be you answered it mainly in with regards to deployment restrictions. But I was talking about the competitiveness of the product, which has something to do with the technology sanctions and the ability of the Chinese suppliers actually producing product

Ulrich Rathe
Director at Bernstein

that seems to be performing from

Ulrich Rathe
Director at Bernstein

a technology perspective rather well. I mean the deployment restrictions are entirely sort of different part of this Pinson movement.

Pekka Lundmark
President & CEO at Nokia

Yes. You're absolutely right. Of course, these are 2 fundamentally different questions. And this will very much depend on what type of access the Chinese vendors will have to the latest silicon, what type of restrictions on chips will there be in the future? And then what type of capabilities they will have inside China?

Pekka Lundmark
President & CEO at Nokia

Currently, the situation is that when it comes to the latest silicon that require EUV, they do not have access. But it's too early to speculate what type of actions the new U. S. Administration will take in many cases together with the allies. This is not only a U.

Pekka Lundmark
President & CEO at Nokia

S. Question. European Union will also have a lot to say on this. And then of course, the question that I'm not at all going to speculate on is that what the internal development capabilities of China will be in the future.

David Mulholland
Head - Investor Relations at Nokia

Thank you, Ulrik. We'll take our next question from Rob Sanders from Danske Bank. Rob, please go ahead.

Robert Sanders
Robert Sanders
Head - Tech Hardware Research at Deutsche Bank

Yes, hi. There's some reports that the DOJ is investigating the Juniper deal. I was just wondering if that deal do you think creates opportunities for you either already or perhaps in the future just because of the disruption that could come with that deal and because of perhaps partnerships that Juniper previously had that maybe you could now take advantage of yourself? And I have a follow-up. Thanks.

Pekka Lundmark
President & CEO at Nokia

I have no comment to that speculation. That is not for us to comment. But on a general level, of course, always when there is M and A activities that creates opportunities for competitors. We, of course, try to take advantage of that. And I know that when we are in M and A situations, our competitors are trying to get advantage of that.

Pekka Lundmark
President & CEO at Nokia

So there is nothing dramatic there, but we now just need to see that what the outcome of that situation will be.

Robert Sanders
Robert Sanders
Head - Tech Hardware Research at Deutsche Bank

Got it. And just as a follow-up, on the €100,000,000 investment, is that primarily on R and D? Or is there an effort to sort of build out a channel and a sales force to leverage your tech advantage? Thanks.

Pekka Lundmark
President & CEO at Nokia

It's both. It's clearly both. There is an increase going to be increased R and D, but then a meaningful portion of that additional investment will also go to market and channel and partnership programs.

David Mulholland
Head - Investor Relations at Nokia

Thank you, Rob. We'll take our next and potentially last question from Felix Henriksen from Nordea. Felix, please go ahead.

Felix Henriksson
Associate Director - Equity Research at Nordea Markets

Hi, guys. Thanks for squeezing me in. I wanted to touch on the full year EBIT guidance and the different scenarios that you've baked into the, I could say, relatively wide guidance range of 1.9% to 2.4%. So what, in your eyes, has to go well for you to get to the upper end? And on the contrary, what happens if you get to the lower end of that guidance rate?

Felix Henriksson
Associate Director - Equity Research at Nordea Markets

Is it mainly related to the top line recovery? Or are there other puts and takes?

Marco Wirén
CFO at Nokia

Yes. Thank you, Felix. And as always, when we provide a range, we take into account what we know and understand today of the market development. And the market is a clear one driver and how this will evolve over the coming quarters. And what we see currently is that the improving trends that we've seen in the second half of twenty twenty four should continue into 2025 as well.

Marco Wirén
CFO at Nokia

And this is supportive of the underlying improvement.

David Mulholland
Head - Investor Relations at Nokia

Did you have a quick follow-up, Felix?

Felix Henriksson
Associate Director - Equity Research at Nordea Markets

Yes, just quickly on how you consider the outlook for bead in the U. S. And for fiber as the dominant technology, so he's following Trump's election as the President, just curious to hear your thoughts about that.

Pekka Lundmark
President & CEO at Nokia

We have to remember that one key reason why the bid program was put together in addition to accelerating broadband development in less populated parts of the U. S. Was really the connection between bid and the requirement for local manufacturing. And of course, all indications are that the new administration is even more keen, if possible, to attract U. S.

Pekka Lundmark
President & CEO at Nokia

Manufacturing. So and that's exactly what we did. We started manufacturing of broadband equipment in Wisconsin. So we believe that this type of actions that we have taken will be favored by the new administration. Then the suggestion would be it is that we have seen that the money has been more or less allocated to the 56 states and territories.

Pekka Lundmark
President & CEO at Nokia

They have received approval for their initial proposals. We have received orders from 3 customers during Q4, and this is expected to gradually pick up. Then if there will be some slowness additional slowness in the process or not because of the administration change. We have not seen that that would happen. But of course, it's very difficult to speculate on something that you don't know.

Pekka Lundmark
President & CEO at Nokia

But I would be highly surprised if somehow after the money already has been allocated to the states that there would somehow be a complete reversal of this program.

David Mulholland
Head - Investor Relations at Nokia

Thank you, Felix. Thank you. Thank you all for the questions today. Ladies and gentlemen, this concludes today's call. I would like to remind you that during the call today, we have made a number of forward looking statements that involve risks and uncertainties.

David Mulholland
Head - Investor Relations at Nokia

Actual results may therefore differ materially from the results currently expected. Factors that could cause such differences can be both external as well as internal operating factors. We have identified such risks in the Risk Factors section of our Annual Report on Form 20 F, which is available on our Investor Relations website. Thank you all.

Operator

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

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