Matt Shimao - Head-Investor Relations Rajeev Suri - President & Chief Executive Officer Timo Ihamuotila - Group Chief Financial Officer & Executive VP.

Gareth Jenkins - UBS Ltd. (Broker) Kai F. Korschelt - Merrill Lynch International Sandeep S. Deshpande - JPMorgan Securities Plc Richard Kramer - Arete Research Services LLP Alexander Peterc - Exane BNP Paribas Kulbinder S. Garcha - Credit Suisse Securities (USA) LLC (Broker) Mark Sue - RBC Capital Markets LLC Francois A. Meunier - Morgan Stanley & Co.

International Plc Tim Long - BMO Capital Markets (United States) Ittai Kidron - Oppenheimer & Co., Inc. (Broker) Simon M. Leopold - Raymond James & Associates, Inc. Vincent Maulay - Oddo & Cie SCA (Broker).

Good day, my name is Stephanie and I will be your conference operator today. At this time I'd like to welcome everyone to the Nokia Second Quarter 2015 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.

I would like now like to turn the call over to Matt Shimao, head of investor relations. Mr. Shimao you may begin..

Ladies and gentlemen, welcome to Nokia second quarter 2015 conference call. I'm Matt Shimao Head of Nokia Investor Relations; Rajeev Suri, President and CEO of Nokia; and Timo Ihamuotila, EVP and Group 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 74 through 89 of our 2014 Annual Report on Form 20-F, our interim report for Q2, 2015 issued today, as well as our filings with the U.S.

Securities and Exchange Commission. Please note that our results release, the complete interim report with tables, and the presentation on our website include non-IFRS results information in addition to the reported results information.

Our complete results reports with tables available on our website 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..

And I know you've been seeing a lot of rumors in the press about what might happen and when it might happen. That is unfortunate but should not distract attention from why we are doing what we're doing. On our last call, I said that we had embarked on the strategic review of HERE in the context of two important developments.

First, that location services are becoming of even greater strategic importance to automotive companies and others; and second, that Nokia's portfolio will become increasingly network focused once the Alcatel-Lucent transaction closes.

I also said at the time that we think HERE is an excellent asset and that our goal is to find the best possible solution for Nokia and its shareholders and for HERE and its employees and customers. None of that has changed. What has changed is where we are in the process.

And we are now in an advanced stage of our strategic review and expect to have more definitive information to share shortly. Beyond that, there is really nothing more I can say other than we will communicate more as soon as we can.

With that, I will turn to Networks, which had a terrific rebound from weak profitability in the first quarter to deliver an excellent second quarter. You will recall that when we announced our Q1 results, I noted that, while growth was good, profitability was impacted by five factors. One, weak software sales.

Two, strategic entry deals, particularly in China. Three, challenging market conditions. Four, operating expenses that partly reflected negative ForEx impacts and five, a mix shift in Global Services. At the time, I said that we had actions to improve in these areas, and I am pleased to say that in Q2 those actions delivered.

First, software sales were up significantly and core network sales improved as well. While we do not disclose full details about software sales, I would note that software share in our sales was up both sequentially and year-on-year by approximately 500 basis points and 400 basis points respectively.

We've been very focused on software sales and on putting the systemic improvements in place to ensure that we are able to price and sell software in the right way as the industry continues its hardware to software migration.

Despite these underlying improvements, I would caution against any assumptions that software share will be at a similar level in coming quarters. We are starting to see more difficult seasonality patterns with stronger quarters in Q2 and Q4 offset by weaker first and third quarters. Second, strategic entry deals.

On our last call, I said that we expected the impact of these deals to ease in the second half of the year. Given that we were able to successfully reduce their impact in Q2, we no longer expect to see further significant easing in the second half of the year. The third factor is the competitive environment.

Last quarter, I said that market conditions were challenging and that there was evidence of a near term shift in market behavior. I continue to believe that to be true. We intend to remain disciplined in the deals we make but we also cannot ignore market reality.

Thus we will continue to take out costs and drive operational improvements wherever and whenever we can. Unlike others, who have yet to acknowledge that market conditions have changed, we are already working to mitigate the situation. And as the second quarter shows, our disciplined operating model positions us well in this environment.

The more we are able to act now, the better prepared we will be to limit the impact on our profitability down the road. This brings me to the fourth factor, costs overall and not just operating expenses.

I've mentioned our Smarter program on previous calls, and that program has eight underlying initiatives that, when combined, address the clear majority of the company's cost base. I will not go through each initiative here but just highlight two.

First, R&D transformation which is focused on improving R&D productivity, efficiency and cost intensity with no negative impacts to product roadmap. We delivered clear R&D improvements in 2014 and continue to work hard to maintain that momentum.

Second, regional services productivity improvement, which ensures we have the most efficient delivery model across all the business lines in Global Services. This effort has already delivered a strong pipeline of improvement to areas which we track rigorously to ensure effective implementation with financial impacts linked directly to our P&L.

