Good morning, ladies and gentlemen. And welcome to Nokia's Third Quarter 2021 Results Call. I'm David Mulholland, Head of Nokia Investor Relations. And today in espo with me is Pekka Lundmark, our President and CEO, along with Marco Wiren, our CFO. During this call we will be making forward-looking statements regarding our future business and financial performance. And these statements are predictions that involve risks and uncertainties. Actual results may therefore differ materially from the results we currently expect. Factors that could cause such differences can be both external as well as internal operating factors. We have identified such risks in more detail in the section titled operating and financial review and prospects, risk factors of our 2020 annual report on Form 20-F, as well as other filings with the U.S. Securities and Exchange Commission. Within the presentation today, unless otherwise stated, references to growth rates will be mostly on a constant-currency basis and margins will be on a comparable reporting basis. Please note that our results release the complete report with tables and the presentation on our website include comparable results information in addition to the reported results, including a detailed explanation and reconciliation between the two. So with that, in terms of what we'll go through today, I'll shortly hand over to Pekka who will go through a brief overview of our financial performance before giving an update on the project progress that we're making in terms of the strategic objectives we've given each business. We'll then run through a quick word on enterprise along with how we see the supply chain constraints, and then hand over to Marco, who'll go through the financial performance in more detail before we get Q&A. So with that, over to Pekka.

Thank you very much, David. And thank you, everybody for joining today. We had another great quarter, third quarter 2021. Strong execution. Also some headwinds that I want to highlight, especially when it comes to top line because of component availability. I'll come back to that soon, because in the big picture, when we look at our numbers in the quarter, we had 2% top line growth. It's 6% year-to-date. But what is interesting is that actually we have could grown faster without supply chain constraints. So the main point here is that we are currently not constrained by market demand or our own production capacity. But what is constraining our growth at the moment is availability of components. 2% growth, couple of highlights. First of all, our most important and largest market, North America, we had excellent 9% growth despite some of these earlier communicated headwinds that we had in mobile networks. The other businesses in North America, very well compensated for the decline that we had in mobile networks, which was very much expected. Then couple of other highlights. Cloud and network services had really good 12% growth and Nokia Technologies also double-digit, 11% growth. And network infrastructure overall against the pretty strong Q3 last year had 6% growth. And within the network infrastructure group, the Fixed Networks division was really the standout though this quarter with fantastic 29% growth. So overall, pretty good quarter from top line point of view. Then if we move to profitability, gross margin -- first, this is really a testimony to our -- improving product competitiveness. We had comparable gross margin expanding by 340 basis points. And this is pretty much across the board at the moment and particularly pleasing to see that mobile networks had 220 basis points. Expansion in gross…

Thank you, Pekka, and good morning from my side as well. I will dig deeper into the financial performance of Nokia during the quarter 3, and I will start with the market estimates. The overall market is pretty much stable compared to our previous view as well but there's a couple of items that I would like to highlight. And the first one is the mobile networks. And as you see, we actually estimate that the addressable market will grow about 5% instead of 6% as we had in our previous estimate. And the main driver here is that we believe that the supply chain situation that Pekka just mentioned will impact this market. And also what comes to the network infrastructure, we believe that these mortgage is also affected by the supply chain constraints. But considering the year-to-date growth, we believe that this market is actually growing 5% instead of 4%. And we especially see in the fixed networks and IP networks side with the CSP customers, where the market is for a strong. And then if we looked for 2% growth that we had in quarter 3, we can see if there is a lot of changes in between different geographies. And it was not with the North America. You can see that we had a 9% growth and we had headwinds in mobile networks just like we have been mentioning those earlier. But these were offset by the double-digit growth that we saw in network infrastructure and Cloud and Network Services. And just to mention also that all the three businesses in networking infrastructure had double-digit growth numbers in North America. And now I exclude ASN because ASN is a different business and it's between the geographies quite a lot of. Then the second area I would…

Thank you, Marco. We'll now start the Q&A session. For the Q&A session, please could you limit yourself to one question as a courtesy to everyone else in the queue. Operator, could you please go ahead and give the instructions.

Thank you. We will now begin the questions and answer session. If you are also doing the video webcast, please mute the audio on your computer before asking your question as there is a 30 seconds delay. [Operator Instructions] comes from Dominik Olszewski from Morgan Stanley. Please go ahead.

