Nokia
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Financial statements
Consolidated financial statements
Notes to consolidated financial statements
Parent Company financial statements
Notes to the Parent Company financial statements
Signing of the Annual Accounts and the
Review of the Board of Directors 2022
Auditor’s report
Auditor’s ESEF assurance report
Other information
Forward-looking statements
Introduction and use of certain terms
Glossary
Investor information
Contact information
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Business overview
Nokia in 2022
Letter from our President and CEO
Our strategy
Our history
Customer Experience
Business groups
Network Infrastructure
Mobile Networks
Cloud and Network Services
Nokia Technologies
Supply chain, sourcing and manufacturing
Corporate governance
Corporate governance statement
Compensation
Board review
Business description
Board’s review 2022
Selected financial data
Operating and financial review
Sustainability and corporate responsibility
Shares and shareholders
Articles of Association
Risk factors
Significant subsequent events
Key ratios
Alternative performance measures
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NOKIA IN 2022
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Overview Business overview
Business
overview
Nokia in 2022
Letter from our President and CEO
Our strategy
Our history
Customer Experience
Business groups
Network Infrastructure
Mobile Networks
Cloud and Network Services
Nokia Technologies
Supply chain, sourcing and manufacturing
04
10
14
22
24
26
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Nokia in 2022
The platform for our future
The Nokia platform guides everything we do across
our global organization. Its three elements shape our
ambition, our strategy and our culture.
Our purpose
At Nokia, we create technology that helps
the world act together.
While our lives may be getting longer, healthier and richer, the world
is facing fundamental challenges: Productivity is stalling, pressure
on the planet is increasing and access to opportunity remains
stubbornly unequal.
Digitalization is central to the solution.
We see the potential of digital to transform business, industry
and society. When the world’s organizations, machines and devices
are in sync with each other and the people they serve, a new
capability unfolds to create a more productive, sustainable and
accessible future.
Our commitment
We are delivering the next evolution in critical
networking through technology leadership and
trusted partnerships.
We are meeting the new demands placed on networks through the
next evolution of networking where networks meet cloud with
‘networks that sense, think and act’.
These networks go beyond connecting people and things, bits and
bytes. They’re adaptable, autonomous, and consumable. They’re alive
with intelligence and enable people, machines and devices to interact
in real time, like never before.
Critically, ‘networks that sense, think and act’ are creating new
opportunities for our customers and partners, both existing and
new, to access and harness the full power of networking like never
before. How?
■ By ‘sensing’ and understanding human and machine parameters
using next generation mobile and optical technologies
■ By ‘thinking’ of actions before a fault occurs in the network or in an
enterprise using next generation analytics and AI
■ By ‘acting’ to connect humans and machines alike by enabling wide
area or local area networks.
Essentials
Our essentials highlight the culture we are creating
for our people, customers and partners.
As we seek to realize the full potential of digital in every industry,
acting as a collaborative partner to our customers and pioneering
the next evolution of networks, we are creating the culture needed
to drive the future growth of Nokia.
■ Open – in mindset, to opportunity, through/with transparency
■ Fearless – bringing authenticity, sharing ideas and opinions,
embracing collaboration
■ Empowered – to make decisions, to act with clear accountability.
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Business overview Nokia in 2022
Helping the
world act
together
At Nokia, we create technology that
helps the world act together.
As a B2B technology innovation leader,
we are pioneering the future where
networks meet cloud to realize the full
potential of digital in every industry.
Through networks that sense, think and
act, we work with our customers and
partners to create the digital services
and applications of the future.
Our products, solutions and services can drive social, environmental, and
economic progress. Digitalization and connectivity can have a critical role in
solving some of the world’s greatest challenges including stalled productivity,
climate change and unequal access to opportunity. Our products and solutions
bring digitalization to physical industries and cities, helping them decarbonize
and increase efficiency, productivity and safety.
Shareholder distributions
Dividend proposed in respect
of 2022(1)
EUR 0.12
per share
Ongoing share buyback program announced
in 2022
EUR 600m
over 2 years
Financial highlights
For the year ended 31 December,
Continuing operations
Net sales
Gross profit
Gross margin
Operating profit
Operating margin
Profit/(loss) for the year
Earnings per share, diluted
Proposed dividend per share(1)
As of 31 December
Net cash and interest-bearing financial
investments(2)
2022
EURm
24 911
10 222
41.0 %
2 318
9.3 %
4 210
EUR
0.74
0.12
2022
EURm
2021
EURm
22 202
8 834
39.8%
2 158
9.7%
1 654
EUR
0.29
0.08
2021
EURm
2020
EURm
21 852
8 193
37.5%
885
4.0%
(2 513)
EUR
(0.45)
0.00
2020
EURm
4 767
4 615
2 485
(1) The Board of Directors proposes to the Annual General Meeting to be authorized to decide in its discretion on
the distribution of an aggregate maximum of EUR 0.12 per share as dividend from the retained earnings and/or
as assets from the reserve for invested unrestricted equity.
(2) Non-IFRS measure. For the definition and reconciliation of non-IFRS measures to the most directly comparable
IFRS measures, refer to ”Alternative performance measures” section.
Global reach
Our technology solutions enable critical
networks for communications service
providers (CSPs) and enterprises around the
world.
Net sales in 2022
EUR 24.9bn
Countries of operation
~130
Average number of employees in 2022
~86 900
Regional split of employees and net sales(1)
North America
10 500
EUR 8 388m
Europe
37 700
EUR 6 662m
Middle East & Africa
3 200
EUR 1 969m
Latin America
2 900
EUR 1 223m
Greater China
11 400
EUR 1 581m
India
16 800
EUR 1 290m
Asia Pacific
4 400
EUR 2 648m
Submarine Networks
EUR 1 150m
(1) Regional net sales figures exclude net sales of Submarine Networks business.
Strengthening our
technology leadership
R&D investment since 2000
EUR 140bn+
Patent families declared as essential to 5G
4 500+
Nobel Prizes awarded for ground-breaking
achievements in global innovation
Promoting freedom of
expression and privacy
In 2022, we completed our second
independent Global Network Initiative
(GNI) assessment. GNI Participants
commit to implementing the
organization’s Principles on Freedom
of Expression and Privacy, providing
direction and guidance to the ICT
industry and its stakeholders on
advancing human rights.
Refer to the “Sustainability and
Corporate Responsibility” section for
more information on our sustainability
and corporate responsibility work.
9
At the beginning of
2022, we joined the
RE100 initiative to
help further solidify
our work towards
100% renewable
electricity across
our facilities by 2025.
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Business overview Nokia in 2022
Our
business
groups
Nokia has four business groups with
each business group aiming to become
a technology and market leader in their
respective sector.
Network
Infrastructure
Mobile
Networks
Cloud and Network
Services
Nokia
Technologies
Network Infrastructure provides fiber, fixed wireless access
technologies, copper, IP routing, data center, subsea and terrestrial
optical networks – along with related services – to customers
including communications service providers, webscales (including
hyperscalers), digital industries and governments.
Mobile Networks creates products and services covering all
network generations. Its portfolio includes products for radio
access networks (RAN) and microwave radio links for transport
networks, solutions for network management as well as network
planning, optimization, network deployment and technical
support services.
Cloud and Network Services enables CSPs and enterprises to
deploy and monetize 5G, cloud-native software and as-a-Service
delivery models.
Nokia Technologies is responsible for managing Nokia’s
patent portfolio and monetizing Nokia’s intellectual property
including patents, technologies and the Nokia brand.
Segment net sales (EURm)
9044
6 736
7 674
9 047
0
2020
2021
2022
Segment operating margin (%)
12.2
10.2%
12.2%
6.8%
10 398
9 717
10 671
10671
+18%
+10%
0
2020
2021
2022
8.8
7.9%
7.9%
8.8%
+200 bps
+90 bps
Segment net sales (EURm)
3350
3 087
3 089
3 351
0
2020
2021
2022
Segment operating margin (%)
5.4
5.4%
5.3%
1595
+8%
1 402
1 502
1 595
+6%
0
2020
2021
2022
80.1% 78.9% 75.7%
-10 bps
80.1
-320 bps
2020
2021
2022
0.0
2020
2021
2022
0.0
08
-2.2
(2.2)%
2020
2021
2022
0.0
2020
2021
2022
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Business overview Letter from our President and CEO
Letter
from our
President
and CEO
A year of acceleration
We said at the start of 2022 that it would be
a year of acceleration, and I am pleased that
we delivered what we promised. The Nokia
team did a great job navigating geopolitical,
economic and supply challenges, successfully
executed our strategy and delivered a
strong full-year performance. As a result,
we achieved another year of solid growth
while maintaining good profitability.
The reset we completed in 2021 meant we
began the year on a much stronger footing for
the second phase of our three-part plan to
reset, accelerate and scale our business with
the aim of ensuring sustainable, profitable
growth. The focus on strengthening our
technology leadership and increasing our
competitiveness helped us gain market share
in many areas including new customer wins
in rapidly growing markets like India.
One of our strategic priorities for 2022, and
beyond, was to broaden our customer base
and grow in Enterprise. I was delighted that
we delivered on this aspiration with strong
Enterprise net sales growth. Importantly we
also achieved significant webscale customer
wins and momentum continues to build in
private wireless, where we had more than
560 customers at the end of 2022.
Our technology leadership was evident in
many other areas, including IP Networks,
where we started to deploy 800 Gigabit
Ethernet (800GE) routing to give operators
more capacity and greater energy efficiency.
We also launched Nokia Lightspan MF-14, the
world’s most advanced fiber platform, and
carried out the first 100G passive optical
network (PON) broadband demonstration
in the US. Together with our partners,
we set new records in 5G carrier aggregation
and launched the world’s first commercial
5G standalone network with network
slicing for Fixed Wireless Access services.
We also launched the first complete 5G core
solution in the Software-as-a-Service (SaaS)
delivery model.
Nokia continued to invest in research and
development and to ensure our technology
leadership for the future. Construction work
got underway on a new campus in Oulu,
Finland, encompassing new facilities for R&D,
manufacturing and office space, and we
announced an ambitious redevelopment of
our Ottawa campus, in Canada, to create a
center of excellence for 5G, cybersecurity,
AI and machine learning research.
This year was not without its challenges.
Nokia strongly condemned the Russian
invasion of Ukraine, and I am proud of our
Ukrainian employees, who are bravely helping
maintain customer networks and provide
critical connectivity. It became clear in the
early days of the invasion that our continued
presence in Russia would no longer be
possible, so we took the decision to exit
the Russian market.
Progress across our
business groups
All four of our empowered and accountable
business groups showed signs of acceleration
this year, helping Nokia take another step
towards our long-term target of growing
faster than the market with a comparable
operating margin of at least 14%(1).
Network Infrastructure had another year of
strong growth, with all four of its business
divisions contributing, and significant
operating margin expansion. Clear technology
leadership across the portfolio and continued
strong demand for fiber were the biggest
drivers. We have now reached more than
100 customers for PSE-V, our advanced
coherent optical solution, and more than
30 customers for our FP5 chipset.
Mobile Networks delivered on its ambition
to return to growth in 2022 and improved
profitability over the full year, driven by
increased portfolio competitiveness and
strong demand. We continued to win new 5G
business and our ReefShark system-on-chip
portfolio accounted for 97% of shipments
by the end of the year, hitting the target of
around 100%.
“ All four of our empowered and accountable business
groups showed signs of acceleration this year, helping
Nokia take another step towards our long-term target
of growing faster than the market with a comparable
operating margin of at least 14%.(1)”
Pekka Lundmark,
President and CEO
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(1) Non-IFRS measure. For the definition and reconciliation of non-IFRS measures to the most directly comparable IFRS measures,
refer to ”Alternative performance measures” section.
Business overview Letter from our President and CEO
continued
Cloud and Network Services grew its top line
as it continued to make progress refocusing
investments and rebalancing the portfolio.
The launch of Nokia Cloud Native
Communication Suite, giving customers
greater energy efficiency, was a highlight.
CNS also created a new business unit, focused
on improving the returns on our customers’
network investment, launched several SaaS
services, and expanded our campus private
wireless leadership while targeting broader
Enterprise Campus Edge opportunities.
Nokia Technologies continued to make good
progress in growth areas with new licensing
agreements in the automotive, consumer
electronics and Internet of Things (IoT)
sectors. We also continued to strengthen
our portfolio, filing patents on over 1 700
new inventions last year and reaching over
4 500 patent families declared as essential
to 5G.
Purpose drives our success
In 2021 we introduced our new purpose –
At Nokia, we create technology that helps
the world act together. To ensure we
achieve our company purpose, in 2022 we
announced a Technology Strategy and a new
Environmental, Social and Governance (ESG)
Strategy to drive closer alignment of product
development across our business with the
aim of making ESG a competitive advantage
for Nokia.
Technology Strategy
This strategy has seven pillars and has evolved
out of our Technology Vision 2030, which
identified the need for advanced networks
and an ecosystem of partners to realize the
potential of digitalization and the three main
metaverses (Consumer, Enterprise and
Industrial) we believe will emerge by the
end of the decade.
The seven technology pillars for Nokia’s
differentiation are: innovation, sustainability,
semiconductors, security, artificial
intelligence, software and consumability.
Environmental, Social and
Governance (ESG) Strategy
This strategy has five focus areas to ensure
that sustainability is a fundamental part of
how Nokia develops technology and makes
business decisions.
The five ESG focus areas are: the environment,
industrial digitalization, security and privacy,
bridging the digital divide and responsible
business.
People at the heart
of our organization
In collaboration with our employees, we also
created a new Nokia People Strategy to guide
our daily work with the intention of putting
our people at the heart of everything we do.
Our goal is to create an environment in which
all our people can thrive so that we can deliver
on our purpose. We believe this approach will
also help us attract, retain and develop the
best talent.
Momentum continues to build in private
wireless, where at the end of 2022 we had
560+
customers
For PSE-V, our advanced coherent optical
solution, we have now reached
100+
customers
and for our FP5 chipset
30+
customers
“ In collaboration with our employees,
we also created a new Nokia People
Strategy to guide our daily work with
the intention of putting our people at
the heart of everything we do. Our goal
is to create an environment in which all
our people can thrive so that we can
deliver on our purpose.”
Renewing our brand and
strategy update
We recognized that we needed to refresh
Nokia’s brand to reflect who we are today. In
2022 we began work on renewing our brand,
and updating our strategy, to help reframe
how customers, partners, stakeholders and
current and potential employees perceive
Nokia with the aim of asserting our leadership
in networking technology when we launched
our refreshed brand in early 2023.
Looking ahead
There were a number of challenges we had
to overcome throughout the year, but I’m
delighted we still managed to accelerate our
performance and demonstrate the resilience
of our business. Thanks to the team, we
ended the year in a much stronger position
and firmly on track to achieve our long-term
business objectives. I firmly believe consistent
execution and progressing towards our
long-term targets will also enable us to deliver
what is our ultimate objective – creating value
for our shareholders.
Pekka Lundmark
President and CEO
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Business overview Our strategy
Our customers
We serve three customer segments:
communications service providers,
enterprises and licensees.
2 Enterprises
Enterprise estimated TAM grew
by 12% to EUR 16 billion from
2021 to 2022.
Enterprise TAM includes enterprise verticals
and webscaler markets. The estimated
enterprise TAM grew by 12% to EUR 16 billion
from 2021 to 2022. We forecast this market
to grow strongly, at 8% CAGR until 2027,
with the private wireless market reaching
27% CAGR.
Enterprise verticals
An enterprise vertical represents a grouping
of companies by an industry that offers
products and services that meet specific
needs. We primarily focus on transportation
and logistics, energy, manufacturing, and
public sector verticals. This reflects our
assessment that these are seeing the most
significant digitalization over the coming
years, as they automate many aspects
of their operations. We project that growth
will mainly be driven by private wireless
and wireline networks in manufacturing,
as well as in the public sector and in energy.
We estimate that IP routing and optical
networks will also continue to grow
moderately in these segments.
Networks play an increasingly important role
in the economy and in society. As a result,
we serve a growing number of customers
who provide critical services to end-users.
We distinguish three customer segments that
we serve with our hardware, software and
services portfolio: Communications services
providers, and enterprises, therein enterprise
verticals and webscalers. In addition, we
license our intellectual property to selected
industries that benefit from our innovations,
primarily in the mobile devices, automotive,
consumer electronics and IoT industries.
Our analysis of the evolution of these
segments is set out below.
1
Communications service
providers (CSPs)
The CSPs estimated total
addressable market (TAM)
grew by 5% to EUR 110 billion
from 2021 to 2022.
A communications service provider offers
telecommunications services such as voice
and/or data services through fixed and/or
mobile connectivity to consumers,
enterprises, governments and other
communications service providers. Nokia
maintains a consolidated view of the Nokia
total addressable market based on multiple
external analyst reports, customer and key
competitor reported and announced insights
as well as Nokia internal insights. We estimate
the CSPs total estimated addressable market
for Nokia grew by 5% to EUR 110 billion from
2021 to 2022. We expect it to only grow
moderately, at a 1% compound annual growth
rate (CAGR) between 2022-27. We expect
the CSP radio access network (RAN) market
outside China to continue to grow through
2023, and the declining investments in LTE
and 2G/3G to start to offset 5G growth
afterwards, resulting in flat outlook after
2023 through to 2027. We expect that fixed
wireless access, fiber, IP routing and optical
networks grow faster than the overall CSP
market, driven by the continuous demand for
higher speed access technologies at homes
and workplaces. The 5G cycle will also yield
growth in software, namely in 5G Core and
in all software segments supporting 5G
operability and monetization.
CSPs have kept their capital expenditure
intensity flat, but increased their earnings
through automation, digitalization, shifts in
channel mix, outsourcing and asset sales.
We expect them to remain focused on the
monetization of their connectivity strengths,
and on cost optimization. They are also
considering divesting from passive
infrastructure and transitioning towards
network sharing models. In areas in which
the network is built for coverage, this
might reduce demand for network vendor
equipment. We have also seen the first
examples of CSPs relying on webscalers to
lead the transition to cloud-based operational
and business models. When combined with
open RAN standards that aim at splitting a
base transceiver station into subcomponents
with open interfaces, this may allow for
new entrants into the market and increase
competition. Conversely, it should also
serve to accelerate innovation and create
opportunities for market share gains for
those investing in the technology.
Geopolitics and environmental criteria
increasingly influence investment and vendor
decisions. Security and sovereignty have
become important factors across the vendor
landscape. Government-funded broadband
initiatives also provide additional funding
for investments, for example in rural areas.
Sustainability considerations such as green
energy use, energy consumption reduction
plans and circular economy approaches also
shift the criteria for vendor selection.
Webscalers
Webscaler refers to companies that provide
cloud-based solutions and services. Alphabet
(Google Cloud Platform), Amazon (Amazon
Web Services) and Microsoft (Azure) are the
largest cloud players – also referred to as
hyperscalers – operating on a global scale.
Our TAM for webscalers consists mainly
of optical networks and IP routing. Within
optical networks, we expect that data center
interconnect (DCI) will be a strong growth
driver, while the increasing webscaler data
traffic requires adoption of higher bit rate
technologies also in IP routing.
The largest, global webscalers are also
assuming an increasingly important role within
the telecommunication domain. They target
edge computing as the next growth engine
for industrial automation workloads and
low-latency applications. They also partner
with CSPs to co-locate edge stacks
on-premises and at metro sites. Additionally,
they aim to run telecommunication network
workloads on their cloud infrastructure. As
such, webscalers are customers and potential
partners, as well as potential competitors in
some areas.
3 Licensees
Licensees refers to companies who have
agreed licenses to use Nokia’s intellectual
property. This includes the licensing of Nokia’s
patent portfolio, the licensing of technologies
for integration into consumer devices and
licensing of the Nokia brand. The majority of
Nokia Technologies’ revenues comes from
patent licensing where we have agreements
with most major smartphone vendors as
well as licensing programs for consumer
electronics, video services, automotive and
the wider IoT domain. In total, we have more
than 200 licensees across all our programs,
including companies like Samsung, Lenovo,
and Volkswagen.
1
CSPs
2
Enterprise
Focus on connectivity
strengths
and using cost optimization
via automation and asset
carve outs to fund both fiber
and 5G investments
Favoring cloud strengths
in vendor and partner
ecosystem
Network monetization
targeting enterprise and edge
use cases
Enterprise verticals
Digitalization and automation
of operations in industrial segments
Transition to software-centric
operations and adoption of industrial OT edge
and on-premise clouds
Energy and manufacturing
as early adopters of private wireless and automation
solutions
Federal, state government
and cities network modernization acceleration
Webscalers
Edge computing
as a growth engine – industrial automation workloads
across on-premise, edge, public cloud
Partnering with CSPs
to co-locate edge stacks and building an ecosystem for
low-latency apps
Targeting telco and network
workloads to run on their cloud infrastructure
Collaborating with CSPs
in the transformation of network operations
Acceleration of ESG and Cybersecurity Maturity
3
Licensees
Patent portfolio
with long life-time
the vast majority of Nokia’s
patents still in force in ten
years’ time
New inventions
every year
in 2022, Nokia filed patent
applications on more than
1 700 new inventions, enabling
5G networks, connected 5G
devices and more
Annual number of patent
filings expected to grow
due to continued investments
in R&D and standardization
Entire industries powered
by our fundamental
cellular and multimedia
inventions
providing us with the
opportunity to expand our
licensing coverage; we are
making good progress in our
growth areas of consumer
electronics, automotive,
and IoT
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Business overview Networks are the key enabler for the digitalization
of industries and the realization of the broader
potential of the metaverse. As a result, we see
opportunity to grow our business, expand into
adjacencies and transform our business model.
Our strategy consists of six pillars – key objectives that will define our success
– and four enablers to help us get there.
The six pillars are:
Grow CSP business
faster than market
1
Expand the share of
enterprise in our business
2
Actively manage
our portfolio
Our strategy
continued
Our
strategy
In 2021, Nokia set out its strategy to deliver
sustainable, profitable growth by becoming
a B2B technology innovation leader,
accompanied by a new purpose and
operating model. We set out actions to reset,
accelerate, and then scale our business
to lead in a world where widespread
digitalization is gathering speed.
And as enterprises, webscalers and
governments digitalize, they increasingly need
the essential networking technology Nokia
provides to succeed. Networks are critical to
unlocking the enormous opportunities across
industrial, enterprise and consumer spheres,
as we outlined in our Technology Vision 2030.
As we move from the 5G era towards
5G-Advanced and 6G, the underlying
networks will need to evolve. The networks
of the next decade will need to meet the
demands of fully immersive augmented and
virtual reality, digital twins, and biosensors.
These technologies will in turn unleash the full
promise of the consumer, enterprise and
industrial metaverses, which until now have
only shown a glimpse of their potential. They
will pave the way for true extended reality (XR)
experiences, which will eventually lead to the
merging of the physical and digital worlds and
the enhancement of humans.
Early metaverse applications are already
visible in industries which use digital twins,
where significant uplifts in productivity,
sustainability and worker safety have been
achieved. We have helped to pioneer these
advances by collaborating with customers
and partners.
The successful and rapid deployment of these
technologies will require a fundamental shift
in connectivity.
We are embracing this opportunity to pioneer
the next evolution of networking, where
networks meet cloud.
Our strategy
To reinforce our position as a leader and
enabler of digitalization, we are confidently
asserting the value we bring:
■ Networking expertise: We know that
accelerating the digital transformation of
every industry will be critical to unlocking
massive gains in sustainability, productivity,
and accessibility – our networking expertise
is increasingly valuable to customers and
partners as they seek to maximize their
growth.
■ Technology leadership: We are specialists
in the technology we deliver – with a
laser-focus on delivering a best of breed
technology portfolio.
■ Pioneering innovation: Innovation runs
through our business – across our evolving
portfolio, in the disruptive research and
game-changing programs at Nokia Bell
Labs, in our work to build the device
and application ecosystems needed for
digitalization, and through our innovation
programs where we bring emerging
technology to life alongside our partners.
■ Collaborative advantage: Collaboration
is in our DNA, and we are valued for the
trusted relationships we build with our
customers. Today, we are going further:
we know that realizing the potential of
digital cannot be achieved alone, so we are
focused on bringing the right partners and
technologies together to create the digital
services and applications of the future.
3
6
CSPs will continue to be our main
customer segment. We will leverage our
strong technological position, investment
in technology leadership and emerging
opportunities to grow our share in key
markets, with geopolitical considerations
supporting this ambition.
Enterprise verticals and webscalers are
deploying campus networks, wide area
private wireless networks, enterprise
physical networks, and data centers
at an accelerated rate to digitalize their
operations. Being a technology leader
in all these domains, we pursue these
opportunities to grow our enterprise
business.
Maintaining our portfolio segments at
number one or number two position,
through several routes including active
portfolio management, is critical for a
profitable and sustainable business.
There may be cases where a leadership
position is not possible and for these
cases, we will consider alternatives.
Secure business
longevity in Nokia
Technologies
4
Build new
business models
5
Develop ESG
into a competitive
advantage
We are investing to ensure the sustained
competitiveness of our patent portfolio.
We will continue to pursue opportunities
from sectors outside mobile devices,
such as automotive, consumer
electronics, IoT and video services.
To broaden our customer base and
change our margin profile, we see
potential in new platform business
models within the broader ecosystem.
We engage with service providers,
webscalers, industrial giants and
emerging players like app developers
and start-ups, to drive the creation of
new products, services, and solutions,
and to explore new business models
including CloudRAN, Network as Code
and as-a-Service.
ESG is increasingly important for
customers, investors, regulators,
partners, and Nokia employees. There
is space in our industry to become the
‘trusted provider’ and Nokia aims to claim
this position. Our ESG strategy lays out
how we will do this and our specific areas
of focus.
The six pillars are underpinned by four enablers:
Develop
future-fit-talent
1
Invest in
long-term
research
2
Digitalize
our own
operations
3
Refresh
our brand
4
We have launched and are
executing a new people
strategy focused on growth,
skills, and development. We
build the right future skills for
our employees in the
technical domains identified
in our technology vision and
strategy, and the commercial
skills to support our
expansion into new domains.
Sustained technology
leadership is a key driver of
our success: it requires us to
anticipate, shape, and invest
in the next technology waves
and breakthroughs. We
continue to invest in
long-term research to ensure
a leadership position in line
with our Technology Vision
2030. We are also deeply
engaged in leading and
influencing standards and
developing standard
essential patents.
We are increasing the
digitalization of our own
operations to lead by
example with a set of
ambitious, company-wide
strategic initiatives to
increase the company’s
performance and
competitiveness, focused on
efficiency, productivity and
agility in internal operations,
customer experience
and R&D.
With Nokia accelerating into
the next phase of our growth
strategy, we have refreshed
our brand to reflect the focus
of Nokia’s business as a B2B
technology innovation leader.
Our new visual identity is
emblematic of an energized,
dynamic and modern Nokia.
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17
Business overview Our strategy
continued
Our path to
continued
technology
leadership
As one of the industry’s leading investors
in communication technology research
and development (R&D), we drive
innovation across a comprehensive
portfolio of network equipment, software,
services and licensing opportunities.
Nokia’s world-leading research
and development
We have a global network of R&D centers,
each with specialties and ecosystems built
around both competence and technologies.
Most of our R&D is conducted within the
business group structures, and is further
elaborated in the Business Group specific
sections of this report.
Laying the path for Nokia’s future
technology innovation and
identifying the most promising
areas for new value creation
While our business groups focus on near-
to mid-term innovation, Nokia’s dedicated
Strategy and Technology (S&T) organization
is focused on longer-term technology cycles.
S&T is responsible for developing a coherent
corporate strategy and technology and
architecture vision across the company,
as well as implementing it in partnership
with Nokia’s business groups. S&T drives
company-wide internal technology alignment,
and by transferring technologies to the
business groups, it evolves the company’s
technology portfolio to enable Nokia’s
continued technology leadership.
Transfer
technologies
to Nokia BGs
Technology
vision & strategy
Security
Corporate
strategy
development
Digitalization
Strategy &
Technology
Appllied
research
Bell Labs
Ecosystem
& strategic
partnerships
Fundamental
research
Bell Labs
Incubating
& venturing
Industry
standardization
Nokia Bell Labs continues its long-standing
tradition of disruptive innovation within the
fundamental technologies that underpin
communications networks and systems.
A key part of its mandate is to also explore
concepts that generate growth opportunities
in adjacent and emerging markets. Nokia has
pioneered many of the foundational
technologies of the 5G era. Now, our research
is actively focusing on the future beyond 5G,
so that we are firmly positioned to continue
our leading role.
Nokia is investing to lead in the 5G-Advanced
networks that are anticipated to begin
appearing in 2025, while also already actively
preparing for leadership in the 6G era.
Hexa-X II, the second phase of the European
Commission’s flagship 6G initiative for
research into the next generation of wireless
networks, was announced in October 2022
with Nokia as project lead, working closely
with a strong consortium of European
partners. Nokia was also named the overall
leader for 6G-ANNA, a German state-funded
6G lighthouse project. Nokia is engaged in
many other projects and initiatives with
industry peers, customers, academia, and
research institutions globally, spanning
Europe, the U.S., and APAC, to form a
common view and direction for 6G.
Nokia is a leader in passive optical networks
(PON). Following our launch in 2020 of the
first commercial 25G PON solution, Nokia Bell
Labs invented the next generation solution,
delivering a record-breaking 100 Gb/s on a
single PON wavelength in 2022. World-class
research on optical systems and devices
innovations enabled record-breaking
transmission speeds of up to 2 Tb/s on a
single wavelength and Pb/s per fiber. Novel
network architecture concepts that leverage
artificial intelligence will allow for the
frictionless deployment of cloud-native
network services, and new business models
across multiple stakeholders.
We are actively engaged in leading and
influencing standards and developing new
standard-essential patents (SEPs), thus
shaping future technologies and systems
while contributing to our IPR portfolio.
We pursue future growth platforms through
NGP Capital innovation outreach, and the
in-house incubation and commercialization of
venture projects. We are creating a strategic
partner platform, as well as productive, global
and multi-dimensional ecosystems for new
business opportunities.
We are also focused on enabling Nokia as a
best-in-class digital enterprise and identifying
security requirements, trends and evolving
risks, to position Nokia as a trusted security
partner for the 5G era and beyond.
Innovation leadership
Spearheaded by Nokia Bell Labs
EUR 140bn+
invested in cutting-edge
R&D since 2000
EUR 4.5bn+
invested in R&D across
Nokia during 2022
Standards leadership
Ecosystem leadership through standardization.
Nokia holds key positions across all major
standardization and industry groups
4 500+
patent families declared as
essential to 5G standards
6G
leadership in Hexa-X project
and beyond
Patent leadership
Constant renewal of industry-leading portfolio
~20 000
patent families with the
vast majority still in force
in ten years’ time
1 700+
patents filed for new
inventions in 2022
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19
Business overview
Our strategy
continued
Our
Technology
Vision 2030
Our Technology Vision provides directional
input to Nokia’s technology strategy and
roadmap, serving as a valuable platform for
strategic engagement with our customers
and key stakeholders. We periodically refresh
our Technology Vision to ensure our outlook
remains cutting-edge, with the latest iteration
released in September 2022.
By 2030, the world will have undergone a
significant transformation. The global rate of
technology adoption will be driven by trends
such as environmental sustainability and
cybersecurity. Advances in semiconductors,
software, artificial intelligence (AI) and
machine learning (ML) will continue to
accelerate. But it will be the development
of technologies that power the metaverse,
cloud and Web3 that will have the greatest
transformative impact. We expect human
augmentation technologies, such as extended
reality (XR), and digital-physical fusion
technologies, such as digital twins, to be the
key drivers of network transformation as we
enter an era of unprecedented immersive
technology and industrial digitalization.
We see metaverse opportunities clearly
differentiated between consumer, enterprise,
and industrial. The enterprise metaverse
has a predominantly IT-focus, while the
industrial has its primary focus on operational,
‘mission-critical’ technologies. We believe
that all three segments promise significant
revenue potential by 2030, and we are already
seeing very solid traction in the industrial
metaverse in particular with the adoption of
digital twins in numerous areas across design,
production and logistics.
We see the network as the key enabler
of metaverse opportunities – and the
expectations on its capabilities will be
stretched beyond what is possible today.
The key attributes of the new network include:
We see the network as critical to realizing
the enormous range of potential that
the metaverse opens in the industrial,
enterprise and consumer spheres as
we approach 2030.
“ We strongly believe that the opportunities of the
metaverse will be realized by a multi-party value
ecosystem, centered around the new network
capabilities and as-a-service propositions. No single
company will be able to provide all the solutions,
and we expect a rich ecosystem to develop around
collaboration, co-innovation and partnering.”
■ Radically enhanced performance, extreme
capacity and optimization for a wide range
of user-specific needs
■ Heightened sensing and context-
awareness; dynamically and automatically
adapting connectivity
■ 100% cloud-native design, supporting
a distributed architecture and openness
through developer-friendly application
programming interfaces (APIs)
■ Efficiency, resilience, and agility, with zero-
touch management and AI/ML-driven,
intent-based autonomy
■ Security and energy efficiency features,
designed-in as core requirements.
The network will need to transform to meet
these challenges alongside new paradigms,
such as networks of networks, specialized
sub-networks, and enriched
‘Network-as-a-Service’ capabilities.
We strongly believe that the opportunities of
the metaverse will be realized by a multi-party
value ecosystem, centered around the new
network capabilities and as-a-service
propositions. No single company will be able
to provide all the solutions, and we expect
a rich ecosystem to develop around
collaboration, co-innovation and partnering.
Nokia is strongly positioned to lead these
collaborative advantages.
u m a n Augmentation
H
Multi-party Value
ecosystem
Network of Networks
Specialized Sub-networks
Network-as-a-Service
Digital-Physic a l
n
F u s i o
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21
Business overview Our history
Our
history
1865
Founded as a
single paper
mill operation
Milestones
18651865
Innovations
1926
Brought sound to
motion pictures*
Nokia has been adapting to the
needs of an ever-changing
world for over 155 years.
1960s
Nokia becomes a
conglomerate comprising
rubber, cable, forestry,
electronics and
power-generation
businesses
2007
Entered a joint venture
with Siemens, combining
mobile and fixed-line
phone network equipment
businesses and creating
Nokia Siemens Networks
(NSN)
2011
Entered a strategic
partnership with Microsoft
to address increasing
competition from iOS and
Android operating systems
Acquired the wireless
network equipment
division of Motorola
2013
Purchased Siemens’
stake in NSN
2014
Sold the Devices and
Services business to
Microsoft
2016
Acquired Alcatel-Lucent,
including Bell Labs,
creating an innovation
leader in next-generation
technology and services
2017
Created Nokia Shanghai
Bell, a joint venture
between Nokia and China
Huaxin, integrating
Alcatel-Lucent Shanghai
Bell Co. Ltd and Nokia
China
2017-2021
Additional acquisitions enhancing our
technology leadership such as:
Deepfield, the US-based leader in real-time
analytics for IP network performance
management and security; Comptel, a
Finland-based telecommunications software
company; Unium, a Seattle-based software
company that specializes in solving complex
wireless networking problems for use in
mission-critical and residential Wi-Fi
applications; and Elenion, a US-based company
focusing on silicon photonics technology
2022
Brought 6G vision to life with DOCOMO and NTT
19601960
20002000
20122012
20172017
20202020
1962
Launched the first
communications satellite,
Telstar 1, into orbit
enabling the first
ever broadcast of live
television between
the US and Europe*
1969
Developed Unix, the
software system that
made the large-scale
networking of diverse
computing systems and
the internet practical*
1982
Introduced both the first
fully digital local telephone
exchange in Europe and
the world’s first NMT
car phone
2001
Invented MIMO
(Multiple-Input and
Multiple-Output), a key
element of a large number
of modern wireless
systems, that allows for
greater throughput
without increasing
bandwidth requirements*
2006
Developed Softrouter,
a routing architecture
permitting the
development of a
programmable, open
network infrastructure to
allow easier deployment
of new services that make
use of exposed network
capabilities*
1991
Enabled the first
GSM call using a
Nokia phone over
the Nokia-built
network of Finnish
communications
service provider
Radiolinja
1998
Became the
world’s largest
manufacturer of
mobile phones
1947
Developed the
transistor, a tiny device
that revolutionized the
entire electronics
industry*
1954
Created the solar cell,
enabling the conversion
of the sun’s energy
into electricity*
1958
Developed the laser,
creating the foundation
for fiber optics*
2020
Selected by NASA to build and deploy the first
end-to-end LTE solution on the lunar surface
Enabled commercial deployment of the world’s
first 5G liquid cooling solution
Set the 5G speed world record
2021
Developed the Resh programming language
to take control of and manage a fleet of robots
2022
Showcased the first 100Gb/s fiber broadband
technology in the US
Launched the Advanced Security Testing and
Research (ASTaR) lab in Dallas – the first
end-to-end 5G testing lab in the US focused
solely on cybersecurity
Introduced the 6 pillars of Responsible AI
*Bell Telephone Laboratories (1925-1984).
Following its acquisition by Nokia in 2016, it was
renamed Nokia Bell Labs.
2014
Developed XG-FAST technology, enabling
service providers to generate fiber-like speeds
of more than 10Gbps over short distances
using existing copper infrastructure*
2017
Developed Probabilistic Constellation Shaping,
an innovative technology to get the most
out of each fiber, irrespective of its length
and capabilities
2019
Opened the world’s
first live end-to-end
5G lab, the Future X
Lab in Murray Hill,
New Jersey, US
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23
Business overview Customer Experience
Customer
Experience
Nokia’s Customer Experience (CX)
organization is designed to ensure
we engage customers with a unified
and consistent voice. The goal of the
organization is to advocate for customers
within Nokia, understanding the needs
of each, to deliver the best possible
experience and business outcomes.
2022 in brief
■ Chosen by Reliance Jio India to build one of the largest 5G networks in the world
■ Collaborated with T-Mobile to build flexible, scalable 5G networks, enabling applications that
provide enterprise and government customers with superfast speeds and lower latency
■ Selected by SK C&D to deploy managed SD-WAN to accelerate group wide digital
transformation
■ Chosen by Etisalat UAE to launch 5G private wireless networks to support digital
transformation
■ Chosen by American Tower to introduce SDN virtualization to redefine fiber broadband
deployment in Argentina
■ Extended our relationship with UScellular to boost its 5G network speed, capacity
and coverage
■ Selected by Moratelindo to deploy a high-performance optical transport network to
boost capacity across Indonesia.
The enterprise team has
worked with more than 2 600
organizations, connecting
people and technologies,
improving safety in the
workplace and in cities
around the world.
The CX organization unites sales and
customer marketing under one umbrella.
This allows us to better leverage common
platforms, processes and resources to drive
brand awareness, create demand, and engage
customers across all markets. CX drives
growth across all network business group
portfolios by engaging CSPs, enterprises
(in target verticals), hyperscalers and
governments, positioning Nokia as a
technology leader, innovation partner,
and solutions provider worldwide.
Our customers benefit from the unique
insights resulting from our extensive analysis
of the global market, and our experience
working with diverse customer types around
the world. This enables our customers to
make the best strategic technology decisions
to help grow their businesses.
While enterprise sales, marketing and delivery
are part of the CX umbrella, the products and
solutions developed for this diverse customer
segment come from the business groups.
Working across industries including
manufacturing, energy, transportation and
the public sector, as well as by harnessing
the power of our growing partner community,
the enterprise team helps customers address
their unique business challenges through
Industry 4.0 digital transformation. Our
solutions help transform operations and
modernize communication networks with
leading next-generation technologies from
across our businesses, including IP, optical,
fixed networks, microwave, and private
wireless networking. The enterprise team has
worked with more than 2 600 organizations,
connecting people and technologies,
improving safety in the workplace (workers
and operations) and in cities around the world.
At the same time, we have increased
automation and agility to boost productivity
and efficiency, and helped our customers
achieve greater resilience and sustainability
through digitalization.
Together, CX and the business groups align
on our go-to-market ambitions, resourcing,
and customer requirements. This enables the
business groups to remain accountable for
their own financial performance. Collective
competence is delivered consistently across
all business groups, coupled with deep
expertise across each unique industry
we serve. This allows us to solve customer
challenges, inspires growth, and enables
our customers to achieve their immediate
and long-term goals.
Case study
The Public Transport Authority of Western Australia will
use Nokia’s private wireless technologies to modernize rail
communications in Perth
Private wireless networking is enabling
Perth to enhance its public transportation
program as part of the city’s long-term
blueprint for the future. The project
includes designing, building, and
maintaining The Public Transport Authority
of Western Australia’s next-generation
communications system, covering 250 km
of railway track and tunnels.
Powered by Nokia’s private wireless
network solution, the new railway
communication system will help enhance
the accuracy of the system, leading to
improved experience and safety. Private
wireless is a key technology in enabling and
accelerating digital transformation across
industries, including transportation.
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25
Business overview
Business groups
Network
Infrastructure
Network Infrastructure builds business-critical
and mission-critical networks for a wide range
of CSP, enterprise, and webscale customers;
delivering fixed access, IP routing, data center
networks, and optical transport for both
terrestrial and subsea applications.
Market overview
Demand for connectivity continues to be
strong. Meanwhile, our customers—who
include CSPs, enterprises, governments,
webscalers and hyperscalers—are turning
their attention to future drivers of demand.
These include enterprise digitalization,
the shift to the cloud, 5G and even 6G
introduction, and digital/physical fusion and
the metaverse. Customers are considering
the demands these place on networks in
terms of capacity, reliability, deterministic
performance and security. At the same time,
the urgency of climate change and heightened
global economic uncertainty has renewed
attention on the importance of sustainability
and efficiency.
We continue to focus our innovation power
on the products, platforms and solutions that
address these issues. This includes providing
established and new operators with the
means to serve residential users, businesses,
and Wi-Fi and 5G cells with a single access
network, radically simplifying the massive
scale in optical networks, or focusing on
the need for highly scalable, deterministic,
and power-efficient capacity in IP networks.
The estimated Network Infrastructure
addressable market, excluding Submarine
Networks(1), for 2022 was EUR 47 billion. We
currently forecast an addressable market,
excluding Submarine Networks(1) for 2023 of
EUR 48 billion, reflecting year-over-growth of
approximately 4%, excluding the impact of
changes in foreign currency exchange rates.
Business groups
continued
“Network Infrastructure had a very successful
2022, driven by our technology leadership
and strong customer focus.”
Federico Guillén
President, Network Infrastructure
Business overview and
organization
Our business divisions are: Fixed Networks,
IP Networks, Optical Networks and Submarine
Networks.
Fixed Networks offers fiber and copper-
based access infrastructure, Wi-Fi in-home
solutions, the cloud and virtualization. In
2022, we continued to advance our leading
position in passive optical networks (PON)2).
We were first-to-market with a 25G PON
solution and have shown up to 100G PON
proofs of concept with customers in Europe
and the USA. We continue to innovate around
solutions that will allow our customers to lead
today, while protecting their investments for
the future. Our Lightspan MF-14 product,
launched in Q4, is the world’s first generation
6 broadband platform, enabling the
convergence of all services on a single fiber
infrastructure. This solution has already been
selected by customers building 25G capable
networks in Europe, North America and
Asia Pacific. We have reinforced our market
leadership(3) in 5G Fixed Wireless Access with
the world’s first large-scale, long-reach 5G
mmWave deployment for Australia’s National
Broadcaster nbn.
IP Networks is a global leader in IP access,
aggregation, and edge and core routing for
residential, business, mobile, cloud and digital
industry applications. Our ability to offer high-
performance and massively scalable networks
is enabled though our industry-leading, in-
house designed FP5 routing silicon and FP5-
based routing platforms. Combined with our
network automation and security platforms,
we further enable customers to efficiently
control, manage, analyze and secure their
IP networks. We are actively driving the next
generation in IP routing – 800 Gigabit Ethernet
– which we have trialed with customers
including BT, DE-CIX and LINX.
Our software-defined WAN solutions
bring easy, efficient network connectivity
configuration among clouds and to any
enterprise branch. Our next-generation data
center fabric makes cloud environments
easier to scale, adapt and operate.
Optical Networks is a leader in optical
transport networks for metro, regional,
long-haul and ultra-long-haul applications.
Our approach helps communications service
providers address the massive growth in
bandwidth demand, while simplifying network
operations through software tools and
automation. This enables a more streamlined
service delivery and a lower total cost of
ownership. The portfolio includes coherent
optical transponders, optical transport
network switching, wavelength-division
multiplexing, reconfigurable optical add-
drop multiplexer solutions and optical line
systems. Our successful rollout of our fifth
generation of coherent optical technology,
based on our in-house designed PSE-V digital
signal processor, highlights our focus on and
commitment to technology innovation.
Submarine Networks continues to be a
leader in the growing undersea telecoms
networks segment and saw continued growth
in demand in 2022, led by hyperscalers and
driven by factors ranging from increased cloud
computing to virtual reality, as well as by the
need to bring the advantages of connectivity
to previously underserved parts of the world.
Our technology innovation and customer
focus helped take Submarine Networks above
EUR 1 billion in sales this year, a first for this
business division.
Competition
Our competitors include Huawei and ZTE,
along with Calix and Adtran (Fixed Networks),
Cisco and Juniper (IP Networks), Ciena and
Infinera (Optical Networks), and Subcom
and NEC (Submarine Networks).
(1) Also excluding Russia and Belarus.
(2) Dell’Oro BB Access Report 2Q22.
(3) 650 Group Report 2Q22.
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27
Business overview Business groups
continued
Network Infrastructure continued
2022 in brief
In 2022, Network Infrastructure’s net sales grew by 18% from 2021.
Continued strong performance across all business divisions—particularly
Fixed Networks and Submarine Networks—was responsible for this result and
helped take our segment operating margin up by 200 basis points to 12.2%.
■ Launched Lightspan MF-14: the world’s first generation 6 broadband
platform
■ Chosen by Microsoft to implement our data switching portfolio for its data
center networks
■ Selected by nbn for our mmWave FWA technology
■ By the end of 2022, we had more than 30 customers for FP5, and had
undertaken trials with customers including BT
■ Selected by TIME dotCom to build a high resilience optical network in Malaysia
■ Took delivery of a new submarine cable maintenance vessel, boosting our
existing fleet.
Taking delivery of a new submarine
cable maintenance vessel.
Nokia demonstrates the latest IP and optical
networking technology to customers.
Lightspan MF-14 is the world’s first
generation 6 broadband platform.
100 Gb/s
Nokia was first to showcase 100 Gb/second
fiber broadband technology in the US
800GE
We started enabling customers to roll out
800GE services
1 000 km+
We demonstrated 600G transmission over
a 1 000 km+ long-haul optical network
Mobile
Networks
Mobile Networks creates products and services
covering all mobile technology generations.
Its portfolio includes products for radio access
networks (RAN) and microwave radio (MWR)
links for transport networks and solutions for
network management, as well as network
planning, optimization, network deployment
and technical support services.
Market overview
The estimated Mobile Networks addressable
market(1) for 2022 was EUR 51 billion. We
currently forecast an addressable market(1)
of EUR 53 billion by 2023, reflecting
year-over-year growth of approximately 5%,
excluding the impact of changes in foreign
currency exchange rates.
We see opportunities in 5G that go beyond
building coverage and capacity for basic
mobile voice and mobile broadband. This
includes industrial 5G use cases with private
wireless networks in various segments
such as manufacturing and logistics, seaports
and cargo handling, airports and airline
companies, mining vehicles and operations,
utilities such as electricity, gas and water,
smart agriculture, and smart cities.
There are opportunities in 4G/5G network
slicing, artificial intelligence and machine
learning (AI/ML) and network architecture
evolution with Cloud RAN and O-RAN. We will
also support the deployment of 5G-Advanced
networks with feature and solution areas
including Extended Reality (XR) and prepare
capabilities for the introduction of 6G towards
the end of the decade.
The RAN market in 2022 faced various
challenges including continued, industry-wide
supply chain disruptions and geopolitical
turbulence, largely and especially due to
Russia’s invasion of Ukraine. However,
outside of Russia, Nokia grew its RAN sales
in almost all markets.
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(1) Excluding China, Russia and Belarus.
29
Business overview Business groups
continued
Mobile Networks continued
“2022 saw Mobile Networks make progress with
delivering sustainable, profitable growth. We
continued with strong investments in research
and development to secure technology leadership
and grew our customer base, despite global
supply constraints.”
Tommi Uitto
President, Mobile Networks
Business overview and
organization
Like many others, Nokia was impacted by
industry-wide supply constraints, particularly
in the first half of the year. However, Nokia was
able to mitigate this impact, retaining all of its
customers and the entirety of its global RAN
footprint in 2022. Since the start of 2019, we
have added 41 new RAN customers in the CSP
market, and another 28 CSP customers have
increased their earlier RAN share with Nokia.
We also increased the rate of converting 4G
customers to 5G from a cumulative 90% in
the fourth quarter of 2021 to a cumulative
110%, excluding China, at the end of 2022.
In 2022, we reached a cumulative number
of 266 commercial 5G deals in the form of
supply agreements, 83 of which were live 5G
networks by the end of the year. Nokia has
also grown its private wireless business, which
has expanded to include over 560 customers,
100 of which are 5G customers. Nokia
announced new, important 5G deals in the
CSP market this year – including those with
Bharti Airtel and Reliance Jio in India, AT&T in
Mexico, Ice in Norway, and Indosat Ooredoo
Hutchison and XL Axiata in Indonesia. We also
announced long-term expansion deals with
existing 5G customers including Chunghwa
Telecom and Taiwan Mobile in Taiwan, and
Orange and T-Mobile in Poland.
In 2022, Mobile Networks continued its
investment in research and development
to further strengthen our 5G portfolio’s
competitiveness and bring the
best-performing networks to our customers.
We also completed our target of converting
close to 100% of our 5G deliveries to
ReefShark System-on-Chip (SoC) technology
in 2022, while keeping a few selected
products FPGA-based when doing so
best suited the needs of the customer.
In 2022, we demonstrated first-to-market
5G features including:
■ Three and four component carrier
aggregation (3CC CA and 4CC CA), which
allows for increased data speeds and
extended coverage, and announced related
technology agreements with A1 Austria,
BT in the UK, China Mobile, du in the UAE,
Optus in Australia, Telefónica Germany,
T-Mobile in the US and stc in Saudi-Arabia.
■ Nokia also announced a RAN slicing deal
with Proximus in Belgium and demonstrated
a new dynamic network slicing solution
with Google, as well as the world’s first
commercial 5G SA network with network
slicing for Fixed Wireless Access with Telia
in Finland.
■ We also achieved an uplink speed record
with Elisa and Qualcomm in Finland,
leveraging millimeter wave spectrum with
carrier aggregation, and the deployment
of the world’s first 5G Edge Slicing solution
on a live commercial network with Cellcom
in Israel and Telia in Finland.
In 2022, we have also continued to invest in
our Open RAN capabilities, with the majority
of Nokia’s SoCs and new hardware and
software platforms now being O-RAN ready.
This gives us the opportunity to support
customers that are interested in O-RAN. Nokia
also expanded its partner base for Cloud RAN
solutions and added IBM, Dell and HPE to its
list of partners, which also includes Amazon
Web Services (AWS), Google Cloud and
Microsoft Azure. We also announced a 3GPP
non-terrestrial (NTN) RAN deal with AST
SpaceMobile that will enable them to offer
direct-to-cell phone connectivity from
space – a move which marks our entry and
leadership into the emerging non-terrestrial
networks (NTN) market segment. During
2022, several new products were added to
the Nokia Wavence MWR portfolio. This
includes a new dual-band, high-capacity
outdoor transceiver. This will help to fulfil the
needs of the rapidly growing rural broadband
market. Nokia also trialed a live MWR backhaul
connection utilizing D-Band spectrum. This
will serve as an ultra-high-capacity extension
for both 5G backhaul and fronthaul in dense
urban environments.
In services, we continued investing in
digitalization and AI/ML-based capabilities
to enable faster rollouts and the speedy
resolution of network faults, while maximizing
network performance. With our digital services
portfolio, we are helping our customers
accelerate their entire network lifecycle,
2022 in brief
In 2022, Mobile Networks net sales grew 10% to EUR 10.7 billion. We increased
investments in R&D to accelerate our product roadmaps towards technology
leadership. Despite these investments and inflationary pressures, improved
cost competitiveness and execution meant we were still able to deliver a
segment operating margin of 8.8% in 2022, remaining stable year-on-year.
■ Reached 266 commercial 5G deals and had more than 560 private wireless
customers, 118 with 5G
■ First to demonstrate innovative 5G features such as three and four
component carrier aggregation (3CC CA and 4CC CA) and network
■ Expanded the Nokia Wavence MWR portfolio including a new dual-band,
high-capacity outdoor transceiver with market-leading RF output power,
helping to fulfill the needs of the rapidly growing rural broadband market
■ Expanded our partner base for Cloud RAN solutions, which now includes AWS,
Google Cloud, Microsoft Azure, IBM, Dell and HPE.
from network design and optimization to
deployment and technical support services.
We are upgrading approximately two million
nodes for our customers per year, while
designing and optimizing more than 380 000
radio sites. In addition, over 400 customers
are using our AI-driven Nokia Digital Assistant
to help them solve network issues faster.
Nokia’s technology is designed to be energy
efficient and contribute towards mobile
operators’ climate and environmental targets.
In 2022, Nokia announced the commercial
availability of its liquid cooled AirScale
Baseband portfolio, which enables a reduction
in cooling system energy consumption of up
to 90%. We also introduced the Intelligent
RAN Operations solution for heightened
5G network management, which reduces
base station energy consumption by up
to 15%.
Competition
The RAN market is a highly consolidated
market. Our main competitors are Huawei,
Ericsson, Samsung and ZTE, but there are
also a number of smaller competitors
competing in specific technology or regional
sub-segments, such as NEC and Fujitsu.
Smaller suppliers in the RAN market include,
for example, Mavenir, Rakuten Symphony,
Parallel Wireless and JMA Wireless. In MWR,
our key competitors include Ceragon, NEC
and Aviat, alongside Huawei and Ericsson.
266
commercial 5G deals in the form
of supply agreements
At the end of 2022, our System-on-Chip
based 5G Powered by ReefShark product
portfolio accounted for
97%
of shipments
A Nokia AirScale
antenna in Hong Kong.
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31
Business overview Market overview
The introduction and monetization of 5G
networks and services, the cloudification of
communications platforms and software and
the transition to as-a-Service models are
increasing demands on organizations to find
new ways to generate returns on their digital
assets, optimize costs, navigate complexity,
and mitigate security risks for their
mission-critical networks.
The estimated CNS addressable market(1) for
2022 was approximately EUR 28 billion. We
forecast a total addressable market(1) in 2023
of EUR 29 billion, reflecting year-over-year
growth of approximately 4%, excluding the
impact of changes in foreign currency
exchange rates.
Business groups
continued
Cloud and
Network Services
With its combined cloud, software, and
services capabilities, Cloud and Network
Services (CNS) serves communication
service providers (CSPs), enterprises,
hyperscale customers, digital developers,
and partners, and is helping them
navigate three major industry
transitions: the introduction and
monetization of 5G networks, the
cloudification of communications
platforms and software, and the
transition to as-a-Service models.
These transitions are shaping the
emerging digital ecosystem.
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“CNS made important progress in 2022 in its mission to help
customers and partners create new value, deliver innovative
digital services, and transform business operations. This
was done with solid momentum in rebalancing our portfolio
and delivering year-over-year sales growth, as well as gross
margin and segment operating profit growth.”
Raghav Sahgal
President, Cloud and Network Services
Business overview and
organization
CNS is composed of four business units:
Business Applications, Cloud and
Cognitive Services, Core Networks, and
Enterprise Solutions. Our emerging
Software-as-a-Service (SaaS) delivery
model underpins each business unit to help
customers transition to greater network
flexibility and achieve faster time to value.
In October 2022, we announced our
Network Monetization Platform, which aims
to accelerate the monetization of our open
products in Business Applications, Core,
and MX Industrial Edge.
CNS delivers cloud-native solutions that
provide network quality of service and agility;
and enable customers to leverage intelligence
that facilitates network efficiency,
self-protection and self-healing, and energy
management. We deploy industrial solutions
that drive digital transformation and Industry
4.0, and help CSPs automate network
operations and manage security.
In 2022, we were ranked #1 by Omdia
for our 5G Standalone Core portfolio
competitiveness strength(2); ranked #1 in
Private Cellular Networks by 650 Group(3);
awarded two TM Forum Excellence awards
for our software in AI, Data & Insights and
Customer Experience & Trust(4); rated #1 in
automated assurance by Analysys Mason(5);
and rated again by GlobalData as a Managed
Infrastructure Services leader(6).
We have rebalanced our investment to
accelerate and scale our portfolio growth
areas of 5G core software, analytics and AI
Services, digital operations, monetization,
private wireless and industrial automation,
and security. We believe these fast-growing,
higher-margin areas are important to our
CSP and enterprise customers and reflect
our view on the emergence of a new digital
ecosystem that is essential to value creation
in a 5G world.
Expanding on this view and how it has
informed the rebalanced operations of CNS,
the new digital ecosystem is one in which we
believe players will converge to combine their
expertise to create services across areas such
as Industry 4.0 and the metaverse; and in
which application developers create new 5G
services that are stitched together in a larger
service chain, delivering end-user value and
driving the monetization efforts that our
CSP and enterprise customers are heavily
focused on.
Competition
The competitive environment comprises
a large number of networking companies,
infrastructure and application software
suppliers, services specialists, hyperscalers,
cloud providers and a wide range of industry
segment businesses.
The market in which we compete has vendors
and other industry participants which may
on occasion be a customer, a partner, and a
direct competitor, depending on the nature
of the engagement. We are regularly building
and nurturing alliances with partners such
as IT vendors, hyperscalers, and systems
integrators, which are increasingly influential
in this space.
(1) Excluding Russia and Belarus.
(2) Omdia Market Landscape: Core 2022, June 2022.
(3) 650 Group, “Private Cellular Quarterly Market and Long-Term
Forecast Report.” June 21, 2022.
(4) TM Forum Excellence Awards, September 2022.
(5) Analysys Mason, Automated assurance: worldwide market
shares 2021, July 2022.
(6) Global Data Product Assessment report - Managed
Infrastructure Services for telcos, February 15, 2022.
33
Business overview Business groups
continued
Cloud and Network Services continued
2022 in brief
We made important progress in 2022. We continued to rebalance our business
towards accelerated value creation for our customers, partners, and for Nokia in
the emerging digital ecosystem, including private wireless and industrial edge.
With that progress, we generated net sales growth of 8% year-on-year and,
through an improved cost position, posted a 5.3% segment operating margin,
down 10 basis points from 2021, due to investments.
■ Nokia’s 5G Core selected to support Comcast’s mobile connectivity efforts
■ Launched cloud-native IMS Voice Core product to simplify network operations
for communications service providers
■ Strengthened private wireless leadership, with over 140 customers added
in 2022 and deployments in 61 countries
■ Key Enterprise launches included MX BOOST, DAC Wi-Fi, new Industrial devices,
and MX Industrial Edge
■ Signed multiple SaaS deals, including one with Equideum Health to power its
healthcare blockchain solutions
■ Strengthened our software focus in security, automation, and monetization,
with AI binding the portfolio together.
We have attained marketplace leadership in
private wireless networking with more than
of which
560 customers,
118 include 5G
6 Software-as-a-Service
offerings announced
including AVA Charging, AVA for Energy,
and Core SaaS
Business overview
Nokia
Technologies
Nokia Technologies is responsible for
managing Nokia’s patent portfolio
and monetizing Nokia’s intellectual
property, including patents,
technologies and the Nokia brand.
Market overview
Nokia Technologies is responsible for
managing Nokia’s patent portfolio and
monetizing Nokia’s intellectual property,
including patents, technologies and the
Nokia brand, building on Nokia’s continued
innovation leadership, long-term investment
into research and development and decades
of driving technology standards development.
Licensees pay royalty fees for the use of our
technology, which we re-invest, along with
additional investment, in developing the
next generation of inventions.
Net sales for the full-year were up 6% to
EUR 1 595 million and segment operating
profit was up 2% at EUR 1 208 million.
We signed over 50 new patent license
agreements across our licensing programs,
including a new agreement with Huawei.
And revenues from our automotive,
consumer electronics, and IoT programs,
which were negligible in 2018, grew to
more than EUR 100 million in 2022.
AI-based energy management
automation can reduce energy costs
and carbon footprint by up to
30%
CNS delivers cloud-native
solutions that provide
network quality of service
and agility; and enable
customers to leverage
intelligence that
facilitates network
efficiency, self-protection
and self-healing, and
energy management.
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35
Business groups
continued
Nokia Technologies continued
“Our patented inventions power entire
industries such as smartphones, consumer
electronics, video services, automotive and
the wider Internet of Things (IoT) domain.”
Jenni Lukander
President, Nokia Technologies
Technology Licensing: We license our
OZO Audio and OZO Playback multimedia
technologies to smartphone and camera
manufacturers, and drive advanced audio
and video research and standardization,
along with product incubation for new
immersive voice and video solutions.
Brand Partnerships: We license the Nokia
brand – a global brand that is recognized
by almost everyone – to HMD Global, the
company behind Nokia-branded phones
and tablets, and other brand partners.
4 500+
patent families declared as essential
to 5G standards
1 700+
patents filed on new inventions
Business overview and
organization
Nokia Technologies has three business areas:
Patent Licensing of Nokia’s patent portfolio,
Technology Licensing of Nokia’s technologies
for integration into consumer devices,
and Brand Partnerships for licensing the
Nokia brand.
Patent Licensing: We manage the Nokia
patent portfolio, working with other Nokia
business groups, and continue to grow our
patent licensing and monetization activities,
which drive most of Nokia Technologies’ net
sales. The core of our business is the mobile
devices licensing program, where we have
agreements with most major smartphone
vendors. We also have patent licensing
programs for consumer electronics,
video services, automotive and the
wider IoT domain.
2022 in brief
Net sales for the full-year were up 6% to EUR 1 595 million and segment operating
profit was up 2% at EUR 1 208 million.
■ Drove innovation, filing over 1 700 new inventions, and reaching 4 500 patent
families declared as essential to 5G standards
■ Signed over 50 new patent license agreements including a new agreement
with Huawei
■ Received a Technology & Engineering Emmy® Award together with our partners
for our video standardization efforts
■ Introduced Immersive Voice, the next-generation voice communication solution
with real-time spatial audio
■ Courts in Germany, the Netherlands and the UK ruled in our favor in our patent
infringement proceedings against OPPO, OnePlus and Realme.
It all starts with the ingenuity of our
inventors. Last year we filed patents
on over 1 700 new inventions.
Innovation and standards
leadership
Nokia has defined many of the fundamental
technologies used in virtually all mobile
devices and taken a leading role in open
standardization. Since 2000, Nokia has
invested more than EUR 140 billion in research
and development (R&D). As a result, we own
one of the broadest and strongest patent
portfolios in the telecommunications sector
with around 20 000 patent families (each
family can comprise several individual patents).
We own a leading share of Standard Essential
Patents (SEPs) in every generation of cellular
standards, with over 4 500 patent families
declared as essential to 5G standards.
We have been ranked #1 in several
independent third-party studies for
our cellular standards patents.
Our portfolio also covers significant
multimedia assets, particularly in video
compression technology, which allows large
files to be shared across the internet. The
work of Nokia’s inventors in video research
and standardization has been recognized with
numerous prestigious awards, including five
Technology & Engineering Emmy® Awards.
Nokia was one of the first companies in the
world to achieve the globally recognized ISO
9001 certification for our high-quality patent
portfolio management processes.
Our portfolio has a long lifetime, with the vast
majority of patents still in force in ten years’
time. We continue to refresh our portfolio with
new inventions every year. In 2022, we filed
patent applications on more than 1 700 new
inventions, enabling 5G networks, connected
5G devices and more. As we continue to invest
heavily in R&D and standardization, the annual
number of filings is expected to grow.
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37
Business overview Supply chain, sourcing and manufacturing
Supply chain,
sourcing and
manufacturing
Despite the easing of global supply
chain constraints towards the end
of the year, 2022 remained highly
challenging, as ongoing supply
chain disruptions continued to
affect operations across industries.
Nokia’s supply chain is essential for our
customers, our business, and for managing
customer demand and supply for our
hardware, software and contract
manufactured products. Our end-to-end
operations include sourcing, demand and
supply planning, manufacturing, distribution
and logistics.
In 2022, we purchased over EUR 15 billion
worth of products and services from around
11 000 different suppliers.
While new opportunities for better managing
our supply chain emerged in 2022, there were
also challenges. Rising geopolitical instability,
the continued reduced availability of
semiconductors, COVID-19-related lockdowns,
and impacts stemming from climate change
continued to affect operations across
industries. Nokia did, however, perform
well despite these global challenges.
Early in 2022, we saw meaningful constraints
on our ability to supply our customers due
to component availability, although as the
situation improved through the second half of
the year, the financial impact on our net sales
for the full year was minimal. Cost inflation
through the supply chain also impacted
our margins but through continued focus
on improving our product cost and careful
management of our customer pricing,
we were largely able to offset this and still
deliver an improved gross margin in 2022.
Increasing resilience through
strong partnerships and a
regional approach
As we further develop a robust and
sustainable supply chain that can best serve
our customers, increasing resilience is critical.
We continuously optimize our manufacturing,
distribution and supplier network across the
regions in which we operate to better serve
our customers. We also leverage artificial
intelligence and machine learning capabilities
to better develop our supply chain and
factory network.
Our geographically dispersed manufacturing
network consists of both our own
manufacturing (23% of the network) and
contract manufacturing partners to minimize
geographic and geopolitical risks. Our network
is strategically located around the world:
Europe (27%), Asia Pacific, Japan/India (27%),
China (32%) and the Americas (14%).
Our regional approach will not only enable
us to deliver a more rapid response to
our customers’ needs, but also reduce
transportation costs and CO2 emissions.
Our Oulu factory now
operates on 99.6%
renewable energy.
50%
We are committed to cutting
greenhouse gas emissions
by 50% by 2030, in line with
our science-based target.
In 2022, we increased manufacturing capacity
with a contract manufacturer in Europe and
opened a new distribution hub in Japan.
Furthermore, we are in the process of
further regionalizing our manufacturing
and distribution to be closer to our customers
in different regions. Due to the continued
uncertainties caused by the current
geopolitical situation, we have reviewed and
optimized our inventory strategies to increase
resilience. Where needed, we have successfully
activated business continuity plans to ensure
uninterrupted manufacturing.
Sustainability through innovation
We are committed to cutting greenhouse gas
emissions across our value chain by 50% by
2030, in line with our science-based target.
This commitment requires action from us,
but also from across our value chain. We work
closely with the entirety of our supply chain to
develop new digital solutions and product
innovations to cut emissions. Our own factories
are on track to be carbon neutral by 2025,
powered by hydro, wind, solar and other
sustainable sources. In 2022, we continued
to work with our Electronics Manufacturing
services suppliers to build the roadmaps to
achieve a mutually agreed target that the
Nokia portion of their manufacturing reach
net zero by 2030.
We continued to collaborate with our suppliers
to encourage sustainable solutions in
transportation, logistics and packaging. We are
committed to prioritizing and strengthening
resilience and sustainability across the
end-to-end supply chain to help us deal
with challenges that arise effectively, and
to be prepared for any future challenges.
Refer to the “Sustainability and Corporate
Responsibility” section for more information
on Nokia’s sustainability targets and
achievements, including those related
to supplier sustainability.
We clearly communicate our Third-party
Code of Conduct and Nokia Supplier
Requirements—which incorporate Responsible
Business Alliance (RBA) Code of Conduct
requirements—to our suppliers. These
include standards for responsible sourcing in
important areas such as the environment and
human rights. Adherence is checked through
audits and EcoVadis documentation audits,
before being followed-up via one-on-one
sessions. In 2022, we also conducted
dedicated learning sessions that focused
on labor migration, diversity and inclusion,
circularity and recycled materials.
Own manufacturing
As of 31 December 2022, the production capacity for our wholly owned sites is noted below:
Country
Australia
China
Finland
France
France
Germany
India
Poland
UK
USA
Location and products(1)
Kilsyth: radio frequency systems(3)
Suzhou: radio frequency systems(4)
Oulu: base stations
Calais: submarine cables
Trignac: radio frequency systems(5)
Hannover: radio frequency systems
Chennai: base stations, radio controllers and
transmission systems, fixed networks
Bydgoszcz: remanufacturing, product integration
Greenwich: submarine cables
Meriden: radio frequency systems(4)
Productive capacity,
net (m2)(2)
5 400
27 000
10 000
61 000
7 300
23 500
14 385
15 200
11 000
31 000
(1) We consider the production capacity of our manufacturing network to be sufficient to meet the requirements of our business.
The extent of utilization of our manufacturing facilities varies from plant to plant and from time to time during the year. None
of these facilities is subject to a material encumbrance.
(2) Production capacity equals the total area allotted to manufacturing and to the storage of manufacturing-related materials.
(3) The manufacturing activities in this site were ramped down during the fourth quarter of 2022.
(4) In December 2022, Nokia entered into an agreement regarding the partial or full disposal of this location. The disposal is expected
to be completed during year 2023.
(5) In January 2023, the relevant employee representatives were informed of a decision to initiate a study to stop all operations in this
site within the second quarter of 2023.
2022 in brief
■ Increased manufacturing capacity with a contract manufacturer in Europe in order to better
serve our European customers and opened a new distribution hub in Japan
■ Enabled our Oulu factory to now operate on 99.6% renewable energy, and our Chennai
factory on 63.2% renewable energy
■ Showcased resiliency by utilizing pre-existing business continuity plans, with Nokia and our
manufacturing partners rapidly able to move manufacturing temporarily from Ukraine to
alternate locations, with minimal impact on business output
■ Continued addressing with suppliers on labor rights due diligence via onsite and online
assessments. Also conducted a deep dive into ethical recruitment and modern slavery topics
■ Shared our new waste circularity requirement for 2030 and established a baseline with our
final assembly suppliers
■ Held in-depth awareness and assessment on circular materials contents for key metals with
materials suppliers.
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Business overview Corporate
governance
Corporate governance statement
Regulatory framework
Main corporate governance bodies of Nokia
Risk management, internal control and internal
audit functions at Nokia
Main procedures relating to insider administration
Auditor fees and services
Compensation
Highlights
Word from the Chair of the Personnel Committee
of the Board
Remuneration Policy
Remuneration summary for the Board of Directors
Remuneration summary for the President and CEO
Remuneration Report 2022
Introduction
Remuneration of the Board of Directors
Remuneration of the President and CEO
Remuneration governance
Group Leadership Team
Review of our incentive plans
Comparator companies
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42
59
60
60
61
61
61
63
63
64
67
67
68
69
71
72
73
75
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41
Corporate governance Corporate governance statement
Corporate
governance
statement
“ In 2022, we continued delivering on
Nokia’s commitment to strong corporate
governance and related practices. To do
that, the activities of the Board of
Directors are structured to develop the
Company’s strategy and to enable the
Board to support and oversee the
management on the delivery of it within
a transparent governance framework.”
This corporate governance statement is
prepared in accordance with Chapter 7,
Section 7 of the Finnish Securities Markets Act
(2012/746, as amended) and the Finnish
Corporate Governance Code 2020 (the
“Finnish Corporate Governance Code”).
Regulatory framework
Our corporate governance practices comply
with Finnish laws and regulations, our Articles
of Association approved by the shareholders
and corporate governance guidelines
(“Corporate Governance Guidelines”) adopted
by the Board of Directors. The Corporate
Governance Guidelines reflect our
commitment to good corporate governance.
They include the directors’ responsibilities,
the composition and election of the members
of the Board and its Committees, and
certain other matters relating to corporate
governance. We also comply with the Finnish
Corporate Governance Code adopted by the
Securities Market Association.
In addition, we comply with the rules and
recommendations of Nasdaq Helsinki and
Euronext Paris as applicable to us due to
the listing of our shares on the exchanges.
Furthermore, as a result of the listing of our
American Depositary Shares on the New York
Stock Exchange (NYSE) and our registration
under the US Securities Exchange Act of 1934,
we follow the applicable U.S. federal securities
laws and regulations, including the
Sarbanes-Oxley Act of 2002 as well as the
rules of the NYSE, in particular the corporate
governance standards under Section 303A of
the NYSE Listed Company Manual. We comply
with these standards to the extent such
provisions are applicable to us as a foreign
private issuer.
To the extent compliance with any
non-domestic rules would conflict with the
laws of Finland, we are obliged to comply
with Finnish laws and applicable regulations.
There are no significant differences in the
corporate governance practices applied by
Nokia compared with those applied by U.S.
companies under the NYSE corporate
governance standards with the exception that
Nokia complies with Finnish law with respect
to the approval of equity compensation plans.
Under Finnish law, stock option plans require
shareholder approval at the time of their
launch. All other plans that include the delivery
of company stock in the form of newly issued
shares or treasury shares require shareholder
approval at the time of the delivery of the
shares unless shareholder approval has
been granted through an authorization to
the Board, a maximum of five years earlier.
The NYSE corporate governance standards
require that the equity compensation plans
are approved by the company’s shareholders.
Nokia aims to minimize the necessity for, or
consequences of, conflicts between the laws
of Finland and applicable non-domestic
corporate governance standards.
In addition to the Corporate Governance
Guidelines, the Committees of the Board
have adopted charters that define each
Committee’s main duties and operating
principles. The Board has also adopted the
Code of Conduct that applies to directors,
executives, and employees of Nokia,
as well as employees of Nokia’s subsidiaries
and affiliated companies (such as joint
ventures) in which Nokia owns a majority
of the shares or exercises effective control.
Furthermore, the Board has adopted
the Code of Ethics applicable to our key
executives, including the President and CEO,
CFO and Corporate Controller.
Main corporate governance
bodies of Nokia
Pursuant to the provisions of the Finnish
Limited Liability Companies Act (2006/624,
as amended) (the “Finnish Companies Act”),
the legislation under which Nokia operates,
and Nokia’s Articles of Association, the
control and management of Nokia are divided
among shareholders at a general meeting
of shareholders, the Board, the President
and CEO and the Group Leadership Team,
chaired by the President and CEO.
General Meeting of Shareholders
Nokia’s shareholders play a key role in
corporate governance, with our Annual
General Meeting offering a regular opportunity
to exercise their decision-making power
in Nokia. In addition, at the meeting the
shareholders may exercise their right to
speak and ask questions.
Each Nokia share entitles a shareholder to one
vote at general meetings of Nokia. The Annual
General Meeting decides, among other things,
on the election and remuneration of the
Board, the adoption of annual accounts, the
distribution of retained earnings shown on the
balance sheet, discharging the members of the
Board and the President and CEO from liability,
as well as on the election and fees of the
external auditor. As of the Annual General
Meeting 2020, the Remuneration Policy is
presented to the general meeting at least
every four years and the Remuneration Report
annually as of 2021. Resolutions of the general
meeting regarding the policy and the report
are advisory.
In addition to the Annual General Meeting,
an Extraordinary General Meeting may be
convened when the Board considers such
a meeting to be necessary, or when the
provisions of the Finnish Companies Act
mandate that such a meeting must be held.
Corporate governance framework
The Finnish Companies Act was amended
on 11 July 2022 to enable limited liability
companies to hold hybrid and virtual-only
general meetings. The legal requirements for
these type of meetings are stringent in Finland,
namely, to protect the shareholders’ rights.
A virtual general meeting, as defined by the
Finnish Companies Act, is a meeting held
without a physical meeting venue, where
shareholders must be able to exercise their
shareholder rights in full and in real-time by
virtual means, including by voting in real-time
and asking questions orally during the meeting.
Once reliable technical methods for
automated foreign shareholder identification
become available in Finland, virtual general
meetings would improve the position of
nominee-registered private shareholders
residing outside of Finland, who in practice
may have been unable to attend the general
meeting in person or be represented by proxy.
The benefits of the virtual general meetings
would further include the reduced
environmental footprint and the ability of the
company to hold a general meeting also under
extraordinary external circumstances such as
navigating through restrictions on physical
gatherings. Nokia is actively involved in
discussions how to enable the automated
identification of foreign shareholders as
we believe the Finnish legislation should be
considered a model example of protecting
shareholders’ rights in the hybrid and
virtual meetings.
Annual General Meeting 2022 and 2023
The Annual General Meeting 2022 took place
at the Company’s headquarters in Espoo
on 5 April 2022. To prevent the spread of the
COVID-19 pandemic, the Board resolved
on extraordinary measures pursuant to the
temporary legislation approved by the Finnish
Parliament on 8 May 2021. The Annual General
Meeting 2022 was held without shareholders
and their proxy representatives being present
at the meeting venue. Participation in the
Annual General Meeting and use of shareholder
rights was possible only by voting in advance as
well as by submitting counterproposals and
asking questions in advance. A total of 59 301
shareholders representing a record number
of approximately 3 100 million shares and
votes participated the Annual General Meeting
through advance voting and the Board’s
proposals were supported by at least 91% of
the votes casted. We were pleased to see both
the record number of votes as well as the
strong shareholders’ support received for all
of the Board’s proposals at the Annual General
Meeting 2022.
Nokia Corporation’s Annual General Meeting
2023 is planned to be held on 4 April 2023.
Proposals of the Board of Directors to the
Annual General Meeting 2023 were published
on 26 January 2023.
Board of Directors
The operations of Nokia are managed
under the direction of the Board, within the
framework set by the Finnish Companies Act
and Nokia’s Articles of Association as well as
any complementary rules of procedure as
defined by the Board, such as the Corporate
Governance Guidelines and the charters of
the Board’s Committees.
Election and composition of the Board
of Directors
Pursuant to the Articles of Association of
Nokia Corporation, we have a Board that is
composed of a minimum of seven and a
maximum of 12 members. The members
of the Board are elected at least annually at
each Annual General Meeting with a simple
majority of the shareholders’ votes cast at the
meeting. The term of a Board member begins
at the close of the general meeting at which
he or she was elected, or later as resolved by
the general meeting, and expires at the close
of the following Annual General Meeting.
The Annual General Meeting convenes by
30 June annually.
Our Board’s leadership structure consists of a
Chair and Vice Chair elected annually by the
Board and confirmed by the independent
directors of the Board from among the Board
members upon the recommendation of
the Corporate Governance and Nomination
Committee. The Chair of the Board has
certain specific duties as stipulated by Finnish
law and our Corporate Governance Guidelines.
The Vice Chair of the Board assumes the
duties of the Chair of the Board in the event
he or she is prevented from performing his or
her duties.