Other topics include site strategy and consolidation, supply chain transformation, focused improvement of underperforming customer accounts, IT modernization and more.

All of these are monitored through our business transformation board in order to ensure delivery of the target cost reductions along with assessment of potential head count implications.

Additionally, to ensure effective control of head count, we have a head count steering board which serves both as a management body as well as a challenger to the various units on their head count plans. In short, we continue to have a laser like focus on costs and operational improvements and we will not relax that focus in the coming quarters.

Finally, the mix in Global Services. Last quarter we pointed to more network implementation and less systems integration. While in Q2 we saw a tilt back in favor of systems integration which also saw much better profitability in the quarter.

Care services and network planning and implementation – I'm sorry, network planning and optimization also performed quite well, both on a sequential and year-on-year basis. Now to the quarterly details. Networks delivered year-on-year net sales growth of 6% in the quarter; however, when you exclude the currency impact, sales were down 4%.

Underlying gross margin was very strong. In fact, the best ever in the history of Nokia Networks at 40%, up 190 basis points year-on-year versus the decline at the market leader. Underlying operating margin was 11.5%, a 50 basis point increase from the same quarter last year.

Our Mobile Broadband and Global Services business segments both grew in the second quarter, albeit helped by currency tailwind. The business mix in the quarter was 51% Mobile Broadband versus 49% for Global Services, a significant shift from the 53/46 mix one year ago.

Global Services had one of its best quarters ever, year-on-year growth of 12.4% including in five out of six regions and four out of five business lines and a roughly 12% increase in absolute operating profit given an operating margin essentially flat from one year ago.

Overall, we are seeing very good progress in professional services that are not always attached to Mobile Broadband, but that actually has the potential to pull through software and hardware sales. Mobile Broadband saw a significant shift from its small operating loss in Q1 with an operating margin of 8.8%.

a 110 basis point improvement compared to last year. As I noted earlier, we saw strong software sales, which was a clear driver of this performance.

Interestingly, while still a relatively small business, our small cell offering is starting to get traction in the market and during the quarter we demonstrated excellent small cell performance for China Mobile, and we're also seeing growing customer interest in LTE-based public safety, which we identified in our strategy as an area of future opportunity.

Turning to the regions, I will provide a bit more color than usual given some of the shifts that are underway. Overall, we saw year-on-year sales growth in five of our six regions, with only Asia-Pacific weaker as a result of market declines in Japan and South Korea.

Greater China led the way in growth, up 24% year-on-year, given the ongoing LTE rollout. Our current expectation is that market momentum in China will remain strong until yearend. China also has a big impact on the total global market.

While our view of the market being flattish at constant currency remains unchanged, much of the growth is in China where foreign vendors have a smaller share than the global average. Middle East and Africa grew very well at 22% year-on-year, and we see ongoing opportunity in the region.

Particularly in Iran following the latest news about the future relief of trade sanctions. We're excited about reestablishing and building relationships with our customers in the country and contributing telecommunication solutions for the people of Iran.

Then North America where we saw particular strength in the network implementation business line, partly coming from the acquisition of SAC Wireless which we had completed in 2014.

As I said in Q4 results call, we are working with Google on the possibilities of opening up the ecosystem around 3.5 gigahertz spectrum for Mobile Broadband in the United States, and I would also note that we slowly continued to gain traction in earning the trust and business of North America's largest operators.

In Asia-Pacific we felt the impact of the overall decline in the Japan and South Korea markets but India is performing extremely well in terms of both growth and profitability. Southeast Asia, which in our structure, does not include Indonesia, is also growing well, roughly doubling sales compared to last year.

We do not see any near term catalyst for either Japan or South Korea to snap back to earlier levels of spending; although, we remain very well positioned in both markets. Europe is a mixed story for us, parts of the region are very challenging.

Russia, for example, is seeing aggressive actions from the Chinese companies as they seek to leverage current political trends. Southeast Europe on the other hand which includes countries like Portugal, Italy and Turkey is very solid for us with modest growth despite the underlying macroeconomic issues. Finally, Latin America.

As you know from previous calls, this has been a challenging area for us. But we are starting to finally see some stabilization. Sales were up by 5% year-on-year and the team there is delivering in a more consistent and predictable manner.

That said, the challenges remain and we do not yet have the diversified customer base that we need for the long term. In short, progress but work in Latin America is still underway as results are not yet satisfactory. Just two other comments on Networks.

First, during the quarter we launched the innovative AirFrame Data Center Solution for telecom operators to implement cloud services. There are plenty of vendors selling cloud technology but very few who can offer cloud technology that is both teleco grade and cost effective.

We have something we believe that is quite unique and initial customer interest has been very good. Second, we signed an agreement to acquire Eden Rock Communications, LLC to boost our multi-vendor self-organizing network radio optimization capabilities, so SON.

Customer feedback on this asset has been extremely positive and we are moving fast to bring these capabilities to a wider market.

In summary a very good quarter for Networks after a tough start to the year with some of the puts and takes that I mentioned and with the impact of seasonal trends, we could see a lower operating margin in Q3 than in Q2 but still be in a position to deliver on our full year targets.