Yes. Good morning, everyone. Thanks for taking the question. You mentioned the 100 basis points of one-offs this year as a positive to operating margin. And as you flagged at the first half as well.Throughout the equally, the supply chain is going to gain too this year. So could you maybe discuss how much it comes by -- how much of revenue impacts or profit impact has that been this year or maybe into Q4. And then secondly, you shared the slides on fiber penetration. Can you just touch on how much operating leverage do you have into that team? Because obviously impressive growth. So how much additional investment does it need? Thanks.

Thank you, Dominic. And what comes to the impacts of semiconductor situation this year? We believe we definitely have seen some impact on slide we highlighted already in Q2 that we could have had higher sales in Q2, but also now in Q3. And that will affect us Q4 as well. We haven't quantified exact numbers, but just like we said, that we would have been able to grow faster than we are, because end markets are supporting high across.

If I take the fiber question, the Fiber Access business is volume sensitive. You need high volumes to get to good margins and that's exactly where we're getting now and you're seeing actually the result coming through now when we have this type of growth. We have been increasing and will most likely continue to slightly increase the R&D investment there, but not in such a way that it would in a way eat away all the good things that we would get through the volume.

Thank you, Dominik. Just a reminder if you'd keep yourself to one question, please. Rachel, next question.

Thank you. The next question is from Francois Bouvignies from UBS. Please go ahead.

Thank you very much. The question I have is on your performance by regions and mainly Europe and China down this quarter. I just want to have your thoughts of what should we expect for the next quarters. 1, because of Europe, it seem that you have a lot of product launches and with the challenges of -- that Huawei is facing, should we expect some market share, maybe gain in the next few quarters in Europe and maybe coming back to a hefty gross there? And on in China in light of the recent contracts announcement there, although small, should we expect the benefit of that in the next quarter also. Thank you very much.

Yeah. What counts to the different regions. We definitely believe that in mobile networks side that if look the European area, that we have had a very good opportunities. One, suppliers have changed the supply base and we've been winning about half of those opportunities. And how exactly this will play out in quarter 4, that's -- let's see about that. It depends -- it's timing issue a little bit as well. When it comes to China, those contracts or shipments will start coming from quarter 4 and forward based on those wins that we did in China latest purchasing ground.

That is right. And if I add just quickly couple of macro comments on both regions, in general in 5G investment and also in many segments of broadband -- fixed broadband, Europe has actually been lagging behind some other parts of the world. There's always some lumpiness in deliveries, which is now mainly explaining the minus 5% in Q3. But structurally, we continue to believe in the European market potential. There is a lot to be gained there. And then when it comes to China structurally, it continues to be, of course, a large and important market. There we have to be realistic that it is a fact that market share that is available to non-Chinese vendors there is currently small and it's prudent to expect that that would not change anytime soon.

Thank you, Francois. Rachel, next question, please.

Thank you. The next question is from Sami Sarkamies from Nordea Markets. Please go ahead.

Hi, thanks for taking my question. I would actually continue on the component shortages. Can you still elaborate on the extent these limited your sales in the second and third quarter. Are we talking about 1 to 2 percentage points or something more meaningful? And do you anticipate potential larger headwind in Q4 and in the first half next year? Thanks.

I'm thinking how to answer that question without giving you a number because we have decided not to quantify. This is also partially -- commercially sensitive, but it is meaningful. and it is actually increasing. It's -- as I said, it's quite possible that this situation will get worse before it gets better. Of course, structurally it will get better one day. Semiconductor industry is currently investing heavily. But there is quite a long time lag before some of that capacity starts coming online. So we can be fairly confident that when we get to '23 and then '24, this situation could completely reverse itself, and there could be excess capacity which would then be reflected on prices. But '22 will be the big -- in a way inflection point where everybody currently still wondering that what will really happen and that's why we are saying that there are uncertainties. We've been doing fairly well in this war about semiconductor so far, but it is getting more challenging.

Thank you, Sami reach your next question, please.

Thank you. The next question is from Alex [Indiscernible] From Goldman Sachs, please go ahead.

Hello, everyone and many thanks for the question. Congrats on the strong results. There's been some debate in the market as to whether we're approaching mid or late cycle as it pertains to 5G. Clearly you've been talking about some opportunities in various regions. Some of those seem to relate to market share. So as we think about demand into 2022 and potentially 2023, can you talk about which regions you see growth and how you think about the drivers there? Obviously component SEG you've talked about how you're thinking about the cycle and demand. Many thanks.

