Good morning, ladies and gentlemen and welcome to Nokia's fourth quarter 2021 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 Wirén, our CFO. Before we get started a quick disclaimer.

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 the risk factor 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 growth rate basis and margins will be on our comparable reporting. Please note that our Q4 report and this presentation are published on our website. And both reported and comparable results and reconciliation between the two are available there.

In terms of the agenda for today, Pekka will give a quick overview of our financial and strategic progress throughout 2021. Before explaining the new long-term targets that we've introduced.

Marco will then go into a bit more detail of some of the key factors impacting our financial and cash flow performance before explaining how we see the business outlook for 2022. And then we'll go to Q&A. With that, let me hand over to Pekka..

Thank you very much, David. Hello, everyone. And thank you for joining the call today. Q4 ended a year, which was truly transformational for Nokia, in many ways. I would like to start with growth. As you remember, we have said throughout the year that this year would be different in terms of seasonality. And that's exactly what happened.

We had 3% top-line growth overall in the year EUR 22.2 billion sales. Q4 pretty much as expected was 5% down year-on-year EUR 6.4 billion, because we had this year in a way much more balanced seasonality compared to where we have typically been. Q4 top-line highlight was clearly network infrastructure 10% of growth.

So overall, good year from top-line point of view. Pretty much as expected when it comes to seasonality. So now let's look at operating margin. We had a strong Q4, 14.2% comparable operating margin. But again, because we had more stable seasonality this year, it was 190 basis points lower than the extremely high and strong Q4 that we had last year.

But overall for the full-year 12.5% comparable operating margin, it's a 300 basis points improvement over 2020. I'm extremely happy and proud of this achievement that our team has delivered. Why do I say that it was a transformational year? Well, this graph helps me to explain that here you see.

First of all, net sales constant currency growth each quarter this was 2020 growth in each quarter. And here you can see the corresponding growth in 2021. Very different picture between those two years. But yes, different seasonality Q4 being relatively weaker as expected.

And then here you see the significant margin improvement that we delivered here is 12 month rolling comparable operating margin starting from Q1 2020. And then developing all the way to the Q4 and to the 12.5% margin that we had. So overall great performance in margin execution.

And this has now together with very good working capital efficiency helped us to deliver a strong cash flow EUR 2.4 billion. Free cash flow for the year, which means that we now have at the end of the year a EUR 4.6 billion net cash position on our balance sheet.

And in simple terms this means that we now have a possibility to resume shareholder distributions. Board is proposing to shareholder meeting - Annual Shareholder Meeting that we will start dividend payments and board is also initiating a share buyback program. And Marco will actually talk more about this in his part.

But now I would like to move on and make a few comments on each of our businesses. And I start with mobile networks, which had if I say for the full - for the group that we had a transformational year that definitely applies to mobile networks. EUR 9.7 billion sales that's down 5% year-over-year.

Pretty much as we expected, because of lower market share in North America, because of the decisions our customers made in 2020. But what is remarkable is that despite this 5% decline in sales in constant currency. We had through our improved technology position, we had 150 basis points improvement in gross margin.

And we had stable comparable operating margin. That's really strong execution from mobile networks. That is further confirmed by the KPI development. Here you see the KPI that we've been reporting for quite some time, which is the ReefShark share of all deliveries in Q4 68%. And in December, already 76%.

So this is pretty much or actually even slightly higher than what we told that we would be at the end of the year. I think our guidance was 70% for the end of the year. So we are strongly on track to meet the target to have pretty much all our deliveries in ReefShark based by the end of this year.

And then the other important indicator that we've been reporting is our combined 4G, 5G market share outside of China. No sorry, not market share that we are also reporting that was 26%. But this graph here is talking about conversion rate 4G, 5G conversion rate, which has now stabilized on about 90% level.

And now when we have in a way stabilized this chase and in mobile networks. Now, of course, the only acceptable goal going forward is to then start gaining market share. And I think we have every possibility to do that, because we have so much stronger technology position. Now compared to where we were about a year ago.

In the middle of this year, we launched the new generation of AirScale products, both baseband and new massive MIMO radios. Largely we can now say, this has been confirmed by multiple customers that we have close the gap to competition in 5G. We already shipping the new AirScale baseband.

We have already shipments to over 150 customers with excellent feedback. One extremely important feature of the new generational products is 75% improvement in baseband energy efficiency.