Now to HERE, which delivered another quarter of excellent results showing significant improvement in both year-on-year sales and profitability. Given the distraction of the strategic review, I have to say that the HERE team has been doing excellent work. These results are not the sign of a business that has taken its eye off the ball.

Highlights in the quarter included HERE expanding it's real time traffic service to 50 countries from 44, while adding innovative features that allow drivers to make more intelligent routing choices. HERE was also selected by Finnish traffic agencies to lead a pilot project to help vehicles communicate safety hazards to others on the road.

The pilot which will start in 2016 will assess the capability of current and emerging mobile network and location cloud technologies to support the timely communication of critical safety information like black ice, sudden traffic buildup or an accident. Finally on to Nokia Technologies, which also had a terrific quarter.

Highlights included, LG Electronics becoming the latest with more than 80 licensees for our standard essential patents and importantly the first major smartphone manufacturer to join the licensing program since we divested Devices and Services. This was a great confirmation of the strength of our IPR portfolio.

The Technologies team took further steps to focus the business on projects that present the most interesting opportunities, and we got a taste of that with the launch on Tuesday of OZO, the first commercial virtual reality camera for professionals.

It's an incredible tool to create amazing virtual reality experiences for people around the world and puts us at the heart of the coming virtual reality revolution. OZO is a truly innovative product offering, a fully 3D, 360 degree camera for recording and playback across the spectrum of virtual reality devices.

It also is not just a gorgeous design but also truly differentiating technology with unique algorithms that remove today's time consuming step of assembling a spherical image. We think it will have a wide range of applications; film studios, marketing firms, travel agencies and many others.

Early feedback from potential customers and ecosystem players has been very positive and is a clear proof point that we are delivering on our strategy which includes a focus on digital media and digital health. During the quarter, we also reiterated our position about what we might do in the future related to smartphones.

Although some of the press coverage misses the point, we have consistently said that if we returned to that market, it would be via a brand licensing model. And as you know, the soonest this could happen is the fourth quarter of 2016. We do not have any intention to try to recreate the full in house mobile phone business that we once had.

With that, let me now hand the call over to Timo for some more details and then we can turn to your questions. So, Timo the floor is yours..

Thank you, Rajeev. I would like to spend the next few minutes taking you through the performance of Nokia Technologies and HERE in the quarter, as well as our venture fund investments before turning to my customary discussion on our cash performance. Finally, I will say a few words on our outlook.

Starting with Nokia Technologies net sales of €193 million in the second quarter increased by 31% year-on-year, or 24% on a constant currency basis. This was primarily due to two factors.

First, approximately 50% of the year-on-year growth in Nokia Technologies net sales in Q2 was related to higher intellectual property licensing income from existing and new licensees; and, second, approximately 50% of the growth was related to nonrecurring net sales.

Taking all the moving parts into consideration, Nokia Technologies underlying quarter net sales run rate was approximately €25 million lower than the €193 million of net sales reported in the quarter. When compared to the year ago quarter, this still represents solid underlying top line growth.

However, as we have said earlier, this can be an inherently lumpy business, particularly when viewed through a quarterly lens. On an annualized basis, the quarter exiting run rate of the Nokia Technologies net sales is approximately €670 million. As I commented last quarter, we are continuing to make very good progress in our licensing activities.

For example, adding LG Electrics (sic) [Electronics] (19:50) during Q2 as the latest company to license our standard essential patents. Finally on Nokia Technologies, I wanted to briefly comment on the OpEx trends and drivers for the business.

If you recall, in conjunction with our Q4 2014 earnings earlier this year, we provided guidance for Technologies quarterly non-IFRS OpEx run rate to be approximately in line with the fourth quarter 2014 level of €69 million.

In Q2, Nokia Technologies non-IFRS OpEx was €79 million increase of €30 million compared to the year ago quarter, partially driven by foreign exchange movements. Given the significant long term growth opportunities that we continue to see for Nokia Technologies, these investments are well aligned with our plans to capture the value that lies ahead.

Additionally, I believe that we are already starting to see some of the early fruits as we execute our strategy. For example, as Rajeev highlighted, we announced the revolutionary virtual reality OZO camera earlier this week and we have beefed up our licensing resources which allows us to run multiple concurrent licensing processes.

We have a very structured and disciplined approach to these investments and are focused on activities that we believe have a clearly identified path to value creation. Accordingly, we have increased our quarterly non-IFRS OpEx run rate for the remainder of 2015 to now be in line with the Q2, 2015 level of approximately €79 million.

We continue to believe that there is significant operating leverage and cash flow generation potential in the Technologies business should we successfully drive revenue growth over the long term. Turning to HERE, which delivered another solid quarter. In Q2, HERE delivered year-on-year net sales growth of 25% or 12% on a constant currency basis.