We believe that we're still maybe 2 to 3 years away from the peak of the 5G market. And then when we look at the development of the market from there, the 4G market peaked and then it started to decline quite quickly after that. We believe that there are good reasons to believe that this peak could actually last for a longer period of time and then it would gradually start declining towards 2030 when then 6G will start hitting the The market. And the reason is clearly that there are -- there will be so many new use cases compared to the previous generations. Of course, the consumer side is one thing. On that one, since you asked about regions, clearly, Europe has been lagging behind in investment compared to the United States, to North America, in general, and Korea, and Japan, and China. So Europe is now clearly picking up on this investment. But then there is this big thing about the industrial digitalization. And as I have said so many times, it seems now that with 5G, this long-standing promise of moving the operational technology of enterprises to networks and to cloud and start realizing the long-standing promise of Fourth Industrial Revolution and significant industrial productivity improvement. That will be possible with the combination of 5G and Cloud and artificial intelligence. And when we are talking to all customers and observing what serious, big, heavy industrial actors are planning at the moment, it's actually quite encouraging. Almost all of them are one way or another going to invest in next-generation connectivity, especially in 5G. There are 15 million industrial campuses in this world. That's an amazing number. And when you start to think about what kind of services network infrastructure, and then different types of edge cloud platform stable invest and I believe that that will create a significant opportunity for several years to come.

Thank you, Alex. Rachel, next question, please.

Thank you. The next question is from Peter Nelson from ABG. Please go ahead.

Thank you very much. Good morning, gentlemen. And thank you for the presentation. I would like to turn to North America please, where you obviously had a strong quarter overall. And looking at mobile tech, I interpret your comments on that we've seen the full brunt of the impact of the headwinds you have talked about before in North America. That we've seen those in Q3 and perhaps, if I interpret correctly, it's not getting worse in Q4. Could you give us any indication on how you're doing on mobile in North America? Marco kindly gave us a number for Europe, but how you're doing in North America on mobile? That will be very helpful. And if you have any outlook you want to share for next year. Thank you.

What we have said earlier is, of course, that we have had certain issues with market share, some price erosion. Those referred to decisions that some of our customers made over than a year ago, around mid 2020, and that is now, of course, reflected in the numbers and that creates a tough Q3 this year comparison compared to Q3 last year. We are not disclosing regional numbers by business. But when you look at the mobile networks, top-line development, for example, you get an idea because the main reason for that is actually North America situation. Sequentially, I don't think it's going to get in a way in any worse. We've been doing well in North America in terms of new decisions and our product competitiveness and our market position actually all the way after those negative decisions were made sometime mid last year. So from that point of view, I believe that we have, in a way, now been able to stabilize the situation, and then of course, our goal is to then turn to a more positive development after this Q4 this year compared to Q4 last year. Of course, still will continue to be a challenge. And this is one of the reasons why we expect that we will not see the typical seasonality, or at least the seasonality will be less pronounced this year than it has typically been in our results.

Thank you, Peter. Rachel, next question, please.

Thank you. Our next question is from Simon Leopold from Raymond James. Please go ahead.

Thanks for taking the question. I wanted to see how you're considering the opportunities from government stimulus projects. If we can hear specific views regarding the art off program that is in the U.S. rural development opportunity fund, as well as global thoughts. You highlighted fixed access. I think that's probably the most effective, but if we could get your perspective. Thank you.

It's very clear that these stimulus programs they create actually a lot of opportunities for us. All the decisions have not been made and there are still final decisions to be made, especially in the U.S. regarding the chips of Act-On and various funds, for example, for R and development and so on. But on balance, this is very positive development for us and we believe that not only our mobile business, but also fixed broadband access business will benefit from these decisions. The same is true to Europe, the recovery and resilience facility of the -- of the European Union, which is now gradually being rolled out to implementation in different members states is definitely a net positive for us.

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

Thank you. The next question is from Robert Sanders from Georgia Bank. Please go ahead.

Yeah. Good morning. Hi, thanks for taking my question. I guess -- I know you don't want to give a specific outlook for 2022 sales. But can you at least rank your segments in terms of growth potential? And which segments within the sort of 3 cloud network and mobile will be most affected by the supply issues you're facing? Thanks a lot.

