So we are a challenger, but the good side of that is, of course, is that now when we have an increasingly strong product portfolio for that based on our in-house silicon, which is welcomed by hyperscalers combined with strong software offering that offers a lot of flexibility for different data center architectures, we believe that there is a possibility to gradually break into this market and get meaningful growth in the segment because, of course, we know — we all know that the CSP market as a whole will not be a growth market. Of course, we target to gain share there, but data centers will be the most significant growth market in the whole world in our industry. And that’s why, it is so important to increasingly focus on that segment.
François Bouvignies: Yes, just a quick clarification on what you said Pekka, the deal you signed that you can’t disclose yet. I mean, I guess it’s a market share. I mean, I guess you are kind of a market share winner, I would imagine, given your low footprint in originally in this?
Pekka Lundmark: Yes, it is. It is a market share win, yes.
François Bouvignies: Okay. And just my follow-up question is on Open RAN. AT&T kind of surprised the market with this deal. And I just was wondering if you see some acceleration in terms of activity of open RAN from other operators following that deal. I mean, we are a few months now, a couple of months after this announcement. From what to understand the other operators are also looking closely at it. And so do you expect other announcements from other operators this year of this kind, or do you really think it’s like just a one-off from now?
Pekka Lundmark: Open RAN is gradually gaining speed. I don’t expect and I have not seen that the AT&T decision would have led to any kind of increase in open run interest in other parts of the world. There are a lot of estimates that in 2028, O-RAN would represent roughly 25% or 24% of the total RAN market. So that gives you a perspective. What I really suggest is that people need to follow up very closely that what the facts about different rollouts are including in all announced projects, how quickly will it be? And will it be true O-RAN, or will it be O-RAN where you just have the same supplier on both sides of the interface. We have two real commercial O-RAN deployments ongoing at the moment. One is with NTT DOCOMO in Japan, and the other one is the recently announced Deutsche Telekom project in Germany.
We have already connected our DU and CU to five suppliers radio units, which is more than any other supplier. So gradually, O-RAN fronthaul — open fronthaul interface is becoming commercial reality. It starts from simple radios and only gradually moves to massive MIMO, but it will eventually get there as well. So it will be part of the market, a small part of the market for quite some time. But as I have said before, we see it as more as an opportunity than a threat for Nokia.
David Mulholland: Thanks, Francois. We’ll take our next question from Sami Sarkamies from Danske Bank. Sami, please go ahead.
Sami Sarkamies: Hi, Thanks for the comment. For Mobile Network of less than €9 billion this year with low single-digit EBIT margin, just curious how will you be able to retain scale and grow revenues to €10 billion target that will be required for double-digit margins in the long run? I mean if we look at the latest forecast from the like of Delora [ph] the five-year outlook for RAN market looks quite flattish even if you assume some share gains from Chinese rivals. Do you have anything else planned than the cost program that was announced after third quarter results?
Pekka Lundmark: Of course, I mean, the cost program is an important element in this, but we also have to remember that perhaps with the exception of India, 2023 was really weak year when it comes to investments. And when you look at the big picture, only 25% of 5G base stations are mid-band. So that is suggesting that there will have to be over time in the second half of 2028, there will have to be significant investments in 5G radio networks in different parts of the world already before 6G starts to come in. Data traffic continues to grow 20% to 30% of the year. And then in addition to that, the Chinese will be increasingly under pressure because of political reasons and because of the various actions that the Western countries have taken to limit their access to latest silicon.
So it is very clear that to get to €10 billion top line, we have to continue to take market share. AT&T is, of course, a setback. From there, we need to start climbing back up towards a market share that we’ll need to start by three, if you want to get to €10 billion top line. It is a challenge, absolutely, and that’s why we have provided a fairly low guidance for this year’s profitability, 1% to 4%, and then we commented 2026 target at the December — December event, we are not assuming that we would get to double-digit by 2026. Then we also need to keep in mind that when we talk about the second half of the decade. By then, we will have significantly increased the non-CSP business part of Mobile Networks. We are already now growing, albeit from a low base, fast in private wireless.
And then a very important target for the second half of the decade is the defense industry, where the spending is significant. It is currently mostly proprietary military technologies when it comes to communications. And the challenge they are facing is that it is getting extremely difficult to being cost competitive there when the technologies are proprietary. So it’s getting extremely expensive. And that’s why the whole defense industry in several parts of the world is looking at commercial technologies at the moment, such as 5G to provide an alternative to proprietary military technologies. We have said that the actions that MN is taking will allow them to lower the level of net sales to reach this 10% operating margin to approximately €10 billion, as you said.