New vehicle licenses of 4.1 million units in the quarter compared to 3.3 million units in the second quarter of 2014, or 24% year-on-year growth. HERE's second quarter non IFRS operating margin was 9.3% compared to a breakeven in the year ago quarter.

This was primarily driven by operating leverage from the higher net sales, which more than offset higher non IFRS operating expenses. And now a few words on our venture fund investments. Last quarter I spent some time highlighting our strong track record of growth-stage investing through the Nokia Growth Partners and BlueRun Ventures entities.

In addition, I commented that after the end of Q1, Nokia Growth Partners had sold its holdings in Ganji.com a major online local services market platform in China to 58.com its competitor in the same field.

BlueRun Ventures also invested in Ganji.com and participated in the transaction which valued Nokia's total indirect holdings in Ganji.com at approximately €200 million. In Q2, we recognized €110 million of group common functions other income, primarily related to the transaction.

The final amount and timing of additional income or expense is dependent on the value and the date at which the venture funds liquidate the 58.com shares. At the end of the second quarter, the fair value of our venture fund investments was approximately €1 billion.

This amount is included and available for sale investments under noncurrent assets in Nokia's balance sheet. Turning to our cash performance during Q2. On a sequential basis Nokia's gross cash declined by approximately €900 million with a quarter-ending balance of approximately €6.6 billion.

Net cash and other liquid assets declined by approximately €840 with quarter-ending balance of approximately €3.8 billion.

It's important to highlight that there were two primary negative drivers of the sequential change in net cash; the payment of the annual dividend and the annual incentive payments related to 214 (sic) [2014] (24:08) at Nokia Networks, excluding these two factors, Nokia's net cash would have increased sequentially.

Taking a step back and working down the cash flow statement, the primary drivers of the movements in our net cash balance in Q2 were the following. Nokia's adjusted profit before changes in net working capital was €530 million in the second quarter primarily driven by Nokia Networks and Nokia Technologies.

Nokia's net cash from operations was €258 million outflow primarily driven by cash outflows related to net working capital. in Q2 Nokia had net working capital cash outflows of approximately €760 million which included approximately €30 million of restructuring related cash outflows at Nokia Networks.

Excluding this cash outflows from net working capital was approximately €730 million primarily driven by decreases in short term liabilities and to a lesser extent increases in receivables.

The sequential decrease in short term liabilities was brought primarily due to the incentive payments I mentioned earlier related to Nokia Networks strong business performance in 2014 as well has a decrease in accounts payable.

Nokia had cash outflows of approximately €30 million related to net financial income and expenses but approximately €80 million of inflows recorded in other financial income and expenses related to foreign exchange hedging and forecasted cash flows.

The hedging of Nokia's non-euro cash and cash equivalents (25:41) as well as the timing mismatch between the foreign exchange cash flow impact on other non-euro denominated balance sheet items. Completing the net cash from operations picture, Nokia had cash outflows of approximately €70 million related to taxes.

And discontinued operations had cash outflows related to net working capital and taxes totaling approximately €10 million in Q2.

From an investing cash flow perspective, cash outflows of approximately €90 million related to continuing operations, capital expenditures and cash inflows of approximately €30 million related to proceeds from the sale of investments.

Additionally, Nokia had cash inflows related to the sale of businesses and discontinued operations of approximately €50 million in Q2. From a financing cash flow perspective, outflows of approximately €330 million were primarily due to the payment of the ordinary dividend of approximately €510 million in Q2.

Finally, foreign exchange rate had an approximately €40 million negative translation impact on the net cash. And before I close, a few comments on our guidance.

I wanted to highlight that in conjunction with Nokia's 150-year anniversary, we will be changing the tickers involved for our Helsinki listed stock, effective from August 10th our ticker will change from NOK1V to NOKIA. Related to this, you will see a press release from us as well as a notice from NASDAQ Helsinki in the coming days.

So then turning to our guidance, I already covered Technologies non-IFRS OpEx update in my earlier remarks. For Nokia Networks, we have reiterated our full year non-IFRS operating margin to be around the midpoint of our long term 8% to 11% gross margin rates.

This reflects Network's first half performance as well as our expectations for the rest of the year. Note that Nokia Networks non- IFRS operating margin benefited from an elevated level of software sales in Q2 and that we expect seasonal factors to influence the non-IFRS operating margin performance in Q3 and Q4 of this year.

Overall, we are pleased with the strong operating performance of Nokia Networks, HERE and Nokia Technologies in Q2. Equally, it was good to see that our systematic long-term investment strategy in Nokia Growth Partners is bearing fruit.

Although, our cash performance in Q2 was unsatisfactory, this was primarily driven by the annual payments of the ordinary dividend and the Nokia Networks 2014 incentives which will naturally not repeat themselves in the second half of the year. As Rajeev said I think we are well positioned to achieve our targets for 2015.

And with that I'll hand it over to Matt for Q&A..

Thank you, Timo. Just a quick one, financing cash outflows were €330 million in Q2, just wanted to make sure that came across. For the Q&A session, please limit yourself to one question only. Operator, please go ahead..

