Nokia Oyj — Investor Presentation 2016

Nov 15, 2016

Higher returns through focused growth: Nokia sets key financial and strategic targets at Capital Markets Day 2016

Higher returns through focused growth: Nokia sets key financial and strategic targets at Capital Markets Day 2016

Nokia Corporation
Stock Exchange Release
November 15, 2016 at 09:00 (CET +1)

Higher returns through focused growth: Nokia sets key financial and strategic
targets at Capital Markets Day 2016

Barcelona, Spain - Nokia today outlined its vision and strategic priorities for
ensuring sustainable growth in its core businesses and tapping new opportunities
in fast-growing markets. The company also set key financial targets that
underscore its ambition to lead in a connected world following three years of
fundamental transformation.

President and CEO Rajeev Suri said at the company's Capital Markets Day event in
Barcelona that the pace of change at Nokia has accelerated since the last
investor event in 2014, with the company now bigger, stronger and more agile,
bolstered especially by the acquisition of Alcatel-Lucent.

"Nokia is extremely well-positioned to win in its primary market with
communication service providers, and we aim to target superior returns through
focused growth into more attractive adjacent markets where high-performance,
end-to-end networks are increasingly in demand," Suri said.

"We also see opportunities to renew current patent licensing agreements at
favorable terms, add new licensees in the mobile phone area and expand licensing
further into new areas such as consumer electronics and the automotive sector.
Given the appeal to others of our innovations in Networks, virtual reality and
digital health, we are confident that we can continue to build our patent and
technology licensing business further in the coming years," he continued.

"Simultaneously, we will remain focused on flawlessly executing our EUR 1.2
billion cost saving program."

Nokia's new strategy builds upon its enhanced business portfolio following the
Alcatel-Lucent acquisition, and focuses on four key priority areas:

* Lead in high-performance, end-to-end networks with communication service
providers: Use our unparalleled, end-to-end portfolio to sustain our market
and profitability leadership.
* Expand network sales to select vertical markets needing high-performing,
secure networks: Broaden our footprint in five select verticals: energy,
transportation, public sector, technological extra-large enterprises and
webscale.
* Build a strong, standalone software business: Move beyond our current
product-attached software model and create a software business with the
margin profile of large software companies, focused on areas including
enterprise software and IoT platforms.
* Create new business and licensing opportunities in the consumer ecosystem:
Expand successful patent licensing efforts into areas like automotive,
consumer electronics and IoT. Create new revenue streams from technology and
brand licensing, and establish new businesses in digital media and digital
health.

"During the next two years, we aim to advance our leading position with
communications service providers, become a credible and recognized player in our
target verticals and tap growth in software with a broader ambition to build a
significant, standalone software business. As we do this, we will continue to
stick closely to our disciplined operating model to deliver compelling financial
results that reward our shareholders," Suri said.

Long-term targets

* Nokia targets to grow net sales for Nokia's Networks business faster over
the long-term than its primary addressable market through continued industry
leadership and disciplined expansion and diversification to adjacent
markets. Nokia's primary addressable market size is approximately EUR 113
billion in 2016, and is expected to have a 5-year compound annual growth
rate of approximately 1%. Nokia's adjacent addressable market size is
approximately EUR 18 billion in 2016, and is expected to have a 5-year
compound annual growth rate of approximately 13%.
* Nokia targets the long-term operating margin range for Nokia's Networks
business to be 10% to 15%, with all Networks business groups expected to
contribute double-digit long-term operating margin. If the market
environment and Nokia's execution are both in-line with Nokia's
expectations, Nokia expects operating margin to be around the midpoint of
this range.
* Taxes

  \* Nokia expects its long-term effective non-IFRS tax rate to be
    approximately 30%.
  \* Nokia expects cash outflows related to taxes to continue at
    approximately EUR 400 million annually until Nokia's deferred tax assets
    have been fully utilized. The cash tax amount may vary depending on
    profit levels in different jurisdictions and the amount of license
    income potentially subject to withholding tax.

* Nokia targets to maintain total cash and other liquid assets at
approximately 30% of its annual net sales over time.

Dividend

* Nokia targets to deliver an earnings-based growing dividend. Nokia targets
to grow the dividend by distributing approximately 40% to 70% of non-IFRS
EPS, taking into account Nokia's cash position and expected cash flow
generation.
* For 2016, Nokia targets to propose a dividend of EUR 0.17 per share, subject
to shareholder approval in 2017.