And one additional highlight that I'd like to mention which we achieved recently was a new benchmark of almost three gigabits per second radio performance in 5G standalone downlink throughput, using carrier aggregation with AirScale on a live CSP network, three gigabits per second.

Then onto Network Infrastructure, a real stellar year and here you can see first of all, how the top-line developed in the four divisions inside network infrastructure. As you can see all businesses had top-line growth. But of course, two really, really fantastic divisions fixed networks 35% growth in the year and then submarine networks 33% growth.

We have clearly taken market share in this business, service provider routing, this is actually market share development all the way - going all the way to the third quarter 2017 and this is third quarter 2021 on a rolling 12 month basis, which is the last available market share from Dell'Oro at the moment.

26% is the latest figure that we have in service provider routing. And then the most important focus segment for us in fixed networks. This is not the only business of course we also have copper and we have optical network terminals and fixed wireless access.

But if I focus on OLTs Optical Line Terminals, which is the most important stronghold that we have in this business. We have there now a growing market share and very high market share of 41%.

And when you look at the market development forecasts for this business going forward, it's actually pretty promising when you look at what the market research agencies are expecting about the continuous fiber rollout.

There are still several countries, for example, in Europe, large countries where the fiber penetration or actually homes passed by fiber has not even reached 50% yet. Optical network market share has been fairly stable 16%. Here we have very important new product generation.

Now, in early deliveries, we are strengthening our position in this business as well. So overall, we continue to have great momentum to build on our technology leadership in network infrastructure. Then on to Cloud and Network Services.

As you may remember, we've been talking about rebalancing of the product portfolio, because there is a very, very right - wide range of products available in that business. We have decided to focus on six segments, 5G core, analytics and AI, private wireless, digital operations, monetization, and security.

We believe that these are those sweet spot in the CNS business where the best growth and the best profitability can be achieved going forward. And I'm pleased to report that if we take those six focus areas that I just mentioned, our year-on-year growth was 13%. Overall, CNS was 1%. But growth in these focus areas was 13%.

And then, in other than this growth focus areas, the top-line development was -8%. So this just seems to confirm that that we have made the right choices when deciding on the focus areas. Then, Nokia Technologies delivered another strong year. 8% top-line growth, excellent profitability continued.

And of course, patent portfolio development being an extremely important KPI of the outlook of this business. During the year, we reached the very important milestone of 4,000 patent families declared as essential for 5G standard.

So overall strong execution, including this is important, including new engagements in automotive and consumer electronics, as we do want to grow into new areas in this business. Then, a couple of comments on enterprise, which is not of course not a business group of its own.

These numbers are embedded in the numbers of several businesses, but we are tracking them separately, because we have a very strong ambition to grow beyond our traditional customer base of service providers. And we do believe that enterprise business offers significant growth opportunities going forward.

The 1% net sales growth that we had in 2021, did not meet our expectations. That's the bad news. But the good news is that we had extremely strong order intake, especially in the second half of the year. That means that we now have a strong foundation for growth for this business for 2022.

One important, not the only one, but one important focus area in our enterprise business is private wireless. And as you can see this development continues in a very promising manner. We currently have 420 private wireless customers. Private wireless, has two sub segments.

One is wide area networks, for example, for authorities and railways and utilities. But the other one, which will be a fast growth segment, going forward is campus wireless. 14 million industrial campuses in the world, a significant part of them will one way or another invest in new generation of networking in the coming years.

We have decided to double down our investment in campus wireless. We are expanding and increasing our R&D investment in campus wireless to build on top of the already strong initial position that we have in that.

And then of course, very importantly, the sales and distribution of the partner, network distribution partner network that is needed to reach out to those 14 million campuses is another significant part of the investment.

And then one additional important thing in the enterprise businesses is increasing engagements with web scalars who of course can be extremely important partners in many parts of that business.

So as you remember, when we presented at our Capital Market Day, we in a way launched a three step concept in our strategy execution, reset, accelerate and scale. And now I'm pleased to confirm that we have completed our reset face.

First of all, strategy, we refocused on R&D to make sure that we go for - drive for technology leadership in all the segments where we compete. We changed our focus from end-to-end to best of breed.

Definitely, we are delivering complete networks also and engaging in network architecture discussions with customers, but we do not want to mix that with the extreme importance of each business group had been responsible for achieving technology leadership in their own segment.

Then on the product side, as I already mentioned, mobile networks secured full portfolio competitiveness, largely caught up competition. In 5G we have stepped up R&D, while improving gross margin, as I already earlier said 550 basis points. Profitability, yes, 300 basis points improvement in comparable operating margin.