Certainly. Your first question comes from the line of Gareth Jenkins with UBS. Your line is open..

Just a quick one on Networks if I could. So you had very strong margins in the quarter. Just wanted – it sounds from your commentary like there were some abnormally high software sales in Q2 after sort of abnormally low in Q1. So, for the rest of the year, you're basically saying down in Q3 then up again in Q4.

Is that – that's the way we should be modeling it. But what about top line? Can you give us any help on how the top line progresses through the course of this year? Are you expecting a recovery in certain markets to drive good top line growth in the second half on a constant currency basis? Thank you..

Thanks, Gareth. So, let me start with the seasonality point. So we are seeing a more normal seasonality this year. And last year was not so much the case for us because in Q1 last year we had elevated levels of software sales coming from Japan. And in Q3 last year we had a big North American project starting to roll out a lot of equipment.

So, if you take out that abnormality, Q1 is usually the weakest quarter of the year, Q2 a bit stronger, Q3 again seasonally weak and Q4 usually the strongest quarter of the year. And that's the seasonality we look at from a market standpoint.

Now when you look at software sales, I think it's important to reflect on what was the level of software sales that we had in the first half of this year and then compare that with the first half of last year, because that becomes a bit more prudent, the way to look at software. And then it's in line. So we see overall that it's in line.

So, there's no change in software per se. It is in line when you look at a longer period. And then of course we have confirmed our guidance which Timo just outlined on profitability, which of course takes into account our software outlook for the rest of the year..

And regarding specific top line OpEx, we are not giving any top line guidance as you know besides the fact that we have just (31:05) we expect to grow overall this year in all the three businesses. So I don't think I can add much more color there..

Thank you, Gareth. Let me try one more time on financing cash outflows in Q2, €530 million. So, operator next question, please..

Certainly. Your next question comes from Kai Korschelt with Merrill Lynch. Your line is open..

Yes, thank you gents. Quick question on Alcatel, on the previous call they said that they had seen already some custom hesitation I guess in wireless and IP platforms, with customers where you do overlap. Just wondering have you seen something similar? Do you expect something similar in the second half? Thank you..

Thanks Kai. No, actually we have not seen a similar impact or a hesitation from customers because of platforms in the future. So it's business as usual from that perspective..

Thank you, Kai. Stephanie, we'll take our next question please..

Your next question comes from the line of Sandeep Deshpande with JPMorgan. Your line is open..

Hi. Thanks for letting me on. Rajeev, you had very strong gross margin in Networks in the second quarter, possibly the strongest Nokia has had. I mean, you talked about some of the puts and takes of this associated with the mix.

How should we look at this gross margin trending into the second half of the year?.

I guess it really does come back to how we look at the year and this is more seasonally trending in a typical – more of a typical year. So, the way I'd at it is that Q3 will be – can be expected to be a bit weaker and Q4 can be expected to be stronger. Just as we saw weak Q1 and a stronger Q2..

So, again in line with us confirming the full year guidance and expecting let's say normal seasonal factors to impact the second half of the year..

Thank you Sandeep. Stephanie, next question please..

Your next question comes from the line of Richard Kramer with Arete Research..

Thanks very much. Couple of questions if I may. One simple one and one more complicated one. For Rajeev, if you look at the underlying growth in Technologies and remove the sort of one off patent sale that happened.

And also clearly this is going to be the last quarter where you're including a year-on-year Microsoft revenue improvement, the underlying growth rate seems to be tracking the growth rate roughly in the smartphones.

When should we expect some of these wider technology and brand licensing efforts to be material to sales? And then a simple one for Timo, if we look at working capital sort of very crudely looked at on the balance sheet, it's up about €1 billion from where it was second quarter last year.

Is this something to do with customer financing, with the business model, it's something that had been drawn down quite substantially in previous years, now it seems to be rising again quite sharply.

Can you comment on that, thanks?.

Okay. Thanks, Richard. Let me just start with the IP, the Technologies question. So I think when you step back and look at it, I think the team's doing a great job in building this robust pipeline of licenses, right. So we also are investing in that.

So you saw a somewhat of an increase in an OpEx on account – majority of it is on account of IP and licensing activities. So in accordance with that, we found LG joined the program. So that's good progress. And I think I'm trying to sort of get the team to focus on multiple negotiations at the same time. And that really needs to be our operating model.

Have a pipeline and you have arbitration, negotiations or litigations all have to happen at the same time. Then in terms of implementation patents, they're somewhat tied with (34:55) patent, it depends on the individual deals. And when it comes to technology licensing and brand licensing.

I would say brand licensing is something that will only begin in earnest from Q4 of next year, as I said because primarily on account of smart devices. And technology licensing will also take a bit longer..

And when it comes to the working capital characteristics. So, I think what you're referring to on the group level is mostly dependent by the fact that the Technologies business earnings or profitability and cash flows can have quite a big mismatch and that runs through our working capital.

So as we said in the case of (35:44) , for example, there was clearly a call it prepayment on licensing which then later runs through and then there are some other situations where basically the revenue can come through profitability first and then the cash might follow later.