2017 outlook for Nokia's Networks business

* Nokia expects net sales for Nokia's Networks business to decline in line
with its primary addressable market in full year 2017.
* Nokia expects operating margin for Nokia's Networks business in full year
2017 to be in the range of 8% to 10%.
* Nokia's outlook for net sales and operating margin for Nokia's Networks
business in full year 2017 are expected to be influenced by factors
including:

  \* A low single digit percentage decline in the primary addressable market
    for Nokia's Networks business;
  \* Competitive industry dynamics;
  \* Product and regional mix;
  \* The timing of major network deployments; and
  \* Execution of cost savings and reinvestment plans, with operating
    expenses down on a year-on-year basis.

2017 outlook for Nokia Technologies

* Due to risks and uncertainties in determining the timing and value of
significant licensing agreements, Nokia believes it is not appropriate to
provide an annual outlook for full year 2017. Nokia expects annualized net
sales related to patent and brand licensing to grow to a run rate of
approximately EUR 950 million by the end of 2016. License agreements which
currently contribute approximately EUR 150 million to the annualized net
sales run rate are set to expire before the end of 2016. If we do not renew
these license agreements, nor sign any new licensing agreements, the
annualized net sales run rate for patent and brand licensing would be
approximately EUR 800 million in early 2017, with approximately 30% of the
global smartphone market, by value, under license.
* Nokia expects total net sales from Digital Health and Digital Media to grow
year-on-year in full year 2017, primarily influenced by increased consumer
adoption of our Digital Health and Digital Media products.

Additional financial guidance

* Nokia expects its free cash flow in 2016, 2017 and 2018 to be affected by
cash outflows related to its EUR 1.2 billion cost savings program and
network equipment swaps. Consequently, Nokia's free cash flow is expected to
be clearly negative in full year 2016, slightly positive in full year 2017
and clearly positive in full year 2018.
* Nokia's EUR 1.2 billion cost savings program

  \* Nokia targets approximately EUR 1.2 billion of total annual cost savings
    in full year 2018 compared to the combined non-IFRS operating costs of
    Nokia and Alcatel-Lucent for full year 2015, excluding Nokia
    Technologies. Nokia expects approximately EUR 800 million of the cost
    savings to come from operating expenses and approximately EUR 400
    million from cost of sales. The cost savings are expected to be achieved
    as follows:

      \* approximately EUR 400 million in full year 2016 (approximately EUR
        250 million to come from operating expenses and approximately EUR
        150 million from cost of sales);
      \* an additional approximately EUR 400 million in full year 2017
        (approximately EUR 200 million to come from operating expenses and
        approximately EUR 200 million from cost of sales; and
      \* an additional approximately EUR 400 million in full year 2018
        (approximately EUR 350 million to come from operating expenses and
        approximately EUR 50 million from cost of sales).

  \* Under this cost savings program, restructuring and associated charges
    are expected to total approximately EUR 1.7 billion, of which
    approximately EUR 640 million was recorded as of Q3 2016. Nokia expects
    approximately EUR 700 million of the total restructuring and associated
    charges to be recorded in full year 2016, approximately EUR 800 million
    to be recorded in full year 2017, and approximately EUR 200 million to
    be recorded in full year 2018. This is an update to the earlier guidance
    commentary for expected restructuring and associated charges to total
    approximately EUR 1.2 billion.
  \* Related restructuring and associated cash outflows are expected to total
    approximately EUR 2.15 billion, of which approximately EUR 280 million
    was recorded as of Q3 2016. Nokia expects approximately EUR 500 million
    of the total restructuring and associated cash outflows to be recorded
    in full year 2016, approximately EUR 700 million to be recorded in full
    year 2017, approximately EUR 500 million to be recorded in full year
    2018, and approximately EUR 450 million of cash outflows in full year
    2019 and beyond. This is an update to the earlier guidance commentary
    for expected restructuring and associated cash outflows to total
    approximately EUR 1.65 billion.
  \* The updated guidance commentary for restructuring and associated charges
    and cash outflows is primarily related to plans to mitigate the more
    challenging than expected market environment with additional
    transformation initiatives. These transformation initiatives include
    plans to further optimize site utilization and plans to further
    streamline activities that impact our cost of sales, as well as plans to
    reinvest in our primary business to maintain industry leadership and
    plans to reinvest to capture growth opportunities, including in the
    cable access market and targeted enterprise sectors.