One driver behind this is that we streamlined SG&A to be able to fund R&D. We had significant increase in our R&D spending. And despite that increase in R&D spending, we have 300 percentage - 300 basis points expansion in our comparable operating margin.

Then leadership structure and the way how we operate new operating model for BGs, we removed the matrix in our P&L management, new members in group leadership team much more straightforward, easier to understand, simple down to the earth model that maximizes the accountability within the management team.

And then last, but definitely not least, people we renewed our purpose during the year and we renewed our ways of working, we launched new, cultural essentials, open, fearless and empowered, which is our guiding star in how we continue to develop our corporate culture. So with the reset now behind us, it's time to accelerate.

And what does accelerate and then after accelerate scale? What does actually mean? It's actually very simple, accelerate means exactly what it is. Accelerate, grow and expand margins, we want to now deliver growth across our businesses.

And we want to continue to expand our margins we have renewed mobile networks portfolio, strong network infrastructure, technology leadership, growth in CNS focus areas, we have strong momentum in enterprise.

Grow, that's what we want to do, we will continue to invest, we want to prioritize R&D investments into our core areas to further strengthen technology leadership, including and this is just two highlights now which we have perhaps not talked that much about, I already mentioned doubling down in our investments in complex wireless to maintain and extend our lead, but then I would also like to highlight optical networks, we are now delivering our next generation product PSE5 generation.

We are capitalizing momentum created by it and this is now a good place to increase ambition level in technology leadership also in the optical business.

We continue to optimize how we operate continuous review of business returns to optimize portfolio, there is still a possibility to improve further R&D efficiency, continue to refocus R&D especially in CNS towards the growth areas and very importantly we continue to invest in the digitalization of our own operations.

There is still some old tools that we are using in different parts of the company and we target additional productivity improvements through digitalization investments. And then the last point, definitely not the least important one, which is innovation going forward.

We're building new business models like as a service, CNS has already launched the first as a service offerings and this is something that we will expand on, we will expand on enterprise, as I said, we continue to build strategic partnerships, including with Webscalars.

And then we want to utilize long-term innovation capacity, including Nokia Bell Labs, the fantastic research organization that we have. There, we believe that there is a case for speeding up the commercialization of the innovation that takes place in Bell Labs.

And then NGP, Nokia Growth Partners, the venture capital arm that we have excellent results in 2021. We have just announced their next Fund, which Marco will talk more about. So in short, grow, invest, optimize, and innovate. And then, to finish, let's take a look at our long-term targets which we have published today.

First of all, given the pace of our strategy execution, we feel that now is the time, right time to introduce new long-term markets. And of course, we aim to deliver continuous improvement in each year.

First of all, we want to grow faster than the market, then we target to reach at least 14% comparable operating margin in the next three to five years. And we are targeting 50% to 85% cash conversion from the comparable operating margin. So overall, ladies and gentlemen, we have every reason to be optimistic about the future.

I'm so proud of this team who delivered such a transformational year. And with that, I would like to hand over to Marco..

Thank you, Pekka and hello from my side as well. If we now just look shortly, the financials and a little bit deeper also when it comes to our '22 guidance. We started with the top-line and how that was developed during Q4, if we look here, we can see that our sales declined about 5% in constant currencies.

And we have communicated throughout the year as well that we will see a different seasonality that we've seen in the previous years. And also if you look at the different regions, you can see quite different development.

Starting with Europe, we're very happy to see that we have a good growth in Europe and thanks to those wins that we have made in this area, mainly in MN and 5G deployments. Then, if you go to Asia-Pacific, you can see that we have a decline about 13% and this is mainly driven by the South Korea market and we had actually good growth in Japan.

But that couldn't offset the whole decline that we had there. And then, of course, I've mentioned North America market as well. As you know, we've been communicating about the negotiations that happen in Mobile Networks side in North America market in 2020. And of course, they had an impact on our net sales here in Q4.

I just want to mention also that in NI, network infrastructure side, we actually had a good growth in North America in quarter four, but that couldn't offset the whole decline that we saw on the Mobile Networks side. But worth mentioning also that in North America full-year, we still saw about 4% growth.

And then if we look what comes to operating margin development, and if we start from '19 and 2020 and we had a 9.5% operating margin and we had the headwinds that we've been communicating as well just dimensioned on North American market, those actually played out exactly as expected.