The independent directors of the new Board
also confirm the election of the members
and chairs for the Board’s Committees from
among the Board’s independent directors
upon the recommendation of the Corporate
Governance and Nomination Committee
and based on each Committee’s member
qualification standards. These elections
take place at the Board’s assembly meeting
following the general meeting.
The Corporate Governance and Nomination
Committee’s aim is to continually renew
the Board to ensure an efficient Board of
international professionals with a diverse
mix of skills, experience and other personal
qualities in line with the diversity principles
established by the Board. The Corporate
Governance and Nomination Committee
considers potential director candidates based
on the short- and long-term needs of the
Company. In the process to identify and select
the candidates matching these needs and
desired profiles, the Committee engages
search firms and external advisors.
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Corporate governance Corporate governance statement
continued
Board independence
In accordance with the Corporate Governance
Guidelines adopted by the Board of Directors,
the Board shall have a majority of Directors
who meet the criteria for independence as
defined by the Finnish Corporate Governance
Code (independent of both the company and
any significant shareholders who hold at least
10% or more of the total shares or voting
rights of the Company) and the rules of the
NYSE. Furthermore, all of the members of
the Board Committees shall be independent
Directors under the relevant criteria for
independence required by the Finnish
Corporate Governance Code and the
applicable rules of the NYSE.
The Board will monitor its compliance
with these requirements for Director
independence on an ongoing basis. Each
independent director is expected to notify
the Chair of the Corporate Governance
and Nomination Committee, as soon as
reasonably practicable, in the event that his
or her personal circumstances change in a
manner that may affect the Board’s evaluation
of such director’s independence. The Board of
Directors evaluates the independence of its
members annually and, in addition to this, on
a continuous basis with the assistance of the
Nomination and Governance Committee.
Board diversity
The Board has adopted principles concerning
Board diversity describing our commitment
to promoting a diverse Board composition
and how diversity is embedded into our
processes and practices when identifying
and proposing new Board candidates as well
as when proposing re-election of current
Board members.
At Nokia, diversity is not a static concept but
rather a relevant mix of required elements for
the Board as a whole that evolves with time
based on, among other things, the relevant
business objectives and future needs of
Nokia. Board diversity is treated as a means
of improvement and development rather
than an end in itself. Diversity of our Board
is considered from a number of aspects
including, but not limited to, skills and
experience, tenure, age, nationality, ethnicity,
cultural and educational backgrounds,
self-declared gender identity, sexual
orientation as well as other individual
qualities. The Board shall include
representatives of more than one gender.
Nokia acknowledges and supports the
resolution adopted by the Finnish
Government on 17 February 2015 on gender
equality on the boards of directors of Finnish
large and mid-cap listed companies, as well as
the board gender balance directive adopted
by the European Parliament on 22 November
2022. We report annually on our objectives
relating to equal representation of both
genders, the means to achieve them, and the
progress we have made in achieving them.
We have met our aim to have at least 40% of
the Director positions held by members of
the underrepresented genders on our Board
composition. Also in the Board composition
proposed to the Annual General Meeting
2023, 50% of the Board members are female.
Director time commitments
The Corporate Governance and Nomination
Committee monitors closely the time
commitments of the Board members and
annually reviews the Directors’ attendance
rate at the Board and relevant Committee
meetings to ensure they are able to devote
the appropriate time to the Company to
carry out their duties and responsibilities.
The Corporate Governance Guidelines of
the Board include numerical limits and a
process for pre-clearance of new roles in
public companies. Directors should not serve
on more than four other boards of public
companies in addition to the Nokia Board, and
no more than on three other boards of public
companies in addition to the Nokia Board,
in case they serve as board chair or lead
independent director outside the Nokia
Board. The Audit Committee members should
not serve on more than two other audit
committees of public companies in addition
to the Nokia Audit Committee. No positions in
excess of these limits may be held without a
prior consent by the Chair of the Board and
the Chair of the Corporate Governance and
Nomination Committee determining that such
positions would not impair the Director’s
service on the Nokia Board or Audit Committee.
The Corporate Governance and Nomination
Committee will annually, ahead of preparing
the proposal on the Board composition,
review and assess the Directors’ current and
planned time commitments outside the
Company to seek affirmation that all Directors
acknowledge the time commitment principles
set forth in the Corporate Governance
Guidelines of the Board.
Current members of the Board of Directors
The Annual General Meeting held on 5 April
2022 elected ten members to the Board for
a term ending at the close of the next Annual
General Meeting. Sari Baldauf, Bruce Brown,
Thomas Dannenfeldt, Jeanette Horan, Edward
Kozel, Søren Skou and Carla Smits-Nusteling
were re-elected as Board members. Lisa
Hook, Thomas Saueressig and Kai Öistämö
were elected as new Board members.
Following the meeting, the Board re-elected
Sari Baldauf to serve as Chair and Søren Skou
as the new Vice Chair of the Board for a
term ending at the close of the next Annual
General Meeting.
The current members of the Board are all
non-executive. For the term that began at
the Annual General Meeting 2022, all Board
member candidates have been determined
to be independent of Nokia and its significant
shareholders under the Finnish corporate
governance rules and the rules of the NYSE,
as applicable.
Currently there are six different nationalities
represented on the Board and 40% of the
Board members are female.
In addition to biographical information of the
Board members, the following table sets forth
also the number of shares and American
Depositary Shares (ADS) held by the members
of the Board at 31 December 2022, when
they held a total of 969 511 shares and ADSs
in Nokia, which represented approximately
0.02% of our total shares and voting rights
excluding shares held by the Nokia Group.
Sari Baldauf (Chair)
Søren Skou (Vice Chair)
Bruce Brown
Thomas Dannenfeldt
Lisa Hook
Jeanette Horan
Edward Kozel
Thomas Saueressig
Carla Smits-Nusteling
Kai Öistämö
Gender
Female
Male
Male
Male
Female
Female
Male
Male
Female
Male
Year of
Nationality
Birth
Finnish
1955
1964
Danish
1958 American
1966
German
1958 American
1955
British
1955 American
German
1985
Dutch
1966
Finnish
1964
Independent of
the company
and major
shareholders
Independent
Independent
Independent
Independent
Independent
Independent
Independent
Independent
Independent
Independent
Tenure(1)
4
3
10
2
0
5
5
0
6
0
Shares(2)
ADSs(2)
243 148
66 377
80 139
14 816
114 045
14 816
202 941
15 227
95 058
122 944
(1) Terms as Nokia Board member before the Annual General Meeting on 5 April 2022.
(2) The number of shares or ADSs includes shares and ADSs received as director compensation as well as shares and ADSs acquired through other means. Stock options or other equity awards that are
deemed as being beneficially owned under the applicable SEC rules are not included.
Experience and skills of the Board members
Business Exec
role with P&L
responsibility
External
boardroom
roles/
Governance
expertise
Finance and
accounting
Legal/Public
policy/
Compliance
Communications
service provider
market segment
Enterprise
market
segment
Technology Cybersecurity
Environmental/
Social issues
Current Board Members
Sari Baldauf
Søren Skou
Bruce Brown
Thomas Dannenfeldt
Lisa Hook
Jeanette Horan
Edward Kozel
Thomas Saueressig
Carla Smits-Nusteling
Kai Öistämö
Proposed new Board Members
Timo Ahopelto
Elizabeth Crain
Proposed members of the Board
of Directors
Proposals of the Board of Directors to the
Annual General Meeting 2023 were published
on 26 January 2023. On the recommendation
of the Board’s Corporate Governance and
Nomination Committee, the Board proposes
to the Annual General Meeting that the
number of Board members be ten. Bruce
Brown and Edward Kozel have informed
that they will no longer be available to serve
on the Nokia Board of Directors after the
Annual General Meeting. Consequently, the
Board proposes, on the recommendation
of the Board’s Corporate Governance and
Nomination Committee, that the following
eight current Board members be re-elected as
members of the Nokia Board of Directors for
a term ending at the close of the next Annual
General Meeting: Sari Baldauf, Thomas
Dannenfeldt, Lisa Hook, Jeanette Horan,
Thomas Saueressig, Søren Skou, Carla
Smits-Nusteling and Kai Öistämö.
Furthermore, the Board proposes, on
the recommendation of the Corporate
Governance and Nomination Committee, that
the following new members be elected to the
Board for a term ending at the close of the
next Annual General Meeting: Timo Ahopelto,
entrepreneur and Founding Partner of
Lifeline Ventures, a venture capital firm;
and Elizabeth Crain, co-founder and Chief
Operating Officer of Moelis & Company,
a global investment bank.
The Corporate Governance and Nomination
Committee will propose in the assembly
meeting of the new Board of Directors that
Sari Baldauf be re-elected to serve as Chair
of the Board and Søren Skou be re-elected
to serve as Vice Chair of the Board, subject to
their election to the Board of Directors. The
Board composition proposed to the Annual
General Meeting 2023 has representation of
six nationalities and 50% of the proposed
members are female.
The proposed members of the Board are
all non-executive. For the term beginning at
the Annual General Meeting 2023, all Board
member candidates have been determined
to be independent of Nokia and its significant
shareholders under the Finnish corporate
governance rules and the rules of the NYSE.
Any possible changes impacting the
independence assessment would be assessed
as of the date of the Annual General Meeting.
The Corporate Governance and Nomination
Committee has prepared the proposed
composition of the Board of Directors to the
Annual General Meeting 2023 after careful
assessment on proposed Directors’ external
time commitments, taking into account
shareholders’ expectations in this regard.
While the prevailing Finnish market practice is
to vote on the proposed Board composition
as a slate, some of our investors have
expressed their preference of being able
to vote on Directors individually. Nokia has
been actively involved in the initiative to
supplement the market practice as well as the
Finnish Corporate Governance Code to enable
the individual director election method in
Finland. We are proud to be among the first
Finnish companies to introduce this individual
director election method and provide our
shareholders with the opportunity to
participate in the vote on individual Board
member candidates in our forthcoming
Annual General Meeting in 2023.
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Corporate governance
Chair Sari Baldauf
Vice Chair Søren Skou
Bruce Brown
Thomas Dannenfeldt
Corporate governance statement
continued
Biographical details of our current
Board members
Chair Sari Baldauf
b. 1955
Chair of the Nokia Board since 2020.
Board member since 2018. Member of the
Corporate Governance and Nomination
Committee and the Personnel Committee.
Master of Business Administration, Helsinki
School of Economics and Business
Administration, Finland. Bachelor of Science,
Helsinki School of Economics and Business
Administration, Finland. Honorary doctorates
in Technology (Helsinki University of
Technology, Finland) and Business
Administration (Turku School of Economics
and Business Administration and Aalto
University School of Business, Finland).
Executive Vice President and General Manager,
Networks Business Group, Nokia 1998–2005.
Various executive positions at Nokia in Finland
and in the United States 1983–1998.
Member of the Supervisory Board and
Member of the Nomination Committee of
Mercedes-Benz Group AG. Member of the
Board of Directors of Aalto University. Senior
Advisor of DevCo Partners Oy. Member of
the Board of Directors and Member of the
Executive Committee of Technology
Industries of Finland.
Member of the Supervisory Board of
Deutsche Telekom AG 2012–2018. Chair of
the Board of Directors of Fortum Corporation
2011–2018. Member of the Board of
Directors of Akzo Nobel 2012–2017.
Vice Chair Søren Skou
b. 1964
Vice Chair of Nokia Board since 2022. Nokia
Board member since 2019. Member of the
Personnel Committee.
MBA (honours), IMD, Switzerland. Bachelor
of Business Administration, Copenhagen
Business School, Denmark. Maersk
International Shipping Education (M.I.S.E.).
Chief Executive Officer of A.P. Møller – Mærsk
A/S 2016–2022. Chief Executive Officer of
Maersk Line 2012–2016. Chief Executive
Officer of Maersk Tankers 2001–2011.
Variety of executive roles, senior positions and
other roles at A.P. Møller – Mærsk since 1983.
Chairman of the Board of the Mærsk
Mc-Kinney Møller Center for Zero Carbon
Shipping (a not-for-profit foundation).
Member of The European Round Table
for Industry.
Bruce Brown
b. 1958
Nokia Board member since 2012. Chair of
the Personnel Committee. Member of the
Corporate Governance and Nomination
Committee and the Technology Committee.
MBA, Xavier University, the United States. BS
(Chemical Engineering), Polytechnic Institute
of New York University, the United States.
Chief Technology Officer of the Procter &
Gamble Company 2008–2014. Various
executive and managerial positions in Baby
Care, Feminine Care, and Beauty Care units
of the Procter & Gamble Company since 1980
in the United States, Germany and Japan.
Member of the Board of Directors, Chair of
the Compensation Committee and member
of the Nominating and Corporate Governance
Committee of the Glatfelter Company.
Member of the Board of Directors, the
Audit Committee and the Compensation
Committee of Medpace Inc. 2016–2019.
Member of the Board of Directors of Agency
for Science, Technology & Research (A*STAR)
in Singapore 2011–2018.
Thomas Dannenfeldt
b. 1966
Nokia Board member since 2020. Member
of the Audit Committee and the Personnel
Committee.
Degree in Mathematics, University of Trier,
Germany.
Chief Financial Officer of Deutsche Telekom
AG 2014–2018. Chief Financial Officer of
Deutsche Telekom’s German operations
2010–2014. Various operational positions
(sales, marketing, customer care, finance and
procurement in fixed and mobile business,
national and international positions) at
Deutsche Telekom 1992–2010.
Chair of the Supervisory Board of Ceconomy
AG and Chair of the Presidential Committee
and Mediation Committee. Member of the
Board of Advisors at axxessio GmbH.
Member of the Board of Directors of T-Mobile
US 2013–2018 and Buy-In 2013–2018.
Chair of the Board of Directors of T-Systems
International 2013–2018 and EE Ltd.
2014–2016.
Lisa Hook
Jeanette Horan
Edward Kozel
Thomas Saueressig
Lisa Hook
b. 1958
Nokia Board member since 2022. Member
of the Audit Committee.
Juris Doctorate, Dickinson School of Law at
Pennsylvania State University, the United
States. Bachelor’s degree in Public Policy,
Duke University, the United States.
President and CEO of Neustar, Inc.
2010–2018. COO of Neustar, Inc. 2008–2010.
President and CEO of Sunrocket, Inc.
2006–2007. Executive positions at America
Online, Inc. 2000–2004. Previous positions as
Partner at Brera Capital Partners, managing
director of Alpine Capital Group, LLC., various
executive positions at Time Warner, Inc.,
legal advisor to the Chairman of the Federal
Communications Commission, and General
Counsel of the Cable Group at Viacom
International, Inc.
Member of the Board of Directors and Chair
of the Risk and Technology Committee of
Fidelity National Information Services, Inc.
Member of the Board of Directors and Chair
of the Consumer Relationships and Regulation
Committee of Philip Morris International.
Member of the Board of Directors of Ritchie
Bros. Auctioneers Inc. and Chair of the
Compensation Committee. Member of the
Board of Zayo Group and Cube IQ. Chair of
Advisory Board of Trilantic Capital Partners.
Member of the U.S. National Security
Telecommunications Advisory Committee
since 2012.
Member of the Board of Directors of Ping
Identity Holding Corporation 2019–2022,
Partners Group Holdings 2020–2021 and
Unisys Corporation 2019–2021. Member
of the Board of Directors of Neustar, Inc.
2010–2019. Previous Board memberships at
RELX Plc and RELX NV, 2006–2016, Covad
Communications 2005–2007, Time Warner
Telecom 1999–2001, K-12 Inc. and National
Geographic Ventures.
Honored as a 2012 Penn State Alumni Fellow
for leadership in technology by the Dickinson
School of Law and Pennsylvania State
University.
Jeanette Horan
b. 1955
Nokia Board member since 2017. Member
of the Audit Committee and the Technology
Committee.
MBA, Business Administration and
Management, Boston University, the United
States. BSc, Mathematics, University of
London, the United Kingdom.
Various executive and managerial positions
at IBM 1998–2015. Vice President of Digital
Equipment Corporation 1994–1998. Vice
President, Development of Open Software
Foundation 1989–1994.
Member of the Supervisory Board at Wolters
Kluwer, and the Chair of the Selection and
Remuneration Committee. Member of the
Board of Advisors at Jane Doe No More, a
non-profit organization. Member of the Board
of Directors of the Ridgefield Symphony
Orchestra, a non-profit organization.
Member of the Board of Advisors of
Cybereason 2017–2018. Member of the
Board of Directors of West Corporation
2016–2017 and Microvision 2006–2017.
Edward Kozel
b. 1955
Nokia Board member since 2017. Chair of
the Technology Committee and member
of the Audit Committee.
Degree in Electrical Engineering and
Computer Science, University of California,
the United States.
President and CEO of Range Networks
2013–2014. Owner of Open Range
2000–2013. Chief Technology and Innovation
Officer and member of the Board of
Management of Deutsche Telekom
2010–2012. CEO of Skyrider 2006–2008.
Managing Director of Integrated Finance
2005–2006. Senior Vice President, Business
development and Chief Technology Officer
and Board member of Cisco 1989–2001.
Member of the Advisory Board at Telia
Ventures 2016–2020.
Various Board memberships in 1999–2009.
Thomas Saueressig
b. 1985
Member of the Executive Board of SAP SE
and Global Head of SAP Product Engineering.
Nokia Board member since 2022. Member of
the Technology Committee.
Degree in Business Information Technology,
University of Cooperative Education in
Mannheim, Germany. Joint Executive MBA
from ESSEC, France and Mannheim Business
School, Germany.
Chief Information Officer of SAP SE
2016–2019, Vice President, Global Head of IT
Services of SAP SE 2014–2016. Held various
positions at SAP in Germany since 2007,
including assignment in the SAP Labs
Silicon Valley in Palo Alto, California, the
United States.
Member of the Young Global Leaders of the
World Economic Forum. Member of the
Industry Advisory Board of the Munich
Institute of Robotics and Machine
Intelligence (MIRMI).
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Corporate governance Corporate governance statement
continued
Carla Smits-Nusteling
b. 1966
Nokia Board member since 2016. Chair of
the Audit Committee and member of the
Corporate Governance and Nomination
Committee.
Master’s Degree in Business Economics,
Erasmus University Rotterdam, the
Netherlands. Executive Master of Finance
and Control, Vrije University Amsterdam,
the Netherlands.
Member of the Board of Directors and Chief
Financial Officer of KPN 2009–2012. Various
financial positions at KPN 2000–2009. Various
financial and operational positions at TNT/PTT
Post 1990–2000.
Member of the Board of Directors and Chair
of the Audit Committee of Allegro.eu SA.
Member of the Board of Directors of the
Stichting Continuïteit Ahold Delhaize (SCAD)
foundation.
Chair of the Board of Directors of TELE2 AB
2013–2023. Lay Judge in the Enterprise
Court of the Amsterdam Court of Appeal
2015–2022. Member of the Supervisory
Board and Chair of the Audit Committee
of ASML 2013–2021. Member of the
Management Board of the Unilever Trust
Office 2015–2019.
Kai Öistämö
b. 1964
President and CEO of Vaisala Corporation.
Nokia Board member since 2022. Chair of
the Corporate Governance and Nomination
Committee and member of the Technology
Committee.
PhD in computer science, Tampere University
of Technology, Finland.
Chief Operating Officer of InterDigital, Inc.
2018–2020. Executive Partner, Siris Capital
Group 2016–2018. EVP, Chief Development
Officer, Nokia 2010–2014. EVP, Devices Nokia
2008–2010. EVP, Mobile Phones Business
Group, Nokia 2006–2008. Several previous
positions at Nokia since 1991.
Chairman of the Board of Fastems Group
2014–2022. Member of the Board of
Directors of Sanoma Group 2010–2021.
Chairman of the Board of Helvar Oy Ab
2014–2020. Member of the Board of
Directors of Mavenir Plc. 2017–2018. Member
of the Board of Directors of Digia / Qt Group
Oyj 2015–2018. Member of the Board of
Directors of InterDigital, Inc. 2015–2018.
Member of the Board of Directors of Oikian
solutions Oy 2014–2018. Chairman of the
Board, Tampere University 2013–2017.
Chairman of the Board of Directors, Tekes
2012–2014. Member of the Board of
Directors of Nokian Renkaat Oyj 2008–2010.
Carla Smits-Nusteling
Kai Öistämö
of new climate and other sustainability
reporting requirements, as well as oversight
of the ethics and compliance program and
information and services security risks and
maturity. The Audit Committee also annually
reviews sustainability disclosures as well as the
use of conflict minerals in Nokia’s products
presented in the annual reports and the
related regulatory filings. The Personnel
Committee assists the Board in the
incorporation of the ESG related metrics in the
incentive structures and oversees the human
capital management, including personnel
policies and practices related to Nokia culture,
physical safety, employee wellbeing, diversity,
recruiting, development and retention.
The Corporate Governance and Nomination
Committee assesses and advises the Board
in the environmental, social and governance
(ESG) related activities and practices aiming to
enhance the governance structure supporting
them. The Technology Committee has
reviewed how the Company’s new ESG
strategy embeds into its technology strategy
and roadmaps.
While the oversight of the security risks and
their management, including cybersecurity,
is a Board level responsibility in the Company,
the detailed reviews of the different security
domains are allocated to the Board’s different
committees. The responsibilities of the Audit
Committee include oversight of the IT and
services security risks and maturity. The
Technology Committee oversees the product
and customer security risk management.
The oversight of the physical risks belongs
to the Personnel Committee.
Operations of the Board of Directors
The Board represents and is accountable to
the shareholders of Nokia. While its ultimate
statutory accountability is to the shareholders,
the Board also takes into account the interests
of Nokia’s other stakeholders. The Board’s
responsibilities are active, not passive, and
include the responsibility to evaluate the
strategic direction of Nokia, its management
policies and the effectiveness of the
implementation of such by the management
on a regular basis. It is the responsibility of the
members of the Board to act in good faith and
with due care, so as to exercise their business
judgment on an informed basis, in a manner
that they reasonably and honestly believe
to be in the best interests of Nokia and its
shareholders. In discharging this obligation,
the members of the Board must inform
themselves of all relevant information
reasonably available to them. The Board
and each Board Committee also have the
power to appoint independent legal, financial
or other advisors as they deem necessary.
The Company will provide sufficient funding to
the Board and to each Committee to exercise
their functions and provide compensation for
the services of their advisors.
The Board is ultimately responsible for, and
its duties include, monitoring and reviewing
Nokia’s financial reporting process, the
effectiveness of related control and audit
functions and the independence of Nokia’s
external auditor, as well as monitoring the
Company’s statutory audit. The Board’s
responsibilities also include overseeing the
structure and composition of our top
management and monitoring legal compliance
and the management of risks related to our
operations. In doing so, the Board may set
annual ranges and/or individual limits for
capital expenditures, investments and
divestitures and other financial and
non-financial commitments that may not be
exceeded without a separate Board approval.
In risk management, the Board’s role includes
risk analysis and assessment in connection
with financial, strategy and business reviews,
updates and decision-making proposals.
Risk management policies and processes are
an integral part of Board deliberations and
risk-related updates are provided to the Board
on a recurring basis. For a more detailed
description of our risk management policies
and processes, refer to “Risk management,
internal control and internal audit functions
at Nokia—Main features of risk management
systems”.
The Board has the responsibility for appointing
and discharging the President, the Chief
Executive Officer, Chief Financial Officer
and Chief Legal Officer.
The Board approves and the independent
directors of the Board confirm the
compensation and terms of employment
of the President and CEO, subject to the
requirements of Finnish law, upon the
recommendation of the Personnel Committee
of the Board. The compensation and terms
of employment of the other Group Leadership
Team members are approved by the Personnel
Committee upon the recommendation of the
President and CEO.
Board oversight of environmental and social
activities and governance practices (ESG)
Under our Corporate Governance Guidelines,
the Board evaluates Nokia’s environmental
and social activities and governance practices
(ESG), related risks and target setting as well as
their implementation and effectiveness in the
Company. In 2022, the Board approved the
new enhanced ESG strategy of the Company
focusing on the environment, industrial
digitalization, security & privacy, bridging
the digital divide, and responsible business.
The Board also reviewed the related risks
and opportunities, approved the targets on
climate change and diversity included in the
short-term incentive program, monitored
them and other ESG targets as well as the
evolving ESG requirements and expectations,
investor feedback and the disclosure approach.
In addition, the Board Committees monitor
environmental and social developments and
activities in the Company in their respective
areas of responsibilities. During 2022, the
Audit Committee’s responsibilities included,
amongst others, the implementation planning
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Corporate governance Corporate governance statement
continued
Key areas of focus for the Board’s and its Committees’ activities in 2022
The table below sets out a high-level overview of the key areas of focus for the Board’s and its Committees’ activities during the year.
Board
– Business and financial reviews
– Russian invasion of Ukraine
– AGM and appointing Board Chair,
– Annual sustainability review
– Business and financial reviews
– Annual strategy meeting
– Business and financial reviews
February
February/March
April
May
July
September/October
December
Vice Chair and Committee members
– Business and financial reviews
– Strategy
– Geopolitical update
– Investor relations and corporate
governance update
– Q1 financials
– Q4 and 2021 financials
– Annual report
– Strategy
– Remuneration Report 2021
– AGM proposals, incl. reinstating
dividend
– Share buyback program
– Annual Policy and Charter review
– Review of CEO’s performance,
targets and remuneration
– AGM proposals on Board
composition and remuneration
– Committee compositions
– Corporate governance statement
– Incentive achievements for 2021
– CEO and GLT performance
– Incentive targets and objectives
for 2022
– Nokia Equity Program proposal 2022
– Q4 and 2021 accounting
– Annual report for 2021, including
– Q1 accounting
– Auditor reporting
– Ethics and compliance, internal
audit and internal controls updates
– AGM proposals to the Board
ESG reporting
– Auditor reporting
– Updates on major innovation
and technology trends
– Review of strategic technology
initiatives
– Annual Charter review
– Auditor reporting
– Ethics and compliance, internal audit
and internal controls updates
– Cybersecurity; IT and service
security
– Tax update
– Conflict Minerals Reporting
– Cybersecurity; Group security
update and approach
– Review of strategic technology
initiatives
Corporate Governance
and Nomination
Committee
Personnel
Committee
Audit
Committee
Technology
Committee
– Business and financial reviews
– Q2 financials
– External market perspective
– Strategy
– Strategy
– Strategy
– Business and financial reviews
– Annual and long-range forecast
– Ethics & compliance
– Nokia innovation framework
– Group Leadership Team (GLT)
– Litigation update
– Digitalization update
succession planning
– Q3 financials
and target setting
– Board evaluation
– Key risks review
– Digitalization update
– Investors’ feedback on Nokia ESG
– AGM shareholder feedback
– Planning of Board composition
proposal
– Corporate governance
– Board remuneration review and
developments
benchmarking
– Status of Board composition
– Annual assessment of director
proposal
commitments
– Board evaluation approach
– Finalizing Board composition
– Culture
– Human capital risk review
– Status of 2023 incentive and
– AGM shareholder feedback
– GLT remuneration
– PC Advisor’s market and
benchmarking update
equity framework
– Human capital update
proposal to the AGM
– Annual Charter review
– 2023 incentive targets
– 2023 equity plans
– Investor and proxy advisor
– GLT succession planning
feedback
– Q2 accounting
– Auditor reporting
– Q3 accounting
– Auditor reporting
– Planning of Remuneration Report
for 2022
– Annual Charter review
– Treasury update
– Pensions update
– Ethics and compliance, internal
audit and internal controls
updates
– Finance IT and digitalization
– Cybersecurity; product and
customer security
– Updates on major innovation and
technology trends
– Review of strategic technology
initiatives
– Ethics and compliance, internal
audit, internal controls updates
– Audit, internal audit and internal
controls updates
– ESG reporting developments
– Privacy program
– ESG technology strategy and
roadmap
– Cybersecurity; IT and service
security
– Annual Charter and Policy
– Cybersecurity; product and
customer security
– Updates on major innovation
– Review of strategic technology
and technology trends
initiatives
– Review of strategic technology
initiatives
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Corporate governance Corporate governance statement
continued
Board evaluation
In line with our Corporate Governance Guidelines, the Board conducts a comprehensive annual performance evaluation, which also includes
evaluation of the Board Committees’ work, the Board and Committee Chairs and individual Board members. The Board evaluation is conducted
as a self-evaluation typically with a detailed questionnaire while an external evaluator is periodically engaged. Feedback is also requested from
selected members of management as part of the Board evaluation process. The questions aim to measure and elicit feedback on the processes,
structure, accountability, transparency, and effectiveness of the Board and to gain an overview of the issues that are areas of excellence, areas
where the Board thinks greater focus is warranted and determining areas where the performance could be enhanced.
Each year, the results of the evaluation are discussed and analyzed by the entire Board and improvement actions are agreed based on such
discussions. In 2022, the evaluation process was carried out as a self-evaluation using an external evaluation platform that included both
numeric assessments and the possibility to provide more detailed written comments. The questionnaire comprised areas such as Nokia
purpose and strategy, Board agenda and meetings, Board members’ talent and culture, Board composition and dynamics as well as information,
reporting and risk management.
Meetings of the Board of Directors
The Board of Directors constitutes a quorum if more than half of its members are present. The Board held 18 meetings excluding Committee
meetings during 2022. In total nine (50%) of these meetings were regular meetings in person or by video connection. The other meetings were
held in writing.
Directors’ attendance at the Board and Committee meetings in 2022 is set forth in the table below:
Member
Sari Baldauf (Chair)
Søren Skou (Vice Chair)
Bruce Brown
Thomas Dannenfeldt
Lisa Hook (as of 5 April 2022)
Jeanette Horan
Edward Kozel
Thomas Saueressig (as of 5 April 2022)
Carla Smits-Nusteling
Kari Stadigh (until 5 April 2022)
Kai Öistämö (as of 5 April 2022)
Average Attendance (%)
Board Meeting Attendance
Board and Committee Meeting Attendance(1)
Meetings
18/18
18/18
18/18
18/18
13/13
17/18
18/18
13/13
18/18
5/5
13/13
%
100
100
100
100
100
94
100
100
100
100
100
99
Meetings
27/27
22/23
32/32
30/30
16/17
27/29
29/29
16/16
28/28
7/7
19/19
%
100
96
100
100
94
93
100
100
100
100
100
98
(1) Any director who so wishes may attend, as a non-voting observer, meetings of committees of which they are not members. Figures exclude directors attending committee meetings as non-voting
observers.
Directors meet without the management in connection with each regularly scheduled meeting. According to Board practices, meetings without
management present are only attended by non-executive directors. These meetings are chaired by the non-executive Chair of the Board.
In case the non-executive Chair of the Board is unable to chair these meetings, the non-executive Vice Chair of the Board chairs the meeting.
Additionally, the independent directors would meet separately at least once annually. In 2022, all members of the Board were non-executive
and determined to be independent from Nokia and significant shareholders under the Finnish corporate governance standards and the rules
of the NYSE.
Committees of the Board of Directors
The Board of Directors has four committees that assist the Board in its duties pursuant to their respective committee charters. The Board
may also establish ad hoc committees for detailed reviews or consideration of particular topics to be proposed for the approval of the Board.
Any director who so wishes may attend, as a non-voting observer, meetings of committees of which they are not members.
Board of Directors
Audit Committee
Oversees the accounting and
financial as well as non-financial
reporting processes of Nokia
and the audits of its financial
statements as well as the
internal controls and
compliance program. In
addition, oversees ESG related
reporting requirements, IT
and services security, privacy
program as well as tax, treasury
and pension activities.
Corporate Governance and
Nomination Committee
Prepares the proposals for the
general meetings in respect of
the composition of the Board and
the director remuneration to be
approved by the shareholders,
oversees the Directors’ time
commitments and independence
and monitors issues and practices
related to corporate governance
and proposes necessary actions
in respect thereof.
Personnel Committee
Oversees the human capital
management related policies
and practices at Nokia. Assists
the Board in discharging its
responsibilities in relation to all
compensation and related
matters, including remuneration
policy and reporting, equity
compensation, and
remuneration of Nokia’s
executives and their terms
of employment.
Technology Committee
Follows major innovation and
technology trends and reviews
related key initiatives of Nokia.
Oversees product and customer
security.
The Audit Committee
The following table sets forth the members of the Audit Committee and their meeting attendance in 2022:
Member
Carla Smits-Nusteling (Chair)
Thomas Dannenfeldt
Lisa Hook (as of 5 April 2022)
Jeanette Horan
Edward Kozel
Average attendance (%)
The Committee consists of a minimum of
three members of the Board who meet all
applicable independence, financial literacy
and other requirements as stipulated by
Finnish law and the rules of Nasdaq Helsinki
and the NYSE. As of 5 April 2022, the Audit
Committee has consisted of the following five
members of the Board: Carla Smits-Nusteling
(Chair), Thomas Dannenfeldt, Lisa Hook,
Jeanette Horan and Edward Kozel.
internal controls over financial reporting, are
designed to provide reasonable assurance
regarding the quality and integrity of Nokia’s
financial statements and related disclosures.
For further information on internal control
over financial reporting, refer to “Risk
management, internal control and internal
audit functions at Nokia–Description of
internal control procedures in relation to
the financial reporting process”.
The Committee is responsible for assisting
the Board in the oversight of:
■ the quality and integrity of the Company’s
financial and non-financial reporting and
related disclosures;
■ the statutory audit of the Company’s
financial statements; including the
sustainability reporting therein;
■ the external auditor’s qualifications and
independence;
■ the performance of the external auditor
subject to the requirements of Finnish law;
■ the performance of the Company’s internal
controls, risk management and the
assurance function;
■ the performance of the internal audit
function;
■ the Company’s compliance with legal and
regulatory requirements, including the
performance of its ethics and compliance
program;
■ the monitoring and assessment of any
related party transactions;
■ the pension liabilities and taxation of the
Company; and
■ the processes and management related
to the cybersecurity of the Company,
including IT and services security.
In discharging its oversight role, the Audit
Committee has full access to all Company
books, records, facilities and personnel. The
Audit Committee also maintains procedures
for the receipt, retention and treatment of
complaints received by Nokia regarding
accounting, internal controls, or auditing
matters and for the confidential, anonymous
submission by our employees of concerns
relating to accounting or auditing matters.
Nokia’s disclosure controls and procedures,
which are reviewed by the Audit Committee
and approved by the President and CEO and
the Chief Financial Officer, as well as the
Under the Finnish Companies Act, an external
auditor is elected by a simple majority vote
of the shareholders at the Annual General
Meeting for one year at a time. The Audit
Committee prepares the proposal to the
shareholders, upon its evaluation of the
qualifications and independence of the
external auditor, of the nominee for election
or re-election. Under Finnish law, the fees of
the external auditor are also approved by the
shareholders by a simple majority vote at the
Annual General Meeting. The Committee
prepares the proposal to the shareholders in
respect of the fees of the external auditor,
and approves the external auditor’s annual
audit fees under the guidance given by the
Annual General Meeting. For information
about the fees paid to Nokia’s external
auditor, Deloitte Oy, during 2022 refer to
“Auditor fees and services” below.
The Board has determined that all members
of the Audit Committee, including its Chair,
Carla Smits-Nusteling, are “audit committee
financial experts” as defined in the
requirements of Item 16A of the Annual
Report on Form 20-F filed with the U.S.
Securities and Exchange Commission (SEC).
Carla Smits-Nusteling and each of the other
members of the Audit Committee are
“independent directors” as defined by Finnish
law, the Finnish Corporate Governance Code
and in Section 303A.02 of the NYSE Listed
Company Manual.
The Audit Committee meets a minimum of
four times a year. The Committee meets
separately with the representatives of Nokia’s
management, heads of the internal audit,
and ethics and compliance functions, and
the external auditor in connection with each
regularly scheduled meeting. The head of the
internal audit function has, at all times, direct
access to the Audit Committee, without the
involvement of management.
Attendance
(meetings)
6/6
6/6
3/4
5/6
6/6
Attendance %
100
100
75
83
100
92
Audit Committee pre-approval policies
and procedures
The Audit Committee of the Board is
responsible, among other matters, for
oversight of the external auditor’s
independence, subject to the requirements
of applicable legislation. The Audit Committee
has adopted a policy regarding an approval
procedure of audit services performed by
the external auditors of the Nokia Group and
permissible non-audit services performed
by the principal external auditor of the
Nokia Group (the “Pre-approval Policy”).
Under the Pre-approval Policy, proposed
services either: (i) may be pre-approved by
the Audit Committee in accordance with
certain service categories described in the
Pre-approval Policy (general pre-approval);
or (ii) require the specific pre-approval of the
Audit Committee (specific pre-approval).
The Pre-approval Policy sets out the audit,
audit-related, tax and other services that have
received the general pre-approval of the Audit
Committee. All other audit, audit-related
(including services related to internal controls
and significant mergers and acquisitions
projects), tax and other services are subject to
specific pre-approval by the Audit Committee.
All service requests concerning generally
pre-approved services are submitted to an
appointed Audit Committee delegate within
management, who determines whether the
services are within the generally pre-approved
services. The Pre-approval Policy is subject
to annual review by the Audit Committee.
The Audit Committee establishes budgeted
fee levels annually for each of the categories
of audit and non-audit services that are
pre-approved under the Pre-approval Policy,
namely, audit, audit-related, tax and other
services. At each regular meeting of the Audit
Committee, the auditor provides a report in
order for the Audit Committee to review the
services that the auditor is providing, as well
as the cost of those services.
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53
Corporate governance Corporate governance statement
continued
The Corporate Governance and Nomination Committee
The following table sets forth the members of the Corporate Governance and Nomination Committee and their meeting attendance in 2022:
The Technology Committee
The following table sets forth the members of the Technology Committee and their meeting attendance in 2022:
Attendance
(meetings)
3/3
4/4
4/4
4/4
1/1
Attendance %
100
100
100
100
100
100
Member
Edward Kozel (Chair)
Bruce Brown
Jeanette Horan
Thomas Saueressig (as of 5 April 2022)
Kai Öistämö (as of 5 April 2022)
Thomas Dannenfeldt (until 5 April 2022)
Average attendance (%)
Attendance
(meetings)
5/5
5/5
5/5
3/3
3/3
2/2
Attendance %
100
100
100
100
100
100
100
Member
Kai Öistämö (Chair) (as of 5 April 2022)
Sari Baldauf
Bruce Brown
Carla Smits-Nusteling
Kari Stadigh (until 5 April 2022)
Average attendance (%)
The Committee consists of three to five
members of the Board who meet all
applicable independence requirements
as stipulated by Finnish law and the rules
of Nasdaq Helsinki and the NYSE. As of
5 April 2022 the Corporate Governance and
Nomination Committee has consisted of the
following four members of the Board: Kai
Öistämö (Chair), Sari Baldauf, Bruce Brown
and Carla Smits-Nusteling.
The Committee fulfills its responsibilities by:
■ actively identifying individuals qualified to
be elected members of the Board as well as
considering and evaluating the appropriate
level and structure of director
remuneration;
■ preparing and evaluating the principles
regarding Board diversity;
■ preparing proposals to the shareholders
on the director nominees for election at
the general meetings as well as director
remuneration;
■ developing and administering Nokia’s
Corporate Governance Guidelines and
giving recommendations regarding them
to the Board; and
■ reviewing Nokia’s disclosure in the
corporate governance statement.
The Committee has the power and practice
to appoint a recruitment firm to identify
appropriate new director candidates.
■ monitoring significant developments in the
law and practice of corporate governance,
including the sustainability-related
governance trends and of the directors’
duties and responsibilities;
■ assisting the Board and each Committee
of the Board in its annual performance
evaluations, including establishing criteria
to be applied in connection with such
evaluations;
The Personnel Committee
The following table sets forth the members of the Personnel Committee and their meeting attendance in 2022:
Member
Bruce Brown (Chair)
Sari Baldauf
Thomas Dannenfeldt (as of 5 April 2022)
Søren Skou
Kari Stadigh (until 5 April 2022)
Average attendance (%)
The Committee consists of a minimum of
three members of the Board who meet all
applicable independence requirements as
stipulated by Finnish law and the rules of
Nasdaq Helsinki and the NYSE. As of 5 April
2022 the Personnel Committee has consisted
of the following four members of the Board:
Bruce Brown (Chair), Sari Baldauf, Thomas
Dannenfeldt and Søren Skou.
The Committee has overall responsibility for
evaluating, resolving and making
recommendations to the Board regarding:
■ preparing the Remuneration Policy and the
Remuneration Report;
■ compensation and terms of employment
of the Company’s senior management;
■ human capital management;
■ all equity-based plans;
■ incentive compensation plans, policies
and programs of the Company affecting
executives; and
■ possible other significant incentive plans.
The Committee is responsible for preparing
the Remuneration Policy, including Nokia’s
compensation philosophy and principles and
ensuring that the Company’s compensation
programs are performance-based, designed
to contribute to long-term shareholder value
creation in line with shareholders’ interests,
properly motivate management, are aligned
with the Remuneration Policy as well as
support overall corporate strategies.
Attendance
(meetings)
5/5
5/5
4/4
4/5
1/1
Attendance %
100
100
100
80
100
96
The Committee also oversees human capital
management and periodically reviews the
personnel policies and practices of Nokia
related to human capital management
and social responsibilities relating to its
employees, including Company culture,
physical safety, employee wellbeing, morale,
diversity, equity and inclusion, talent
management and development, succession
planning, resourcing, recruiting, attrition,
retention and employee engagement.
The Committee consists of a minimum of
three members of the Board who meet
applicable independence requirements as
stipulated by Finnish law and the rules of
Nasdaq Helsinki and the NYSE and have such
skills in innovation, technology and science
matters as the Board determines adequate
from time to time. As of 5 April 2022 the
Technology Committee has consisted of the
following five members of the Board: Edward
Kozel (Chair), Bruce Brown, Jeanette Horan,
Thomas Saueressig and Kai Öistämö.
In its dialogue with and provision of opinions
and advice to the management, the
Committee will periodically review:
■ the Company’s technological
competitiveness and new strategic
technology initiatives as well as market
trends, considering both organic as well
as inorganic options to retain or attain
competitiveness;
■ the Company’s approach to major
technological innovations;
■ key technology trends that may result in
disruptive threats or opportunities and
the proposals on how to adequately
address them;
■ high-level risks and opportunities
associated with the Company’s Research
and Development Programs;
■ embedding sustainability in the technology
roadmaps; and
■ the processes and management related
to the cybersecurity of the Company,
including product and customer security.
Group Leadership Team and the President and CEO
The Group Leadership Team is responsible for the operative management of Nokia. The Group Leadership Team is chaired by the President and
CEO. The President and CEO’s rights and responsibilities include those allotted to the President under Finnish law.
On 31 December 2022, the Group Leadership Team consisted of 10 members, including the President and CEO, representing six different
nationalities. In total 30% of the Group Leadership Team members were female. In addition to biographical information of the Group Leadership
team members, the table below sets forth the number of shares and ADSs held by the members as at 31 December 2022, a total of 3 612 050
Nokia shares. These holdings represented approximately 0.06% of our total shares and voting rights excluding shares held by the Nokia Group.
Name
Pekka Lundmark
Nishant Batra
Ricky Corker
Federico Guillén
Amy Hanlon-Rodemich Chief People Officer
Jenni Lukander
Raghav Sahgal
Gender
Position
Male
President and CEO
Chief Strategy and Technology Officer Male
Male
Chief Customer Experience Officer
Male
President of Network Infrastructure
Female
Female
Male
Year of birth Nationality
1963
1978
1967
1963
1972
1974
1962
Finnish
Indian
Australian
Spanish
American
Finnish
American
On GLT since
2020
2021
2019
2016
2022
2019
2020
President of Nokia Technologies
President of Cloud and
Network Services
Chief Corporate Affairs Officer
President of Mobile Networks
Chief Financial Officer
Melissa Schoeb
Tommi Uitto
Marco Wirén
Female
Male
Male
1968
1969
1966
2021
American
2019
Finnish
Finnish/Swedish 2020
Shares(1)
ADSs(1)
1 289 304
507 531
361 554
406 408
–
76 788
473 310
127 342
139 559
230 254
{1) At 31 December 2022, no ADSs were held by the Group Leadership Team members. The number of shares or ADSs includes shares and ADSs received as compensation as well as shares and ADSs
acquired through other means. Stock options or other equity awards that are deemed as being beneficially owned under the applicable SEC rules are not included.
At present, our Group Leadership Team consists of 11 members, following the appointment of Esa Niinimäki as Chief Legal Officer in January
2023. The current Group Leadership Team has a representation of six different nationalities and 27% of the members are female.
54
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55
Corporate governance
Pekka Lundmark
Nishant Batra
Ricky Corker
Federico Guillén
Corporate governance statement
continued
Biographical details of the current members
of the Nokia Group Leadership Team
Pekka Lundmark
b. 1963
President and Chief Executive Officer (CEO)
since 2020. Rejoined Nokia in 2020.
Master of Science, Department of Technical
Physics, Helsinki University of Technology,
Finland.
President and CEO, Fortum Corporation,
2015–2020. President and CEO, Konecranes
Plc, 2005–2015 and Group Executive Vice
President 2004–2005. President and CEO,
Hackman Oyj, 2002–2004. Managing Partner,
Startupfactory 2000–2002. Various executive
positions at Nokia 1990–2000.
Commissioner, Broadband Commission for
Sustainable Development. Member of the
Board, Research Institute of the Finnish
Economy (ETLA) and Finnish Business and
Policy Forum (EVA). International Member
of the Academy, Royal Swedish Academy
of Engineering Sciences (IVA). Member
of the Board, Finnish Athletics Federation.
Chairman of the Board, Confederation of
Finnish Industries 2019–2020. Member of
the Board, East Office of Finnish Industries
2009–2020. Chairman of the Board, Finnish
Energy 2016–2018.
Nishant Batra
b. 1978
Chief Strategy and Technology Officer (CSTO).
Group Leadership Team member since 2021.
Joined Nokia in 2021.
MBA from INSEAD. Master’s degrees in
Telecommunications and in Computer
Science, Southern Methodist University,
Dallas, the United States. Bachelor’s degree in
Computer Applications, Devi Ahilya University,
Indore, Madhya Pradesh, India.
Executive Vice President and Chief Technology
Officer, Veoneer Inc. 2018–2021. Prior to
Veoneer Inc. held several senior positions at
Ericsson 2006–2018 in the United States,
Sweden and India.
Member of the Board of Directors of Sensys
Gatso Group 2020–2022.
Ricky Corker
b. 1967
Chief Customer Experience Officer (CCXO).
Group Leadership Team member since 2019.
Joined Nokia in 1993.
Bachelor in Communications and Electronic
Engineering from the Royal Melbourne
Institute of Technology, Australia.
President of Customer Operations, Americas,
Nokia 2019–2020. Executive Vice President
and President of North America, Nokia
2011–2018. Head of Asia Pacific, Nokia
Siemens Networks 2009–2011. Head of Asia
North Region, Nokia Siemens Networks
2008–2009. Head of Hutchison Global
Customer Business Team, Nokia Siemens
Networks 2007–2008. Vice President Asia
Pacific, Nokia Networks 2005–2007. Lead
Sales Director Asia Pacific, Nokia Networks
2004–2005. Account Director Telstra, Nokia
Networks 2002–2003. Account Director
Vodafone Australia and New Zealand, and
Sales Director Vodafone Asia Pacific Customer
Business Team, Nokia Networks 2001–2002.
Commercial Director Global Accounts British
Telecom, Nokia Networks 2001. Senior sales
and marketing positions at Nokia 1993–2001.
Federico Guillén
b. 1963
President of Network Infrastructure. Group
Leadership Team member since 2016.
Joined Nokia in 2016.
Degree in Telecommunications Engineering,
ETSIT at Universidad Politécnica de Madrid,
Spain. Master’s degree in Switching &
Communication Architectures, ETSIT at
Universidad Politécnica de Madrid, Spain.
Master’s Degree in International Management,
ESC Lyon and Alcatel, France.
President of Customer Operations, Europe,
Middle East & Africa and Asia Pacific, Nokia
2018–2020. President of Fixed Networks,
Nokia 2016–2018. President of Fixed
Networks, Alcatel-Lucent 2013–2016.
President and Chief Senior Officer of
Alcatel-Lucent Spain and Global Account
Manager Telefónica, Alcatel-Lucent
2009–2013. Vice President Sales of
Vertical Market Sales in Western Europe,
Alcatel-Lucent 2009. Head of Regional
Support Center, Fixed Access Division for
South Europe, Middle East & Africa, India and
Caribbean & Latin America, Alcatel-Lucent
2007–2009. President and Chief Senior
Officer, Alcatel Mexico and Global Account
Manager, Telmex 2003–2007. Various R&D,
portfolio and sales management positions
with Telettra in Spain, and with Alcatel in
Spain, Belgium and the United States
1989–2003.
Amy Hanlon-Rodemich
Jenni Lukander
Esa Niinimäki
Raghav Sahgal
Melissa Schoeb
Amy Hanlon-Rodemich
b. 1972
Chief People Officer (CPO). Group Leadership
Team member since 2022. Joined Nokia
in 2022.
Master of Human Resources and
Organizational Development, University of
San Francisco, the United States. Bachelor
of Arts in English, Tufts University, Boston,
the United States.
Chief People Officer, GlobalLogic, a Hitachi
Group Company 2019–2022. Vice President,
Human Resources, Synopsys, Inc. 2017–2019.
Executive Vice President, People Success,
Milestone Technologies 2016–2017. Director
and Global HR Head, Yahoo 2013–2016.
Various positions such as Senior HR Business
Partner, Senior Manager, Director, Global
Talent Development Operations, VMware
2004–2013. Employee Relations Specialist,
Technology Credit Union 2003–2004.
Human Resources Manager, CAT Technology
2000–2003. Manager, Staffing Programs,
Inktomi Corporation 1996–2000.
Member of the Board, Exceptional Women
Awardees Foundation. Advisory Board
member, Topia, Inc. Advisory Board Member,
BrightPlan. Co-Chair and Governing Board
Member, CHRO Executive Summit (Evanta).
Board Member, Bay Area Executive
Development Network.
Jenni Lukander
b. 1974
President of Nokia Technologies. Group
Leadership Team member since 2019.
Joined Nokia in 2007.
Master of Laws, University of Helsinki, Finland.
Senior Vice President, Head of Patent
Business, Nokia 2018–2019. Vice President,
Head of Patent Licensing, Nokia 2018. Vice
President, Head of Litigation and Competition
Law, Nokia 2016–2018. Director, Head of
Regulatory and Competition Law, Nokia
2015–2016. Director, Head of Competition
Law, Nokia 2011–2015. Senior Legal Counsel,
Nokia 2007–2011. Visiting lawyer, Nokia 2001.
Lawyer, Roschier Ltd. 1999–2007.
Esa Niinimäki
b. 1976
Chief Legal Officer (CLO) and Board Secretary.
Group Leadership Team member since 2023.
Joined Nokia in 2007.
Master of Laws, Fordham University, School
of Law, New York, the United States. Master
of Laws, University of Helsinki, Finland.
Interim Chief Legal Officer, Nokia 2022–2023.
Deputy Chief Legal Officer, Vice President,
Corporate Legal and Board Secretary, Nokia
2018–2023. General Counsel, Global Services,
Nokia 2015–2018. Head of Corporate Legal,
Nokia Solutions and Networks and Head of
Finance & Labor Legal, Nokia 2013–2015.
Senior Legal Counsel, Legal and IP, India,
Middle East and Africa, Nokia 2012–2013.
(Senior) Legal Counsel, Corporate Legal,
Nokia 2007–2011. Group Legal Counsel,
Metsä Group 2005–2007. Associate Lawyer,
White & Case LLP 2003–2005.
Member of the Market Practice Board of
Securities Market Association, Finland;
the Advisory Board of the Finnish Listed
Companies; the Legal Affairs Committee
of the Confederation of Finnish Industries
and the Policy Committee of the Directors’
Institute of Finland.
Raghav Sahgal
b. 1962
President of Cloud and Network Services.
Group Leadership Team member since 2020.
Joined Nokia in 2017.
Master of Science in Computer Systems
Management, University of Maryland, the
United States. Bachelor of Science in
Computer Engineering, Tulane University,
New Orleans, the United States. Executive
Business Certificate in General Management,
Harvard University, the United States.
President of Nokia Enterprise 2020. Senior
Vice President, Nokia Software 2017–2020.
President, NICE Ltd. Asia Pacific and the Middle
East 2010–2017. Advisory Board Member,
Orga Systems 2010–2014. Vice President,
Communications Business Unit, Asia Pacific &
Japan, Oracle 2008–2010. Chief Business
Officer, Comverse 2005–2006. Executive
Vice President, Asia Pacific, CSG 2002–2005.
Vice President, Software Products Group Asia
Pacific, Lucent Technologies 2000–2002.
Melissa Schoeb
b. 1968
Chief Corporate Affairs Officer (CCAO).
Group Leadership Team member since 2021.
Joined Nokia in 2021.
Bachelor of Arts in International Relations
and Spanish, University of Mary Washington,
Virginia, the United States. Fellowship
Recipient, Four Freedoms Foundation,
Rome, Italy.
Vice President, Corporate Affairs, Occidental
2017–2021. Vice President, Communications
and Public Affairs, Occidental 2012–2017.
Senior Director, Communications and Public
Affairs, Occidental 2007–2012. Senior Vice
President and Senior Partner, General
Manager and other senior positions,
FleishmanHillard 2002–2007. Director of
Global Communications, Nortel Networks
2000–2002. Vice President, Technology,
FleishmanHillard 1998–2000. Business
Director, The VenCom Group Inc. 1995–1997.
Consultant, London, the United Kingdom
and Washington D.C., the United States,
Gemini Consulting 1991–1995.
Member of the Arthur Page Society and
The Seminar. Member of Mary Washington
University College of Business Executive
Advisory Board.
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Corporate governance Corporate governance statement
continued
Tommi Uitto
b. 1969
President of Mobile Networks. Group
Leadership Team member since 2019.
Joined Nokia in 1996.
Marco Wirén
b. 1966
Chief Financial Officer (CFO). Group
Leadership Team member since 2020.
Joined Nokia in 2020.
Tommi Uitto
Marco Wirén
Master’s degree in industrial management,
Helsinki University of Technology, Finland.
Master’s degree in operations management,
Michigan Technological University, the
United States.
Senior Vice President, Global Product Sales,
Mobile Networks, Nokia 2016–2018. Senior
Vice President, Global Mobile Broadband
Sales, Customer Operations, Nokia Networks
2015–2016. Senior Vice President, West
Europe, Customer Operations, Nokia
Networks 2013–2015. Head of Radio Cluster
(Senior Vice President), Mobile Broadband,
Nokia Siemens Networks 2012–2013. Head of
Global LTE Radio Access Business Line (Vice
President) and Quality, Mobile Broadband
Nokia Siemens Networks, 2011–2012. Head
of Product Management, Network Systems,
Nokia Siemens Networks 2010. Head of
Product Management, Radio Access, Nokia
Siemens Networks 2009. Head of WCDMA/
HSPA and Radio Platforms Product
Management, Nokia Siemens Networks 2008.
Head of WCDMA/HSPA Product Line
Management, Nokia Siemens Networks 2007.
General Manager, Radio Controller Product
Management Nokia Networks, 2005–2007.
Director, Sales & Marketing (Lead Sales
Director), France Telecom/Orange Nokia
Networks 2002–2005. Operations Director,
Northeast Europe, Central & Eastern Europe
and Middle East, Nokia Networks 1999–2002.
Master’s degree in Business Administration,
University of Uppsala, Sweden. Studies in
management and strategic leadership,
including at Duke Business School, the United
States; IMD, Switzerland and Stockholm
School of Economics, Sweden.
President, Wärtsilä Energy and Executive
Vice President, Wärtsilä Group 2018–2020.
Executive Vice President and CFO, Wärtsilä
Group 2013–2018. Executive Vice President
and CFO, SSAB Group 2008–2013. Vice
President, Business Control, SSAB Group
2007–2008. CFO, Eltel Networks 2006–2007.
Vice President of Business development,
Eltel Networks 2004–2005. Head of Service
Division, Eltel Networks 2003–2004. Vice
President, Corporate Development, Eltel
Networks 2002–2003. Vice President,
Strategy & Business Development, NCC Group
1999–2002. Head of Strategic Planning, NCC
Group 1998–1999. Group Controller, NCC
Group 1996–1998.
Vice Chair of the Board of Directors of Neste
Corporation 2019–2023 and member of the
Board of Directors of Neste Corporation
2015–2023.
Summary of changes in the Group
Leadership Team in 2022 and thereafter
The following members stepped down from
the Group Leadership Team:
■ Stephanie Werner-Dietz; Chief People
Officer, as of 31 August 2022; and
■ Nassib Abou-Khalil, Chief Legal Officer,
as of 6 October 2022.
The Group Leadership Team was
complemented with two new appointments:
■ Amy Hanlon-Rodemich, Chief People
Officer, effective as of 24 October 2022;
and
■ Esa Niinimäki, Chief Legal Officer, effective
as of 25 January 2023.
Risk management, internal
control and internal audit
functions at Nokia
Main features of risk
management systems
We have a systematic and structured
approach to risk management. Key risks and
opportunities are primarily identified against
business targets either in business operations
or as an integral part of strategy and financial
planning. Risk management covers strategic,
operational, financial, compliance and hazard
risks. Key risks and opportunities are analyzed,
managed and monitored as part of business
performance management.
The principles documented in the Nokia
Enterprise Risk Management Policy, which is
approved by the Audit Committee of the
Board, require risk management and its
elements to be integrated into key processes.
One of the core principles is that the business
or function head is also the risk owner,
although all employees are responsible for
identifying, analyzing and managing risks,
as appropriate, given their roles and duties.
Our overall risk management concept is based
on managing the key risks that would prevent
us from meeting our objectives, rather than
focusing on eliminating all risks. In addition to
the principles defined in the Nokia Enterprise
Risk Management Policy, other key policies
reflect implementation of specific aspects
of risk management.
Overseeing risk is an integral part of the
Board’s deliberations. Key risks and
opportunities are reviewed by the Group
Leadership Team and the Board in order to
create visibility on business risks as well as
to enable prioritization of risk management
activities. The Board’s Audit Committee
is responsible for, among other matters,
risk management relating to the financial
reporting process and assisting the Board’s
oversight of the risk management function.
The Board’s role in overseeing risk includes
risk analysis and assessment in connection
with financial, strategy and business reviews,
updates and decision-making proposals.
Description of internal control
procedures in relation to the financial
reporting process
The management is responsible for
establishing and maintaining adequate
internal control over Nokia’s financial
reporting. Our internal control over financial
reporting is designed to provide reasonable
assurance to the management and the Board
regarding the reliability of financial reporting
and the preparation and fair presentation of
published financial statements.
The management conducts a yearly
assessment of Nokia’s internal controls over
financial reporting in accordance with the
Committee of Sponsoring Organizations
framework (the “COSO framework”, 2013)
and the Control Objectives for Information
and Related Technology (COBIT) framework
of internal controls. The assessment is
performed based on a top-down risk
assessment of our financial statements
covering significant accounts, processes
and locations, corporate-level controls
and information systems’ general controls.
As part of its assessment, the management
has documented:
■ the corporate-level controls, which create
the “tone from the top” containing the
Nokia values and Code of Conduct and
which provide discipline and structure
to decision-making processes and ways
of working. Selected items from our
operational mode and governance
principles are separately documented
as corporate-level controls;
■ the significant processes: (i) give a complete
end-to-end view of all financial processes;
(ii) identify key control points; (iii) identify
involved organizations; (iv) ensure coverage
for important accounts and financial
statement assertions; and (v) enable
internal control management within Nokia;
■ the control activities, which consist of
policies and procedures to ensure the
management’s directives are carried out
and the related documentation is stored
according to our document retention
practices and local statutory requirements;
and
■ the information systems’ general controls
to ensure that sufficient IT general controls,
including change management, system
development and computer operations,
as well as access and authorizations,
are in place.
Further, the management has also:
■ assessed the design of the controls in
place aimed at mitigating the financial
reporting risks;
■ tested operating effectiveness of all key
controls; and
■ evaluated all noted deficiencies in internal
controls over financial reporting in the
interim and as of year-end.
In 2022, Nokia has followed the procedures
as described above and has reported on
the progress and assessments to the
management and to the Audit Committee
of the Board on a quarterly basis.
Description of the organization of the
internal audit function
We also have an internal audit function
that examines and evaluates the adequacy
and effectiveness of our system of internal
control. Internal audit reports to the Audit
Committee of the Board. The head of the
internal audit function has direct access to
the Audit Committee, without involvement of
the management. The internal audit staffing
levels and annual budget are approved by the
Audit Committee. All authority of the internal
audit function is derived from the Board.
The internal audit aligns to the business
by business group and function.
Annually, an internal audit plan is developed
with input from the management, taking into
account key business risks and external
factors. This plan is approved by the Audit
Committee. Audits are completed across the
business focusing on site level, customer
level, business project level, IT system
implementation, IT security, operations
activities or at a Group function level. The
results of each audit are reported to the
management identifying issues, financial
impact, if any, and the correcting actions to
be completed. Quarterly, the internal audit
function communicates the progress of the
internal audit plan completion, including
the results of the closed audits, to the
Audit Committee.
Internal audit also works closely with our
Ethics and Compliance office to review any
financial concerns brought to light from
various channels and, where relevant, works
with Enterprise Risk Management to ensure
priority risk areas are reviewed through audits.
In 2022, the internal audit plan was materially
completed. Due to some continued COVID-19
impacts, a small number of audits had to
be rescheduled to 2023. The results of all
completed reviews, as well as the rescheduling
to 2023 were reported to management and
to the Audit Committee.
Related party transactions
We determine and monitor related parties in
accordance with the International Accounting
Standards (IAS 24, Related Party Disclosures)
and other applicable regulations including
the applicable U.S. securities laws. We
maintain information on our related parties
as well as monitor and assess related party
transactions. As a main principle, all
transactions should be conducted at
arm’s-length and as part of the ordinary
course of business. In exceptional cases where
these principles would be deviated from,
Nokia would set up a separate process to
determine the related parties in question and
to seek relevant approvals in accordance with
internal guidelines and applicable regulations.
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Corporate governance Corporate governance statement
continued
Main procedures relating to
insider administration
Our insider administration is organized
according to the applicable European Union
and Finnish laws and regulations as well as
applicable U.S. securities laws and regulations.
In addition, the Board of Directors has
approved the Nokia Insider Policy, which sets
out Nokia-wide rules and practices to ensure
full compliance with applicable rules and that
inside information is recognized and treated
in an appropriate manner and with the highest
integrity. The Nokia Insider Policy is applicable
to all directors, executives and employees
of Nokia.
Persons discharging managerial
responsibilities
Nokia has identified members of the Board
of Directors and the Group Leadership Team
as persons discharging managerial
responsibilities who, along with persons
closely associated with them, are required
to notify Nokia and the Finnish Financial
Supervisory Authority of their transactions
with Nokia’s financial instruments. Nokia
publishes the transaction notifications.
In addition, according to the Nokia Insider
Policy, persons discharging managerial
responsibilities are obligated to clear with
the Head of Corporate Legal a planned
transaction in Nokia’s financial instruments in
advance. It is also recommended that trading
and other transactions in Nokia’s financial
instruments are carried out in times when
the information available to the market is as
complete as possible.
Closed window
Persons discharging managerial
responsibilities are subject to a closed window
period of 30 calendar days preceding the
disclosure of Nokia’s quarterly or annual
result announcements, as well as the day
of the disclosure. During the closed window
period, persons discharging managerial
responsibilities are prohibited from dealing
in Nokia’s financial instruments.
Nokia has imposed this closed window period
also on separately designated financial
reporting persons who are recurrently
involved with the preparation of Nokia’s
quarterly and annual results announcements.
These persons are separately notified
of their status as designated financial
reporting persons.
Insider registers
Nokia does not maintain a permanent
insider register. Insiders are identified on a
case-by-case basis for specific projects and
are notified of their insider status. Persons
included in a project-specific insider register
are prohibited from dealing in Nokia’s
financial instruments until the project ends
or is made public.
Supervision
Our insider administration’s responsibilities
include internal communications related
to insider matters and trading restrictions,
setting up and maintaining our insider
registers, arranging related trainings as well
as organizing and overseeing compliance
with the insider rules.
Violations of the Nokia Insider Policy must
be reported to the Head of Corporate Legal.
Nokia employees may also use channels
stated in the Nokia Code of Conduct for
reporting incidents involving suspected
violations of the Nokia Insider Policy.
Auditor fees and services
Deloitte Oy, based in Helsinki, Finland, served as our auditor for the financial year ended 31 December 2022 and for the financial year ended
31 December 2021. The auditor is elected annually by our shareholders at the Annual General Meeting for the financial year commencing next
after the election. On an annual basis, the Audit Committee of the Board prepares a proposal to the shareholders regarding the appointment
of the auditor based upon its evaluation of the qualifications and independence of the auditor to be proposed for election.
The following table presents fees by type paid to Deloitte’s network of firms for the years ended 31 December:
EURm
Audit fees(1)
Audit-related fees(2)
Tax fees(3)
All other fees(4)
Total
2022
22.7
0.8
0.4
0.2
24.1
2021
22.0
1.9
0.2
0.1
24.2
(1) Audit fees consist of fees incurred for the annual audit of the Group’s consolidated financial statements and the statutory financial statements of the Group’s subsidiaries.
(2) Audit-related fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the Group’s financial statements or that are
traditionally performed by the independent auditor, and include consultations concerning financial accounting and reporting standards; advice and assistance in connection with local statutory
accounting requirements; due diligence related to mergers and acquisitions; and audit procedures in connection with investigations in the pre-litigation phase and compliance programs. They also
include fees billed for other audit services, which are those services that only the independent auditor can reasonably provide, and include the provision of comfort letters and consents in connection
with statutory and regulatory filings and the review of documents filed with the SEC and other capital markets or local financial reporting regulatory bodies.
(3) Tax fees include fees billed for: (i) services related to tax compliance including preparation and/or review of tax returns, preparation, review and/or filing of various certificates and forms and consultation
regarding tax returns and assistance with revenue authority queries; compliance reviews, advice and assistance on other indirect taxes; and transaction cost analysis; (ii) services related to tax audits; (iii)
services related to individual compliance (preparation of individual tax returns and registrations for employees (non-executives), assistance with applying visa, residency, work permits and tax status for
expatriates); (iv) services related to technical guidance on tax matters; (v) services related to transfer pricing advice and assistance with tax clearances; and (vi) tax consultation and planning (advice on
stock-based remuneration, local employer tax laws, social security laws, employment laws and compensation programs and tax implications on short-term international transfers).
(4) Other fees include fees billed for Company establishments; liquidations; forensic accounting, data security, other consulting services and reference materials and services.
Compensation
This section sets out our remuneration governance, policies and how they have been
implemented within Nokia. It includes our Remuneration Report where we disclose the
compensation of our Board members and the President and CEO for 2022 and which will be
presented to an advisory vote at the Annual General Meeting 2023. A standalone version
is published on a stock exchange release.
Other compensation-related information provided alongside the Remuneration Report is not
subject to a vote at the Annual General Meeting 2023, but provides added information on the
compensation policies applied within Nokia as well as on the compensation of the rest of the
Group Leadership Team.
We report information applicable to executive compensation in accordance with Finnish
regulatory requirements and with requirements set by the U.S. Securities and Exchange
Commission that are applicable to us.
Highlights
■ While 2021 was a year of reset, with major changes in strategy,
operating model, organization design and culture, 2022 was a
year of acceleration for Nokia, and the business achieved strong
financial results, reflected in a proposal to increase the dividend
authorization at the Annual General Meeting 2023.
■ As President and CEO, Pekka Lundmark had no change to his base
salary and target compensation in 2022, and his short-term
incentive payment of 144% of target reflects Nokia’s strong
performance against objectives set by the Board.
■ Pekka Lundmark spent a significant amount of time in North
America in 2022, reflecting the importance of the North American
market and its home to key enterprise and webscale companies
that we partner with. While temporarily based out of Nokia’s
California office, Pekka Lundmark met in-person with many key
customers in North and South America, built networks within the
U.S. technology industry and deepened government relations.
■ The 2020 Performance share plan grants to Pekka Lundmark and
other Global Leadership Team (GLT) members were made in the
second half of 2020, and accordingly, performance outcomes for
the three-year period will be known in the second half of 2023
after the end of the performance period.
■ Reflecting the input from investors, the 2023 metrics for the
long-term incentive plan (Performance shares) for Pekka Lundmark
and the rest of the GLT will change from 100% absolute total
shareholder return (absolute TSR) to a blend of two-thirds absolute
TSR and one-third relative total shareholder return (relative TSR)
against our comparator group.
■ To bring greater focus to the important ESG topics of carbon
emission reduction and gender diversity, the Board has decided
that for the 2023 short-term incentive, the ESG weighting
will increase from 10% to 20% for the President and CEO,
and the rest of the GLT with a corresponding reduction in their
strategic objectives.
■ For 2023, as a result of Nokia’s continued growth and strong
business performance it was decided by the Board to increase
the President and CEO’s base salary by 3.5%, which is lower
than Nokia’s 2022 average global salary increase for the general
employee population.
Word from the Chair of the Personnel
Committee of the Board
Dear Fellow Shareholder,
I am delighted to present this year’s compensation report, in a year
where Nokia delivered clear acceleration in results across the business
and a broadened customer base through strong growth in Enterprise.
Business context
As the Letter from our President and CEO sets out in more detail, 2022
was a year when Nokia successfully executed its business strategy and
delivered on its commitment of an acceleration in business results.
Our continued use in 2022 of a long-term performance metric based
on shareholder return ensures that shareholders and executives are
aligned for the short- and long-term and there are direct links between
executive compensation and shareholder value creation. In 2022,
we maintained the compensation approach set by the Remuneration
policy approved by shareholders in 2020. The Remuneration Report,
and all elements of the compensation delivered in 2022, are fully
consistent with the approved policy.
For 2023, we will strengthen this alignment with the Performance
shares awarded being based on two-thirds absolute TSR and one-third
relative TSR, against our established comparator group. The comparator
group that we adopted last year has worked well and will be used as
the comparator group for the relative TSR calculation in the 2023
Performance shares. During 2023, we will continue to regularly engage
with key shareholders to discuss their views on our compensation
policies, programs and associated disclosures, and will reflect on their
insights when proposing to the Annual General Meeting 2024 the
Remuneration Policy and in preparing Nokia’s equity plan for 2024–2026.
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Corporate governance
Compensation
continued
Strategy and compensation
At the core of Nokia’s philosophy lie two principles:
■ pay for performance and aligning the interests of employees with
shareholders; and
■ ensuring that compensation programs and policies support the
delivery of the corporate strategy and create long-term sustainable
shareholder value.
Shareholder outreach
We were pleased that the remuneration report received 93% support
as part of an advisory vote in the Annual General Meeting in 2022,
and that 97% support was received for the revised fees to Directors.
During 2022 we also met with 13 of our largest shareholders and
several other key stakeholders, discussing a range of issues, primarily
focused on ESG and equity topics. These meetings have helped to
inform our views and strengthen our belief that ESG measures are
one of the core components of our incentive plans and have led to us
increasing the proportion of ESG weighting in the annual short-term
incentive for the President and CEO and the GLT members to 20%.
CEO compensation
During 2022, there was no increase to Pekka Lundmark’s base salary
and target incentives.
■ Pekka Lundmark’s bonus for 2022 was at 144% of target totaling
EUR 2 342 438, reflecting the strong acceleration in Nokia’s overall
business performance.
■ The second tranche of Pekka Lundmark’s restricted shares, awarded
to him in 2020 in respect of forfeited compensation from his
previous employer, vested in October 2022. This tranche totaled
117 467 shares. The third and final tranche is due in 2023 subject
to his continued service.
For 2023, as a result of Nokia’s continued growth and strong business
performance it was decided by the Board to increase Pekka
Lundmark’s base salary by 3.5%, which is lower than Nokia’s 2022
average global salary increase for the general employee population.
2022 remuneration outcomes
The 2022 short-term incentive outcome for the President and CEO
at 144% of overall target reflects Nokia’s strong 2022 performance.
The Board is satisfied with both the financial outcome and the
progress as measured against our ESG metrics, which is important
to Nokia’s future success and sustainability.
The 2020 Performance share plan metric is based on share price
increase achieved and dividends payable. Awards to the President and
CEO and other GLT members were made in the second half of 2020
and accordingly performance outcomes will be known in the second
half of 2023 as a result of the 36-month performance period. The
incentive range for the 2020 Performance Share plan is not disclosed
until after vesting takes place in 2023, in order to safeguard
commercially sensitive information.
Share ownership requirement
Pekka Lundmark significantly exceeds the shareholding requirement
with a holding worth more than four times his annual base salary
against a requirement of three times. This is a sign of his commitment
to and alignment with Nokia’s long-term success.
Short- and long-term incentives in 2023
Our 2023 incentive structure for the President and CEO and the rest of
the GLT is outlined below.
Delivering sustainable value – Long-term incentive
Two-thirds Absolute Total Shareholder Return,
one-third Relative Total Shareholder Return
Focus on increase in share price and payment of the dividend
Delivering the next year’s step in the strategic plan –
Short-term incentive
Economic profit
70%
Deliver Economic
profit
Environmental, social and
governance aspects (ESG)
20%
Deliver on our responsibilities
to reduce carbon emissions
and become a more diverse
employer
Strategic
objective 10%
Deliver meaningful
strategic actions
The 2023 Performance shares under the Nokia Long-term Incentive
Plan 2021–2023 is based on absolute TSR (as measured by dividend
adjusted share price at the end of the performance period) and
relative TSR performance (the absolute TSR as measured against our
27 comparator companies) over the life of the three-year plan from
the date of the award. The President and CEO, and the rest of the GLT
will continue to receive Performance shares as the main form of their
long-term incentives. Our compensation approach and structure
continues to play a key role in supporting Nokia’s business strategy
and sustainable share price growth over time.
In the Remuneration Report, we also show a comparison of the
development of compensation for the Board members and the
President and CEO, against average employee remuneration and
Nokia’s financial development over the last five years. The comparison
continues to show a clear link between President and CEO pay and
Company performance.
I will be stepping down from the Nokia Board effective in April at
the 2023 Annual General Meeting. It has been an honor to serve
as the Chair of the Personnel Committee during a period in which
we increased our engagement with investors and moved to a
compensation program that is better aligned with the investor,
stakeholder and management interests, introduced incentives to
drive ESG outcomes, and improved our disclosures to Investors.
In my more than 10 years on the Nokia Board, I have never felt
better about Nokia’s future.
Bruce Brown
Chair of the Personnel Committee
Remuneration Policy
Nokia Corporation’s Remuneration Policy was supported at the Annual
General Meeting 2020 receiving 86% of votes in favor. This policy
remained in force and unchanged during 2022. The information below
is provided as a summary for ease of reference.
In addition to applying the Remuneration Policy to our President and
CEO, the principles of our policy extend to the Group Leadership
Team. This includes caps to equity award amounts and provisions
related to clawback.
The Board regularly monitors the effectiveness of the measures used
in our incentive plans to ensure that they align with and drive the
strategy of the Company.
Remuneration summary for the Board of Directors
The Board’s Corporate Governance and Nomination Committee
periodically reviews the remuneration for the Chair and members
of the Board against companies of similar size and complexity. The
objective of the Corporate Governance and Nomination Committee
is to enable Nokia to compete for the top-of-the-class Board
competence in order to maximize the value creation for the
shareholders. The Committee’s aim is to ensure that the Company
has an efficient Board comprised of international professionals
representing a diverse and relevant mix of skills, experience,
background and other personal qualities in line with the diversity
principles established by the Board. Competitive Board remuneration
contributes to the achievement of this target.
The structure of the Board remuneration for the current term of the
Board that began at the Annual General Meeting held on 5 April 2022
and ends at the close of the Annual General Meeting in 2023 is set out
in the table below.
Fees
Fees consist of annual fees and meeting fees.
Approximately 40% of the annual fee is paid in Nokia
shares purchased from the market on behalf of the
Board members or alternatively delivered as treasury
shares held by the Company. The balance is paid in
cash, most of which is typically used to cover taxes
arising from the paid remuneration.
Meeting fees are paid in cash.
No meeting fees and no additional annual fees based
on service in any of the Board Committees are paid to
the Chair of the Board.
Non-executive directors are not eligible to participate
in any Nokia incentive plans and do not receive
performance shares, restricted shares or any other
equity-based or other form of variable compensation
for their duties as members of the Board.
Non-executive directors do not participate in any
Nokia pension plans.
Members of the Board shall normally retain until the
end of their directorship such number of shares that
corresponds to the number of shares they have
received as Board remuneration during their first
three years of service in the Board (the net amount
received after deducting those shares needed to
offset any costs relating to the acquisition of the
shares, including taxes).
Directors are compensated for travel and
accommodation expenses as well as other costs
directly related to Board and Committee work.
This compensation is paid in cash.
Incentives
Pensions
Share
ownership
requirement
Other
Remuneration for the term that began at the Annual General Meeting
held on 5 April 2022 and ends at the close of the Annual General
Meeting in 2023 consisted of the following fees.
Annual fee(1)
Chair
Vice Chair
Member
Chair of Audit Committee
Member of Audit Committee
Chair of Personnel Committee
Member of Personnel Committee
Chair of Technology Committee
Member of Technology Committee
Meeting fee(2)
Meeting requiring intercontinental travel
Meeting requiring continental travel
EUR
440 000
195 000
170 000
30 000
15 000
30 000
15 000
20 000
10 000
EUR
5 000
2 000
(1) The fees payable to the Committee Chairs and members were not paid to the Chair of the Board
for her service in any of the Board Committees.
(2) Paid for a maximum of seven meetings per term. Was not paid to the Chair of the Board.
Proposals of the Board of Directors to the Annual General Meeting 2023
were published on 26 January 2023. To ensure the competitiveness
of the Board remuneration and reflecting the fee development in
Nokia’s global peer group, the Corporate Governance and Nomination
Committee has resolved to recommend to the Board that the annual
fees of Board members, save for the Chair of the Board, be proposed to
be increased by EUR 15 000. Other remuneration payable to the Board
and all Committee members would remain at an unchanged level.