An easy way to answer that would be that CNS will not be affected because it's software. And this is actually a relevant point because we are -- overall, we see growth opportunities in all the businesses next year. But we are not going to be limited by demand side. Next year, this whole game will be more supply game compared to what it is typically been. CNS is, of course, different because there are no limitations as to delivery capacity. So in terms of market and in terms of our product competitiveness, we believe that direction of travel and the underlying development is positive. The uncertainties caused by the supply side and there I do not see big differences between Mobile Networks and network infrastructure because these fundamental challenges are not even things that would be there with individual chip makers. They go all the way to wafer production and availability of substrates for the components and so on. So it did affect -- it will affect everybody.

Thank you, Robert. Rachel, next question, please.

Thank you. The next question is from Frank Maao from DnB. Please go ahead.

Yes. Hi, gentlemen, and thank you for taking the question. So I was wondering if you could talk a little bit about how the cost inflation challenges panel for more practical level. And also, in terms of the supply chain bottlenecks a lot. If you can unpack what kind of bottlenecks you are most worried about. Is it semis, what kind of semis? You mentioned substrates, but also could there be issues around, obviously, in typically around Sitec with than not being from third-parties there in place at the time, cables and brackets or batteries. So whatever you're. If you could talk a little bit to give us some color around what's gear basic is more challenged? If it's just the semi partials, all the stuff and are related to that, what is the length of the contract with the suppliers to manage the bill of materials impact of the cost inflation which is coming from these -- these disturbances? You have -- typically you have long contracts that would lead to smooth out, say a 10% or 20% increase in spot prices, for example, for semiconductors? That's my question. Thank you.

Typically, these contracts would be annual contracts and this is one of the reason why the uncertainty, for example, regarding 2022 is there because a lot of these negotiations are actually on going, for 2022 at the moment. For commercially sensitive reasons, I will not go into details as to which suppliers it would be and which segments. As I already said earlier, it is fairly broad-based affecting all semiconductors. And to some extent could behave a little bit different for memories, but still, the whole industry of semiconductors is being affected. And again, it's commercially sensitive. That's why I will not discuss that. what type of price increases we are seeing. And of course it is continuous discussion with both suppliers, and then of course, our customers. And our goal is to find the right balance between being able to deliver and then also optimize our margins.

Thank you, Frank. Rachel, next question, please.

Thank you. The next question is from Sandeep Deshpande from JPMorgan. Please go ahead.

Yes. Hi. Just coming back to the issues on semiconductors, etc. If I may ask, if you look at the run market today, particularly in the West, there isn't that much competition in the market given the geopolitical issues that are ongoing. And customers typically can't change suppliers just because you can 't supply this quarter and you'll be able to supply next quarter. So does this thought just mean that your demand is delayed into next year and once you can get the supply of semiconductors that your sales will be much higher because you will probably not lose business because of the semiconductor situation.

I think, Sandeep, that is the right assessment. Of course, there can be individual cases where the reality would be different. But in majority of the cases, I believe that's exactly what would happen, that it would be more of a delay of delivery than loosing the sale completely.

Thank you, Sandeep. Rachel, next question, please?

Thank you. The next question is from Paul Silverstein from Cowen. Please go ahead.

Thank you. I appreciate taking the question. Simple question. Where is the opportunity or opportunities for grid us upside with respect your margin structure, putting supply chain challenges a side which presumably are transitory.

Yeah, we're working quite heavily on 2 fronts of this sign I would say. One is, of course, securing that we have the technological leadership because what we believe is that when you have the technological leadership then you have much better ability to have higher margins as well. And the other one is securing that we have the best, most optimal cost base. And you've seen also that with increasing the R&D, the same time we actually have been able to reduce our cost base in other areas to mitigate that increase that we have in R&D. So the more R&D we can focus on and get the right output, because it's not only money put into R&D but also the efficiency of R&D, and we have been extremely good on actually increasing the output, and Mobile Networks is very good example how we've been measuring how much output we get based on the same amount of money that we put in. And we continue to do that in all areas.

Thank you, Paul. Rachel, next question, please.

Next question is from Aleksander Peterc from Societe Generale, CIB. Please go ahead.