And then these were offset by a strong underlying demand especially in NI and Mobile Networks. And also on the Mobile Networks side, we had a very good progress on our product cost side. And thanks to these good market wins that we had and own progress on product cost side.

We had a good development throughout the year and also the external market, analyst firms upgraded the market expectations couple of times throughout the year. And with together the one-offs that we had, we landed at 12.5. So very proud of this progress that we've seen throughout the year.

And then when it comes to cash performance, we had a good cash performance throughout the year, and also in the Q4, and gross cash landed at EUR 9.3 billion, and the net cash at EUR 4.6 billion.

So within the quarter, we actually had a very good profit generation and that was off, taken down actually by mainly by the networking capital development, where we saw receivables increasing slightly offset by inventories, which were a little bit down.

So all in all EUR 300 million increase in our net cash during the quarter, when it comes to free cash flow that landed at about EUR 400 million in the quarter and full-year was about EUR 2.4 billion and at the same time as we were actually continuing to reducing the level of receivables and then what comes to that, how are we using the cash? I think we have a quite clear capital allocation policy, our first priority is investing in R&D.

And we believe that these will give good returns to shareholders. And the second priority is shareholder distributions.

And if we look to R&D investments, why do we do it that, just securing that we have a technology leadership, not only today, but also longer-term, why we invest more in Bell Labs, and also the NGP, our venture fund that Pekka just mentioned. And in both of these areas, we also have business innovations.

What comes to NGP, we just announced today, a new fund, Fund V and that's about a $400 million fund that we will invest in the next coming years in areas that are strategically relevant to Nokia. And if you look the track record of NGP, it has been very good. So far, they have had about 15% to 200% IRR at maturity.

In addition to that of course, the good financial position that we have, we have to secure that we can fulfill those commitments we have to watch our customers and that's why we will intelligently think how to increase the inventory levels that we have, especially in these situations we'll see that there's a supply chain constraints.

And if you look our working couple of rotation days, we've seen a pretty good development in the past two years' time and also the inventory rotation days had been declining in a nice way. And I'm worried about if we increase inventories - inventory levels at such because that will definitely benefit our top-line and margins.

You see a slight increase in accounts receivable towards the end of the year and I would say that this is mainly because we reduce the sale of receivables. So the underlying development is very good. And what comes to the distribution to our shareholders, thanks to the strong liquidity position that we have.

Actually, the board of directors have today proposed to the AGM, a $0.08 of dividend for results of 2021 and this will be paid on a quarterly basis.

Also to manage our capital structure and excess cash, the board of directors will initiate now a share buyback program with the intention of repurchasing up to EUR 600 million over the next coming two years. And let's go over to '22 outlook and giving some more details of each of these three different areas.

And just stating the outlook itself on the net sales side EUR 22.6 billion to EUR 23.8 billion and the comparable operating margin between 11 and 13.5. Free cash flow we actually have changed how we guide that in the future. So now it's a conversion from comparable operating profit to cash flow.

And we believe that in 2022, that will be between 25% to 55%. And let's look into each of these a little bit more detail, what is the background and support for these, starting with the top-line, if we looked operating the addressable market, we see that it's growing about 3% on constant currencies. And we see growth across all businesses.

In Mobile Networks, the driver is 5G deployments, in Network Infrastructure, it is connectivity, investments in national broadband initiatives, and also the fixed wireless. And what comes to cloud and network services, we see continued growth in enterprise sector, especially in private wireless, but also webscale like edge computing.

And regionally, I'd say that we see growth in all regions, especially in North America, Europe, and Asia-Pacific. And of course, without the constraints that we see in the supply chain, I think we will see higher growth than this as well. Just a couple of words about Mobile Networks as well.

This is now excluding China, and Network Infrastructure is excluding the submarine business and Mobile Networks growth of 3%, I would say that if we compare with external analyst firms like Dell'Oro, this is pretty much aligned with their expectations as well.

This is now in constant currencies in Euros while they usually have USD and also the perimeter is little bit different. They only look the RAN while we have a bit wider perimeter. And if we look operating margin, we can see that starting from '21 and excluding the one-offs about 150 basis points, we learned at 11.

And we see that sales growth and operational improvements will be the main driver of the margin improvements during this year, of course, tempered by the impact from supply chain costs, general cost inflation and also on investments for the future. So 2022 will be a continuation of the path towards our long-term targets.

And then, finally, what comes to our cash flow guidance. In 2021, we had very strong cash conversion, almost 90%. And in 2022, most of these factors will be similar to '21. But we assume increased outflow of networking capital as we build more inventory and I believe also we will have more normal customer payments.