Consequently, on the recommendation of the Board’s Corporate
Governance and Nomination Committee and in line with Nokia’s
Remuneration Policy, the Board of Directors proposes to the Annual
General Meeting 2023 that the annual fees payable for a term ending at
the close of the next Annual General Meeting be as follows: EUR 440 000
for the Chair of the Board, EUR 210 000 for the Vice Chair of the Board,
EUR 185 000 for each member of the Board, EUR 30 000 each for the
Chairs of the Audit Committee and the Personnel Committee and
EUR 20 000 for the Chair of the Technology Committee as an additional
annual fee, EUR 15 000 for each member of the Audit Committee
and Personnel Committee and EUR 10 000 for each member of the
Technology Committee as an additional annual fee. Further, the
additional annual fees are paid to all members of the above-mentioned
Committees, including the Board Chair.
In order to align the interests of the Board members with those of
the shareholders, it is also proposed that, in line with the Company’s
Corporate Governance Guidelines, approximately 40% of the annual fee
be paid in Nokia shares either purchased from the market on behalf of
the Board members or alternatively delivered as treasury shares held by
the Company.
In addition, the Board of Directors proposes that the meeting fees for
Board and Board Committee meetings remain at the current level and
are paid to all Board members, including the Board Chair. The meeting
fees are based on potential travel required between the Board
member’s home location and the location of a meeting and paid for
a maximum of seven meetings per term as follows: EUR 5 000 per
meeting requiring intercontinental travel; and EUR 2 000 per meeting
requiring continental travel. Only one meeting fee is paid if the travel
entitling to the fee includes several meetings of the Board and
its Committees.
The Board also proposes that members of the Board of Directors shall
be compensated for travel and accommodation expenses as well as
other costs directly related to Board and Board Committee work. The
meeting fee, travel expenses and other expenses would be paid in cash.
62
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63
Corporate governance Compensation
continued
Remuneration summary for the President and CEO
Element
Year ending 31 December 2023
Name
Pekka Lundmark
Base salary
EUR 1 345 500
Year ended
31 December 2022
Pekka Lundmark
EUR 1 300 000
Short-term
incentives
Measures:
Measures:
■ 100% Nokia scorecard
■ 100% Nokia scorecard
To incentivize and reward performance
against delivery of the annual business plan.
– 70% Economic profit
– 20% Environment,
social and governance
– 10% Strategic objectives
– 70% Comparable
operating profit
– 20% Strategic objectives
– 10% Environment,
social and governance
Long-term
incentives
(Performance
Shares)
Target award 200% of base
salary (EUR 2 691 000)
Target award 200%
of base salary (EUR 2 600 000)
Minimum 0% of base salary
Minimum 0% of base salary
To reward for delivery of sustainable
long-term performance, align the
President and CEO’s interests with
those of shareholders and aid retention.
Maximum 400% of base salary(1)
Maximum 400% of base salary(1)
Metrics:
2/3rds Absolute Total
Shareholder return
1/3rd Relative Total
Shareholder Return
Contribution to the mandatory
TyEL pension plan in Finland.
Pension
Metric: Absolute Total Shareholder
Return
Contribution to the mandatory
TyEL pension plan in Finland.
To provide for retirement with a level
of certainty.
Benefits &
mobility
Life and critical illness insurance,
private medical insurance and
company car, phone etc.
Life and critical illness insurance,
private medical insurance and
company car, phone etc.
To attract, retain and protect the
President and CEO.
Total Target
Remuneration
Share ownership
requirement
EUR 5 718 375(1)
EUR 5 525 000(1)
Requirement: 3 times annual
base salary
Requirement: 3 times annual
base salary
Requirement (value):
EUR 4 036 500
Requirement (value):
EUR 3 900 000
(1) Excluding share price growth and the matching shares under the 2020 and 2021 eLTI co-investment arrangements.
Purpose
Operation
Opportunity
Provide competitive base salary to attract
and retain individual with the requisite level
of knowledge, skills and experience to lead
our businesses.
Base pay is normally reviewed annually taking into consideration
a variety of factors, including, for example, the following:
■ performance of the Company and the individual;
■ remuneration of our external comparator group;
■ changes in individual responsibilities; and
■ employee salary increases across Nokia and in the local market.
Short-term incentives are based on performance against
single-year targets and normally paid in cash.
Targets for the short-term incentives are set at the start of the
year, in the context of analyst expectations and the annual plan,
selecting measures that align to the delivery of Nokia’s strategy.
Achievement is assessed at the end of the year.
Short-term incentives are subject to the clawback policy
(see below).
Long-term incentive awards are normally made in performance
shares and paid for performance against longer-term targets.
Targets are set in the context of the Nokia long-term plans
and analyst forecasts ensuring that they are considered both
demanding and motivational.
Long-term incentives are subject to the clawback policy
(see below).
Retirement age is defined and pensions are provided in line with
local country arrangements; in Finland this is the statutory Finnish
pension system (Finnish TyEL).
Under the TyEL arrangements, base salary, incentives and other
taxable benefits are included in the definition of earnings while
gains from equity-related plans are not.
No supplemental pension arrangements are provided in Finland.
Benefits are made available as part of the same policy that applies
to employees more broadly in the relevant country. Additionally
other benefits, such as security provisions, may be provided
as appropriate.
Pay reviews are set within the context of employee increases
and changes within the Nokia peer group. Changes reflect not
only improving performance but also improving competence
and skills as would be applied to any other employee in Nokia.
Target award 125% of base salary
Minimum 0% of base salary
Maximum 281.25% of base salary
Target award 200% of base salary
Minimum 0% of base salary
Maximum 400% of base salary(1)
The Board’s Personnel Committee retains discretion to make
awards up to twice that level in exceptional circumstances such
as for example upon recruitment, significant change in
responsibilities, significant strategic change or other similar
events. The use of discretion would be explained at the time.
Pursuant to Finnish legislation, Nokia is required to make
contributions to the Finnish TyEL pension arrangements in
respect of the President and CEO. Such payments can be
characterized as defined contribution payments. The amount
is disclosed in the Remuneration Report.
The value will be the cost to the company.
64
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65
Corporate governance
Compensation
continued
Illustration of the earning opportunity for the
President and CEO
The illustration below shows the pay components of the President
and CEO at minimum, target and maximum payout. It includes an
annual apportionment of both 2020 and 2021 eLTI co-investment
arrangements. Pekka Lundmark chose to invest in both years aligning a
considerable proportion of his incentive directly to shareholder return.
Earning opportunity of the President and CEO (EURm)
20
15
10
5
0
Min
Target
Max
Base salary
Short-term incentive
Long-term incentive
Co-investment arrangement
Share ownership requirement
Nokia believes that it is desirable for its executives to own shares in
Nokia to align their interests with those of shareholders and to ensure
that their decisions are in the long-term interest of the company. The
President and CEO is required to own three times his or her annual
base salary in Nokia shares and is given a period of five years from
appointment to achieve the required level of share ownership.
Remuneration on recruitment
Our policy on recruitment is to offer a compensation package that is
sufficient to attract, retain and motivate the individual with the right
skills for the required role.
On occasion, we may offer compensation to buy out awards or other
lost compensation which the candidate held prior to joining Nokia, but
which lapsed upon the candidate leaving their previous employer. Due
consideration is given to the potential value and timing of such awards,
taking into account any conditions attached to the awards and the
likely performance against such conditions.
Clawback
The President and CEO is subject to a clawback policy where any
restatement of financial results may result in the reclaiming of
amounts previously paid, which had been based on numbers that have
since been materially restated. Any such reclaimed amount, and the
period over which payments can be reclaimed, will take into account
the circumstances and duration of any misstatement. In the case of
unintentional misstatement, payments made within the last three
years may be subject to the policy at the discretion of the Personnel
Committee.
Termination provisions
In the event of a termination of employment, any payable
compensation is determined in line with legal advice regarding local
legislation, country policies, contractual obligations and the rules
of the applicable incentive and benefit plans. Current termination
provisions of the President and CEO’s service agreement are described
in the Remuneration Report.
Change of control arrangements, if any, are based on a double trigger
structure, which means that both a specified change of control event
and termination of the individual’s employment must take place for
any change of control-based severance payment to materialize.
Please note that the Remuneration Report, applicable to the Board and President and CEO,
subject to an advisory vote at the Annual General Meeting 2023, is set out below and is also
published on a stock exchange release. Other compensation-related information provided before
and after the Remuneration Report is not subject to a vote at the Annual General Meeting 2023,
but provides further information on the compensation policies applied within Nokia and the
compensation of the Group Leadership Team.
Remuneration Report 2022
Introduction
This Remuneration Report (the Report) of Nokia Corporation (Nokia or Company) has been approved by the Company’s Board of Directors
to be presented to the Annual General Meeting 2023. The resolution of the Annual General Meeting on the Report is advisory. The Report
presents the remuneration of the members of the Board of Directors and the President and CEO for the financial year 2022 in accordance
with the Finnish Decree of the Ministry of Finance 608/2019, the Finnish Corporate Governance Code of 2020 as well as other applicable
Finnish laws and regulations.
The members of the Board of Directors and the President and CEO have been remunerated in accordance with our approved Remuneration
Policy during the financial year 2022. No temporary or other deviations from the Policy have been made and no clawback provisions have
been exercised during the financial year 2022.
In 2022, our remuneration structure promoted the Company’s long-term financial success by setting the performance criteria for short-
and long-term incentives to support the Company’s short- and long-term goals, as well as through shareholding requirements set for
the President and CEO and the Board members. Aligned with Nokia’s pay-for-performance remuneration principle, performance-based
compensation was emphasized over fixed base salary. The setting and application of the performance criteria for incentive programs
executed the philosophy of pay-for-performance and supported the delivery of the corporate strategy as well as the creation of long-term
sustainable shareholder value.
The table below compares the development of the remuneration of our Board of Directors, President and CEO, average employee pay and
the Company performance.
Year
2018
2019
2020
2021
2022
Aggregate remuneration
of the Board of
Directors (EUR)(1)
2 203 000
2 219 000
2 016 000
1 821 000
2 280 000
President and
CEO actual
remuneration (EUR)
4 651 009
3 897 625
3 587 781(2)
4 908 244
4 316 606
Average Salaries
and Wages (EUR)(3)
63 220
61 980
65 787
70 411
74 100
Net sales (EURm)
22 563
23 315
21 852
22 202
24 911
Total Shareholder Return
(Rebased to 100 at
31 Dec 2017)(4)
85.92
57.48
54.95
132.63
119.31
(1) Aggregate total remuneration paid to the members of the Board during the financial year as annual fee and meeting fee, as applicable, and as approved by general meetings of shareholders.
The value depends on the number of members elected to the Board for each term as well as on the composition of the Board committees and travel required.
(2) The President and CEO actual remuneration represents the combined total in 2020, when Pekka Lundmark replaced Rajeev Suri.
(3 Average salaries and wages are based on average employee numbers and their total salaries and wages as reported in the Company’s financial statements.
(4) Total shareholder return on last trading day of the previous year.
We also present this data graphically:
Comparative data (rebased year end 2017 = 100)
150%
100%
50%
0
2017
2018
2019
2020
2021
2022
Remuneration of the Board of Directors
President and CEO actual remuneration
Average salaries and wages
Net sales
Total Shareholder Return
66
NOKIA IN 2022
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67
Corporate governance Compensation
continued
While the graph reflects the euro values paid during each financial year, in practice the Board members’ remuneration closely aligns with
the performance of the Company and the total shareholder return. Approximately 40% of the Board members’ annual fees are paid in
Nokia shares purchased from the market on their behalf. The rest of the annual fee was paid in cash, most of which is typically used to
cover taxes arising from the remuneration. All members of the Board were non-executive during the financial years 2018–2022.
The pay-for-performance remuneration principle applied to the President and CEO as well as the shareholding requirement of the
President and CEO and the Board members, as applicable, contribute to an alignment of interests with shareholders, while also promoting
and incentivizing decisions that are in the long-term interest of the Company.
Remuneration of the Board of Directors
The shareholders resolve annually on director remuneration at the Annual General Meeting based on a proposal made by the Board of
Directors on the recommendation of the Board’s Corporate Governance and Nomination Committee.
At the Annual General Meeting held on 5 April 2022 Kari Stadigh stepped down from the Board and the Annual General Meeting resolved
to elect 10 members to the Board. The following Board members were re-elected for a term ending at the close of the Annual General
Meeting 2023: Sari Baldauf, Bruce Brown, Thomas Dannenfeldt, Jeanette Horan, Edward Kozel, Søren Skou and Carla Smits-Nusteling.
Lisa Hook, Thomas Saueressig and Kai Öistämö were elected as new members of the Board for the same term.
The aggregate amount of compensation paid to Board members in 2022 equaled EUR 2 280 000 of which EUR 2 205 000 consisted of
annual fees and the rest of meeting fees. In accordance with the resolution by the Annual General Meeting 2022, approximately 40% of the
annual fee from Board and Board Committee work was paid in Nokia shares purchased from the market on behalf of the Board members
following the Annual General Meeting. The directors shall retain until the end of their directorship such number of shares that corresponds
to the number of shares they have received as Board remuneration during their first three years of service on the Board. The rest of the
annual fee was paid in cash. All meeting fees were also paid in cash.
It is the Company’s policy that the non-executive members of the Board do not participate in any of Nokia’s equity programs and do
not receive performance shares, restricted shares, or any other equity-based or other variable compensation for their duties as Board
members. No such variable compensation was paid since all persons acting as Board members during the financial year 2022 were
non-executive.
The following table outlines the total annual compensation paid in 2022 to the members of the Board for their services, as resolved by the
shareholders at the Annual General Meeting.
Sari Baldauf (Chair)
Søren Skou (Vice Chair)
Bruce Brown
Thomas Dannenfeldt
Lisa Hook
Jeanette Horan
Edward Kozel
Thomas Saueressig
Carla Smits-Nusteling
Kari Stadigh (until 5 April 2022)(2)
Kai Öistämö
Total
Annual fee (EUR) Meeting fees (EUR)(1)
440 000
210 000
210 000
200 000
185 000
195 000
205 000
180 000
200 000
–
180 000
2 205 000
–
9 000
17 000
9 000
7 000
–
12 000
7 000
9 000
–
5 000
75 000
Total
remuneration
paid (EUR)
440 000
219 000
227 000
209 000
192 000
195 000
217 000
187 000
209 000
–
185 000
2 280 000
60% of annual
fees and all
meeting fees paid
in cash (EUR)
264 000
135 000
143 000
129 000
118 000
117 000
135 000
115 000
129 000
–
113 000
1 398 000
40% of annual
fees paid in
shares (EUR)
176 000
84 000
84 000
80 000
74 000
78 000
82 000
72 000
80 000
–
72 000
882 000
Number of Shares
approximately 40%
of the annual fee
36 217
17 285
17 285
16 462
15 227
16 050
16 874
14 816
16 462
–
14 816
181 494
(1) Meeting fees include all meeting fees paid for the term that ended at the Annual General Meeting held on 5 April 2022 and meeting fees accrued and paid in 2022 for the term that began at the
same meeting.
(2) Stepped down at the Annual General Meeting on 5 April 2022 and did not receive any annual or meeting fees in 2022.
Remuneration of the President and CEO
The following table shows the actual remuneration received by Pekka Lundmark in 2022 and 2021. The long-term incentive figures relate
to the release of restricted shares granted on joining in respect of forfeited shares from his previous employer.
EUR
Salary
Short-term incentive(2)
Long-term incentive
Other compensation(3)
Total
2022
1 300 000
2 342 438
560 318
113 850
4 316 606
Pay mix(1)
31%
56%
13%
2021
1 300 000
2 975 781
596 732
35 731
4 908 244
Pay mix(1)
27%
61%
12%
(1) Pay mix reflects the proportions of base salary, short-term incentive and long-term incentive of total compensation, excluding other compensation.
(2) Short-term incentives represent amounts earned in respect of the financial year, but that are paid in April of the following year.
(3) Other compensation includes benefits such as telephone, car, driver, tax compliance support, and medical insurance.
Pursuant to Finnish legislation, Nokia is required to make contributions to the Finnish TyEL pension arrangements in respect of the
President and CEO. Such payments can be characterized as defined contribution payments. In 2022, payments to the Finnish state pension
system equaled EUR 475 384 for Pekka Lundmark in respect of his service as President and CEO (EUR 314 457 for Pekka Lundmark in 2021).
No supplementary pension arrangements were offered.
Short-term incentive
The 2022 short-term incentive framework for the President and CEO was based on financial, strategic and ESG objectives. Achievement
against the 2022 targets was as follows:
Metric
Comparable Operating Profit(1)
Diversity
Emissions Scopes 1,2 and 3
Strategic Objectives(2)
Weight
70%
5%
5%
20%
Target
2 885 EURm
Diversity of new hires
293 955 tCO2e (Scopes 1 and 2)
Balanced scorecard (Scope 3)
Individual objectives
Achievement
156%
60%
151%
122%
(1) Non-IFRS measure. For the definition and reconciliation of non-IFRS measures to the most directly comparable IFRS measures, refer to ”Alternative performance measures” section.
(2) The outcome is driven by growth in Enterprise sales and projects that are important to Nokia’s future.
Accordingly, the short-term incentive of Pekka Lundmark as the President and CEO equaled EUR 2 342 438 or 144% of the target award.
Long-term incentives
In 2022, Pekka Lundmark was awarded the following Performance share awards under Nokia’s Long-term Incentive Plan 2021–2023.
The performance condition for the 2022 Performance shares is based on absolute total shareholder return and the actual achievement
will be detailed following the end of the three-year performance period.
Performance share awards(1)
Awarded as regular performance share award
Units awarded
543 900
Grant date fair value
(EUR)
2 409 477
Grant date
6 July 2022
Vesting
Q3 2025
(1) The 2022 Performance shares have a three-year performance period based on absolute total shareholder return. The maximum payout is 200% subject to maximum performance against the
performance criterion. Vesting is subject to continued employment.
Vesting for the President and CEO during the year
The second tranche of Pekka Lundmark’s 2020 restricted share award, made to him on joining in recognition of forfeited awards from his
previous employer, vested on 1 October 2022, releasing 117 467 shares to the value of EUR 560 318.
Share awards vesting during the year
2020 Restricted Share Award Tranche 2
Units awarded
117 467
Target
N/A
Achievement
N/A
Units vesting
117 467
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NOKIA IN 2022
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69
Corporate governance Compensation
continued
Share ownership and unvested share awards
Our share ownership policy requires that the President and CEO holds a minimum of three times his or her annual base salary in Nokia
shares in order to ensure alignment with shareholder interests over the long term. Pekka Lundmark significantly exceeds this requirement
with a holding of more than four times base salary, well within the five-year allotted period.
Pekka Lundmark’s unvested shares include his 2020 and 2021 eLTI awards, the last tranche of his buy-out Restricted share award as well as
any Performance share grants made to him since joining Nokia. The payout of his 2020 eLTI and Performance shares will not be known until
later in 2023.
The eLTI is a selective arrangement offered to senior leaders in 2021 and to the president and CEO in 2020. In return for the purchase and
continued holding of Nokia shares, a 2:1 match of Nokia Performance shares was made which vest after three years subject to absolute
total shareholder return and continued employment. The maximum payout is 200% subject to maximum performance against the
performance criterion.
Pekka Lundmark
Beneficially owned shares as of 31 December 2022
Unvested shares under outstanding Nokia equity plans(2)
Total
(1) The values are based on the closing price of a Nokia share of EUR 4.327 on Nasdaq Helsinki on 30 December 2022.
(2) The number of units represents the number of unvested awards as of 31 December 2022.
President and CEO’s termination provisions are as follows:
Units
1 289 304
4 455 440
5 744 744
Value(1) (EUR)
5 578 818
19 278 689
24 857 507
Termination by Reason
Cause
Nokia
Notice
None
Nokia
Reasons other
than cause
Up to 12 months
President
and CEO
Any reason
12 months
President
and CEO
Nokia’s material
breach of the service
agreement
Up to 12 months
Compensation
The President and CEO is entitled to no additional compensation and all
unvested equity awards would be forfeited after termination.
The President and CEO is entitled to a severance payment equaling up to
12 months of compensation (including annual base salary, benefits, and
target incentive) and unvested equity awards would be forfeited after
termination.
The President and CEO may terminate his service agreement at any time
with 12 months’ prior notice. The President and CEO would either continue
to receive salary and benefits during the notice period or, at Nokia’s
discretion, a lump sum of equivalent value. Additionally, the President and
CEO would be entitled to any short- or long-term incentives that would
normally vest during the notice period. Any unvested equity awards would
be forfeited after termination.
In the event that the President and CEO terminates his service agreement
based on a final arbitration award demonstrating Nokia’s material breach of
the service agreement, he is entitled to a severance payment equaling up to
12 months of compensation (including annual base salary, benefits and target
incentive). Any unvested equity awards would be forfeited after termination.
Remuneration governance
We manage our remuneration through clearly defined processes,
with well-defined governance principles, ensuring that no individual
is involved in the decision-making related to their own remuneration
and that there is appropriate oversight of any compensation decision.
Remuneration of the Board is annually presented to shareholders for
approval at the Annual General Meeting and the remuneration of the
President and CEO is approved by the Board.
The Board submits its proposal to the Annual General Meeting on
the recommendation of the Board’s Corporate Governance and
Nomination Committee, which actively considers and evaluates
the appropriate level and structure of directors’ remuneration.
Shareholders also authorize the Board to resolve to issue shares,
for example to settle Nokia’s equity-based incentive plans,
based on the proposal of the Board.
The Board of Directors approves, and the independent members
of the Board confirm, the compensation of the President and CEO,
upon recommendation of the Personnel Committee. The Personnel
Committee consults regularly with the President and CEO and the
Chief People Officer though they are not present when their own
compensation is reviewed or discussed. This enables the Personnel
Committee to be mindful of employee pay and conditions across the
broader employee population. The Committee has the power, in its
sole discretion, to retain compensation consultants to assist the
Personnel Committee in evaluating executive compensation.
The Personnel Committee Chair regularly engages with shareholders
to discuss their views on our compensation policies, programs and
associated disclosures and reflect on their feedback. These insights
have informed an expansion of the ESG weighting in the short-term
incentive and the introduction of relative TSR as a metric in the 2023
Performance shares.
Work of the Personnel Committee
The Personnel Committee convened five times during 2022
with a general theme for each meeting.
D E C
JAN
N O V
F
E
B
T
C
O
S
E
P
4
3
1
2
M
A
R
R
P
A
M AY
September
■ Succession
■ 2023 Incentive framework
■ Analytics and demographics
■ Equity plan direction
December
■ Personnel Committee charter
review
■ 2023 Incentive metrics
■ Shareholder feedback ahead
of 2023 proxy season
■ Remuneration Report for 2022
February
■ Incentive targets and
objectives
■ Nokia Equity Program
■ Culture evolution
■ Prior year’s incentive results
■ President and CEO
remuneration
May
■ Culture update
■ Shareholder feedback in
the AGM
■ GLT compensation review
■ Policy and structure review
July
■ People risks and opportunities
■ LTI Development
■ Status of incentive payouts
and ESG goal achievement
The President and CEO is subject to a 12-month non-competition and non-solicit obligation that applies after the termination of the
service agreement or the date when he is released from his obligations and responsibilities, whichever occurs earlier.
A
U
G
JUL
J U N
1 Approvals & reporting
2 Philosophy & structure
3 Long-term direction & market review
4 Planning
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71
Corporate governance
Compensation
continued
The President and CEO
The President and CEO has an active role in the compensation
governance and performance management processes for the Group
Leadership Team and the wider employee population at Nokia.
The President and CEO is not a member of the Personnel Committee
and does not vote at Personnel Committee meetings, nor does he
participate in any conversations regarding his own compensation.
Advisors
The Personnel Committee engaged Willis Towers Watson, an
independent external consultant, to assist in the review and
determination of executive compensation and program design and
provide insight into market trends and regulatory developments.
Group Leadership Team
At the end of 2022, the Group Leadership Team consisted of 10 persons split between Finland, other European countries, Singapore and the
United States. For information regarding the current Group Leadership Team composition, refer to the Corporate Governance Statement.
Name
Pekka Lundmark
Nishant Batra
Ricky Corker
Federico Guillén
Amy Hanlon-Rodemich
Jenni Lukander
Raghav Sahgal
Melissa Schoeb
Tommi Uitto
Marco Wirén
Position in 2022
President and CEO
Chief Strategy and Technology Officer
Chief Customer Experience Officer
President of Network Infrastructure
Chief People Officer
President of Nokia Technologies
President of Cloud and Network Services
Chief Corporate Affairs Officer
President of Mobile Networks
Chief Financial Officer
Appointment date
1 August 2020
18 January 2021
1 January 2019
8 January 2016
24 October 2022
1 August 2019
1 June 2020
12 April 2021
31 January 2019
1 September 2020
The remuneration of the members of the Group Leadership Team
consists of base salary, other benefits, and short- and long-term
incentives. Short-term incentive plans are based on rewarding the
delivery of business performance utilizing certain, or all, of the
following metrics as appropriate to the member’s role: comparable
operating profit of Nokia*, segment operating profit for the relevant
business group, diversity and carbon emission targets and defined
strategic objectives.
Executives on the Group Leadership Team are subject to the same
remuneration policy framework as the President and CEO. This
includes being subject to clawback and shareholding requirements.
The shareholding requirement for members of the Group Leadership
Team is two times their base salary.
Remuneration of the Group Leadership Team in 2022
Remuneration of the Group Leadership Team (excluding the President and CEO) in 2021 and 2022, in the aggregate, was as follows:
Salary, Short-term incentives and other compensation(2)
Long-term incentives(3)
Total
2022
EURm(1)
13.6
7.0
20.6
2021
EURm(1)
16.0
2.2
18.2
(1) The values represent each member’s time on the Group Leadership Team.
(2) Short-term incentives represent amounts earned in respect of 2022 performance. Other compensation includes mobility related payments, local benefits and pension costs.
(3) The amounts represent the equity awards that vested in 2022 and 2021.
The members of the Group Leadership Team (excluding the President and CEO) were awarded the following equity awards under the Nokia
equity program in 2022:
Award
Performance share award(2)
Restricted share award(3)
Units
awarded(1)
1 610 900
58 900
Grant date fair value (EUR)
7 148 486
260 927
Grant date
6 July and 15 December 2022
6 July 2022
Vesting
Q3 and Q4 2025
Q3 2023
(1) Includes units awarded to persons who were Group Leadership Team members during 2022.
(2) The 2022 Performance shares have a three-year performance period based on absolute total shareholder return. The maximum payout is 200% subject to maximum performance against the
performance criterion. Vesting is subject to continued employment.
(3) Vesting of each tranche of the restricted share awards is conditional on continued employment.
Unvested equity awards held by the Nokia Group Leadership Team, including the President and CEO
The following table sets forth the potential aggregate ownership interest through the holding of equity-based long-term incentives of the Group
Leadership Team in office, including the President and CEO, as of 31 December 2022:
Number of equity awards held by
the Group Leadership Team(1)
% of the outstanding shares(2)
% of the total outstanding equity
incentives (per instrument)(3)
Shares receivable
through performance
shares at grant
Shares receivable
through performance
shares at maximum(4)
10 191 488
0.18%
16.05%
20 382 976
0.36%
16.05%
Shares receivable
through restricted
shares
357 090
0.01%
0.66%
(1) Includes the 10 members of the Group Leadership Team in office at 31 December 2022.
(2) The percentages are calculated in relation to the outstanding number of shares and total voting rights of Nokia at 31 December 2022, excluding shares held by the Nokia Group. No member of the
Group Leadership Team owns more than 1% of the outstanding Nokia shares.
(3) The percentages are calculated in relation to the total outstanding equity incentives per instrument.
(4) At maximum performance, under the performance share plans outstanding at 31 December 2022, the payout would be 200% and the table reflects this potential maximum payout.
Review of our incentive plans
Each year we monitor the performance of our incentive plans against
the targets for the plan, total shareholder return and the impact that
the plans have on total compensation compared with market peers.
Long-term incentives
We annually review compensation against key metrics such as total
shareholder return and share price to validate the effectiveness of
our equity plans.
The 2020 Performance share plan is due to vest in the second half of
2023 and accordingly the performance outcome for the three-year
period will then be known.
The metric for the performance shares awarded in 2022 (under the
Nokia LTI Plan 2021–2023) was based on total shareholder return
in a similar manner to the 2020 and 2021 awards. This reflects our
commitment to driving the best direct, long-term results and closely
aligns plan participants with the interests of shareholders. Awards
to senior executives and leaders were made in July. Awards are not
due to vest until a corresponding date three years later in 2025.
The performance conditions remained constant for all performance
share awards made in 2022.
Target setting
Targets for the short-term incentives are set annually at or before
the start of the year, balancing the need to deliver value with the need
to motivate and drive performance of the Group Leadership Team.
Targets are selected from a set of strategic metrics that align with
driving sustainable value for shareholders and are set in the context of
market expectations and analyst consensus forecasts. Targets for our
long-term incentive plans are set in a similar context. The long-term
incentive targets are set at the start of the performance period and
locked in for the life of the plan.
Short-term incentives
In 2022, short-term incentive targets and achievements were based
on a mix of metrics as shown below. Targets were measured either
at a Nokia Group level or, alternatively, at a mix of Nokia Group and
business group level for business group presidents.
■ Comparable operating profit of Nokia*
■ Segment operating profit for the relevant business group
■ Role related strategic objectives
■ ESG (carbon emissions and diversity)
Those Group Leadership Team members not leading a business group
will have the equivalent proportion of their incentive based on Nokia’s
comparable operating profit*.
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73
* Non-IFRS measure. For the definition and reconciliation of non-IFRS measures to the most
directly comparable IFRS measures, refer to ”Alternative performance measures” section.
Corporate governance Comparator companies
This consists of the following 27 companies.
ABB
Adobe
Airbus
ASML
Atos
BAE Systems
Capgemini
Ciena
Cisco Systems
Corning
Dell Technologies
Ericsson
Hewlett Packard Enterprise
HP
IBM
Infineon Technologies
Juniper Networks
Kone
Motorola Solutions
NXP Semiconductors
Oracle
Philips
SAP
Siemens Healthineers
VMware
Vodafone Group
Wärtsilä
Pay for performance
Core to our compensation philosophy is a desire to pay for performance.
Each year we review overall total shareholder return compared with
long-term incentive payouts mapping the performance of the plans
against the total shareholder return curve.
Share price and total shareholder return vs long-term
incentive performance
250%
200%
150%
100%
50%
25.72% 23.75%
100% 100%
86%
46%
29%
57% 53%
0
TSR
value
Nil
2012
2013
2015 2016
2014
2017
2018 2019 2020*
Long-term incentive plan, as of 31 December
2021*
2022*
Achieved
Overachieved
Nokia total shareholder return (“TSR”)
* Performance period not yet completed.
Looking at the performance of our long-term incentive plans
against total shareholder return, there is a reasonable alignment
with the performance of the plans declining as total shareholder
return declines.
The Board continues to actively monitor the performance of our
long-term incentive plans to ensure that they deliver value for
shareholders.
Compensation
continued
Nokia Long-Term Incentive Plan and Employee Share
Purchase Plan 2021–2023
The Long-term Incentive Plan (LTI Plan) intends to effectively contribute
to the long-term value creation and sustainability of the Company and
align the interests of the executives and employees with those of
Nokia’s shareholders. Nokia’s Long-term Incentive Plan for 2021–2023
is a key tool which supports these objectives. Under the LTI Plan the
Company may grant eligible executives and other employees awards
in the form of both Performance shares and Restricted shares.
Awards under the LTI Plan may be granted between the date the plan is
approved and 31 December 2023 subject to applicable performance
metrics as well as performance and/or restriction periods of up to
36 months depending on the award. Consequently, the restriction
periods for the last awards granted under the LTI Plan would end in
2026. Performance metrics as well as weightings and targets for the
selected metrics for Performance shares are set by the Board of
Directors annually to ensure they continue to support Nokia’s
long-term business strategy and financial success.
The potential maximum aggregate number of Nokia shares that
may be issued based on awards granted under the LTI Plan in 2021,
2022 and 2023 is 350 million. Until the Nokia shares are delivered,
the participants will not have any shareholder rights, such as voting or
dividend rights associated with the Performance or Restricted shares.
If the participant’s employment with Nokia terminates before the
vesting date of the award or a part of an award, the individual is not,
as a main rule, entitled to settlement based on the plan.
The approach for 2023 will be that the majority of the LTI Plan
participants receive Restricted shares rather than Performance shares.
Executives continue to receive Performance shares as the main form
of long-term incentives. The 2023 metrics for Performance shares
will change to a blend of two-thirds absolute total shareholder return
(absolute TSR) and one-third relative total shareholder return (relative
TSR) against our comparator group for the President and CEO, GLT
and some senior executives. Other executives will receive a mixture of
Performance Shares and Restricted Shares. The Performance shares
awarded to other executives (excluding President and CEO, GLT and
some senior executives) will be subject to absolute TSR metrics only.
All Performance shares vests no earlier than three years from grant.
In general, Restricted shares will vest three years from grant (cliff
vesting) which will be applicable to executives receiving part of their
main long-term incentive in Restricted Shares. In limited cases,
predominantly related to extraordinary retention and recruitment
and in the U.S., the Company may introduce different vesting periods
with tranche vesting.
The purpose of the employee share purchase plan (ESPP) is to
encourage share ownership within the Nokia employee population,
increasing engagement and sense of ownership in the company.
Under the ESPP 2021–2023, subject to the Board commencing annual
plan cycles, the eligible employees may elect to make contributions
from their monthly net salary to purchase Nokia shares at market value
on pre-determined dates on a quarterly basis during the applicable
plan period. Nokia would deliver one matching share for every two
purchased shares that the participant still holds at the end of applicable
plan cycle. In addition, the participants may be offered free shares
subject to meeting certain conditions related to participation as
determined by the Board.
The maximum number of shares that can be issued under all plan cycles
commencing under the ESPP in 2021, 2022 and 2023 is 35 million.
Participants have immediate shareholder rights over all shares
purchased from the market. Until the matching or free Nokia shares are
delivered, the participants will not have any shareholder rights, such as
voting or dividend rights associated with the matching or free shares.
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75
Corporate governance Board
review
Business description
Board’s review
Selected financial data
Operating and financial review
Results of operations
Results of segments
Network Infrastructure
Mobile Networks
Cloud and Network Services
Nokia Technologies
Group Common and Other
Liquidity and capital resources
Financial position
Cash flow
Financial assets and debt
Venture fund investments and commitments
Treasury policy
Foreign exchange impact
Sustainability and corporate responsibility
Our purpose, strategy and targets
Sustainability governance
Risk management
Environment
Industrial digitalization
Bridging the digital divide
Security and Privacy
Responsible business
Our People
Disclosure under the European Union Taxonomy Regulation
Shares and shareholders
Share details
Shareholders
Articles of Association
Risk factors
Significant subsequent events
Key ratios
Alternative performance measures
78
79
80
81
81
84
84
85
86
87
88
89
89
89
90
90
90
91
92
92
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99
101
101
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116
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125
126
127
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77
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Board review
Business description
Board’s review 2022
Business description
Board’s review 2022
The shares of Nokia Corporation are listed
on the Nasdaq Helsinki Stock Exchange,
the New York Stock Exchange and the
Euronext Paris Stock Exchange.
Nokia Corporation is a public limited liability
company incorporated and domiciled in
Helsinki, Finland. Nokia Corporation is the
parent company (Parent Company or Parent)
for all its subsidiaries (Nokia or the Group).
At Nokia, we create technology that helps the
world act together. We provide mobile, fixed
and cloud network solutions that enable
critical networks for communication service
providers (CSPs), enterprise verticals and
hyperscalers. Our portfolio of products,
services and licensing opportunities helps
accelerate digitalization to address global
sustainability, productivity and accessibility
challenges. We have customers in more
than 100 countries around the world and
operations in Europe, the Middle East & Africa,
Greater China, North America, Asia-Pacific
and Latin America.
The year 2022 started with high hopes for
global stability after two years of COVID-
19-related disruption. However, the Russian
invasion of Ukraine soon unleashed a new
wave of global challenges, together with
human tragedy and suffering. The war led
to an energy crisis, further fueled inflation,
challenged global interdependence and
increased the risk of recession.
Yet Nokia was able to navigate these
challenges while capitalizing on sustained
demand for connectivity and the megatrend
towards digitalization.
The Board was pleased to see continued
progress with the accelerate phase of
Nokia’s reset-accelerate-scale plan, which
was demonstrated by the strong financial
performance in 2022. Nokia’s ability to
remain on track with its strategic plans
bodes well for 2023.
Investing for continued
technology leadership
Since the introduction of the three-phase
strategy in 2021, Nokia has significantly
improved its technology competitiveness
and refocused its cost base towards research
and development (R&D) to drive long-term
differentiation and technology leadership.
Our R&D spending reached over EUR 4.5 billion
in 2022, as we invest to meet current and
future customer needs and position Nokia for
broader digitalization opportunities beyond
our core business. In 2022, we continued
to extend our technology leadership in IP
Networks with 800 Gigabit Ethernet (800GE)
and we increased shipments of our FP5
chipset-powered solutions and the proportion
of 5G deliveries powered by our ReefShark
System-on-Chip (SoC) technology.
While our four accountable business groups
focus on near- to mid-term innovation, our
world-renowned industrial research arm Nokia
Bell Labs is focused on a longer-time horizon,
as it anticipates and shapes technology cycles.
In our Technology Vision 2030, updated
in September 2022, we outlined that the
transition to 6G technology will happen
by the end of this decade. This gives rise
to new metaverse opportunities clearly
differentiated between the consumer,
enterprise, and industrial domains. We believe
that all three segments promise significant
revenue potential for Nokia by 2030, and we
are already seeing very solid traction in the
Industrial Metaverse with the adoption of
digital twins.
As these metaverses evolve, and the digital
and physical worlds fuse, cybersecurity
will become even more critical. Nokia’s
aim is to ensure that every generation of
communications technology is more secure
than the previous one. Nokia is sharing
expertise and practical experience with
customers and partners and investing
increasingly in security testing and technical
collaboration. As part of that work, the
Board is ensuring Nokia also maintains a
continuous focus on its own cybersecurity.
Environmental, Social and
Governance (ESG) as a
competitive advantage
Nokia refreshed its ESG strategy with the aim
of embedding ESG into decision-making in
every part of the business, including product
development and making ESG a competitive
advantage for the business. At the same time,
we try to minimize any potential negative
impacts, societal or environmental, including
greenhouse gas emissions.
The Board’s work in 2022
The Annual General Meeting 2022 took
place at Nokia’s headquarters in Espoo on
5 April 2022. Due to the ongoing COVID-19
pandemic at the time, the meeting was
held without shareholders and their proxy
representatives being present. Despite
the meeting setup, we were pleased to
see the high engagement level from our
owners. Approximately 59 300 shareholders,
representing a record number 3.1 billion
shares and votes, participated in the meeting
via advance voting with strong support for
the Board’s proposals. The Annual General
Meeting 2022 elected 10 members to the
Board, including three new members –
Lisa Hook, Thomas Saueressig and Kai
Öistämö – as we continue to renew the
Board’s composition to ensure it has the
right mix of skills, experience, tenures and
other personal qualities.
During 2022, the Board held 18 meetings,
of which nine were in person or via video
conferencing. In our meetings, the Board
followed its annual plan with a focus on the
key priorities of the year. At the beginning
of the year, the Board paid special attention
to geopolitical developments and also
decided to restart distributions to our
shareholders by proposing a dividend
authorization and launching a new share
buyback program. Throughout the year, the
Board focused on the strategic priorities of
Nokia, including growing our CSP business
faster than the market, expanding the share
of Enterprise business, actively managing our
portfolio, securing the business longevity of
Nokia Technologies, building new business
models, and developing ESG as a competitive
advantage. In parallel, the Board focused on the
enablers of those priorities: talent, long-term
research, digitalization and brand.
The four Committees of the Board – Audit,
Corporate Governance and Nomination,
Personnel and Technology – assisted and
supported the Board effectively during the
year and held a total of 20 meetings. In
particular, ESG matters continued to form an
integral part of the Committees’ activities and
the Committees monitored environmental
and social developments and the company’s
related activities in their respective areas of
responsibility, such as human capital, ethics,
security, energy efficiency, sustainability
reporting, and climate and diversity in the
management’s incentives. The Corporate
Governance and Nomination Committee
continued to work on the renewal of the Board
composition, the outcome of which is reflected
in the Board composition proposed to the
2023 Annual General Meeting, including two
new director candidates, Timo Ahopelto and
Elizabeth Crain, and an equal split of female
and male directors on the Board.
Our direction for 2023
With a refreshed strategy in place, Nokia will
continue in the accelerate phase of its strategy
in 2023: gaining market share, adding new
Enterprise customers, and continuing our
pursuit of technology leadership wherever we
compete. Our margins show the benefits of
these priorities so far. In addition, our recent
brand refresh will build awareness of Nokia’s
position as a B2B technology innovation leader.
Due to our confidence in Nokia’s long-term
outlook and strong balance sheet position,
the Board proposed a dividend authorization
of EUR 0.12 per share to the Annual General
Meeting 2023. In addition, the Board decided
to start in January the second EUR 300 million
phase of the EUR 600 million share
buyback program.
The Board would like to thank all of Nokia’s
employees for delivering another year of
growth in and for creating a strong foundation
to keep delivering in 2023 and beyond.
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79
Board review Selected financial data
Operating and financial review
Selected
financial data
This section includes selected financial and other measures for the Nokia Group as of and for each of the years in the three-year period ended
31 December 2022. The information has been derived from, and should be read in conjunction with, our audited consolidated financial
statements prepared in accordance with IFRS. The consolidated financial statements as of 31 December 2022 and 2021 and for the years
ended 31 December 2022, 2021 and 2020 are included in this report.
For the year ended 31 December
From the consolidated income statement
Net sales
Operating profit
% of net sales
Profit before tax
Profit/(loss) for the year from continuing operations
Profit/(loss) for the year from discontinued operations
Profit/(loss) for the year
From the consolidated statement of financial position
Non-current assets
Current assets
Total assets
Capital and reserves attributable to equity holders of the parent
Non-controlling interests
Total equity
Interest-bearing liabilities(1)
Lease liabilities(1)
Provisions(1)
Other liabilities(1)
Total shareholders’ equity and liabilities
Other information
Research and development expenses
% of net sales
Capital expenditure(2)
% of net sales
Personnel expenses
Average number of employees
Order backlog, EUR billion
Key financial indicators and ratios
Earnings per share attributable to equity holders of the parent
Basic earnings per share, EUR
Continuing operations
Profit/(loss) for the year
Diluted earnings per share, EUR
Continuing operations
Profit/(loss) for the year
Proposed dividend per share, EUR(3)
Return on capital employed %(2)
Return on shareholders’ equity %(2)
Equity ratio %(2)
Net debt to equity (gearing) %(2)
Cash and cash equivalents
Total cash and interest-bearing financial investments(2)
Net cash and interest-bearing financial investments(2)
Net cash flows from operating activities
Free cash flow(2)
2022
2021
2020
(in EURm, except for percentage and personnel data)
24 911
2 318
9.3%
2 184
4 210
49
4 259
22 677
20 266
42 943
21 333
93
21 426
4 477
1 042
1 435
14 563
42 943
(4 550)
(18.3)%
(601)
(2.4)%
(7 903)
86 896
19.5
0.75
0.76
0.74
0.75
0.12
9.5%
22.0%
49.9%
(22.2)%
5 467
9 244
4 767
1 474
840
22 202
2 158
9.7%
1 926
1 654
(9)
1 645
20 452
19 597
40 049
17 360
102
17 462
4 653
1 009
1 569
15 356
40 049
(4 214)
(19.0)%
(560)
(2.5)%
(7 541)
87 927
20.3
0.29
0.29
0.29
0.29
0.08
10.1%
10.9%
43.6%
(26.4)%
6 691
9 268
4 615
2 625
2 368
21 852
885
4.0%
743
(2 513)
(3)
(2 516)
17 976
18 215
36 191
12 465
80
12 545
5 576
910
1 532
15 628
36 191
(4 087)
(18.7)%
(479)
(2.2)%
(7 310)
92 039
16.6
(0.45)
(0.45)
(0.45)
(0.45)
–
4.6%
neg.
34.7%
(19.8)%
6 940
8 061
2 485
1 759
1 356
Operating and
financial review
The financial information included in this “Operating and financial
review” section as of and for the years ended 31 December 2022
and 2021 has been derived from our audited consolidated financial
statements included in this report. The financial information should be
read in conjunction with, and is qualified in its entirety by reference to,
our audited consolidated financial statements.
Results of operations
This “Results of operations” section discusses the results of our
continuing operations.
Impact of COVID-19 on our operations
The COVID-19 pandemic that started in early 2020 and had a severe
impact on the global economy and financial markets during the year,
continued to affect people and businesses around the world in 2021
and 2022. While the situation is improving and economic recovery
is on its way, certain parts of the world and certain sectors of the
economy continue to be hit harder than others. While in 2020 our
financial performance was impacted by temporary factory closures,
temporarily lower travel and other items, in 2021 and 2022 we
saw some benefit related to an increase in demand in areas like
Fixed Networks, where trends such as remote working drove
communications service providers to increase investments in their
broadband infrastructure. In 2022, certain countries, such as China,
continued to see the impact of COVID-19, causing subsequent
lockdowns in many cities which had an impact on our industry’s
supply chain.
As of 31 December 2022, potential risks and uncertainties continue
to exist related to the scope and duration of the COVID-19 pandemic
and the pace and shape of the economic recovery following it, and it
is impossible to predict with accuracy the precise impact of such risks
on our operations and our business.
Cost savings program
In the first quarter of 2021, we announced plans to reset our cost
base, targeting a reduction of approximately EUR 600 million by the
end of 2023. Given the strength in our end markets, the pace of
restructuring in 2021 and 2022 has been slower than we initially
planned. The overall size of the plan, however, remains unchanged,
and continues to depend on the evolution of our end markets –
consistent with our commentary when we announced the plan.
In 2022, we updated our expectations for restructuring and
associated charges as well as cash outflows, compared to our original
estimates. We expect the cost savings to result in approximately
EUR 500-600 million of restructuring and associated charges by 2023,
down from our previous estimate of EUR 600-700 million. We also
expect total restructuring and associated cash outflows to be
approximately EUR 1 050-1 150 million, down slightly from our
previous estimate of EUR 1 100-1 200 million. This total includes
approximately EUR 500 million of cash outflows related to our previous
restructuring program.
Exit of Russian market
Following the Russian invasion of Ukraine in early 2022, on 12 April
2022, Nokia announced its intention to exit the Russian market.
Consequently, Nokia has suspended deliveries, stopped new business
and moved its limited R&D activities out of Russia. However, Western
governments had, for humanitarian reasons, expressed concerns
about the risk of critical telecommunication network infrastructure
in Russia failing and emphasized the importance of ensuring the
continued flow of information and access to the internet which
provides outside perspectives to the Russian people. Therefore,
Nokia will aim to provide the necessary support to maintain the
networks already present as the company exits the market and has
applied for the relevant licenses to enable this support in compliance
with current sanctions. Nokia sees this as the most responsible course
of action to take. Regarding the financial impact of the decision,
Russia accounted for less than 2% of our net sales in 2021. Additionally,
Nokia recognized a provision of EUR 104 million in the first quarter
of 2022 in relation to Russia. The exiting of the market has not had
a material impact on our financials in 2022.
(1) Includes both current and non-current liabilities in the consolidated statement of financial position.
(2) Non-IFRS measures. For the definition and reconciliation of non-IFRS measures to the most directly comparable IFRS measures, refer to ”Alternative performance measures” section.
(3) The Board of Directors proposes to the Annual General Meeting to be authorized to decide in its discretion on the distribution of an aggregate maximum of EUR 0.12 per share as dividend from the
retained earnings and/or as assets from the reserve for invested unrestricted equity.
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Board review
Operating and financial review
continued
For the year ended 31 December 2022 compared to the year ended 31 December 2021
The following table sets forth the results of Nokia’s continuing operations and the percentage of net sales for the years indicated.
For the year ended 31 December
EURm % of net sales
EURm % of net sales
2022
2021
Net sales
Cost of sales
Gross profit
Research and development expenses
Selling, general and administrative expenses
Other operating income and expenses
Operating profit
Share of results of associated companies and joint ventures
Financial income and expenses
Profit before tax
Income tax benefit/(expense)
Profit for the year from continuing operations
Attributable to:
Equity holders of the parent
Non-controlling interests
24 911
(14 689)
10 222
(4 550)
(3 013)
(341)
2 318
(26)
(108)
2 184
2 026
4 210
4 201
9
100.0
(59.0)
41.0
(18.3)
(12.1)
(1.4)
9.3
(0.1)
(0.4)
8.8
8.1
16.9
16.9
–
22 202
(13 368)
8 834
(4 214)
(2 792)
330
2 158
9
(241)
1 926
(272)
1 654
1 632
22
100.0
(60.2)
39.8
(19.0)
(12.6)
1.5
9.7
–
(1.1)
8.7
(1.2)
7.4
7.4
0.1
Year-on-year
change %
12
10
16
8
8
–
7
–
(55)
13
–
155
157
(59)
Net sales
Net sales in 2022 were EUR 24 911 million, an increase of EUR 2 709
million, or 12%, compared to EUR 22 202 million in 2021. Supply chain
disruptions and semiconductor supply constraints impacted the
timing of revenue through the year but following meaningful
improvements in the second half of 2022, the year ended with
minimal impact from this. In addition to benefiting from foreign
exchange rate fluctuations, performance was driven by growth
across all four business groups, with particular strength in Network
Infrastructure. Mobile Networks and Cloud and Network Services both
showed solid growth in 2022, while Nokia Technologies also grew,
although it benefited from an option exercised in a long-term license
that led to an additional EUR 305 million revenue recognition in 2022.
Foreign exchange rate fluctuations contributed approximately 6% of
the total growth in 2022.
The following table sets forth distribution of net sales by region for
the years indicated.(1)
For the year ended 31 December
Asia Pacific
Europe(2)
Greater China
India
Latin America
Middle East & Africa
North America
Submarine Networks
Total
2022
EURm
2,648
6,662
1,581
1,290
1,223
1,969
8,388
1,150
24,911
2021
EURm
2,472
6,313
1,512
1,035
983
1,771
7,187
929
22,202
Year-on-year
change %
7
6
5
25
24
11
17
24
12
(1) In 2022, Nokia changed the way it presents net sales information on a regional basis. Nokia considers that providing net sales for the Submarine Networks business separately from the rest of the
Group improves the usefulness of disclosed information by removing volatility caused by the specific nature of the Submarine Networks business. The comparative information for net sales to external
customers by region has been recast accordingly.
(2) All Nokia Technologies IPR and licensing net sales are allocated to Finland.
The following table sets forth distribution of net sales by customer
type for the years indicated.
For the year ended 31 December
Communication service providers
Enterprise
Licensees
Other(1)
Total
2022
EURm
19 921
1 997
1 595
1 398
24 911
2021
EURm
17 977
1 575
1 502
1 148
22 202
Year-on-year
change %
11
27
6
22
12
(1) Includes net sales of Submarine Networks which operates in a different market, and Radio
Frequency Systems (RFS), which is being managed as a separate entity, and certain other items,
such as elimination of inter-segment revenues and certain items related to purchase price
allocation. Submarine Networks and RFS net sales also include revenue from communication
service providers and enterprise customers.
Gross profit
Gross profit in 2022 was EUR 10 222 million, an increase of
EUR 1 388 million, or 16%, compared to EUR 8 834 million in 2021.
The increase in gross profit was primarily driven by margin expansion
in Network Infrastructure, as well as ongoing improvements in cost
competitiveness and favorable regional mix in Mobile Networks.
Cloud and Network Services and Nokia Technologies also both
improved, with Nokia Technologies benefiting from the higher
revenue recognition in 2022. Gross profit in 2022 also reflected
lower restructuring and associated charges, which amounted to
EUR 84 million in 2022, compared to EUR 121 million in 2021. In 2022,
variable pay accruals within cost of sales were lower, compared to
2021. Gross margin in 2022 was 41.0%, compared to 39.8% in 2021.
Operating expenses
Our research and development expenses in 2022 were EUR 4 550 million,
an increase of EUR 336 million, or 8%, compared to EUR 4 214 million
in 2021. Research and development expenses represented 18.3%
of our net sales in 2022 compared to 19.0% in 2021. Research and
development expenses reflected our commitment to build and
maintain technology leadership across our portfolio and were also
negatively impacted by foreign exchange rate fluctuations. By
business, the increase was primarily related to both Mobile Networks
and Network Infrastructure. The research and development expenses
in 2022 also reflected lower restructuring and associated charges,
which amounted to EUR 37 million in 2022, compared to EUR 62 million
in 2021. In 2022, variable pay accruals within research and
development expenses were lower, compared to 2021.
Our selling, general and administrative expenses in 2022 were
EUR 3 013 million, an increase of EUR 221 million compared to
EUR 2 792 million in 2021. Selling, general and administrative
expenses represented 12.1% of our net sales in 2022 compared to
12.6% in 2021. The increase in selling, general and administrative
expenses was broad-based across businesses and reflected the
impact of higher salary expenses and investments made in areas
like private wireless, in addition to the negative impact from foreign
exchange rate fluctuations. Additionally, the higher selling, general
and administrative expenses in 2022 reflected higher amortization
of acquired intangible assets, partially offset by lower restructuring
and associated charges. In 2022, selling, general and administrative
expenses included amortization of acquired intangible assets of
EUR 356 million, compared to EUR 335 million in 2021. 2022 included
restructuring and associated charges of EUR 52 million, compared to
EUR 74 million in 2021. In 2022, variable pay accruals within selling,
general and administrative expenses were lower, compared to 2021.
Other operating income and expenses in 2022 was a net expense of
EUR 341 million, a decrease of EUR 671 million, compared to a net
income of EUR 330 million in 2021. The net negative fluctuation in
our other operating income and expenses was primarily due to lower
net benefits from Nokia’s venture fund investments, the negative
impact from foreign exchange hedging and a net negative fluctuation
in the amount of loss allowances on trade receivables. In 2022,
the net benefit related to Nokia’s venture fund investments was
approximately EUR 20 million, compared to a net benefit of
approximately EUR 190 million in the year-ago period. The impact of
hedging was negative EUR 107 million in 2022, compared to a benefit
of EUR 45 million in 2021.
Operating profit
Our operating profit in 2022 was EUR 2 318 million, an increase of
EUR 160 million, compared to an operating profit of EUR 2 158 million
in 2021. The increase in operating profit was due to higher gross
profit, partially offset by a net negative fluctuation in other operating
income and expenses, higher research and development expenses
and higher selling, general and administrative expenses. Our operating
margin in 2022 was 9.3%, compared to 9.7% in 2021.
Financial income and expenses
Financial income and expenses were a net expense of EUR 108 million
in 2022, a decrease of EUR 133 million, or 55%, compared to a net
expense of EUR 241 million in 2021. The net positive fluctuation in
financial income and expenses was primarily due the impact of higher
interest rates on pension plans and interest income, as well as a
positive revaluation of embedded derivatives related to foreign
currency orders. Financial income and expenses were also impacted
by loss allowances and impairments on customer financing loans
and the release of cumulative exchange difference related to
abandonment of foreign operations, in addition to a change in the
financial liability to acquire Nokia Shanghai-Bell non-controlling
interest. In 2022, loss allowances and impairments on customer
financing loans recognized in the income statement were EUR 61 million,
compared to EUR 32 million in 2021. The release of cumulative
exchange differences related to abandonment of foreign operations
amounted to EUR 20 million in 2022, compared to no impact in 2021.
In 2022, the change in liability to acquire Nokia Shanghai-Bell
non-controlling interest was positive EUR 11 million, compared to
negative EUR 33 million in 2021.
Profit before tax
Our profit before tax in 2022 was EUR 2 184 million, an increase
of EUR 258 million compared to EUR 1 926 million in 2021.
Income tax
Income taxes were a net benefit of EUR 2 026 million in 2022, a net
positive fluctuation of EUR 2 298 million compared to a net expense
of EUR 272 million in 2021. The fluctuation in net income taxes
was primarily attributable to the recognition of Finnish deferred tax
assets of EUR 2.5 billion that positively impacted 2022, somewhat
offset by higher income tax expenses and the absence of a prior
year tax benefit related to past operating model integration that
benefited 2021.
In 2020, Nokia de-recognized deferred tax assets in Finland, as
required, due to a regular assessment of our ability to utilize deferred
tax assets in Finland for the foreseeable future, which was done
primarily based on our historical performance. At December 31 2022,
Nokia concluded, based on its latest assessment, that it is probable
that it will be able to utilize the unused tax losses and deductible
temporary differences in Finland and re-recognized deferred tax
assets of EUR 2.5 billion in the consolidated statement of financial
position. For more details, please refer to Note 11, Income taxes,
of our consolidated financial statements.
Profit attributable to equity holders of the parent and earnings
per share
The profit attributable to equity holders of the parent in 2022 was
EUR 4 201 million, an increase of EUR 2 569 million, compared to a
profit of EUR 1 632 million in 2021. The change in profit attributable
to equity holders of the parent was primarily due to the income tax
benefit, the improvement in operating profit and a net positive
fluctuation in financial income and expenses.
Our EPS from continuing operations in 2022 was EUR 0.75 (basic)
and EUR 0.74 (diluted) compared to EUR 0.29 (basic) and EUR 0.29
(diluted) in 2021.
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Board review Operating and financial review
continued
Results of segments
In 2022, we had four operating and reportable segments for the financial reporting purposes: (1) Network Infrastructure, (2) Mobile Networks,
(3) Cloud and Network Services and (4) Nokia Technologies. We also present segment-level information for Group Common and Other. The
amounts presented in this “Results of segments” section for each reportable segment and Group Common and Other represent the amounts
reported to the management for the purpose of assessing performance and making decisions about resource allocation. Certain costs and
revenue adjustments are not allocated to the segments for this purpose. For more information on our operational and reporting structure
as well as the reconciliation of reportable segment measures to those of the Nokia Group, refer to Note 5, Segment information, in the
consolidated financial statements.
Network Infrastructure
For the year ended 31 December 2022 compared to the year ended 31 December 2021
The following table sets forth the segment operating results and the percentage of net sales for the years indicated.
For the year ended 31 December
Net sales(1)
Cost of sales
Gross profit
Research and development expenses
Selling, general and administrative expenses
Other operating income and expenses
Operating profit
2022
2021
EURm % of net sales
EURm % of net sales
Year-on-year
change %
9 047
(5 739)
3 308
(1 307)
(833)
(66)
1 102
100.0
(63.4)
36.6
(14.4)
(9.2)
(0.7)
12.2
7 674
(4 990)
2 684
(1 165)
(765)
30
784
100.0
(65.0)
35.0
(15.2)
(10.0)
0.4
10.2
18
15
23
12
9
–
41
(1) In 2022, net sales include IP Networks net sales of EUR 3 063 million, Optical Networks net sales of EUR 1 891 million, Fixed Networks net sales of EUR 2 943 million and Submarine Networks net sales of
EUR 1 150 million. In 2021, net sales include IP Networks net sales of EUR 2 679 million, Optical Networks net sales of EUR 1 708 million, Fixed Networks net sales of EUR 2 358 million and Submarine
Networks net sales of EUR 929 million.
Net sales
Network Infrastructure net sales in 2022 were EUR 9 047 million, an
increase of EUR 1 373 million, or 18%, compared to EUR 7 674 million
in 2021. While net sales in Network Infrastructure benefited from
foreign exchange rate fluctuations in 2022, the increase reflected
growth across all businesses. Foreign exchange rate fluctuations
contributed approximately 8% of the total Network Infrastructure
growth in 2022.
IP Networks net sales were EUR 3 063 million in 2022, an increase of
EUR 384 million, or 14%, compared to EUR 2 679 million in 2021. Net
sales in IP Networks increased in 2022, driven by ongoing technology
leadership, with particular strength in North America. IP Networks also
saw the first commercial shipments of the new FP5-based IP Routing
products in the fourth quarter of 2022.
Optical Networks net sales were EUR 1 891 million in 2022, an increase
of EUR 183 million, or 11%, compared to EUR 1 708 million in 2021.
The increase in Optical Networks net sales primarily reflected strong
demand and customer engagement of our PSE-V solutions. Optical
Networks was also impacted by supply constraints, which showed signs
of easing in the second half of 2022.
Fixed Networks net sales were EUR 2 943 million in 2022, an increase
of EUR 585 million, or 25%, compared to EUR 2 358 million in 2021.
The strong growth in Fixed Networks net sales resulted from
continued strong fiber deployments, with broad-based growth
across most regions.
Submarine Networks net sales were EUR 1 150 million in 2022, an
increase of EUR 221 million, or 24%, compared to EUR 929 million in
2021. The increase in Submarine Networks net sales continued to be
related to webscale-driven project deployments.
Gross profit
Network Infrastructure gross profit in 2022 was EUR 3 308 million,
an increase of EUR 624 million, or 23%, compared to EUR 2 684 million
in 2021. Network Infrastructure gross margin in 2022 was 36.6%,
compared to 35.0% in 2021. The increase in Network Infrastructure
gross profit primarily reflected higher net sales and favorable mix shift.
In 2022, variable pay accruals within Network Infrastructure cost of
sales were lower, compared to 2021.
Operating expenses
Network Infrastructure research and development expenses were
EUR 1 307 million in 2022, an increase of EUR 142 million, or 12%,
compared to EUR 1 165 million in 2021. The increase in research and
development expenses primarily reflected increased investments
for technology leadership, inflation and foreign exchange rate
fluctuations. In 2022, variable pay accruals within Network
Infrastructure research and development expenses were lower,
compared to 2021.
Network Infrastructure selling, general and administrative expenses
were EUR 833 million in 2022, an increase of EUR 68 million, or 9%,
compared to EUR 765 million in 2021. The increase in Network
Infrastructure selling, general and administrative expenses largely
reflected inflation and foreign exchange rate fluctuations. In 2022,
variable pay accruals within Network Infrastructure selling, general
and administrative expenses were lower, compared to 2021.
Network Infrastructure other operating income and expenses was
an expense of EUR 66 million in 2022, a change of EUR 96 million
compared to an income of EUR 30 million in 2021. The change in other
operating income and expenses was primarily due to the negative
impact from foreign exchange hedging, as well as a net negative
fluctuation in the amount of loss allowances on trade receivables.
Operating profit
Network Infrastructure operating profit was EUR 1 102 million in 2022,
an increase of EUR 318 million, or 41%, compared to EUR 784 million
in 2021. Network Infrastructure operating margin in 2022 was 12.2%,
compared to 10.2% in 2021. The strong increase in operating margin
was attributable to higher gross profit, partly offset by higher
operating expenses and the net negative fluctuation in other
operating income and expenses.
Mobile Networks
For the year ended 31 December 2022 compared to the year ended 31 December 2021
The following table sets forth the segment operating results and the percentage of net sales for the years indicated.
For the year ended 31 December
Net sales
Cost of sales
Gross profit
Research and development expenses
Selling, general and administrative expenses
Other operating income and expenses
Operating profit
Net sales
Mobile Networks net sales in 2022 were EUR 10 671 million, an
increase of EUR 954 million, or 10%, compared to EUR 9 717 million
in 2021. While net sales in Mobile Networks benefited from foreign
exchange rate fluctuations in 2022, the increase was also driven
by improved portfolio competitiveness and strong demand, with
particular growth in our products business. While supply chain
disruptions and semiconductor supply constraints impacted the
timing of revenue through the year, following meaningful
improvements in the second half of 2022, the year ended with minimal
impact from this. Foreign exchange rate fluctuations contributed
approximately 7% of the total Mobile Networks growth in 2022.
Gross profit
Mobile Networks gross profit in 2022 was EUR 4 096 million, an
increase of EUR 459 million, or 13%, compared to EUR 3 637 million
in 2021. Mobile Networks gross margin in 2022 was 38.4%, compared
to 37.4% in 2021. The increase in Mobile Networks gross profit
largely reflected higher net sales, ongoing improvements in cost
competitiveness and favorable regional mix, somewhat offset by the
absence of a EUR 80 million positive impact of a one-time software
deal that was completed in the second quarter of 2021. In 2022,
variable pay accruals within Mobile Networks cost of sales were lower,
compared to 2021.
2022
2021
EURm % of net sales
EURm % of net sales
Year-on-year
change %
10 671
(6 575)
4 096
(2 234)
(865)
(57)
940
100.0
(61.6)
38.4
(20.9)
(8.1)
(0.5)
8.8
9 717
(6 080)
3 637
(2 078)
(832)
38
765
100.0
(62.6)
37.4
(21.4)
(8.6)
0.4
7.9
10
8
13
8
4
–
23
Operating expenses
Mobile Networks research and development expenses were
EUR 2 234 million in 2022, an increase of EUR 156 million, or 8%
compared to EUR 2 078 million in 2021. In addition to the negative
impact from foreign exchange rate fluctuations, the higher research
and development expenses reflected continued investments for
technology leadership. In 2022, variable pay accruals within Mobile
Networks research and development expenses were lower, compared
to 2021.
Mobile Networks selling, general and administrative expenses
were EUR 865 million in 2022, an increase of EUR 33 million, or 4%,
compared to EUR 832 million in 2021. The increase in Mobile Networks
selling, general and administrative expenses largely reflected the
impact of higher salary expenses, continued investments and the
impact of foreign exchange rate fluctuations. In 2022, variable pay
accruals within Mobile Networks selling, general and administrative
expenses were lower, compared to 2021.
Mobile Networks other operating income and expenses was an
expense of EUR 57 million in 2022, a change of EUR 95 million
compared to an income of EUR 38 million in 2021. The change in other
operating income and expenses was primarily due to the negative
impact from foreign exchange hedging, as well as a net negative
fluctuation in the amount of loss allowances on trade receivables.
Operating profit
Mobile Networks operating profit was EUR 940 million in 2022, an
increase of EUR 175 million, compared to EUR 765 million in 2021.
Mobile Networks operating margin was 8.8% in 2022 compared to
7.9% in 2021.
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Board review Operating and financial review
continued
Cloud and Network Services
For the year ended 31 December 2022 compared to the year ended 31 December 2021
The following table sets forth the segment operating results and the percentage of net sales for the years indicated.
Nokia Technologies
For the year ended 31 December 2022 compared to the year ended 31 December 2021
The following table sets forth the segment operating results and the percentage of net sales for the years indicated.
For the year ended 31 December
Net sales
Cost of sales
Gross profit
Research and development expenses
Selling, general and administrative expenses
Other operating income and expenses
Operating profit
2022
2021
EURm % of net sales
EURm % of net sales
Year-on-year
change %
3 351
(2 011)
1 340
(577)
(544)
(42)
177
100.0
(60.0)
40.0
(17.2)
(16.2)
(1.3)
5.3
3 089
(1 929)
1 160
(537)
(477)
20
166
100.0
(62.4)
37.6
(17.4)
(15.4)
0.6
5.4
8
4
16
7
14
–
7
For the year ended 31 December
Net sales
Cost of sales
Gross profit
Research and development expenses
Selling, general and administrative expenses
Other operating income and expenses
Operating profit
Net sales
Cloud and Network Services net sales in 2022 were EUR 3 351 million,
an increase of EUR 262 million, or 8%, compared to EUR 3 089 million
in 2021. While net sales in Cloud and Network Services benefited from
foreign exchange rate fluctuations in 2022, the growth reflected a
strong performance from Enterprise Solutions largely offsetting
performances across the other businesses. Foreign exchange rate
fluctuations contributed approximately 6% of the total Cloud and
Network Services growth in 2022.
Cloud and Network Services selling, general and administrative
expenses were EUR 544 million in 2022, an increase of EUR 67 million,
or 14%, compared to EUR 477 million in 2021. The increase in Cloud
and Network Services selling, general and administrative expenses
largely reflected investments made to strengthen our leadership
position in campus wireless, in addition to the negative impact from
foreign exchange rate fluctuations. In 2022, variable pay accruals
within Cloud and Network Services selling, general and administrative
expenses were lower, compared to 2021.
Gross profit
Cloud and Network Services gross profit in 2022 was EUR 1 340 million,
an increase of EUR 180 million, or 16%, compared to EUR 1 160 million
in 2021. Cloud and Network Services gross margin in 2022 was 40.0%,
compared to 37.6% in 2021. The increase in Cloud and Network
Services gross profit reflected the benefits from operational
improvements that have been made across the business. In 2022,
variable pay accruals within Cloud and Network Services cost of sales
were lower, compared to 2021.
Operating expenses
Cloud and Network Services research and development expenses
were EUR 577 million in 2022, an increase of EUR 40 million, or 7%,
compared to EUR 537 million in 2021. The increase in Cloud and
Network Services research and development expenses largely
reflected investments made to strengthen our leadership position
in campus wireless, in addition to the negative impact from foreign
exchange rate fluctuations. In 2022, variable pay accruals within Cloud
and Network Services research and development expenses were lower,
compared to 2021.
Cloud and Network Services other operating income and expenses
was an expense of EUR 42 million in 2022, a change of EUR 62 million
compared to an income of EUR 20 million in 2021. The change in other
operating income and expenses was primarily due to the negative
impact from foreign exchange hedging, as well as a net negative
fluctuation in the amount of loss allowances on trade receivables.
Operating profit
Cloud and Network Services operating profit was EUR 177 million
in 2022, an increase of EUR 11 million, compared to EUR 166 million
in 2021. Cloud and Network Services operating margin in 2022 was
5.3% compared to 5.4% in 2021. The increase in Cloud and Network
Services operating profit in 2022 was due to higher gross profit, partly
offset by higher operating expenses and a negative fluctuation in
other operating income and expenses.
Net sales
Nokia Technologies net sales in 2022 were EUR 1 595 million, an
increase of EUR 93 million, or 6%, compared to EUR 1 502 million in
2021. The increase in Nokia Technologies net sales primarily reflects
an option exercised within a long-term license. Net sales also benefited
from new deals signed in 2022, including positive traction in areas
such as automotive, consumer electronics and IoT, and also included
some catch-up net sales and one-time transactions. These were
somewhat offset by the negative impact of two licensing agreements
that ended during 2021 which are in the process of litigation/renewal,
along with the impact of market share changes in the smartphone
industry, including a company that has exited the smartphone market.
Foreign exchange rate fluctuations contributed approximately 1% of
the total Nokia Technologies growth in 2022.
As outlined in Note 6, Revenue recognition, of the consolidated
financial statements, Nokia has been recognizing revenue each quarter
related to a 10-year patent license agreement entered into in April
2014. Under the terms of the agreement the licensee had an option
to extend the license agreement for the remaining life of the licensed
patents, making it in substance a perpetual license. In the fourth
quarter of 2022 they exercised this right. Under the applied
accounting policies, the notice triggered revenues of EUR 305 million
in the fourth quarter of 2022 that would otherwise have been
recognized in future periods. Nokia will therefore no longer
recognize revenue in relation to this agreement in future periods.
Gross profit
Nokia Technologies gross profit in 2022 was EUR 1 590 million,
an increase of EUR 93 million, or 6%, compared to EUR 1 497 million
in 2021. The higher gross profit in Nokia Technologies was due to
higher net sales.
2022
2021
EURm % of net sales
EURm % of net sales
Year-on-year
change %
1 595
(5)
1 590
(214)
(136)
(32)
1 208
100.0
(0.3)
99.7
(13.4)
(8.5)
(2.0)
75.7
1 502
(5)
1 497
(201)
(92)
(19)
1 185
100.0
(0.3)
99.7
(13.4)
(6.1)
(1.3)
78.9
6
–
6
6
48
–
2
Operating expenses
Nokia Technologies research and development expenses in 2022 were
EUR 214 million, an increase of EUR 13 million, or 6%, compared to
EUR 201 million in 2021. The increase in Nokia Technologies research
and development expenses was primarily due to higher investments
to drive creation of intellectual property.
Nokia Technologies selling, general and administrative expenses
in 2022 were EUR 136 million, an increase of EUR 44 million,
or 48%, compared to EUR 92 million in 2021. The increase in
Nokia Technologies selling, general and administrative expenses
was primarily due to higher licensing-related and litigation costs.
Nokia Technologies other operating income and expenses in 2022 was
an expense of EUR 32 million, a change of EUR 13 million compared to
an expense of EUR 19 million in 2021. The change in other operating
income and expense was primarily related to a loss allowance on
certain trade receivables recorded in 2022.
Operating profit
Nokia Technologies operating profit in 2022 was EUR 1 208 million, an
increase of EUR 23 million, or 2%, compared to an operating profit of
EUR 1 185 million in 2021. The slight increase in Nokia Technologies
operating profit was due to higher net sales, partially offset by higher
operating expenses and a net negative fluctuation in other operating
income and expense. Nokia Technologies operating margin in 2022
was 75.7% compared to 78.9% in 2021.
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Board review Operating and financial review
continued
Group Common and Other
For the year ended 31 December 2022 compared to the year ended 31 December 2021
The following table sets forth the operating results for Group Common and Other, and the percentage of net sales for the years indicated.
For the year ended 31 December
Net sales
Cost of sales
Gross profit
Research and development expenses
Selling, general and administrative expenses
Other operating income and expenses
Operating loss
2022
2021
EURm % of net sales
EURm % of net sales
Year-on-year
change %
295
(307)
(12)
(117)
(226)
37
(318)
100.0
(104.1)
(4.1)
(39.7)
(76.6)
12.5
(107.8)
257
(270)
(13)
(103)
(213)
204
(125)
100.0
(105.1)
(5.1)
(40.1)
(82.9)
79.4
(48.6)
15
14
(8)
14
6
–
154
Net sales
Group Common and Other net sales in 2022 were EUR 295 million,
an increase of EUR 38 million, or 15%, compared to EUR 257 million
in 2021. The increase in Group Common and Other net sales was
due to Radio Frequency Systems, with particularly strong growth
in North America. Foreign exchange rate fluctuations contributed
approximately 7% of the total Group Common and Other growth
in 2022.
Group Common and Other other operating income and expense in
2022 was an income of EUR 37 million, a decrease of EUR 167 million
compared to an income of EUR 204 million in 2021. The lower other
operating income in 2022 was primarily related to lower net benefits
from Nokia’s venture fund investments. In 2022, the net benefit
related to Nokia’s venture fund investments was approximately
EUR 20 million, compared to a net benefit of approximately
EUR 190 million in the year-ago period.
Gross profit
Group Common and Other gross profit in 2022 was negative
EUR 12 million, compared to negative EUR 13 million in 2021.
Group Common and Other gross margin in 2022 was negative
4.1% compared to negative 5.1% in 2021.
Operating expenses
Group Common and Other research and development expenses in
2022 were EUR 117 million, an increase of EUR 14 million, or 14%,
compared to EUR 103 million in 2021.
Group Common and Other selling, general and administrative
expenses in 2022 were EUR 226 million, an increase of EUR 13 million,
or 6%, compared to EUR 213 million in 2021. In 2022, variable pay
accruals within Group Common and Other selling, general and
administrative expenses were lower, compared to 2021.
Operating loss
Group Common and Other operating loss in 2022 was EUR 318 million,
a change of EUR 193 million, compared to an operating loss of
EUR 125 million in 2021. The change in Group Common and Other
operating loss was primarily attributable to the lower other operating
income, as well as higher research and development expenses and
selling, general and administrative expenses.
Liquidity and capital resources
Financial position
At 31 December 2022, our cash and cash equivalents equaled
EUR 5 467 million, a decrease of EUR 1 224 million compared to
EUR 6 691 million as of 31 December 2021. The decrease was
primarily attributable to net cash inflow from operating activities
of EUR 1 474 million, offset by net cash outflow related to
interest-bearing financial investments of EUR 1 198 million,
capital expenditure of EUR 601 million, payment of principal portion
of lease liabilities of EUR 217 million, dividends of EUR 353 million
and share repurchases of EUR 300 million.
At 31 December 2022, our total cash and interest-bearing financial
investments* equaled EUR 9 244 million, a decrease of EUR 24 million,
compared to EUR 9 268 million as of 31 December 2021. The decrease
was primarily attributable to net cash inflow from operating activities
of EUR 1 474 million, offset by capital expenditure of EUR 601 million,
payment of principal portion of lease liabilities of EUR 217 million,
dividends of EUR 353 million and share repurchases of EUR 300 million.
At 31 December 2022, our net cash and interest-bearing
financial investments* equaled EUR 4 767 million, an increase of
EUR 152 million, compared to EUR 4 615 million as of 31 December
2021. The increase was mainly attributable to net cash inflow from
operating activities of EUR 1 474 million and fair value changes of our
interest-bearing liabilities due to higher interest rates and stronger
USD, partially offset by capital expenditure of EUR 601 million,
payment of the principal portion of the lease liabilities of
EUR 217 million, dividends of EUR 353 million and share
repurchases of EUR 300 million.
Cash flow
The cash inflow from operating activities in 2022 was
EUR 1 474 million, a decrease of EUR 1 151 million compared to
a cash inflow of EUR 2 625 million in 2021. The decrease was primarily
attributable to an increase in cash tied-up to net working capital of
EUR 1 843 million in 2022 compared to EUR 268 million cash tied-up
in 2021, partially offset by increase in net profit, adjusted for non-cash
items, of EUR 3 813 million, an increase of EUR 455 million compared
to EUR 3 358 million in 2021. The primary drivers for the increase in
cash tied-up to net working capital compared to 2021 were related
to an increase in inventories of EUR 991 million compared to an
increase of EUR 48 million in 2021 and an increase in receivables
of EUR 451 million compared to a decrease in receivables of
EUR 239 million in 2021. These were partially offset by a decrease
in liabilities of EUR 401 million compared to a decrease of
EUR 459 million in 2021. The decrease in liabilities during 2022 was
primarily attributable to a decrease in contract liabilities, restructuring
and associated cash outflows and liabilities related to variable pay,
partially offset by an increase in trade payables.
In 2022, the cash inflow from operating activities included paid taxes
of EUR 381 million, an increase of EUR 67 million compared to
EUR 314 million in 2021, interest received of EUR 65 million compared
to EUR 41 million in 2021 and interest paid of EUR 180 million
compared to EUR 192 million in 2021.
The cash outflow from investing activities was EUR 1 880 million in
2022, an increase of EUR 85 million compared to EUR 1 795 million
cash outflow in 2021. Cash outflow from investing activities was
primarily driven by net cash outflow of EUR 1 198 million of
interest-bearing financial investments in 2022 compared to
EUR 1 447 million in 2021, cash outflow due to the capital expenditure
of EUR 601 million in 2022 compared to EUR 560 million in 2021 and
net cash outflow from other non-current financial investments of
EUR 66 million compared to net cash inflow of EUR 200 million in 2021.