So I think it's more driven by those dynamics than anything unusual, for example, going on in the Networks business..

Thank you, Richard. Stephanie, next question please..

Your next question comes from the line of Alexander Peterc with Exane BNP Paribas, your line is open..

Yes, thanks. Thanks for taking my question.

I'd just like to dwell a little bit on the OpEx hike in Technologies, if you could maybe share your thoughts on how this business is going to develop in the longer term? Are we going to see economies of scale coming through? Because it's now a business with very high fixed cost and also obviously high gross margin.

So, I'd just like to understand will we be able to drive growth there without hiking OpEx in step with revenue.

And just very quickly in terms of the calendar of you offer, do you agree with the statement that (36:52) that this could be now achieved a little bit quicker than initially expected, thanks?.

Thanks Alex. Why don't I start with Technologies OpEx. And I think, first of all, when we look at the Technologies OpEx developments, we were up about €30 million year-over-year and then up some €8 million quarter-on-quarter.

So the €30 million from a year ago is not really comparable as we have said earlier because that's when sort of Nokia Technologies was still part of the Group. I mean, that was just when the Microsoft transaction was closing and thereafter it has been made a separate business, which has required investments in IT and software.

So – and like we should more compare the run rate change quarter-on-quarter and of that clear majority is actually coming from Technologies licensing business related OpEx investment.

Actually, if you look at our release today and look at the Technologies head count, Technologies head count went down from end of Q1 to end of Q2, and I'm simply saying this because it demonstrates that we really are very disciplined in how we look at our investments into these new activities.

And, so, no, it is not directly correlated to the top line, because basically in this business the top line can be inherently lumpy and if we would get a top line uptick from one of these lumpy things, we would not invest one penny more than we think is reasonable to do (38:24) capability and value of this business..

Thanks Alex for the question on timeline. So the progress is good. We've got 11 countries as I said EU and U.S. being two of them. China is the next one we're absolutely focused on working with the regulators there. Good progress and discussions. I believe our stand very much still first half of 2016.

And we continue to focus with all the remaining countries that we continue to look at..

Thank you Alex. Stephanie next question please..

Your next question comes from the line of Kulbinder Garcha with Credit Suisse. Your line is open..

Thanks. Just two very quick questions. Rajeev on the NSN sales performance year-to-date has that met your expectations. And the reason why I'm asking is that constant currency didn't grow again this quarter.

And I would have thought, given the market share gains you have or the contracts you've done actually over the last 12 months to 18 months, I would have thought sales performance would have been better even in markets that were worse than you would have thought six to nine months ago.

And then Timo can you just clarify is the Samsung IP arbitration on track? Have timelines shifted? Do you still expect it to settle (39:38) in the second half of this year? Many thanks?.

Okay. Kulbinder, let me start with the market question. So, first I want to step back and say how is the market looking. We said it's a flat market at constant currency. We also say that the significant part of growth overall in the global market is coming from China because of the massive LTE rollouts with the three customers there.

So one can conclude that the global market outside of China could even be declining this year. So that's kind of the background of, and of course the European suppliers in China have a lower than average share, right, compared to the fellow Chinese.

But when I look at our performance, 4% down constant currency and also what we did in Q1 relative to the other peers that have reported, I think we are in good shape. So market by market if we were to look at our market share, we're holding steady. It's all good.

But just because China is a bigger part of the growth of the market naturally it has mechanically an implication that the European peers will have lesser share..

And then the Samsung arbitration, so basically we have said in our regulatory filings that we expect the Samsung arbitration to conclude during 2015 and furthermore we have also said that due to the nature of the arbitration, the public arbitration proceedings, there cannot be an assurance as to the timing of the final decision..

Okay. Thank you, Kulbinder. Stephanie, next question..

Your next question comes from the line of Mark Sue with RBC Capital Markets. Your line is open..

Thank you.

If I net out the software mix benefits, are the remaining things Nokia can do to improve the operational part of margins, R&D transformation, for example, does it get harder for Mike Oran (41:27) and his team to tighten the screws, or are we getting to pint of diminishing returns? And on the market, Rajeev, how do you feel about rationality starting to prevail in the industry with consolidation? Can we actually start to think about a lift in industry-wide profits for Networks?.

Yeah, good, thanks, Mark. So the first question is really on cost structure. No, I absolutely think that we have more room to continue to find efficiency. There is more room in R&D transformation. I gave a few pointers in my prepared remarks. We got good efficiency last year and there's more to go for.

The same is in other parts of the business, in this regional services productivity improvement program, which goes country by country, looks at our services delivery and focuses on improving cost there. Same goes for looking at upsell by way of software and many such initiatives.

So, I think we have something like eight such initiatives ongoing, and we'll continue to find those. Another example is Global Delivery Center and how much more can we increase of our share of delivery which is remotely managed at a lower cost base. And a lot of this future efficiency drive will come from automating the way we do business.