When it comes to Nokia Tech, we're going to have about EUR 450 million impact from the prepayments that we have received in earlier years. And these together will lead to cash conversion between 25% to 55%. In the long-term, when we see more normal networking capital development, we believe that cash conversion should be between 55 and 85.

But also, if you take 2021 and '22 together, we will actually be already around that area that we see in a longer-term. So thank you from my side and back to you, David..

And thank you, Pekka for the presentations. Before we move to the Q&A session, I just wanted to give you all a date for your diaries, I'm following on from the Mobile Networks progress update that we did back in December. Our next event for progress updates will be on our Network Infrastructure business.

And that session will be held on Thursday, the 17th of March. We'll send the details out to you shortly. With that over to the Q&A. As a courtesy to others in the queue, could you please limit yourself to one question? Rachel, could you please give the instructions..

Thank you. We will now begin the question-and-answer session. If you were also watching the video webcast, please remember to mute the audio on your computer before asking your question as there is a 30 second delay. [Operator Instructions]. I will now hand the call back to Mr. David Mulholland..

Sure. Our first question comes from Andrew Gardiner of Citi. Andrew, please go ahead..

Thank you, David. Good morning, guys. Appreciate you taking the question. I had one on the sort of revised long-term margin target, please. You spoke Pekka about the phases of the strategy, you've just completed the reset phase and then now embarking on accelerate and scale.

Under the reset phase, you'd already shown nicely expanding margins, 1.5 percentage points on an underlying basis last year, excluding those one-offs. And you're calling for a similar kind of expansion 1 to 1.5 percentage points this year.

But if you're now moving into the accelerate phase, and like you described focusing on growth, both at the top and the bottom-line, why is it going to take longer to expand margins to the north of 14%, than it has been during the reset phase? Thank you..

Yes, thank you. That's, of course, a highly relevant question. We have a stronger technology position now than we had a year, year and a half ago. The market continues strong carrier CapEx plans, at least what we have seen now in North America for this year, for example. They all look strong.

Then there also continuous uncertainties in the component side, inflation, uncertainties. We just simply don't want to get ahead of ourselves. We want to ensure that that we have continuous improvement year-over-year and we felt that if we take the underlying profitability of 11%, excluding the one-offs last year.

We felt that 14% this is the right level for the three to five year target. Of course, three to five years is a fairly wide range. We do see improvement potential in mobile networks, in network infrastructure, in cloud network services.

And I was talking about the levers that we see supporting the growth and margin expansion and business in those businesses earlier..

Thank you, Andrew. Our next question will come from Simon Leopold from Raymond James. Simon, please go ahead..

Thanks for taking the question. You didn't talk too much about supply chain constraints, which I'm interpreting as probably good news. But if you could update us, because you certainly did indicate that there were some headwinds. So I'd like to get an update in terms of some quantification of what the impact was, in terms of the quarter.

How it's evolved over the last 90 days. And what are you assuming in terms of improvement in any supply chain constraints for your 2022 outlook? Thank you..

Yes, thanks. If my memory serves me, right. I said in - was it in Q3 report. I'm not 100%. But somewhere I said that, that it could get worse before it gets better. And now, we did not say that. But it would - it does not mean that that the situation would be over, it has stabilized. That is fair to say.

But it continues tight, there are still going to be at least in the first half of this year, situations where people live more or less hand to mouth. We had 3% top-line growth last year. That growth could have been a bit higher. Had there been more component semiconductors especially available.

So there was a revenue shift from especially the second half of the year, including Q4 to 2022. And again, we are not out of the woods yet. We have managed this very challenging situation very well without any major casualties or any major customer losses, but situation continuous and calls for continuous day-to-day management.

Then, when it comes to the economic impact of this in 2022 numbers. We have, of course incorporated that in our guidance. And that is one of the reasons why as you could see the 2.5 percentage point guidance range is still quite wide at this time..

Thank you, Simon. The next question comes from Frank Maao at DNB..

Yes, hi, and good morning, everyone. So my question pertains to the cloud and network services business. What are the main challenges you see there with regards to margin progress, both in 2022, but also longer-term.

Do you see potentially contributing positively being accretive or diluting potential so, to the long-term group margin? How do you see it longer-term? Thank you..

Well, the cloud and network services being more software centric than the other businesses. Of course, that means that that if and hopefully when, when we get the volumes up really up in the new focus segments, there should be a lot of additional margin potential yet.