Major items of capital expenditure in 2022 included investments in
R&D equipment, test equipment, hardware for telecommunication
and cloud environment, repair or improvements of sites, shipyards
and vessels.
In 2022, the cash outflow from financing activities was
EUR 837 million, compared to EUR 1 212 million cash outflow in 2021.
The cash outflow was primarily driven by dividend payments
EUR 353 million, purchase of treasury shares EUR 300 million and
payments of the principal portion of lease liabilities EUR 217 million
in 2022. In 2021, the cash outflow was primarily driven by payments
of long-term borrowings of EUR 927 million and payments of the
principal portion of lease liabilities EUR 226 million.
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*
Non-IFRS measures. For the definition and reconciliation of non-IFRS measures to the most
directly comparable IFRS measures, refer to ”Alternative performance measures” section.
Board review Operating and financial review
continued
Financial assets and debt
At 31 December 2022, our net cash and interest-bearing
financial investments* equaled EUR 4 767 million consisting of
EUR 9 244 million in total cash and interest-bearing financial
investments*, and EUR 4 477 million of long-term and short-term
interest-bearing liabilities.
Venture fund investments and commitments
We make financing commitments to a number of unlisted venture
funds that make technology-related investments. The majority of the
investments are managed by NGP Capital, a global venture capital firm
backing exceptional entrepreneurs driving the convergence of the
physical and virtual world.
As of 31 December 2022, our venture fund investments equaled
EUR 828 million, compared to EUR 758 million as of 31 December
2021. For more information on the fair value of our venture fund
investments, refer to Note 21, Fair value of financial instruments,
of our consolidated financial statements.
As of 31 December 2022, our venture fund commitments equaled
EUR 433 million, compared to EUR 137 million as of 31 December
2021. As a limited partner in venture funds, we are committed to
capital contributions and entitled to cash distributions according to
the respective partnership agreements and underlying fund activities.
For more information on venture fund commitments, refer to Note 27,
Commitments, contingencies and legal proceedings.
Treasury policy
Treasury activities are governed by the Nokia Treasury Policy approved
by the President and CEO within the authority granted by the Board of
Directors and supplemented by operating procedures approved by the
CFO, covering specific areas such as foreign exchange risk, interest
rate risk, credit risk and liquidity risk. The objective of treasury’s
liquidity and capital structure management activities is to ensure that
we have sufficient liquidity to go through unfavorable periods without
being severely constrained by the availability of funds to execute
Nokia’s business plans and implement Nokia’s long-term business
strategy. We are risk-averse in our treasury activities.
We hold our total cash and interest-bearing financial investments*
predominantly in euro. Our interest-bearing financial investments
mainly include high-quality money market and fixed income instruments
with strict maturity limits. We also have a EUR 1 500 million revolving
credit facility available for liquidity purposes. The facility has no
financial covenants and remains undrawn.
At 31 December 2022, our interest-bearing liabilities consisted of
EUR 750 million notes due in 2024, EUR 500 million notes due in 2025,
EUR 500 million R&D loan from the European Investment Bank
maturing in 2025, EUR 250 million R&D loan from the Nordic
Investment Bank with final maturity in 2025, EUR 750 million notes
due in 2026, USD 500 million notes due in 2027, EUR 500 million notes
due in 2028, USD 74 million notes due in 2028, USD 206 million notes
due in 2029, USD 500 million notes due in 2039, and EUR 162 million
of other liabilities. The EUR notes maturing in 2024, 2025, 2026 and
2028 as well as the USD notes maturing in 2027 and 2039, are issued
by Nokia Corporation, while the USD notes maturing in 2028 and 2029
are issued by Lucent Technologies Inc., a predecessor to Nokia of
America Corporation (Nokia’s wholly-owned subsidiary, formerly known
as Alcatel-Lucent USA Inc.). The loans from the Nordic Investment
Bank and from the European Investment Bank are drawn by Nokia
Corporation. For more information on our interest-bearing liabilities,
refer to Note 20, Interest-bearing liabilities, of our consolidated
financial statements.
In June 2021, we exercised our option to extend the maturity date
of the EUR 1 500 million revolving credit facility. Subsequent to the
extension, EUR 1 412 million of the facility has its maturity in June
2026 and EUR 88 million of the facility has its maturity in June 2024.
We consider that with EUR 9 244 million of total cash and
interest-bearing financial investments*, and with our undrawn
revolving credit facility, we have sufficient funds to satisfy our
future working capital needs, capital expenditure, R&D investments,
structured finance, venture fund commitments, acquisitions and
debt service requirements, at least through 2023. We further consider
that with our current credit ratings of BBB- by S&P Global Ratings
(at 31 December 2022, BB+), Ba1 by Moody’s (at 31 December 2022,
Ba2), and BBB- by Fitch, we have access to the capital markets
should any funding needs arise in 2023.
We aim to maintain investment grade credit ratings.
Off-balance sheet arrangements
There are no material off-balance sheet arrangements that have,
or are reasonably likely to have, a current or future effect on our
financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that are material to
investors, except for the purchase obligations and lease commitments,
as well as guarantees and financing commitments disclosed in
Note 27, Commitments, contingencies and legal proceedings,
and in Note 32, Financial risk management, of our consolidated
financial statements.
Foreign exchange impact
We are a company with global operations and net sales derived from
various countries, invoiced in various currencies. Therefore, our
business and results from operations are exposed to changes in
exchange rates between the euro, our reporting currency, and other
currencies, such as the U.S. dollar. The magnitude of foreign exchange
exposures changes over time as a function of our net sales and costs
in different markets, as well as the prevalent currencies used for
transactions in those markets. Significant changes in exchange rates
may also impact our competitive position and related price pressures
through their impact on our competitors.
To mitigate the impact of changes in exchange rates on our results,
we hedge material net foreign exchange exposures (net sales less
costs in a currency) typically with a hedging horizon of approximately
12 months. For the majority of these hedges, hedge accounting is
applied to reduce income statement volatility.
In 2022, approximately 25% of Group net sales and total costs
were denominated in euro, and approximately 50% of Group net
sales and total costs were denominated in U.S. dollars. In 2022,
approximately 5% of Group net sales and total costs were
denominated in Chinese yuan.
The average currency mix for Group net sales and total costs:
Currency
EUR
USD
CNY
Other
Total
2022
2021
Net sales
~25%
~50%
~5%
~20%
~100%
Total costs
~25%
~50%
~5%
~20%
~100%
Net sales
~25%
~50%
~5%
~20%
~100%
Total costs
~25%
~50%
~5%
~20%
~100%
For the full year 2022 compared to the previous year, the U.S. dollar
was stronger against the euro. The stronger U.S. dollar in 2022 on a
year-on-year basis had a significantly positive impact on our net sales
reported in euros. However, the stronger U.S. dollar also contributed
to significantly higher costs of sales and slightly higher operating
expenses on a year-on-year basis. In total, before hedging, the
stronger U.S. dollar on a year-on-year basis had a positive effect on
our operating profit in 2022.
For a discussion of the instruments used by us in connection with
our hedging activities, refer to Note 32, Financial risk management,
of our consolidated financial statements. Refer also to the “Risk
factors” section.
*
Non-IFRS measures. For the definition and reconciliation of non-IFRS measures to the most
directly comparable IFRS measures, refer to ”Alternative performance measures” section.
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Board review Sustainability and corporate responsibility
Sustainability
and corporate
responsibility
We believe that the positive impact of the
technology we create and deliver provides
our greatest contribution to realizing the
United Nations Sustainable Development
Goals (SDGs) and outweighs potential
negative impacts.
Our products, solutions and services can drive
social, environmental, and economic progress.
Digitalization and connectivity can have a
critical role in solving some of the world’s
greatest challenges including stalled
productivity, climate change and unequal
access to opportunity. Our products and
solutions bring digitalization to physical
industries and cities, helping them
decarbonize and increase efficiency,
productivity, and safety. We support the
energy industry in transitioning to a
renewable, smart grid future. Digitalization
and connectivity are essential to a more
equitable, secure society, providing improved
access to healthcare, education and greater
potential economic opportunity. They can also
play a key role in achieving a cleaner, safer
planet with reduced carbon emissions and
more efficient use and reuse of natural
resources. We work to maximize this positive
impact of our technology – our handprint.
At the same time, we understand our
responsibility to constantly minimize
potential negative impacts of our operations,
environmental or social, striving for
continuous improvement in product design
and responsible business practices employed
in Nokia and across our value chain. This is
our footprint. We have built robust policies,
processes and management systems that
align with globally recognized frameworks.
Our business model is described in the
“Business overview” section of this report.
Our purpose, strategy and targets
Our sustainability approach aligns with the
topics that are most material to our business
and where we have the most impact on
sustainable development, providing structure
and focus for our activities. At the core of
our strategy and approach is our purpose,
to create the technology that helps the world
act together.
In 2022, we launched a refreshed ESG
(Environment, Social and Governance)
strategy and a new mandatory ESG training
which was completed by over 97% of
employees. The new strategy aims to ensure
we maximize our impact in the areas most
material to Nokia and is embedded in business
and technology strategies and impacts how
we make business decisions and develop our
products and solutions. The strategy builds on
five strategic focus areas where Nokia looks to
differentiate and create tangible environmental
and social benefits: Environment (climate and
circularity), Industrial Digitalization, Security
and Privacy, Bridging the Digital Divide,
and Responsible Business.
Key strategic
ESG areas
Be the leader in energy efficiency and
circular practices
Environment
We provide connectivity and digital solutions that
sustainably transform physical industries
Industrial
digitalization
Security
& Privacy
Bridging the
digital divide
Responsible
business
Security and Privacy become a cornerstone
of our reputation and product proposition
We are a bridge for digital inclusion through our
connectivity and digital skill building solutions
Take proactive and values-driven role in driving
responsible business practices internally and in
our value chain
In the environment arena, we focus on two
areas: climate and circularity. Our greatest
source of emissions comes from the use of
our products in our customers’ networks. To
address this, we aim for leadership in energy
efficiency, building on work in silicon, software,
and systems and opportunities to optimize
across the network with energy orchestration
and green operations. In circularity we focus
on opportunities to promote hardware
circularity and manage the sourcing and
reuse of key source materials.
Industrial digitalization provides the
opportunity to sustainably transform physical
industries and cities through digitalization and
connectivity. We focus on our offering through
our Enterprise solutions for industry and cities
that can enable decarbonization, resource
efficiency, and safety. This can have a much
greater impact on the world’s carbon footprint
in comparison to reducing our own footprint,
though we understand the importance of
taking action across both domains.
Security and Privacy are together positioned
as the cornerstone of our reputation and
product proposition. Product development
follows the ‘Design for Security’ methodology,
building security into the life cycle from the
very start, with a strict minimum baseline for
services delivered to customers. Nokia’s
customer security team consists of security
experts who partner with our customers to
build and maintain secure networks, compliant
with national regulations for critical telecom
infrastructure.
We aim to bridge the digital divide using
our broad product portfolio and focused
partnering with non-terrestrial operations to
address different demographics and through
digital skill building. Connectivity, combined
with digital skills, allows more equal access to
healthcare, education and employment for
individuals and the opportunity to participate
in the digital economy for small businesses.
In responsible business we work to ensure
our business practices are aligned to our
ethical and responsible values. We apply this
approach internally, in our supply chain and
across our value chain. We collaborate with
the aim to improve systemic issues related
to environment, mitigating the misuse of
technology (and advocating for responsible
AI principles), ethics, human rights, inclusion
and diversity and working conditions and
contributing to the responsible development
of new standards.
Our materiality assessment
As part of our strategy refresh and in line
with good practice, we completed an impact
materiality assessment in spring 2022 with
an external consultancy. The results of this
assessment are based on desktop research
into global macro trends that have an impact
on sustainable development, interviews and a
survey conducted with internal and external
stakeholder representatives (including
employees, customers, investors, suppliers,
partners, non-governmental organizations
and academics), and insights from
sustainability experts.
The diagram below shows the top right
quadrant of this materiality assessment
matrix. The top right quadrant shows the
topics considered most relevant to our
business and to stakeholders, economy
and the environment. The most important
topics for Nokia are:
■ Climate impact through products
■ Environmental impact through products
and enabling transformation in other
industries
■ Ethical business practices and ethical use
of new technologies
■ Privacy and security
■ Responsible sourcing
Our new materiality matrix
The topics listed as most important are largely
unchanged since the 2019 matrix refresh,
with climate, ethical business practices, and
how Nokia’s products can enable change in
other industries, cities and society continuing
to be among the most important topics. The
most significant growth in importance can be
seen in privacy and security, responsible
sourcing and circularity. Biodiversity also
appeared for the first time in the top quartile
of the matrix. The actual potential impact of
biodiversity on Nokia business is currently
being further investigated.
t
n
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m
n
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i
v
n
e
e
h
t
d
n
a
y
m
o
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o
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e
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,
s
r
e
d
o
h
e
k
a
t
s
o
t
e
c
n
a
v
e
e
R
l
Privacy and
security
Ethical business
practices
Health & safety of
employees
Responsible
sourcing
Transparency
Enablement of industry
transformation
Diversity &
inclusion
Nokia's own
environmental impact
Ethical use of new
technologies
Climate impact
through products
How products can
enable diversity &
inclusion
Circularity
Impact
innovation
Digital
inclusion
Human rights
Community
participation
Employee
skills
Biodiversity
Relevance to Nokia's business
Opportunity
Risk mitigation
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Board review
Sustainability and corporate responsibility
continued
Sustainable Development Goals
The United Nations Sustainable Development Goals (SDGs) and their targets remain a key framework for
our sustainability work. Goals 8, 9 and 13 are the most material for our business and reflect the areas in
which we can have the greatest positive impact. We believe digitalization and connectivity will continue to
play a critical role in accelerating and achieving all 17 SDGs. More examples of how the work we do actively
contributes to all 17 SDGs can be found on our website.
Promote inclusive and
sustainable economic growth,
employment and decent work
As a global company we have significant
direct and indirect economic impact.
Our direct economic impact includes for
example our purchasing from suppliers,
wages and benefits paid to our employees,
income taxes paid to the public sector,
and community investments. The benefits
of the technology we provide deliver our
greatest indirect impact.
Build resilient infrastructure,
promote sustainable
industrialization and foster
innovation
Goal 9 remains the most material SDG for us
in the area of helping the world act together
and improving people’s lives with our
technology. It relates directly to the core
of our business. The networks we supply to
our customers provide access to people
everywhere, connecting them to more
information, more public services and greater
economic opportunities. The connectivity
and digitalization our products and solutions
provide are critical enablers of sustainable
transformation of asset heavy industries
including manufacturing.
Take urgent action to combat
climate change and its impacts
Climate change is the most significant
sustainability challenge for our business and
the planet and requires that we put in place
the processes and concrete actions to do
our part. Through the technology we provide
we also help customers, other industries,
individuals and society digitalize industrial
processes so that they become more
predictive and productive, with reduced
emissions. We have set an ambitious
science-based target (SBT) in line with
the 1.5°C warming scenario to reduce our
Scope 1, 2 and 3 greenhouse gas emissions
by 50% between 2019 and 2030. The SBT
also includes reaching net zero by 2050.
We believe the technology we provide
enables both environmental and social
benefits to individuals, industries and
communities that far outweigh any
negative impacts.
Key sustainability targets
Our targets are determined based on our sustainability strategy and are distributed across short-, medium- and long-term. The key targets are
listed in the table below.
Progress of selected ESG targets in 2022
Strategic
focus area
Target
year
Base
year
Target
2022 results
Environment
2030 2019 Our Science-based target (SBT):
Reduce our greenhouse gas (GHG)
emissions across our value chain (Scope 1,
2 and 3) by 50% between 2019 and 2030,
and reach net zero by 2050.
Climate
2030 2019 Our final assembly suppliers reach net zero
emissions by 2030.
2030 2019 Our suppliers reduce GHG emissions by
50% by 2030.(2)
Emissions covered by our SBT were 37 627 000
tons CO2e(1) which, as anticipated, are 13%
above our cumulative carbon budget for
2020–2022, if a linear reduction from 2019 is
expected annually. Total emissions however
remained at the same level as in 2021. However,
we do not expect the reduction of emissions
in our value chain to be a linear process. We aim
to achieve our target of 50% reduction in
emissions by 2030 as we expect to see greater
impact as more energy efficient products and
features of our portfolio are adopted and
decarbonization of the electricity grid is
expected to continue globally.
Our final assembly supplier emissions were
46 000 tons CO2e which is a 39% reduction
from 2019.
Our suppliers’ emissions were 683 700 tons
CO2e which is 78% reduction from 2019.
However, as this includes emissions data from
hundreds of suppliers and the quality of
allocated emissions data has been of concern,
we are conscious that some of the reductions
may be due to the quality of the data reported.
Status
Not on
track
On track
On track
2022 N/A
Reach 60% renewable electricity in our
own facilities.
Reached 63% renewable electricity in our
own facilities.
Achieved
2022 2019 45% reduction of facility GHG emissions.
Reduced 54% of facility GHG emissions.
Achieved
Circularity
2022 N/A
Divert 75% of facility waste from landfill.
80% of facility waste was diverted from landfill.
Achieved
Bridging the digital divide
Connecting the
unconnected
and under-
served
2030 2021 Help our customers to connect the next
2 billion measured by number of
subscriptions in Nokia radio customers’
networks by 2030.
2025 2021 Harness Nokia technology, capabilities and
funds to improve the lives of 1 500 000
through social digitalization projects,
digital skill building, and connecting the
unconnected or underserved by 2025.(4)
In line with Nokia's long term goal, we work with
our customers to provide broadband based
digital services on more subscriptions. The
number of mobile broadband subscriptions in
Nokia radio customers’ networks has increased
from 2021 to end of 2022 by 400 million(3).
We reached 560 702 direct beneficiaries
through social digitalization projects,
building digital skill inclusion, connecting
the unconnected or underserved and
improving inclusion, equity and diversity.
On track
On track
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Board review Sustainability and corporate responsibility
continued
Strategic
focus area
Target
year
Base
year
Target
2022 results
Status
Responsible Business
2030 2016 100% of suppliers delivering high risk
activity to meet “H&S preferred supplier”
status (score 4 or more out of 5) in our
Health & Safety maturity assessment.
2022 N/A
Reach a minimum of 26% female hires in all
global external recruits.
2030 2016 Reach 85% favorability of employee/line
manager engagement on ethics and
compliance.
Health &
Safety
Inclusion &
Diversity
Ethics &
Compliance
2022 N/A
Ethical Business Training (EBT) completed
by 95% of employees.
2022 N/A
Complete our second Global Network
Initiative (GNI) assessment and, as a result,
Nokia deemed to have shown good faith
efforts to implement the GNI principles in
freedom of expression and privacy.
Human Rights
Responsible
sourcing
2025 2020 80% of suppliers achieve satisfactory
sustainability score (based on aggregated
weighted share) from supplier performance
evaluation (includes performance across
our sustainability assessment programs
such as EcoVadis, CDP, Conflict minerals).
(1) CO2e = carbon dioxide equivalents
(2) Refers to our material suppliers
(3) Reference Source: GSMA Intelligence
(4) Improving lives refers to increased digital connectivity and inclusion for 1 500 000 people
21% of relevant suppliers met H&S preferred
supplier status.
On track
27% of external recruits were women.
We achieved the 2022 target via increased
marketing, communication and talent attraction
activities to make Nokia’s employer brand stand
out for diversity-friendly employment policies
and attract diverse talent.
Progress against the target was measured as
favorable responses to the following question
in our employee survey: “My line manager sets
a positive example by acting with integrity.”
88% of the responses were favorable.
Achieved
Achieved
98% of employees completed the training.
Achieved
We completed our second Global Network
Initiative independent assessment earlier and
are proud to report that the GNI board found we
have made good faith efforts to implement the
GNI Principles on freedom of expression and
privacy with improvement over time.
Achieved
78% of suppliers received satisfactory
sustainability score in our assessment programs
on average.
On track
Sustainability governance
The Board of Directors evaluates the Company’s sustainability-related risks and target setting as well as their implementation and effectiveness
in Nokia. In 2022, the Board approved the selected key sustainability targets on climate change and diversity (included in the short-term
incentive program), social impact budget, the new materiality matrix and reviewed the sustainability strategy and targets, evolving ESG
(environmental, social and governance) requirements and expectations, investor feedback and disclosure approach. In addition, the Board
Committees monitor environmental and social developments and activities in the Company in their respective areas of responsibilities. In 2022,
the Chief Corporate Affairs Officer had overall responsibility for sustainability in the Group Leadership Team (GLT). In line with our new mode of
operation, the GLT approves sustainability-related strategy, overall targets and operational frameworks, within which corporate functions and
business groups can operate. This enables accountability and empowerment of each business group whilst maintaining appropriate strategic
and operative oversight. Independent councils and committees, such as the Sustainability Council, are used to steer, align and ensure the
implementation of these strategies, targets and frameworks and make recommendations to the GLT. Our overall sustainability governance
framework and responsibilities are shown in the diagram below.
Nokia Board
of Directors
■ Approves ESG strategy and evaluates ESG practices, related risks and target setting as well as their
implementation and effectiveness.
■ Specific sustainability topics are reviewed by Board Committees based on their responsibilities, including
ESG reporting, materiality assessment, ethics and compliance, cybersecurity, privacy, culture, human capital
management and embedding sustainability in our technologies.
Group
Leadership
Team
■ Reviews and approves implementation of and changes to sustainability-related policies, management and
operational frameworks, strategy, targets and performance, annual sustainability report, and links to
rewarding.
■ Conducts sustainability review and provides feedback minimum 2 times per year and as topic-specific
areas require.
■ CEO, CFO and business group presidents review additional sustainability topics minimum two times per year
as part of Nokia business reviews.
Sustainability
Council
■ Steers the alignment of
sustainability strategy,
priorities, and the
implementation of
sustainability activities
across Nokia
■ Contributes to the
sustainability strategy and
materiality assessment,
and reviews sustainability
targets and performance
■ Provides additional insight
to sustainability-related
risks and opportunities
Members
Senior leaders from units
representing all Business
Groups, Customer
Experience, Corporate
Affairs, People, Finance,
Strategy and Technology
and Legal and Compliance.
Convened 10 times in 2022.
Donations and
Sponsorships
Committee
■ Sets principles for
allocation of corporate
donations and
investments for
universities and
communities
■ Approves funds for
donational location
and reviews major
sponsorships
■ Assesses the impact of
all donation programs
Members
Chief Financial Officer, Chief
Corporate Affairs Officer,
Chief People Officer, VP,
Technology Leadership, Chief
Compliance Officer, Vice
President Head of Customer
Experience Finance.
Convened two times in 2022.
Inclusion and
Diversity Steering
Committee
■ Reviews annual Inclusion
and Diversity (I&D) plans
■ Sets Nokia-level I&D
ambitions and measures
impact and targets
■ Evaluates business group
level I&D actions and
provides feedback to
business groups
Members
Chief Legal Officer, Head
of Inclusion & Diversity,
other senior leaders from
business groups, Human
Resources, ESG and legal,
and representatives from
employee resource groups.
Convened two times
in 2022.
Human Rights Due
Diligence Council
■ Governs high-level
alignment on Nokia’s
Human Rights Policy and
implementing procedures
■ Steers decisions on Nokia
businesses from a human
rights point of view
■ Ensures alignment
between all business
groups and functions and
appropriate mitigations
are put in place
Members:
Chief Legal Officer, Chief
Corporate Affairs Officer,
Chief Compliance Officer,
VP ESG, VP Technology
Leadership, other senior
leaders per need. Head of
Human Rights, Legal
Counsel. Schedule
Convened two times
in 2022.
ESG function
Ethics and Compliance Office
The corporate ESG function drives the implementation of
the ESG strategy and actions needed to achieve targets at
the operational level. Subject matter experts contribute
fact-based input to the different functions and business
groups. Ensure corporate sustainability reporting is in line
with requirements and regulations.
Supports employees with training and guidance, fostering
ethical decision making and choices that are consistent with
our values, policies, and laws. Promotes an open reporting
culture and oversees robust and impartial concern reporting,
investigation, and remediation processes.
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Board review ■ product safety
■ environmental incidents
■ health & safety
■ privacy and security, including cybersecurity
threats
■ potential human rights abuse through
misuse of the technology we provide
■ potential lack of proper respect for
human rights, fair labor conditions, the
environment and communities in our
operations and supply chains
■ non-compliance with regulations or our
supplier and customer requirements
■ violation of ethical standards, including
our Code of Conduct
■ labor unrest and strikes
■ inability to retain, motivate, develop and
recruit appropriately skilled employees
■ purchasing boycotts and public harm
to our brand
■ issues with tariffs and taxation, including
tax disputes
■ disruptions in our manufacturing, service
creation, delivery, logistics or supply chain
caused, for instance, by natural disasters,
military actions, civil unrest, public health
and safety threats (including disease
outbreaks), many of which may be fueled by
the adverse effects resulting from climate
change.
How these risks are managed, including
related key policies and actions, is further
discussed in the following paragraphs,
in the context of relevant topics.
Sustainability and corporate responsibility
continued
Risk management
Sustainability related risks and opportunities
are part of our Enterprise Risk Management
framework. We recognize and aim to mitigate
the potential risks and negative impacts
associated with our business whether related
to technology, supply chain, climate or people,
while also driving the opportunities within
and beyond our business to contribute to
achieving the UN Sustainable Development
Goals. We have clear policies and processes
for each identified material sustainability
related risk, including our Code of Conduct
which reflects our values through clear and
simple directions on ways of working for all
employees and business partners. The main
features of our risk management systems
are described as part of our Corporate
governance statement (see Corporate
Governance – Risk management, internal
control and internal audit functions at Nokia).
In addition, the “Risk factors” section of
this report provides discussion on the
most important risk factors affecting
our operations. These risks include
sustainability-related issues such as:
We continue delivering supplier workshops and
trainings to ensure the correct safety equipment
is used and projects have risk procedures and
controls in place.
Environment
Our greatest impact on the environment lies in the role our products and
solutions play in helping to decarbonize and dematerialize other industries and
cities. This is what we call our environmental handprint and is achieved through
the sustainable transformation of industries and society. More information on
how we address this can be found in the industrial digitalization section below.
To address our own footprint, we focus on
both climate and circularity where we aim
for leadership in the energy efficiency of
our products and circular practices.
Climate
Climate change remains a significant risk to
society and the natural environment. Climate
change can negatively impact our supply chain
and our customers’ business, as well as the
global economy, and political and social
stability. We recognize that the products and
services we provide globally may affect the
environment and climate as manufacturing,
distributing, and operating these products
require energy and other natural resources. In
2022, 95% of our greenhouse gas emissions
footprint came from our products in use by
our customers in their networks. We can
directly impact our footprint by constantly
improving power consumption, increasing
energy efficiency and driving innovation.
For example, in 2022 we announced the
commercial availability of our liquid cooling
solution across our AirScale radio base station
offering. This innovative solution can reduce
the energy used by the cooling system at a
base station site by up to 90%.
We continue to also innovate in terms of the
silicon, software and hardware we develop.
During the year other innovations included:
■ AVA for Energy SaaS which applies artificial
intelligence to reduce energy consumption
across the network
■ Our FP5 network processor in IP service
routing platforms
■ Our Quillion chipset reduces power
consumption for fiber broadband products
by 50%, and has been adopted by 100% of
our customer base
■ New Intelligent Radio Access Network
Operations solution designed to manage
the increasing complexity of 5G networks,
including energy, through machine
learning (ML)
Our own operations are a minor part of our
footprint (around 1%) and are less prone to
the impact of natural catastrophes and severe
weather, but we still work hard to reduce our
own operational footprint. In 2022 we joined
the RE100 initiative in line with our global
ambition to use 100% renewable electricity
across our facilities by 2025 and we were
recognized with the initiative’s best newcomer
award during climate week in New York.
Our climate achievements
We have set a science-based greenhouse
gas (GHG) emission reduction target through
the Science Based Target (SBT) initiative.
Our target is to reduce our emissions by
50% between 2019 and 2030 across our
value chain (Scope 1, 2 and 3).
In 2022, our Scope 1 GHG emissions were
124 000 tons CO2e and market-based
Scope 2 emissions were 135 300 tons CO2e.
At the end of 2022, our progress on Scope 2
emissions was better than expected as we
continue to make significant improvements
in our own operations. Our Scope 3 emissions
were 39 454 200 tons CO2e, decreasing from
the previous year.
However, we are not on track with our SBT
as anticipated as we were 13% above our
cumulative carbon budget for 2020–2022
if a linear reduction from 2019 is expected
annually. We do not expect the reduction
of emissions in our value chain to be a linear
process. We continue to work to stay within
the 2020-2030 cumulative carbon budget
and achieve our target of 50% reduction in
emissions by 2030 as we expect to see
greater impact as more energy efficient
products and features of our portfolio
are adopted and decarbonization of the
electricity grid continues globally.
Beyond improvements in product energy
efficiency, modernization of legacy networks
also drives improved energy efficiency,
and the customer base station sites we
modernized in 2022 used on average 44%
less energy than those where our customers
did not modernize. The number of
modernized products is based on the number
of radio network products replaced at
customer sites for which the data is available
in a global product deployment database
for the reportable year. The average power
consumption of radio network products is
based on ETSI standard 202706 defined
measurements.
We also work with our suppliers to reduce
our upstream indirect emissions and to
drive circular practice and innovation with
our suppliers. In 2022 we continued and
enhanced our supplier climate engagement
and saw 481 of our key suppliers responding
to CDP’s request to disclose their climate
performance information and 278 also
provided emission reduction targets. We also
had 276 suppliers responding on the CDP
Water security questionnaire. To move
forward with climate-related targets, we also
encouraged suppliers to set climate targets
to be in line with the Science Based Targets
initiative and recognized climate-related
innovations as part of our Supplier Diamond
Awards Program. With our final assembly
suppliers, we worked on developing
roadmaps for realizing their 2030 zero
emissions targets.
In logistics, to help us reduce our emissions
we partnered with our logistics service
providers to further develop biofuel-based
transportation solutions and continued to
implement lower emission flights using
Sustainable Aviation Fuel.
Circularity
We also aim to be a driver of circular practices
in our industry. We focus on opportunities to
promote hardware circularity by managing the
sourcing and reuse of key source materials.
We build on our existing waste processes
and circular products and services offering,
proactively increasing the take back of
products from customer modernization
projects and end of life equipment and
increase the availability and sales of
refurbished products. We also look to
increase the use of recycled materials in
our products, augmenting the inclusion of
recycled plastics, steel, copper and aluminum
in our mechanical parts.
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Highlights
In 2022, we introduced a new circular metric
to guide our operational circularity journey
and to close the material loop. Our new target
is to reach 95% waste circularity rate in 2030.
Targets:
In 2022, we achieved 98% tin, tantalum,
tungsten and gold traceability and
conflict-free status and extended due
diligence to cobalt and mica.
2025: We target to achieve 98% tin,
tantalum, tungsten and gold traceability
and conflict-free status, with extended
due diligence to cobalt and mica and two
additional minerals
As part of our drive for refurbishment and
reuse of products in 2022, we sent around
2 900 metric tons of old telecommunications
equipment for materials recycle, and we
refurbished or reused approximately
88 900 units with a combined total weight
of 400 metric tons.
Our new circularity target includes waste
across our value chain: from our own top
20 sites based on waste production, including
own final assembly factories, supply chain
final assembly factories, installation projects
at customer sites and product takeback. The
new target maximizes recycling and recovery
of waste so that waste disposal is minimized.
During 2022, we concentrated on increasing
circular waste data availability.
We also introduced our waste circularity target
to our final assembly suppliers and began
performance monitoring and setting
long-term targets. We also focused on
identification of prioritized materials and
relevant suppliers where we want to focus
further to decrease the dependency on virgin
materials and increase the uptake of recycled
materials in our mechanical parts, currently
prioritizing aluminum, steel, copper
and plastics.
We announced the opening of a repair and
maintenance hub in Saudi Arabia, providing
another key component of the circular
ecosystem in the region.
We continue to align our climate-related
disclosures in our CDP report according to the
guidance of the Task Force on Climate-related
Financial Disclosures (TCFD). CDP is a global
organization that runs a bespoke global
disclosure system for investors, companies,
cities, states, and regions to manage their
environmental impacts.
We have in place a robust environmental
management system and environmental
policy, supported by documented
processes and procedures to ensure their
implementation. The system helps us to
monitor our progress and identify needed
improvements. Our own operational footprint
is certified under the ISO 14001:2015
environmental management system standard
and at the end of 2022 the coverage of
employees within the scope of that
certification was 86%.
Share of suppliers who have completed identification
of all smelters and have achieved conflict-free status
100 %
80 %
60 %
40 %
20 %
0 %
99 %
98 %
68 %
38 %
21 %
5 %
3TG combined*
Cobalt
Mica
Suppliers who have completed identification of all smelters
Suppliers who have achieved conflict-free status
*
3TG combined shows the 4 minerals together (Tantalum, Tin, Gold and Tungsten),
and is core to our reporting.
Industrial digitalization
Digitalization and connectivity are a critical part of the solution to decarbonizing and dematerializing
physical industries which significantly contribute to global carbon emissions. This is our handprint
and represents the enablement effect of the technology solutions we provide. We aim to maximize
this handprint as it provides our greatest potential impact on climate change.
As part of our strategy we provide low latency
connectivity, private wireless networks,
sensors and AI/ML as the basis of a ‘Green
Digital’ proposition in our Enterprise portfolio.
We are working within our ecosystem to
identify methodologies that better measure
the enablement effect and articulate the
business case for transformation to
accelerate and scale adoption.
Nokia’s own Oulu factory in Finland is a fully
digitalized factory that has been recognized
as a WEF lighthouse, and an example of the
impact digitalization can bring. It incorporates
all 5G+ technologies to drive machining and
assembly, using robotics, autonomous
transportation through mobile robots,
advanced quality control methods including
video analytics, and maintenance schedules
driven by augmented Intelligence/machine
learning recommendations based on
real-time asset condition data.
According to the latest data gathered in 2022,
the Nokia Oulu factory output has increased
by 250% since 2015 whilst maintaining the
same level of resources and energy
consumption. We saw a reduction in energy
consumption per produced product. In
addition, both process defects and product
time to market have been reduced by half.
Besides the environmental benefits, the
factory has also experienced efficiency gains
through the reduction of robot lead time by
80%, and it has reduced staff floor time by
20%, leading to greater worker safety.
We work with customers across the energy,
manufacturing, transportation and other
industries as we underline the belief
that there is no green without digital.
As of the end of 2022, we have provided
connectivity and digitalization solutions
to 2 600 enterprise customers.
Bridging the digital divide
Despite the accelerated uptake of digitalization during the pandemic, the digital divide widened
both for individuals and for many small and medium-sized enterprises (SMEs) who were not able
to participate in the digital economy.
Nokia aims to be a bridge for digital inclusion
by bringing both our connectivity and digital
skills building solutions to create more
inclusive access to healthcare, education and
employment for individuals. We aim to also
enable potential new business opportunities
for SMEs. We can achieve this by leveraging
our broad product portfolio, as well as
focused strategies with non-terrestrial
network operators to connect different
demographics to broadband level speeds
in both fixed and wireless domains.
Nokia can also build on its existing training
assets, certifications and social initiatives to
support digital skill building. Since its launch in
2020, over 40 000 individuals have registered
for the Nokia 5G certification learning
program. As SMEs digitalize, and ensure
their employees upskill and increase their
knowledge of digital technologies, this is
also expected to be critical to retention
and growth.
As part of our focus on bridging the digital
divide, we created new targets with medium-
and long-term focus.
■ By 2025, we target to improve the lives
of 1.5 million through social digitalization
projects, digital skill building, and
connecting the unconnected or
underserved
■ By 2030, we aim to provide broadband
based digital services with 2 billion
subscriptions
Our social initiatives in 2022 reached 614 149
direct beneficiaries across the world. This
work included 110 programs in 34 countries.
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Security and Privacy
In our refreshed ESG strategy we position security and privacy as the cornerstone of our
reputation and product proposition. We will work to ensure a common security baseline
enforced for all products and services and accelerate our security strategy ambitions. This
involves reinforcing the Nokia Design for Security framework and driving end-to-end product
security testing initiatives like the Advanced Security Testing and Research (ASTaR) Lab, as well
as leveraging our own innovative portfolio offerings.
Responsible
business
procedures in place to manage and mitigate
any related risk to data subjects in the event
of a personal data breach.
These processes also include mechanisms
to communicate in a timely fashion with
supervisory authorities, should that be
required. A program of privacy awareness
and general and targeted role-based training
ensures we continuously and effectively
address areas of the highest privacy impact.
Our mission is to protect and safeguard
personal data in Nokia’s possession, and
we have a network of certified privacy
professionals who regularly provide coaching
on privacy.
In the 5G era, the nature and scale of
information networks are evolving, as are
the nature and scale of security threats.
5G will interconnect countless new devices,
empower new industries, and enable a myriad
of new applications and use cases. As one
consequence, more avenues of attack are
available for cyber criminals to compromise
critical infrastructure, including the
telecommunications infrastructure. Threats
and vulnerabilities do not only show up in the
individual network components but can also
be exploited in the overall solution. Nokia has
taken a new step in safeguarding 5G against
such threats by creating the ASTaR Lab. The
ASTaR Lab is the first end-to-end 5G testing
lab in the United States focused solely on
cybersecurity and a concrete testimony of
Nokia’s commitment to making security a
foundational pillar of Nokia’s technology
strategy and a differentiator in the
marketplace. Nokia continuously develops
and improves its processes and tools used
in product development and has made
Design for Security (or DFSEC) an integral and
fundamental part of it. Throughout 2022,
product security and DFSEC requirements
have been further enhanced to meet the
latest industry standards.
Nokia’s cyber resilience refers to its ability to
identify, respond, and recover swiftly from a
security incident, aiming to ensure Nokia and
its customers can retain business continuity
and recover to normality quickly in case of
a security incident.
We have a Nokia managed Cyber Defense
Center covering Nokia activities, public Cloud,
R&D labs and Nokia Data Centers, as well
as a Computer Emergency Response team
addressing critical security incidents. Nokia
developed and maintain an actionable Cyber
Resilience Plan, built on an assessment of
the cyber risks the business is most likely to
experience, leveraging Nokia’s emergency
policies, plans and procedures.
As a trusted partner in security for our
customers, we aim to meet key regulatory
and customer requirements. Nokia’s 2022
information security strategy, cyber risks and
programs, which are periodically reported to
the executive management level and Board
of Directors, embed strong governance and
compliance requirements. Our security
ambition is reflected in the supplier selection
processes, contracts and supplier
assessments targeted to ensure effective
security to be in place in our supply chain
and with our Third Parties. Nokia relies on
enforced security policies and standards,
security training and programs to ensure the
protection of our key data and intellectual
property. By the end of 2022, around 98% of
our employees across all locations completed
the Information Security Awareness Training.
Nokia has elevated its customers’ trust
through the set-up of a security operations
governance for customer services, and a
security baseline, leading to ISO27001
certification for selected services to
assess our capability to keep up with
the ever-increasing market legal and
regulatory demands.
In privacy, we have established a
comprehensive company-wide privacy
program based on respecting privacy rights
and exercising high standards of integrity in
dealing with and protecting personal data,
set out in core principles that are based on
relevant laws, best practices, and standards.
We conduct privacy assessments that aim to
mitigate privacy risk in relation to the data we
collect, process, and store. We observe the
concept of data minimization, meaning we
endeavor only to collect personal data that is
necessary for the purposes for which it is
collected and to retain such data for no longer
than is necessary. We implement appropriate
controls to ensure that only persons with a
clear and justifiable need to know can access
personal data. We have formal processes and
Our Highlights
Around 98% of our employees completed
the Ethical Business Training.
In 2022, we implemented 479 supply chain
audits, including 67 onsite in-depth audits
on corporate responsibility topics, 33 onsite
audits against our supplier requirements and
379 supplier assessments conducted using
the EcoVadis scorecards.
We successfully completed our second
independent external Human Rights
assessment for the Global Network Initiative
(GNI). The assessment found Nokia showed
good faith efforts over time to implement the
GNI Principles on freedom of expression and
human rights.
Of the Human Rights Due Diligence (HRDD)
cases investigated in 2022, 55% were
resolved as “Go,” 31% as “Go with conditions”
and 11% as “No Go.”
We launched our six-pillar approach to
responsible AI and the Nokia Technology
Ethics Advisory Board.
We improved our hiring and in December
2022, women represented 26.6% of the
external hires.
Our enhanced ESG strategy builds upon our
existing practices where we look to take a
proactive and values-driven approach to
responsible business practices both internally
and working closely with our value chain,
targeting to improve fundamental issues in
the value chain. These include environmental
risks, technology risks, and human rights
risks where we drive responsible and ethical
practice and procedures.
Ethics and compliance
We aim to conduct our business with the
highest standards of business ethics and
integrity. Our comprehensive compliance
program and our strong culture of integrity
allow us to earn and keep the trust of our
customers, governments, employees and
other stakeholders. Our Code of Conduct
provides the framework for our commitment
to integrity by uniting all leaders and
employees behind a common vision and set
of values. Our Code of Conduct sets out four
straightforward defining principles: 1) we
follow the laws where we do business; 2) we
set an example for one another by being
honest and fair; 3) we promote a culture of
integrity through mutual respect and trust;
and 4) we hold each other accountable to
adhere to the Code of Conduct and report
potential violations. These principles are
supplemented by 14 key business policy
statements covering critical issues and risks
we face (see the picture on the right).
Our Code of Conduct and
the 14 main policy areas
We do business
the right way
■ Conflicts of interests
■ Dealing with government officials
■ Fair competition
■ Improper payments (Anti-corruption)
■ Trade compliance
■ Working with third parties
We respect
our people and
community
■ Environment
■ Fair employment
■ Health, safety & labor conditions
■ Human rights
■ Privacy
We safeguard
our assets
■ Controllership
■ Intellectual property &
confidential information
■ Insider trading
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Oversight and grievance mechanisms
Our Board of Directors and its Audit
Committee and our executive leadership
team all provide oversight of our ethics and
compliance program. Our Chief Compliance
Officer provides periodic reports and
updates concerning compliance programs,
investigations, and evolving external
enforcement and risk trends to the Board,
Audit Committee and others, as needed.
Employees are expected and encouraged to
report concerns about ethical misconduct,
potential violations of the law, our Code of
Conduct, or our company policies. We provide
numerous channels and mechanisms to
facilitate such reporting, including the means
to report anonymously (unless prohibited
by local law), and we strive to ensure that
employees feel comfortable reporting
concerns. Our global Ombuds program helps
drive our ‘speak-up’ culture and allays any
concerns employees may feel about potential
reprisal for having filed a report.
In 2022, we received 1033 concerns, of
which 360 were investigated by our Business
Integrity Group (our investigations team in the
compliance organization) as alleged violations
of our Code of Conduct. In 2022, the Business
Integrity Group closed 300 investigations into
alleged violations of our Code of Conduct,
131 of which were substantiated with
cause found after investigation. We also
implemented corrective actions including
dismissals and written warnings following
investigations conducted by the Business
Integrity Group. Beyond individual discipline,
these investigations resulted in detailed root
cause analysis, and remedial measures and
improvements were identified and monitored
for implementation.
We do business the right way
A separate Code of Ethics sets out further
expectations of our President and CEO, Chief
Financial Officer and Corporate Controller.
We also have a Third-Party Code of Conduct
and training material that applies to our
suppliers and partners and clearly state our
expectations regarding ethical conduct. All
suppliers are informed about the Third-Party
Code of Conduct and training material during
the contract agreement stage, and Nokia
sales partners, who are screened by our
Anti-Corruption Center of Excellence (CoE)
team, are required to certify that they have
read the Third Party Code of Conduct. Our
Codes are further supplemented by policies,
procedures, and guidance documents covering
a range of topics, such as third-party screening
procedures and corporate hospitality.
In 2022, we continued our longstanding
practice of providing annual training to our
employees on ethical business practices. Our
Workplace Ethics and Integrity Training was
completed by around 98% of our employees,
surpassing the agreed target of 95%.
We supplement our mandatory training with
targeted training that addresses high risk
areas, regulatory requirements, and critical
and emerging needs. We use a combination
of videos, in-depth training modules,
microlearning modules, and live training
sessions to educate employees about
high-risk areas. In 2022, more than 11 000
attendees received live training with over
600 compliance topics covered in about
200 sessions. We developed short, animated
“just-in-time” training modules that focus
on select topics and are triggered by
specific employee actions; for example,
raising a concern through our Ethics Helpline
will prompt a short training on the
investigation process.
Anti-corruption and bribery
We do not tolerate corrupt behavior by our
employees, partners, or suppliers. Improper
payments are strictly prohibited. We employ
a multi-faceted approach to prevent
corruption. We have clear and unequivocal
policies concerning improper payments,
facilitation payments, gifts and hospitality,
sponsorships and donations, and other areas
of corruption risk.
We carry out training and regularly
communicate with our employees regarding
legal and compliance risks, and we review
these risks and our mitigation measures with
the company’s senior leadership and Audit
Committee of the Board of Directors. Online
training on preventing bribery and corruption
was included in our 2022 “Workplace Ethics
and Inclusion” mandatory training for all
employees. We conduct periodic audits and
risk assessments to ensure that we identify
and respond to corruption risks across our
operations. Our compliance operations
reviews are comprehensive assessments of
compliance risk within regions and business
groups. Compliance control framework
assessments are site or business reviews that
focus on identifying anti-corruption risks and
developing, implementing, and monitoring
responsive mitigation controls. We also carry
out risk-based due diligence and monitoring
procedures for different categories of third
parties (such as suppliers and business
partners) to assess and manage potential
risks related to engaging and working with
them. In 2022, we completed four compliance
operation reviews and 13 compliance control
framework assessments, which assess the
effectiveness of our compliance processes
and risk mitigants.
The Anti-Corruption Center of Excellence
(CoE) is a dedicated group within our
compliance team that assesses, monitors,
and approves or rejects engagement with
high-risk third parties (including, but not
limited to, commercial third parties and
high-risk suppliers), as well as practices
such as gifts, entertainment, hospitality,
sponsorships and donations. Potential
customers are screened to identify risks
related to such matters as money laundering,
terrorism financing, and human rights abuses.
The activities of the CoE are digitalized and
tool-based, including, for example, monitoring
and training of third parties. Third parties
must adhere to our Third-Party Code of
Conduct, and they are required to sign our
anti-corruption certification annually. In 2022,
over 200 of our Nokia sales partners certified
that they read the Third-Party Code of
Conduct and completed the training video.
In addition, as necessary, live discussions on
effective compliance programs are held with
our partners with the goal to exchange
best practices.
Cases handled by the Human
Rights Due Diligence process
and how they were resolved
1
3
2
1 Go
2 Go with conditions
3 No go
55%
31%
11%
Human rights
We are committed to the principles of the
Universal Declaration of Human Rights, the
United Nations Global Compact, and the
Organisation for the Economic Co-operation
and Development (OECD) guidelines for
Multinational Enterprises. We encourage our
suppliers and business partners to share
these values. We endorsed the United Nations
Guiding Principles on Business and Human
Rights in 2011. Our Code of Conduct together
with our Human Rights Policy sets out our
approach to human rights. Our human rights
processes cover the whole value chain, from
supplier management to product end use
and we have set clear requirements for all
areas separately.
The technology we provide can bring positive
benefits to individuals and society as a whole.
We have a robust Human Rights Due Diligence
process that aims to ensure the technology
we provide is not misused to limit the privacy
or freedom of expression of any individual
or group.
Our Human Rights Due Diligence (HRDD)
process, which is embedded in our global
sales process, provides the mechanism and
tools to effectively mitigate our most salient
human rights risks arising from the potential
misuse of the products and technology we
provide. Before any sale is made, we aim to
identify the level of possible risk to human
rights through potential misuse of our
technology and provide mitigation if any risk
is identified. The HRDD process is initiated
according to various triggers including
technology type, customer, country and use
case. Of the cases handled by HRDD in 2022,
55% were resolved as ‘Go’, 31% as ‘Go with
conditions’, and 11% as ‘No go’. In addition to
potential product misuse, human rights risks
appear in our global supply chain. Our supply
chain risks and activities are further discussed
in the Responsible Sourcing section below
and in a separate modern slavery statement
published on our website.
We are a member of the Global Network
Initiative (GNI), a multi-stakeholder group
of companies, civil society organizations
(including human rights and press freedom
groups), investors, and academics working
together to protect and advance freedom of
expression and privacy in the ICT sector. In
2022, we successfully completed our second
independent assessment for the GNI and
were found to have shown good faith efforts
over time to implement the GNI Principles on
freedom of expression and human rights.
In 2022, Nokia strongly condemned the
Russian invasion of Ukraine. Our Ukrainian
employees helped maintain customer
networks and provide critical connectivity for
their country. It became clear in the early days
of the invasion that our continued presence
in Russia would no longer be possible, so we
took the decision to exit the Russian market
in a responsible way.
Responsible sourcing
We expect our suppliers to adhere to our
Third Party Code of Conduct and provide
them with our Supplier Requirements,
including the Responsible Business Alliance
(RBA) Code of Conduct and additional,
Nokia-specific sustainability requirements.
The requirements cover such topics as
environment, health, safety and security,
privacy, risk management, labor and human
rights management, modern slavery and
ethics. We also run assessments and audits on
our suppliers and provide training to ensure
they meet our ethical requirements and
continuously improve on their performance.
We also work with our suppliers on
remediation actions and push to raise the
bar on standards across our ecosystem.
While COVID-19 and related precautions are
still limiting the possibility of conducting
onsite audits in certain regions, we continue
to assess and monitor our suppliers.
COVID-19 also heightened the potential risks
of both child and informal labor. In 2022,
we implemented 479 supply chain audits
(439 in 2021), including 67 onsite in-depth
audits on corporate responsibility topics,
33 onsite audits against our supplier
requirements and 379 supplier assessments
and follow-ups conducted using the EcoVadis
scorecards. We also ran training workshops
for suppliers including topics such as climate
change, circularity, responsible minerals
sourcing, modern slavery, labor migration,
diversity and inclusion, and health and safety.
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Our People
Our Highlights
In 2022, we communicated our new people strategy, which puts our
employees at the heart of everything we do. The aim is to create a
working environment in which everyone can thrive.
In 2022, Nokia launched two new global minimum standard benefits:
1) in support of inclusion and diversity, equal childcare benefits are
now offered to all employees regardless of their gender, and 2)
company-provided life insurance of one year’s capped base salary
is now offered to all employees regardless of country.
At Nokia, we care about our people and believe they are critical to the
long-term sustainability and competitiveness of our company. We aim
to hire and retain the best talent and provide a work environment
where each person can thrive. The foundation of our culture is based
on the Nokia essentials which incorporate our values and determine
how we, both as a company and as individuals, interact with each other
and the world around us. The essentials reflect how it should feel to
work at Nokia, and what we want our customers, suppliers and
partners to experience working with us.
“At Nokia, we care about
our people and believe
they are critical to the
long-term sustainability
and competitiveness
of our company.”
Our people grow continuously and develop in an open,
fearless and empowered culture. A culture that is inclusive
and diverse, creates trust and enables our people to deliver
company business priorities in a responsible way.
The essentials
Our essentials are brought to life through our
people’s strategy.
Putting our people at the
heart of everything we do
Nokia people strategy
Open
I am open in mindset: to opportunity, to the future
and evolving market needs, to new approaches,
and to collaborate.
Fearless
I am fearless and bring my authentic self to work,
sharing my ideas and opinions and knowing that
mistakes are OK as long as we can learn from them.
Empowered
I am empowered and supported to make decisions
and own my work because I am trusted and I trust my
colleagues, who have my back in success or failure.
The people strategy translates the essentials into ambitions and actions in four ways:
Growing together
Nokia people strategy
At Nokia we work together to align personal, professional and business
growth by providing our people with visibility, resources and support at
every step of their journey. By enriching, recognizing, and rewarding
individual experiences and skills, we aim to be a company where people
not only work, but thrive.
In 2022, we launched a portal which harnesses the power of AI/ML to
match our employees’ individually profiled skills, interests, aspirations
and preferences with new career opportunities and resources available
at Nokia. In addition to leadership training, we established the new
Technical Career Path that supports employees to advance their
careers as subject matter experts without becoming a people
manager. Around 261 internal coaches and around 479 mentors are
available at Nokia to support our employees on their growth journey.
Focus on ESG enablement
In 2022, we focused on ESG enablement across our global
organization. We introduced our first ever global mandatory ESG
training which was completed by around 97% of employees by the
end of the year and was available in 13 languages. We also laid the
foundations of an ESG support network across our global footprint
with the introduction of ESG principals. These principals spend part
of their working time as an ESG point of contact and support for
our teams in the field, share experiences and provide two-way
engagement between corporate and regional teams. Also, an online
training was introduced at both a basic level and more advanced level
on ESG topics and information targeting our customer facing teams
and the currently 56 ESG principals globally. Communication was also
targeted at key functions within the company.
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Leading lights
Nokia people strategy
Experience is
everything
Nokia people strategy
In times of change and uncertainty, it is more important than ever to
lead with strong human skills that promote psychological safety and
create a working environment in which all people can live our Nokia
essentials. The new hybrid working environment requires connecting
with employees in new ways, engaging through empathy, whilst
retaining strategic and operational focus. To help leaders retain and
develop their people in this unprecedented environment, we have
implemented new initiatives in 2022, including:
■ A global standard approach to onboarding new leaders with an
explicit focus on preparing for management in the post-COVID
working environment.
■ Targeted face-to-face “Lead in Focus” sessions for critical areas of
the business to support prioritization and coordination of complex
technology rollouts.
■ Online training modules for leaders to refresh and reflect on their
leadership behaviors and skills.
■ Monthly community calls allowing leaders from around the world
to share best practices, tips and challenging situations to improve
our collective knowledge.
We are shaping the Nokia environment to enable people to be
empowered and productive. We strive for increased flexibility in how
and where employees work, simplified policies and processes,
psychological safety and the feeling of working in a united manner.
We announced our new flexible working approach that was effective
from 2022 and allows employees (subject to business need) to work
up to three days a week remotely on average, provides greater
acceptance of fully remote work, and greater flexibility in their
working hours.
We belong
Nokia people strategy
We are building a culture of belonging and personal connection to the
broader Nokia community. To truly act together, we must be inclusive,
offering equal opportunities regardless of individual background,
preferences and identity so that everyone feels valued, heard,
and able to contribute.
■ As part of the 2022 mandatory training for all employees,
we included a Workplace Ethics and Inclusion training to further
strengthen inclusive behaviors and Nokia’s speak-up culture.
In addition, we launched a company wide Allyship program and
established an Inclusion & Diversity community which offers
volunteering opportunities and growth experiences for employees.
It caters for further inclusion and diversity education and best
practice sharing across Nokia.
We continue actions to ensure Nokia is an inclusive place to work for
people with disabilities. In 2022 we piloted four disability inclusion
country projects in China, Poland, Hungary and Italy and published
an eBook for managers leading people with disabilities.
We also continued to drive improvements in gender diversity by:
■ Monitoring pay equity: In 2022, the end-of-year review showed a
statistically barely significant unexplained pay gap. We will continue
to stress and apply mitigations to keep it closed in the future.
A new global ‘New Child Leave’ policy has been implemented in 2022
to provide any Nokia employee who becomes a parent, regardless of
gender, with at least 90 calendar days’ (three calendar months) paid
leave and the right to return to work up to one year following the date
of birth or adoption. This policy allows our people time to experience
the joy of parenthood and bond with their new child free from
financial stress and without the emotional pressure of returning to
work too soon. The global average length of paternity leave is only
approximately two weeks. This new policy encourages fathers to
spend more time with their newborn child.
■ Targeting 26% women in global external hiring, revising our
recruitment process, and continuing training to recruiters and
managers on how to avoid bias. In December 2022, women
represented 26.6% of the external hires.
■ Running programs in collaboration with UN Women, our customers
and internally to support women’s careers.
■ Increasing our talent attraction activities through:
– forming a team of Inclusion & Diversity sourcing professionals
across markets where we hire most
– very targeted social media campaigns for diverse employee hiring
– establishing a new Nokia Academy in Bangalore and increasing the
intake of the already existing Nokia Poland Academy
– focusing on the conversion of trainees into permanent employees.
Employee demographics
The market for skilled employees in our business remains extremely
competitive. Our workforce has evolved over recent years as we have
introduced changes in our strategy to respond to our business targets
and our activities. These changes may in the future cause disruption
and fatigue among employees, which, when coupled with our
employee demographics and a dependence on key resources in some
areas, make a focus on skill refresh, wellbeing, inclusivity and enabling
personal and professional growth imperative.
In 2022, the average number of employees was 86 896 (87 927 in
2021 and 92 039 in 2020) divided geographically as follows: Asia
Pacific (21 141), China (11 427), Finland (6 753), Latin America (2 903),
Middle East and Africa (3 148), North America (10 540) and other
European countries (30 984).
At the end of 2022, 30% of our executive leadership positions
were held by women, while the share of women in all leadership
positions across Nokia was 17%. In total, women accounted for
23% of our workforce.
Share of women in our workforce in 2022
50%
40%
30%
20%
10%
0%
40%
30%
23%
17%
Nokia Board
of Directors
Group Leadership
Team
All leadership
positions
Total
workforce
108
NOKIA IN 2022
NOKIA IN 2022
109
Board review Sustainability and corporate responsibility
continued
Taxonomy
The management system is certified with
the internationally recognized ISO 45001.
The certification is provided by a third party,
Bureau Veritas, and the share of our
employees covered by the certification
at the end of 2022 was over 84%.
We implement training, analysis, assessments
and consequence management to address
job-related health and safety risks. We run a
wide range of programs targeted at constantly
improving our health and safety performance,
while also encouraging employees and
contractors to report near misses and
dangerous incidents.
We see the highest risk exposure to health
and safety in the delivery of field work, which
is predominantly delivered by our contractors
through tasks such as working at height,
driving for work and electrical installation
and maintenance. Consequently, we have set
stringent key performance indicators related
to the supplier’s ability to deliver safely, which
is evaluated by our Health and Safety Maturity
Assessment process.
Our key standards Working at Height,
Rigging & Lifting, and Driving and Electrical
are implemented with non-negotiables for
effective controls to manage risk on a global
scale in all markets. Incident management
and reporting and investigation programs
encourage all employees and contractors
working on our behalf to report all
incidents including near misses and high
potential incidents.
Our assurance and governance programs
have built in checkpoints to measure
effectiveness. We have agreed metrics and key
performance indicators designed into all levels
of our programs and business processes
to assure and manage risk in critical areas
such as supplier qualification and project
management where high-risk activities are
delivered. Market operational reviews and
internal and external audits provide the
visibility and accountability needed to improve
performance and reduce risk. In addition,
regular reporting, communication of recovery
plans and action management are in place
to ensure effective program management.
By the end of 2022, 99.1% of suppliers
delivering high-risk activity had been assessed
using our H&S Maturity Assessment Process
and 98.3% of the assessed suppliers met H&S
compliant supplier status. We also carried out
implementation assessments on 99.4% of all
high-risk projects. 96.6% of those projects
were found to meet our minimum
non-negotiable requirements.
In support of inclusion and diversity,
equal childcare benefits are now
offered to all Nokia employees.
Wellbeing
Our global Life Insurance policy ensures that
the loved ones of any Nokia employee who
dies will receive financial support of not less
than one year’s gross base salary, subject to a
financial cap. The local implementation of this
global policy continues to progress and was
almost 100% completed by end of 2022.
At Nokia, we empower employees to manage
their personal health and wellbeing, feel safe
talking about their mental health at work, and
provide access to the support they need when
they need it most. Nokia’s Personal Support
Service continues to provide confidential,
professional support and advice on a range of
emotional, practical and work-life issues, and
is available to all Nokia employees and their
family members. This service played a critical
role in providing support to those impacted
directly, or indirectly by the Russian invasion
of Ukraine as well as to Nokia volunteers
who worked tirelessly to support refugees
from Ukraine.
Our global mental health and wellbeing
training series continued in 2022 with 23
webinars covering a wide range of topics from
ergonomics and movement to sleep and
burnout. Over 11 000 employees engaged
with the content in these sessions, either live
or on-demand. Regional trainings are available
in local languages. Over 10 000 employees
registered to participate in the nine-week
annual Nokia Sports Festival which
emphasizes the importance of movement
to enhance physical and mental wellbeing.
We also launched an employee-led resource
group, ShareToCare, to normalize
conversations around mental health by
voluntarily sharing personal experiences.
Health, safety and labor conditions
Our Code of Conduct is the basis for labor
conditions, enhanced by a full set of global
human resources policies and procedures
that enable fair employment. We adhere to
the International Labor Organization (ILO)
Declaration on Fundamental Principles and
Rights at Work, and we meet, or where
possible exceed, the requirements of labor
laws and regulations wherever we have
operations. We work hard to ensure decent
working conditions and fair employment,
recognizing both international and local
laws and guidelines. Our health and safety
management system is the basis for our
overall program and an integral part of
how we manage health and safety.
Disclosure under the European
Union Taxonomy Regulation
In order to meet the European Union’s (EU)
climate and energy targets for 2030 and
reach the goals of the European Green Deal,
the EU Taxonomy Regulation (2020/852)
was introduced to establish a common
classification system for environmentally
sustainable economic activities on the basis
of defined objectives and technical screening
criteria. The purpose of the taxonomy is to
help identify the economic activities which
make a substantial contribution to the Green
Deal objectives, while creating a common
ground for businesses and investors, allowing
them to communicate about green activities
in a credible and transparent manner. At the
same time, the EU Taxonomy helps investors
navigate the transition to sustainability by,
among others, providing them with long-term
incentives to directing financing toward
activities that contribute substantially to one
or more of environmental objectives, so called
“green investments”.
By clearly defining what can be considered
“green” within a certain sector of activities,
the EU Taxonomy seeks to incentivize and
encourage businesses to launch new projects,
or upgrade existing ones, in order to meet one
or more of these environmental objectives:
1. Climate change mitigation
2. Climate change adaptation
3. Sustainable use and protection of water
and marine resources
4. The transition to a circular economy
5. Pollution prevention and control
6. Protection and restoration of biodiversity
and ecosystems.
The disclosure by companies of
Taxonomy-aligned green activities aims to
ensure the public release of more reliable,
comparable sustainability information,
thus openly available for investors and
stakeholders. As a company subject to the EU
Taxonomy Regulation, including the related
delegated acts and their annexes, we are
required to disclose the amount and share of
our net sales (turnover) derived from, and
capital expenditure and operating expenditure
associated with economic activities that are
EU taxonomy-compliant economic activities.
Disclosure requirements for the
financial year 2022
Reporting obligations come into force
gradually in accordance with the timelines
set out in the Taxonomy Regulation.
For the financial year 2022, we are required
to report financial indicators only for
environmental objectives 1 (Climate change
mitigation) and 2 (Climate change adaptation).
Nokia should report the share of its activities
that are eligible and whether they are aligned
with the EU taxonomy. ‘Eligible’, in this
context, refers to activities that are
recognized by the EU taxonomy but have
not yet been evaluated using the prescribed
technical screening criteria. Also, to claim
‘alignment’ with the current version of the
EU Taxonomy, an economic activity needs to
demonstrably comply with all the following
requirements:
a) it complies with the technical screening
criteria and contributes substantially to
one of six environmental objectives
b) it does not significantly harm any of the
other environmental objectives
c) it is carried out in compliance with
certain social and governance
minimum safeguards.
First reporting obligations related to
objectives 3 through 6 are currently expected
to apply for the financial year 2023, but the
final timeline of related technical criteria and
delegated acts has not yet been confirmed.
Nokia’s business activities and the
EU taxonomy
The EU taxonomy and its technical screening
criteria are dynamic, and further development
of the criteria is ongoing. Not all sectors and
economic activities have been recognized yet
in the taxonomy and its screening criteria. The
sectors that have a large emissions footprint
have been prioritized in the development of
the taxonomy. The telecom sector is one of
the sectors not yet specifically recognized in
the EU taxonomy sectors which in turn
provide the basis for economic activities.
Without such recognition, the taxonomy
eligibility is low for Nokia.
To determine our taxonomy-eligible activities,
we have established a cross-organizational
working group consisting of our business
groups, technology, finance and sustainability
experts. We have also created a steering
committee to provide guidance and review
of EU taxonomy reporting.
We have conducted an analysis mapping of
our activities to the taxonomy. From the
activities included in Annex I and II of the
Climate Delegated Act, we identified the
following activities as potentially relevant for
Nokia: activities 3.6, 8.1, 8.2, 9.1 /9.2, 7.3-7.6,
6.12 and 6.5 contributing to environmental
objectives 1 and 2. We identified
taxonomy-eligible activities corresponding to
either net sales or R&D operating expenditure
only in category 8.2 Data-driven solutions for
Greenhouse gas (GHG) emissions reductions
(Objective 1: Climate change mitigation).
The identified category is limited in our
context and further underscores the issue
that the Telecom sector is not yet addressed
as such in the EU taxonomy and, therefore,
the positive impact (handprint) of connectivity
and digitalization towards sustainability
are not currently recognized here. Our
connectivity and digitalization solutions
enable efficiencies and sustainable
transformation of other industries,
with an important role as an enabler of
decarbonization. Secondly, we continually
seek to increase energy efficiency across our
portfolio, for purposes of reducing the
environmental footprint of our products in
use by our customers. Thirdly, we also work
with our supply chain to enable efficiencies
that help reduce the embodied carbon
associated with the design, manufacture,
delivery and end of life of our products. This
means that our achievements in reducing
GHG emissions for our customers, industry
and society at large may not be recognized by
the current version of the EU taxonomy. For
more information on our ESG strategy and
targets to reduce our GHG emissions across
our value chain refer to “Our purpose,
strategy and targets” section above.
We recognize the role of the EU taxonomy
in bringing clarity and comparability to
environmental reporting and helping to avoid
greenwashing. Therefore, we have taken a
conservative approach in our interpretation
of activities which may qualify as eligible,
meaning that for example for activity 8.2
under ‘Climate change mitigation’ we only
considered data-driven solutions
‘predominantly’ designed or developed for
GHG emission reduction. As stated, our
solutions have features that save energy,
and improvements in our product efficiency
enable GHG emission reductions through
reduced power consumption when products
are used by our customers. However, those
features are usually designed and sold as part
of the overall product or solution and are not
110
NOKIA IN 2022
NOKIA IN 2022
111
Board review Taxonomy
continued
‘predominantly’ designed to reduce
emissions. The ‘predominant’ purpose of our
products and solutions is to provide
connectivity and communication networks to
industry, countries and communities. Hence,
the taxonomy-eligible net sales and R&D
expenditure is low for the financial year 2022.
We resolutely support the ambitious
environmental goals set by the EU and
continue to advocate for future work on the
EU taxonomy to recognize the positive impact
that connectivity and digitalization, including
technologies such as 5G and other advanced
communications technologies may have on
the six environmental objectives of the
taxonomy. For example, as a founding
member of the European Green Digital
Coalition (‘EGDC’) formed from a group of
CEOs of ICT companies (including Nokia’s)
we are committed to support the Green and
Digital Transformation of the EU. As part
of this commitment, the EGDC is developing
methods and tools to measure the net
positive impact of green digital technologies
on the environment and climate and
supports the potential use of such methods
by the EU Taxonomy.
Individually eligible capital expenditure
(CapEx) and operating expenditure
(OpEx)
We have considered CapEx and OpEx arising
from certain individual investments that
enable related activities to either improve
energy efficiency, become low-carbon, or lead
to greenhouse gas reductions, and that meet
the description of the corresponding economic
activity in the Climate Delegated Act.
We identified capital expenditure under
activities 7.3 ‘Installation, maintenance and
repair of energy efficiency equipment’ and 6.5
‘Transport by motorbikes, passenger cars and
light commercial vehicles’ (under Objective 1:
Climate change mitigation). Capital
expenditure is reported as eligible under
these activities to the extent that the
identified assets enable the activities to
become low-carbon or to lead to greenhouse
gas reductions. Examples of such capex
expenditure include individual energy efficient
equipment investments on our premises, for
example replacement of air conditioning
systems, as well as electric and hybrid vehicle
leases. We have not identified any individually
eligible operating expenditure.
Alignment assessment
We have considered the technical screening
criteria for all the taxonomy activities
identified as eligible, including both the
business-related eligible activity and the
individually eligible activities. We concluded
that the taxonomy-eligible activities do not
meet the full alignment criteria as defined by
the EU taxonomy. For example, activity 8.2
‘Data-driven solutions for Greenhouse gas
(GHG) emissions reductions contributing to
climate change mitigation’ requires the
comparison of the life-cycle emission savings
data between our products and other similar
products or solutions on the market. Such
data has limited public availability, and
therefore, the full alignment criteria could not
be met for the financial year 2022 reporting.
We continue to monitor regulatory
developments and, in particular, the evolution
of the alignment criteria within the EU
taxonomy regulation and the issuance of
sector-specific guidance for the upcoming
reporting periods.
Accounting policy for the taxonomy-related financial KPIs
Our taxonomy-eligible and taxonomy-aligned net sales, capital expenditure and operating expenditure for 2022 are shown in the tables below.
Proportion of net sales (turnover) from products or services associated with Taxonomy-aligned economic activities
Substantial
contribution
criteria
DNSH criteria (‘Does Not Significantly Harm’)
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Economic activities
A. TAXONOMY-ELIGIBLE ACTIVITIES
A.1. Environmentally sustainable
activities (Taxonomy-aligned)
8.2. Data-driven solutions for GHG
emissions reductions
Net sales of environmentally sustainable
activities (Taxonomy-aligned) (A.1)
A.2. Taxonomy-Eligible but not
environmentally sustainable
activities (not Taxonomy-aligned
activities)
8.2. Data-driven solutions for GHG
emissions reductions
Net sales of Taxonomy-Eligible but not
environmentally sustainable activities
(not Taxonomy-aligned activities)
(A.2)
Total (A.1 + A.2)
B. TAXONOMY-NON-ELIGIBLE
ACTIVITIES
Net sales of Taxonomy-non-eligible
activities (B)
Total (A+B)
24 906 100%
24 911 100%
112
NOKIA IN 2022
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113
Board review
Taxonomy
continued
Proportion of capital expenditure (CapEx) from products or services associated with Taxonomy-aligned economic activities
Proportion of operating expenditure (OpEx) from products or services associated with Taxonomy-aligned economic activities
Substantial
contribution
criteria
DNSH criteria (‘Does Not Significantly Harm’)
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contribution
criteria
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Economic activities
A. TAXONOMY-ELIGIBLE ACTIVITIES
A.1. Environmentally sustainable
activities (Taxonomy-aligned)
6.5. Transport by motorbikes,
passenger cars and light commercial
vehicles contribution
7.3. Installation, maintenance and repair
of energy efficiency equipment
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activities)
6.5. Transport by motorbikes,
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of energy efficiency equipment
CapEx of Taxonomy-Eligible but not
environmentally sustainable activities
(not Taxonomy-aligned activities)
(A.2)
Total (A.1 + A.2)
B. TAXONOMY-NON-ELIGIBLE
ACTIVITIES
CapEx of Taxonomy-non-eligible
activities (B)
Total (A+B)
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Economic activities
A. TAXONOMY-ELIGIBLE ACTIVITIES
A.1. Environmentally sustainable
activities (Taxonomy-aligned)
8.2. Data-driven solutions for GHG
emissions reductions
OpEx of environmentally sustainable
activities (Taxonomy-aligned) (A.1)
A.2. Taxonomy-Eligible but not
environmentally sustainable
activities (not Taxonomy-aligned
activities)
8.2. Data-driven solutions for GHG
emissions reductions
OpEx of Taxonomy-Eligible but not
environmentally sustainable activities
(not Taxonomy-aligned activities)
(A.2)
Total (A.1 + A.2)
B. TAXONOMY-NON-ELIGIBLE
ACTIVITIES
OpEx of Taxonomy-non-eligible
activities (B)
Total (A+B)
Taxonomy-related reporting obligations include a description of an ‘accounting policy’, including calculation principles for the numerator and the
denominator. This section explains how net sales (turnover), capital expenditure and operating expenditure were determined and allocated to
the numerator; and the basis on which the net sales, capital expenditure and operating expenditure were calculated.
Net sales
Taxonomy-eligible net sales (turnover) in the numerator includes the aggregated amount of net sales from products and services associated
with its taxonomy-eligible economic activities. The denominator is the total net sales of the Nokia Group as presented in the consolidated
income statement.
Capital expenditure
Taxonomy-eligible CapEx includes only individually eligible capital expenditure from activities that reduce GHG emissions but are not directly
generating net sales. In 2022, other capital expenditure related to taxonomy-eligible activities was not considered relevant nor material.
The denominator is the total amount of additions to intangible assets, property, plant and equipment, and right-of-use assets during the
financial year as presented in the consolidated financial statements. Additions are considered before depreciation and amortization for the
relevant financial year. Total additions are presented in the notes to consolidated financial statements in Note 13, Goodwill and intangible
assets; Note 14, Property, plant and equipment; and Note 15, Leases.
Operating expenditure
In assessing its taxonomy-eligible operating expenses, Nokia includes in the numerator the estimated direct research and development
expenses related to the products and services associated with its taxonomy-eligible economic activities, excluding depreciation, amortization
and impairment costs.
The denominator consists of research and development expenses as presented in the consolidated income statement, excluding depreciation,
amortization and impairment costs. The definition of operating expenses in the EU taxonomy includes also building renovation measures,
short-term leases, maintenance and repair, and any other direct expenditures relating to servicing of assets of property, plant and equipment.
As these expenses cannot be measured reliably, they are excluded from reported operating expenses to the extent the expenses are not
already included in the research and development expenses.
114
NOKIA IN 2022
NOKIA IN 2022
115
Board review
Shares and shareholders
Shares and
shareholders
Share details
Shares and share capital
Nokia has one class of shares. Each Nokia share entitles the holder to one vote at general meetings of Nokia.
At 31 December 2022, the share capital of Nokia Corporation equaled EUR 245 896 461.96 and the total number of shares issued was
5 632 297 576. At 31 December 2022, the total number of shares included 45 281 539 shares owned by Group companies representing
approximately 0.8% of the total number of shares and the total voting rights.
In 2022, under the authorization granted to the Board of Directors by the Annual General Meeting, the Parent Company issued 20 800 000
new shares without consideration to itself to fulfill the company’s obligation under the Nokia Equity Programs.
In 2022, under the authorization granted to the Board of Directors by the Annual General Meeting, the Parent Company issued 15 986 016
treasury shares to employees, including certain members of the Group Leadership Team, as settlement under Parent Company equity-based
incentive plans and the employee share purchase plan. The shares were issued without consideration and in accordance with the rules of
the plans.
Information on the authorizations held by the Board of Directors in 2022 to issue shares and special rights entitling to shares, to transfer shares
and repurchase own shares, as well as information on related party transactions, the shareholders, stock options, shareholders’ equity per
share, dividend yield, price per earnings ratio, share prices, market capitalization, share turnover and average number of shares is available in
this section “Shares and shareholders” and additionally in the “Corporate governance—Compensation” section, and in Notes 18, Equity and 31,
Related party transactions, of the consolidated financial statements.
In December 2022, the Board of Directors decided to cancel 63 963 583 Nokia shares held by the Company and repurchased under the buyback
program initiated in the first quarter of 2022. The cancellation did not affect the Company’s share capital nor total equity.
The Board of Directors held at 31 December 2022 a total of 969 511 shares and ADSs in Nokia, which represented approximately 0.02% of
our total shares and voting rights excluding shares held by the Nokia Group. The President and CEO owned at 31 December 2022 a total of
1 289 304 shares.
There were no public takeover offers by third parties for Nokia’s shares or by Nokia for other companies’ shares during the 2022 and 2021
fiscal years.
Nokia does not have minimum or maximum share capital or a par value of a share.
31 December
Share capital, EURm
Shares, (000s)
Shares held by the Group, (000s)
Number of shares excluding shares held by the Group, (000s)
Average number of shares excluding shares held by the Group
during the year
Basic, (000s)(1)
Diluted, (000s)(1)
Number of registered shareholders(2)
2022
246
5 632 298
45 282
5 587 016
2021
246
5 675 461
40 468
5 634 993
2020
246
5 653 886
36 390
5 617 496
2019
246
5 640 536
34 955
5 605 581
2018
246
5 635 945
42 783
5 593 162
5 614 182
5 670 020
238 359
5 630 025
5 684 235
233 844
5 612 418
5 612 418
246 886
5 599 912
5 626 375
248 526
5 588 020
5 588 020
243 409
(1) Used in calculation of earnings per share for profit or loss for the year attributable to equity holders of the parent.
(2) Each account operator is included in the figure as only one registered shareholder.
Key ratios
For the year ended 31 December, Continuing operations
Earnings per share, basic, EUR
Earnings per share, diluted, EUR
P/E ratio
Proposed dividend per share, EUR(1)(2)
Total dividends, EURm(1)(3)
Payout ratio(1)
Dividend yield %(1)
31 December
Shareholders’ equity per share, EUR
Share price(4)
Market capitalization, EURm
2022
0.75
0.74
5.77
0.12
676
0.16
2.77
2022
3.82
4.33
24 192
2021
0.29
0.29
19.22
0.08
449
0.28
1.44
2021
3.08
5.57
31 409
2020
(0.45)
(0.45)
neg.
0.00
–
–
–
2020
2.22
3.15
17 701
2019
0.00
0.00
–
0.00
–
–
–
2019
2.73
3.30
18 476
2018
(0.10)
(0.10)
neg.
0.20
560
neg.
3.98
2018
2.73
5.03
28 134
(1) The Board of Directors proposes to the Annual General Meeting to be authorized to decide in its discretion on the distribution of an aggregate maximum of EUR 0.12 per share as dividend from the
retained earnings and/or as assets from the reserve for invested unrestricted equity.
(2) In 2019, Nokia’s Annual General Meeting resolved to authorize the Board of Directors to resolve on the distribution of an aggregate maximum of EUR 0.20 per share as dividend for the financial year
2018 in four quarterly installments. Finally, the Board of Directors resolved on the distribution of two quarterly installments totaling EUR 0.10 per share.
(3) In 2022, dividends paid is calculated based on the proposed Annual General Meeting authorization to the Board of maximum distribution of EUR 0.12 per share for the financial year 2022, and the total
number of shares on the date of issuing the financial statements for 2022. On the date of issuing the financial statements for 2022 the total number of Nokia shares is 5 632 297 576. Comparative
amounts represent the actual total distribution to equity holders of the parent for the year presented.