* Network equipment swaps

  \* Nokia expects to record approximately EUR 900 million of network
    equipment swaps in total. The charges and related cash outflows are
    expected to be recorded as follows: approximately EUR 300 million in
    full year 2016, approximately EUR 300 million in full year 2017, and
    approximately EUR 300 million in full year 2018. The charges related to
    network equipment swaps will be recorded as non-IFRS exclusions and,
    therefore, will not affect Nokia's non-IFRS operating profit.

* Financial income and expenses

  \* Nokia expects non-IFRS financial income and expenses to be an expense of
    approximately EUR 300 million in full year 2017. This is expected to
    primarily include net interest expenses related to interest bearing
    liabilities, interest costs related to defined benefit pension and other
    post-employment benefit plans, as well as the impact of foreign exchange
    rate fluctuations on certain balance sheet items.
  \* Nokia expects the cash outflows related to financial income and expenses
    to be approximately EUR 200 million in full year 2017. This is expected
    to primarily include net interest expenses related to interest bearing
    liabilities and the impact of foreign exchange rate fluctuations on
    certain balance sheet items.

* Taxes

  \* In full year 2017 and 2018, Nokia expects its effective non-IFRS tax
    rate to be between 30% and 35%. Nokia expects its non-IFRS tax rate in
    full year 2017 to be at the high end of the guidance range. Nokia
    expects its non-IFRS tax rate in full year 2018 to be at the low end of
    the guidance range.
  \* Nokia expects cash outflows related to taxes to be approximately EUR
    400 million in full year 2017 and 2018. The cash tax amount may vary
    depending on profit levels in different jurisdictions and the amount of
    license income potentially subject to withholding tax.

* Nokia expects capital expenditures to be approximately EUR 500 million in
full year 2017, primarily attributable to capital expenditures by Nokia's
Networks business.

About Nokia
Nokia is a global leader in creating the technologies at the heart of our
connected world. Powered by the research and innovation of Nokia Bell Labs, we
serve communications service providers, governments, large enterprises and
consumers, with the industry's most complete, end-to-end portfolio of products,
services and licensing.

From the enabling infrastructure for 5G and the Internet of Things, to emerging
applications in virtual reality and digital health, we are shaping the future of
technology to transform the human experience. www.nokia.com

Media Enquiries:
Nokia
Communications
Tel. +358 (0) 10 448 4900
Email: press.services@nokia.com