Right now, we are still doing a lot of portfolio cleaning, there are a lot of old products that are getting to the end of their economic life. There also some non-performing units, non-performing products that we are cleaning up. And then we are increasing our focus and investment in the focus areas that I was talking about.

And I believe that that has a possibility to deliver good growth going forward. On top of all this, and I did talk about campus wireless, also quite a lot.

And then there is this strategic structural development that would start taking speed gradually, which is the development with various asset service models where you actually want to offer certain functionalities, for example, in network security, network quality management and anomaly detection as a service.

These are some of the initial services that we have just recently launched.

And then one thing that I also talked about already last time, I think is this evolution of open interfaces, where you want to hide enormous network complexity from developers and offer a simple set of API's through which networking functionality, for example, industrial vertical applications can be offered to users and that way engaging the developer community in a much more simple and straightforward way than what has traditionally been the case in this type of networking applications and communications networks in general..

Thank you, Frank. We'll now take the next question from Alex Duval at Goldman Sachs..

Thanks for question. Had a quick one on the U.S. market in wireless and Nokia's position there. I wondered, firstly, if you could talk a bit about what you see in terms of market demand, both this year and next year for that particular market on the wireless side? And secondly, related to that there obviously been some historic share losses.

I wonder to what extent you feel given what you're saying today about an improved wireless offering that you could potentially regain some share, and how much progress we could expect from that? Many thanks..

Of course, it goes without saying that, that the 16% decline in net sales of mobile networks in the quarter is not a good achievement. But the point here is that it that this is something that we had been trying to say throughout the year that the session I lead would be different.

And this again, this go back to decisions that the customers made earlier in the year 2020. Now, the good news is that that after those decisions in typically mid around mid-2020. We have not lost any more market share. In North America, we have - had some smaller wins with some smaller operators.

We of course, then also secured a five year 5G deal with both T-Mobile and AT&T. So in the big picture, I would put it this way that that we have now established a new baseline for our North American business. And that's not the bad baseline.

In - on top of the mobile network position, we have strong position in network infrastructure and cloud network services, which were quite a lot actually able to compensate for what mobile networks lost in Q4 in North America. Now listening to the CapEx plans of the key customers in America that is of course a reason for optimization.

We see continued strong market demand there and now very importantly, when we have a completely different product competitiveness than we had a year or two, even two years ago.

We have every reason to be hopeful and optimistic and I don't think that when we are talking about targets to in general not only in North America, but in general to now start to go after increasing market share. I do not see that. That's an unrealistic target..

Thank you, Alex. We'll now take our next question from Peter Nielson at ABG. Peter, please go ahead..

Thank you very much, David. Good morning, gentlemen. Can I just follow-up on that Pekka, please and preceding question. The margin guidance you've given for mobile networks is a fairly broad one.

Could you discuss a little bit what would be the determining factors, whether you end up at the lower bit upper end of the range? Is it primarily a question of top-line leverage? Thank you very much..

Yes, if you - I mean, top-line leverage is of course extremely important in mobile networks. But there is also the gross margin expansion that we saw in the year. We had 7.9%, comparable operating margin in 2021. And if you take away some of the effects of the one-offs, 7% roughly would be a good comparable via starting point for this year.

And we are saying that our assumption is between 6.5% to 9.5%. And of course, we have incorporated into this everything. We are seeing on the market on the positive side, stronger product position, demand that continues strong, then on the other side of the equation, inflationary development that we are playing all this against each other.

You may call it bald. That's, of course your call. But we are just trying to give you as realistic and as honest and as transparent picture as to where we believe that this year would land..

Thank you, Peter. We'll take the next question from Francois Bouvignies from UBS. Francois, please go ahead..

Hi, thank you very much. My question is regarding the top-line for 2020. So if you look at your guidance, and I just did focused on currency. You're barely growing in your top-line in 2022. If my math is correct, and you showed some addressable market going 3% at constant currency.

If we look at your comments, a strong backlog, a positive momentum in operators CapEx, which is well above I mean 3% with no market share loss. Europe, you're gaining some market share, because of the swap out. So, I'm trying to reconcile, all these comments and the market dynamic with your guidance for the top-line.

Is there anything we should be aware that would justify your lower growth and market growth? Just trying to understand if I'm missing something? Thank you..