(4) Closing Nokia share price at year-end on Nasdaq Helsinki.
Share turnover
For the year ended 31 December
Number of shares traded during the year (000s)(1)
Average number of shares excluding shares held by the Group
during the year (000s)
Share turnover %
(1) Source: Nasdaq Helsinki, the NYSE composite tape and Euronext Paris.
2022
2019
10 294 615 16 560 334 13 903 762 11 003 630
2021
2020
2018
8 960 687
5 614 182
183
5 630 025
294
5 612 418
248
5 599 912
196
5 588 020
160
The principal trading markets for the shares are Nasdaq Helsinki and Euronext Paris, in the form of shares, and the NYSE, in the form of ADSs.
Share price development
Annual data
2022 Full year High/Low
2022 Full year Average (Volume-weighted)
Year-end value 31 December 2022
Year-end value 31 December 2021
Change from 31 December 2021
to 31 December 2022
Nasdaq Helsinki
New York Stock Exchange
Euronext Paris
High
Low
Value
High
Low
Value
High
Low
Value
5.77
EUR
4.12
6.34
USD
4.08
5.76
EUR
4.12
4.75
4.33
5.57
(22.3)%
4.99
4.64
6.22
(25.4)%
4.83
4.34
5.57
(22.1)%
Stock option exercises
Since 2019, Nokia has not administered any global stock option plans.
116
NOKIA IN 2022
NOKIA IN 2022
117
Board review
Shares and shareholders
continued
Dividend and share buybacks
The dividend to shareholders is Nokia’s principal method of distributing earnings to shareholders. The dividend policy was updated at the
Capital Markets Day in March 2021 to be “We target recurring, stable and over time growing ordinary dividend payments, taking into account the
previous year’s earnings as well as the company’s financial position and business outlook”.
The Board of Directors proposes to the Annual General Meeting 2023 that no dividend is distributed by a resolution of the Annual General
Meeting for the financial year ended on 31 December 2022. Instead, the Board proposes to the Annual General Meeting to be authorized to
decide, in its discretion, on the distribution of an aggregate maximum of EUR 0.12 per share as dividend from the retained earnings and/or as
assets from the reserve for invested unrestricted equity. The authorization would be used to distribute dividend and/or assets from the reserve
for invested unrestricted equity in four installments during the authorization period, in connection with the quarterly results, unless the Board
of Directors decides otherwise for a justified reason. The proposed total authorization for distribution of dividend and/or assets from the
reserve for invested unrestricted equity is in line with the Company’s dividend policy. The authorization would be valid until the opening of the
next Annual General Meeting. The Board would make separate resolutions on the amount and timing of each distribution of dividend and/or
assets from the reserve for invested unrestricted equity.
In 2020 and 2021, Nokia generated strong cash flow which has significantly improved the cash position of the company. To manage the
company’s capital structure, Nokia’s Board of Directors initiated a share buyback program under the authorizations from the Annual General
Meetings 2021 and 2022 to repurchase shares to return up to EUR 600 million of cash to shareholders in tranches over a period of two years.
The first phase of the share buyback program with a maximum aggregate purchase price of EUR 300 million started in February 2022 and ended
in November 2022. The second EUR 300 million phase of the share buyback program started in January 2023 and it will end at the latest by
21 December 2023.
We distribute distributable funds, if any, within the limits set by the Finnish Companies Act as defined below. We make and calculate the
distribution, if any, in the form of cash dividends, assets from the reserve for invested unrestricted equity, share buybacks, or in some other
form, or a combination of these. There is no specific formula by which the amount of a distribution is determined, although some limits set
by law are discussed below. The timing and amount of future distributions of retained earnings and/or assets from the reserve for invested
unrestricted equity, if any, will depend on our future results and financial conditions.
Under the Finnish Companies Act, we may distribute retained earnings and/or assets from the reserve for invested unrestricted equity on
our shares only upon a shareholders’ resolution and subject to limited exceptions in the amount proposed by the Board. The amount of any
distribution is limited to the amount of distributable earnings of the Parent Company pursuant to the last audited financial statements
approved by our shareholders, taking into account the material changes in the financial situation of the Parent Company after the end of
the last financial period and a statutory requirement that the distribution of earnings must not result in insolvency of the Parent Company.
Subject to exceptions relating to the right of minority shareholders to request a certain minimum distribution, the distribution may not exceed
the amount proposed by the Board of Directors.
Purchases of equity securities by the Company and affiliated purchasers
The table below presents additional information on the purchases of treasury shares in 2022:
Period
January
February
March
April
May
June
July
August
September
October
November
December
Total
Total number
of shares
purchased
0
3 329 808
7 133 000
5 349 700
7 028 300
7 494 800
6 747 000
5 564 840
7 623 200
9 275 500
4 417 435
0
63 963 583
Average price
paid per share,
EUR
–
4.91
4.71
4.93
4.70
4.57
4.64
5.02
4.68
4.51
4.47
–
4.69
Total number of
shares purchased
as part of publicly
announced plans
or programs
0
3 329 808
7 133 000
5 349 700
7 028 300
7 494 800
6 747 000
5 564 840
7 623 200
9 275 500
4 417 435
0
63 963 583
Maximum value of
shares that may
yet be purchased
under the plans
or programs,
EUR
300 000 000
283 659 670
250 098 525
223 733 533
190 704 228
156 482 445
125 160 611
97 215 458
61 564 055
19 741 514
–
300 000 000(1)
(1) In December 2022, the Board decided to launch the second EUR 300 million phase of the share buyback program pursuant to an authorization from the Annual General Meeting 2022. The repurchases
started in January 2023.
Shareholders
At 31 December 2022, shareholders registered in Finland represented approximately 23% and shareholders registered in the name of a
nominee represented approximately 77% of the total number of shares of Nokia Corporation. The number of directly registered shareholders
was 238 359 at 31 December 2022. Each account operator (12) is included in this figure as only one registered shareholder.
Largest shareholders registered in Finland at 31 December 2022(1)
Shareholder
Solidium Oy
Keskinäinen Työeläkevakuutusyhtiö Varma
Keskinäinen Eläkevakuutusyhtiö Ilmarinen
Keskinäinen Työeläkevakuutusyhtiö Elo
Valtion Eläkerahasto
OP-Suomi -Sijoitusrahasto
Oy Lival Ab
Svenska Litteratursällskapet i Finland r.f.
Nordea Pro Finland Fund
Danske Invest Finnish Equity Fund
Total number
of shares 000s
301 000
75 236
68 595
33 690
29 000
17 865
17 020
15 217
10 710
9 130
% of all shares
5.34
1.34
1.22
0.60
0.51
0.32
0.30
0.27
0.19
0.16
% of all voting rights
5.34
1.34
1.22
0.60
0.51
0.32
0.30
0.27
0.19
0.16
(1) Excluding nominee registered shares and shares owned by Nokia Corporation. Nokia Corporation owned 33 822 878 shares at 31 December 2022.
Breakdown of share ownership at 31 December 2022(1)
By number of shares owned
1–100
101–1 000
1 001–10 000
10 001–100 000
100 001–500 000
500 001–1 000 000
1 000 001–5 000 000
Over 5 000 000
Total
Number of
shareholders
62 259
109 230
58 824
7 547
393
43
40
23
238 359
% of
shareholders
26.12
45.83
24.68
3.17
0.17
0.02
0.02
0.01
100.00
Total number
of shares
3 050 629
48 557 985
183 833 261
186 194 111
75 445 465
30 630 857
105 494 319
4 999 090 949
5 632 297 576
% of
all shares
0.05
0.86
3.26
3.31
1.34
0.54
1.87
88.76
100.00
(1) The breakdown covers only shareholders registered in Finland, and each account operator (12) is included in the number of shareholders as only one registered shareholder. As a result, the breakdown
is not illustrative of the entire shareholder base of Nokia.
By nationality
Non-Finnish shareholders
Finnish shareholders
Total
By shareholder category (Finnish shareholders)
Corporations
Households
Financial and insurance institutions
Non-profit organizations
Governmental bodies (incl. pension insurance companies)
Total
% of shares
77.49
22.51
100.00
% of shares
2.39
7.44
2.15
1.28
9.25
22.51
At 31 December 2022, a total of 866 842 784 ADSs (equivalent to the same number of shares or approximately 15.4% of the total shares) were
outstanding and held of record by 103 448 registered holders in the United States. We are aware that many ADSs are held of record by brokers
and other nominees, and accordingly the above number of holders is not necessarily representative of the actual number of persons who are
beneficial holders of ADSs or the number of ADSs beneficially held by such persons. Based on information available from Broadridge Financial
Solutions, Inc., the number of beneficial owners of ADSs at 31 December 2022 was 819 411.
Based on information known to us as of 1 February 2023, at 31 December 2022, BlackRock, Inc. beneficially owned 347 358 118 Nokia shares,
which at that time corresponded to approximately 6.2% of the total number of shares and voting rights of Nokia.
To the best of our knowledge, Nokia is not directly or indirectly owned or controlled by any other corporation or any government, and there are
no arrangements that may result in a change of control of Nokia.
Shares and stock options owned by the members of the Board and the Nokia Group Leadership Team
At 31 December 2022, the members of our Board and the Group Leadership Team held a total of 4 581 561 shares and ADSs in Nokia,
which represented approximately 0.08% of our shares and total voting rights excluding shares held by the Nokia Group.
Offer and listing details
Our capital consists of shares traded on Nasdaq Helsinki under the symbol “NOKIA” and Euronext Paris under the symbol “NOKIA”. Our ADSs,
each representing one of our shares, are traded on the NYSE under the symbol “NOK”. The ADSs are evidenced by American Depositary Receipts
(ADRs) issued by Citibank, N.A.
118
NOKIA IN 2022
NOKIA IN 2022
119
Board review Articles of Association
Articles of Association
Articles of Association
Amendment of our Articles of Association
requires a resolution of the general meeting
of shareholders, supported by two-thirds of
the votes cast and two-thirds of the shares
represented at the meeting.
Registration
Nokia Corporation is organized under the laws
of the Republic of Finland and registered in
the Finnish Trade Register under the business
identity code 0112038-9. Under its current
Articles of Association, Nokia’s corporate
purpose is to research, develop, manufacture,
market, sell and deliver products, software
and services in a wide range of consumer
and business-to-business markets. These
products, software and services relate to,
among others, network infrastructure for
telecommunication operators and other
enterprises, the internet of things, human
health and wellbeing, multi-media, big data
and analytics, mobile devices and consumer
wearables and other electronics. The company
may also create, acquire and license
intellectual property and software as well as
engage in other industrial and commercial
operations, including securities trading and
other investment activities. The company
may carry on its business operations directly,
through subsidiary companies, affiliate
companies and joint ventures.
Directors’ voting powers
Under Finnish law, resolutions of the Board
shall be made by a majority vote. A director
shall refrain from taking any part in the
consideration of an agreement between the
director and the company or third party,
or any other issue that may provide any
material benefit to him or her, which may be
contradictory to the interests of the company.
Under Finnish law, there is no age limit
requirement for directors, and there are no
requirements under Finnish law that a director
must own a minimum number of shares in
order to qualify to act as a director. However,
in accordance with the current company
policy, approximately 40% of the annual
fee payable to the Board members is paid in
Nokia shares purchased from the market or
alternatively by using treasury shares held by
Nokia, and the directors shall retain until the
end of their directorship such number of
shares that corresponds to the number
of shares they have received as Board
remuneration during their first three years
of service (the net amount received after
deducting those shares used for offsetting
any costs relating to the acquisition of the
shares, including taxes).
Share rights, preferences
and restrictions
Each share confers the right to one vote at
general meetings. According to Finnish law,
a company generally must hold an Annual
General Meeting called by the Board within
six months from the end of the financial year.
Additionally, the Board is obliged to call an
Extraordinary General Meeting, whenever
such meeting is deemed necessary, or at
the request of the auditor or shareholders
representing a minimum of one-tenth of all
outstanding shares. Under our Articles of
Association, the Board is elected at least
annually at the Annual General Meeting of
shareholders for a term ending at the end
of the next Annual General Meeting.
Under Finnish law, shareholders may attend
and vote at general meetings in person or by
proxy. It is not customary in Finland for a
company to issue forms of proxy to its
shareholders. Accordingly, Nokia does not do
so. However, registered holders and beneficial
owners of ADSs are issued forms of proxy by
the Depositary.
To attend and vote at a general meeting, a
shareholder must be registered in the register
of shareholders in the Finnish book-entry
system on or prior to the record date set
forth in the notice of the general meeting.
A registered holder or a beneficial owner of
the ADSs, like other beneficial owners whose
shares are registered in the company’s
register of shareholders in the name of a
nominee, may vote with their shares provided
that they arrange to have their name entered
in the temporary register of shareholders for
the general meeting.
The record date is the eighth business day
preceding the meeting. To be entered in the
temporary register of shareholders for the
general meeting, a holder of ADSs must
provide the Depositary, or have his broker or
other custodian provide the Depositary, on or
before the voting deadline, as defined in the
proxy material issued by the Depositary, a
proxy with the following information: the
name, address, and social security number or
another corresponding personal identification
number of the holder of the ADSs, the
number of shares to be voted by the holder
of the ADSs and the voting instructions. The
register of shareholders as of the record date
of each general meeting is public until the end
of the respective meeting. Other nominee
registered shareholders can attend and vote
at the general meetings by instructing their
broker or other custodian to register the
shareholder in Nokia’s temporary register of
shareholders and give the voting instructions
in accordance with the broker’s or custodian’s
instructions.
Pre-emptive rights
In connection with any offering of shares,
the existing shareholders have a pre-emptive
right to subscribe for shares offered in
proportion to the amount of shares in their
possession. However, a general meeting of
shareholders may vote, by a majority of
two-thirds of the votes cast and two-thirds
of the shares represented at the meeting,
to waive this pre-emptive right provided that,
from the company’s perspective, weighty
financial grounds exist.
Monitoring of Foreign
Corporate Acquisitions
Under the Finnish Act on the Monitoring of
Foreign Corporate Acquisitions (2012/172 as
amended), a notification to the Ministry of
Economic Affairs and Employment is required
for a non-resident of Finland, directly or
indirectly, when acquiring one-tenth or more
of the voting power or corresponding factual
influence in a company. The Ministry of
Economic Affairs and Employment has to
confirm the acquisition unless the acquisition
would jeopardize important national interests,
in which case the matter is referred to the
Council of State. If the company in question is
operating in the defense sector, an approval
by the Ministry of Economic Affairs and
Employment is required before the acquisition
is made. These requirements are not
applicable if, for instance, the voting power is
acquired in a share issue that is proportional
to the holder’s ownership of the shares.
Moreover, the requirements do not apply
to residents of countries in the European
Economic Area or EFTA countries, except
where at least one tenth of shares or other
controlling right in such resident are held by a
party not resident in the European Economic
Area or EFTA.
By completing and returning the form of proxy
provided by the Depositary, a holder of ADSs
also authorizes the Depositary to give notice
to us, required by our Articles of Association,
of the holder’s intention to attend the
general meeting.
The rights of shareholders are related to the
shares as set forth in the Finnish Companies
Act and our Articles of Association. Neither
Finnish law nor our Articles of Association
sets limitations on the rights to own Nokia
securities, including the rights of foreign
shareholders to hold or exercise voting rights
in the said securities. Amendment of the
Articles of Association requires a decision
of the general meeting of shareholders,
supported by two-thirds of the votes cast
and two-thirds of the shares represented
at the meeting.
Each of our shares confers equal rights to
share in the distribution of the company’s
funds. Under Finnish law, dividend entitlement
lapses after three years if a dividend remains
unclaimed for that period, in which case the
unclaimed dividend will be recognized as
income by Nokia.
Disclosure of shareholder
ownership or voting power
According to the Finnish Securities Market Act,
a shareholder shall disclose his or her
ownership or voting power to the company
and the Finnish Financial Supervisory
Authority when the ownership or voting power
reaches, exceeds or falls below 5, 10, 15, 20,
25, 30, 50 or 90% of all the shares or the
voting rights. The term “ownership” includes
ownership by the shareholder, as well as
selected related parties, and calculating the
ownership or voting power covers agreements
or other arrangements, which when concluded
would cause the proportion of voting rights
or number of shares to reach, exceed or fall
below the aforementioned limits. Upon
receiving such notice, the company shall
disclose it by a stock exchange release
without undue delay.
Purchase obligation
Our Articles of Association require a
shareholder that holds one-third or one-half
of all of our shares to purchase the shares
of all other shareholders that so request.
A shareholder who becomes subject to the
purchase obligation is also obligated to
purchase any subscription rights, stock
options or convertible bonds issued by
the company if so requested by the holder.
The purchase price of the shares under our
Articles of Association is the higher of: (a) the
weighted average trading price of the shares
on Nasdaq Helsinki during the ten business
days prior to the day on which we have been
notified by the purchaser that its holding has
reached or exceeded the threshold referred
to above or, in the absence of such
notification or its failure to arrive within the
specified period, the day on which our Board
otherwise becomes aware of this; or (b) the
average price, weighted by the number of
shares, which the purchaser has paid for
the shares it has acquired during the last
12 months preceding the date referred
to in (a).
Under the Finnish Securities Market Act, a
shareholder whose voting power exceeds
30% or 50% of the total voting rights in a
company shall, within one month, offer to
purchase the remaining shares of the
company, as well as any other rights entitling
to the shares issued by the company, such as
subscription rights, convertible bonds or stock
options issued by the company. The purchase
price shall be the market price of the
securities in question. Subject to certain
exceptions, the market price is determined
on the basis of the highest price paid for the
security during the preceding six months
by the shareholder or any party in close
connection to the shareholder. Subject to
certain exceptions, if the shareholder or any
related party has not during the six months
preceding the offer acquired any securities
that are the target for the offer, the market
price is determined based on the average
of the prices paid for the security in public
trading during the preceding three months
weighted by the volume of trade.
Under the Finnish Companies Act, a
shareholder whose holding exceeds
nine-tenths of the total number of shares
or voting rights in Nokia has both the right
and, upon a request from the minority
shareholders, the obligation to purchase all
the shares of the minority shareholders for
the then current market price. The market
price is determined, among other things,
on the basis of the recent market price of
the shares. The purchase procedure under
the Finnish Companies Act differs, and the
purchase price may differ, from the purchase
procedure and price under the Finnish
Securities Market Act, as discussed above.
However, if the threshold of nine-tenths has
been exceeded through either a mandatory
or a voluntary public offer pursuant to the
Finnish Securities Market Act, the market price
under the Finnish Companies Act is deemed
to be the price offered in the public offer,
unless there are specific reasons to deviate
from it.
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Board review Risk factors
Risk factors
Shareholders and potential investors
should carefully review the following risk
factors, in addition to other information
contained in this report. The risks and
risk factors described below could, either
individually or collectively, adversely
affect our business, competitiveness,
market share, results of operations,
profitability, financial condition, liquidity,
reputation, brand and share price. The
risk factors described below should not
be construed as exhaustive. There may
be additional risks that are unknown to
us, and other risks currently believed to
be immaterial that could turn out to
be material.
For a more detailed description of legal
proceedings to which we are a party, refer to
Note 27, Commitments, contingencies and
legal proceedings, of our consolidated
financial statements. This report also contains
forward-looking statements that involve risks
and uncertainties. Unless otherwise indicated
or the context otherwise requires, references
in these risk factors to “Nokia”, the “Nokia
Group”, “Group”, “we”, “us” and “our” mean
Nokia’s consolidated operating segments.
Certain risks or events may be more prevalent
with respect to the Group or a certain
business group, business or part of the Group.
Cost and performance remain the top
priorities for our customers. Our capability to
compete in the top-two-vendors field, as a
trusted partner for critical networks, is
dependent on multiple external and internal
factors, partially outside our control, including
such as:
Risks related to our strategy and its
execution
■ Our ability to become and remain a leading
provider of technology, software and
services in the industries and markets
in which we operate;
■ Sustained traffic growth over customers’
networks, growing use cases and
low-latency services as a driver for
the demand for our products;
■ Reaching technology limits in key
technologies which might change demand
pattern for our products and competitive
dynamics;
■ Trends, such as cloudification, open RAN/
openness, virtualization and disaggregation
with potential impact on our portfolio
of products and services, competitive
landscape, business models and our
margin profile;
■ The degree our investments, including
venture funds, result in technologies,
products or services that achieve or retain
broad or timely market acceptance, answer
to the expanding needs or preferences
of our customers or consumers, or in break-
through innovations, research assets,
digitalization and intellectual property that
we could otherwise utilize for value creation;
■ Our ability and success in acquiring or
divesting businesses and technologies,
integrating acquisitions, entering into
licensing arrangements, forming and
managing joint ventures or partnerships
and in realizing the anticipated benefits,
synergies, cost savings or efficiencies from
these transactions;
■ Our success in continuing to improve our
organizational or operational structure
for increased operational efficiency and
in executing our business plans; and
■ Our ability to meet our sustainability
targets, including with respect to our
greenhouse gas emission commitments,
and to comply with stakeholder
expectations regarding sustainability
activities and disclosures.
Risks related to the general economic and
financial market conditions and to the
industries and markets in which we operate
■ We are a global company and our sales and
profitability is dependent on general
economic and financial market conditions,
such as accelerating inflation, increased
global macroeconomic uncertainty,
major currency fluctuations, higher interest
rates and financing costs, and other
developments in the economies and
industries where we, our customers and
partners/suppliers operate, including
current situation involving Russia and
Ukraine that has ignited a threat of energy
crises and recession particularly in Europe;
■ Depending on the duration of the
COVID-19 outbreak or appearance of other
viral pandemic, and disruptiveness of the
related measures to contain the virus and
other prolonged impacts of the pandemic,
the pandemic could have further adverse
effect on the results of our operations and
financial condition;
■ The cyclical nature of the markets in which
we operate which are affected by many
factors, including, technological changes,
competitor behavior, customer consolidation
and customers’ purchase and spending
behavior, deployments and rollout timing;
■ Intense competition and price erosion
largely driven by competition challenging
the connectivity business models of our
customers;
■ Our dependency on a limited number of
customers and large multi-year agreements.
Loss of a single customer or contract,
operator consolidation, unfavorable
contract terms or other issues related to
a single agreement may have a material
adverse effect on our business and
financial condition; and
■ Competitiveness of or developments
■ Our manufacturing, service creation,
regarding pricing and agreement terms
we offer, such as accelerating inflation and
our ability to pass increased costs to our
pricing, and including developments with
respect to customer financing or extended
payment terms or credit lines that we
provide our customers. Unwillingness of
banks or other institutions to provide
guarantees or financing to our customers
or purchase our receivables could impair
our capability to enter new customers or
markets, to mitigate payment risk and to
manage our liquidity.
Risks impacting our competitiveness
■ Our ability to adapt to changing business
models, technological changes and to meet
new competition;
■ Investing effectively and profitably in new
competitive high-quality products, services,
upgrades and technologies that have
accurately anticipated the technological,
regulatory and market trends;
■ Our success in the development of new
technologies and services, their rollout
and commercialization in a timely manner;
■ Severity of potential inefficiencies,
incidents, malfunctions or disruptions of
our information technology systems and
processes or disruptions of services relying
on our or third-party IT. As our services
and business operations, including those
we have outsourced, rely on complex IT
systems, networks and related services,
our reliance on the precautions taken by
external companies to ensure the reliability
of our and their IT systems, networks and
related services is increasing. Consequently,
certain disruptions in IT systems and
networks affecting our external providers
could also have a material adverse effect
on our business;
■ Actual or perceived security or privacy
breaches, as well as defects, errors or
vulnerabilities in our technology and that
of third-party providers. Our business
model relies on solutions for distribution
of services and software or data storage,
which entail inherent risks relating not only
to applicable regulatory regimes, but also
to cybersecurity incidents and other
unauthorized access to network data or
other potential security risks that may
adversely affect our business and/or
compromise personal data;
customer deliveries, logistics or supply
chain to operate without significant
interruptions or shortages, including the
impacts of COVID-19, Russian invasion
of Ukraine, other geopolitical tensions,
European energy crisis, and the overall
disruption and continuing uncertainty in the
global supply chain, securing availability of
resources and other components to meet
the demand, ability to adapt supply, defects
in products or related software or services
and achieving required efficiencies and
flexibility . Additionally, adverse events,
such as geopolitical disruptions, natural or
man-made disasters, labor or civil unrest or
health crises, may have a profound impact
on our service delivery, production sites
or the production sites of our suppliers/
partners which are geographically
concentrated. It is also possible that our
suppliers/partners may fail to meet our
and our customers’ product quality, health,
safety or security requirements or comply
with other regulations or local laws,
such as environmental, social or labor laws;
■ Our ability to retain, develop, reskill and
recruit appropriately skilled employees and
balance the workforce. Employees may face
change fatigue, reduction in motivation and
energy as our efforts to evolve our business
and improve efficiency continue. The
market for skilled employees is increasingly
competitive, particularly given the similar
technology trends affecting various
industries simultaneously and increased
remote working expanding the job market
for individual employees; and
■ Success in identifying and implementing
the appropriate measures to improve
cost-efficiency, end-to-end costs related
to our portfolio of products and services,
maintaining achieved efficiency level and
managing the inflationary pressures on
costs in order to continue investments
in R&D and future capabilities, including
5G-Advanced and 6G, cloud, security,
automation/digitalization, development of
standard essential patents and the degree
our efforts lead to targeted results,
benefits, cost savings or improvements.
Risks associated with intellectual property
rights, technology and brand licensing
■ Our products, services and business
models depend on proprietary technologies
developed by us and our future success
is impacted by our ability to create new
relevant technologies, products and
services through our R&D, as well as our
ability to protect our innovations and to
maintain the strength of our intellectual
property portfolio;
■ Our patent licensing income and other
intellectual property-related revenues are
subject to risks and uncertainties such as
our ability to maintain our existing sources
of intellectual property-related revenue and
on fair and reasonable commercial terms,
establish new sources of revenue, protect
our intellectual property from infringement
and our ability to monetize our intellectual
property e.g., due to market, regulatory
and other developments, or court rulings
in intellectual property-related litigation
and other disputes. A proportionally
significant share of the current patent
licensing income is generated from the
smartphone market, which is rapidly
changing and features a limited number
of large vendors. Uncertainty relating
to the evolving global regulatory and
standardization landscape relating to
intellectual property is a challenge;
■ To renew existing license agreements and
conclude new license agreements with
potential licensees and to protect our
intellectual property, we may and have
engaged in legal actions to enforce our
intellectual property rights against
unlawful infringement, outcomes of
which are uncertain;
■ While the primary source of Nokia
Technologies business group net sales
and profits is licensing of the Nokia patents,
we are also engaged with licensing of
technologies and of the Nokia brand, as well
as with other business ventures, including
venture fund investments and technology
innovation and incubation. Expected net
sales and profitability for these businesses
may not materialize as planned or, for some
of these businesses, at all; and
■ Our products, services and business
models depend on technologies that we
have developed as well as technologies that
are licensed to us by certain third parties.
As a result, evaluating the rights related
to the technologies we use or intend to
use is increasingly challenging, and we
expect to continue to face claims that we
have allegedly infringed third parties’ IPR.
The use of these technologies may also
result in increased licensing costs for us,
restrictions on our ability to use certain
technologies in our products and/or costly
and time-consuming litigation.
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Board review Significant subsequent events
Significant
subsequent events
New euro-denominated notes
On 21 February 2023, Nokia issued
EUR 500 million 4.375% sustainability-linked
Notes due August 2031 under its 5 billion
Euro Medium-Term Note Programme.
The proceeds of the new notes are intended
to fund the Tender Offer and for general
corporate purposes.
Offer to purchase
outstanding notes
On 9 February 2023, Nokia announced that
it commenced an offer to purchase the
outstanding EUR 750 million 2.00% notes
due 15 March 2024 (the “2024 Notes”),
EUR 500 million 2.375% notes due 15 May
2025 (the “2025 Notes”) and EUR 750 million
2.00% notes due 11 March 2026 (the “2026
Notes”), up to a maximum cash consideration
of EUR 700 million (the “Tender Offer”).
The purpose of the Tender Offer is to manage
the overall indebtedness of Nokia and to
extend Nokia’s debt maturity profile in an
efficient manner.
On 16 February 2023, the Tender Offer
expired. Nokia accepted tenders for
EUR 372 million (49.66% of the nominal
amount) of the 2024 Notes, EUR 208 million
(41.57% of the nominal amount) of the
2025 Notes and EUR 120 million (15.96 %
of the nominal amount) of the 2026 Notes.
The Tender Offer was settled on
21 February 2023.
Financial and tax-related uncertainties
■ We have operations in many countries
with different tax laws and rules, which may
result in complex tax issues and disputes.
We may be obliged to pay additional taxes
as a result of changes in law, or changes of
tax authority practice or interpretation
(possibly with retroactive effect in certain
cases), potentially resulting in a material
impact on our tax burden;
■ Our actual or anticipated performance,
among other factors, could reduce our
ability to utilize our tax attributes and
deferred tax assets;
■ We may not have access to sources of
funding on favorable terms, or at all;
■ We may not be able to maintain our
investment grade credit ratings;
■ Due to our global operations, our net sales,
costs and results of operations, as well as
the US dollar value of our dividends and
market price of our ADSs, are affected
by exchange rate fluctuations;
■ Our pension and other post-employment
benefit obligations are subject to numerous
factors that could result in a need for
increased funding; and
■ Recoverability of the carrying amount
of our goodwill, which could result in
significant impairment charges.
Risks associated with ownership of
our shares
■ Uncertainty of the amount of dividend and/
or repayment of capital and other profit
distributions such as share buybacks to
shareholders for each financial period and
which depend, such as but not limited to,
on available cash balances, expected cash
flow generation, anticipated cash needs,
retained earnings, the results of our
operations and our financial condition;
■ Our share and/or ADS price may be
volatile and could be subject to fluctuations
in response to various factors, some of
which are beyond our control; and
■ Non-Finnish shareholders are likely required
to provide detailed information to obtain
advantageous withholding tax treatment
for dividends.
Risk factors
continued
Risks stemming from geopolitical, legal,
regulatory and compliance environment
■ We conduct our business globally, being
subject to direct and indirect regulation
and being exposed to political, geopolitical
and regulatory developments, such as
unfavorable or unpredictable treatment
in relation to trade sanctions, tariffs, tax
matters and export controls, exchange
controls, and other restrictions, geopolitical
conflicts and military actions, labor unrest,
civil unrest, and public security and safety
threats, including ongoing developments
related to Russian invasion of Ukraine and
the impact of related coordinated economic
and financial sanctions packages and of our
decision to discontinue our operations in
Russia and Belarus, and those affecting
national security, competition law, supply
chains, environmental, social and
governance (ESG) topics and
anti-corruption;
■ Changes in various existing regulations
or in their application to current
or new technologies, products or
telecommunication and technology sectors
in general, or emerging new regulation and
compliance in areas such as security,
privacy, including data protection and the
protection or transfer of personal data,
digital economy or sustainable finance;
■ Our products, services and operations
meeting all relevant quality, health, safety
or security standards and other
recommendations and regulatory
requirements globally;
■ We are subject to litigation, arbitrations,
agreement-related disputes and product
liability-related allegations during normal
course of business, which may be disruptive
and expensive. At any given time, we may
be subject to inspections, investigations,
claims, and government proceedings, and
the extent and outcome of such
proceedings may be difficult to estimate
with any certainty. We may be subject to
material fines, penalties and other
sanctions as a result of such investigations;
■ Our governance, internal controls and
compliance processes could fail to detect
errors or wrongdoings and to prevent
regulatory penalties at corporate level, in
operating subsidiaries and joint ventures.
The degree of control and level of influence
over joint ventures, other affiliated
companies where Nokia does not have
direct management control and third parties
we engage with, whose performance we
may be held liable for, is limited; and
■ We engage in the installation and
maintenance of undersea
telecommunications cable networks.
During this activity, we may cause damage
to existing undersea infrastructure,
for which we may ultimately be held
responsible.
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Board review Key ratios
Alternative performance measures
Key ratios
Earnings per share (basic)
Profit/(loss) attributable to equity holders of the parent
Weighted average number of shares outstanding during the year
Earnings per share (diluted)
Profit/(loss) attributable to equity holders of the parent adjusted for the effect of dilution
Adjusted weighted average number of shares during the year
P/E ratio
Closing share price at 31 December
Earnings per share (basic) for continuing operations
Payout ratio
Proposed dividend per share
Earnings per share (basic) for continuing operations
Dividend yield %
Proposed dividend per share
Closing share price at 31 December
Shareholders’ equity per share
Capital and reserves attributable to equity holders of the parent
Number of shares at 31 December – number of treasury shares at 31 December
Market capitalization
(Number of shares at 31 December – number of treasury shares at 31 December) x closing share price at 31 December
Share turnover %
Number of shares traded during the year
Average number of shares during the year
Alternative
performance
measures
Certain financial measures presented in this report are not measures of financial performance, financial position or cash flows defined in IFRS.
As these measures are not defined in IFRS, they may not be directly comparable with financial measures used by other companies, including
those in the same industry. The primary rationale for presenting these measures is that the management uses these measures in assessing the
financial performance of Nokia and believes that these measures provide meaningful supplemental information on the underlying business
performance of Nokia. These financial measures should not be considered in isolation from, or as a substitute for, financial information
presented in compliance with IFRS.
In 2022 Nokia replaced its performance measures (i) Total cash and current financial investments (“total cash”) and (ii) Net cash and current
financial investments (“net cash”) with (i) Total cash and interest-bearing financial investments (“total cash”) and (ii) Net cash and interest-bearing
financial investments (“net cash”), respectively. The definitions of these performance measures were updated accordingly to reflect the
changes made to Nokia’s consolidated statement of financial position. The purposes for using these measures, as stated below, did not change.
The modifications to the performance measures were made as during 2022 Nokia commenced investing in highly liquid corporate bonds that
are primarily classified as non-current interest-bearing financial investments based on their initial maturity. The comparative amounts for total
cash and net cash did not change.
Return on capital employed %
Definition
Return on capital employed is defined as Profit before tax + Interest expense on interest-bearing liabilities / Average capital and reserves
attributable to equity holders of the parent + average non-controlling interests + average interest-bearing liabilities.
Purpose
Return on capital employed indicates how efficiently Nokia uses its capital to generate profits.
Composition of return on capital employed %:
EURm
Profit before tax
Interest expense on interest-bearing liabilities
Total
Average capital and reserves attributable to equity holders of the parent(1)
Average non-controlling interests(1)
Average interest-bearing liabilities(1)
Total capital employed
Return on capital employed %
2022
2 184
103
2 287
19 347
98
4 565
24 010
9.5%
2021
1 926
113
2 039
14 913
91
5 115
20 119
10.1%
2020
743
127
870
13 895
78
4 927
18 900
4.6%
(1) Calculated as the average of opening and closing balance for the year as presented in the consolidated statement of financial position. Refer to the consolidated financial statements.
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Board review Alternative performance measures
continued
Return on shareholders’ equity %
Definition
Return on shareholders’ equity is defined as Profit/(loss) for the year attributable to equity holders of the parent / Average capital and reserves
attributable to equity holders of the parent.
Net cash and interest-bearing financial investments
Definition
Net cash and interest-bearing financial investments equals total cash and interest-bearing financial investments less long-term and short-term
interest-bearing liabilities.
Purpose
Return on shareholders’ equity indicates how efficiently Nokia uses the capital invested by its shareholders to generate profits.
Composition of return on shareholders’ equity %:
EURm
Profit/(loss) for the year attributable to equity holders of the parent
Average capital and reserves attributable to equity holders of the parent(1)
Return on shareholders’ equity %
2022
4 250
19 347
22.0%
2021
1 623
14 913
10.9%
2020
(2 523)
13 895
(18.2)%
(1) Calculated as the average of opening and closing balance for the year as presented in the consolidated statement of financial position. Refer to the consolidated financial statements.
Equity ratio %
Definition
Equity ratio % is defined as Total capital and reserves attributable to equity holders of the parent + non-controlling interests / Total assets.
Purpose
Equity ratio indicates the proportion of assets financed by the capital provided by the equity holders of the parent to total assets of Nokia.
Composition of equity ratio %:
EURm
Total capital and reserves attributable to the equity holders of the parent
Non-controlling interests
Shareholders’ equity
Total assets
Equity ratio %
2022
21 333
93
21 426
42 943
49.9%
2021
17 360
102
17 462
40 049
43.6%
2020
12 465
80
12 545
36 191
34.7%
Total cash and interest-bearing financial investments
Definition
Total cash and interest-bearing financial investments consist of cash and cash equivalents, current interest-bearing financial investments and
non-current interest-bearing financial investments.
Purpose
Total cash and interest-bearing financial investments is used to indicate funds available to Nokia to run its current and invest in future business
activities as well as provide return for security holders.
Composition of total cash and interest-bearing financial investments:
EURm
Cash and cash equivalents
Current interest-bearing financial investments
Non-current interest-bearing financial investments
Total cash and interest-bearing financial investments
2022
5 467
3 080
697
9 244
2021
6 691
2 577
–
9 268
2020
6 940
1 121
–
8 061
Purpose
Net cash and interest-bearing financial investments is used to indicate Nokia’s liquidity position after cash required to settle the interest-bearing
liabilities.
Composition of net cash and interest-bearing financial investments:
EURm
Total cash and interest-bearing financial investments
Cash and cash equivalents
Current interest-bearing financial investments
Non-current interest-bearing financial investments
Interest-bearing liabilities
Long-term interest-bearing liabilities
Short-term interest-bearing liabilities
Net cash and interest-bearing financial investments
2022
2021
2020
5 467
3 080
697
(4 249)
(228)
4 767
6 691
2 577
–
(4 537)
(116)
4 615
6 940
1 121
–
(5 015)
(561)
2 485
Net debt to equity (gearing) %
Definition
Net debt to equity (gearing) % is defined as Interest-bearing liabilities less Total cash and interest-bearing financial investments / (Total capital
and reserves attributable to the equity holders of the parent + Non-controlling interests).
Purpose
Net debt to equity ratio presents the relative proportion of shareholders’ equity and interest-bearing liabilities used to finance Nokia’s assets
and indicates the leverage of Nokia’s business.
Composition of net debt to equity (gearing) %:
EURm
Interest-bearing liabilities
Long-term interest-bearing liabilities
Short-term interest-bearing liabilities
Total cash and interest-bearing financial investments
Cash and cash equivalents
Current interest-bearing financial investments
Non-current interest-bearing financial investments
Net debt
Total capital and reserves attributable to the equity holders of the parent
Non-controlling interests
Shareholders’ equity
Net debt to equity (gearing) %
2022
2021
2020
4 249
228
4 537
116
5 015
561
(5 467)
(3 080)
(697)
(4 767)
21 333
93
21 426
(22.2)%
(6 691)
(2 577)
–
(4 615)
17 360
102
17 462
(26.4)%
(6 940)
(1 121)
–
(2 485)
12 465
80
12 545
(19.8)%
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Board review Comparable operating margin %
Definition
Comparable operating margin is defined as Comparable operating profit / Net sales.
Purpose
Comparable operating margin is used as a measure of Nokia’s operating profitability as a percentage of net sales excluding intangible asset
amortization and other purchase price fair value adjustments, goodwill impairments, restructuring related charges and certain other items
affecting comparability.
As with comparable operating profit, we believe that our comparable operating margin provides meaningful supplemental information to both
management and investors regarding Nokia’s underlying business performance by excluding certain items of income and expenses that may not
be indicative of Nokia’s business operating results.
Composition of comparable operating margin:
EURm
Comparable operating profit
Net sales
Comparable operating margin %
2022
3 109
24 911
12.5%
2021
2 775
22 202
12.5%
2020
2 081
21 852
9.5%
Alternative performance measures
continued
Free cash flow
Definition
Free cash flow is defined as Net cash flows from operating activities – purchases of property, plant and equipment and intangible assets (capital
expenditures) + proceeds from sale of property, plant and equipment and intangible assets – purchase of non-current financial investments +
proceeds from sale of non-current financial investments.
Purpose
Free cash flow is the cash that Nokia generates after net investments to tangible, intangible and non-current financial investments and it
represents the cash available for distribution among its security holders. It is a measure of cash generation, working capital efficiency and capital
discipline of the business.
Composition of free cash flow:
EURm
Net cash flows from operating activities
Net capital expenditures
Purchase of property, plant and equipment and intangible assets (capital expenditures)
Proceeds from sale of property, plant and equipment and intangible assets
Purchase of other non-current financial investments
Proceeds from sale of other non-current financial investments
Free cash flow
2022
1 474
(601)
33
(115)
49
840
2021
2 625
(560)
103
(77)
277
2 368
2020
1 759
(479)
13
(59)
122
1 356
Capital expenditure
Definition
Purchases of property, plant and equipment and intangible assets (excluding assets acquired under business combinations).
Purpose
Capital expenditure is used to describe investments in profit-generating activities in the future.
Composition of capital expenditure:
EURm
Purchase of property, plant and equipment and intangible assets
Capital expenditure
2022
(601)
(601)
2021
(560)
(560)
2020
(479)
(479)
Comparable operating profit
Definition
Comparable operating profit excludes intangible asset amortization and other purchase price fair value adjustments, goodwill impairments,
restructuring related charges and certain other items affecting comparability.
Purpose
We believe that our comparable operating profit provides meaningful supplemental information to both management and investors regarding
Nokia’s underlying business performance by excluding certain items of income and expenses that may not be indicative of Nokia’s business
operating results. Comparable operating profit is used also in determining management remuneration.
Composition of comparable operating profit:
EURm
Operating profit
Amortization of acquired intangible assets
Restructuring and associated charges
Costs associated with country exit
Impairment and write-off of assets, net of reversals
Settlement of legal disputes
Gain on sale of fixed assets
Gain on defined benefit plan amendment
Other
Comparable operating profit
2022
2 318
411
177
98
97
–
–
–
8
3 109
2021
2 158
391
263
–
45
(80)
(53)
–
51
2 775
2020
885
407
651
–
241
–
–
(90)
(13)
2 081
130
NOKIA IN 2022
NOKIA IN 2022
131
Board review Financial
statements
132
NOKIA IN 2022
NOKIA IN 2022
Financial statements
Consolidated financial statements
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of cash flows
Consolidated statement of changes in shareholders’ equity
Notes to consolidated financial statements
1. Corporate information
2. Significant accounting policies
3. New and amended standards and interpretations
4. Use of estimates and critical accounting judgments
5. Segment information
6. Revenue recognition
7. Expenses by nature
8. Personnel expenses
9. Other operating income and expenses
10. Financial income and expenses
11. Income taxes
12. Earnings per share
13. Goodwill and intangible assets
14. Property, plant and equipment
15. Leases
16. Inventories
17. Other receivables
18. Equity
19. Other comprehensive income
20. Interest-bearing liabilities
21. Fair value of financial instruments
22. Derivative and firm commitment assets and liabilities
23. Share-based payments
24. Pensions and other post-employment benefits
25. Deferred revenue and other liabilities
26. Provisions
27. Commitments, contingencies and legal proceedings
28. Notes to the consolidated statement of cash flows
29. Group companies
30. Significant partly-owned subsidiaries
31. Related party transactions
32. Financial risk management
33. Subsequent events
Parent Company financial statements
Parent Company income statement
Parent Company statement of financial position
Parent Company statement of cash flows
Notes to the Parent Company financial statements
1. Accounting principles
2. Personnel expenses
3. Auditor’s fees
4. Other operating income and expenses
5. Financial income and expenses
6. Group contributions
7.
Income taxes
8. Tangible assets
9.
Investments
10. Prepaid expenses and accrued income
11. Shareholders’ equity
12. Distributable earnings
13. Fair value and other reserves
14. Fair value of financial instruments
15. Derivative financial instruments
16. Provisions
17. Interest-bearing liabilities
18. Accrued expenses and other liabilities
19. Commitments and contingencies
20. Loans granted to the management of the Company
21. Notes to the statement of cash flows
22. Nokia companies
23. The shares of the Parent Company
24. Financial risk management
25. Subsequent events
Signing of the Annual Accounts and the
Review of the Board of Directors 2022
Auditor’s report
Auditor’s ESEF assurance report
134
134
135
136
137
138
139
139
139
150
150
151
154
155
155
156
156
157
159
160
161
162
163
163
164
167
167
169
171
172
173
179
179
180
181
182
187
188
190
197
198
198
199
201
202
202
205
205
205
206
206
206
207
207
207
208
208
208
209
211
212
212
213
213
213
213
214
214
214
214
215
216
219
133
Financial statements Consolidated income statement
Consolidated statement of comprehensive income
For the year ended 31 December
Net sales
Cost of sales
Gross profit
Research and development expenses
Selling, general and administrative expenses
Other operating income
Other operating expenses
Operating profit
Share of results of associated companies and joint ventures
Financial income
Financial expenses
Profit before tax
Income tax benefit/(expense)
Profit/(loss) for the year from continuing operations
Profit/(loss) for the year from discontinued operations
Profit/(loss) for the year
Attributable to:
Equity holders of the parent
Non-controlling interests
Earnings per share attributable to equity holders of the parent
Basic
Continuing operations
Profit/(loss) for the year
Diluted
Continuing operations
Profit/(loss) for the year
The notes are an integral part of these consolidated financial statements.
Notes
5, 6
7
7
7
9
7, 9
31
10
10
11
12
2022
EURm
24 911
(14 689)
10 222
(4 550)
(3 013)
98
(439)
2 318
(26)
86
(194)
2 184
2 026
4 210
49
4 259
4 250
9
EUR
0.75
0.76
0.74
0.75
2021
EURm
22 202
(13 368)
8 834
(4 214)
(2 792)
443
(113)
2 158
9
43
(284)
1 926
(272)
1 654
(9)
1 645
1 623
22
EUR
0.29
0.29
0.29
0.29
2020
EURm
21 852
(13 659)
8 193
(4 087)
(2 898)
126
(449)
885
22
165
(329)
743
(3 256)
(2 513)
(3)
(2 516)
(2 523)
7
EUR
(0.45)
(0.45)
(0.45)
(0.45)
For the year ended 31 December
Notes
Profit/(loss) for the year
Other comprehensive income
Items that will not be reclassified to profit or loss
Remeasurements of defined benefit plans
Income tax related to items that will not be reclassified to profit or loss
Items that may be reclassified subsequently to profit or loss
Translation differences
Net investment hedges
Cash flow and other hedges
Financial assets at fair value through other comprehensive income
Other (decrease)/increase, net
Income tax related to items that may be reclassified subsequently
to profit or loss
Other comprehensive income/(loss), net of tax
Total comprehensive income/(loss) for the year
Attributable to:
Equity holders of the parent
Non-controlling interests
The notes are an integral part of these consolidated financial statements.
19
2022
EURm
4 259
(424)
77
710
(127)
83
(46)
(3)
(21)
249
4 508
4 500
8
2021
EURm
1 645
3 040
(755)
1 153
(249)
–
7
–
2
3 198
4 843
4 814
29
2020
EURm
(2 516)
624
(140)
(1 232)
266
15
47
3
25
(392)
(2 908)
(2 914)
6
134
NOKIA IN 2022
NOKIA IN 2022
135
Financial statements
Consolidated statement of financial position
Consolidated statement of cash flows
31 December
ASSETS
Non-current assets
Goodwill and intangible assets
Property, plant and equipment
Right-of-use assets
Investments in associated companies and joint ventures
Non-current interest-bearing financial investments
Other non-current financial investments
Deferred tax assets
Other non-current financial assets
Defined benefit pension assets
Other non-current receivables
Total non-current assets
Current assets
Inventories
Trade receivables
Contract assets
Other current receivables
Current income tax assets
Other current financial and firm commitment assets
Current interest-bearing financial investments
Cash and cash equivalents
Total current assets
Total assets
SHAREHOLDERS’ EQUITY AND LIABILITIES
Capital and reserves attributable to equity holders of the parent
Share capital
Share premium
Treasury shares
Translation differences
Fair value and other reserves
Reserve for invested unrestricted equity
Retained earnings/(accumulated deficit)
Total capital and reserves attributable to equity holders of the parent
Non-controlling interests
Total equity
Non-current liabilities
Long-term interest-bearing liabilities
Long-term lease liabilities
Deferred tax liabilities
Defined benefit pension and post-employment liabilities
Contract liabilities
Deferred revenue and other non-current liabilities
Provisions
Total non-current liabilities
Current liabilities
Short-term interest-bearing liabilities
Short-term lease liabilities
Other financial and firm commitment liabilities
Current income tax liabilities
Trade payables
Contract liabilities
Deferred revenue and other current liabilities
Provisions
Total current liabilities
Total liabilities
Total shareholders’ equity and liabilities
The notes are an integral part of these consolidated financial statements.
Notes
13
14
15
31
21, 32
21
11
21, 32
24
17
16
21, 32
6, 32
17
11
21, 22, 32
21, 32
21, 32
18
20, 21, 32
20
11
24
6
21, 25
26
20, 21, 32
20
21, 22, 32
11
21, 32
6
21, 25
26
2022
EURm
2021
EURm
6 930
2 015
929
199
697
828
3 834
252
6 754
239
22 677
3 265
5 549
1 203
934
153
615
3 080
5 467
20 266
42 943
246
503
(352)
169
3 905
15 487
1 375
21 333
93
21 426
4 249
858
332
2 459
120
103
622
8 743
228
184
1 038
185
4 730
1 977
3 619
813
12 774
21 517
42 943
7 051
1 924
884
243
–
758
1 272
325
7 740
255
20 452
2 392
5 382
1 146
859
214
336
2 577
6 691
19 597
40 049
246
454
(352)
(396)
4 219
15 726
(2 537)
17 360
102
17 462
4 537
824
282
3 408
354
436
645
10 486
116
185
762
202
3 679
2 293
3 940
924
12 101
22 587
40 049
For the year ended 31 December
Cash flow from operating activities
Profit/(loss) for the year
Adjustments, total
Change in net working capital(1)
(Increase)/decrease in receivables
(Increase)/decrease in inventories
Decrease in non-interest-bearing liabilities
Cash flows from operations
Interest received
Interest paid
Income taxes paid, net
Net cash flows from operating activities
Cash flow from investing activities
Purchase of property, plant and equipment and intangible assets
Proceeds from sale of property, plant and equipment and intangible assets
Acquisition of businesses, net of cash acquired
Purchase of interest-bearing financial investments
Proceeds from maturities and sale of interest-bearing
financial investments
Purchase of other non-current financial investments
Proceeds from sale of other non-current financial investments
Foreign exchange hedging of cash and cash equivalents
Other
Net cash flows used in investing activities
Cash flow from financing activities
Acquisition of treasury shares
Proceeds from long-term borrowings
Repayment of long-term borrowings
Proceeds from/(repayment of) short-term borrowings
Payment of principal portion of lease liabilities
Dividends paid and other contributions to shareholders
Net cash flows (used in)/from financing activities
Translation differences
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
(1) Net working capital includes both short-term and long-term items.
Notes
28
15, 20
18
20
20
20
15, 20
18
2022
EURm
4 259
(446)
(451)
(991)
(401)
1 970
65
(180)
(381)
1 474
(601)
33
(20)
(3 595)
2 397
(115)
49
(38)
10
(1 880)
(300)
8
(2)
27
(217)
(353)
(837)
19
(1 224)
6 691
5 467
2021
EURm
1 645
1 713
239
(48)
(459)
3 090
41
(192)
(314)
2 625
(560)
103
(33)
(1 845)
398
(77)
277
(77)
19
(1 795)
–
17
(927)
(67)
(226)
(9)
(1 212)
133
(249)
6 940
6 691
2020
EURm
(2 516)
5 267
(418)
553
(845)
2 041
33
(35)
(280)
1 759
(479)
13
(104)
(1 154)
123
(59)
122
79
21
(1 438)
–
1 595
(246)
(83)
(234)
(149)
883
(174)
1 030
5 910
6 940
The consolidated statement of cash flows combines cash flows from both the continuing and the discontinued operations.
In 2022, net cash flows from operating activities and net cash flows used in investing activities include cash inflows of EUR 26 million
(EUR 0 million in 2021 and EUR 6 million in 2020) and EUR 29 million (EUR 0 million in 2021 and EUR 7 million in 2020), respectively, related to
discontinued operations.
The notes are an integral part of these consolidated financial statements.
136
NOKIA IN 2022
NOKIA IN 2022
137
Financial statements
Consolidated statement of changes in shareholders’ equity
Notes to consolidated financial statements
Total comprehensive
loss for the year
Share-based payments
Excess tax benefit on
share-based
payments
Settlement of
share-based
payments
Dividends
Acquisition of
non-controlling
interests
Investment in subsidiary
by non-controlling
interest
Other movements
Total transactions
with owners
31 December 2020
Profit for the year
Other comprehensive
EURm
1 January 2020
Loss for the year
Other comprehensive
Notes
Share
capital
Share
premium
Treasury
shares
Translation
differences
Fair value
and other
reserves
Reserve for
invested
unrestricted
equity
Retained
earnings/
(Accumulated
deficit)
Attributable
to equity
holders of
the parent
Non-
controlling
interests
Total
equity
246
427
(352)
(372)
1 382
15 607
(1 613) 15 325
(2 523)
(2 523)
76
7
15 401
(2 516)
loss
18, 19
(922)
528
3
(391)
–
–
76
2
(62)
18
–
(922)
528
–
(2 520)
49
(2 914)
76
2
(13)
–
(10)
(10)
–
(1)
(1)
(1)
6
(392)
(2 908)
76
2
(13)
(5)
(10)
2
–
(5)
2
1
–
246
16
443
–
(352)
(1)
(1 295)
–
1 910
49
15 656
(10)
54
(4 143) 12 465
1 623
1 623
(2)
80
22
52
12 545
1 645
income
18, 19
899
2 309
(17)
3 191
7
3 198
Total comprehensive
income for the year
Share-based payments
Settlement of
share-based
payments
Dividends
Total transactions
with owners
31 December 2021
Profit for the year
Other comprehensive
–
–
108
(97)
18
–
899
2 309
–
1 606
4 814
108
29
4 843
108
70
(27)
–
(27)
(7)
(7)
–
246
11
454
–
(352)
–
(396)
–
4 219
70
15 726
–
81
(2 537) 17 360
4 250
4 250
(7)
102
9
74
17 462
4 259
income
18, 19
565
(314)
(1)
250
(1)
249
–
565
(314)
–
4 249
4 500
149
8
4 508
149
Total comprehensive
income for the year
Share-based payments
Settlement of
share-based
payments
Acquisition of
treasury shares(1)
Cancellation of
treasury shares(1)
Dividends
Total transactions
with owners
31 December 2022
–
–
149
(100)
18
18
18
(300)
300
73
(12)
(300)
(27)
(312)
–
(337)
(27)
(312)
–
(354)
(17)
(337)
–
246
49
503
–
(352)
–
169
–
3 905
(239)
15 487
(337)
1 375
(527)
21 333
(17)
93
(544)
21 426
1. Corporate information
Nokia Corporation, a public limited liability company incorporated and
domiciled in Helsinki, Finland, is the parent company (Parent Company
or Parent) for all its subsidiaries (Nokia or the Group). Nokia is a global
provider of mobile, fixed and cloud network solutions combining
hardware, software and services, as well as licensing of intellectual
property, including patents, technologies and the Nokia brand. Nokia’s
operational headquarters are located in Espoo, Finland. The shares of
Nokia Corporation are listed on the Nasdaq Helsinki Stock Exchange,
the New York Stock Exchange and the Euronext Paris Stock Exchange.
These consolidated financial statements for the year ended
31 December 2022 were authorized for issuance and filing by the
Board of Directors on 2 March 2023.
2. Significant accounting policies
Basis of presentation and statement of compliance
The consolidated financial statements are prepared in accordance
with International Financial Reporting Standards (IFRS) as issued by
the International Accounting Standards Board (IASB) and as adopted
by the European Union (EU). The consolidated financial statements
are presented in millions of euros (EURm), except as otherwise noted,
and are prepared under the historical cost convention, except as
disclosed in the accounting policies below. The consolidated
financial statements also conform to the Finnish accounting and
company legislation.
Other information
This paragraph is included in connection with statutory reporting
requirements in Germany. The fully consolidated German subsidiary,
Nokia Solutions and Networks GmbH & Co. KG, registered in the
commercial register of Munich under HRA 88537, has made use
of the exemption available under § 264b and § 291 of the German
Commercial Code (HGB).
Principles of consolidation
The consolidated financial statements comprise the financial
statements of the Parent Company, and each of those companies over
which it exercises control. Control over an entity exists when Nokia is
exposed, or has rights, to variable returns from its involvement with
the entity and has the ability to affect those returns through its power
over the entity. Presumption is that a majority of voting rights results
in control. To support this presumption, Nokia considers all relevant
facts and circumstances in assessing whether it has power over the
entity including voting rights and potential voting rights, rights to
appoint key management personnel and rights arising from other
contractual arrangements. Consolidation of a subsidiary begins when
Nokia obtains control over the subsidiary and ceases when it loses
control over the subsidiary.
All intercompany transactions are eliminated as part of the
consolidation process. Non-controlling interest represents the
proportion of net profit or loss, other comprehensive income and
net assets in subsidiaries that is not attributable to the equity
holders of the Parent.
Business combinations
Business combinations are accounted for using the acquisition
method. The consideration transferred in a business combination is
measured as the aggregate of the fair values of the assets transferred,
liabilities incurred towards the former owners of the acquired entity or
business and equity instruments issued. Acquisition-related costs are
recognized as expenses in the consolidated income statement in the
period in which the costs are incurred and the related services are
received with the exception of costs directly attributable to the
issuance of equity instruments that are accounted for as a deduction
from equity.
Identifiable assets acquired and liabilities assumed are measured
at the acquisition date fair values. Nokia elects whether to measure
the non-controlling interests in the acquiree at fair value or at the
proportionate share of the acquiree’s identifiable net assets on a
business combination by business combination basis. The excess
of the aggregate of the consideration transferred and the amount
recognized for non-controlling interests over the acquisition date fair
values of the identifiable net assets acquired is recorded as goodwill.
Investments in associates and joint ventures
An associate is an entity over which Nokia exercises significant
influence. A joint venture is a type of joint arrangement whereby the
parties that have joint control of the arrangement have rights to the
net assets of the arrangement.
Nokia’s investments in associates and joint ventures are accounted for
using the equity method. Under the equity method, the investment in
an associate or joint venture is initially recognized at cost. The carrying
amount of the investment is adjusted to recognize changes in Nokia’s
share of net assets of the associate or joint venture since the
acquisition date. Nokia’s share of profits and losses of associates
and joint ventures is reflected in the consolidated income statement.
Any change in other comprehensive income of associates and joint
ventures is presented as part of Nokia’s other comprehensive income.
Non-current assets (or disposal groups) held for sale and
discontinued operations
Non-current assets or disposal groups are classified as assets held
for sale if their carrying amounts will be recovered principally through
a sale transaction rather than through continuing use. Non-current
assets classified as held for sale, or included in a disposal group
classified as held for sale, are not depreciated or amortized.
Discontinued operation is reported when a component of Nokia,
comprising operations and cash flows that can be clearly distinguished
both operationally and for financial reporting purposes from the rest
of Nokia, has been disposed of or is classified as held for sale, and that
component represents a major line of business or geographical area
of operations or is part of a single coordinated plan to dispose of a
separate major line of business or geographical area of operations.
Profit or loss from discontinued operations is reported separately
from income and expenses from continuing operations in the
consolidated income statement, with prior periods presented on
a comparative basis. Intra-group revenues and expenses between
continuing and discontinued operations are eliminated. Discontinued
operations presented in these consolidated financial statements
comprise the financial results related to the HERE digital mapping
and location services business and the Devices & Services business
sold in 2015 and 2014, respectively.
(1) Treasury shares were acquired as part of the share buyback program announced on 3 February 2022. The shares were repurchased using the reserve for invested unrestricted equity. The repurchased
shares were canceled on 8 December 2022.
The notes are an integral part of these consolidated financial statements.
138
NOKIA IN 2022
NOKIA IN 2022
139
Financial statements Notes to consolidated financial statements
continued
Revenue recognition
Nokia accounts for a contract with a customer when the contract
has been approved in writing, which is generally when both parties
are committed to perform their respective obligations, the rights,
including payment terms, regarding the goods and services to be
transferred can be identified, the contract has commercial substance,
and collection of the consideration to which Nokia expects to be
entitled is probable. Management considers only legally enforceable
rights in evaluating the accounting for contracts with customers. As
such, frame agreements that do not create legally enforceable rights
and obligations are accounted for based on the issuance of subsequent
legally binding purchase orders under the frame agreements.
A contract modification or a purchase order is accounted for as a
separate contract if the scope of the contract increases by additional
distinct goods or services, and the price of the contract increases
by an amount that reflects the standalone selling price of those
additional goods or services. In case the additional goods or services
are distinct but not sold at a standalone selling price, the contract
modification is accounted for prospectively. In cases where the
additional goods or services are not distinct, the modification is
accounted for through a cumulative catch-up adjustment.
Nokia recognizes revenue from contracts with customers to reflect
the transfer of promised goods and services to customers for
amounts that reflect the consideration to which Nokia expects to be
entitled in exchange for those goods and services. The consideration
may include a variable amount, which Nokia estimates based on the
most likely amount. Items causing variability include volume discounts
and sales-based or usage-based royalties. Nokia includes variable
consideration into the transaction price only to the extent that it is
highly probable that a significant revenue reversal will not occur.
The transaction price also excludes amounts collected on behalf
of third parties.
In case the timing of payments provides either the customer or
Nokia with a significant benefit of financing, the transaction price is
adjusted for the effect of financing and the related interest revenue or
interest expense is presented separately from revenue. As a practical
expedient, Nokia does not account for financing components if, at
contract inception, the consideration is expected to be received within
one year before or after the goods or services have been transferred
to the customer.
Nokia enters into contracts with customers consisting of any
combination of hardware, services and intellectual property. Hardware
and software sold by Nokia includes warranty, which can either be
assurance-type for repair of defects and replacement of hardware
recognized as a centralized warranty provision, or service-type for
scope beyond the repair of defects or for a time period beyond the
standard assurance-type warranty period and considered a separate
performance obligation within the context of the contract.
The associated revenue recognized for such contracts depends on the
nature of the underlying goods and services provided. The promised
goods or services in the contract might include sale of goods, license
of intellectual property and grant of options to purchase additional
goods or services that may provide the customer with a material right.
Nokia conducts an assessment at contract inception to determine
which promised goods and services in a customer contract are distinct
and accordingly identified as performance obligations.
The standalone selling price of each performance obligation
is determined by considering factors such as the price of the
performance obligation if sold on a standalone basis and the expected
cost of the performance obligation plus a reasonable margin when
price references are not available. The portion of the transaction
price allocated to each performance obligation is then recognized
when the revenue recognition criteria for that performance obligation
have been met.
Nokia allocates the transaction price to each distinct performance
obligation on the basis of their standalone selling prices, relative
to the overall transaction price. If a standalone selling price is not
observable, it is estimated. The transaction price may include a
discount or a variable amount of consideration that is generally
allocated proportionately to all performance obligations in the
contract unless Nokia has observable evidence that the entire
discount relates to only one or more, but not all, performance
obligations in a contract. The amount of revenue recognized is the
amount allocated to the satisfied performance obligation based
on the relative standalone selling prices. A performance obligation
may be satisfied at a point in time or over time.
Nokia presents its customer contracts in the consolidated statement
of financial position as either a contract asset or a contract liability,
depending on the relationship between Nokia’s performance and the
customer’s payment for each individual contract. On a net basis, a
contract asset position represents where Nokia has performed by
transferring goods or services to a customer before the customer
has provided the associated consideration or before payment is due.
Conversely, a contract liability position represents where a customer
has paid consideration or payment is due, but Nokia has not yet
transferred goods or services to the customer. Contract assets
presented in the consolidated statement of financial position are
current in nature while contract liabilities can be either current
or non-current. Invoices are generally issued as control transfers
and/or as services are rendered. Invoiced receivables represent
unconditional rights to payment and are presented separately as
trade receivables in the consolidated statement of financial position.
Sale of products
Nokia manufactures and sells a range of networking equipment,
covering the requirements of network operators. Revenue for these
products is recognized when control of the products has transferred,
the determination of which may require judgment. Typically, for
standard equipment sales, control transfers upon delivery. For more
complex solutions, control generally transfers upon acceptance.
In some arrangements, mainly within the Submarine Networks
business, Nokia’s performance does not create an asset with an
alternative use and Nokia recognizes revenue over time using the
output method, which faithfully depicts the manner in which the asset
is transferred to the customer as well as Nokia’s enforceable rights to
payment for the work completed to date, including margin. The output
measure selected by Nokia for each contract may vary depending on
the nature of the contract.
Sale of services
Nokia provides services related to the provision of networking
equipment, ranging from managing a customer’s network and
product maintenance services to network installation, integration
and optimization. Revenue for each separate service performance
obligation is recognized as or when the customer obtains the benefits
of Nokia’s performance. Service revenue is recognized over time for
managed and maintenance services, as in these cases Nokia performs
throughout a fixed contract term and the customer simultaneously
receives and consumes the benefits as Nokia performs. In some
cases, Nokia performs services that are subject to customer
acceptance where revenue is recognized when the customer
acceptance is received.
Sale of intellectual property licenses
Nokia provides its customers with licenses to intellectual property (IP)
owned by Nokia by granting software licenses and rights to benefit
from Nokia’s IP in their products. When a software license is sold,
revenue is recognized upon delivery or acceptance of the software,
as Nokia has determined that each software release is distinct and
the license is granted for software as it exists when the control
transfers to the customer.
When Nokia grants customers a license to use IP owned by Nokia, the
associated license fee revenue is recognized in accordance with the
substance of the relevant agreements. In the majority of cases, Nokia
retains obligations to continue to develop and make available to the
customer the latest IP in the licensed assets during the contract term,
and therefore revenue is recognized pro rata over the period during
which Nokia is expected to perform. Recognition of the revenue as
pro rata over the term of the license is considered the most faithful
depiction of Nokia’s satisfaction of the performance obligation as
the IP being licensed towards the customer includes new inventions
patented by Nokia that are highly interdependent and interrelated
and created through the course of continuous research and
development (R&D) efforts that are relatively stable throughout
the year. In some contracts, Nokia has no remaining obligations to
perform after granting a license to the initial IP, and licensing fees are
non-refundable. In these cases, revenue is recognized at the beginning
of the license term.
Government grants
Government grants are recognized when there is reasonable
assurance that Nokia will comply with the conditions attached to
them and the grants will be received. Government grants received as
compensation for expenses or losses incurred are recognized in the
consolidated income statement as a deduction against the related
expenses except for certain non-recurring grants that are recognized
as other operating income. Government grants related to assets are
presented in the consolidated statement of financial position as
deferred income and recognized as income over the same period the
asset is depreciated or amortized.
Government grants received in the form of R&D tax credits are
recognized as a deduction against R&D expenses if the amount of the
tax credit is linked to the amount of R&D expenditures incurred by
Nokia and the tax credit is a fully collectible asset that will be paid in
cash by the government in case Nokia is not able to offset it against its
income tax payable. R&D tax credits that do not meet both conditions
are recognized as income tax benefit.
Employee benefits
Pensions and other post-employment benefits
Nokia has various post-employment plans in accordance with the local
conditions and practices in the countries in which it operates. Nokia’s
defined benefit plans comprise significant pension programs and
schemes as well as material other post-employment benefit plans
providing post-employment healthcare and life insurance coverage
to certain employee groups. Defined benefit plans expose Nokia to
various risks such as investment risk, interest rate risk, life expectancy
risk, and regulatory/compliance risk. The characteristics and extent
of these risks vary depending on the legal, fiscal and economic
requirements in each country, as well as the impact of global events.
The plans are generally funded through payments to insurance
companies or contributions to trustee-administered funds as
determined by periodic actuarial calculations.
In a defined contribution plan, Nokia’s legal or constructive obligation
is limited to the amount that it agrees to contribute to the fund.
Nokia’s contributions to defined contribution plans, multi-employer
and insured plans are recognized in the consolidated income
statement in the period to which the contributions relate. If a pension
plan is funded through an insurance contract where Nokia does not
retain any legal or constructive obligations, the plan is treated as a
defined contribution plan. All arrangements that do not fulfill these
conditions are considered defined benefit plans.
For defined benefit plans, including pension and post-employment
healthcare and life insurance, costs are assessed using the projected
unit credit method: the cost is recognized in the consolidated income
statement so as to spread the benefit over the service lives of
employees. The defined benefit obligation is measured as the present
value of the estimated future cash outflows using interest rates on
high-quality corporate bonds or government bonds with maturities
that most closely match expected payouts of benefits. The defined
benefit plan asset is measured at fair market value as of the reporting
date. The liability or asset recognized in the consolidated statement of
financial position is the present value of the defined benefit obligation
as of the reporting date less the fair value of plan assets including
effects of any asset ceiling.
Service cost related to employees’ service in the current period as well
as past service cost resulting from plan amendments, curtailments,
and gains and losses on settlements are all presented within cost of
sales, research and development expenses or selling, general and
administrative expenses in the consolidated income statement. Past
service costs are recognized immediately in the consolidated income
statement when the plan amendment, curtailment or settlement
occurs. Net interest, consisting of interest calculated by applying a
discount rate to the net defined benefit liability or asset and the effect
of asset ceiling, as well as pension plan administration costs not taken
into account in determining the return on plan assets, are presented
within financial income and expenses in the consolidated income
statement. Remeasurements, comprising actuarial gains and losses,
the effect of the asset ceiling and the return on plan assets, excluding
amounts recognized in net interest, are recognized immediately in the
consolidated statement of financial position with a corresponding
debit or credit to pension remeasurements reserve within
shareholders’ equity through other comprehensive income in the
period in which they occur. Remeasurements are not reclassified to
profit or loss in subsequent periods.
Actuarial valuations for Nokia’s defined benefit post-employment
plans are performed annually or when a material plan amendment,
curtailment or settlement occurs.
Share-based payments
Nokia offers three types of global share-based compensation plans for
employees: performance shares, restricted shares and the employee
share purchase plan.
Employee services received and the corresponding increase in equity
are measured by reference to the fair value of the equity instruments
as of the grant date, excluding the impact of any non-market vesting
conditions. Plans that apply tranched vesting are accounted for under
the graded vesting model. Equity-based incentive grants are expected
to be settled with equity, and are generally conditional on continued
employment as well as the fulfillment of any performance conditions
specified in the award terms. Until the Nokia shares are delivered,
the participants do not have any shareholder rights, such as voting
or dividend rights, associated with the shares. The share grants
are generally forfeited if the employment relationship with Nokia
terminates prior to vesting. Share-based compensation is recognized
as an expense in the consolidated income statement over the relevant
service periods.
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Financial statements Notes to consolidated financial statements
continued
Income taxes
Income tax expense comprises current tax and deferred tax. Tax is
recognized in the consolidated income statement except to the extent
that it relates to items recognized in other comprehensive income, or
directly in equity, in which case the related tax is recognized in other
comprehensive income or equity, respectively.
Current taxes are based on the results of the Group companies and
are calculated using the local tax laws and tax rates that are enacted
or substantively enacted as of the reporting date. Corporate taxes
withheld at the source of the income on behalf of the Group
companies are accounted for as income taxes when determined
to represent a tax on net income.
Deferred tax assets and liabilities are determined using the balance
sheet liability method for all temporary differences arising between
the tax bases of assets and liabilities and their carrying amounts in the
consolidated financial statements. Deferred tax assets are recognized
to the extent it is probable that future taxable profit will be available
against which the unused tax losses, unused tax credits and deductible
temporary differences can be utilized in the relevant jurisdictions.
Deferred tax assets are assessed for realizability as of each reporting
date. When facts and circumstances indicate it is no longer probable
that deferred tax assets will be utilized, adjustments are made as
necessary. Deferred tax liabilities are recognized for taxable
temporary differences, and for temporary differences that arise
between the fair value and the tax base of identifiable net assets
acquired in business combinations.
Deferred tax liabilities are not recognized if they arise from the initial
recognition of goodwill. Deferred tax liabilities are provided on taxable
temporary differences arising from investments in subsidiaries,
associates and joint arrangements, except for deferred tax liability
where the timing of the reversal of the temporary difference is
controlled by Nokia, and it is probable that the temporary difference
will not reverse in the foreseeable future.
Deferred tax assets and deferred tax liabilities are measured using
the enacted or substantively enacted tax rates as of the reporting
date that are expected to apply in the period when the asset is
realized or the liability is settled. Deferred tax assets and liabilities
are not discounted.
Deferred tax assets and deferred tax liabilities are offset for
presentation purposes when there is a legally enforceable right to set
off current tax assets against current tax liabilities, and the deferred
tax assets and deferred tax liabilities relate to income taxes levied by
the same taxation authority on either the same taxable entity or
different taxable entities, which intend either to settle current tax
liabilities and assets on a net basis, or to realize the assets and settle
the liabilities simultaneously in each future period in which significant
amounts of deferred tax liabilities or deferred tax assets are expected
to be settled or recovered.
Nokia periodically evaluates positions taken in tax returns with
respect to situations in which applicable tax regulation is subject
to interpretation. It adjusts the amounts of current and deferred
tax assets and liabilities recorded, where it is considered probable,
i.e. more likely than not, that certain tax positions may not be fully
sustained upon review by tax authorities. The amounts recorded are
based on the most likely amount or the expected value, depending on
which method Nokia expects to better predict the resolution of the
uncertainty, as of each reporting date.
Foreign currency translation
Functional and presentation currency
The financial statements of all Group companies are measured using
functional currency, which is the currency of the primary economic
environment in which the entity operates. The consolidated financial
statements are presented in euro, the functional and presentation
currency of the Parent Company.
Transactions in foreign currencies
Transactions in foreign currencies are recorded at exchange rates
prevailing at the dates of the individual transactions. For practical
reasons, a rate that approximates the actual rate at the date of the
transaction is often used. Monetary assets and liabilities denominated
in foreign currency are valued at the exchange rates prevailing at the
end of the reporting period. Foreign exchange gains and losses arising
from monetary assets and liabilities as well as fair value changes of
related hedging instruments are recognized in financial income and
expenses in the consolidated income statement. Unrealized foreign
exchange gains and losses related to non-monetary non-current
financial investments are included in the fair value measurement of
these investments and recognized in other operating income and
expenses in the consolidated income statement.
Foreign Group companies
On consolidation, the assets and liabilities of foreign operations whose
functional currency is other than euro are translated into euro at the
exchange rates prevailing at the end of the reporting period. The
income and expenses of these foreign operations are translated into
euro at the average exchange rates for the reporting period. The
exchange differences arising from translation for consolidation are
recognized as translation differences in the consolidated statement
of comprehensive income. On disposal of a foreign operation the
cumulative amount of translation differences relating to that foreign
operation is reclassified to profit or loss.
Intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. Internally generated intangibles, except for
development costs that may be capitalized, are expensed as
incurred. Development costs are capitalized only if Nokia has the
technical feasibility to complete the asset; has an ability and intention
to use or sell the asset; can demonstrate that the asset will generate
future economic benefits; has resources available to complete
the asset; and has the ability to measure reliably the expenditure
during development.
The useful life of Nokia’s intangible assets, other than goodwill, is finite.
Following initial recognition, finite intangible assets are carried at cost
less accumulated amortization and accumulated impairment losses.
Intangible assets are amortized over their useful lives, generally three
to ten years, using the straight-line method, which is considered to
best reflect the pattern in which the asset’s future economic benefits
are expected to be consumed. Depending on the nature of the
intangible asset, the amortization charges are presented within cost
of sales, research and development expenses or selling, general and
administrative expenses in the consolidated income statement.
Right-of-use assets are measured at cost less accumulated
depreciation and impairment losses, and adjusted for any
remeasurements of the lease liabilities. The cost of right-of-use assets
includes the amount of lease liabilities recognized, initial direct costs
incurred, and lease payments made at or before the commencement
date less any lease incentives received. Right-of-use assets are
depreciated on a straight-line basis over the lease term as follows:
Buildings
Other
3–15 years
3–5 years
Lease liabilities are measured at the present value of lease payments
to be made over the lease term. Nokia determines the lease term as
the non-cancellable term of the lease, together with any periods
covered by an option to extend the lease if it is reasonably certain to
be exercised, as well as any periods covered by an option to terminate
the lease if it is reasonably certain not to be exercised. The lease
payments include fixed lease payments and certain fixed non-lease
components less any lease incentives receivable, variable lease
payments that depend on an index or a rate, and appropriate
termination fees whenever the lease term has been determined based
on the expectation that Nokia will exercise its option to terminate.
Nokia does not generally enter into lease contracts with variable lease
payments linked to future performance or use of an underlying asset.
After the commencement date, the amount of lease liabilities is
measured on an amortized cost basis using the effective interest
method where the lease liabilities increase related to the accretion
of interest and decrease for lease payments made. In addition, the
carrying amounts for the right-of-use asset and lease liability are
remeasured if there is a modification, a change in the lease term or
a change in the future lease payments resulting from a change in an
index or rate used to determine such lease payments. The interest
component of the lease payments is recognized as interest expense
within financial expenses.
Nokia uses its incremental borrowing rate to calculate the present
value of lease payments as the interest rate implicit in the lease is not
readily determinable. Nokia estimates its incremental borrowing rate
quarterly based on the rate of interest that Nokia would pay to borrow
over the lease term with a similar security to obtain an asset of a
similar value to the leased asset in a similar economic environment.
Nokia measures all leases at amortized cost based on the appropriate
discount rate available in the quarter when lease commencement
occurred. Where a lease contract modification or reassessment
of the lease liability resulting from a change in the lease term occurs,
Nokia remeasures the present value of the lease liability based on
the appropriate discount rate available in the quarter when the
reassessment or modification occurs.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated
depreciation and accumulated impairment losses. Depreciation is
recorded on a straight-line basis over the expected useful lives of the
assets as follows:
Buildings and constructions
Buildings and constructions
Light buildings and constructions
Vessels
Cable-laying vessels
Cable-laying accessories
Machinery and equipment
Production machinery, measuring and test equipment
Other machinery and equipment
20–33 years
3–20 years
15–40 years
4–10 years
1–5 years
3–10 years
Land and water areas are not depreciated.