RISKS AND FORWARD-LOOKING STATEMENTS

It should be noted that Nokia and its businesses are exposed to various risks
and uncertainties and certain statements herein that are not historical facts
are forward-looking statements, including, without limitation, those regarding:
A) our ability to integrate Alcatel Lucent into our operations and achieve the
targeted business plans and benefits, including targeted synergies and cost
savings in relation to the acquisition of Alcatel Lucent announced on April
15, 2015 and closed in early 2016; B) expectations, plans or benefits related to
our strategies and growth management; C) expectations, plans or benefits related
to future performance of our businesses; D) expectations, plans or benefits
related to changes in our management and other leadership, operational structure
and operating model; E) expectations regarding market developments, general
economic conditions and structural changes; F) expectations and targets
regarding financial performance, results, operating and interest expenses,
taxes, currency exchange rates, hedging, cost savings and competitiveness, as
well as results of operations including targeted synergies and those related to
market share, prices, net sales, capital expenditures, income and margins; G)
timing of the deliveries of our products and services; H) expectations and
targets regarding collaboration and partnering arrangements, joint-ventures or
the creation of joint-ventures, as well as our expected customer reach; I)
outcome of pending and threatened litigation, arbitration, disputes, regulatory
proceedings or investigations by authorities, including the implications of the
legal action brought against the French stock market authority's (Autorité des
marchés financiers) clearance decision on Nokia's public buy-out offer followed
by a squeeze-out; J) expectations regarding restructurings, investments, uses of
proceeds from transactions, acquisitions and divestments and our ability to
achieve the financial and operational targets set in connection with any such
restructurings, investments, divestments and acquisitions; and K) statements
preceded by or including "believe," "expect," "anticipate," "foresee," "sees,"
"target," "estimate," "designed," "aim," "plans," "intends," "focus,"
"continue," "project," "should," "will" or similar expressions. These statements
are based on the management's best assumptions and beliefs in light of the
information currently available to it. Because they involve risks and
uncertainties, actual results may differ materially from the results that we
currently expect. Factors, including risks and uncertainties, that could cause
such differences include, but are not limited to: 1) our ability to execute our
strategy, sustain or improve the operational and financial performance of our
business or correctly identify or successfully pursue business opportunities or
growth; 2) our ability to achieve the anticipated business and operational
benefits and synergies from the Alcatel Lucent transaction, including our
ability to integrate Alcatel Lucent into our operations and within the timeframe
targeted, and our ability to implement our organization and operational
structure efficiently; 3) the outcome of the decision by the French Court of
Appeal in relation to the clearance decision of Nokia's public buy-out offer and
squeeze-out; 4) our dependence on general economic and market conditions and
other developments in the economies where we operate; 5) our dependence on the
development of the industries in which we operate, including the cyclicality and
variability of the telecommunications industry; 6) our exposure to regulatory,
political or other developments in various countries or regions, including
emerging markets and the associated risks in relation to tax matters and
exchange controls, among others; 7) our ability to effectively and profitably
compete and invest in new competitive high-quality products, services, upgrades
and technologies and bring them to market in a timely manner; 8) our dependence
on a limited number of customers and large multi-year agreements; 9) Nokia
Technologies' ability to maintain and establish new sources of patent and
intellectual property licensing income and IPR-related revenues, particularly in
the smartphone market; 10) our dependence on IPR technologies, including those
that we have developed and those that are licensed to us, and the risk of
associated IPR-related legal claims, licensing costs and restrictions on use;
11) our exposure to direct and indirect regulation, including economic or trade
policies, and the reliability of our governance, internal controls and
compliance processes to prevent regulatory penalties; 12) our reliance on third-
party solutions for data storage and the distribution of products and services,
which expose us to risks relating to security, regulation and cybersecurity
breaches; 13) Nokia Technologies' ability to generate net sales and
profitability through licensing of the Nokia brand, the development and sales of
products and services, as well as other business ventures which may not
materialize as planned, including in the areas of Digital Health and Digital
Media; 14) our exposure to legislative frameworks and jurisdictions that
regulate fraud, economic trade sanctions and policies, and Alcatel Lucent's
previous and current involvement in anti-corruption allegations; 15) the
potential complex tax issues, tax disputes and tax obligations we may face in
various jurisdictions, including the risk of obligations to pay additional
taxes; 16) our actual or anticipated performance, among other factors, which
could reduce our ability to utilize deferred tax assets; 17) our ability to
retain, motivate, develop and recruit appropriately skilled employees; 18) our
ability to manage our manufacturing, service creation, delivery, logistics and
supply chain processes, and the risk related to our geographically concentrated
production sites; 19) the impact of unfavorable outcome of litigation,
arbitration, agreement-related disputes or allegations of product liability
associated with our businesses; 20) exchange rate fluctuations, as well as
hedging activities; 21) inefficiencies, breaches, malfunctions or disruptions of
information technology systems; 22) our ability to optimize our capital
structure as planned, including completing intended share repurchases, and to
re-establish our investment grade credit rating or otherwise improve our credit
ratings; 23) uncertainty related to the amount of dividends and equity return we
are able to distribute to shareholders for each financial period; 24) our
ability to achieve targeted benefits from or successfully implement planned
transactions, as well as the liabilities related thereto; 25) our involvement in
joint ventures and jointly-managed companies or failures to create planned joint
ventures; 26) performance failures by our partners or failure to agree to
partnering arrangements with third parties; 27) our ability to manage and
improve our financial and operating performance, cost savings, competitiveness
and synergy benefits after the acquisition of Alcatel Lucent; 28) adverse
developments with respect to customer financing or extended payment terms we
provide to customers; 29) the carrying amount of our goodwill may not be
recoverable; 30) risks related to undersea infrastructure; 31) unexpected
liabilities with respect to pension plans, insurance matters and employees; and
32) unexpected liabilities or issues with respect to the acquisition of Alcatel
Lucent, including pension, postretirement, health and life insurance and other
employee liabilities or higher than expected transaction costs as well as the
risk factors specified on pages 69 to 87 of our annual report on Form 20-F filed
on April 1, 2016 under "Operating and financial review and prospects-Risk
factors", as well as in Nokia's other filings with the U.S. Securities and
Exchange Commission. Other unknown or unpredictable factors or underlying
assumptions subsequently proven to be incorrect could cause actual results to
differ materially from those in the forward-looking statements. We do not
undertake any obligation to publicly update or revise forward-looking
statements, whether as a result of new information, future events or otherwise,
except to the extent legally required.

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