Yes, thank you so much. As we stated that we believe that market in general withdraw about 3%. And there's a little bit differences in mobile networks market, which is 3% growth. And as I said, this is pretty much according to same principle and the same levels as Dell'Oro. If you look the same perimeter and the same currency.

So currencies play a big role here also and in network infrastructure, the market is growing about 3% as worldwide. CNS, we see about 5% growth. And if you look our guidance today would be half of this year, it is going from EUR 22.2 billion to EUR 22.6 billion to EUR 23.8 billion.

So I would say that, that we are - our ambition is to grow faster than market and this is something that we are definitely working on..

Thank you, Francois. We'll now take the next question from Artem Beletski at SEB. Artem, please go ahead..

Yes, hi. And thank you for taking my question.

I would like to pick your thoughts, what comes to inflation situation and what type of impacts you're basically baking in what comes to your top-line guidance for this year, so could you maybe comment about the pricing picture what comes to products and services for this year compared to say normal years, what you have seen previously..

Marco may have a general inflation comment and related to guidance, but I just say maybe one thought in the beginning that of course, the inflation and development is pretty much new to our industry component.

Costs are increasing and of course, it goes without saying that in all new contracts that we make with our customers, we take all this into account. It is of course much more straightforward in new contracts than in existing contracts.

That of course goes without saying, but we are basically mitigating the inflationary effects both with our suppliers and customers pretty much every day..

Yes, and just building what Pekka said, I would say that if you look our guidance at the interval that we have given us, well, that depends quite a lot about how the inflation is working but also market demand itself and also the supply chain situation.

And these all together of course with our own performances is depending factor where we land in those intervals..

Thank you, Artem. We'll now take the next question from Alek Peterc from Societe Generale. Alex, please go ahead..

Yes, good morning and thank you for taking my question. I just like to understand again pertaining to your long-term guidance, we had a pretty good track records in recent periods of landing at the higher end of your guidance range.

So in a hypothetical situation where your '22 clean, comparable operating margin lands towards the higher end of your 11% to 13.5% range, would you then say that your 14% plus three to five year target will look too conservative, either in scale or in terms of timing? Thanks..

Well, without getting into too much speculation on this, I guess everybody understands that the higher on this year's range we would land this year, the more likely it is that we would achieve the 14% target earlier. But more than that, I would not like to speculate, I will target this continuous improvement in all our businesses.

And as I said in my presentation, we believe that when we look at Mobile Networks, Network Infrastructure, CNS, we are in a good position to continuously improve in all those businesses. And hopefully we would reach that 14% as quickly as possible..

Thank you, Alex. We'll take the next question from Rob Sanders from Deutsche Bank. Rob, please go ahead..

Yes, hi. Good morning. I just had a question on RAN share, your 4G, 5G share ex-China, I think fell to 26% in 2021, I was just wondering in which regions, do you think there is the best opportunity to get back to 30%, which I think under the previous management was a target? Thanks..

Well, we have not published a particular target. We of course note that the market share has now stabilized and our target is to increase it from 26%. But we have not given as to how far we would like it to go and how quickly.

I would say that there is potential in all markets, there are several markets in the world who haven't actually yet even started 5G, Latin America is very early stage still, India has not even started. So there's still yet a lot of business, business to gain in many parts of the world.

But I would not like to highlight specifically any particular regions where the margin share gain possibility would be highest..

Thank you, Rob. We'll now take the next question from Sami Sarkamies from Nordea Markets. Sami, please go ahead..

Thanks, I would still like to go back to the free cash flow guidance that is looking surprisingly weak, as you're indicating a bit more than EUR 1 billion of free cash flow this year. That's about half the level of last year.

Could you still please explain why this looking like a difficult year for you thinking of free cash flow generation?.

Yes, thank you, Sami. We had an exceptional cash flow generation in 2021 and we might have a big swings in a cash flow, just like we saw in '21 and many of those payments that we received towards the end of year could have actually rolled over to '22.

And that's why I also mentioned that if you look these two years together, we are in a very good position when it comes to free cash flow generation. We believe that this year, we will have little more build-up of networking capital. Two main reasons one is of course, the inventory.

We believe that we could increase our inventories a little bit on areas where we believe are important and secure that we can supply and deliver those commitments to our customers that we have. And the other one is that we believe that we will have increasing trade receivables as well.

But if you look the trend and over time and a longer-term as well, we believe that we will have a good cash flow generation..

Thank you, Sami. We'll now take the next question from Sandeep Deshpande from JPMorgan. Sandeep, please go ahead..