Maintenance, repairs and renewals are generally expensed in the
period in which they are incurred. However, major renovations are
capitalized and included in the carrying amount of the asset when it
is probable that future economic benefits in excess of the originally
assessed standard of performance of the existing asset will flow to
Nokia. Major renovations are depreciated over the remaining useful life
of the related asset. Leasehold improvements are depreciated over
the shorter of the lease term and the useful life. Gains and losses on
the disposal of property, plant and equipment are included in other
operating income or expenses.
Leases
Nokia assesses at contract inception whether a contract is, or contains,
a lease. At the commencement date of the lease, Nokia recognizes a
right-of-use asset and a lease liability for all leases with a lease term
exceeding 12 months. The commencement date is the date when the
lessor makes the underlying leased asset available for use by Nokia.
Nokia applies a practical expedient whereby leases for which the
lease term is 12 months or less at the lease commencement date
(short-term leases) are not recognized in its consolidated statement
of financial position. Instead, Nokia recognizes the lease payments
associated with short-term leases as an operating expense on a
straight-line basis over the lease term. In addition, as a practical
expedient, Nokia does not separate certain non-lease components
from lease components but instead accounts for each lease
component and associated specified non-lease component as a single
lease component. Non-lease components such as payments for
maintenance and services made in conjunction with the leased asset
are included in the lease liability whenever these payments are fixed
and defined in the lease contract. Other payments for non-lease
components that are variable based on consumption, e.g. property
taxes, insurance payments and variable property service costs, are
recognized as an expense when incurred.
The majority of Nokia’s leased assets relate to commercial and
industrial properties such as R&D facilities, production facilities and
office buildings. Nokia also leases vehicles provided as employee
benefits and service vehicles.
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Financial statements Notes to consolidated financial statements
continued
Impairment of goodwill, intangible assets, property, plant
and equipment and right-of-use assets
Nokia assesses the recoverability of the carrying value of goodwill,
intangible assets, property, plant and equipment and right-of-use
assets if events or changes in circumstances indicate that the
carrying value may be impaired. In addition, Nokia tests the carrying
value of goodwill for impairment annually even if there is no indication
of impairment.
Factors that Nokia considers when it reviews indications of impairment
include, but are not limited to, underperformance of the asset relative
to its historical or projected future results, significant changes in the
manner of using the asset or the strategy for the overall business,
and significant negative industry or economic trends.
Goodwill is allocated to the cash-generating units or groups of
cash-generating units that are expected to benefit from the synergies
of the related business combination and that reflect the lowest level
at which goodwill is monitored for internal management purposes.
A cash-generating unit, as determined for the purposes of Nokia’s
goodwill impairment testing, is the smallest group of assets
generating cash inflows that are largely independent of the cash
inflows from other assets or groups of assets. The carrying value
of a cash-generating unit includes its share of relevant corporate
assets allocated to it on a reasonable and consistent basis. When the
composition of one or more groups of cash-generating units to which
goodwill has been allocated is changed, the goodwill is reallocated
based on the relative fair value of the affected groups of
cash-generating units.
Nokia conducts its impairment testing by determining the
recoverable amount for an asset, a cash-generating unit or groups
of cash-generating units. The recoverable amount of an asset,
a cash-generating unit or groups of cash-generating units is the
higher of its fair value less costs of disposal and its value-in-use.
The recoverable amount is compared to the asset’s, cash-generating
unit’s or groups of cash-generating units’ carrying value. If the
recoverable amount for the asset, cash-generating unit or groups
of cash-generating units is less than its carrying value, the asset is
considered impaired and is written down to its recoverable amount.
Impairment losses are presented in cost of sales, research and
development expenses or selling, general and administrative expenses
in the consolidated income statement, except for impairment losses
on goodwill, which are presented in other operating expenses.
Inventories
Inventories are stated at the lower of cost and net realizable value.
Cost is determined using standard cost, which approximates actual
cost on a first-in first-out (FIFO) basis. Net realizable value is the
amount that can be realized from the sale of the inventory in the
normal course of business after allowing for the costs of realization.
In addition to the cost of materials and direct labor, an appropriate
proportion of production overhead is included in the cost of inventory.
An allowance is recorded for excess inventory and obsolescence
based on the lower of cost and net realizable value.
Fair value measurement of financial instruments
A number of financial instruments are measured at fair value as of
each reporting date after initial recognition. Fair value is the price that
would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement
date. The fair value of an asset or a liability is measured using the
assumptions that market participants would use when pricing the
asset or liability, assuming that market participants act in their
economic best interest, by using quoted market rates, discounted cash
flow analyses and other appropriate valuation models. Nokia uses
valuation techniques that are appropriate in the circumstances and
for which sufficient data is available to measure fair value, maximizing
the use of relevant observable inputs and minimizing the use of
unobservable inputs. All financial assets and liabilities for which fair
values are being measured or disclosed in the consolidated financial
statements are categorized within the fair value hierarchy, described
as follows, based on the lowest level input that is significant to the fair
value measurement as a whole:
Level 1—Quoted (unadjusted) market prices for exchange-traded
products in active markets for identical assets or liabilities;
Level 2—Valuation techniques for which significant inputs other
than quoted prices are directly or indirectly observable; and
Level 3—Valuation techniques for which significant inputs are
unobservable.
Nokia categorizes assets and liabilities that are measured at fair value
on a recurring basis into an appropriate level of the fair value hierarchy
at the end of each reporting period.
Classification and measurement of financial assets
Nokia has classified its financial assets that are debt instruments in
the following three categories: financial assets measured at amortized
cost, financial assets measured at fair value through other
comprehensive income, and financial assets measured at fair value
through profit and loss. Nokia has classified its financial assets that are
equity instruments to financial assets measured at fair value through
profit and loss. The selection of the appropriate category is made
based on both Nokia’s business model for managing the financial asset
and on the contractual cash flow characteristics of the asset.
Nokia’s business model for managing financial assets is defined on a
portfolio level. The business model must be observable on a practical
level by the way the business is managed. The cash flows of financial
assets measured at amortized cost are solely payments of principal
and interest. These assets are held within a business model that has
an objective to hold assets to collect contractual cash flows. Financial
assets measured at fair value through other comprehensive income
have cash flows that are solely payments of principal and interest and
these assets are held within a business model that has an objective
that is achieved both by holding financial assets to collect contractual
cash flows and selling financial assets. Financial assets measured at
fair value through profit and loss are assets that do not fall in either
of these two categories. In addition to the classification as described
above, the accounting for financial assets is impacted if the financial
asset is part of a hedging relationship (see below the section on
Hedge accounting).
All purchases and sales of financial assets are recorded on the trade
date, that is, when Nokia commits to purchase or sell the asset.
A financial asset is derecognized when substantially all the risks and
rewards related to the financial asset have been transferred to a third
party that assumes control of the financial asset.
Non-current interest-bearing financial investments
Non-current interest-bearing financial investments include
investments in highly liquid corporate bonds that are long-term
in nature based on their initial maturity. These investments are
initially measured at fair value and in subsequent periods measured
at amortized cost using the effective interest method. These
investments are executed with the main purpose of collecting
contractual cash flows and principal repayments. However,
investments are sold from time to time for liquidity management
and market risk mitigation purposes.
For these investments interest calculated using the effective interest
method, as well as foreign exchange gains and losses, are recognized
in financial income and expenses in the consolidated income
statement. When an investment is disposed of, the difference between
the carrying amount derecognized and the consideration received is
recognized in financial income and expenses in the consolidated
income statement. The FIFO method is used to determine the cost
basis of fixed income securities at amortized cost that are being
disposed of.
Due to the high credit quality of Nokia’s investment portfolio, the
estimated credit loss is normally based on 12-month expected credit
loss. Loss allowance is calculated on a quarterly basis, recorded as an
adjustment to the carrying amount of the investment and recognized
in other financial expenses in the consolidated income statement.
Other current financial assets
Other current financial assets include current part of other non-current
financial assets and short-term loan receivables as well as derivative
assets that are discussed separately in the Derivative financial
instruments section below.
Short-term loan receivables are initially measured at fair value and in
subsequent periods measured at amortized cost using the effective
interest method. Interest calculated using the effective interest
method as well as foreign exchange gains and losses are recognized
in financial income and expenses in the consolidated income
statement. For these loans, a loss allowance is calculated on a
quarterly basis based on a review of collectability and available
collateral, recorded as an adjustment to the carrying amount of
the investment and recognized in other financial expenses in the
consolidated income statement.
Trade receivables
Trade receivables arise from contracts with customers and represent
an unconditional right to receive the consideration and only the
passage of time is required before the consideration is received. Nokia
sells trade receivables to various financial institutions without recourse
in the normal course of business, in order to manage credit risk and
working capital cycle, and the business model for managing trade
receivables is holding receivables to collect contractual cash flows
and selling receivables. Trade receivables are initially recognized
and subsequently remeasured at fair value, determined using the
discounted cash flow method. The changes in fair value are recognized
in fair value reserve in other comprehensive income. If trade
receivables are sold, the difference between the carrying amount
derecognized and the consideration received is recognized in financial
expenses in the consolidated income statement.
Other non-current financial investments
Other non-current financial investments include investments in
unlisted private equity shares and unlisted venture funds. As these
equity and debt investments do not fulfil the criteria of being solely
payments of principal and interest, they are classified as fair value
through profit and loss and are initially recognized and subsequently
remeasured at fair value.
Fair value is estimated using a number of methods, including, but not
limited to: quoted market rates; the current market value of similar
instruments; prices established from a recent arm’s-length financing
transaction of target companies; and analysis of market prospects and
operating performance of target companies, taking into consideration
public market comparable companies in similar industry sectors. Nokia
uses judgment in selecting the appropriate valuation methodology
as well as underlying assumptions based on existing market practice
and conditions.
Fair value adjustments, foreign exchange gains and losses as well as
realized gains and losses from the disposal of these investments are
recognized within other operating income and expenses in the
consolidated income statement.
Other non-current financial assets
Other non-current financial assets include restricted assets and other
receivables, customer and vendor financing related loan receivables
and certain other financial assets of a long-term nature.
Restricted assets and other receivables include restricted bank
deposits primarily related to employee benefits as well as other loan
receivables. These assets are initially measured at fair value and in
subsequent periods at amortized cost using the effective interest
method. Interest calculated using the effective interest method as
well as foreign exchange gains and losses are recognized in financial
income and expenses in the consolidated income statement. For
these assets, a loss allowance is calculated on a quarterly basis based
on a review of collectability and available collateral, recorded as an
adjustment to the carrying amount of the investment and recognized
in other financial expenses in the consolidated income statement.
Customer- and vendor-related loan receivables are managed in a
portfolio with a business model of holding investments to collect
principal and interest as well as selling investments. They are initially
recognized and subsequently remeasured at fair value determined
using the discounted cash flow method. The changes in fair value are
recognized in fair value reserve in other comprehensive income.
Interest calculated using the effective interest method as well as
foreign exchange gains and losses are recognized in financial income
and expenses in the consolidated income statement. Estimated credit
loss is typically based on 12-month expected credit loss for existing
loans and estimated additional draw-downs during that period; refer
to Impairments section for further detail. Loss allowance is calculated
on a quarterly basis based on a review of collectability and available
collateral, and recorded in other financial expenses in the consolidated
income statement reducing fair value loss recorded in other
comprehensive income. In case a receivable is sold, the impact of
expected credit loss is reversed, and the full gain or loss incurred
for the sale is recorded in financial income and expenses in the
consolidated income statement.
The cash flows of other financial assets of a long-term nature do not
fulfill the criteria of being solely payments of principal and interest.
These investments are initially recognized and subsequently
remeasured at fair value using quoted market rates, discounted
cash flow models or other appropriate valuation methods as of
the reporting date. Fair value adjustments, foreign exchange gains
and losses as well as realized gains and losses from the disposal of
these investments are mainly recognized within financial income
and expenses in the consolidated income statement.
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Financial statements Notes to consolidated financial statements
continued
Current interest-bearing financial investments
Nokia invests a portion of the corporate cash needed to cover the
projected cash outflows of its ongoing business operations in highly
liquid, interest-bearing investments. Current interest-bearing financial
investments may include investments measured at amortized cost
and investments measured at fair value through profit and loss.
Corporate cash investments in bank deposits used as collateral for
derivative transactions are initially measured at fair value and in
subsequent periods measured at amortized cost using the effective
interest method. Interest calculated using the effective interest
method as well as foreign exchange gains and losses are recognized in
financial income and expenses in the consolidated income statement.
Corporate cash investments in bank deposits, as well as fixed income
and money market securities with initial maturity or put feature longer
than three months that have characteristics of solely payments of
principal and interest and are not part of structured investments, are
managed in a portfolio with a business model of holding investments
to collect principal and interest, and are initially measured at fair value
and in subsequent periods measured at amortized cost using the
effective interest method. These investments are executed with the
main purpose of collecting contractual cash flows and principal
repayments. However, investments are sold from time to time for
liquidity management and market risk mitigation purposes.
For these investments interest calculated using the effective interest
method, as well as foreign exchange gains and losses, are recognized
in financial income and expenses in the consolidated income
statement. When an investment is disposed of, the difference between
the carrying amount derecognized and the consideration received is
recognized in financial income and expenses in the consolidated
income statement. The FIFO method is used to determine the cost
basis of fixed income securities at amortized cost that are being
disposed of.
Due to the high credit quality of Nokia’s investment portfolio, the
estimated credit loss is normally based on 12-month expected credit
loss. Loss allowance is calculated on a quarterly basis, recorded as an
adjustment to the carrying amount of the investment and recognized
in other financial expenses in the consolidated income statement.
Corporate cash investments may also include money market funds
that do not qualify as cash equivalents, investments acquired for
trading purposes, investment structures consisting of securities
traded in combination with derivatives with complementing and
typically offsetting risk factors and other investments that have cash
flows not being solely payments of principal and interest. These
investments are executed with the purpose of collecting contractual
cash flows and principal repayments as well as for capital appreciation
and can be sold at any time.
These investments are initially recognized and subsequently
remeasured at fair value determined using quoted market rates,
discounted cash flow models or other appropriate valuation methods
as of the reporting date. Fair value adjustments, foreign exchange
gains and losses and realized gains and losses are recognized in
financial income and expenses in the consolidated income statement.
Cash and cash equivalents
Cash and cash equivalents include cash at bank and in hand as well as
highly liquid, fixed income and money market investments that are
readily convertible to known amounts of cash with maturities at
acquisition of three months or less, as well as bank deposits with
maturities or contractual call periods at acquisition of three months
or less. Due to the high credit quality and short-term nature of
these investments, there is an insignificant risk of change in value.
Investments in money market funds that have a risk profile consistent
with the aforementioned criteria are also classified as cash
equivalents. Investments that have cash flows that are solely
payments of principal and interest are measured at amortized cost. All
other investments are measured at fair value through profit and loss.
Classification and measurement of financial liabilities
Nokia has classified its financial liabilities in the following categories:
financial liabilities measured at amortized cost and financial liabilities
measured at fair value through profit and loss. Nokia classifies
derivative liabilities as well as the conditional obligation related to
Nokia Shanghai Bell at fair value through profit and loss and all other
financial liabilities at amortized cost.
All financial liabilities are initially recognized at fair value and, in case
of borrowings and payables, net of transaction costs. Financial
liabilities are derecognized when the related obligation is discharged
or canceled or expired. Additionally, a substantial modification of
the terms of an existing financial liability is accounted for as a
derecognition of the original financial liability and the recognition
of a new financial liability. On derecognition of a financial liability,
the difference between the carrying amount extinguished and
the consideration paid is recognized in interest expenses in the
consolidated income statement.
Interest-bearing liabilities
Long-term interest-bearing liabilities are measured at amortized cost
using the effective interest method. Short-term interest-bearing
liabilities, including the current part of long-term interest-bearing
liabilities and collaterals for derivative transactions, are measured at
amortized cost using the effective interest method.
Transaction costs, interest calculated using the effective interest
method as well as foreign exchange gains and losses are recognized in
financial income and expenses in the consolidated income statement.
Other financial liabilities
Other financial liabilities mainly include a conditional obligation to
China Huaxin as part of the Nokia Shanghai Bell definitive agreements
where China Huaxin obtained the right to fully transfer its ownership
interest in Nokia Shanghai Bell to Nokia in exchange for a future cash
settlement. The financial liability related to the conditional obligation
is measured based on the expected future cash settlement with any
changes recorded in financial income and expenses in the consolidated
income statement.
Other financial liabilities also include derivative liabilities that
are discussed separately in the Derivative financial instruments
section below.
Trade payables
Trade payables are carried at invoiced amount, which is considered
to be equal to the fair value due to the short-term nature of Nokia’s
trade payables.
Impairments of financial assets
Impairment requirements apply to the recognition of a loss allowance
for expected credit losses (ECL) on financial assets measured at
amortized cost, financial assets measured at fair value through other
comprehensive income, financial guarantee contracts and loan
commitments. Nokia continuously assesses its financial instruments
on a forward-looking basis and accounts for the changes in ECL on
a quarterly basis using the following method:
■ ECL = PD x LGD x EAD
■ Probability of Default (PD) is estimated separately for the
centralized investment portfolio and non-centralized investments.
The estimate is based on the credit rating profile of these
investments as well as specific local circumstances as applicable,
unless there are specific events that would indicate that the credit
rating would not be an appropriate basis for estimating credit risk
at the reporting date.
■ For Loss Given Default (LGD), the recovery rate is also estimated
separately for centralized investment portfolios and non-centralized
investments and is based on the type of investment, specific local
circumstances as applicable as well as related collateral
arrangements, if any.
■ Exposure at Default (EAD) is normally the nominal value of the
investment or financial guarantee. For loan commitments, EAD is
based on estimated draw-down amounts for the next 12 months.
All Nokia’s current and non-current interest-bearing financial
investments at amortized cost are considered to have low credit risk,
and the loss allowance recognized during the period is limited to
12 months’ expected losses. Financial instruments that are rated
as investment grade are considered to have low credit risk for the
purposes of this assessment.
Nokia applies a simplified approach to recognizing a loss allowance
based on measurement of lifetime expected credit losses arising
from trade receivables and contract assets without significant
financing components. Based on quantitative and qualitative analysis,
Nokia has determined that the credit risk exposure arising from its
trade receivables is low risk. Quantitative analysis focuses on historical
loss rates, historic and projected sales and the corresponding trade
receivables, and overdue trade receivables including indicators of any
deterioration in the recovery expectation. Qualitative analysis focuses
on all relevant conditions, including customer credit rating, country
credit rating and political situation, to improve the accuracy of
estimating lifetime expected credit losses.
For other non-current financial assets, loans, loan commitments and
financial guarantees extended to third parties, the ECL is calculated
separately for each significant counterparty using the method
described above, including the impact of any collateral arrangements
or other credit enhancements to LGD. The estimate is based on
12-month ECL unless there has been a significant increase in credit
risk for the specific counterparty since the initial recognition, in which
case lifetime ECL is estimated. Breaches of contract, credit rating
downgrades and other credit measures are typical indicators that
Nokia takes into consideration when assessing whether the credit risk
on a financial instrument has increased significantly since initial
recognition. Nokia considers additional indicators to determine if a
financial asset is credit-impaired including whether the counterparty is
in significant financial difficulties and whether it is becoming probable
that the customer will enter bankruptcy or financial reorganization.
Typically customer loan credit risk is higher than credit risk of trade
receivables and contract assets on average.
The change in the amount of loss allowance for ECL for trade
receivables and contract assets is recognized in other operating
expenses and for other financial assets in financial expenses in the
consolidated income statement. For assets carried at amortized cost,
the loss allowance is recorded as an adjustment to the carrying
amount. For assets carried at fair value through other comprehensive
income, the loss allowance is recorded as an adjustment in other
comprehensive income instead of adjusting the carrying amount
that has already been recorded at fair value. For financial guarantee
contracts, the loss allowance is recognized as an other financial liability
in the statement of financial position.
Derivative financial instruments
All derivatives are recognized initially at fair value on the date a
derivative contract is entered into and subsequently remeasured at
fair value. The method of recognizing the resulting gain or loss varies
according to whether the derivatives are designated and qualify under
hedge accounting.
The cash flows of a hedge are classified as cash flows from operating
activities in the consolidated statement of cash flows in case the
underlying hedged items relate to Nokia’s operating activities. When
a derivative contract is accounted for as a hedge of an identifiable
position relating to financing or investing activities, the cash flows of
the contract are classified in the same way as the cash flows of the
position being hedged. Certain derivatives are hedging the foreign
exchange risk of Nokia’s cash position and their cash flows are included
in cash flows from investing activities in the consolidated statement
of cash flows.
Derivatives not designated in hedge accounting relationships
carried at fair value through profit and loss
Foreign exchange forward contracts are valued at market-forward
exchange rates. Changes in fair value are measured by comparing
these rates with the original contract-forward rate. Currency options
are valued as of each reporting date by using the Garman & Kohlhagen
option valuation model. Changes in fair value are recognized in the
consolidated income statement.
Fair values of forward rate agreements, interest rate options,
futures contracts and exchange-traded options are calculated
based on quoted market rates as of each reporting date. The
discounted cash flow method is used to value interest rate and
cross-currency swaps. Changes in fair value are recognized in the
consolidated income statement.
For derivatives not designated under hedge accounting but hedging
identifiable forecast exposures such as anticipated foreign currency
denominated sales and purchases, the gains and losses are recognized
in other operating income or expenses in the consolidated income
statement. The gains and losses on all other derivatives not
designated under hedge accounting are recognized in financial income
and expenses in the consolidated income statement.
Embedded derivatives included in contracts are identified and
monitored by Nokia. For host contracts that are not financial assets
containing embedded derivatives that are not closely related, the
embedded derivatives are separated and measured at fair value as of
each reporting date with changes in fair value recognized in financial
income and expenses in the consolidated income statement. For host
contracts that are financial assets containing embedded derivatives,
the whole contract is measured at fair value as of each reporting date
with changes in fair value recognized in financial income and expenses
in the consolidated income statement.
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Financial statements Notes to consolidated financial statements
continued
Hedge accounting
Nokia applies hedge accounting on certain foreign exchange forward
contracts, options or option strategies, and interest rate derivatives.
Qualifying options and option strategies have zero net premium, or
a net premium paid. For option structures, the critical terms of the
purchased and written options are the same and the notional amount
of the written option component is not greater than that of the
purchased option.
In the fair valuation of foreign exchange forward contracts, Nokia
separates the spot element and the forward element including the
impact of foreign currency basis spread and forward points, which
is considered as the cost of hedging for foreign exchange forward
contracts. In the fair valuation of foreign exchange option contracts,
Nokia separates the intrinsic value and time value, which is considered
as the cost of hedging for foreign exchange option contracts. In the
fair valuation of cross-currency swaps, Nokia separates the foreign
currency basis spread that is considered as the cost of hedging for
cross-currency swaps.
Cash flow hedges: hedging of forecast foreign currency
denominated sales and purchases
Nokia applies cash flow hedge accounting primarily to forecast
business foreign exchange exposure that arises from highly probable
forecast operative business transactions. The risk management
strategy is to hedge material net exposures (identified standard sales
exposure minus identified standard costs exposure) by using foreign
exchange forwards and foreign exchange options in a layered hedging
style that follows defined hedging level ranges and hedge maturities in
quarterly time buckets. The hedged item must be highly probable and
present an exposure to variations in cash flows that could ultimately
affect profit or loss.
Nokia only designates the spot element of the foreign exchange
forward contract as the hedging instrument. Currency options, or
option strategies, may also be used for cash flow hedging, in which
case the intrinsic value of the option is designated as the hedging
instrument. Hedge effectiveness is assessed at inception and
quarterly during the hedge relationship to ensure that an economic
relationship exists. As Nokia only enters in hedge relationships where
the critical terms match, the assessment of effectiveness is done on
a qualitative basis.
For qualifying foreign exchange forwards and foreign exchange
options, the change in fair value that reflects the change in spot
exchange rates on a discounted basis is recognized in hedging reserve
in other comprehensive income. The changes in the forward element
of the foreign exchange forwards and the time value of the options
that relate to hedged items are deferred in the cost of hedging reserve
in other comprehensive income and are subsequently accounted for
in the same way as the spot element or intrinsic value.
In each quarter, Nokia evaluates whether the forecast sales and
purchases are still expected to occur. If a portion of the hedged cash
flow is no longer expected to occur, all related deferred gains or losses
are derecognized from other comprehensive income and recognized
in other operating income and expenses in the consolidated income
statement as hedge accounting criteria is no longer met. If the hedged
cash flow ceases to be highly probable, but is still expected to occur,
accumulated gains and losses remain in other comprehensive income
until the hedged cash flow affects profit or loss.
Nokia’s risk management objective is to hedge forecast cash flows until
the related revenue has been recognized. Each hedge relationship is
discontinued during the quarter when the hedge matures, which is
also the quarter that it has been designated to hedge. At this point,
the accumulated profit or loss of cash flow hedges is recycled to
other operating income and expenses in the consolidated income
statement. In case the forecast amount of revenue is not recognized
during a quarter, the full accumulated profit or loss of cash flow
hedges designated for said quarter is still recycled and the portion
related to forecast revenue that was not recognized is disclosed as
hedge ineffectiveness.
As cash flow hedges primarily mature in the same quarter as the
hedged item, there is no significant ineffectiveness resulting from
time value of money. Nokia will validate the magnitude of the impact
of discounting related to the amount of profit or loss recognized in
other comprehensive income on a quarterly basis.
Nokia has also entered into foreign exchange forwards in relation to
forecast sales and purchases that do not qualify as highly probable
forecast transactions and hence do not satisfy the requirements for
hedge accounting. For these foreign exchange forwards, the gains and
losses are recognized in other operating income and expenses in the
consolidated income statement.
Cash flow hedges: hedging of foreign exchange risk of future
interest cash flows
Nokia also applies cash flow hedging to future interest cash flows in
foreign currency related to issued bonds. These future interest cash
flows are hedged with cross-currency swaps that have been bifurcated
and designated partly as fair value hedges to hedge both foreign
exchange and the interest rate benchmark risk component of the
issued bond and partly as cash flow hedges to hedge the foreign
exchange risk related to the remaining portion of interest cash flows
on the issued bond. The accumulated profit or loss for the part of
these cross-currency swaps designated as cash flow hedges is initially
recorded in hedging reserve and recycled to profit or loss at the time
when the related interest cash flows are settled. Nokia separates the
foreign currency basis spread from cross-currency swaps and excludes
it from the hedge relationship as cost of hedging that is initially
recognized and subsequently measured at fair value and recorded
in cost of hedging reserve in other comprehensive income.
Fair value hedges: hedging of foreign exchange exposure
In certain cases, mainly related to long-term construction projects,
Nokia applies fair value hedge accounting for foreign exchange risk
with the objective to reduce the exposure to fluctuations in the fair
value of firm commitments due to changes in foreign exchange rates.
Changes in the fair value of both spot and forward elements of the
derivatives designated and qualifying as fair value hedges, together
with any changes in the fair value of the hedged firm commitments
attributable to the hedged risk, are recorded in financial income and
expenses in the consolidated income statement.
Fair value hedges: hedging of interest rate exposure
Nokia applies fair value hedge accounting to reduce exposure to fair
value fluctuations of interest-bearing liabilities due to changes in
interest rates and foreign exchange rates. Nokia uses interest rate
swaps and cross-currency swaps aligned with the hedged items to
hedge interest rate risk and associated foreign exchange risk.
Accumulated changes in fair value from qualifying hedges are
derecognized from translation differences within consolidated
shareholders’ equity on the disposal of all or part of a foreign
subsidiary by sale, liquidation, repayment of share capital or
abandonment. The cumulative amount or proportionate share of
changes in the fair value of qualifying hedges deferred in translation
differences is recognized as income or expense on disposal.
Provisions
Provision is recognized when Nokia has a present legal or constructive
obligation as a result of past events, it is probable that an outflow
of resources will be required to settle the obligation and a reliable
estimate of the amount can be made. Management judgment may
be required in determining whether it is probable that an outflow
of economic benefits will be required to settle the obligation. The
amount recognized as a provision is based on the best estimate of
unavoidable costs required to settle the obligation at the end of the
reporting period.
When estimating the amount of unavoidable costs, management
may be required to consider a range of possible outcomes and their
associated probabilities, risks and uncertainties surrounding the
events and circumstances as well as making assumptions of the timing
of payment. Changes in estimates of timing or amounts of costs
required to settle the obligation may become necessary as time
passes and/or more accurate information becomes available. Nokia
assesses the adequacy of its existing provisions and adjusts the
amounts as necessary based on actual experience and changes in
facts and circumstances as of each reporting date. For descriptions
of different classes of provisions, refer to Note 26, Provisions.
Contingent liabilities
Nokia discloses ongoing legal matters that relate to possible
obligations whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events not wholly
within the control of Nokia. These matters are assessed continually
to determine whether an outflow of resources embodying economic
benefits has become probable so as to recognize a provision.
Treasury shares
Nokia recognizes its own equity instruments that are acquired
(treasury shares) as a reduction of equity at cost of acquisition.
When canceled or reissued, the acquisition cost of treasury shares
is recognized in retained earnings or other distributable reserves
of the equity.
Dividend and equity repayment
Nokia pays dividend and/or makes equity repayments to its
shareholders in quarterly installments. Each quarterly distribution is
resolved by the Board of Directors separately in accordance with the
authorization granted by the Annual General Meeting. Dividends and/
or equity repayments are recognized in the consolidated financial
statements when the Board of Directors has resolved on the
quarterly payment.
Nokia has entered into long-term borrowings mainly at fixed rate and
swapped a portion of them into floating rates in line with a defined
target interest profile. Nokia aims to mitigate the adverse impacts
from interest rate fluctuations by continuously managing net interest
exposure resulting from financial assets and liabilities by setting
appropriate risk management benchmarks and risk limits. The hedged
item is identified as a proportion of the outstanding loans up to the
notional amount of the swaps as appropriate to achieve the risk
management objective. Nokia enters into interest rate swaps that
have similar critical terms as the hedged item, such as reference rate,
reset dates, payment dates, maturities and notional amount and
hence Nokia expects that there will be no significant ineffectiveness.
Nokia has not entered into interest rate swaps where it would be
paying fixed rate.
Nokia’s borrowings are carried at amortized cost. Changes in the fair
value of derivatives designated and qualifying as fair value hedges,
together with any changes in the fair value of hedged liabilities
attributable to the hedged risk, are recorded in financial income and
expenses in the consolidated income statement. Nokia separates the
foreign currency basis spread from cross-currency swaps and excludes
it from the hedged risk as cost of hedging that is initially recognized
and subsequently measured at fair value and recorded in cost of
hedging reserve in other comprehensive income. If a hedge
relationship no longer meets the criteria for hedge accounting,
hedge accounting ceases, cost of hedging recorded in cost of
hedging reserve is immediately expensed and any fair value
adjustments made to the carrying amount of the hedged item
while the hedge was effective are recognized in financial income
and expenses in the consolidated income statement based on the
effective interest method.
Hedges of net investments in foreign operations
Nokia applies hedge accounting for its foreign currency hedging of
selected net investments. Hedged item can be an amount of net
assets equal to or less than the carrying amount of the net assets of
the foreign operation in Nokia consolidated financial statements. The
risk management strategy is to protect the euro counter value of the
portion of this exposure expected to materialize as non-euro cash
repatriation in the foreseeable future.
Nokia only designates the spot element of the foreign exchange
forward contract as the hedging instrument. Currency options, or
option strategies, may also be used for net investment hedging,
in which case the intrinsic value of the option is designated as the
hedging instrument. Hedge effectiveness is assessed at inception and
quarterly during the hedge relationship to ensure that an economic
relationship exists. As Nokia only enters in hedge relationships where
the critical terms match, the assessment of effectiveness is done on
a qualitative basis with no significant ineffectiveness expected.
For qualifying foreign exchange forwards, foreign exchange options
and option strategies, the change in fair value that reflects the change
in spot exchange rates is recognized in translation differences within
consolidated shareholders’ equity. The changes in the forward
element of foreign exchange forwards as well as the changes in the
time value of options (collectively known as the “cost of hedging”) is
recognized in cost of hedging reserve in other comprehensive income.
The cost of hedging at the date of designation of the foreign exchange
forward or option contract as a hedging instrument is amortized to
financial income and expenses in the consolidated income statement
over the duration of the contract. Hence, in each reporting period,
the change in fair value of forward element of the foreign exchange
forward contract or the time value of the option contract is recorded in
cost of hedging reserve, while the amortization amount is reclassified
from cost of hedging reserve to profit or loss.
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Financial statements Notes to consolidated financial statements
continued
3. New and amended standards and interpretations
On 1 January 2022, Nokia adopted the following amendments to the
accounting standards issued by the IASB and endorsed by the EU:
■ Amendments to IFRS 3 Business Combinations: Reference to the
Conceptual Framework,
■ Amendments to IAS 16 Property, Plant and Equipment: Proceeds
before Intended Use,
■ Amendments to IAS 37 Provisions, Contingent Liabilities and
Contingent Assets: Onerous Contracts — Cost of Fulfilling a
Contract, and
■ Amendments included in the Annual Improvements to IFRS
Accounting Standards 2018-2020 Cycle.
The amendments had no material impact on Nokia’s consolidated
financial statements.
Nokia has not early adopted any new or amended standards or
interpretations that have been issued but are not yet effective.
The new and amended standards and interpretations issued by the
IASB that are effective in future periods are not expected to have a
material impact on the consolidated financial statements of Nokia
when adopted. Nokia intends to adopt these new and amended
standards and interpretations, if applicable, when they become
effective and are endorsed by the EU.
4. Use of estimates and critical accounting
judgments
The preparation of financial statements requires use of management
judgment in selecting and applying accounting policies as well as
making estimates and assumptions about the future. These
judgments, estimates and assumptions may have a significant effect
on the amounts recognized in the financial statements.
The estimates and assumptions used in determining the carrying
amounts of assets and liabilities are based on historical experience,
expected outcomes and various other factors that were available when
these consolidated financial statements were prepared, and they are
believed to be reasonable under the circumstances. The estimates
|and assumptions are reviewed continually and revised if changes
in circumstances occur, or as a result of new information or more
experience. As estimates and assumptions inherently contain a
varying degree of uncertainty, actual outcomes may differ resulting
in adjustments to the carrying amounts of assets and liabilities in
the subsequent periods.
The accounting matters presented in this note are determined to
involve the most difficult, subjective or complex judgments, or are
considered as key sources of estimation uncertainty.
Pension and other post-employment benefit obligations
and expenses
Key source of estimation uncertainty
The determination of pension and other post-employment benefit
obligations and expenses for defined benefit plans is dependent on
a number of estimates and assumptions, including the discount rate,
future mortality rate, annual rate of increase in future compensation
levels, and healthcare costs trend rates and usage of services in the
United States where the majority of our post-employment healthcare
plans are maintained. Changes in assumptions and actuarial estimates
may materially affect the benefit obligation, future expense and
future cash flow. Based on these estimates and assumptions,
at 31 December 2022, defined benefit obligations amount to
EUR 18 312 million (EUR 22 704 million in 2021) and the fair value
of plan assets amounts to EUR 22 691 million (EUR 27 128 million
in 2021).
Critical accounting judgment
Where a surplus on a defined benefit scheme arises, Nokia analyzes
the recoverability of the surplus through either a refund or through
reduction of future contributions in determining whether it is
necessary to restrict the amount of the surplus that is recognized.
Nokia has two plans in the US, one plan in the UK and one in
Belgium with material surplus positions with a combined surplus of
EUR 6 697 million at 31 December 2022 (EUR 7 718 million in 2021).
In 2021, Nokia modified the terms of all pension plans in the US after
which it has made the judgment that all plans with material surplus
positions meet the requirements of recoverability. The remaining
pension plans for which Nokia has determined that the surplus assets
are not recoverable are considered to be not material. The resulting
asset ceiling limitation is recorded at EUR 84 million at 31 December
2022 (EUR 92 million in 2021).
Refer to Note 24, Pensions and other post-employment benefits.
Income taxes
Critical accounting judgment
Nokia is subject to income taxes in the jurisdictions in which it
operates. Judgement is required in determining current tax expense,
uncertain tax positions, deferred tax assets and deferred tax liabilities;
and the extent to which deferred tax assets can be recognized.
Estimates related to the recoverability of deferred tax assets are based
on forecasted future taxable income and tax planning strategies.
Based on these estimates and assumptions, at 31 December 2022
Nokia has EUR 20 214 million (EUR 33 222 million in 2021) of unused
tax losses, unused tax credits and deductible temporary differences
for which no deferred tax assets are recognized due to uncertainty of
utilization. The majority of the unrecognized deferred tax assets relate
to France.
The utilization of deferred tax assets is dependent on future taxable
profit in excess of the profit arising from the reversal of existing
taxable temporary differences. The recognition of deferred tax assets
is based on the assessment of whether it is probable that sufficient
taxable profit will be available in the future to utilize the unused tax
losses, unused tax credits and deductible temporary differences
before the unused tax losses and unused tax credits expire.
Recognition of deferred tax assets involves judgment regarding the
future financial performance of the particular legal entity or tax group
that has recognized the deferred tax asset. At 31 December 2022,
Nokia re-recognized deferred tax assets of EUR 2.5 billion related to
Finland in the consolidated statement of financial position.
Refer to Note 11, Income taxes, for further information.
Cloud and Network Services
The Cloud and Network Services segment is built around software and
the cloud and is focused on driving leadership in cloud-native software
and as-a-service delivery models, as demand for critical networks
accelerates; and with strong market positions in communications
software, private wireless networks, and cognitive (or intelligent)
services. The Cloud and Network Services portfolio encompasses
core network solutions, including both voice and packet core;
business applications covering areas like security, automation, and
monetization; cloud and cognitive services; and enterprise solutions
covering private wireless and industrial automation.
Nokia Technologies
The Nokia Technologies segment, building on decades of innovation
and R&D leadership in technologies used in virtually all mobile
devices used today, is expanding the Nokia patent licensing business,
increasing the strength of Nokia brand through brand licensing, and
establishing a technology licensing business. The majority of net
sales and related costs and expenses attributable to licensing and
patenting the patent portfolio of Nokia is recorded in Nokia
Technologies, while each segment separately records its own
research and development expenses.
Group Common and Other
Despite not a reportable segment, Nokia also provides segment-level
information for Group Common and Other. Group Common and Other
includes Radio Frequency Systems which is managed as a separate
entity. In addition, Group Common and Other includes certain
corporate-level and centrally managed operating expenses, as well
as fair value gains and losses on investments in unlisted venture
funds, including investments managed by NGP Capital.
5. Segment information
Nokia has four operating and reportable segments for financial
reporting purposes: (1) Network Infrastructure, (2) Mobile Networks,
(3) Cloud and Network Services and (4) Nokia Technologies.
In addition, Nokia provides net sales disclosure for the following
business divisions within the Network Infrastructure segment:
(i) IP Networks, (ii) Optical networks, (iii) Fixed Networks and
(iv) Submarine Networks.
The President and CEO is the chief operating decision-maker
monitoring the operating results of segments for the purpose
of assessing performance and making decisions about resource
allocation. Key financial performance measures of the segments
comprise primarily net sales and segment operating profit. The
evaluation of segment performance and allocation of resources is
primarily based on segment operating profit which the management
believes is the most relevant measure for this purpose. Segment
operating profit excludes intangible asset amortization and other
purchase price fair value adjustments, goodwill impairments,
restructuring related charges and certain other items of income and
expenses that may not be indicative of the business operating results.
Accounting policies of the segments are the same as those
described in Note 2, Significant accounting policies, except that
certain above-mentioned items of income and expenses are not
allocated to the segments. Inter-segment revenues and transfers
are accounted for as if the revenues were to third parties, that is,
at current market prices.
Segment descriptions
Network Infrastructure
The Network Infrastructure segment serves communication service
providers, enterprises, webscales and public sector customers. It
comprises the following business divisions: (i) IP Networks, which
provides IP networks and services for residential, mobile, enterprise
and cloud applications; (ii) Optical Networks, which provides optical
transport networks for metro, regional, longhaul and ultra-longhaul
applications; (iii) Fixed Networks, which provides fiber, fixed wireless
access, and copper technologies; and (iv) Submarine Networks, which
offers undersea cable transmission.
Mobile Networks
The Mobile Networks segment creates products and services covering
all mobile network generations. Its portfolio includes products for
radio access networks (RAN) and microwave radio (MWR) links for
transport networks, solutions for network management, as well as
network planning, optimization, network deployment and technical
support services.
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Financial statements Notes to consolidated financial statements
continued
Segment information
EURm
2022
Net sales to external customers
Net sales to other segments
Operating profit/(loss)
Share of results of associated companies
and joint ventures
Financial income and expenses
Profit before tax
Other segment items
Depreciation and amortization
2021
Net sales to external customers
Net sales to other segments
Operating profit/(loss)
Share of results of associated companies
and joint ventures
Financial income and expenses
Profit before tax
Other segment items
Depreciation and amortization
2020
Net sales to external customers
Net sales to other segments
Operating profit/(loss)
Share of results of associated companies
and joint ventures
Financial income and expenses
Profit before tax
Other segment items
Depreciation and amortization
Material reconciling items between total segment operating profit and operating profit for the Group
EURm
2022
Network
Infrastructure(1)
Mobile
Networks
9 044
3
1 102
10 658
13
940
Cloud and
Network
Services
3 350
1
177
Nokia
Technologies
Group Common
and Other
1 583
12
1 208
276
19
(318)
–
(11)
6
(8)
–
Eliminations
and
unallocated
items(2)
–
(48)
(791)
(13)
Nokia
Group
24 911
–
2 318
(26)
(108)
2 184
Total segment operating profit
Amortization of acquired intangible assets
Restructuring and associated charges
Costs associated with country exit
Impairment and write-off of assets, net of reversals
Settlement of legal disputes
Gain on sale of fixed assets
Gain on defined benefit plan amendment
Other
Operating profit for the Group
(229)
(347)
(91)
(34)
(28)
(411)
(1 140)
Information by geographies and customer concentration
Net sales to external customers by country
7 673
1
784
9 711
6
765
3 088
1
166
1 490
12
1 185
240
17
(125)
–
(37)
(617)
(1)
6
6
(2)
–
–
22 202
–
2 158
9
(241)
1 926
EURm
Finland(1)
United States
India
Japan
Other
Total
3 109
(411)
(177)
(98)
(97)
–
–
–
(8)
2 318
2022
1 697
7 949
1 283
904
13 078
24 911
2021
2 775
(391)
(263)
–
(45)
80
53
–
(51)
2 158
Net sales(1)
2021
1 605
6 791
1 022
1 030
11 754
22 202
2020
2 081
(407)
(651)
–
(241)
–
–
90
13
885
2020
1 480
6 792
945
904
11 731
21 852
(208)
(338)
(95)
(33)
(30)
(391)
(1 095)
6 735
1
457
10 394
4
819
3 086
1
(67)
1 389
13
1 123
(1)
22
5
1
250
19
(251)
(5)
(2)
(38)
(1 196)
–
21 852
–
885
22
(164)
743
(200)
(347)
(114)
(39)
(25)
(407)
(1 132)
(1) Includes IP Networks net sales of EUR 3 063 million (EUR 2 679 million in 2021 and EUR 2 585 million in 2020), Optical Networks net sales of EUR 1 891 million (EUR 1 708 million in 2021 and
EUR 1 695 million in 2020), Fixed Networks net sales of EUR 2 943 million (EUR 2 358 million in 2021 and EUR 1 759 million in 2020) and Submarine Networks net sales of EUR 1 150 million
(EUR 929 million in 2021 and EUR 697 million in 2020).
(2) Unallocated items comprise costs related to the intangible asset amortization and other purchase price fair value adjustments, goodwill impairments, restructuring related charges and certain
other items.
(1) Net sales to external customers by country are based on the location of the customer, except for Nokia Technologies IPR and licensing net sales which are allocated to Finland.
Major customers
As is typical for our industry, Nokia’s net sales are largely driven by multi-year customer agreements with a limited number of significant
customers. Net sales from Nokia’s largest customer were 10% (11% in 2021 and 11% in 2020) of net sales to external customers. Net sales
from the largest customer were reported by Networks Infrastructure, Mobile Networks, Cloud and Network Services as well as Group Common
and Other.
Non-current assets by country
EURm
Finland
United States
France
Other
Total
(1) Consists of goodwill and intangible assets, property, plant and equipment and right-of-use assets.
Non-current assets(1)
2022
1 365
5 032
2 180
1 297
9 874
2021
1 348
5 083
2 029
1 399
9 859
152
NOKIA IN 2022
NOKIA IN 2022
153
Financial statements Notes to consolidated financial statements
continued
6. Revenue recognition
Management has determined that Nokia’s geographic areas are considered as the primary determinants to depict how the nature, amount,
timing and uncertainty of revenue and cash flows are affected by economic factors. Nokia’s primary customer base consists of companies that
operate on a country-specific or a regional basis. Although Nokia’s technology cycle is similar around the world, different countries and regions
are inherently in a different stage of that cycle, often influenced by macroeconomic conditions specific to those countries and regions. In
addition to Net sales to external customers by region, the chief operating decision maker also reviews Net sales by customer type disclosed
below.
Each reportable segment, as described in Note 5, Segment information, consists of customers that operate in all geographic areas. No reportable
segment has a specific revenue concentration in any geographic area other than Nokia Technologies, which is included within Europe.
Net sales to external customers by region are based on the location of the customer, except for Nokia Technologies IPR and licensing net
sales which are allocated to Europe. In 2022, Nokia changed the way it presents net sales information on a regional basis. Nokia considers
that providing net sales for the Submarine Networks business separately from the rest of the Group improves the usefulness of disclosed
information by removing volatility caused by the specific nature of the Submarine Networks business. The comparative information for Net sales
to external customers by region has been recast accordingly.
Net sales to external customers by region
EURm
Asia Pacific
Europe
Greater China
India
Latin America
Middle East & Africa
North America
Submarine Networks
Total
Net sales by customer type
EURm
Communications service providers
Enterprise
Licensees
Other(1)
Total
2022
2 648
6 662
1 581
1 290
1 223
1 969
8 388
1 150
24 911
2022
19 921
1 997
1 595
1 398
24 911
2021
2 472
6 313
1 512
1 035
983
1 771
7 187
929
22 202
2021
17 977
1 575
1 502
1 148
22 202
2020
2 652
6 092
1 497
953
954
1 886
7 121
697
21 852
2020
17 954
1 571
1 402
925
21 852
(1) Includes net sales of Submarine Networks which operates in a different market, and Radio Frequency Systems (RFS), which is being managed as a separate entity, and certain other items, such as
eliminations of inter-segment revenues. Submarine Networks and RFS net sales also include revenue from communications service providers and enterprise customers.
Contract assets and contract liabilities
Contract asset balances decrease upon reclassification to trade receivables when Nokia’s right to payment becomes unconditional. Contract
liability balances decrease when Nokia satisfies the related performance obligations and revenue is recognized. There were no material
cumulative adjustments to revenue recognized arising from changes in transaction prices, changes in measures of progress or changes in
estimated variable consideration.
During the year, Nokia recognized EUR 1.6 billion (EUR 1.7 billion in 2021) of revenue that was included in the current contract liability balance at
the beginning of the period.
Order backlog
At 31 December 2022, the aggregate amount of the transaction price allocated to partially or wholly unsatisfied performance obligations arising
from fixed contractual commitments amounted to EUR 19.5 billion (EUR 20.3 billion in 2021 that included the amounts related to the completed
contract disclosed below). Management has estimated that these unsatisfied performance obligations will be recognized as revenue as follows:
Within 1 year
2-3 years
More than 3 years
Total
2022
75%
21%
4%
100%
2021
73%
24%
3%
100%
The estimated timing of the satisfaction of these performance obligations is subject to change owing to factors beyond Nokia’s control such as
customer and network demand, market conditions and, in some cases, restrictions imposed by the weather or other factors impacting project
logistics. Revenue recognized in the reporting period from performance obligations satisfied (or partially satisfied) in previous periods (for
example, due to changes in transaction price) was not material.
Completed Contracts
In April 2014, Nokia entered into an agreement to license certain technology patents and patent applications owned by Nokia on the effective
date of that agreement, on a non-exclusive basis, to a licensee, for a period of 10 years (the “License Agreement”). Contemporaneously and
under the terms of the License Agreement, Nokia issued to the licensee an option to extend the technology patent license for the remaining life
of the licensed patents. Nokia received all cash consideration due for the sale of the 10-year license and option upon closing of the License
Agreement. Management has determined that, upon transition to IFRS 15, Revenue from Contracts with Customers, the License Agreement is
a completed contract. As such, in accordance with the transition requirements of the standard, Nokia has continued to apply its prior revenue
accounting policies, based on IAS 18, Revenue, and related interpretations, to the License Agreement recognizing revenue over the term of the
License Agreement.
In December 2022, the licensee exercised a contractual option to extend the license agreement for the remaining life of the licensed patents,
making it in substance a perpetual license. As a result, Nokia has recognized all the remaining revenue related to the License Agreement during
the year in accordance with its accounting policies based on IAS 18, Revenue, and related interpretations related to this completed contract.
After the 2022 revenue recognition, Nokia will no longer recognize revenue in relation to this agreement in future periods.
7. Expenses by nature
EURm
Personnel expenses
Cost of material
Project subcontracting and other customer contract expenses
Depreciation and amortization
IT services
Impairment charges
Other
Total operating expenses
2022
7 903
8 481
3 156
1 140
376
90
1 545
22 691
2021
7 541
6 320
4 225
1 095
230
39
1 037
20 487
2020
7 310
6 016
4 887
1 132
343
241
1 164
21 093
Operating expenses include government grant income and R&D tax credits of EUR 146 million (EUR 111 million in 2021 and EUR 98 million in
2020) most of which have been recognized in the consolidated income statement as a deduction against research and development expenses.
Restructuring charges by function(1):
EURm
Cost of sales
Research and development expenses
Selling, general and administrative expenses
Total restructuring charges
(1) Restructuring charges include defined benefit plan curtailment income and expenses.
8. Personnel expenses
EURm
Salaries and wages(1)
Pension and other post-employment benefit expense, net
Share-based payment expense
Social security costs
Total
(1) Includes termination benefits.
The average number of employees is 86 896 (87 927 in 2021 and 92 039 in 2020).
2022
85
37
46
168
2022
6 439
434
149
881
7 903
2021
133
73
78
284
2021
6 191
406
118
826
7 541
2020
245
189
67
501
2020
6 055
362
76
817
7 310
154
NOKIA IN 2022
NOKIA IN 2022
155
Financial statements Notes to consolidated financial statements
continued
9. Other operating income and expenses
EURm
Other operating income
Gains from unlisted venture funds
Subsidies and government grants
Gain on sale of property, plant and equipment
Settlements and resolutions of legal disputes
Other
Total
Other operating expenses
Changes in provisions
Foreign exchange (losses)/gains on hedging forecasted sales and purchases
Expected credit losses on trade receivables
Impairment of disposal groups
Goodwill impairment(1)
Other
Total
2022
27
20
7
–
44
98
(134)
(107)
(107)
(72)
–
(19)
(439)
2021
188
43
66
90
56
443
(77)
45
16
–
–
(97)
(113)
2020
61
3
3
–
59
126
(5)
5
(171)
–
(200)
(78)
(449)
(1) Nokia conducted an impairment test based on the long-range plan prepared in the fourth quarter of 2020 and concluded that the carrying amount exceeded the recoverable amount for its Fixed
Networks group of CGUs.
10. Financial income and expenses
EURm
Financial income
Interest income on financial investments
Interest income on financing components of other contracts
Other financial income(1)
Total
Financial expenses
Interest expense on interest-bearing liabilities
Negative interest on financial investments
Interest expense on financing components of other contracts(2)
Interest expense on lease liabilities
Net interest income on defined benefit plans
Net fair value gains/(losses) on hedged items under fair value hedge accounting
Net fair value (losses)/gains on hedging instruments under fair value hedge
accounting
Net foreign exchange gains/(losses)
Other financial expenses(3)
Total
2022
2021
69
13
4
86
(103)
(27)
(66)
(26)
92
262
(265)
20
(81)
(194)
21
28
(6)
43
(113)
(29)
(40)
(24)
26
25
(25)
(60)
(44)
(284)
2020
30
38
97
165
(127)
(9)
(83)
(25)
–
(122)
118
(8)
(73)
(329)
(1) In 2022, includes an income of EUR 11 million (expense of EUR 33 million in 2021 and income of EUR 79 million in 2020) due to a change in the fair value of the financial liability related to Nokia Shanghai
Bell. Refer to Note 30, Significant partly-owned subsidiaries.
(2) In 2022, includes EUR 46 million (EUR 12 million in 2021 and EUR 31 million in 2020) related to the sale of receivables.
(3) In 2022, includes an impairment of EUR 61 million (an increase in loss allowance of EUR 32 million in 2021 and EUR 58 million in 2020) related to loans extended to an emerging market customer.
156
NOKIA IN 2022
NOKIA IN 2022
11. Income taxes
Components of the income tax benefit/(expense)
EURm
Current tax
Deferred tax
Total
2022
(426)
2 452
2 026
2021
(409)
137
(272)
Income tax reconciliation
Reconciliation of the difference between income tax computed at the statutory rate in Finland of 20% and income tax recognized in the
consolidated income statement:
EURm
Income tax expense at statutory rate
Permanent differences
Non-creditable withholding taxes
Income taxes for prior years(1)
Effect of different tax rates of subsidiaries operating in other jurisdictions
Effect of deferred tax assets not recognized(2)
Benefit arising from previously unrecognized deferred tax assets(3)
Net decrease/(increase) in uncertain tax positions
Change in income tax rates
Income taxes on undistributed earnings
Total
(1) In 2021, relates primarily to a tax benefit related to past operating model integration.
(2) In 2020, includes a derecognition of deferred tax assets related to Finland.
(3) In 2022, includes a re-recognition of deferred tax assets related to Finland.
2022
(437)
87
(72)
3
(68)
(107)
2 646
9
24
(59)
2 026
2021
(385)
47
(37)
95
(57)
(77)
187
(29)
17
(33)
(272)
2020
(295)
(2 961)
(3 256)
2020
(149)
90
(37)
26
(39)
(3 202)
105
(12)
(12)
(26)
(3 256)
Income tax liabilities and assets include a net liability of EUR 182 million (EUR 192 million in 2021) relating to uncertain tax positions with
inherently uncertain timing of cash outflows.
Prior period income tax returns for certain Group companies are under examination by local tax authorities. Nokia has ongoing tax investigations
in various jurisdictions, including the United States, Canada, India, Brazil, Saudi Arabia, France, China and South Korea. Nokia’s business and
investments, especially in emerging market countries, may be subject to uncertainties, including unfavorable or unpredictable tax treatment.
Management judgment and a degree of estimation are required in determining the tax expense or benefit. Even though management does not
expect that any significant additional taxes in excess of those already provided for will arise as a result of these examinations, the outcome or
actual cost of settlement may vary materially from estimates.
Deferred tax assets and liabilities
EURm
Tax losses carried forward and unused tax credits
Undistributed earnings
Intangible assets and property, plant and equipment
Right-of-use assets
Defined benefit pension assets
Other non-current assets
Inventories
Other current assets
Lease liabilities
Defined benefit pension and other post-employment
liabilities
Other non-current liabilities
Provisions
Other current liabilities
Other temporary differences
Total before netting
Netting of deferred tax assets and liabilities
Total after netting
Deferred
tax assets
1 011
–
3 267
–
–
66
216
225
176
925
18
311
326
27
6 568
(2 734)
3 834
2022
Deferred
tax liabilities
–
(193)
(309)
(177)
(1 989)
(30)
(18)
(95)
–
–
–
(73)
(154)
(28)
(3 066)
2 734
(332)
Net balance
3 502
–
3 502
Deferred
tax assets
794
–
1 167
–
–
49
79
152
165
1 023
1
82
300
36
3 848
(2 576)
1 272
2021
Deferred
tax liabilities
–
(136)
(176)
(210)
(2 052)
(34)
(13)
(81)
–
–
–
(87)
(55)
(14)
(2 858)
2 576
(282)
Net balance
990
–
990
157
Financial statements
Notes to consolidated financial statements
continued
Movements in the net deferred tax balance during the year:
EURm
1 January
Recognized in income statement, continuing operations
Recognized in other comprehensive income
Acquisitions through business combinations and disposals and others
Translation differences
31 December
2022
990
2 452
56
2
2
3 502
2021
1 562
137
(753)
(6)
50
990
2020
4 734
(2 961)
(115)
7
(103)
1 562
Amount of temporary differences, tax losses carried forward and tax credits for which no deferred tax asset was recognized due to uncertainty
of utilization:
EURm
Temporary differences
Tax losses carried forward
Tax credits
Total
2022
1 579
18 324
311
20 214
2021
13 487
19 393
342
33 222
Deferred tax assets are recognized to the extent it is probable that future taxable profit will be available against which the unused tax losses,
unused tax credits and deductible temporary differences can be utilized in the relevant jurisdictions. At 31 December 2022, Nokia has
recognized deferred tax assets of EUR 3.8 billion (EUR 1.3 billion at 31 December 2021).
In addition, at 31 December 2022, Nokia has unrecognized deferred tax assets of which majority relate to France. These deferred tax assets
have not been recognized due to uncertainty regarding their utilization. A significant portion of the French unrecognized deferred tax assets
are indefinite in nature and available against future French tax liabilities, subject to a limitation of 50% of annual taxable profits.
Nokia continually evaluates the probability of utilizing its deferred tax assets and considers both positive and negative evidence in its
assessment. At 31 December 2021, Nokia concluded based on its assessment that it was not probable that it would have been able to utilize
the unused tax losses, unused tax credits and deductible temporary differences in Finland, which were generated over a longer period including
as a result of historical operating performance and integration costs in Finland related to the 2016 acquisition of Alcatel-Lucent. This conclusion
was based on the weighting of objective negative evidence of cumulative taxable losses against more subjective positive evidence. The primary
factors in this weighting were the more objective record of a pattern of historical financial performance compared to the more inherently
subjective expectations regarding future financial performance in Finland.
In 2021 and 2022, Nokia generated accounting and taxable profit in Finland and there were improvements in financial performance compared
to preceding periods. The changes arise from the underlying improvements in operating performance, including successful execution of the
new Nokia strategy and improved competitiveness in Mobile Networks. These improvements are expected to be sustained in the upcoming
years, as well as over the longer term. In addition, Nokia has determined that, in 2022, a pattern of material taxable profits was re-established
in Finland. Nokia’s re-established pattern of profitability together with Nokia’s forecasts of future taxable profit in Finland provides positive
evidence about its ability to utilize the unused tax losses and deductible temporary differences in Finland. At 31 December 2022, Nokia
concluded based on its assessment that it is probable that it will be able to utilize the unused tax losses and deductible temporary differences
and re-recognized deferred tax assets of EUR 2.5 billion in the consolidated statement of financial position.
In performing this assessment, Nokia has not applied any cut-off period, other than expiry under the relevant tax legislation. A significant
portion of Finnish deferred tax assets are indefinite in nature and available fully against future Finnish tax liabilities. Due to the non-expiry
of these assets, the sensitivity of future profit projections affects mainly the period of time over which the deferred tax assets are expected
to be utilized.
Expiry of tax losses carried forward and unused tax credits:
EURm
Tax losses carried forward
Within 10 years
Thereafter
No expiry
Total
Tax credits
Within 10 years
Thereafter
No expiry
Total
2022
2021
Recognized
Unrecognized
Total
Recognized
Unrecognized
Total
1 344
–
2 095
3 439
85
47
117
249
1 247
4
17 073
18 324
286
4
21
311
2 591
4
19 168
21 763
371
51
138
560
132
–
2 172
2 304
32
49
177
258
2 508
3
16 882
19 393
325
4
13
342
2 640
3
19 054
21 697
357
53
190
600
Nokia has undistributed earnings of EUR 388 million (EUR 422 million in 2021) for which a deferred tax liability has not been recognized as these
earnings will not be distributed in the foreseeable future.
12. Earnings per share
Profit or loss attributable to equity holders of the parent
Continuing operations
Discontinued operations
Profit/(loss) for the year
Weighted average number of shares outstanding
Effect of potentially dilutive shares
Performance shares
Restricted shares and other
Total effect of potentially dilutive shares
Adjusted weighted average number of shares
Earnings per share
Basic earnings per share
Continuing operations
Discontinued operations
Profit/(loss) for the year
Diluted earnings per share
Continuing operations
Discontinued operations
Profit/(loss) for the year
2022
EURm
4 201
49
4 250
000s
shares
2021
EURm
1 632
(9)
1 623
000s
shares
2020
EURm
(2 520)
(3)
(2 523)
000s
shares
5 614 182
5 630 025
5 612 418
46 187
9 651
55 838
5 670 020
50 300
3 910
54 210
5 684 235
19 780
3 884
23 664
5 636 082
EUR
0.75
0.01
0.76
0.74
0.01
0.75
EUR
0.29
0.00
0.29
0.29
0.00
0.29
EUR
(0.45)
0.00
(0.45)
(0.45)
0.00
(0.45)
Basic earnings per share is calculated by dividing the profit or loss attributable to equity holders of the parent by the weighted average number
of shares outstanding during the year. Diluted earnings per share is calculated by adjusting the profit or loss attributable to equity holders of
the parent, and the weighted average number of shares outstanding, for the effects of all dilutive potential ordinary shares. Potential ordinary
shares are excluded from the calculation of diluted earnings per share when they are determined to be antidilutive.
In 2020, the effect of potentially dilutive shares was excluded from the calculation of diluted earnings per share as it was determined to be
antidilutive due to the loss from continuing operations.
158
NOKIA IN 2022
NOKIA IN 2022
159
Financial statements
Notes to consolidated financial statements
continued
13. Goodwill and intangible assets
EURm
Acquisition cost at 1 January 2021
Translation differences
Additions
Acquisitions through business combinations(1)
Disposals and retirements
Acquisition cost at 31 December 2021
Accumulated amortization and impairment charges at 1 January 2021
Translation differences
Disposals and retirements
Amortization
Accumulated amortization and impairment charges at 31 December 2021
Net book value at 1 January 2021
Net book value at 31 December 2021
Acquisition cost at 1 January 2022
Translation differences
Additions
Disposals and retirements
Acquisition cost at 31 December 2022
Accumulated amortization and impairment charges at 1 January 2022
Translation differences
Disposals and retirements
Amortization
Accumulated amortization and impairment charges at 31 December 2022
Net book value at 1 January 2022
Net book value at 31 December 2022
Goodwill
6 182
307
–
63
–
6 552
(1 108)
(13)
–
–
(1 121)
5 074
5 431
6 552
247
–
–
6 799
(1 121)
(11)
–
–
(1 132)
5 431
5 667
Intangible assets
9 187
325
15
24
(52)
9 499
(7 234)
(243)
47
(449)
(7 879)
1 953
1 620
9 499
249
49
(19)
9 778
(7 879)
(190)
19
(465)
(8 515)
1 620
1 263
(1) In 2021, Nokia acquired 100% ownership interest in Zyzyx, Inc. Goodwill of this acquisition was allocated to the Network Infrastructure operating segment.
Net book value of intangible assets by type of asset(1):
EURm
Customer relationships
Patents and licenses
Technologies and IPR&D
Tradenames and other
Total
2022
923
151
83
106
1 263
Total
15 369
632
15
87
(52)
16 051
(8 342)
(256)
47
(449)
(9 000)
7 027
7 051
16 051
496
49
(19)
16 577
(9 000)
(201)
19
(465)
(9 647)
7 051
6 930
2021
1 178
183
133
126
1 620
(1) The largest movements are due to amortization and translation differences, with the exception of Technologies and IPR&D, which included acquired technology EUR 24 million in 2021.
At 31 December 2022, the weighted average for the remaining amortization periods is approximately three years for customer relationships,
four years for patents and licenses, two years for technologies and IPR&D, and four years for tradenames and others.
Goodwill
Nokia has allocated goodwill to the operating segments corresponding to groups of cash-generating units (CGUs) that are expected to benefit
from goodwill in line with Nokia’s operational and reporting structure. Refer to Note 5, Segment information.
Allocation of goodwill
The following table presents the allocation of goodwill to groups of CGUs at 31 December:
EURm
Network Infrastructure
Mobile Networks
Cloud and Network Services
2022
2 812
2 284
571
2021
2 690
2 191
550
Recoverable amounts
The recoverable amounts of the groups of CGUs were based on fair value less costs of disposal that was determined using a level 3 fair value
measurement based on a discounted cash flow calculation. The cash flow projections used in calculating the recoverable amounts were based
on financial plans approved by management covering an explicit forecast period of three years.
Seven additional years of cash flow projections subsequent to the explicit forecast period of three years reflect a gradual progression towards
the steady state cash flow projections modeled in the terminal year. The terminal growth rate assumptions reflect long-term average growth
rates for the industries and economies in which the groups of CGUs operate. The discount rates reflect current assessments of the time value
of money and relevant market risk premiums reflecting risks and uncertainties for which the future cash flow estimates have not been adjusted.
Other key variables in future cash flow projections include assumptions on estimated sales growth, gross margin and operating margin. All cash
flow projections are consistent with market participant assumptions.
Terminal growth rate and post-tax discount rate applied in the impairment test for the groups of CGUs:
Key assumption %
Network Infrastructure
Mobile Networks
Cloud and Network Services
Terminal growth rate
Post-tax discount rate
2022
1.6
1.3
1.8
2021
1.4
1.2
1.6
2022
9.0
7.7
7.0
The results of the impairment testing indicate adequate headroom for each group of CGUs in 2022.
14. Property, plant and equipment
EURm
Acquisition cost at 1 January 2021
Translation differences
Additions
Reclassifications
Disposals and retirements
Acquisition cost at 31 December 2021
Accumulated depreciation at 1 January 2021
Translation differences
Impairment charges
Disposals and retirements
Depreciation
Accumulated depreciation at 31 December 2021
Net book value at 1 January 2021
Net book value at 31 December 2021
Acquisition cost at 1 January 2022
Translation differences
Additions
Reclassifications
Disposals and retirements
Acquisition cost at 31 December 2022
Accumulated depreciation at 1 January 2022
Translation differences
Impairment charges
Disposals and retirements
Depreciation
Accumulated depreciation at 31 December 2022
Net book value at 1 January 2022
Net book value at 31 December 2022
Land, buildings,
constructions
and vessels
1 265
53
27
28
(145)
1 228
(482)
(26)
(14)
114
(87)
(495)
783
733
1 228
15
55
160
(49)
1 409
(495)
(6)
(33)
46
(87)
(575)
733
834
Machinery,
equipment
and other
3 135
88
333
41
(226)
3 371
(2 272)
(59)
–
216
(345)
(2 460)
863
911
3 371
8
361
40
(191)
3 589
(2 460)
(6)
(12)
185
(363)
(2 656)
911
933
Assets under
construction
137
7
214
(69)
(9)
280
–
–
–
–
–
–
137
280
280
3
166
(200)
(1)
248
–
–
–
–
–
–
280
248
2021
7.7
7.7
6.9
Total
4 537
148
574
–
(380)
4 879
(2 754)
(85)
(14)
330
(432)
(2 955)
1 783
1 924
4 879
26
582
–
(241)
5 246
(2 955)
(12)
(45)
231
(450)
(3 231)
1 924
2 015
160
NOKIA IN 2022
NOKIA IN 2022
161
Financial statements Notes to consolidated financial statements
continued
15. Leases
Right-of-use assets
Right-of-use assets represent Nokia’s right to use the underlying leased assets.
EURm
Acquisition cost at 1 January 2021
Translation differences
Net additions(1)
Retirements
Acquisition cost at 31 December 2021
Accumulated depreciation at 1 January 2021
Translation differences
Impairment charges
Retirements
Depreciation
Accumulated depreciation at 31 December 2021
Net book value at 1 January 2021
Net book value at 31 December 2021
Acquisition cost at 1 January 2022
Translation differences
Net additions(1)
Retirements
Acquisition cost at 31 December 2022
Accumulated depreciation at 1 January 2022
Translation differences
Impairment charges
Retirements
Depreciation
Accumulated depreciation at 31 December 2022
Net book value at 1 January 2022
Net book value at 31 December 2022
(1) Net additions comprise new lease contracts as well as modifications and remeasurements of existing lease contracts.
Amounts recognized in the income statement(1)
EURm
Depreciation of right-of-use assets
Interest expense on lease liabilities
Impairment charges, net of reversals
Total
Buildings
1 106
47
209
(44)
1 318
(386)
(15)
(25)
44
(151)
(533)
720
785
1 318
6
184
(85)
1 423
(533)
3
6
85
(150)
(589)
785
834
2022
(225)
(26)
6
(245)
Other
180
3
76
(36)
223
(95)
(2)
–
36
(63)
(124)
85
99
223
(3)
73
(52)
241
(124)
1
–
52
(75)
(146)
99
95
2021
(214)
(24)
(25)
(263)
Total
1 286
50
285
(80)
1 541
(481)
(17)
(25)
80
(214)
(657)
805
884
1 541
3
257
(137)
1 664
(657)
4
6
137
(225)
(735)
884
929
2020
(223)
(25)
(32)
(280)
(1) Excluding certain other lease related amounts such as expenses relating to short-term leases, income from subleasing and gains arising from sale and leaseback transactions that are not material.
Amounts reported in the statement of cash flows
EURm
Payment of principal portion of lease liabilities
Interest paid on lease liabilities
Total
2022
(217)
(26)
(243)
2021
(226)
(24)
(250)
2020
(234)
(25)
(259)
The maturity analysis of lease liabilities is presented in Note 32, Financial risk management. Commitments related to future lease contracts are
presented in Note 27, Commitments, contingencies and legal proceedings.
16. Inventories
EURm
Raw materials and semi-finished goods
Finished goods
Contract work in progress(1)
Total
2022
1 075
1 375
815
3 265
2021
673
1 039
680
2 392
(1) Contract work in progress comprises costs incurred to date for customer contracts where the contractual performance obligations are not yet satisfied. Contract work in progress will be recognized as
cost of sales when the corresponding revenue is recognized.
The cost of inventories recognized as an expense during the year and included in cost of sales is EUR 8 623 million (EUR 6 427 million in 2021
and EUR 6 115 million in 2020).
The cost of inventories recognized as an expense includes EUR 267 million (EUR 203 million in 2021 and EUR 230 million in 2020) in respect of
write-downs of inventory to net realizable value, and has been reduced by EUR 98 million (EUR 112 million in 2021 and EUR 98 million in 2020)
in respect of the reversal of such write-downs. Previous write-downs have been reversed primarily as a result of changes in estimated
customer demand.
17. Other receivables
Non-current
EURm
R&D tax credits and other indirect tax receivables
Deposits
Other
Total
Current
EURm
R&D tax credits, VAT and other indirect tax receivables
Prepayments related to contract manufacturing
IT-related prepaid expenses
Divestment-related receivables
Other
Total
2022
159
45
35
239
2022
468
62
41
26
337
934
2021
148
47
60
255
2021
480
22
42
23
292
859
162
NOKIA IN 2022
NOKIA IN 2022
163
Financial statements Notes to consolidated financial statements
continued
18. Equity
Shares and share capital
Share capital
Nokia Corporation has one class of shares. Each share entitles the holder to one vote at general meetings. The shares have no par value nor is
there a minimum or maximum share capital or number of shares under the Articles of Association of Nokia Corporation. At 31 December 2022,
the share capital amounted to EUR 245 896 461.96 (EUR 245 896 461.96 in 2021) and consisted of 5 632 297 576 (5 675 461 159 in 2021)
issued and fully paid shares. In 2022, Nokia Corporation issued without consideration in a directed share issue 20 800 000 new shares to itself
to fulfill the company’s obligations under the Nokia Equity Programs and canceled 63 963 583 shares it had repurchased during the year.
Share premium
Share premium reserve consists of the share premium account of the Parent Company. In addition, the equity impact corresponding to the
employee services received related to the equity-settled share-based compensation plans is recorded in the share premium reserve.
Treasury shares
At 31 December 2022, the number of Nokia shares held by the Group companies was 45 281 539 (40 467 555 in 2021) representing 0.8%
(0.7% in 2021) of the share capital and total voting rights.
In 2022, Nokia Corporation transferred without consideration 15 986 016 shares held by the company to employees, including certain
members of the Group Leadership Team, as settlement of Nokia’s equity-based incentive plans and the employee share purchase plan.
In addition, Nokia repurchased 63 963 583 shares under the first phase of its share buyback program. The repurchased shares were canceled
in December 2022.
Reconciliation of the number of shares outstanding at the beginning and at the end of the period:
Number of shares 000s
1 January
Settlement of share-based payments
Acquisition of treasury shares
31 December
2022
5 634 993
15 986
(63 963)
5 587 016
2021
5 617 496
17 497
–
5 634 993
2020
5 605 581
11 915
–
5 617 496
Authorizations given to the Board of Directors related to issue and repurchase of shares
Authorization to issue shares and special rights entitling to shares
At the Annual General Meeting held on 5 April 2022, the shareholders authorized the Board of Directors to issue a maximum of 550 million
shares through one or more issues of shares or special rights entitling to shares. The Board of Directors is authorized to issue either new shares
or shares held by Nokia. The authorization included the right for the Board of Directors to resolve on all the terms and conditions of such share
and special rights issuances, including issuance in deviation from the shareholders’ pre-emptive rights. The authorization may be used to
develop Nokia’s capital structure, diversify the shareholder base, finance or carry out acquisitions or other arrangements, settle Nokia’s
equity-based incentive plans, or for other purposes resolved by the Board of Directors. The authorization is effective until 4 October 2023,
and it terminated the previous authorizations to issue shares and special rights entitling to shares.
Authorization to repurchase shares
At the Annual General Meeting held on 5 April 2022, the shareholders authorized the Board of Directors to repurchase a maximum of
550 million shares. The amount corresponds to less than 10% of the total number of Nokia’s shares. Shares may be repurchased to be canceled,
held to be reissued, transferred further or for other purposes resolved by the Board. The shares may be repurchased otherwise than in
proportion to the shares held by the shareholders. The price paid for the shares under the authorization shall be based on the market price
of Nokia shares on the securities markets on the date of the repurchase or a price otherwise formed in a competitive process. The Board shall
resolve on all other matters related to the repurchase of Nokia shares. The authorization is effective until 4 October 2023, and it terminated
the previous authorization to repurchase shares to the extent that the Board has not previously resolved to repurchase shares based on
such authorization.
Distribution of funds
Nokia distributes funds to its shareholders in two ways: a) as dividends from retained earnings and/or as assets from the reserve for invested
unrestricted equity, and b) by repurchasing its own shares using funds in the unrestricted equity. The amount of any distribution is limited to the
amount of distributable earnings of the Parent Company, and subject to exceptions relating to the right of minority shareholders to request a
certain minimum distribution, the distribution may not exceed the amount proposed by the Board of Directors.
Dividend and/or assets from the reserve for unrestricted invested equity
Nokia’s Board of Directors proposes to the Annual General Meeting 2023 that no dividend is distributed by a resolution of the AGM for the
financial year ended on 31 December 2022. Instead, the Board proposes to the AGM to be authorized to decide, in its discretion, on the
distribution of an aggregate maximum of EUR 0.12 per share as dividend from the retained earnings and/or as assets from the reserve for
invested unrestricted equity. The authorization would be used to distribute dividend and/or assets from the reserve for invested unrestricted
equity in four quarterly installments during the period of validity of the authorization unless the Board decides otherwise for a justified reason.
On the date of issuing the financial statements for 2022 the total number of Nokia shares is 5 632 297 576 and consequently the total amount
of distribution would be EUR 676 million. Total number of shares includes the shares held by the Parent Company which are not entitled
to distribution.
The AGM in 2022 resolved to authorize the Board of Directors to decide on the distribution of an aggregate maximum of EUR 0.08 per share as
dividend and/or as assets from the reserve of invested unrestricted equity for the financial year 2021. The authorization was used to distribute
dividend in four installments. During 2022, three installments of dividend were distributed amounting to EUR 0.06 per share and EUR 337
million in total. The fourth installment of EUR 0.02 was paid in February 2023. The AGM in 2021 resolved that no dividend is distributed for the
financial year 2020.
Share buyback program
In February 2022, Nokia’s Board of Directors initiated a share buyback program under the authorization from the AGM to repurchase shares.
The program targets to return up to EUR 600 million of cash to shareholders in tranches over a period of two years. In the first phase, which was
launched on 11 February 2022 and which ended on 11 November 2022, Nokia repurchased 63 963 583 shares corresponding to 1.1% of the
total number of Nokia shares at 31 December 2021. The aggregate purchase price of all shares acquired in the first phase was EUR 300 million
and the average price per share was EUR 4.69. The repurchased shares were canceled in December 2022.
In December 2022, Nokia’s Board of Directors decided to launch the second phase of the share buyback program based on the authorization
granted by Nokia’s Annual General Meeting on 5 April 2022. The repurchases started on 2 January 2023 and will end at the latest by
21 December 2023. The aggregate purchase price of all shares to be acquired under the second phase of the program shall not exceed
EUR 300 million. The maximum number of shares that can be repurchased is 275 000 000 shares corresponding to approximately 5% of the
total number of shares in Nokia. The repurchases will be funded using funds in the reserve for invested unrestricted equity and hence the
repurchases will reduce Nokia’s total unrestricted equity. The repurchased shares will be canceled.
Nokia has appointed a third-party broker as the lead-manager for the second phase of the buyback program. The lead-manager will make
trading decisions independently of and without influence from Nokia. Nokia may terminate the program prior to its scheduled end date with
one trading day notice provided that it does not possess any inside information as defined in Article 7 of the Market Abuse Regulation (MAR).
Nature and purpose of other equity reserves
Translation differences
Translation differences consist of foreign exchange differences arising from translation of foreign operations into euro, the presentation
currency of the consolidated financial statements, as well as gains and losses related to hedging of net investments in foreign operations.
Fair value and other reserves
Pension remeasurements
Pension remeasurements reserve includes actuarial gains and losses as well as return on plan assets and changes in the effect of the asset
ceiling, excluding amounts recognized in net interest, related to Nokia’s defined benefit plans.
Hedging reserve
Hedging reserve includes the change in fair value that reflects the change in spot exchange rates for certain foreign exchange forward contracts
that are designated as cash flow hedges to the extent that the hedge is effective.