Sort of more analytics, more automation and so forth (42:43). But we're not done here with cost. I mean, this is an efficiency industry and we are the masters of how to play this game. Your second question was on the rationality in the market, our competitive intensity.

Again, remember I said that flat market at constant currency, significant part of growth from China. So, that of course does mean that there are fewer deals chased by competitors which naturally raises the competitive intensity.

And then there are some deals that in my view don't merit the strategic deal qualification, but they get that kind of treatment sometimes by competitors. So having said that, in all of this, I believe our operating model is best equipped to sort of continue with the lean operating model and so on.

So, I think we're in a good shape in terms of managing the business given our lean operating model..

And Rajeev, just to add a numerical anecdote to the first part of the business, so I think it's good to note that even if our OpEx is up year-on-year, where FX is a significant driver quarter-on-quarter Networks, OpEx, when now the euro-dollar rate has been actually pretty flat for the third part of the year or after the Q1 closed, we are actually sequentially down in OpEx from €803 million to €789 million.

So we are really working on this hard and this is also in line what we said about the OpEx expectations after Q1..

Thank you Mark. Stephanie next question, please..

Next question comes from the line of Francois Meunier with Morgan Stanley. Your line is open..

Hey, thanks for taking my question. I think Rajeev in your opening remarks, you said something about having different approach today between Nokia and Alcatel ahead of the merger. So, maybe you could explain what are those different approach you're relating to. And the second question is about the pricing in the industry.

I think everyone got scared in Q1 about your comments about pricing getting really tough. And now it sounds from your comment that the margin is getting a bit better or not worse from what we heard from you in Q1. What has changed exactly? Is it because you're less aggressive on pricing or someone else is less aggressive on pricing? Thank you..

Yes, thanks you Francois. So on the operational model question, there are some differences in terms of the way we manage our regions which have execution within regions are not just sales entities there's execution driven regions. In the case of Alcatel-Lucent it's slightly different. It's more BU-centric execution.

So there are those kinds of differences not huge but ones that we have to understand how each company works and what is the best (45:35). Again, our principle will be to reduce integration to the extent possible. And, so, we will only sort of really integrate where it's necessary, G&A and sourcing and wireless R&D and so on.

So, but, otherwise we want to be very prudent and pragmatic about how we will set up the operational model..

There's also a difference in services execution rate..

Yes. And we have service as a separate segment and services in their case as part of kind of the overall BUs, the BUs that they have. So we're working through that. And then on the price rationality, I think the competitive intensity is still there. That's not necessarily changed from Q1 to Q2.

What has changed is how we are managing to equip ourselves for even more competitiveness in the future. And I'll tell you that this is not based on some sort of hunch. This is based on – I'm involved in a lot of the difficult deals that the company – I'm personally approving those deals.

I'm in the detail on those deals so I know what I'm talking about when it comes to intensity. But equally, we need to be able to manage well and we're doing that. It's good to know what's not good enough in the market and act on it. And so that's the way we'd like to lead the company, and no denial is permissible..

Thank you Francois. Stephanie, next question..

Your next question comes from the line of Tim Long with BMO Capital Markets. Your line is open..

Thank you. Rajeev I just wanted to get back to the competitive environment and pricing. It sounds like it remains challenging out there and you guys are managing through it. Just curious how severe is the pricing environment. And then secondly how do you think about the growth to margin tradeoff. You are benefiting from some good currency tail winds now.

So it doesn't really show up in the reported results. But when that an anniversaries and how should we think about going – having to participate in some deals with the industry reality compared to margins? Thank you..

Yeah, thanks, Tim. This is an important question. So the balance between profit and growth is always one that we have to maintain. So the way we run the company and manage our regions is very much driven by performance relative to planning currency.

So we look at constant currency and how we sort of planned our numbers rather than letting regions get away with the ForEx driven increase. So, that way we're quite pragmatic in how we sort of run the regions. Your question on the trade off. You can't of course completely ignore market reality. If some deals are tough, we'll be disciplined.

We walk away from. So, we continue to retain our pricing discipline. We have a pricing committee here. We analyze price erosion looking backwards. We forecast what it'll be going forward based on the decisions we make in our different limits authority approval bodies of deals. So we're very much clued into the whole thing.

And so I think the balance is at a regional level you only take those deals that are strategic for me that have long-term, good strong profitability profile. And that doesn't go away. So we're not still going to take any deals that – we'll they're just aggressive and they'll be aggressive forever, so let's participate.

So while that's something we can (48:50) market reality, whenever there's a tradeoff, we will choose profit better than just sales for the sake of it or growth for the sake of it. Having said that, we also want to balance our scale. Scale is important in this business. So, we're prudently managing both of them..

And maybe a quick comment on the currency as you referred to the currency as well. So the currency has a bigger positive impact on the top line, but then bigger negative impact on the OpEx line and in that sense they kind of balance out. So it's actually a bit of a driver in the profitability line..

Thank you, Tim. Stephanie we'll take our next question, please..

