First, by quarter two at the latest, we start disclosing regional sales and cash flow metrics by business growth, which help provide a more complete picture of the individual parts of the business. And the second is that we will change the way of account for the impact of our venture funds. Historically, they have been recorded in other operating income and expense and therefore, included in our operating profit. But going forward, we will now report this in financial income and expenses, and we believe that this makes sense given the volatility of these valuations in recent years. And with that, back to you, Pekka, for some final thoughts before Q&A.
Pekka Lundmark: Thanks, Marco. And just very quickly, before we turn to Q&A, let me conclude with a couple of remarks. First of all, as already discussed, we faced a highly challenging environment in 2023, but considering the 8% decline in net sales I believe we delivered a resilient financial performance. Our business group did a good job maintaining profitability and still delivering on operating margin targets as we said at the start of the year. We also delivered a solid cash performance in line with the guidance we gave at the start of the year. This is enabling the Board to propose an increase in our shareholder distributions for the coming year. Secondly, we are moving quickly on our cost reduction program. And more importantly, we continue to take steps to increase the operational autonomy of our business groups.
We want to make sure they are empowered to take the right decisions to create shareholder value into the future. And finally, while the environment will remain challenging in the first half of 2024, the strong order intake we saw in Q4 points to some improvement in the spending environment, especially for Network Infrastructure. Also, we are now in the final stages of our smartphone license renewal cycle in Nokia Technologies. This will lead to greater stability in Nokia Technologies going forward and will allow the business to focus more on its growth areas. With that, I will hand back to David for the Q&A.
David Mulholland: Thank you, Pekka and Marco, for the presentations. [Operator Instructions] Alice, with that, could you please give the instructions?
Operator: We will now begin the question-and-answer session [Operator Instructions] I will now hand the call back to Mr. David Mulholland.
David Mulholland: Thanks, Alice. We’ll take our first question from Jakob Bluestone from BNP Paribas Exane. Jakob, please go ahead.
Jakob Bluestone: Thanks, David. Hi. Good morning. I was hoping you could maybe expand a little bit on the green shoots commentary. Specifically, what do you think is driving the sort of improvement coming through? And maybe if you could just comment a little bit whether you’re seeing any green shoots in Mobile Networks or if it’s just on the Network Infrastructure side? Thank you.
Pekka Lundmark: Yes. Thank you. The comment on green shoots was clearly more on the NI side. And of course, the good thing now is that, as you know, we have the four businesses in NI, we had strong order intake in Q4 in all 4 business divisions of NI. In IP Networks, it’s driven by tailwinds in webscale and enterprise contracts. In Fixed Networks, its driven by government funding, which starts to benefit the market already now in order intake, but because of the delivery cycle, then in terms of sales and topline, mostly in the second half of 2024. In Optical Networks, it’s simply share gains because of our strong product momentum and the excellent feedback we are receiving from customers to our recent product announcements. And in Submarine Networks, we already had a strong order book in the beginning of the quarter, but we had great order intake in Q4 as well, and that combination is now going to be driving the outlook for that business going forward.
David Mulholland: Did you have a follow-up, Jakob?
Jakob Bluestone: Maybe just on the Mobile Networks. What are you sort of seeing there? It sounds like it’s still pretty tough?
Pekka Lundmark: Yes. The — I mean, the market will remain tough at least for the first half of the year. When you look at the Mobile Networks sales guidance for this year, there, of course, you need to remember that the significant part of that is driven by India. Our group sales in India were — in 2022, they were €1.3 billion and last year, €2.8 billion. And now we are expecting that 2024 on group level would be somewhere between €1.5 billion to €2 billion and most of that decline that we will see in India this year will be in Mobile Networks. So, that already — when you do the math, you can see that, that explains a significant part of the drop. But overall, I mean, we are still expecting or waiting for mobile operators throughout the world to start investing because investments have been very low, 2023 was a tough year for the whole market, of course, most pronounced in North America.
Fact still remains that only about 25% of base stations outside of China are 5G midband. And a small majority of all core networks have been upgraded 5G advanced. And those investments will need to come because without that operators will not be able to monetize 5G properly. Right now, interest rates are still high. Many operators have high leverage. The good thing would be that if interest rates would come down, data traffic will continue to grow 20% to 30% per year. So, gradually, that will also start to force operators to again invest. But the reality is that nobody knows when that will come. I’m absolutely convinced that it will come, but we are not yet seeing concrete signs of it happening.
David Mulholland: Thank you, Jakob. We’ll take our next question from Simon Leopold from Raymond James. Simon, please go ahead.
Simon Leopold: Great. I wanted to see if you could help us in terms of how the AT&T transition with the ORAN project, is affecting your revenue assumptions? And what I’m sort of trying to tease out here is there sort of a step-down rapid decline, or is there may be a long tail of spending before a slowdown? I just like a little bit of color about how we should think about that revenue impact in 2024? Thank you.