Cost of hedging reserve
Cost of hedging reserve includes forward element of foreign exchange forward contracts and the time value of foreign exchange options related
to cash flow hedging of forecasted foreign currency sale and purchase transactions. Additionally, cost of hedging reserve includes the difference
between the change in fair value of forward element of foreign exchange forward contracts and the time value of option contracts and the
amortization of forward element of foreign exchange forward contracts and time value of option contracts related to net investment hedging.
Cost of hedging reserve also includes changes in fair value from foreign currency basis spread related to fair value hedging of foreign currency
denominated bonds.
Fair value reserve
Fair value reserve includes the changes in fair value of financial instruments that are managed in a portfolio with a business model of holding
financial instruments to collect contractual cash flows including principal and interest as well as selling financial instruments. The fair value
changes recorded in fair value reserve for these instruments are reduced by amounts of loss allowances.
Reserve for invested unrestricted equity
The reserve for invested unrestricted equity includes that part of the subscription price of issued shares that according to the share issue
decision is not to be recorded to the share capital as well as other equity inputs that are not recorded to some other reserve. The amounts
received for treasury shares are recorded to the reserve for invested unrestricted equity, unless it is provided in the share issue decision that
it is to be recorded in full or in part to the share capital. The Nokia shares repurchased under the ongoing share buyback program are funded
using funds in the reserve for invested unrestricted equity.
164
NOKIA IN 2022
NOKIA IN 2022
165
Financial statements Notes to consolidated financial statements
continued
Other equity
Retained earnings/accumulated deficit
Retained earnings/accumulated deficit is the net total of previous years’ profits and losses less dividends paid to the shareholders.
Non-controlling interests
Non-controlling interests represent the share of net assets of certain subsidiaries attributable to their minority shareholders. For more
information on the contractual arrangement related to the ownership interests in the Nokia Shanghai Bell Group, refer to Note 30,
Significant partly-owned subsidiaries.
Changes in other comprehensive income by component of equity
EURm
1 January 2020
Foreign exchange translation differences
Net investment hedging gains
Remeasurements of defined benefit plans
Net fair value gains/(losses)
Transfer to income statement
Other decrease
Movement attributable to non-controlling interests
31 December 2020
Foreign exchange translation differences
Net investment hedging losses
Remeasurements of defined benefit plans
Net fair value (losses)/gains
Transfer to income statement
Movement attributable to non-controlling interests
31 December 2021
Foreign exchange translation differences
Net investment hedging losses
Remeasurements of defined benefit plans
Net fair value gains/(losses)
Transfer to income statement
Movement attributable to non-controlling interests
31 December 2022(1)
Translation
differences
Pension
remeasurements
Hedging
reserve
Cost of hedging
reserve
Fair value
reserve
Fair value and other reserves
(372)
(1 231)
307
–
–
–
(1)
2
(1 295)
1 162
(249)
–
–
(7)
(7)
(396)
697
(147)
–
–
14
1
169
1 457
–
–
484
–
–
–
(1)
1 940
–
–
2 302
–
–
–
4 242
–
–
(349)
–
–
–
3 893
(6)
–
–
–
13
(5)
–
–
2
–
–
–
(15)
6
–
(7)
–
–
–
24
61
–
78
(14)
–
1
–
(13)
16
–
–
(10)
–
–
–
5
4
–
(1)
–
–
–
(27)
10
–
(18)
(55)
–
–
–
(175)
208
–
–
(22)
–
–
–
(25)
32
–
(15)
–
–
–
(208)
175
–
(48)
(1) In 2022, translation differences includes EUR 80 million gains (EUR 226 million gains in 2021 and EUR 475 million gains in 2020) related to net investment hedging.
Capital management
For capital management purposes Nokia defines capital as total equity and interest-bearing liabilities less cash and cash equivalents, current
interest-bearing financial investments and non-current interest-bearing financial investments.
The main objectives of Nokia’s capital management are to maintain a solid overall financial position and to ensure sufficient financial flexibility
to execute Nokia’s long-term business strategy and to provide returns to shareholders. From a cash perspective, Nokia aims to maintain the
balance of its cash and cash equivalents, interest-bearing financial investments less interest-bearing liabilities at 10-15% of annual net sales
over time. This cash target replaces previous cash target to maintain a level of cash and cash equivalents and interest-bearing financial
investments at 30% or more of annual net sales. To support these objectives, Nokia aims to maintain investment grade credit ratings.
Nokia’s current long-term credit ratings are BBB- (stable) by Fitch, Ba1 (stable) by Moody’s, and BBB- (stable) by S&P Global Ratings.
At 31 December 2022, Nokia’s credit ratings were BBB- (stable) by Fitch, Ba2 (positive) by Moody’s, and BB+ (positive) by S&P Global Ratings.
With regards to shareholder remuneration, Nokia targets recurring, stable and over time growing ordinary dividend payments, taking into
account the previous year’s earnings as well as the company’s financial position and business outlook. Nokia is also using share repurchases
as a tool to manage its capital structure through the reduction of capital and distribute excess cash to the shareholders.
19. Other comprehensive income
EURm
Pension remeasurements(1)
Remeasurements of defined benefit plans
Net change during the year
Translation differences
Exchange differences on translating
foreign operations
Transfer to income statement
Net change during the year
Net investment hedges(2)
Net investment hedging (losses)/gains
Net change during the year
Cash flow and other hedges(3)
Net fair value (losses)/gains
Transfer to income statement
Net change during the year
Financial assets at fair value through
other comprehensive income
Net fair value losses
Transfer to income statement on
loss allowance
Transfer to income statement on disposal
Net change during the year
Other (decrease)/increase
Total
2022
2021
2020
Gross
Tax
Net
Gross
Tax
Net
Gross
Tax
Net
(424)
(424)
77
77
(347)
(347)
3 040
3 040
(755)
(755)
2 285
2 285
624
624
(140)
(140)
484
484
696
14
710
(127)
(127)
(15)
98
83
1
–
1
(20)
(20)
12
(27)
(15)
697
14
711
(147)
(147)
(3)
71
68
1 160
(7)
1 153
(249)
(249)
(10)
10
–
(264)
56
(208)
(25)
2
–
2
–
–
–
–
–
–
1 162
(7)
1 155
(249)
(249)
(10)
10
–
(1 232)
–
(1 232)
266
266
1
14
15
1
–
1
42
42
(1)
(3)
(4)
(1 231)
–
(1 231)
308
308
–
11
11
(25)
(213)
38
(175)
172
46
(46)
(3)
193
(34)
(9)
13
–
56
138
37
(33)
(3)
249
19
13
7
–
3 951
–
–
–
–
(753)
19
13
7
–
3 198
229
31
47
3
(277)
(46)
(6)
(14)
–
(115)
183
25
33
3
(392)
(1) In 2021, remeasurement of defined benefit plans includes the impact of the modification of the terms of the US defined benefit pension plans. For more information, refer to Note 24, Pensions and
other post-employment benefits.
(2) In 2020, income tax related to net investment hedging gains includes EUR 94 million related to the derecognition of deferred tax assets in Finland. For more information, refer to Note 11, Income taxes.
(3) Includes movements in cash flow hedging reserve and related cost of hedging reserve.
20. Interest-bearing liabilities
Issuer/borrower
Nokia Corporation
Nokia Corporation
Nokia Corporation
Nokia Corporation
Nokia Corporation
Nokia Corporation
Nokia of America Corporation
Nokia Corporation
Nokia of America Corporation
Nokia Corporation
Nokia Corporation and
various subsidiaries
Total
Instrument
2.00% Senior Notes
EIB R&D Loan
NIB R&D Loan(2)
2.375% Senior Notes
2.00% Senior Notes
4.375% Senior Notes
6.50% Senior Notes
3.125% Senior Notes
6.45% Senior Notes
6.625% Senior Notes
Other liabilities
Currency
EUR
EUR
EUR
EUR
EUR
USD
USD
EUR
USD
USD
Nominal (million)
750
500
250
500
750
500
74
500
206
500
Final maturity
March 2024
February 2025
May 2025
May 2025
March 2026
June 2027
January 2028
May 2028
March 2029
May 2039
Carrying amount EURm(1)
2022
736
500
250
478
716
436
70
457
194
478
2021
759
500
250
497
760
464
66
497
183
553
162
4 477
124
4 653
(1) Carrying amount includes EUR 120 million of fair value losses (EUR 166 million of fair value gains in 2021) related to fair value hedge accounting relationships, including EUR 180 million of fair value gains
(EUR 203 million in 2021) related to discontinued fair value hedge accounting relationships that are amortized over the life of the respective Senior Notes.
(2) The loan from the Nordic Investment Bank (NIB) is repayable in three equal annual installments in 2023, 2024 and 2025.
166
NOKIA IN 2022
NOKIA IN 2022
167
Financial statements
Notes to consolidated financial statements
continued
Nokia’s significant credit facilities and funding programs at 31 December:
Committed/
uncommitted
Committed
Uncommitted
Uncommitted
Uncommitted
Total
Financing arrangement
Revolving Credit Facility(1)
Finnish Commercial Paper Programme
Euro-Commercial Paper Programme
Euro Medium Term Note Programme(2)
(1) The facility has its maturity in June 2026, except for EUR 88 million having its maturity in June 2024.
(2) All euro-denominated bonds have been issued under the Euro Medium Term Note Programme.
Currency
EUR
EUR
EUR
EUR
Nominal (million)
1 500
750
1 500
5 000
Utilized (million)
2022
–
–
–
2 500
2 500
2021
–
–
–
2 500
2 500
21. Fair value of financial instruments
Financial assets and liabilities recorded at fair value are categorized based on the amount of unobservable inputs used to measure their fair
value. The three hierarchical levels used are based on an increasing amount of judgment associated with the inputs used to derive fair valuation
for these assets and liabilities, level 1 being market values for exchange traded products, level 2 being primarily based on publicly available
market information, and level 3 requiring most management judgment. At the end of each reporting period, Nokia categorizes its financial
assets and liabilities to the appropriate level of fair value hierarchy. Items carried at fair value in the following table are measured at fair value
on a recurring basis.
Carrying amounts
Fair value(1)
Fair value through profit or loss
Fair value
through other
comprehensive
income(2)
All borrowings and credit facilities presented in the tables above are senior unsecured and have no financial covenants.
EURm
Amortized cost
Level 1
Level 2
Level 3
Level 2
Total
To manage interest rate and foreign exchange risks related to Nokia’s interest-bearing liabilities, Nokia has designated the following
cross-currency swaps as hedges under both fair value hedge accounting and cash flow hedge accounting, and interest rate swaps as hedges
under fair value hedge accounting at 31 December:
Notional (million)
Fair value EURm
Entity
Nokia Corporation
Nokia Corporation
Nokia Corporation
Nokia Corporation
Nokia Corporation
Nokia Corporation
Total
Instrument(1)
Interest rate swaps
Interest rate swaps
Interest rate swaps
Cross-currency swaps
Interest rate swaps
Cross-currency swaps
Currency
Maturity
EUR March 2024
EUR
May 2025
EUR March 2026
June 2027
USD
May 2028
EUR
May 2039
USD
2022
750
500
750
500
500
500
2021
185
–
–
500
–
300
2022
(12)
(17)
(34)
(26)
(36)
(97)
(222)
(1) All cross-currency swaps and interest rate swaps are fixed-to-floating swaps.
Changes in lease liabilities, interest-bearing liabilities and associated derivatives arising from financing activities:
EURm
1 January 2021
Cash flows
Non-cash changes:
Changes in foreign exchange rates
Changes in fair value
Reclassification between long-term
and short-term
Net additions(3)
Other
31 December 2021
Cash flows
Non-cash changes:
Changes in foreign exchange rates
Changes in fair value
Reclassification between long-term
and short-term
Net additions(3)
Other
31 December 2022
Long-term
interest-bearing
liabilities
Short-term
interest-bearing
liabilities
Derivatives held
to hedge long-term
borrowings(1)
Lease liabilities(2)
5 015
(923)
122
(53)
380
–
(4)
4 537
(1)
69
(282)
(84)
–
10
4 249
561
(67)
2
–
(380)
–
–
116
27
1
–
84
–
–
228
154
13
(104)
(10)
–
–
–
53
7
(57)
243
–
–
–
246
910
(226)
36
–
–
296
(7)
1 009
(217)
8
–
–
242
–
1 042
2021
–
–
–
(7)
–
(46)
(53)
Total
6 640
(1 203)
56
(63)
–
296
(11)
5 715
(184)
21
(39)
–
242
10
5 765
(1) Includes derivatives designated in fair value and cash flow hedge accounting relationships as well as derivatives not designated in hedge accounting relationship but hedging identifiable long-term
borrowing exposure.
(2) Includes non-current and current lease liabilities.
(3) Net additions comprise new lease contracts as well as modifications and remeasurements of existing lease contracts.
2022
Other non-current financial investments
Other non-current financial assets
Non-current interest-bearing
financial investments
Other current financial assets
Derivative assets
Trade receivables
Current interest-bearing financial
investments
Cash and cash equivalents
Total financial assets
Long-term interest-bearing liabilities
Other long-term financial liabilities
Short-term interest-bearing liabilities
Other short-term financial liabilities
Derivative liabilities
Discounts without
performance obligations
Trade payables
Total financial liabilities
–
183
697
296
–
–
1 447
4 176
6 799
4 249
–
228
75
–
539
4 730
9 821
5
–
–
–
–
–
–
–
5
–
–
–
–
–
–
–
–
–
91
–
–
239
–
1 633
1 291
3 254
–
–
–
–
496
–
–
496
823
–
–
–
–
–
–
–
823
–
48
–
502
–
–
–
550
–
27
–
36
–
5 549
–
–
5 612
–
–
–
–
–
–
–
–
828
301
697
332
239
5 549
3 080
5 467
16 493
4 249
48
228
577
496
539
4 730
10 867
Total
828
301
659
332
239
5 549
3 080
5 467
16 455
4 230
48
228
577
496
539
4 730
10 848
EURm
Amortized cost
Level 1
Level 2
Level 3
Level 2
Total
Total
Carrying amounts
Fair value(1)
Fair value through profit or loss
Fair value
through other
comprehensive
income(2)
2021
Other non-current financial investments
Other non-current financial assets
Other current financial assets
Derivative assets
Trade receivables
Current interest-bearing
financial investments
Cash and cash equivalents
Total financial assets
Long-term interest-bearing liabilities
Other long-term financial liabilities
Short-term interest-bearing liabilities
Other short-term financial liabilities
Derivative liabilities
Discounts without
performance obligations
Trade payables
Total financial liabilities
–
130
115
–
–
526
4 627
5 398
4 537
–
116
–
–
479
3 679
8 811
8
–
–
–
–
–
–
8
–
–
–
–
–
–
–
–
–
101
–
200
–
2 051
2 064
4 416
–
–
–
–
240
–
–
240
750
–
–
–
–
–
–
750
–
68
–
522
–
–
–
590
–
94
21
–
5 382
–
–
5 497
–
–
–
–
–
–
–
–
758
325
136
200
5 382
2 577
6 691
16 069
4 537
68
116
522
240
479
3 679
9 641
758
325
136
200
5 382
2 577
6 691
16 069
4 775
68
116
522
240
479
3 679
9 879
(1) The following fair value measurement methods are used for items not carried at fair value: The fair values of long-term interest-bearing liabilities, including current part, are primarily based on
publicly available market information (level 2). The fair values of other assets and liabilities, including loan receivables and loans payable, are primarily based on discounted cash flow analysis (level 2).
The fair value is estimated to equal the carrying amount for short-term financial assets and financial liabilities due to limited credit risk and short time to maturity. Refer to Note 2, Significant
accounting policies.
(2) No financial instruments measured at fair value through other comprehensive income are categorized in fair value hierarchy level 1 or level 3.
168
NOKIA IN 2022
NOKIA IN 2022
169
Financial statements Notes to consolidated financial statements
continued
Lease liabilities are not included in the fair value of financial instruments.
22. Derivative and firm commitment assets and liabilities
The level 1 category includes financial assets and liabilities measured in whole by reference to published quotes in an active market. A financial
instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, and those prices
represent actual and regularly occurring market transactions on an arm’s-length basis. This category includes only exchange traded products.
The level 2 category includes financial assets and liabilities measured using a valuation technique based on assumptions that are supported
by prices from observable current market transactions. These include assets and liabilities with fair values based on publicly available market
information, financial assets with fair values based on broker quotes and assets that are valued using Nokia’s own valuation models where
material assumptions are market observable. The majority of Nokia’s cash equivalents, current interest-bearing financial investments,
over-the-counter derivatives, trade receivables and certain other financial assets are included in this category.
The level 3 financial assets category includes a large number of investments in unlisted equities and unlisted venture funds, including
investments managed by NGP Capital which specializes in growth-stage investing. The fair value of level 3 investments is determined using one
or more valuation techniques where the use of the market approach generally consists of using comparable market transactions, while the use
of the income approach generally consists of calculating the net present value of expected future cash flows. For unlisted funds, the selection
of appropriate valuation techniques by the fund managing partner may be affected by the availability and reliability of relevant inputs. In some
cases, one valuation technique may provide the best indication of fair value while in other circumstances multiple valuation techniques may
be appropriate.
The inputs generally considered in determining the fair value of level 3 investments include the original transaction price, recent transactions
in the same or similar instruments, completed or pending third-party transactions in the underlying investment or comparable issuers,
subsequent rounds of financing, recapitalizations or other transactions undertaken by the issuer, offerings in the equity or debt capital markets,
and changes in financial ratios or cash flows, adjusted as appropriate for liquidity, credit, market and/or other risk factors. The fair value may be
adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the managing partner in the absence of
market information.
The level 3 investments are remeasured at each reporting date taking into consideration any changes in estimates, projections and
assumptions, as well as any changes in economic and other relevant conditions. Level 3 investments include approximately 50 separate venture
funds investing in hundreds of individual companies in various sectors and geographies, focusing on 5G, digital health, software and enterprise
sectors. Hence, specific estimates and assumptions used by managing partners in the absence of observable inputs do impact the fair value
of individual investments, but no individual input has a significant impact on the aggregated fair value of level 3 investments.
Level 3 financial liabilities include a conditional obligation to China Huaxin as part of the Nokia Shanghai Bell definitive agreements where China
Huaxin obtained the right to fully transfer its ownership interest in Nokia Shanghai Bell to the Group in exchange for a future cash settlement.
The fair value of the liability is measured based on the expected future cash settlement. The measurement of the financial liability involves
estimation of the option exercise price and the distribution of excess cash balances upon exercise. Unobservable valuation inputs include
certain financial performance metrics of Nokia Shanghai Bell. No individual input has a significant impact on the total fair value of the level 3
financial liability. Refer to Note 30, Significant partly-owned subsidiaries.
Reconciliation of the opening and closing balances of level 3 financial assets and liabilities:
EURm
1 January 2021
Net gains/(losses) in income statement
Acquisitions through business combination
Additions(1)
Deductions(1)
Transfers out of level 3
Other movements
31 December 2021
Net gains in income statement
Additions(1)
Deductions(1)
Transfers out of level 3
Other movements
31 December 2022
Level 3 financial
assets
Level 3 financial
liabilities
727
177
–
69
(218)
(7)
2
750
13
101
(39)
(4)
2
823
(439)
(107)
(48)
–
7
–
(3)
(590)
24
–
20
–
(4)
(550)
(1) For level 3 financial assets, additions mainly include capital contributions to venture funds and deductions mainly include distributions from venture funds.
The gains and losses from venture fund and similar investments categorized in level 3 are included in other operating income and expenses.
The gains and losses from other level 3 financial assets and liabilities are recorded in financial income and expenses. A net gain of EUR 23 million
(EUR 85 million in 2021) related to level 3 financial instruments held at 31 December 2022 was included in the profit and loss during 2022.
EURm
2022
Hedges on net investment in foreign subsidiaries
Foreign exchange forward contracts
Cash flow hedges
Foreign exchange forward contracts
Currency options bought
Fuel hedges
Fair value hedges
Interest rate swaps
Foreign exchange forward contracts
Firm commitments
Cash flow and fair value hedges(3)
Cross-currency swaps
Derivatives not designated in hedge accounting relationships carried
at fair value through profit and loss
Foreign exchange forward contracts
Currency options bought
Embedded derivatives(4)
Other derivatives
Total
2021
Hedges on net investment in foreign subsidiaries
Foreign exchange forward contracts
Cash flow hedges
Foreign exchange forward contracts
Currency options bought
Fair value hedges
Interest rate swaps
Foreign exchange forward contracts
Firm commitments
Cash flow and fair value hedges(3)
Cross-currency swaps
Derivatives not designated in hedge accounting relationships carried
at fair value through profit and loss
Foreign exchange forward contracts
Currency options bought
Other derivatives
Total
Assets
Liabilities
Fair value(1)
Notional(2)
Fair value(1)
Notional(2)
–
77
2
2
–
19
117
–
86
–
51
2
356
1
28
–
–
22
58
15
74
–
2
200
3 509
1 775
173
33
–
393
1 842
–
5 625
18
2 495
5
15 868
1 568
1 521
7
185
577
2 069
265
6 432
10
25
12 659
(9)
(30)
–
–
(99)
(163)
(28)
(123)
(72)
–
–
–
(524)
(11)
(47)
–
–
(80)
(11)
(68)
(23)
–
–
(240)
1 103
1 034
–
–
2 500
1 981
384
938
6 968
–
–
–
14 908
1 394
1 571
–
–
2 182
397
441
6 390
–
–
12 375
(1) Included in other current financial and firm commitment assets and other financial and firm commitment liabilities in the consolidated statement of financial position.
(2) Includes the gross amount of all notional values for contracts that have not yet been settled or canceled. The amount of notional value outstanding is not necessarily a measure or indication of market
risk as the exposure of certain contracts may be offset by that of other contracts.
(3) Cross-currency swaps have been designated partly as fair value hedges and partly as cash flow hedges.
(4) Embedded derivatives are related to customer contracts.
170
NOKIA IN 2022
NOKIA IN 2022
171
Financial statements
Notes to consolidated financial statements
continued
23. Share-based payments
In 2022, the share-based payment expense for all equity-based incentive plans amounted to EUR 149 million (EUR 118 million in 2021 and
EUR 76 million in 2020).
Active share-based payment plans by instrument
Performance shares
Restricted shares
1 January 2020
Granted
Forfeited
Vested(2)
31 December 2020
Granted
Forfeited
Vested(2)
31 December 2021
Granted
Forfeited
Vested(2)
31 December 2022
Number of
performance shares
outstanding
at target
Weighted
average grant
date fair value
EUR(1)
91 225 523
38 753 394
(4 752 172)
(25 754 552)
99 472 193
17 749 650
(5 783 031)
(31 611 804)
79 827 008
12 661 300
(2 450 396)
(26 290 064)
63 747 848
2.63
5.11
3.49
Weighted
average grant
date fair value
EUR(1)
3.06
5.05
4.15
Number of
restricted shares
outstanding
3 275 175
3 830 700
(1 100 107)
(1 478 175)
4 527 593
25 046 200
(783 950)
(2 026 150)
26 763 693
32 238 100
(1 695 734)
(2 778 431)
54 527 628
(1) The fair value for the 2019 performance shares and all restricted shares are estimated based on the grant date market price of the Nokia share less the present value of dividends expected to be paid
during the vesting period. The fair value for the 2020, 2021 and 2022 performance shares is estimated based on the dividend-adjusted price of the Nokia share at the end of the performance period
of the plan and the target payout levels.
(2) Vested performance shares at target are multiplied by the confirmed payout (% of target) to calculate the total number of Nokia shares settlement.
Performance shares
In 2022, Nokia had outstanding Performance shares from grants made in 2019, 2020, 2021 and 2022. Shares granted under the 2019
Performance Share Plan vested 1 January 2022 and were settled soon thereafter. Starting in 2021, grants made for Performance shares were
targeted on a more limited basis to senior level employees and executives.
The 2020, 2021, and 2022 Performance share grants have a three-year vesting period where Nokia’s actual total shareholder return (“TSR”) is
compared to the target TSR to determine the number of Nokia shares that will be delivered at settlement. TSR is calculated based on the growth
in the Nokia share price adjusted for any dividends resolved during the plan period. The 2020, 2021 and 2022 Performance share grants do not
include a minimum payout guarantee.
Global performance share plans at 31 December 2022:
Plan
2019
2020
2021
2022
Performance shares
outstanding at target
–
34 192 094
16 957 154
12 598 600
Confirmed payout
(% of target)
53
–
–
–
Performance
period
2019-2021
2020-2023
2021-2023
2022-2024
Settlement
year
2022
2023
2024
2025
Restricted shares
In 2022, there were outstanding restricted shares from grants made in 2019, 2020, 2021 and 2022. Starting in 2021, Nokia has granted
restricted shares to selected employees as the primary method of equity compensation. Restricted Shares represent a commitment by
Nokia to deliver Nokia shares to eligible participants at a future point in time, subject to the fulfillment of predetermined service conditions.
Restricted Shares will either vest on the third anniversary of the award or follow a tranche vesting schedule whereby each plan vests in one
or more tranches determined at the award date. The restricted share grants are generally forfeited if the employment relationship with Nokia
terminates prior to vesting of the applicable tranche or tranches.
Employee share purchase plan
Nokia offers a voluntary Employee Share Purchase Plan to its employees. Participating employees make contributions from their net salary
to purchase Nokia shares on a monthly basis during a 12-month savings period. Nokia intends to deliver one matching share for every two
purchased shares the employee holds as of the end of the Plan cycle. In 2022, 5 243 560 matching shares were issued as a settlement to
the participants of the Employee Share Purchase Plan 2021 (4 851 070 matching shares issued under the 2020 Plan in 2021 and 6 340 859
matching shares issued under the 2019 Plan in 2020).
24. Pensions and other post-employment benefits
Defined contribution plans
In 2022, the amount recognized in the consolidated income statement related to defined contribution plans was EUR 241 million
(EUR 223 million in 2021 and EUR 209 million in 2020).
Defined benefit pension plans
Nokia’s most significant defined benefit pension plans are in the United States, Germany, and the United Kingdom. Together, they account for
91% of Nokia’s total defined benefit obligation (91% in 2021) and 90% of Nokia’s total fair value of plan assets (91% in 2021).
The defined benefit obligations, the fair value of plan assets, the effects of the asset ceiling and the net defined benefit balance at 31 December:
EURm
United States, Pension
United States, OPEB
Germany
United Kingdom
Other
Total
2022
2021
Defined
benefit
obligation
(12 340)
(1 615)
(1 957)
(730)
(1 670)
(18 312)
Fair value
of plan assets
17 726
637
1 179
942
2 207
22 691
Effects of
asset ceiling
–
–
–
–
(84)
(84)
Net defined
benefit
balance
5 386
(978)
(778)
212
453
4 295
Defined
benefit
obligation
(14 892)
(2 015)
(2 630)
(1 235)
(1 932)
(22 704)
Fair value
of plan assets
20 987
759
1 295
1 652
2 435
27 128
Effects of
asset ceiling
–
–
–
–
(92)
(92)
Net defined
benefit
balance
6 095
(1 256)
(1 335)
417
411
4 332
United States
Nokia has significant defined benefit pension plans and a significant post-employment welfare benefit plan (OPEB) providing post-employment
healthcare benefits and life insurance coverage in the United States.
Defined Benefit Pension Plans
The defined benefit pension plans include both traditional service-based programs and cash-balance plans. Salaried, non-union-represented
employees are covered by a cash-balance program. All other legacy programs, including legacy service-based programs, were frozen by
31 December 2009. For former employees who, when actively employed, were represented by a union, Nokia maintained two defined benefit
pension plans, both of which are traditional service-based programs. On 31 December 2021, these two plans were merged.
Other Post-Employment Benefit Plan
The post-employment plan provides welfare benefits for certain retired former employees. Pursuant to an agreement with the Communications
Workers of America (CWA) and the International Brotherhood of Electrical Workers (IBEW) unions, Nokia provides post-employment healthcare
benefits and life insurance coverage for employees formerly represented by these two unions. That agreement was renewed in 2020 and the
contract expires on 31 December 2027.
Germany
Nokia maintains two primary plans in Germany which cover the majority of active employees: the cash-balance plan Beitragsorientierter
Altersversorgungs Plan (BAP) for the Group’s former Nokia employees and a similar cash-balance program (AVK Basis-/Matchingkonto) for the
Group’s former Alcatel-Lucent employees. Individual benefits are generally dependent on eligible compensation levels, ranking within the Group
and years of service. These plans are partially funded defined benefit pension plans, the benefits being subject to a minimum return guaranteed
by the Group. The funding vehicle for the BAP is the NSN Pension Trust e.V. The trust is legally separate from the Group and manages the plan
assets in accordance with the respective trust agreements.
All other plans have been frozen or closed in prior years and replaced by the cash-balance plans. Benefits are paid in annual installments,
as monthly retirement pension, or as a lump sum on retirement in an amount equal to accrued pensions and guaranteed interest.
United Kingdom
Nokia maintains one primary plan in the UK, “Nokia Retirement Plan for former NSN & ALU employees”, which is the result of the 2019 merger of
the legacy Nokia plan where the plan was merged and members’ benefits were transferred to the legacy Alcatel-Lucent plan. The combined plan
consists of both money purchase sections with Guaranteed Minimum Pension (GMP) underpin and final salary sections. All final salary sections
are closed to future benefit accrual: the legacy Nokia plan closed on 30 April 2012 and the legacy Alcatel-Lucent plan on 30 April 2018. Individual
benefits for final salary sections are dependent on eligible compensation levels and years of service. For the money purchase sections with
GMP underpin, individual benefits are dependent on the greater of the value of GMP at retirement date or the pension value resulting from the
individual’s invested funds. Nokia engages the services of an external trustee service provider to manage all investments for the combined
pension plan.
172
NOKIA IN 2022
NOKIA IN 2022
173
Financial statements Notes to consolidated financial statements
continued
Impact on the consolidated financial statements
Movements in the defined benefit obligation, fair value of plan assets and the impact of the asset ceiling
The movements in the present value of the defined benefit obligation for the years ended 31 December:
EURm
1 January
Current service cost
Interest expense
Past service cost
Settlements
Total
Remeasurements:
(Loss)/gain from change in
demographic
assumptions
Gain/(loss) from change in
financial assumptions
Experience (loss)/gain
Total
Translation differences
Contributions from plan
participants
Benefits paid
Other
Total
31 December
Weighted average duration
of the defined benefit
obligation (in years)
2022
2021
United States
pension
United States
OPEB
(14 892)
(113)
(363)
–
–
(476)
(2 015)
–
(50)
–
–
(50)
Other
pension
(5 797)
(92)
(94)
2
54
(130)
Total
(22 704)
(205)
(507)
2
54
(656)
United States
pension
United States
OPEB
(15 340)
(106)
(308)
(5)
–
(419)
(2 039)
–
(41)
–
–
(41)
Other
pension
(6 122)
(90)
(61)
22
38
(91)
Total
(23 501)
(196)
(410)
17
38
(551)
–
(6)
2
(4)
(7)
6
(12)
(13)
2 689
(159)
2 530
(869)
–
1 367
–
498
(12 340)
398
(12)
380
(114)
(59)
253
(10)
70
(1 615)
1 447
(149)
1 300
54
(35)
240
11
270
(4 357)
4 534
(320)
4 210
(929)
(94)
1 860
1
838
(18 312)
640
75
708
(1 184)
–
1 343
–
159
(14 892)
82
(1)
87
(157)
(71)
219
(13)
(22)
(2 015)
267
(44)
211
(135)
(27)
240
127
205
(5 797)
989
30
1 006
(1 476)
(98)
1 802
114
342
(22 704)
7.6
8.7
9.3
8.1
9.1
10.1
12.6
10.1
Present value of obligations includes EUR 14 330 million (EUR 16 788 million in 2021) of wholly funded obligations, EUR 3 009 million
(EUR 4 723 million in 2021) of partly funded obligations and EUR 973 million (EUR 1 193 million in 2021) of unfunded obligations.
The movements in the fair value of plan assets for the years ended 31 December:
2022
2021
EURm
1 January
Interest income
Administrative expenses and
interest on asset ceiling
Settlements
Total
Remeasurements:
Return on plan assets,
excluding amounts
included in interest
income
Total
Translation differences
Contributions:
Employers
Plan participants
Benefits paid
Section 420 Transfer(1)
Other
Total
31 December
United States
pension
United States
OPEB
20 987
517
(18)
–
499
(3 577)
(3 577)
1 271
28
–
(1 367)
(117)
2
(183)
17 726
759
18
–
–
18
(110)
(110)
38
9
59
(253)
117
–
(30)
637
Other
pension
5 382
87
(5)
(44)
38
(959)
(959)
(66)
47
35
(138)
–
(11)
(133)
4 328
Total
27 128
622
(23)
(44)
555
(4 646)
(4 646)
1 243
84
94
(1 758)
–
(9)
(346)
22 691
United States
pension
United States
OPEB
19 869
411
(16)
–
395
760
760
1 625
25
–
(1 343)
(348)
4
(37)
20 987
459
12
–
–
12
47
47
50
(6)
71
(219)
348
(3)
241
759
Other
pension
5 360
56
(5)
(42)
9
46
46
159
60
27
(147)
–
(131)
(33)
5 382
(1) Section 420 Transfer. Refer to Future cash flows section below.
The movements in the impact of the asset ceiling limitation for the years ended 31 December:
EURm
1 January
Interest expense
Remeasurements:
Change in asset ceiling,
excluding amounts
included in interest
expense
Translation differences
31 December
Net balances at 31 December:
2022
2021
United States
pension
United States
OPEB
–
–
–
–
–
–
–
–
–
–
Other
pension
(92)
–
12
(4)
(84)
Total
(92)
–
12
(4)
(84)
United States
pension
United States
OPEB
Other
pension
(1 125)
(22)
1 198
(51)
–
–
–
–
–
–
(70)
–
(17)
(5)
(92)
2022
2021
EURm
31 December
Consisting of:
United States
pension
United States
OPEB
5 386
(978)
Net Pension Assets
Net Pension Liabilities
5 658
(272)
–
(978)
Other
pension
(113)
1 096
(1 209)
Total
4 295
6 754
(2 459)
United States
pension
United States
OPEB
6 095
(1 256)
6 422
(327)
–
(1 256)
Other
pension
(507)
1 318
(1 825)
Total
25 688
479
(21)
(42)
416
853
853
1 834
79
98
(1 709)
–
(130)
171
27 128
Total
(1 195)
(22)
1 181
(56)
(92)
Total
4 332
7 740
(3 408)
174
NOKIA IN 2022
NOKIA IN 2022
175
Financial statements
Notes to consolidated financial statements
continued
Asset ceiling limitation
Nokia may recognize the surplus of a pension plan to the amount of economic benefit that the entity can realize, either through a refund or
as a reduction in future contributions. In 2021, Nokia modified the terms of all three of its US defined benefit pension plans to provide that,
in the event of a termination of the plan, any remaining balance in the pension fund, after settling plan liabilities, shall be distributed to Nokia.
As a result of the adoption of this modification, Nokia recognized a reduction of EUR 1 369 million in the effect of the asset ceiling in 2021.
Movements in asset ceiling limitation are recognized directly in the consolidated statement of comprehensive income, excluding amounts
included in interest expense. In 2022, Nokia recognized an asset ceiling limitation in the amount of EUR 84 million (EUR 92 million in 2021).
Recognized in the income statement
Recognized in the consolidated income statement for the years ended 31 December:
EURm
Current service cost(1)
Past service cost(1)
Net interest(2)
Settlements(1)
Total
(1) Included in operating expenses within the consolidated income statement.
(2) Included in financial expenses within the consolidated income statement.
Recognized in other comprehensive income
Recognized in other comprehensive income for the years ended 31 December:
EURm
Return on plan assets, excluding amounts included in interest income
(Loss)/gain from change in demographic assumptions
Gain/(loss) from change in financial assumptions
Experience (loss)/gain
Change in asset ceiling, excluding amounts included in interest expense
Total
2022
205
(2)
(92)
(10)
101
2022
(4 646)
(4)
4 534
(320)
12
(424)
2021
196
(17)
(26)
4
157
2021
853
(13)
989
30
1 181
3 040
2020
211
(63)
–
5
153
2020
2 476
288
(2 007)
100
(233)
624
Actuarial assumptions and sensitivity analysis
Actuarial assumptions
Assumptions regarding future mortality are set based on actuarial advice in accordance with published statistics and experience in each country.
The discount rates and mortality tables used for the significant plans:
United States
Germany
United Kingdom(1)
Total weighted average for all countries
(1) Tables are adjusted with 1.5% long-term rate of improvement.
Discount rate %
Mortality table
2022
4.9
3.7
4.8
4.7
2021
2.4
0.9
1.9
2.2
2022
Pri–2012 w/MP–2020
mortality projection scale
Heubeck 2018G
CMI 2021
The principal actuarial weighted average assumptions used for determining the defined benefit obligation and sensitivity of the defined benefit
obligation to changes in these assumptions:
Discount rate for determining present values
Pension growth rate
Inflation rate
Life Expectancy
2022
4.7%
2.2%
2.1%
87-89 years
2021
2.2%
0.4%
1.8%
87-88 years
Change in
assumption
1.0%
1.0%
1.0%
1 year
Increase in
assumption(1)
Decrease in
assumption(1)
EURm
1 319
(261)
(235)
(758)
EURm
(1 541)
218
206
705
(1) Positive movement indicates a reduction in the defined benefit obligation; a negative movement indicates an increase in the defined benefit obligation.
Sensitivity analysis
When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions, the present value of the defined benefit
obligation is calculated using the projected unit credit method. The sensitivity analyses are based on a change in an assumption while holding
all other assumptions constant and may not be representative of the actual impact of changes. If more than one assumption is changed
simultaneously, the combined impact of changes would not necessarily be the same as the sum of the individual changes. If the assumptions
change to a different level compared with that presented, the effect on the defined benefit obligation may not be linear. Increases and
decreases in the principal assumptions, which are used in determining the defined benefit obligation, do not have a symmetrical effect on the
defined benefit obligation primarily due to the compound interest effect created when determining the net present value of the future benefit.
Investment strategies
The overall pension investment objective of Nokia is to preserve or enhance the defined benefit pension plans’ funded status through the
implementation of an investment strategy that maximizes return within the context of minimizing funded status risk. In formulating the asset
allocation for the plans, multiple factors are considered, including, but not limited to, the long-term risk and return expectations for a variety
of asset classes as well as current and multi-year projections of the defined benefit pension plans’ demographics, benefit payments,
contributions and funded status. Local trustee boards are responsible for conducting Asset-Liability Management (ALM) studies, when
appropriate; overseeing the investment of plan assets; and monitoring and managing associated risks under company oversight and in
accordance with local law. The results of the ALM framework are implemented on a plan level.
Nokia’s pension investment managers may use derivative financial instruments including futures contracts, forward contracts, options and
interest rate swaps to manage market risk. The performance and risk profile of investments is regularly monitored on a standalone basis as well
as in the broader portfolio context. One risk is a decline in the plan’s funded status as a result of the adverse performance of plan assets and/or
defined benefit obligations. The application of the ALM study focuses on minimizing such risks.
Disaggregation of plan assets
EURm
Equity securities
Fixed income securities
Insurance contracts
Real estate
Short-term investments
Private equity and other
Total
2022
2021
Quoted
1 086
16 070
–
–
482
93
17 731
Unquoted
–
164
790
1 297
–
2 709
4 960
Total
1 086
16 234
790
1 297
482
2 802
22 691
%
5
71
4
6
2
12
100
Quoted
1 359
18 732
–
–
1 646
107
21 844
Unquoted
–
164
981
1 224
–
2 915
5 284
Total
1 359
18 896
981
1 224
1 646
3 022
27 128
%
5
70
4
4
6
11
100
United States plan assets
The majority of Nokia’s United States pension plan assets are held in a master pension trust. The OPEB plan assets are held in two separate
trusts. The Pension & Benefits Investment Committee formally approves the target allocation ranges every few years on the completion of the
ALM study by external advisors and internal investment management. The overall United States pension plan asset portfolio, at 31 December
2022, reflects a balance of investments split of approximately 20/80 between equity, including alternative investments for this purpose, and
fixed income securities.
Most short-term investments including cash, equities and fixed-income securities have quoted market prices in active markets. Equity securities
represent investments in equity funds and direct investments, which have quoted market prices in an active market. Fixed income securities
represent direct investments in government and corporate bonds, as well as investments in bond funds, which have quoted market prices in
an active market. Insurance contracts are customary pension insurance contracts structured under domestic law in the respective countries.
Real estate investments are investments in commercial properties or real estate funds, which invest in a diverse range of real estate properties.
Short-term investments are liquid assets or cash, which are being held for a short period of time, with the primary purpose of controlling the
tactical asset allocation. Private equity net asset values (NAVs) are determined by the asset managers based on inputs such as operating results,
discounted future cash flows and market based comparable data. Assets invested in alternative asset classes such as private equity, real estate
and absolute return, are measured using latest available valuations provided by the asset managers, reviewed by Nokia, and adjusted for
subsequent cash flows.
176
NOKIA IN 2022
NOKIA IN 2022
177
Financial statements Notes to consolidated financial statements
continued
Future cash flows
Contributions
Group contributions to the pension and other post-employment benefit plans are made to facilitate future benefit payments to plan
participants. The funding policy is to meet minimum funding requirements as set forth in the employee benefit and tax laws, as well as any such
additional amounts as Nokia may determine appropriate. Contributions are made to benefit plans for the sole benefit of plan participants.
Employer contributions expected to be paid in 2023 total EUR 79 million.
United States
Funding methods
Funding requirements for the three United States qualified defined benefit pension plans are determined by the applicable statutes, namely the
Employee Retirement Income Security Act of 1974 (ERISA), the Internal Revenue Code of 1986, and regulations issued by the Internal Revenue
Service (IRS). In determining funding requirements, ERISA allows assets to be either market value or an average value over a period of time; and
liabilities to be based on spot interest rates or average interest rates over a period of time. For the non-represented, represented and formerly
represented defined benefit pension plans, Nokia does not foresee any future funding requirement for regulatory funding purposes, given the
plans’ asset allocation and the level of assets compared to liabilities.
Post-employment healthcare benefits for both non-represented and formerly union represented retirees are capped for those who retired
on or before 1 March 1990. The benefit obligation associated with this group of retirees is 98% of the total United States retiree healthcare
obligation at 31 December 2022. The US government’s Medicare program is the primary payer for those aged 65 and older, comprising almost
all uncapped retirees.
Section 420 transfers
Section 420 of the U.S. Internal Revenue Code (Section 420) allows for the transfer of pension assets in excess of specified thresholds above
the plan’s funding obligation (excess pension assets) to a retiree health benefits account, a retiree life insurance account, or both, maintained
within the pension plan and to use the assets in such accounts to pay for, or to reimburse the employer for the cost of providing, applicable
health or life insurance benefits, each as defined in Section 420, for retired employees, and with respect to health benefits, their spouses
and dependents. Employers making such transfers are required to continue to provide healthcare benefits or life insurance coverage, as the
case may be, for a certain period of time (cost maintenance period) at levels prescribed by regulations. Pursuant to Section 420, Nokia has
transferred during 2022 EUR 117 million (EUR 348 million in 2021) in excess pension assets to cover the cost of retiree healthcare benefits
and retiree life insurance coverage. Section 420 is currently set to expire on 31 December 2032.
Benefit payments
The following table summarizes expected benefit payments from the defined benefit pension plans and other post-employment benefit plans
until 2032. Actual benefit payments may differ from expected benefit payments.
EURm
2023
2024
2025
2026
2027
2028-2032
US Pension
Occupational
243
226
213
200
186
747
Management
1 282
1 012
963
916
869
3 652
US OPEB
Other countries
Total
Supplemental
plans
27
26
25
25
24
105
Formerly union
represented
100
74
67
58
51
348
Non-union
represented
58
59
60
60
60
303
297
288
291
294
292
1 563
2 007
1 685
1 619
1 553
1 482
6 718
Benefits are paid from plan assets where there is sufficient funding available to the plan to cover the benefit obligation. Any payments in excess
of the plan assets are paid directly by Nokia. Direct benefit payments expected to be paid in 2023 total EUR 125 million.
25. Deferred revenue and other liabilities
Non-current
EURm
Deferred revenue(1)
Salaries, wages and social charges
Other
Total
Current
EURm
Deferred revenue(1)
Salaries, wages and social charges
VAT and other indirect taxes
Discounts without performance obligations
Accrued expenses related to customer projects
Other
Total
2022
–
46
57
103
2022
–
1 669
328
539
466
617
3 619
2021
305
46
85
436
2021
155
1 780
349
479
517
660
3 940
(1) In 2021, non-current deferred revenue of EUR 305 million and current deferred revenue of EUR 155 million related to an IP licensing contract which was determined to be a completed contract as
defined in the transition guidance of IFRS 15, Revenue from Contracts with Customers. In December 2022, the licensee exercised a contractual option to extend the license agreement for the
remaining life of the licensed patents, making it in substance a perpetual license. As a result, Nokia has recognized all the remaining revenue related to the License Agreement during the year. Refer
to Note 6, Revenue recognition.
Other accruals include accrued logistics, research and development, IT, interest and royalty expenses, as well as various amounts that are
individually insignificant.
26. Provisions
EURm
1 January 2022
Charged to income statement:
Additions
Reversals
Total charged to income statement
Utilized during year(1)
Translation differences and other
31 December 2022
Non-current
Current
Restructuring
Warranty
312
254
125
–
125
(245)
1
193
63
130
156
(57)
99
(132)
–
221
20
201
Litigation and
Environmental(2)
251
61
(12)
49
(56)
9
253
153
100
Project
losses
235
26
(2)
24
(52)
–
207
138
69
Other
517
284
(98)
186
(134)
(8)
561
248
313
Total
1 569
652
(169)
483
(619)
2
1 435
622
813
(1) The utilization of restructuring provision includes items transferred to accrued expenses, of which EUR 58 million remained in accrued expenses at 31 December 2022.
(2) Environmental provision was EUR 155 million at 31 December 2022 (EUR 149 million at 31 December 2021).
Restructuring provision
Nokia provides for the estimated cost to restructure when a detailed formal plan of restructuring has been completed, approved by management,
and announced. Restructuring costs consist primarily of personnel restructuring charges. The other main components are costs associated
with exiting real estate locations, and costs of terminating certain other contracts directly linked to the restructuring. At 31 December 2022,
the restructuring provision amounted to EUR 193 million including personnel and other restructuring costs. The provision consists primarily
of amounts related to the announcements made by Nokia on 25 October 2018 and 16 March 2021. The majority of the restructuring cash
outflows is expected to occur over the next two years.
Warranty provision
Nokia provides for the estimated liability to repair or replace products under standard warranty at the time revenue is recognized. The provision
estimate is based on historical experience of the level of repairs and replacements. Cash outflows related to the warranty provision are generally
expected to occur within the next 18 months.
Litigation and environmental provisions
Nokia provides for the estimated future settlements related to legal proceedings based on the probable outcome of the claims. Nokia also
provides for environmental remediation when Nokia becomes obliged, legally or constructively, to rectify environmental damage relating to soil,
groundwater, surface water or sediment contamination. Cash outflows related to the litigation and environmental liabilities are inherently
uncertain and generally occur over several periods. For a presentation of legal matters potentially affecting Nokia, refer to Note 27,
Commitments, contingencies and legal proceedings.
178
NOKIA IN 2022
NOKIA IN 2022
179
Financial statements
Notes to consolidated financial statements
continued
Project loss provision
Nokia provides for onerous contracts based on the lower of the expected cost of fulfilling the contract and the expected cost of terminating the
contract. An onerous contract is a contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic
benefits expected to be received under it. Project loss provisions relate to contracts with customers and are evaluated at a contract level.
The majority of the project loss provision utilization is expected to occur over the next two years.
Other provisions
Nokia provides for various legal and constructive obligations such as material liability, indirect tax provisions, costs associated with exiting
the Russian market, divestment-related provisions, employee-related provisions other than restructuring provisions and asset retirement
obligations. Cash outflows related to other provisions are generally expected to occur over the next two years.
27. Commitments, contingencies and legal proceedings
Contractual obligations
EURm
Purchase obligations at 31 December 2022(1)
5 308
Within 1 year Between 1 and 3 years Between 3 and 5 years
More than 5 years
391
118
79
Total
5 896
(1) Includes inventory purchase obligations, service agreements and outsourcing arrangements.
Additionally, Nokia has committed lease contracts that had not yet commenced at 31 December 2022. The future lease payments for these
non-cancellable lease contracts are EUR 31 million within five years and EUR 192 million thereafter.
At 31 December 2022, Nokia has potential (undiscounted) future lease payments of EUR 807 million (EUR 718 million in 2021) relating to
extension options not expected to be exercised and EUR 15 million (EUR 48 million in 2021) relating to termination options expected to be
exercised that are not included in the lease liability.
Guarantees and other contingent commitments
EURm
Contingent liabilities on behalf of Group companies
Guarantees issued by financial institutions
Commercial guarantees(1)
Non-commercial guarantees
Corporate guarantees(2)
Commercial guarantees(1)
Non-commercial guarantees
Financing commitments
Customer finance commitments(3)
Venture fund commitments(4)
2022
2021
1 238
538
504
32
26
433
1 281
442
457
35
21
137
(1) In commercial guarantees, Nokia reports guarantees that are issued in the normal course of business to Nokia’s customers for the performance of Nokia’s obligations under supply agreements,
including tender bonds, performance bonds and warranty bonds.
(2) In corporate guarantees, Nokia reports guarantees with primary obligation that have been issued to Nokia’s customers and other third parties.
(3) Customer finance commitments are available under loan facilities negotiated with customers. Availability of the facility is dependent upon the borrower’s continuing compliance with the agreed
financial and operational covenants, and compliance with other administrative terms of the facility. The loan facilities are primarily available to fund capital expenditure relating to purchases of network
infrastructure equipment and services. Refer to Note 32, Financial risk management.
(4) As a limited partner in NGP Capital and certain other funds making technology-related investments, Nokia is committed to capital contributions and entitled to cash distributions according to the
respective partnership agreements and underlying fund activities. In January 2022, Nokia agreed on capital commitment of USD 400 million to NGP Capital’s Fund V. The fund’s emphasis on companies
developing emerging 5G use cases for industrial and business transformation aligns closely with Nokia’s technology leadership vision and its efforts to maximize the value shift towards cloud.
Per industry standard practice, the capital will be called throughout the 10 year lifecycle of the fund.
The amounts in the table above represent the maximum principal amount of commitments and contingencies, and these amounts do not
reflect management’s expected outcomes.
Legal matters
A number of Group companies are and will likely continue to be subject to various legal proceedings and investigations that arise from time to
time, including proceedings regarding intellectual property, product liability, sales and marketing practices, commercial disputes, employment
and wrongful discharge, antitrust, securities, health and safety, environmental, tax, international trade, privacy matters and compliance. As a
result, Nokia may incur substantial costs that may not be covered by insurance and could affect business and reputation. While management
does not expect any of the legal proceedings it is currently aware of to have a material adverse effect on Nokia’s financial position, litigation is
inherently unpredictable and Nokia may in the future incur judgments or enter into settlements that could have a material adverse effect on its
profitability and cash flows.
Litigation and proceedings
Mass labor litigation in Brazil
Nokia is defending against a number of labor claims in various Brazilian labor courts. Plaintiffs are former employees whose contracts were
terminated after Nokia exited from certain managed services contracts. The claims mainly relate to payments made under, or in connection
with, the terminated labor contracts. Nokia has closed the majority of the court cases through settlement or judgment.
Asbestos litigation in the United States
Nokia is defending approximately 300 asbestos-related matters, at various stages of litigation. The claims are based on premises liability,
products liability, and contractor liability. The claims also involve plaintiffs allegedly diagnosed with various diseases, including but not limited
to asbestosis, lung cancer, and mesothelioma.
Intellectual property rights litigation
Continental
In 2019, Continental Automotive Systems (Continental) brought breach of FRAND (fair, reasonable and non-discriminatory terms) and antitrust
claims against Nokia and others. The antitrust claims were dismissed with prejudice. In 2022, this decision became final after Continental lost on
appeal and reconsideration requests. Continental also brought breach of contract and FRAND-related claims against Nokia in another US court
in 2021. In the beginning of 2023, Nokia’s motion to dismiss was granted in part and denied in part, and the action will proceed on the remaining
claims at this time.
Oppo
In 2021, Nokia commenced patent infringement proceedings against Oppo, OnePlus and Realme in several countries in Asia and Europe. Across
these actions, more than 30 patents are in suit, covering a mix of cellular standards and technologies such as connectivity, user interface and
security. Oppo responded by filing invalidation actions against certain Nokia patents, a number of patent infringement actions against Nokia
equipment in Germany, China and Finland and actions in China against Nokia relating to standard essential patent licensing issues. Nokia has
had multiple patents confirmed as valid and infringed including in Germany, the Netherlands and the UK.
Vivo
In 2022, Nokia commenced patent infringement proceedings against Vivo in Germany and several countries in Asia. Vivo responded by filing a
number of patent infringement actions against Nokia equipment in Germany and China. They also filed an action in China against Nokia relating
to standard essential patent licensing issues.
28. Notes to the consolidated statement of cash flows
EURm
Adjustments for(1)
Depreciation and amortization
Share-based payments
Impairment charges
Restructuring charges(2)
Profit from other non-current financial investments
Profit on sale of property, plant and equipment, net
Share of results of associated companies and joint ventures
Financial income and expenses
Income tax (benefit)/expense
Other operating income and expenses
Total
(1) Includes continuing and discontinued operations.
(2) Adjustments represent the non-cash portion of the restructuring charges recognized in the consolidated income statement.
2022
2021
2020
1 140
149
152
125
(27)
(35)
26
28
(2 030)
26
(446)
1 095
108
40
183
(188)
(59)
(9)
240
273
30
1 713
1 132
76
246
454
(61)
(3)
(26)
167
3 254
28
5 267
180
NOKIA IN 2022
NOKIA IN 2022
181
Financial statements Notes to consolidated financial statements
continued
29. Group companies
The Group’s subsidiaries at 31 December 2022:
Country of incorporation
Finland
Afghanistan
Algeria
Angola
Argentina
Armenia
Australia
Austria
Azerbaijan
Bangladesh
Belarus
Belgium
Bolivia
Bosnia and Herzegovina
Brazil
Bulgaria
Cabo Verde
Cameroon
Canada
Chile
China
Company name
Comptel Communications Oy
Comptel Oy
Nokia Innovations Oy
Nokia Investments Oy
Nokia Solutions and Networks Asset Management Oy
Nokia Solutions and Networks Branch Operations Oy
Nokia Solutions and Networks Oy
Nokia Technologies Oy
Nokia Teknologia Oy
Vertu Holdings Oy
Nokia Siemens Networks Afghanistan LLC
Nokia Algerie Sarl
Alcatel-Lucent Angola, Limitada
Nokia Solutions and Networks Argentina S.A.
Nokia Solutions and Networks CJSC
Nokia Services Pty Limited
Nokia Solutions and Networks Australia Pty Ltd
Radio Frequency Systems Pty Limited
IRIS Telecommunication Austria GmbH
Nokia Solutions and Networks Holding Österreich GmbH
Nokia Solutions and Networks Österreich GmbH
Nokia Solutions and Networks Baku LLC
Nokia Solutions and Networks Bangladesh Limited
Nokia Solutions and Networks LLC
Nokia Bell NV
Nokia Solutions and Networks Bolivia S.A.
Nokia Solutions and Networks d.o.o. Banja Luka
Nokia Solutions and Networks d.o.o., Sarajevo
Alcatel Submarine Networks Brazil Ltda.
Nokia Solutions and Networks do Brasil Telecomunicações Ltda.
RFS Brasil Telecomunicacoes Ltda
Nokia Solutions and Networks EOOD
Alcatel-Lucent Submarine Networks (Cabo Verde), Lda
Societe de Telecommunication Camerounaise–Sotelcam
Nokia Canada Inc.
Nokia Solutions and Networks Chile Ltda.
Alcatel-Lucent Shanghai Bell Information Products Co., Ltd.
Hunan Huanuo Technology Co. Ltd.
Lucent Technologies Investment Co. Ltd.
Lucent Technologies Nanjing Telecommunications Co., Ltd.
Lucent Technologies Qingdao Telecommunications Systems Ltd.
Nokia (Shanghai) Enterprise Management Co., Ltd.
Nokia Networks (Chengdu) Co., Ltd.
Nokia Shanghai Bell Co., Ltd.(1)
Nokia Shanghai Bell Software Co., Ltd.
Nokia Solutions and Networks (Suzhou) Co., Ltd.
Nokia Solutions and Networks (Suzhou) Supply Chain Service Co., Ltd.
Nokia Solutions and Networks Investment (China) Co. Ltd.
Nokia Solutions and Networks System Technology (Beijing) Co., Ltd.
Nokia Technologies (Beijing) Co., Ltd.
RFS Radio Frequency Systems (Shanghai) Co., Ltd.
RFS Radio Frequency Systems (Suzhou) Co., Ltd.
Parent
holding %
–
–
100.0
100.0
–
–
100.0
100.0
100.0
100.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Group ownership
interest %
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
50.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
50.0
100.0
100.0
99.6
100.0
100.0
50.0
50.0
100.0
100.0
51.0
100.0
50.0
50.0
50.0
100.0
100.0
100.0
50.0
100.0
50.0
50.0
Country of incorporation
Company name
Parent
holding %
Group ownership
interest %
Colombia
Costa Rica
Croatia
Czech Republic
Denmark
Dominican Republic
Ecuador
Egypt
El Salvador
Estonia
France
Germany
Greece
Guatemala
Honduras
Hong Kong
Hungary
India
Indonesia
Iran
Nokia Solutions and Networks Colombia Ltda.
Alcatel Centroamerica S.A.
Nokia Costa Rica S.A.
Nokia Solutions and Networks d.o.o.
Nokia Solutions and Networks Czech Republic, s.r.o.
Alcatel Submarine Networks Denmark ApS
Nokia Denmark A/S
Nokia Dominican Republic, S.A.S.
Nokia Solutions and Networks Ecuador S.A.
Nokia Egypt S.A.E.
Nokia El Salvador, S.A. de C.V.
Nokia Solutions and Networks OÜ
Alcatel Lucent
Alcatel Submarine Networks
Alcatel Submarine Networks Marine
Camilec
Evolium
IRIS Telecommunication France
Nokia Networks France
Nokia Participations
Nokia Participations Chine
Nokia Submarine Networks Holding
Radio Frequency Systems France
Alcatel SEL Unterstützungs GmbH
ATG Germany GmbH
IRIS Telecommunication GmbH
Nokia Asset Verwaltungsgesellschaft mbH
Nokia Display Technics GmbH i.L.
Nokia Electronics Bochum GmbH i.L.
Nokia Kunststofftechnik GmbH i.L.
Nokia Solutions and Networks GmbH & Co. KG
Nokia Solutions and Networks International Holding GmbH
Nokia Solutions and Networks Management GmbH
Nokia Technology GmbH
Nokia Unterstützungsgesellschaft GmbH
Radio Frequency Systems GmbH
RFS Holding GmbH
Nokia Solutions and Networks Hellas Single Member S.A.
Nokia Operations de Guatemala, S.A.
Nokia Solutions and Networks Honduras, S.A.
Alcatel Submarine Networks Hong Kong Limited
Nokia Hong Kong Limited
Nokia Shanghai Bell (Hong Kong) Limited
OZ Communications HK Limited
Nokia Solutions and Networks Kft.
Nokia Solutions and Networks TraffiCOM Kft.
C-Dot Alcatel-Lucent Research Centre Private Limited
Comptel Communications India Private Limited
Nokia India Private Limited
Nokia Solutions and Networks India Private Limited
RFS India Telecom Private Limited
P.T. Lucent Technologies Network Systems Indonesia
PT Nokia Solutions and Networks Indonesia
Pishahang Communications Networks Development Company (Private Joint Stock)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100.0
–
–
–
–
–
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
50.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
50.0
50.0
100.0
100.0
100.0
100.0
100.0
50.0
100.0
100.0
99.0
51.0
100.0
100.0
100.0
50.0
100.0
100.0
90.0
182
NOKIA IN 2022
NOKIA IN 2022
183
Financial statements Notes to consolidated financial statements
continued
Country of incorporation
Company name
Parent
holding %
Group ownership
interest %
Country of incorporation
Company name
Parent
holding %
Group ownership
interest %
Ireland
Israel
Italy
Jamaica
Japan
Kazakhstan
Kenya
Kuwait
Lao Peoples
Democratic Republic
Latvia
Lithuania
Malaysia
Mexico
Moldova
Morocco
Myanmar
Netherlands
New Zealand
Nicaragua
Nigeria
Norway
Pakistan
Paraguay
Peru
Philippines
Poland
Portugal
Puerto Rico
Romania
Russia
Nokatus Insurance Company Designated Activity Company (DAC)
Nokia Ireland Limited
Nokia Solutions and Networks Ethernet Services Ltd.
Nokia Solutions and Networks Israel Ltd.
Nokia Solutions and Networks Italia S.p.A.
Nokia Solutions and Networks S.p.A.
RFS Italia SRL
Nokia Jamaica Limited
Nokia Innovations Japan G.K.
Nokia Solutions and Networks Japan G.K.
“Nokia Solutions and Networks Kazakhstan” LLP
Alcatel-Lucent East Africa Limited
Nokia Solutions and Networks Kuwait W.L.L
Nokia Shanghai Bell Lao Sole Co. Ltd.
Nokia Solutions and Networks SIA
UAB Nokia Solutions and Networks
Comptel Communications Sdn Bhd
Nokia Services and Networks Malaysia Sdn. Bhd.
Nokia Operations de México S.A. de C.V.
Radio Frequency Systems de Mexico S.A. de C.V.
“Nokia Solutions and Networks” S.R.L.
Nokia Solutions and Networks Morocco SARL
Nokia Solutions and Networks Myanmar Limited
Alcatel-Lucent RT International B.V.
Alcatel-Lucent Services International B.V.
Nokia Solutions and Networks B.V.
Nokia Solutions and Networks Nederland B.V.
SRA Computer C.V.
Nokia New Zealand Limited
Lucent Technologies Nicaragua, S.A.
Nokia Solutions and Networks Nicaragua S.A.
Alcatel-Lucent Nigeria Limited
Nokia Solutions and Networks Nigeria Ltd.
Alcatel Submarine Networks Norway AS
Nokia Solutions and Networks Norge AS
Alcatel-Lucent Pakistan Limited
Nokia Solutions and Networks Pakistan (Private) Limited
Nokia Paraguay S.A.
Nokia Solutions and Networks Peru S.A.
Comptel Palvelut Philippines Inc.
Lucent Technologies Philippines Inc.
Nokia Shanghai Bell Philippines, Inc.
Nokia Solutions and Networks Philippines, Inc.
Nokia Technology Center Philippines, Inc.
IRIS Telecommunication Poland sp. z o.o.
Nokia Solutions and Networks Sp. z.o.o
Alcatel-Lucent Portugal, S.A.
Nokia Solutions and Networks Portugal S.A.
Nokia Puerto Rico Inc.
Nokia Networks S.R.L.
AO “Nokia Solutions and Networks”
Nokia Training Center
OOO “Nokia Solutions and Networks”
OOO “RTK–Network Technologies”
100.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100.0
100.0
100.0
100.0
100.0
100.0
50.0
100.0
100.0
100.0
100.0
100.0
49.0
50.0
100.0
100.0
100.0
100.0
100.0
50.0
100.0
100.0
100.0
50.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
90.0
100.0
100.0
100.0
100.0
100.0
50.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
99.2
100.0
66.0
100.0
49.0
Saudi Arabia
Senegal
Serbia
Singapore
Slovakia
Slovenia
South Africa
South Korea
Spain
Sri Lanka
Sweden
Switzerland
Taiwan
Tanzania
Thailand
Tunisia
Turkey
Ukraine
United Arab Emirates
United Kingdom
Alcatel-Lucent Saudi Arabia Co., Ltd.
Nokia Arabia Limited
Nokia West and Central Africa SA
Nokia Solutions and Networks Serbia d.o.o. Beograd
Nokia Solutions and Networks Singapore Pte. Ltd.
Radio Frequency Systems (S) Pte Ltd
Nokia Slovakia, A.S.
Nokia Solutions and Networks, telekomunikacijske resitve, d.o.o.
Nokia Solutions and Networks South Africa Pty. Ltd.
Nokia South Africa (Pty) Ltd
Radio Frequency Systems Africa (Pty) Ltd
Nokia Solutions and Networks Korea Ltd.
Nokia Spain, S.A.
Nokia Transformation, Engineering & Consulting Services Spain S.L.U.
Nokia Solutions and Networks Lanka (Private) Limited
Nokia Solutions and Networks AB
Alcatel-Lucent Trade International AG
Nokia Solutions and Networks Schweiz AG
Nokia Solutions and Networks Taiwan Co., Ltd.
Taiwan International Standard Electronics Limited
Nokia Solutions and Networks Tanzania Limited
Lucent Technologies Networks (Thailand) Limited
Nokia (Thailand) Co., Ltd.
Nokia Solutions and Networks CCC
Nokia Solutions and Networks Tunisia SA
Alcatel Lucent Teletas Telekomunikasyon A.S.
IRIS Telekomünikasyon Mühendislik Hizmetleri A.S.
Nokia Solutions Networks Iletisim A.S.
LLC “Nokia Solutions and Networks Ukraine”
Alcatel Lucent Middle East North Africa DMCC
Nokia Solutions and Networks MEA FZ-LLC
Alcatel IP Networks Limited
Alcatel Submarine Networks UK Ltd
Alcatel-Lucent Centro Caribbean Holding Limited
Apertio Ltd.
Comptel Communications Holdings Limited
Comptel Communications Limited
IRIS Service Delivery UK Ltd
Mesaplexx Limited
Nokia Solutions and Networks UK Limited
Nokia Technologies (UK) Limited
Nokia UK Limited
R.F.S. (UK) Limited
STC
Symbian Limited
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100.0
100.0
100.0
100.0
100.0
50.0
100.0
100.0
100.0
69.9
50.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
60.0
100.0
27.0
100.0
100.0
100.0
65.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
50.0
100.0
100.0
184
NOKIA IN 2022
NOKIA IN 2022
185
Financial statements Notes to consolidated financial statements
continued
Country of incorporation
Company name
Parent
holding %
Group ownership
interest %
United States
Uruguay
Uzbekistan
Venezuela
Vietnam
Alcatel Submarine Networks USA Inc.
Alcatel-Lucent International Holdings Inc.
Bell Laboratories Inc.
Elenion Technologies LLC
Intellisync LLC
Lucent Technologies GRL LLC
MRAC, Inc.
Nassau Metals Corporation
Nokia Apps Distribution LLC
Nokia Federal Solutions LLC
Nokia Innovations US LLC
Nokia Investment Management Corporation
Nokia of America Corporation
Nokia US Holdings Inc.
Radio Frequency Systems, Inc.
SAC AE Design Group, Inc.
SAC Wireless of CA, Inc.
SAC Wireless, LLC
Western Electric Company Incorporated
Western Electric International Incorporated
Zyzyx, Inc.
Nokia Uruguay S.A.
Nokia Solutions and Networks Tashkent LLC
Alcatel de Venezuela C.A.
Nokia Solutions and Networks Venezuela C.A.
Alcatel-Lucent Vietnam Limited
Nokia Solutions and Networks Technical Services Vietnam Company Limited
–
–
–
–
100.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
50.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
(1) Nokia Group owns 50% plus one share of Nokia Shanghai Bell Co., Ltd. with China Huaxin, an entity controlled by the Chinese government, holding the remaining ownership interests. Nokia Shanghai Bell
Co., Ltd. is the parent company of the Nokia Shanghai Bell Group. Refer to Note 30, Significant partly-owned subsidiaries.
The Group’s associated companies at 31 December 2022:
Country of incorporation
Finland
Austria
China
Cuba
France
Germany
Hong Kong
Netherlands
Nigeria
Saudi Arabia
United States
Company name
HMD Global Oy
TETRON Sicherheitsnetz Errichtungs-und BetriebsgmbH
Alcatel Shenyang Telecommunication Co., Ltd.
Fujian FUNO Mobile Communication Technology Co.,Ltd
Shanghai Alcatel Network Support Systems Co., Ltd.
Zhejiang Bell Technical Co., Ltd.
Copal, S.A.
Cibair S.A.S.
III - V LAB
Logistics Warehousing Systems GmbH
TD Tech Holding Limited
MobiRail V.O.F.
ITT Nigeria Limited
Nokia Solutions and Networks Al-Saudia Co. Limited
MobileMedia Ideas LLC
Parent
holding %
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Group ownership
interest %
10.0
35.0
27.5
49.0
25.5
20.0
49.0
19.0
40.0
20.0
51.0
50.0
40.0
49.0
40.0
30. Significant partly-owned subsidiaries
Nokia holds an ownership interest of 50% plus one share in Nokia Shanghai Bell’s parent company, Nokia Shanghai Bell Co., Ltd. (NSB), with China
Huaxin Post & Telecommunication Economy Development Center (China Huaxin) holding the remaining ownership interests. Nokia applied
judgment to conclude that it is able to control NSB based on an assessment of various factors including the ability to nominate key management
personnel, decision-making related to the management of NSB operations and Nokia’s exposure to variable returns from NSB.
In 2017, Nokia entered into a contractual arrangement providing China Huaxin with the right to fully transfer its ownership interest in NSB to
Nokia and Nokia with the right to purchase China Huaxin’s ownership interest in NSB in exchange for a future cash settlement. To reflect this,
Nokia derecognized the non-controlling interest balance related to NSB and recognized a financial liability based on the estimated future cash
settlement to acquire China Huaxin’s ownership interest. If the contractual arrangement expires unexercised on 1 July 2023, Nokia will
derecognize the financial liability and record non-controlling interest equal to its share of NSB’s net assets with any difference recorded within
shareholders’ equity.
The measurement of the financial liability is complex as it involves estimation of the option exercise price and the distribution of excess cash
balances upon exercise. In 2022, Nokia recognized EUR 11 million gain (EUR 33 million loss in 2021) in financial income and expenses to reflect
a change in the estimated future cash settlement. At 31 December 2022, the expected future cash settlement amounted to EUR 482 million
(EUR 504 million in 2021).
Financial information for the Nokia Shanghai Bell Group(1):
EURm
Summarized income statement
Net sales(2)
Operating loss
Loss for the year
Loss for the year attributable to:
Equity holders of the parent
Non-controlling interests(3)
Summarized statement of financial position
Non-current assets
Non-current liabilities
Non-current net assets
Current assets(4)
Current liabilities
Current net assets
Net assets(5)
Non-controlling interests(3)
Summarized statement of cash flows
Net cash flows from operating activities
Net cash flows used in investing activities
Net cash flows used in financing activities
Translation differences
Net (decrease)/increase in cash and cash equivalents
2022
2021
1 316
(149)
(148)
(148)
–
487
(129)
358
1 939
(1 185)
754
1 112
–
38
(33)
(4)
(8)
(7)
1 174
(8)
(24)
(24)
–
575
(161)
414
2 144
(1 284)
860
1 274
–
143
0
(82)
67
128
(1) Financial information for the Nokia Shanghai Bell Group is presented before elimination of intercompany transactions with the rest of the Group but after elimination of intercompany transactions
between entities within the Nokia Shanghai Bell Group.
(2) Includes EUR 29 million (EUR 61 million in 2021) net sales to other Group entities.
(3) Based on the contractual arrangement with China Huaxin, Nokia does not recognize any non-controlling interest in NSB.
(4) Includes a total of EUR 725 million (EUR 733 million in 2021) of cash and cash equivalents.
(5) The distribution of the profits of NSB requires the passing of a special resolution by more than two-thirds of its shareholders, subject to a requirement that at least 50% of the after-tax distributable
profits are distributed as dividends each year.
186
NOKIA IN 2022
NOKIA IN 2022
187
Financial statements Notes to consolidated financial statements
continued
31. Related party transactions
Nokia has related party transactions with pension funds, associated companies and joint ventures, and the management and the Board of
Directors. Transactions and balances with companies over which Nokia exercises control are eliminated on consolidation. Refer to Note 2,
Significant accounting policies, and Note 29, Principal Group companies.
Transactions with pension funds
Nokia has borrowings of EUR 37 million (EUR 40 million in 2021) from Nokia Unterstützungsgesellschaft mbH, Nokia’s German pension
fund, a separate legal entity. The loan bears interest at the rate of 6% per annum and its duration is pending until further notice by the loan
counterparties who have the right to terminate the loan with a 90 day notice. The loan is included in short-term interest-bearing liabilities
in the consolidated statement of financial position. For more information on Nokia’s pension plans, refer to Note 24, Pensions and other
post-employment benefits.
Transactions with associated companies and joint ventures
EURm
Sales
Purchases
Trade receivables
Trade payables
Investments in associated companies and joint ventures are individually immaterial.
Management compensation
Compensation information for the President and CEO:
2022
74
(127)
36
(26)
2021
87
(144)
45
(29)
2020
115
(177)
31
(26)
EUR
2022
Pekka Lundmark
2021
Pekka Lundmark
2020
Pekka Lundmark, from 1 August 2020
Rajeev Suri, until 31 July 2020(3)
Base
salary/fee
Cash
incentive
payments
Share-based
payment
expenses(1)
Pension
expenses
Total(2)
1 300 000
2 342 438
5 425 169
406 806
9 474 413
1 300 000
2 975 781
4 263 505
589 873
9 129 159
541 667
759 365
573 068
945 697
1 063 164
1 276 825
211 050
341 591
2 388 949
3 323 478
(1) Represents the expense for all outstanding equity grants recorded during the year.
(2) Additionally, the CEO has received EUR 113 850 (EUR 35 731 in 2021 and EUR 80 244 in 2020) other compensation such as telephone, car, driver, mobility, tax compliance support and medical
insurance.
(3) Upon stepping down from his role as CEO in 2020, Nokia recorded termination benefits, EUR 5 122 317, for Rajeev Suri according to terms of his exit agreement. During 2021, the details of Rajeev Suri’s
exit agreement were revised and an incentive payout factor was finalized, resulting into a credit of EUR 96 201 recorded to the income statement in 2021.
Total remuneration awarded to the Group Leadership Team for their time as members of the Group Leadership Team:
EURm
Short-term benefits
Post-employment benefits(1)
Share-based payments
Termination benefits(2)
Total
2022
17
1
13
1
32
2021
20
2
12
–
34
2020
27
2
9
10
48
(1) The members of the Group Leadership Team participate in the local retirement programs applicable to employees in the country where they reside.
(2) Includes both termination payments and payments made under exceptional contractual arrangements for lapsed equity awards.
Board of Directors’ compensation
The annual remuneration paid to the members of the Board of Directors, as decided by the Annual General Meetings in the respective years:
EUR
Sari Baldauf, Chair
Søren Skou, Vice Chair(4)
Bruce Brown(4)(5)
Thomas Dannenfeldt(4)(6)
Lisa Hook(6)
Jeanette Horan(5)(6)
Edward Kozel(5)(6)
Elizabeth Nelson
Thomas Saueressig(5)
Carla Smits-Nusteling(6)
Olivier Piou
Kari Stadigh
Kai Öistämö(5)
Total
Annual
fee(1)
EUR
440 000
210 000
210 000
200 000
185 000
195 000
205 000
–
180 000
200 000
–
–
180 000
2 205 000
2022
Meeting
fees(2)
EUR
–
9 000
17 000
9 000
7 000
–
12 000
–
7 000
9 000
–
–
5 000
75 000
Shares
received(3)
number
36 217
17 285
17 285
16 462
15 227
16 050
16 874
–
14 816
16 462
–
–
14 816
Annual
fee(1)
EUR
440 000
175 000
200 000
185 000
–
185 000
195 000
–
–
190 000
–
200 000
–
1 770 000
2021
Meeting
fees
EUR
–
7 000
7 000
7 000
–
7 000
7 000
–
–
9 000
–
7 000
–
51 000
Shares
received(3)
number
43 711
17 385
19 868
18 378
–
18 378
19 372
–
–
18 875
–
19 868
–
Annual
fee(1)
EUR
440 000
160 000
190 000
175 000
–
175 000
195 000
175 000
–
190 000
–
185 000
–
1 885 000
2020
Meeting
fees
EUR
5 000
11 000
22 000
–
–
20 000
17 000
17 000
–
17 000
11 000
11 000
–
131 000
Shares
received(3)
number
48 523
17 644
20 953
19 299
–
19 299
21 504
19 299
–
20 953
–
20 401
–
(1) Annual fees consist of Board member fees and Committee chair and member fees.
(2) Meeting fees include all meeting fees paid for the term that ended at the Annual General Meeting held on 5 April 2022, and meeting fees accrued and paid in 2022 for the term that began at the same
meeting.
(3) Approximately 40% of each Board member’s annual compensation is paid in Nokia shares purchased from the market, and the remaining approximately 60% is paid in cash.
(4) Annual fees in 2022 include EUR 30 000 for Bruce Brown as Chair and EUR 15 000 for Søren Skou and Thomas Dannenfeldt as members of the Personnel Committee.
(5) Annual fees in 2022 include EUR 20 000 for Edward Kozel as Chair and EUR 10 000 for Bruce Brown, Jeanette Horan, Thomas Saueressig, and Kai Öistämö as members of the Technology Committee.
(6) Annual fees in 2022 include EUR 30 000 for Carla Smits-Nusteling as Chair and EUR 15 000 for Thomas Dannenfeldt, Lisa Hook, Jeanette Horan, and Edward Kozel as members of the Audit Committee.
Transactions with the Group Leadership Team and the Board of Directors
No loans were granted to the members of the Group Leadership Team and the Board of Directors in 2022, 2021 or 2020.
Terms of termination of employment of the President and CEO
Rajeev Suri stepped down from his position as President and CEO on 31 July 2020. Nokia’s Board of Directors appointed Pekka Lundmark as
President and CEO of Nokia and he started in his new role on 1 August 2020.
The President and CEO, Pekka Lundmark, may terminate his service agreement at any time with 12 months’ prior notice. The President and CEO
would either continue to receive salary and benefits during the notice period or, at Nokia’s discretion, a lump sum of equivalent value.
Additionally, the President and CEO would be entitled to any short- or long-term incentives that would normally vest during the notice period.
Any unvested equity awards would be forfeited after termination.
In the event that the President and CEO terminates his service agreement based on a final arbitration award demonstrating Nokia’s material
breach of the service agreement, he is entitled to a severance payment equaling up to 12 months of compensation, including annual base
salary, benefits and target incentive. Any unvested equity awards would be forfeited after termination.