Your next question comes from the line of Ittai Kidron with Oppenheimer..

Thanks. I wanted to talk about the venture again Timo. I think you mentioned there's another billion dollars of available to sale assets there.

Can you give us a sense of timing, how do you think that – what's the timing of this flowing into the P&L? And also what's the built -in gain in that billion dollar available for sale asset?.

Yeah, thanks for the question. So, first of all, it's important to note that we have been investing for this for a long period of time.

So this is not like a new activity and BlueRun Ventures was originally something which started already in the late 1990s early 2000 and then we moved from BlueRun Ventures to Nokia Growth Partners where basically Nokia is actually the sole limited partner, i.e. sole limited partner investor into the fund. So this is a long history.

I'm simply saying it because this is an activity where you have to be again very disciplined and think very long term. So these are not big annual flows running necessarily into that investment pool.

Now, I can't comment on kind of like the mark to market situation of the 1 billion and, of course, as is typical in this kind of business it's very difficult to estimate when they would flow through P&L because its exit situation is different, be it outright sale, possible IPO and so forth. So I don't think I can give that much more there..

Thank you..

Thanks, Ittai. Stephanie, next question please..

Your next question comes from the line of Simon Leopold with Raymond James. Your line is open..

Great, thank you. Appreciate it. Looking at the HERE business. It's interesting in that you've shown great leverage sales growth without tremendous operating expense growth. I want to get a better understanding of the operating expense trends here, whether we should think about the operating expense levels as relatively stable at current levels.

Or you've talked about being in investment mode. Should we expect declines or are there activities that should drive growth as revenue continues to grow, thank you..

Okay. Thanks a lot, Timo here. So, if we look at the HERE business what we have said earlier as well is that we think that that business can benefit from further operating leverage with top line growth. That's what we have said.

Simultaneously, of course, there is quite a bit going on, on this market when people talk about move from like the current model of map to these HD maps which are needed then for driverless cars into the future and so forth.

So I'm not saying that there couldn't be an increase in the OpEx related to that and of course we are simultaneously, like in any transition, then trying to drive down the current technology OpEx into more of an efficiency mode and then investing into the new.

But yes we expect that that business could continue to benefit from further operating leverage..

Thank you Simon. Stephanie, we'll take our next question..

Your next question comes from the line of Frederick Little (52:55) with Danske Bank your line is open..

Yes, thank you for taking my question. Rajeev could you please elaborate a little bit on what you expect from the North American market in the second half.

It has been a topic in several of these conference calls and it's interesting to hear your view on if operators in the North America market have resumed activity levels or will resume activity levels to more normal levels starting from now and onwards. Thank you..

Thanks, Frederick (53:27). So yes we've seen in the first half a bit more muted cautious CapEx outlay but we think in the second half that as the market – that it could get a slight uptick. And but perhaps more in the medium to longer term there will be a stronger up-tick if you like.

And now you know from our perspective that we are exposed to two out of the four major customers. So we don't have a direct correlation with the market to our business necessarily simply because we're not present in the other two in the meaningful way..

Thank you Frederick. Stephanie, I think we have time for one more question for today's call..

Certainly. Your last question comes from the line of Vincent Maulay with Oddo. Your line is open..

Thank you. A specific question on the LG agreement and patents. Is it fair to say it will boost gross margin as soon as Q3 and it could reach roughly €100 million annual incremental sales..

I'm sorry, Vincent, could you please repeat the question. It was regarding LG, but I wasn't quite able to follow (54:44)..

Yeah, it was on LG, just want to know is it fair to say it will boost gross margin as soon as Q3 and if you it could reach roughly €100 million annual incremental sales..

I'm sorry, but we have not given any exact view on any of the licensing agreements what we have and in that sense I would just like to remind that the net sales in Nokia Technologies includes revenue from all of Technologies licensing negotiations, litigations and arbitrations to the extent that we believe is currently required, but they are not a forecast of the likely future outcome of ongoing licensing projects..

Thank you, Vincent. And with that I'd like to turn the call back over to Rajeev for some closing remarks..

Thanks, Matt. Thank, Timo. And thanks again to all of you for joining. I'd like to close with a couple of thoughts. First, the developments that we are seeing in the market further validate the strategic logic of the Alcatel-Lucent transaction.

Scope to target new, more attractive markets and scale to give us the ability to deliver adequate profitability in tough market conditions. Absolutely the right step forward for Nokia and we believe for Alcatel-Lucent as well. Second, the performance of Nokia Networks showed that Q1 was not the start of a new normal.

Well I do not excuse our performance in that quarter; I believe that Q2 shows the power of our operating model, lean cost structure, strong execution capabilities and resilient focused culture.

As I suggested in my remarks, we do not see totally smooth sailing ahead, but we are well positioned today and are working to ensure we are well prepared for tomorrow. Overall, a very good quarter, no doubt about it. With that, thank you very much for your time and attention and Matt back to you..

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 74 through 89 of our 2014 Annual Report on Form 20 F, our Interim Report for Q2 2015 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..