Good morning, and thanks for taking the question. I'd just like to focus little bit on on Cloud and Network Services or CNS. Could you tell us how advanced you are with adjusting the poorly performing projects there that's maybe still weigh on margins? Should we expect any benefit once all of those issues are fully resolved? And how sustainable is the shop gross margin improvement that we saw here? You mentioned a 10% point improvement outside of the last year's losses. So basically, how much of this we should continue to model going forward? Thanks.

Basically, we're doing two things in CNS at the moment. We are -- First of all, we are addressing certain older non-performing contracts, which is one part of this. And then in addition to that, which is perhaps even more important strategically is then the complete reassessment and reshuffling of the portfolio. And as I explained in my presentation, we have now defined the six focus areas to invest in, which will then be driving CNS growth going forward. The gross margin improvement in Q3, I would be a bit careful when you look at the year-on-year because of those big one-off project provisions that we had last year which we did not have this year. Of course, our goal is and I believe we will get there, that once we clean up the old portfolio of bad projects and then focus the business on the right growth segments. The goal is that that would be a structural driving up margins. But again, one quarter is too short and now we have this exceptional suggestion with the big provisions last year. So I would be a little bit careful as to not to drop too quick conclusions on Q3.

Thank you, Alex. Rachel, next question, please.

Thank you. The next question is from Stefan Slowinski from Exane BNP. Please go ahead.

Yes. Hi, and thank you for taking my question. I would like to ask you about OPEX trends going forward then basically what comes to R&D. So we have seen increase there as you have been highlighted in previous, sot is now basically full impact visible on XT -8 side. and maybe in terms of SG&A trends, and potential to say instant difficultly impacts and other factors. Could you provide some color on the development going forward also there? Thank you.

Yeah. Thank you for the question. And then, yeah definitely we have said that this year we will definitely double-down on R&D, especially in mobile networks. But we also have increased R&D in network infrastructure as you saw the new FP5 chip that we launched. So these have created more cost in the R&D side. And what comes to the future investments in R&D that we balance always based on what we believe is needed to secure that we have the technological leadership position. When it comes to SG&A cost s, we -- there we continuously see what opportunities do we have to be most optimal and get out of that kind of service that we need in the Company as a whole, and secure and be competitive compared to our peers as well. So I will not go into estimations of next coming years, R&D levels that we will get back to you when we guide next year's figures as well.

Thanks, Arden. Rachel, can mean I'll take our last question, please?

Thank you. The final question is from Richard Kramer from Arete Research. Please go ahead.

Thanks very much. Just want to dig in on the enterprise area for a little while. If we look at the run rate of sales and the 380 million customers, I know you may still be ramping with many of them, it averages out to a very small amount for customer, less than 4 million euros. And obviously you mentioned some large hyperscalers in there. Can you lay out how you're planning to go-to-markets in this space? Because what we've seen with many of your peers in the past is that they haven't got that go-to-market right. And also since you seem to be sticking fairly strictly to budgeted spend levels in areas like sales and marketing this year, so how do you plan to realize that enterprise opportunity next year without building a large sales force and channel organization? Thanks.

There are a couple of different segments, which have to be dealt with differently. The large webscalers, it's actually fairly R&D intensive discussion that you need to have with them. So it's very straightforward. And of course, the number of these customers is fairly limited. So that's in a way of case of it's own. Then when we talk about private wireless, there are two different types of private wireless. There are the wide area networks for utilities and railways and public services. Those deals are actually conceptually fairly close to what we're doing in mobile networks. A similar type of approach to those customers works fairly well. But then a completely different case is these millions of industrial campuses and there we are currently developing the distribution model. You cannot have your own sales force that would visit 50 million industrial composition, you need to have a distribution network or layers of distribution so that you don't need to invest in fixed cost for that sales force yourself. So that's what we are currently building.

Thanks, Richard. Ladies and gentlemen, this concludes today's call. I would like to remind you that during the call today, we've made a number of forward-looking statements that involve risks and uncertainties. Actual results may therefore differ materially from the results currently expected. Factors that could cause such differences can be both external as well as internal operating factors. We have identified these in more detail in the section titled Operating and Financial Review and Prospects, risk factors of our 2020 annual report on Form 20-F, as well as other filings with U.S. Securities and Exchange Commission. Thank you for joining us.