Yes, hi. Thanks for letting me in.

My question is I mean, when we look at where the margin of your competitor, who has restructured for many years is today and looked at your long-term 14% plus guidance, the 14% plus guidance looks - doesn't look very aggressive at this point, given where they have been able to take their margins to, why does Nokia not think that they can also reach that sort of margin in the wireless networks business unless of course, your view on the market share is different?.

Yes, thank you, Sandeep. I mean it is a fact that, of course, the business portfolios are different, different between different actors. And we have businesses that some other companies do not have. But if we talk specifically about Mobile Networks, it is of course a business, which has very high R&D investment.

And that automatically means that volume and top-line is extremely important and going forward, just for the sake of argument, if we had similar top-line and similar geographic, geographical mix as probably the competitor you are referring to, I see no reason why we would not have similar margins, this goes back to the product, fundamental product competitiveness, which now starts to be in a pretty good shape.

And that's why this next step in our strategy, which is called Accelerate and then scale is so enormously important. Now fortunately in our case, we have other businesses, which are very good in terms of margin.

And when we look at this year's target 11% to 13.5% compared to where we believe that we would be just a couple of years ago, I think that's good development. But again we are now focusing on that 14% and hopefully we will get there as soon as possible. It's very much a volume game from now on in Mobile Networks..

Thank you, Sandeep. We'll now take our next question from Richard Kramer from Arete. Richard, please go ahead..

Thanks very much, many of your competitors are also targeting this enterprise space, Pekka. And talking about exposing API's and hopes of getting some development of 5G network applications. And you mentioned the order growth.

But can you talk a little bit more about two specific things, one your go to market and the costs of that and the sales cycle? But also long-term, do you expect enterprise to be higher margin than your current carrier business? Thanks very much..

Yes, the go to market obviously, if you want to reach those 14 million industrial composites that I was talking about, it has to be fundamentally different.

And that's what we are building at the moment, you need a strong partner network, you need system integration partners, you need partnerships with different types of cloud service providers, Webscalars, and so on and so on.

There is I mean, from cost point of view, it would be a hopeless case to try to scale your own Salesforce to reach to 14 million industrial composites then of course, on the product side, also, you need to make sure that your product is as scalable as packagable as possible.

And that's why the general development towards APIs and creating a platform for developers and offering the whole thing as a service as the business is evolving to that's really, really important. And to your second question, yes.

Once we increase the annual recurring revenue as a service business model, absolutely, that model has a higher margin potential going forward. But of course, that will be evolutionary development over the coming years..

Thank you, Richard. We'll now take our last question from Fredrik Lithell from Handelsbanken. Fredrik, please go ahead..

Thank you very much. Thank you for taking my question.

I would like to tap your brain a little bit on Enterprise 5G again, and maybe [indiscernible] the wrong market aspect of Enterprise 5G for the coming years and if you could for us sort of frame a little bit, what the potential in terms of RAN market growth is coming from sort of new segments if you'd like fixed wireless access.

I mean, we've been talking about FWA for several years, but it's still to show in how it contributes to RAN or to Mobile Networks revenue generation coming here. So could you sort of talk a little bit about the potential when it comes to Enterprise 5G and how that sort of trickles down into their own market value, if you like? Thank you..

We are first of all strong believers in the potential of the Enterprise and compass wireless, it's a market that we have noted that is extremely hard to estimate on a date that level that how fast that growth will be, because it could swing a lot between the extremes, the only thing that is certain that it will grow substantially faster than the carrier RAN market, it starts from a low level.

So we will certainly see years where the market can grow at least 30%, 35%, if not more, while the carrier market, most likely over time is in the low single digits. You mentioned Fixed Wireless Access, that is actually a market that now driven by the new 5G based systems is driving a lot of growth.

And that is in addition to passive optical networks is one key reason why our fixed networks business is growing so fast. Remember, in our model, Fixed Wireless Access is in Network Infrastructure, in Fixed Networks business, it's not in Mobile Networks, even though technically, of course, we are delivering radios there.

So we are bullish about the market potential. But unfortunately, I mean I'm not able to and I don't think anyone is able to detail that how much exactly the growth will be over the coming years..

Thank you, Fredrik. Ladies and gentlemen, this concludes today's call. If you have any outstanding questions, please do feel free to reach out to the Investor Relations team. I'd 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 such risks in the Risk Factors section of our Annual Report on Form 20-F which is available on our Investor Relations website.

With that, thank you very much..

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