Nokia Corporation Financial Report for Q4 and Full Year 2018

Nokia Corporation

Financial Statement Release

January 31, 2019 at 08:00 (CET 1)

Nokia Corporation Financial Report for Q4 and Full Year 2018

Nokia delivers strong growth and improved profitability in Q4; strategic momentum in Software and Enterprise

Board of Directors plans to propose a dividend of EUR 0.20 per share for 2018, up 5% compared to EUR 0.19 for 2017

This is a summary of the Nokia Corporation financial report for Q4 and full year 2018 published today. The complete financial report for Q4 and full year 2018 with tables is available at www.nokia.com/financials. Investors should not rely on summaries of our financial reports only, but should review the complete financial reports with tables.

RAJEEV SURI, PRESIDENT AND CEO, ON Q4 2018 RESULTS

Nokia ended the year with a strong fourth quarter. We saw the second consecutive quarter of year-on-year sales growth across all five of our Networks business groups, as well as improved profitability in both Networks and Nokia Technologies. The execution of our strategy also proceeded well, with the work we have put into building a solid foundation for Nokia Software showing clear results and our enterprise business rapidly becoming a pillar of growth.

Looking forward, I expect Nokias performance to strengthen for the full year 2019 versus 2018 and our view of a fast and meaningful shift to 5G remains unchanged. Given that 5G rollouts will be staggered over the course of the year, we expect 2019 to have a soft first half followed by a much more robust second half.

Over the longer-term, we expect a virtuous cycle of investment, where operators update their networks across multiple domains - from optical to macro radio, fixed wireless access to cloud core, small cells to IP routing, network agnostic software and more. Following this, we expect a second wave where industrial customers will invest in private wireless technology including LTE and 5G-ready networks. With our end-to-end portfolio, Nokia is well-positioned to tap this extended cycle.

Q4 and January-December 2018 reported and non-IFRS results. Refer to note 1, Basis of Preparation, note 2, Non-IFRS to reported reconciliation and note 15, Performance measures, in the Financial statement information section for details.

EUR million (except for EPS in EUR) Q418 Q417 YoY change Constant currency YoY change Q1-Q418 Q1-Q417 YoY change Constant currency YoY change

Net sales 6 869 6 651 3% 3% 22 563 23 147 (3)% 1%

Operating profit/(loss) 552 419 32% (59) 16

Operating margin % 8.0% 6.3% 170bps (0.3)% 0.1% (40)bps

EPS, diluted 0.03 (0.07) (0.10) (0.26)

Operating profit/(loss) (non-IFRS) 1 120 1 004 12% 2 180 2 587 (16)%

Operating margin % (non-IFRS) 16.3% 15.1% 120bps 9.7% 11.1% (140)bps

EPS, diluted (non-IFRS) 0.13 0.13 0% 0.23 0.33 (30)%

Net cash and current financial investments 3 051 4 514 (32)% 3 051 4 514 (32)%

Net sales in Q4 2018 were EUR 6.9bn, compared to EUR 6.7bn in Q4 2017. Net sales grew by 3% year-on-year, on both a reported and constant currency basis. Our robust topline performance reflects the strong competitiveness across our portfolio and that our strategy execution is tracking well. We maintained good momentum, with strong 5G customer engagement in all key markets, particularly strong performance in Nokia Software and solid performance in our enterprise business.

Non-IFRS diluted EPS in Q4 2018 was EUR 0.13, compared to EUR 0.13 in Q4 2017. Particularly strong execution in Q4 enabled us to achieve our full year 2018 operational guidance, with year-on-year operating profit growth in Networks, as well as in Nokia Technologies on a recurring basis. Non-IFRS diluted EPS increased by EUR 0.02 year-on-year on a recurring basis, driven by our gross profit performance and continued operating expense reduction, partially offset by foreign exchange hedging and higher income tax expenses.

Reported diluted EPS in Q4 2018 was EUR 0.03, compared to negative EUR 0.07 in Q4 2017, primarily driven by lower income tax expenses and our gross profit performance, partially offset by lower one-time licensing net sales, foreign exchange hedging and higher financial expenses.

In Q4 2018, net cash and current financial investments increased sequentially by approximately EUR 1.2bn and we ended 2018 with a strong financial position. In Q4 2018, net cash from operating activities benefitted from strong seasonality and positive changes in net working capital. Consequently, recurring free cash flow for full year 2018 was slightly negative.

ANNUAL DISTRIBUTION TO SHAREHOLDERS

The dividend to shareholders is Nokias principal method of distributing earnings to shareholders. Over the long term, Nokia targets to deliver an earnings-based growing dividend by distributing approximately 40% to 70% of non-IFRS diluted EPS, taking into account Nokias cash position and expected cash flow generation. Beginning with the distribution for 2018, Nokia plans to pay dividends in quarterly installments. In addition, Nokia intends to implement a dividend fee for American Depository Receipt (ADR) holders.

For 2018, Nokias Board of Directors plans to propose that the Annual General Meeting in 2019 authorizes the Board to resolve on the maximum annual distribution of EUR 0.20 per share, compared to EUR 0.19 for 2017, to be paid quarterly during the authorization period, unless the Board decides otherwise for a justified reason. The Board would make separate resolutions on each distribution and such resolutions would be separately disclosed following the Annual General Meeting 2019 and in connection with our financial reports for Q2, Q3 and Q4. The annual distribution would be paid as quarterly dividends from retained earnings and/or assets from the fund for invested unrestricted equity.

At the end of 2018, the distributable funds on the statement of f

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