188
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NOKIA IN 2022
189
Financial statements Notes to consolidated financial statements
continued
32. Financial risk management
General risk management principles
We have a systematic and structured approach to risk management. Key risks and opportunities are primarily identified against business targets
either in business operations or as an integral part of strategy and financial planning. Risk management covers strategic, operational, financial,
compliance and hazard risks. Key risks and opportunities are analyzed, managed and monitored as part of business performance management.
The principles documented in the Nokia Enterprise Risk Management Policy, which is approved by the Audit Committee of the Board, require risk
management and its elements to be integrated into key processes. One of the core principles is that the business or function head is also the
risk owner, although all employees are responsible for identifying, analyzing and managing risks, as appropriate, given their roles and duties.
Our overall risk management concept is based on managing the key risks that would prevent us from meeting our objectives, rather than
focusing on eliminating risks. In addition to the principles defined in the Nokia Enterprise Risk Management Policy, other key policies and
operating procedures reflect the implementation of specific aspects of risk management, including financial risk management.
Financial risks
The objective for treasury activities is to guarantee sufficient funding at all times and to identify, evaluate and manage financial risks. Treasury
activities support this aim by mitigating the adverse effects on the profitability of the underlying business caused by fluctuations in the financial
markets, and by managing the capital structure by balancing the levels of liquid assets and financial borrowings. Treasury activities are governed
by the Nokia Treasury Policy approved by the President and CEO, which provides principles for overall financial risk management and determines
the allocation of responsibilities for financial risk management activities. Operating procedures approved by the Chief Financial Officer (CFO)
cover specific areas such as foreign exchange risk, interest rate risk, credit risk and liquidity risk as well as the use of derivative financial
instruments in managing these risks. Nokia is risk averse in its treasury activities.
Financial risks are divided into market risk covering foreign exchange risk and interest rate risk; credit risk covering business-related credit risk
and financial credit risk; and liquidity risk.
Market risk
Foreign exchange risk
Nokia operates globally and is exposed to transaction and translation foreign exchange risks. The objective of foreign exchange risk
management is to mitigate adverse impacts from foreign exchange fluctuations on Nokia’s profitability and cash flows. Treasury applies a global
portfolio approach to manage foreign exchange risks within approved guidelines and limits.
Transaction risk arises from foreign currency denominated assets and liabilities together with foreign currency denominated future cash flows.
Transaction exposures are managed in the context of various functional currencies of Group companies. Material transactional foreign exchange
exposures are hedged, unless hedging would be uneconomical due to market liquidity and/or hedging cost. Exposures are defined using
transaction nominal values. Exposures are mainly hedged with derivative financial instruments, such as foreign exchange forward contracts
and foreign exchange options with most of the hedging instruments having a duration of less than a year.
Layered hedging approach is typically used for hedging of highly probable forecast foreign currency denominated cash flows with quarterly
hedged items defined based on set hedge ratio ranges for each successive quarter. Hedged items defined for successive quarters are hedged
with foreign exchange forward contracts and foreign exchange options with a hedge ratio of 1:1. Hedging level ranges are adjusted on a monthly
basis including hedging instrument designation and documentation as appropriate. In case hedges exceed the hedge ratio range for any specific
quarter, the hedge portfolio for that specific quarter is adjusted accordingly.
In certain cases, mainly related to long-term construction projects, Nokia applies fair value hedge accounting for foreign exchange risk with the
objective to reduce the exposure to fluctuations in the fair value of the related firm commitments due to changes in foreign exchange rates.
Exposures are mainly hedged with foreign exchange forward contracts with most of the hedging instruments matching the duration of the
underlying projects. Nokia continuously manages the portfolio of hedging instruments to ensure appropriate alignment with the portfolio
of hedged items at a hedging ratio of 1:1.
As Nokia has entities where the functional currency is other than the euro, the shareholders’ equity is exposed to fluctuations in foreign
exchange rates. Changes in shareholders’ equity caused by movements in foreign exchange rates are shown as currency translation differences
in the consolidated financial statements. The risk management strategy is to protect the euro counter value of the portion of this exposure
expected to materialize as foreign currency repatriation cash flows in the foreseeable future. Exposures are mainly hedged with derivative
financial instruments, such as foreign exchange forward contracts and foreign exchange options with most of the hedging instruments having
a duration of less than a year. Hedged items are defined based on conservative expectations of repatriation cash flows based on a range of
considerations. Net investment exposures are reviewed, hedged items designated, and hedging levels adjusted at minimum on a quarterly
basis with a hedge ratio of 1:1. Additionally, hedging levels are adjusted whenever there are significant events impacting expected repatriation
cash flows.
The foreign exchange risk arising from foreign currency denominated interest-bearing liabilities is primarily hedged using cross-currency swaps
that are also used to manage Nokia’s interest rate profile (refer to the interest rate risk section below).
Notional amounts in currencies that represent a significant portion of the currency mix in outstanding financial instruments and other hedged
items at 31 December:
EURm
USD
CNY
JPY
INR
2022
Foreign exchange exposure designated as hedged item for cash flow hedging, net(1)
Foreign exchange exposure designated as hedged item for fair value hedging for
FX risk, net(2)
Foreign exchange exposure designated as hedged item for net investment hedging(3)
Foreign exchange exposure from interest-bearing liabilities(4)
Foreign exchange exposure from items on the statement of financial position,
excluding interest-bearing liabilities, net
Other foreign exchange derivatives, carried at fair value through profit and loss, net(5)
EURm
2021
Foreign exchange exposure designated as hedged item for cash flow hedging, net(1)
Foreign exchange exposure designated as hedged item for fair value hedging for
FX risk, net(2)
Foreign exchange exposure designated as hedged item for net investment hedging(3)
Foreign exchange exposure from interest-bearing liabilities(4)
Foreign exchange exposure from items on the statement of financial position, excluding
interest-bearing liabilities, net
Other foreign exchange derivatives, carried at fair value through profit and loss, net(5)
854
(402)
311
(68)
1 458
3 007
(758)
(2 709)
4 214
USD
601
1 580
1 540
(841)
(1 602)
1 372
–
866
–
(888)
892
CNY
(484)
–
920
–
(938)
896
–
–
–
–
192
–
204
(151)
(272)
(1 117)
JPY
500
–
–
–
155
(109)
INR
(219)
–
201
–
(404)
322
(1) Includes foreign exchange exposure from forecasted cash flows related to sales and purchases. In some currencies, especially the US dollar, Nokia has substantial foreign exchange exposures in both
estimated cash inflows and outflows. These underlying exposures have been hedged.
(2) Includes foreign exchange exposure from contractual firm commitments. These underlying exposures have been substantially hedged.
(3) Includes net investment exposures in foreign operations. These underlying exposures have been hedged.
(4) Includes interest-bearing liabilities that have been hedged with cross-currency swaps and foreign exchange forwards. Refer to Note 20, Interest-bearing liabilities.
(5) Items on the statement of financial position are hedged by a portion of foreign exchange derivatives not designated in a hedge relationship and carried at fair value through profit and loss. Embedded
derivatives are included in this line item.
The methodology for assessing foreign exchange risk exposures: Value-at-Risk
Nokia uses the Value-at-Risk (VaR) methodology to assess exposures to foreign exchange risks. The VaR-based methodology provides estimates
of potential fair value losses in market risk-sensitive instruments as a result of adverse changes in specified market factors, at a specified
confidence level over a defined holding period. Nokia calculates the foreign exchange VaR using the Monte Carlo method, which simulates
random values for exchange rates in which Nokia has exposures and takes the non-linear price function of certain derivative instruments into
account. The VaR is determined using volatilities and correlations of rates and prices estimated from a sample of historical market data, at a 95%
confidence level, using a one-month holding period. To put more weight on recent market conditions, an exponentially weighted moving
average is performed on the data with an appropriate decay factor. This model implies that, within a one-month period, the potential loss will
not exceed the VaR estimate in 95% of possible outcomes. In the remaining 5% of possible outcomes, the potential loss will be at minimum
equal to the VaR figure and, on average, substantially higher. The VaR methodology relies on a number of assumptions, which include the
following: risks are measured under average market conditions, changes in market risk factors follow normal distributions, future movements
in market risk factors are in line with estimated parameters and the assessed exposures do not change during the holding period. Thus, it is
possible that, for any given month, the potential losses at a 95% confidence level are different and could be substantially higher than the
estimated VaR.
The VaR calculation includes foreign currency denominated monetary financial instruments, such as current financial investments, loans and
trade receivables, cash, loans and trade payables; foreign exchange derivatives carried at fair value through profit and loss that are not in
a hedge relationship and are mostly used to hedge the statement of financial position foreign exchange exposure, as well as embedded
derivatives; and foreign exchange derivatives designated as forecasted cash flow hedges, fair value hedges and net investment hedges
as well as the exposures designated as hedged items for these hedge relationships.
190
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191
Financial statements Notes to consolidated financial statements
continued
The VaR risk measures for Nokia’s sensitivity to foreign exchange risks are presented in the Total VaR column and the simulated impact to
financial statements presented in profit, other comprehensive income (OCI) and cumulative translation adjustment (CTA) columns in the
table below.
Effects of hedge accounting on the financial position and performance
Nokia is using several types of hedge accounting programs to manage its foreign exchange and interest rate risk exposures; refer to Note 2,
Significant accounting policies. The effect of these programs on Nokia’s financial position and performance at 31 December:
2022
2021
Simulated impact on financial statements
Simulated impact on financial statements
EURm
EURm
31 December
Average for the year
Range for the year
Total VaR
38
31
12–67
Profit
40
36
17–59
OCI
33
48
31–70
CTA
–
–
0–0
Total VaR
11
7
4–13
Profit
12
12
10–15
OCI
31
19
14–31
CTA
–
–
0–0
Interest rate risk
Nokia is exposed to interest rate risk either through market value fluctuations of items on the consolidated statement of financial position
(price risk) or through changes in interest income or expenses (refinancing or reinvestment risk). Interest rate risk mainly arises through
interest-bearing liabilities and assets. Estimated future changes in cash flows and the structure of the consolidated statement of financial
position also expose Nokia to interest rate risk.
The objective of interest rate risk management is to mitigate adverse impacts arising from interest rate fluctuations on the consolidated income
statement, cash flow, and financial assets and liabilities while taking into consideration Nokia’s target capital structure and the resulting net
interest rate exposure. Nokia has entered into long-term borrowings mainly at fixed rates and swapped a portion of them into floating rates,
in line with a defined target interest profile. Nokia has not entered into interest rate swaps where it would be paying fixed rates. Nokia aims to
mitigate the adverse impacts from interest rate fluctuations by continuously managing net interest rate exposure arising from financial assets
and liabilities, by setting appropriate risk management benchmarks and risk limits.
Interest rate profile of items under interest rate risk management at 31 December:
EURm
Non-current interest-bearing financial investments
Current interest-bearing financial investments
Cash and cash equivalents
Interest-bearing liabilities
Financial assets and liabilities before derivatives
Interest rate derivatives
Financial assets and liabilities after derivatives
2022
2021
Fixed rate
697
912
346
(3 658)
(1 703)
3 216
1 513
Floating rate(1)
–
2 168
5 121
(819)
6 470
(3 216)
3 254
Fixed rate
–
182
499
(3 871)
(3 190)
838
(2 352)
Floating rate(1)
–
2 395
6 192
(782)
7 805
(838)
6 967
(1) All cash equivalents and derivative transaction-related collaterals with initial maturity of three months or less are considered floating rate for the purposes of interest rate risk management.
Treasury monitors and manages interest rate exposure centrally. Nokia uses selective sensitivity analyses to assess and measure interest rate
exposure arising from interest-bearing assets, interest-bearing liabilities and related derivatives. Sensitivity analysis determines an estimate
of potential fair value changes in market risk-sensitive instruments by varying interest rates in currencies in which Nokia has material amounts
of financial assets and liabilities while keeping all other variables constant. Sensitivities to credit spreads are not reflected in the numbers.
Nokia’s sensitivity to interest rate exposure in the investment and debt portfolios is presented in the fair value column in the table below with
simulated impact to financial statements presented in profit and OCI columns.
EURm
Interest rates – increase by 100 basis points
Interest rates – decrease by 100 basis points(2)
Impact on
fair value(1)
(2)
4
2022
Impact on
profit
3
(2)
Impact on
OCI
(1)
(1)
Impact on
fair value
140
(163)
2021
Impact on
profit
1
(1)
Impact on
OCI
2
(3)
(1) In 2022, bonds issued by Nokia Corporation have been fully swapped from fixed to floating resulting in significant decrease in impact on fair value.
(2) In 2022, Nokia has updated the analysis of interest rate sensitivity to equal shift for increase and decrease due to changes in the interest rate environment. Comparative numbers have been
adjusted accordingly.
2022
Carrying amount of hedging instruments
Notional amount of hedging instruments
Notional amount of hedged items
Change in intrinsic value of hedging instruments since 1 January
Change in value of hedged items used to determine hedge effectiveness
2021
Carrying amount of hedging instruments
Notional amount of hedging instruments
Notional amount of hedged items
Change in intrinsic value of hedging instruments since 1 January
Change in value of hedged items used to determine hedge effectiveness
Cash flow
hedges(1)
Net investment
hedges(1)
Fair value
hedges
for FX risk(1)
Fair value and
cash flow
hedges(1)
46
(1 350)
1 353
(12)
20
(19)
(1 196)
1 201
(43)
40
(9)
(4 299)
4 299
(126)
126
(11)
(2 949)
2 949
(249)
249
(145)
(1 456)
1 458
(111)
112
(57)
(1 579)
1 577
(95)
92
(247)
3 438
(3 438)
(265)
262
(54)
891
(891)
(25)
25
(1) No significant ineffectiveness has been recorded during the periods presented and economic relationships have been fully effective.
The most significant foreign exchange hedging instruments under cash flow, net investment and fair value hedge accounting at 31 December:
Currency
Fair value
(EURm)
Weighted
average
hedged rate
Total
Within
3 months
Between
3 and 12
months
Between
1 and 3 years
Beyond
3 years
Maturity breakdown of notional amounts (EURm)(1)
2022
Cash flow hedge accounting
Net investment hedge
accounting
Fair value hedge accounting
for FX risk
2021
Cash flow hedge accounting
Net investment hedge
accounting
Fair value hedge accounting
for FX risk
GBP
JPY
USD
USD
CNY
USD
USD
GBP
GBP
JPY
USD
USD
CNY
INR
USD
USD
5
5
22
12
0.8593
138.8404
1.0394
1.0868
(235)
(235)
(1 261)
423
(76)
(66)
(347)
–
(8)
(3)
7.4193
1.0563
(866)
(3 007)
(866)
(3 007)
(159)
(169)
(914)
193
–
–
–
–
–
217
–
–
–
–
–
13
–
–
(145)
1.1358
(1 456)
(448)
(213)
(787)
(8)
(4)
4
(1)
(25)
14
(4)
(4)
1
0.8574
0.8570
130.3819
1.1586
1.1643
7.2106
85.8900
1.1290
(209)
203
(392)
(1 042)
457
(920)
(201)
(1 540)
(55)
(6)
(100)
(358)
6
(920)
(201)
(1 540)
(154)
92
(292)
(684)
201
–
–
–
–
110
–
–
235
–
–
–
–
7
–
–
15
–
–
–
(61)
1.1689
(1 580)
(73)
(238)
(1 130)
(139)
(1) Negative notional amounts indicate that hedges sell currency, and positive notional amounts indicate that hedges buy currency.
For information on the impact of hedge accounting on equity, refer to Note 18, Equity. For information on hedging instruments used for fair
value and cash flow hedge accounting related to Nokia’s interest-bearing liabilities, refer to Note 20, Interest-bearing liabilities. For information
on derivative instruments, refer to Note 22, Derivative and firm commitment assets and liabilities.
192
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NOKIA IN 2022
193
Financial statements Notes to consolidated financial statements
continued
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to Nokia. Credit risk arises
from credit exposures to customers, including outstanding receivables, financial guarantees and committed transactions, as well as financial
institutions, including bank and cash, fixed income and money market investments, and derivative financial instruments. Credit risk is managed
separately for business-related and financial credit exposures.
Business-related credit risk
Nokia aims to ensure the highest possible quality in trade receivables and contract assets as well as customer or third-party loan receivables.
The Credit Risk Management Standard Operating Procedure, approved by the CFO, lays out the framework for the management of the
business-related credit risks. The Credit Risk Management Standard Operating Procedure sets out that credit decisions are based on credit
evaluation in each business, including credit rating and limits for larger exposures, according to defined principles. Group level limit approvals
are required for material credit exposures. Credit risks are monitored in each business and, where appropriate, mitigated on a case-by-case
basis with the use of letters of credit, collaterals, sponsor guarantees, credit insurance, and sale of selected receivables.
Nokia’s payment terms are 80 days on average. Credit exposure is measured as the total of trade receivables, contract assets and loans
outstanding from customers and committed credits. Trade receivables do not include any major concentrations of credit risk by customer.
The top three customers account for 4.5%, 3.5% and 3.3% (5.6%, 5.5% and 3.2% in 2021) of trade receivables, contract assets and loans due
from customers and other third parties at 31 December 2022. The top three credit exposures by country account for 14.7%, 10.8% and 7.3%
(17.6%, 9.3% and 8.4% in 2021) of Nokia’s trade receivables, contract assets and loans due from customers and other third parties at
31 December 2022. The 14.7% relates to credit exposure in the United States (17.6% in 2021 from the United States).
The total of trade receivables, contract assets and loans due from customers is EUR 7 456 million (EUR 7 084 million in 2021) and customer
financing related loan commitments undrawn is EUR 26 million (EUR 21 million in 2021) at 31 December 2022.
The aging of trade receivables, contract assets and customer finance loans at 31 December 2022:
EURm
Trade receivables
Contract assets
Customer financing related loan receivables
Total gross receivables
Expected credit loss allowance(1)
Total net receivables
Current
5 117
1 203
212
6 532
(361)
6 171
Past due
1-30 days
210
–
8
218
(15)
203
Past due
31-180 days
267
–
5
272
(65)
207
Past due
More than
180 days
355
–
79
434
(203)
231
Total
5 949
1 203
304
7 456
(644)
6 812
(1) The total expected credit loss allowance includes EUR 311 million of credit-impaired assets relating to certain emerging market customers.
The expected credit loss allowance and amount charged to the consolidated income statement for trade receivables, contract assets and
customer financing related loan receivables for the years ended 31 December:
EURm
Expected credit loss allowance(1)
Expected credit loss charged to income statement
(1) In 2022, the expected credit loss allowance includes EUR 33 million transferred from other provisions.
2022
644
160
2021
444
10
2020
434
211
Financial credit risk
Financial instruments contain an element of risk resulting from changes in the market price due to counterparties becoming less creditworthy
or risk of loss due to counterparties being unable to meet their obligations. Financial credit risk is measured and monitored centrally by
Treasury. Financial credit risk is managed actively by limiting counterparties to a sufficient number of major banks and financial institutions,
and by monitoring the creditworthiness and the size of exposures continuously. Additionally, Nokia enters into netting arrangements with all
major counterparties, which give the right to offset in the event that the counterparty would not be able to fulfill its obligations. Nokia enters
into collateral agreements with certain counterparties, which require counterparties to post collateral against derivative receivables.
Investment decisions are based on strict creditworthiness and maturity criteria as defined in the Treasury-related policies and procedures.
As a result of this investment policy approach and active management of outstanding investment exposures, Nokia has not been subject to
any material credit losses in its financial investments in the years presented. Due to the high credit quality of Nokia’s financial investments,
the expected credit loss for these investments is deemed insignificant based on 12 months’ expected credit losses at 31 December 2022.
Outstanding non-current and current interest-bearing financial investments, cash equivalents and cash classified by credit rating grades ranked
in line with S&P Global Ratings categories at 31 December:
EURm
2022
Total
2021
Total
Rating(1)
AAA
AA+ – AA-
A+ – A-
BBB+ – BBB-
Other
AAA
AA+ – AA-
A+ – A-
BBB+ – BBB-
Other
Cash
Due within
3 months
Due between
3 and 12
months
Due between
1 and 3 years
Due between
3 and 5 years
Due beyond
5 years
Total(2)(3)
–
683
1 553
39
123
2 398
–
1 073
1 534
180
101
2 888
1 046
643
2 314
477
6
4 486
1 819
567
2 376
879
12
5 653
–
250
865
52
–
1 167
–
–
371
2
–
373
–
–
190
291
–
481
–
–
125
–
–
125
–
–
234
197
8
439
–
–
229
–
–
229
–
–
203
70
–
273
–
–
–
–
–
–
1 046
1 576
5 359
1 126
137
9 244
1 819
1 640
4 635
1 061
113
9 268
(1) Bank Parent Company ratings are used here for bank groups. Actual bank subsidiary ratings may differ from the Bank Parent Company rating.
(2) Non-current and current interest-bearing financial investments and cash equivalents include bank deposits, structured deposits, investments in money market funds and investments in fixed income
instruments.
(3) Instruments that include a call feature have been presented at their final maturities. Instruments that are contractually due beyond three months include EUR 551 million (EUR 424 million in 2021)
of instruments that have a call period of less than three months.
Nokia has restricted bank deposits primarily related to employee benefits of EUR 122 million (EUR 119 million in 2021) that are presented in
other non-current financial assets. Nokia has assessed the counterparty credit risk for these financial assets and concluded that expected credit
losses are not significant.
The following table sets out financial assets and liabilities subject to offsetting under enforceable master netting agreements and similar
arrangements at 31 December. To reconcile the items shown in the table below to the consolidated statement of financial position, items that
are not subject to offsetting would need to be included, refer to Note 22, Derivative and firm commitment assets and liabilities.
EURm
2022
Derivative assets
Derivative liabilities
Total
2021
Derivative assets
Derivative liabilities
Total
Related amounts not set off in the
statement of financial position
Net amounts of financial
assets/(liabilities) presented
in the statement of financial position
Financial instruments
assets/(liabilities)
Cash collateral
(received)/pledged
Net amount
182
(496)
(314)
139
(229)
(90)
(158)
158
–
(102)
102
–
(20)
327
307
(26)
126
100
4
(11)
(7)
11
(1)
10
The financial instruments subject to enforceable master netting agreements and similar arrangements are not offset in the consolidated
statement of financial position as there is no intention to settle net or realize the asset and settle the liability simultaneously.
194
NOKIA IN 2022
NOKIA IN 2022
195
Financial statements
Notes to consolidated financial statements
continued
Liquidity risk
Liquidity risk is defined as financial distress or extraordinarily high financing costs arising from a shortage of liquid funds in a situation where
outstanding debt needs to be refinanced or where business conditions unexpectedly deteriorate and require financing. Transactional liquidity
risk is defined as the risk of executing a financial transaction below fair market value or not being able to execute the transaction at all within a
specific period of time. The objective of liquidity risk management is to maintain sufficient liquidity, and to ensure that it is readily available
without endangering its value in order to avoid uncertainty related to financial distress at all times.
Nokia aims to secure sufficient liquidity at all times through efficient cash management and by investing primarily in highly liquid money market
investments. Depending on its overall liquidity position, Nokia may pre-finance or refinance upcoming debt maturities before contractual
maturity dates. The transactional liquidity risk is minimized by entering into transactions where proper two-way quotes can be obtained from
the market. Nokia aims to ensure flexibility in funding by maintaining committed and uncommitted credit lines. Refer to Note 20,
Interest-bearing liabilities.
The following table presents an undiscounted, contractual cash flow analysis for lease liabilities, financial liabilities and financial assets that are
presented on the consolidated statement of financial position as well as loan commitments given and obtained. The line-by-line analysis does
not directly reconcile with the consolidated statement of financial position.
Total
Due within
3 months
Due between
3 and 12
months
Due between
1 and 3 years
Due between
3 and 5 years
Due beyond
5 years
EURm
2022
Non-current financial assets
Other non-current financial assets(1)
Non-current interest-bearing financial investments
Current financial assets
Other current financial assets excluding derivatives(1)
Current interest-bearing financial investments
Cash and cash equivalents(2)
Cash flows related to derivative financial assets
gross settled:
Derivative contracts – receipts
Derivative contracts – payments
Trade receivables
Non-current financial and lease liabilities
Long-term interest-bearing liabilities
Long-term lease liabilities
Other non-current financial liabilities
Current financial and lease liabilities
Short-term interest-bearing liabilities
Short-term lease liabilities
Other financial liabilities excluding derivatives(3)
Cash flows related to derivative financial liabilities
net settled:
Derivative contracts - payments
Cash flows related to derivative financial liabilities
gross settled:
Derivative contracts – receipts
Derivative contracts – payments
Discounts without performance obligations
Trade payables
Commitments given and obtained
Loan commitments given undrawn(4)
Loan commitments obtained undrawn(5)
78
767
284
3 092
5 509
–
5
207
2 146
4 947
–
7
77
946
31
11 596
(11 429)
6 014
9 170
(9 089)
4 885
2 109
(2 038)
1 004
(5 348)
(867)
(17)
(230)
(223)
(502)
(43)
–
–
(131)
(61)
(482)
(98)
–
–
(99)
(162)
(20)
30
376
–
–
136
297
(282)
123
(2 182)
(340)
(17)
–
–
–
(13)
5
(31)
(1)
12 421
(12 618)
(539)
(4 730)
(26)
1 486
8 832
(8 992)
(205)
(4 561)
(13)
(1)
1 271
(1 303)
(211)
(165)
(13)
(3)
919
(1 003)
(121)
(3)
573
(542)
(2)
–
–
80
–
1 410
2
275
–
–
200
20
(20)
2
46
104
–
–
195
–
–
–
(1 397)
(200)
–
(1 628)
(327)
–
–
–
–
7
–
–
–
7
826
(778)
–
(1)
–
–
(1) Other non-current financial assets and other current financial assets excluding derivatives include mainly customer financing related loan receivables.
(2) Instruments that include a call feature have been presented at their final maturities. Instruments that are contractually due beyond three months include EUR 551 million of instruments that have a call
period of less than three months.
(3) Other financial liabilities include a conditional obligation to China Huaxin presented in the earliest period as the exercise period is open.
(4) Loan commitments given undrawn have been included in the earliest period in which they could be drawn or called.
(5) Loan commitments obtained undrawn have been included based on the period in which they expire. These amounts include related commitment fees.
EURm
2021
Non-current financial assets
Other non-current financial assets(1)
Current financial assets
Other current financial assets excluding derivatives(1)
Current interest-bearing financial investments
Cash and cash equivalents(2)
Cash flows related to derivative financial assets net settled:
Derivative contracts – receipts
Cash flows related to derivative financial assets
gross settled:
Derivative contracts – receipts
Derivative contracts – payments
Trade receivables
Non-current financial and lease liabilities
Long-term interest-bearing liabilities
Long-term lease liabilities
Other non-current financial liabilities
Current financial and lease liabilities
Short-term interest-bearing liabilities
Short-term lease liabilities
Other financial liabilities excluding derivatives(3)
Cash flows related to derivative financial liabilities
gross settled:
Derivative contracts – receipts
Derivative contracts – payments
Discounts without performance obligations
Trade payables
Commitments given and obtained
Loan commitments given undrawn(4)
Loan commitments obtained undrawn(5)
Total
Due within
3 months
Due between
3 and 12
months
Due between
1 and 3 years
Due between
3 and 5 years
Due beyond
5 years
236
128
2 576
6 695
2
10 498
(10 291)
5 673
(5 409)
(882)
(34)
(116)
(236)
(522)
12 100
(12 220)
(664)
(3 679)
(21)
1 482
15
110
2 274
6 268
13
18
302
71
–
(2)
7 907
(7 835)
4 829
1 774
(1 713)
812
(39)
–
–
(89)
(62)
(504)
8 483
(8 556)
(419)
(3 522)
(3)
(1)
(86)
–
–
(27)
(174)
(18)
1 629
(1 663)
(175)
(152)
(18)
(3)
110
–
–
126
4
462
(434)
32
(1 171)
(353)
(34)
–
–
–
1 179
(1 231)
(70)
(4)
–
80
86
–
–
230
–
49
(35)
–
(2 038)
(225)
–
–
–
–
180
(176)
–
–
–
1 406
12
–
–
–
–
306
(274)
–
(2 075)
(304)
–
–
–
–
629
(594)
–
(1)
–
–
(1) Other non-current financial assets and other current financial assets excluding derivatives include mainly customer financing related loan receivables.
(2) Instruments that include a call feature have been presented at their final maturities. Instruments that are contractually due beyond three months include EUR 424 million of instruments that have a call
period of less than three months.
(3) Other financial liabilities include a conditional obligation to China Huaxin presented in the earliest period as the exercise period is open.
(4) Loan commitments given undrawn have been included in the earliest period in which they could be drawn or called.
(5) Loan commitments obtained undrawn have been included based on the period in which they expire. These amounts include related commitment fees.
33. Subsequent events
Non-adjusting events after the reporting period
Offer to purchase outstanding notes
On 9 February 2023 Nokia announced that it commenced an offer to purchase the outstanding EUR 750 million 2.00% notes due 15 March
2024 (the “2024 Notes”), EUR 500 million 2.375% notes due 15 May 2025 (the “2025 Notes”) and EUR 750 million 2.00% notes due 11 March
2026 (the “2026 Notes”), up to a maximum cash consideration of EUR 700 million (the “Tender Offer”). The purpose of the Tender Offer is to
manage the overall indebtedness of Nokia and to extend Nokia’s debt maturity profile in an efficient manner.
On 16 February 2023 the Tender Offer expired. Nokia accepted tenders for EUR 372 million (49.66% of the nominal amount) of the 2024 Notes,
EUR 208 million (41.57% of the nominal amount) of the 2025 Notes and EUR 120 million (15.96 % of the nominal amount) of the 2026 Notes.
The Tender Offer was settled on 21 February 2023.
New euro-denominated notes
On 21 February 2023 Nokia issued EUR 500 million 4.375% sustainability-linked Notes due August 2031 under its 5 billion Euro Medium-Term
Note Programme. The proceeds of the new notes are intended to fund the Tender Offer and for general corporate purposes.
196
NOKIA IN 2022
NOKIA IN 2022
197
Financial statements
Parent Company income statement
Parent Company statement of financial position
For the year ended 31 December
Net sales(1)
Cost of sales
Gross profit
Selling, general and administrative expenses
Other operating income
Other operating expenses
Operating profit
Financial income and expenses
Income from non-current investments
Interest and other financial income
Interest and other financial expenses
Impairment of investments in subsidiaries and other shares
Gain on sale of shares and businesses
Total financial income and expenses
Profit before appropriations and tax
Appropriations
Group contributions
Profit/(loss) before tax
Income tax
Profit/(loss) for the year
Notes
4
4
5
5
5
9
5
6
7
2022
EURm
473
(9)
464
(54)
7
(3)
414
401
375
(262)
–
2
516
930
(560)
370
8
378
2021
EURm
182
(10)
172
(63)
19
(16)
112
600
296
(163)
(6)
–
727
839
(360)
479
3
482
(1) Net sales from Nokia Technologies segment. In December 2022, a licensee exercised a contractual option to extend the license agreement for the remaining life of the licensed patents, making it in
substance a perpetual license. As a result, the company has recognized all the remaining revenue related to the License Agreement during the year. After the 2022 revenue recognition, Nokia will no
longer recognize revenue in relation to this agreement in future periods.
The notes are an integral part of these financial statements.
As of 31 December
ASSETS
Non-current assets
Intangible assets
Intangible rights
Total intangible assets
Tangible assets
Land and water areas
Buildings
Machinery and equipment
Other tangible assets
Total tangible assets
Investments
Investments in subsidiaries
Non-current interest-bearing financial investments
Other non-current financial investments
Total investments
Other non-current assets
Non-current loan receivables from Group companies
Non-current loan receivables from other companies
Other non-current receivables
Deferred tax assets
Total other non-current assets
Total non-current assets
Current assets
Accounts receivable from Group companies
Accounts receivable from other companies
Current loan receivables from Group companies
Group contribution receivable from Group companies
Other financial assets from Group companies
Other financial assets from other companies
Prepaid expenses and accrued income from Group companies
Prepaid expenses and accrued income from other companies
Current financial investments
Total current assets
Cash and cash equivalents
Total assets
The notes are an integral part of these financial statements.
Notes
2022
EURm
2021
EURm
8
8
8
8
9
9, 14
9, 14
14
14
14
14, 15
14, 15
10
10
14
14
2
2
9
72
2
4
87
18 695
697
1
19 393
2 778
1
26
7
2 812
22 294
17
1
4 668
–
270
182
111
510
3 076
8 835
3 357
34 486
2
2
9
77
2
5
93
18 661
–
1
18 662
2 765
1
24
–
2 790
21 547
161
1
5 060
150
151
139
127
527
2 514
8 830
4 513
34 890
198
NOKIA IN 2022
NOKIA IN 2022
199
Financial statements Parent Company statement of financial position
continued
As of 31 December
SHAREHOLDERS’ EQUITY AND LIABILITIES
Capital and reserves
Share capital
Share premium
Fair value and other reserves
Reserve for invested unrestricted equity
Retained earnings
Profit/(loss) for the year
Total equity
Provisions
Non-current liabilities
Long-term interest-bearing liabilities
Advance payments from other companies
Total non-current liabilities
Current liabilities
Short-term interest-bearing liabilities to Group companies
Short-term interest-bearing liabilities to other companies
Group contribution liabilities to Group companies
Other financial liabilities to Group companies
Other financial liabilities to other companies
Advances received from other companies
Accounts payable to Group companies
Accounts payable to other companies
Accrued expenses and other liabilities to Group companies
Accrued expenses and other liabilities to other companies
Total current liabilities
Total liabilities
Total shareholders’ equity and liabilities
The notes are an integral part of these financial statements.
Notes
11
11
11, 13
11, 12
11, 12
11, 12
16
14, 17
14, 17
14, 17
14
14
18
18
2022
EURm
2021
EURm
246
46
31
15 091
1 628
378
17 419
48
3 984
–
3 984
11 004
103
560
182
978
–
58
19
49
82
13 035
17 019
34 486
246
46
15
15 318
1 483
482
17 590
43
4 299
305
4 604
10 743
26
510
118
733
155
211
19
53
85
12 653
17 257
34 890
Parent Company statement of cash flows
For the year ended 31 December
Cash flow from operating activities
Profit/(loss) for the year
Adjustments, total
Change in net working capital
Decrease in accounts receivable
(Decrease)/increase in non-interest-bearing short-term liabilities
Decrease in non-interest-bearing long-term liabilities
Cash from operations
Interest received
Interest paid
Other financial income and expenses received, net
Income taxes (paid)/received, net
Net cash from operating activities
Cash flow from investing activities
Purchase of shares in subsidiary companies and current financial investments
Dividends received
Proceeds from disposal of businesses
Purchase of property, plant and equipment and intangible assets
Proceeds from sale of property, plant and equipment and other intangible assets
(Payments of) other non-current receivables
Proceeds from/(payments of) current receivables
Purchase of non-current investments
Proceeds from non-current investments
Purchase of current investments
Proceeds from current investments
Net cash (used in) investing activities
Cash flow from financing activities
Purchase of own shares
Proceeds from/(payments of) from long-term borrowings
Proceeds from short-term borrowings
Dividends paid
Group contributions, net
Net cash (used in)/from financing activities
Net (decrease) in cash and cash equivalents
Cash and cash equivalents as of January 1
Cash and cash equivalents as of December 31
The notes are an integral part of these financial statements.
Notes
21
2022
EURm
378
143
43
(166)
(316)
82
264
(243)
10
(7)
106
(34)
401
2
(2)
2
(64)
423
(763)
14
(2 783)
2 273
(531)
(300)
4
262
(337)
(360)
(731)
(1 156)
4 513
3 357
2021
EURm
482
(298)
276
23
(155)
328
191
(149)
11
3
384
(25)
600
25
–
3
(46)
(446)
–
–
(1 727)
302
(1 314)
–
(800)
1 640
–
(440)
400
(530)
5 043
4 513
200
NOKIA IN 2022
NOKIA IN 2022
201
Financial statements
Notes to the Parent Company financial statements
1. Accounting principles
Basis of presentation
The Parent Company (Nokia Corporation) financial statements are
prepared in accordance with the Finnish Accounting Standards (FAS).
The Parent Company is responsible for arranging Nokia’s internal
financing. Changes in the internal and external financing needs arising
from changes in operative and organizational models affect the
Parent Company’s financial position.
The Parent Company has one branch Nokia Oyj, Succursale de Lancy,
which is located in Switzerland. The branch is included in the Parent
Company’s financial statements.
Revenue recognition
The Parent Company provides its customers with licenses to
intellectual property (IP) by granting customers with rights to use the
Parent Company’s IP in their products. When the Parent Company
grants customers with rights to use IP in their products, the associated
license fee revenue is recognized in accordance with the substance
of the relevant agreements. In the majority of cases, Nokia retains
obligations to continue to develop the licensed assets during the
contract term, and therefore revenue is recognized pro rata over the
period during which the Parent Company is expected to perform.
Recognition of the revenue as pro rata over the term of the license
is considered the most faithful depiction of the Parent Company’s
satisfaction of the performance obligation as the IP being licensed
to the customer includes new inventions patented by the Parent
Company that are highly interdependent and interrelated and created
through continuous R&D efforts that are relatively stable throughout
the year. In some contracts, the Parent Company has no remaining
obligations to perform after granting a license to the initial IP, and
licensing fees are non-refundable. In these cases, revenue is
recognized at the beginning of the license term.
Foreign currency translation
Monetary assets and liabilities denominated in foreign currency
are valued at the exchange rates prevailing at the end of the
reporting period.
Share-based payments
The Parent Company offers three types of equity-settled share-based
compensation plans for employees: performance shares, restricted
shares and the employee share purchase plan. Share-based
compensation is recognized as an expense in the income statement
when the shares are delivered. The settlement covers taxes and similar
charges incurred.
Pensions
Contributions to pension plans are expensed in the income statement
in the period to which the contributions relate. Pension expenses are
reported according to the local legislation.
Intangible assets and property, plant and equipment
Intangible assets are stated at cost less accumulated amortization
according to plan. Property, plant and equipment is stated at cost less
accumulated depreciation according to plan. Depreciation and
amortization according to plan are recorded on a straight-line basis
over the expected useful lives of the assets as follows:
Intangible assets
Buildings
Machinery and equipment
3–7 years
20–33 years
3–10 years
Land and water areas are not depreciated. The accumulated
depreciation and amortization according to plan comply with the
Finnish Business Tax Act.
Classification and measurement of financial instruments
For the presentation of the financial instruments, where applicable,
the Parent Company applies fair value measurement in accordance
with the Finnish Accounting Standards (Accounting Act 5:2a §), and
thus applies the same accounting principles as the Nokia consolidated
financial statements.
Classification and measurement of financial assets
The Parent Company classifies its financial assets into the following
categories: financial assets measured at amortized cost, financial
assets measured at fair value through fair value reserve and financial
assets measured at fair value through profit and loss. The selection of
the appropriate category is made based on both the Parent Company’s
business model for managing the financial asset and on the
contractual cash flow characteristics of the asset.
The business model for managing financial assets is defined on
portfolio level. The business model must be observable on a practical
level by the way the business is managed. The cash flows of financial
assets measured at amortized cost are solely payments of principal
and interest. These assets are held within a business model which has
an objective to hold assets to collect contractual cash flows. Financial
assets measured at fair value through fair value reserve have cash
flows that are solely payments of principal and interest and these
assets are held within a business model that has an objective achieved
both by holding financial assets to collect contractual cash flows and
selling financial assets. Financial assets measured at fair value through
profit and loss are assets that do not fall in either of these two
categories. In addition to the classification as described above, the
accounting for financial assets is impacted if the financial asset is part
of a hedging relationship (see the section on hedge accounting below).
All purchases and sales of financial assets are recorded on the trade
date, that is, when the Parent Company commits to purchase or sell
the asset. A financial asset is derecognized when substantially all the
risks and rewards related to the financial asset have been transferred
to a third party that assumes control of the financial asset.
Accounts receivable
Accounts receivable include amounts invoiced to customers as well as
amounts where the revenue recognition criteria have been fulfilled
but the customers have not yet been invoiced. Accounts receivable
are carried at the original amount invoiced to customers less loss
allowances on accounts receivable accounts. Loss allowances on
accounts receivable are based on a regular review of all outstanding
amounts, including an analysis of historical bad debt, customer
concentrations, customer creditworthiness, past due amounts,
current economic trends and changes in customer payment terms.
Impairment charges on receivables identified as uncollectible are
included in other operating expenses.
Investments
Investments in subsidiaries are stated at cost, or if the recoverable
amount is expected to be permanently lower than the acquisition cost,
at cost less accumulated impairment. Other non-current financial
investments primarily include technology-related investments in
unlisted private equity shares and unlisted venture funds, which are
classified as fair value through profit and loss. These equity investments
are initially recognized and subsequently remeasured at fair value.
Fair value is estimated using a number of methods, including, but not
limited to: quoted market rates, the current market value of similar
instruments; prices established from a recent arm’s-length financing
transaction of target companies; and analysis of market prospects and
operating performance of target companies, taking into consideration
public market comparable companies in similar industry sectors. The
Parent Company uses judgment in selecting the appropriate valuation
methodology as well as underlying assumptions based on existing
market practice and conditions.
Fair value adjustments, foreign exchange gains and losses as well as
realized gains and losses from the disposal of these investments are
recognized within other income and expenses in the income statement.
Current and non-current interest-bearing financial investments in
bank deposits, as well as fixed income and money market securities
with initial maturity or put feature longer than three months that have
characteristics of solely payments of principal and interest and are
not part of structured investments, are managed in a portfolio with
a business model of holding investments to collect principal and
interest, and are initially measured at fair value and in subsequent
periods measured at amortized cost using the effective interest
method. These investments are executed with the main purpose of
collecting contractual cash flows and principal repayments. However,
investments are sold from time to time for liquidity management and
market risk mitigation purposes.
Investments in money-market funds that do not qualify as cash
equivalents as well as fixed income and money-market securities
having initial maturities over three months that are held for trading or
are included in investment structures consisting of securities traded in
combination with derivatives are classified as fair value through profit
and loss. Investments in this portfolio are executed with the main
purpose of collecting contractual cash flows, principal repayments
and capital appreciation and they can be sold at any time.
Current interest-bearing financial investments also include term
deposits used as collaterals for derivative transactions. These
investments are initially measured at fair value and in subsequent
periods measured at amortized cost. Interest income as well as foreign
exchange gains and losses are recognized in financial income and
expenses in the income statement.
Non-current interest-bearing financial investments
Non-current interest-bearing financial investments include
investments in highly liquid corporate bonds that are long-term in
nature based on their initial maturity. The Parent Company applies
Finnish Accounting Standards accounting Act 5:2a § principle and thus
applies the same accounting principle as the Nokia consolidated
financial statements.
These investments are initially measured at fair value and in
subsequent periods measured at amortized cost using the effective
interest method. These investments are executed with the main
purpose of collecting contractual cash flows and principal repayments.
However, investments are sold from time to time for liquidity
management and market risk mitigation purposes.
For these investments interest calculated using the effective interest
method, as well as foreign exchange gains and losses, are recognized
in financial income and expenses in the consolidated income
statement. When an investment is disposed of, the difference between
the carrying amount derecognized and the consideration received is
recognized in financial income and expenses in the consolidated
income statement. The FIFO method is used to determine the cost
basis of fixed income securities at amortized cost that are being
disposed of.
Due to the high credit quality of Nokia’s investment portfolio, the
estimated credit loss is normally based on 12-month expected credit
loss. Loss allowance is calculated on a quarterly basis, recorded as an
adjustment to the carrying amount of the investment and recognized
in other financial expenses in the consolidated income statement.
Other financial assets
Loan receivables include loans to Nokia companies and third parties
and are measured at nominal value and not in excess of their probable
value. Loans are subject to quarterly review as to their collectability
and available collateral. An allowance is made if a loan is deemed not to
be fully recoverable. The related cost is recognized in other expenses
or financial expenses, depending on the nature of the receivable, to
reflect the shortfall between the carrying amount and the present
value of the expected future cash flows. Interest income on loan
receivables is recognized in financial income and expenses.
Cash and cash equivalents
Cash and cash equivalents include cash at bank and in hand as well as
highly liquid, fixed-income and money-market investments that are
readily convertible to known amounts of cash with maturities at
acquisition of three months or less, as well as bank deposits with
maturities or contractual call periods at acquisition of three months
or less. Due to the high credit quality and short-term nature of
these investments, there is an insignificant risk of change in value.
Investments in money-market funds that have a risk profile consistent
with the aforementioned criteria are also classified as cash equivalents.
Impairment of financial assets
Impairment requirements apply to the recognition of a loss allowance
for expected credit losses on financial assets measured at amortized
cost, financial assets measured at fair value through fair value reserve,
financial guarantee contracts and loan commitments. The Parent
company continuously assesses its financial instruments on a
forward-looking basis and accounts for the changes in expected credit
losses on a quarterly basis. Refer to Note 2, Significant accounting
policies in the consolidated financial statements.
Classification and measurement of financial liabilities
The Parent Company has classified its financial liabilities in the
following categories: financial liabilities measured at amortized cost
and financial liabilities measured at fair value through profit and loss.
In accordance with the Finnish Accounting Standards (Accounting Act
5:2a §), the Parent Company classifies derivative liabilities at fair
value through profit and loss and all other financial liabilities at
nominal value.
Interest-bearing liabilities
Interest-bearing liabilities, including the current part of long-term
interest-bearing liabilities and collaterals for derivative transactions,
are measured at nominal value. Transaction costs are initially
recognized as accruals and amortized to the income statement over
the life of the instrument. Foreign exchange gains and losses as well as
interest are recognized in financial income and expenses in the income
statement over the life of the instrument.
Accounts payable
Accounts payable are carried at the invoiced amount.
202
NOKIA IN 2022
NOKIA IN 2022
203
Financial statements The Parent Company also applies cash flow hedging to future interest
cash flows in foreign currency related to issued bonds. These future
interest cash flows are hedged with cross-currency swaps that
have been bifurcated and designated partly as fair value hedges to
hedge both foreign exchange and the interest rate benchmark risk
component of the issued bond and partly as cash flow hedges to
hedge the foreign exchange risk related to the remaining portion of
interest cash flows on the issued bond. The accumulated profit or loss
for the part of these cross-currency swaps designated as cash flow
hedges is initially recorded in hedging reserve and recycled to profit
or loss at the time when the related interest cash flows are settled.
The Parent Company separates the foreign currency basis spread from
cross-currency swaps and excludes it from the hedge relationship as
cost of hedging that is initially recognized and subsequently measured
at fair value and recorded in cost of hedging reserve in equity.
Deferred tax
Deferred tax assets are recognized to the extent it is probable that
future taxable profit will be available against which the unused tax
losses, unused tax credits and deductible temporary differences can
be utilized. The company continually evaluates the probability of
utilizing its deferred tax assets and considers both positive and
negative evidence in its assessment. Evaluation takes into account that
Finnish Nokia entities can balance their taxable profits via the group
contribution system. At 31 December 2022, the company concluded
based on its assessment that it is probable that it will be able to utilize
certain deductible temporary differences and re-recognized deferred
tax assets of EUR 7 million. At 31 December 2022, the company
had derecognized deferred tax assets of EUR 59 million related to
unused tax credits and EUR 24 million related to deductible temporary
differences, the use of which was not considered probable and no
deferred tax asset has been therefore booked.
Notes to the Parent Company financial statements
continued
Derivative financial instruments
All derivatives are recognized initially at fair value on the date a
derivative contract is entered into and subsequently remeasured at
fair value. The method of recognizing the resulting gain or loss varies
according to whether the derivatives are designated and qualify under
hedge accounting.
Derivatives not designated in hedge accounting relationships
carried at fair value through profit and loss
Forward foreign exchange contracts are valued using the forward
exchange rate of the statement of financial position date. Changes
in fair value are measured by comparing these rates with the
original contract-forward rate. Currency options are valued using
the Garman & Kohlhagen option valuation model on the statement
of financial position date. Changes in fair value are recognized in
the income statement.
Fair values of forward rate agreements, interest rate options, futures
contracts and exchange-traded options are calculated based on
quoted market rates at each statement of financial position date.
Discounted cash flow method is used to value interest rate and
cross-currency swaps. Changes in fair value are recognized in the
income statement.
Interest income or expense on interest rate derivatives is accrued
in the income statement during the financial year.
Hedge accounting
The Parent Company may apply hedge accounting on certain forward
foreign exchange contracts, certain options or option strategies, and
interest rate derivatives. Qualifying options and option strategies have
zero net premium or a net premium paid. For option structures, the
critical terms of the bought and sold options are the same and the
nominal amount of the sold option component is no greater than that
of the bought option.
The Parent Company applies fair value hedge accounting to reduce
exposure to fair value fluctuations of interest-bearing liabilities due
to changes in interest rates and foreign exchange rates. Interest rate
swaps and cross-currency swaps are used aligned with the hedged
items to hedge interest rate risk and associated foreign exchange risk.
The Parent Company’s borrowings are carried at amortized cost.
Changes in the fair value of derivatives designated and qualifying
as fair value hedges, together with any changes in the fair value
of hedged liabilities attributable to the hedged risk, are recorded
in financial income and expenses in the income statement.
The Parent Company separates the foreign currency basis spread
from cross-currency swaps and excludes it from the hedged risk as
cost of hedging that is initially recognized and subsequently measured
at fair value and recorded in cost of hedging reserve in equity. If a
hedge relationship no longer meets the criteria for hedge accounting,
hedge accounting ceases, cost of hedging recorded in cost of hedging
reserve is immediately expensed and any fair value adjustments
made to the carrying amount of the hedged item while the hedge
was effective are recognized in financial income and expenses in
the income statement based on the effective interest method.
2. Personnel expenses
EURm
Salaries and wages
Share-based payments
Pension expenses
Social security expenses
Total
Average number of employees
Marketing
Administration
Total average
Number of employees as of December 31
2022
37
6
6
1
50
2022
8
214
222
212
2021
30
9
5
1
45
2021
7
232
238
227
In 2022, Nokia changed the presentation of average number of employees. The comparative amounts have been recast accordingly.
Management compensation
Refer to Note 31, Related party transactions in the consolidated financial statements.
3. Auditor’s fees
Deloitte Oy served as our auditor for the period from January 1 to December 31, 2022. The auditor is elected annually by our shareholders at
the Annual General Meeting for the financial year commencing next after the election. The following table presents fees by type paid to
Deloitte’s network of firms for the years ended 31 December.
EURm
Audit fees
Audit-related fees
Tax fees
Other fees
Total
Parent Company
Nokia Group
2022
10
–
–
–
10
2021
10
1
–
–
11
2022
23
1
–
–
24
2021
22
2
–
–
24
In 2022, Deloitte Oy performed non-audit services for the Parent company for total fees of EUR 261 thousand (EUR 208 thousand in 2021).
These services included services described in Auditing Act 1:1.2 § for EUR 18 thousand (EUR 43 thousand in 2021) and other non-audit services
for EUR 243 thousand (EUR 208 thousand in 2021).
4. Other operating income and expenses
EURm
Other operating income
Rental income
Gain on sale of non-current investments
Other income
Total
Other operating expenses
Divestment Provision
Loss on sale of other tangible assets
Land area rehabilitation
Other expenses
Total
2022
2021
3
–
4
7
(2)
(1)
–
–
(3)
3
10
6
19
–
(4)
(5)
(7)
(16)
204
NOKIA IN 2022
NOKIA IN 2022
205
Financial statements Notes to the Parent Company financial statements
continued
5. Financial income and expenses
EURm
Income from non-current investments
Dividend income from Group companies
Total
Interest and other financial income
Interest income from Group companies
Interest income from other companies
Foreign exchange gains/losses, net
Other financial income from other companies
Gain on sale of shares and businesses
Total
Interest and other financial expenses
Interest expenses to Group companies
Interest expenses to other companies
Other financial expenses to other companies
Total
2022
401
401
235
63
55
22
2
377
(115)
(128)
(19)
(262)
2021
600
600
173
4
70
49
–
296
(8)
(122)
(33)
(163)
Financial income and expenses include EUR 265 million expense related to derivative financial instruments subject to hedge accounting
(EUR 25 million expense in 2021) and EUR 262 million income related to liabilities subject to fair value hedge accounting (EUR 25 million income
in 2021).
6. Group contributions
EURm
Granted
Received
Total
7. Income taxes
EURm
Current tax
Tax relating to previous financial years
Deferred tax
Total
2022
(560)
–
(560)
2022
(7)
–
15
8
2021
(510)
150
(360)
2021
–
3
–
3
8. Tangible assets
EURm
Acquisition cost as of 1 January 2021
Additions
Disposals and retirements
Acquisition cost as of 31 December 2021
Accumulated depreciation as of 1 January 2021
Disposals and retirements
Depreciation(1)
Accumulated depreciation as of 31 December 2021
Net book value as of 1 January 2021
Net book value as of 31 December 2021
Acquisition cost as of 1 January 2022
Additions
Disposals and retirements
Acquisition cost as of 31 December 2022
Accumulated depreciation as of 1 January 2022
Disposals and retirements
Depreciation(1)
Accumulated depreciation as of 31 December 2022
Net book value as of 1 January 2022
Net book value as of 31 December 2022
(1) Recognized in selling, general and administrative expenses.
9. Investments
EURm
Investments in subsidiaries
Net carrying amount as of 1 January
Additions
Disposals
Impairments
Net carrying amount as of 31 December
Non-current interest-bearing financial investments
Net carrying amount as of 1 January
Additions
Disposals
Reclassification
Net carrying amount as of 31 December
Other non-current financial investments
Net carrying amount as of 1 January
Net carrying amount as of 31 December
Subsidiaries and associated companies are presented in Note 29, Group companies in the consolidated financial statements.
10. Prepaid expenses and accrued income
EURm
Expected future cash settlement to acquire non-controlling interest in Nokia Shanghai Bell(1)
Accrued interest
Prepaid and accrued royalty income
Other accrued income from Group companies
Other prepaid expenses and accrued income from other companies
Total
(1) Refer to Note 30, Significant partly-owned subsidiaries in the consolidated financial statements.
206
NOKIA IN 2022
NOKIA IN 2022
Land and
water areas
9
–
–
9
–
–
–
–
9
9
9
–
–
9
–
–
–
–
9
9
Buildings
164
–
(1)
163
(81)
–
(5)
(86)
83
77
163
1
(4)
160
(86)
3
(5)
(88)
77
72
Machinery
and equipment
16
–
–
16
(13)
–
(1)
(14)
3
2
16
–
–
16
(14)
–
–
(14)
2
2
Other tangible
assets and
advance
payments
15
5
(15)
5
(5)
5
–
–
10
5
5
–
–
5
–
–
(1)
(1)
5
4
Total
204
5
(16)
193
(99)
5
(6)
(100)
105
93
193
1
(4)
190
(100)
3
(6)
(103)
93
87
2022
2021
18 661
34
–
–
18 695
18 657
25
(15)
(6)
18 661
–
763
(14)
(52)
697
1
1
2022
482
72
–
50
17
621
–
–
–
–
–
1
1
2021
503
56
5
71
19
654
207
Financial statements
Notes to the Parent Company financial statements
continued
11. Shareholders’ equity
EURm
As of 1 January 2021
Settlement of share-based payments
Net fair value gains/(losses)
Profit for the year
As of 31 December 2021
As of 1 January 2022
Settlement of share-based payments
Acquisition of treasury shares(2)
Net fair value gains/(losses)
Dividends
Profit for the year
As of 31 December 2022
Share
capital
Share
premium
Fair value and
other reserves
246
–
–
–
246
246
–
–
–
–
–
246
46
–
–
–
46
46
–
–
–
–
–
46
(18)
–
33
–
15
15
–
–
16
–
–
31
Reserve for
invested
unrestricted
equity
15 248
70
–
–
15 318
15 318
73
(300)
–
–
–
15 091
Retained
earnings(1)
1 483
–
–
482
1 965
1 965
–
–
–
(337)
378
2 006
Total
17 005
70
33
482
17 590
17 590
73
(300)
16
(337)
378
17 419
(1) Includes treasury shares of EUR 344 million reducing the amount of retained earnings.
(2) In 2022, Nokia Corporation repurchased 63 963 583 own shares as part of the share buyback program announced on 3 February 2022. Shares were repurchased using the reserve for invested
unrestricted equity. The repurchased shares were cancelled on 8 December 2022.
In December 2022, Nokia’s Board of Directors decided to launch the second phase of the share buyback program based on the authorization
granted by Nokia’s Annual General Meeting on 5 April 2022. The repurchases started on 2 January 2023 and will end at the latest by
21 December 2023. The aggregate purchase price of all shares to be acquired under the second phase of the program shall not exceed
EUR 300 million. The maximum number of shares that can be repurchased is 275 000 000 shares corresponding to approximately 5% of
the total number of shares in Nokia. The repurchases will be funded using funds in the reserve for invested unrestricted equity and hence
the repurchases will reduce Nokia’s total unrestricted equity. The repurchased shares will be canceled.
12. Distributable earnings
EURm
Reserve for invested unrestricted equity
Retained earnings
Profit/(loss) for the year
Unrestricted equity total
Distributable earnings total
13. Fair value and other reserves
EURm
As of 1 January 2021
Fair value and cash flow hedges
Net fair value gains/(losses)
Transfer to income statement
As of 31 December 2021
As of 1 January 2022
Fair value and cash flow hedges
Net fair value gains/(losses)
Transfer to income statement
As of 31 December 2022
2022
15 091
1 628
378
17 096
17 096
2021
15 318
1 483
482
17 283
17 283
Hedging reserve
Cost of hedging
Total
Gross
(16)
29
(1)
12
12
32
(2)
42
Tax
–
–
–
–
–
(8)
–
(8)
Net
(16)
Gross
(2)
29
(1)
12
12
24
(2)
34
5
–
3
3
(6)
–
(3)
Tax
–
–
–
–
–
–
–
–
Net
(2)
5
–
3
3
(6)
–
(3)
Gross
(18)
34
(1)
15
15
26
(2)
39
Tax
–
–
–
–
–
(8)
–
(8)
Net
(18)
34
(1)
15
15
18
(2)
31
14. Fair value of financial instruments
Financial assets and liabilities recorded at fair value are categorized based on the amount of unobservable inputs used to measure their fair
value. Three hierarchical levels are based on an increasing amount of judgment associated with the inputs used to derive fair valuation for
these assets and liabilities, level 1 being market values for exchange traded products, level 2 being primarily based on publicly available market
information, and level 3 requiring most management judgment. At the end of each reporting period, Nokia categorizes its financial assets
and liabilities to the appropriate level of fair value hierarchy. Items carried at fair value in the following table are measured at fair value on a
recurring basis.
Carrying amounts
Fair value(1)
EURm
Amortized cost
Level 2
Level 3
Total
Total
As of 31 December 2022
Non-current Interest-Bearing financial investments
Other non-current financial investments
Non-current loan receivables from Group companies
Non-current loan receivables from other companies
Current loan receivables from Group companies
Other current financial assets from Group companies
including derivatives
Other current financial assets from other companies
including derivatives
Current financial investments
Cash and cash equivalents
Total financial assets
Long-term interest-bearing liabilities to other companies
Short-term interest-bearing liabilities to Group companies
Short-term interest-bearing liabilities to other companies
Other financial liabilities to Group companies including derivatives
Other financial liabilities to other companies including derivatives
Total financial liabilities
697
–
2 778
1
4 668
–
–
–
–
–
–
270
–
1 445
2 107
11 696
3 984
11 004
103
–
19
15 110
182
1 631
1 250
3 333
–
–
–
182
477
659
–
1
–
–
–
–
–
–
–
1
–
–
–
–
482
482
697
1
2 778
1
4 668
659
1
2 778
1
4 668
270
270
182
3 076
3 357
15 030
3 984
11 004
103
182
978
16 251
182
3 076
3 357
14 992
3 974
11 004
103
182
978
16 241
Carrying amounts
Fair value(1)
EURm
Amortized cost
Level 2
Level 3
Total
Total
As of 31 December 2021
Non-current financial investments
Non-current loan receivables from Group companies
Non-current loan receivables from other companies
Current loan receivables from Group companies
Other current financial assets from Group companies
including derivatives
Other current financial assets from other companies
including derivatives
Current financial investments
Cash and cash equivalents
Total financial assets
Long-term interest-bearing liabilities to other companies
Short-term interest-bearing liabilities to Group companies
Short-term interest-bearing liabilities to other companies
Other financial liabilities to Group companies including derivatives
Other financial liabilities to other companies including derivatives
Total financial liabilities
–
2 765
1
5 060
–
–
–
–
–
151
–
520
2 522
10 868
4 299
10 743
26
–
–
15 068
139
1 994
1 991
4 275
–
–
–
118
229
347
1
–
–
–
–
–
–
–
1
–
–
–
–
504
504
1
2 765
1
5 060
1
2 765
1
5 060
151
151
139
2 514
4 513
15 144
4 299
10 743
26
118
733
15 919
139
2 514
4 513
15 144
4 512
10 743
26
118
733
16 132
(1) The following fair value measurement methods are used for items not carried at fair value: The fair values of long-term interest-bearing liabilities are primarily based on publicly available market
information (level 2). The fair values of other assets and liabilities, including loans receivable and loans payable are primarily based on discounted cash flow analysis (level 2). The fair value is estimated
to equal the carrying amount for current financial assets and financial liabilities due to limited credit risk and short time to maturity. Refer to Note 2, Significant accounting policies in the consolidated
financial statements.
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209
Financial statements Notes to the Parent Company financial statements
continued
The level 2 category includes financial assets and liabilities measured using a valuation technique based on assumptions that are supported
by prices from observable current market transactions. These include assets and liabilities with fair values based primarily on publicly available
market information, financial assets with fair values based on broker quotes and assets that are valued using the Parent Company’s own
valuation models whereby the material assumptions are market observable. The majority of the Parent Company’s cash equivalents, current
investments, over-the-counter derivatives and certain other products are included within this category.
The level 3 financial assets category includes investments in unlisted equities and unlisted venture funds. The fair value of level 3 investments
is determined using one or more valuation techniques where the use of the market approach generally consists of using comparable market
transactions, while the use of the income approach generally consists of calculating the net present value of expected future cash flows. For
unlisted funds, the selection of appropriate valuation techniques by the fund managing partner may be affected by the availability and reliability
of relevant inputs. In some cases, one valuation technique may provide the best indication of fair value while in other circumstances multiple
valuation techniques may be appropriate.
The inputs generally considered in determining the fair value of level 3 investments include the original transaction price, recent transactions
in the same or similar instruments, completed or pending third-party transactions in the underlying investment or comparable issuers,
subsequent rounds of financing, recapitalizations or other transactions undertaken by the issuer, offerings in the equity or debt capital markets,
and changes in financial ratios or cash flows, adjusted as appropriate for liquidity, credit, market and/or other risk factors. The fair value may be
adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the managing partner in the absence of
market information.
The level 3 investments are remeasured for each reporting date taking into consideration any changes in estimates, projections and
assumptions, as well as any changes in economic and other relevant conditions. Level 3 financial liabilities include a conditional obligation to
China Huaxin as part of the Nokia Shanghai Bell definitive agreements, where China Huaxin obtained the right to fully transfer its ownership
interest in Nokia Shanghai Bell to Nokia in exchange for a future cash settlement. The fair value of the liability is calculated using the net present
value of the expected future cash settlement. Change in this liability does not have an impact on income statement. Refer to Note 30, Significant
partly-owned subsidiaries in the consolidated financial statements.
Reconciliation of the opening and closing balances of level 3 financial assets and liabilities:
EURm
As of 1 January 2021
Other movements
As of 31 December 2021
As of 1 January 2022
Other movements
As of 31 December 2022
Level 3
Financial
Assets
Level 3
Financial
Liabilities
1
–
1
1
–
1
(420)
(84)
(504)
(504)
22
(482)
15. Derivative financial instruments
EURm
As of 31 December 2022
Fair value hedges
Interest rate swaps
Cash flow and fair value hedges(3)
Cross-currency interest rate swaps
Derivatives not designated in hedge accounting relationships carried
at fair value through profit and loss
Forward foreign exchange contracts, other companies
Forward foreign exchange contracts, Group companies
Currency options bought, other companies
Currency options bought, Group companies
Currency options sold, other companies
Currency options sold, Group companies
Total
As of 31 December 2021
Fair value hedges
Interest rate swaps
Cash flow and fair value hedges(3)
Cross-currency interest rate swaps
Derivatives not designated in hedge accounting relationships carried
at fair value through profit and loss
Forward foreign exchange contracts, other companies
Forward foreign exchange contracts, Group companies
Currency options bought, other companies
Currency options bought, Group companies
Currency options sold, other companies
Currency options sold, Group companies
Total
Assets
Liabilities
Fair value(1)
Notional(2)
Fair value(1)
Notional(2)
–
–
180
270
2
–
–
–
452
–
15
123
152
–
–
–
–
290
–
–
11 130
6 428
192
–
–
–
17 750
185
265
9 957
7 708
17
1
–
–
18 133
(99)
2 500
(123)
938
(274)
(179)
–
–
–
(2)
(677)
–
(68)
(161)
(117)
–
–
–
–
(346)
11 086
8 858
–
–
–
192
23 574
–
441
11 537
7 283
–
–
1
17
19 279
(1) Included in other current financial assets and other current financial liabilities in the statement of financial position.
(2) Includes the gross amount of all notional values for contracts that have not yet been settled or cancelled. The amount of notional value outstanding is not necessarily a measure or indication of market
risk as the exposure of certain contracts may be offset by that of other contracts.
(3) Cross-currency interest rate swaps have been designated partly as fair value hedges and partly as cash flow hedges.
Derivative financial instrument designation to hedging relationships in the table above presents the use of and accounting for derivative
financial instruments from the perspective of the Parent Company’s standalone financial statements, which may differ from the designation in
the consolidated financial statements. Refer to 22, Derivative and firm commitment assets and liabilities.
210
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211
Financial statements Notes to the Parent Company financial statements
continued
16. Provisions
EURm
Divestment-related
Other
Total
17. Interest-bearing liabilities
Issuer/borrower
Nokia Corporation
Nokia Corporation
Nokia Corporation
Nokia Corporation
Nokia Corporation
Nokia Corporation
Nokia Corporation
Nokia Corporation
Nokia Corporation
Nokia Corporation
Total
Instrument
2.00% Senior Notes
EIB R&D Loan
NIB R&D Loan(2)
2.375% Senior Notes
2.00% Senior Notes
4.375% Senior Notes
3.125% Senior Notes
6.625% Senior Notes
Other liabilities to Group companies
Other liabilities to other companies
Currency
EUR
EUR
EUR
EUR
EUR
USD
EUR
USD
Nominal (million)
750
500
250
500
750
500
500
500
Final maturity
March 2024
February 2025
May 2025
May 2025
March 2026
June 2027
May 2028
May 2039
2022
38
10
48
2021
33
10
43
Carrying amount EURm(1)
2022
738
500
250
480
719
439
459
482
11 004
20
15 091
2021
761
500
250
500
764
466
500
557
10 743
26
15 068
18. Accrued expenses and other liabilities
EURm
Accrued interest expenses
Salaries and social expenses
Other accrued expenses to Group companies
Other accrued expenses to other companies
Total
19. Commitments and contingencies
EURm
Contingent liabilities on behalf of Group companies
Leasing guarantees
Other guarantees
Contingent liabilities on behalf of other companies
Other guarantees
2022
50
12
49
20
131
2021
45
13
53
27
138
2022
2021
600
1 249
–
551
1 281
–
As of 31 December 2022 operating lease commitments amounted to EUR 2 million (EUR 1 million in 2021). In 2022 Nokia has made a
EUR 12 million commitment related to purchases of own shares.
20. Loans granted to the management of the Company
There were no loans granted to the members of the Nokia Leadership Team and Board of Directors as of 31 December 2022 or 2021.
(1) Carrying amount includes EUR 120 million of fair value losses (EUR 166 million of fair value gains in 2021) related to fair value hedge accounting relationships, including EUR 180 million of fair value gains
(EUR 203 million in 2021) related to discontinued fair value hedge accounting relationships that are amortized over the life of the respective Senior Notes.
(2) The loan from the Nordic Investment Bank (NIB) is repayable in three equal annual instalments in 2023, 2024 and 2025.
21. Notes to the statement of cash flows
EURm
Significant credit facilities and funding programs:
Committed/Uncommitted
Committed
Uncommitted
Uncommitted
Uncommitted
Total
Financing arrangement
Revolving Credit Facility(1)
Finnish Commercial Paper Programme
Euro-Commercial Paper Programme
Euro Medium Term Note Programme(2)
(1) The facility has its maturity in June 2026, except for EUR 88 million having its maturity in June 2024.
(2) All euro-denominated bonds have been issued under the Euro Medium Term Note Programme.
Currency
EUR
EUR
EUR
EUR
Nominal (million)
1 500
750
1 500
5 000
2022
–
–
–
2 500
2 500
2021
–
–
–
2 500
2 500
All borrowings and credit facilities presented in the tables above are senior unsecured and have no financial covenants.
Adjustments for
Depreciation and amortization
Income tax
Financial income and expenses, net
Impairment charges
Asset retirements
Share-based payment
Disposal of businesses
Group contributions
Other financial items
Total
2022
6
(8)
(87)
–
–
73
–
560
(401)
143
2021
1
(3)
(133)
6
11
70
(10)
360
(600)
(298)
212
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213
Financial statements
Notes to consolidated financial statements
continued
Signing of the Annual Accounts and the
Review of the Board of Directors 2022
22. Nokia companies
Refer to Note 29, Group companies in the consolidated financial statements.
23. The shares of the Parent Company
Refer to Note 18, Equity in the consolidated financial statements.
24. Financial risk management
Nokia has a systematic and structured approach to financial risk management across business operations and processes. Financial risk
management policies and procedures are group-wide, and there are no separate or individual financial risk management policies or procedures
for the Parent Company. Hence, internal and external financial risk exposures and transactions are managed only in the context of the Nokia
financial risk management strategy. The Parent Company is the centralized external dealing entity in Nokia. The Parent Company executes all
significant external financial transactions with banks based on Nokia’s financial risk management strategy and executes identical opposite
internal financial transactions with Nokia companies as required. Refer to Note 32, Financial Risk Management in the consolidated financial
statements.
25. Subsequent events
Offer to purchase outstanding notes
On 9 February 2023 Nokia announced that it commenced an offer to purchase the outstanding EUR 750 million 2.00% notes due 15 March
2024 (the “2024 Notes”), EUR 500 million 2.375% notes due 15 May 2025 (the “2025 Notes”) and EUR 750 million 2.00% notes due 11 March
2026 (the “2026 Notes”), up to a maximum cash consideration of EUR 700 million (the “Tender Offer”). The purpose of the Tender Offer is to
manage the overall indebtedness of Nokia and to extend Nokia’s debt maturity profile in an efficient manner.
On 16 February 2023 the Tender Offer expired. Nokia accepted tenders for EUR 372 million (49.66% of the nominal amount) of the 2024 Notes,
EUR 208 million (41.57% of the nominal amount) of the 2025 Notes and EUR 120 million (15.96% of the nominal amount) of the 2026 Notes.
The Tender Offer was settled on 21 February 2023.
New euro-denominated notes
On 21 February 2023 Nokia issued EUR 500 million 4.375% sustainability-linked Notes due August 2031 under its 5 billion Euro Medium-Term
Note Programme. The proceeds of the new notes are intended to fund the Tender Offer and for general corporate purposes.
The distributable funds on the statement of financial position of the Company on 31 December 2022 were EUR 17 096 million, of which the
profit for the financial year 2022 was EUR 378 million.
The Board of Directors proposes to the Annual General Meeting 2023 that based on the statement of financial position to be adopted for
the financial year ended on 31 December 2022, no dividend is distributed by a resolution of the Annual General Meeting for the financial year
ended on 31 December 2022. Instead, the Board proposes to the Annual General Meeting to be authorized to decide, in its discretion, on the
distribution of an aggregate maximum of EUR 0.12 per share as dividend from the retained earnings and/or as assets from the reserve for
invested unrestricted equity.
On the date of issuing the financial statements for 2022 the number of the Company’s shares is 5 632 297 576, and the authorization would
equal to an approximate maximum of EUR 676 million.
The proposed total authorization for asset distribution is in line with the Company’s dividend policy.
2 March 2023
Sari Baldauf
Chair
Bruce Brown
Lisa Hook
Søren Skou
Thomas Dannenfeldt
Jeanette Horan
Edward Kozel
Thomas Saueressig
Carla Smits-Nusteling
Kai Öistämö
Pekka Lundmark
President and CEO
The Auditor’s note
Auditor’s Report has been issued today
Helsinki, 2 March 2023
Deloitte Oy
Authorized Public Accountant Firm
Marika Nevalainen
APA
214
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215
Financial statements Our application of materiality
We define materiality as the magnitude of misstatement in the
financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed
or influenced. We use materiality both in planning the scope of our
audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality
for the financial statements as a whole as follows:
Materiality
Basis for
determining
materiality
Rationale for
the benchmark
applied
Materiality in the Group financial statements
€185 million
0.8% of consolidated net sales and 2.0% of gross
profit
Given the importance of net sales and gross profit to
investors and other users of the financial statements,
we have used these as primary benchmarks.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period. These matters were addressed
in the context of our audit of the financial statements as a whole
and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
We have also addressed the risk of management override of internal
controls. This includes consideration of whether there was evidence
of management bias that represented a risk of material misstatement
due to fraud.
Auditor’s report
To the Annual General Meeting of Nokia Corporation
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of Nokia Corporation
(business identity code 0112038-9) for the year ended 31 December
2022. The financial statements comprise the consolidated balance
sheet, income statement, statement of comprehensive income,
statement of cash flows, statement of changes in shareholders’
equity and notes, including a summary of significant accounting
policies, as well as the parent company’s balance sheet, income
statement, statement of cash flows and notes.
In our opinion
■ the consolidated financial statements give a true and fair view
of the group’s financial position, financial performance and cash
flows in accordance with International Financial Reporting Standards
(IFRS) as adopted by the EU.
■ the financial statements give a true and fair view of the parent
company’s financial performance and financial position in
accordance with the laws and regulations governing the preparation
of financial statements in Finland and comply with statutory
requirements.
Our opinion is consistent with the additional report submitted to the
Audit Committee.
Basis for opinion
We conducted our audit in accordance with good auditing practice in
Finland. Our responsibilities under good auditing practice are further
described in the Auditor’s Responsibilities for the Audit of the Financial
Statements section of our report.
We are independent of the parent company and of the group
companies in accordance with the ethical requirements that are
applicable in Finland and are relevant to our audit, and we have fulfilled
our other ethical responsibilities in accordance with these requirements.
In our best knowledge and understanding, the non-audit services that
we have provided to the parent company and group companies are in
compliance with laws and regulations applicable in Finland regarding
these services, and we have not provided any prohibited non-audit
services referred to in Article 5(1) of regulation (EU) 537/2014.
The non-audit services that we have provided have been disclosed
in note 3 to the parent company financial statements.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
Auditor’s report
Key audit matter
How our audit addressed the key audit matter
Revenue recognition – Accounting for significant and complex contracts
Refer to Notes 2 and 6 to the financial statements
The Company recognises revenue in accordance with International
Financial Reporting Standard 15 Revenue from Contracts with
Customers. Certain contracts that the Company enters into are
particularly significant in value and contain highly complex terms and
conditions which impact revenue recognition. Such complexities
include the determination of the standalone selling price, combination
of contracts assessments, and accounting for contractual discounts
and modifications.
Given the level of complexity and management judgement involved
in the accounting for significant and complex contracts, performing
audit procedures to evaluate the reasonableness of these accounting
judgements required a high degree of auditor judgement, and there
was significant audit effort in obtaining sufficient audit evidence.
This matter is a significant risk of material misstatement referred
to in EU Regulation No 537/2014, point (c) of Article 10(2).
Income taxes – Realisability of deferred tax assets in Finland
Refer to Notes 2 and 11 to the financial statements
The Company recognises deferred income taxes for tax attributes
and for differences between the financial statement and tax basis
of assets and liabilities in accordance with International Accounting
Standards 12 Income Taxes. Deferred tax assets and liabilities are
determined using the balance sheet liability method for all temporary
differences arising between the tax bases of assets and liabilities and
their carrying amounts in the consolidated financial statements.
Deferred tax assets are recognised to the extent it is probable that
future taxable profit will be available against which the unused tax
losses, unused tax credits and deductible temporary differences
can be utilised. Deferred tax assets are assessed for realisability
as of each reporting date.
As of December 31, 2022 the Company has determined that owing
to underlying improvements in operating performance that are
expected to be sustained in the longer term, there is sufficient
evidence to recognize Finnish deferred tax assets of EUR 2.5 billion,
resulting in an income tax benefit of EUR 2.5 billion.
The determination that it is probable that sufficient taxable profit will
be generated in Finland in the future to realize deferred tax assets
requires management to make significant judgments and estimates
related to future taxable profit. Therefore, performing audit
procedures to evaluate the reasonableness of management’s
estimates of future taxable profit and assessment that realization of
the deferred tax assets is probable required a high degree of auditor
judgment and an increased extent of effort, including the need to
involve our income tax specialists.
Our audit procedures related to the determination of the
appropriateness of the accounting for significant and complex contracts
included the following, among others:
■ We assessed management’s accounting policy in relation to the areas
of complexity identified in all significant and complex contracts to
determine compliance of the policy with IFRS 15;
■ We tested the effectiveness of controls over revenue recognition of
significant and complex contracts, specifically focusing on controls
relating to the areas of accounting complexity;
■ We utilised data analytics to identify those contracts with higher
levels of risk based on size and complexity;
■ We analyzed the terms and conditions of significant and complex
contracts, and obtained and read the Company’s accounting papers
setting out management’s accounting conclusions, along with other
supporting audit evidence;
■ We made inquiries of senior management in the finance and
operations teams relevant to the significant and complex contracts
regarding commercial and financial considerations relating to those
contracts;
■ We assessed whether management’s conclusions, including
determination of standalone selling price, were in compliance with
IFRS 15.
Our audit procedures related to evaluating and challenging the
Company’s determination that it is probable that sufficient taxable
profit will be generated in Finland in the future to realise deferred tax
assets included the following, among others:
■ We tested the effectiveness of controls over deferred tax assets,
including management’s controls over the estimates of future
taxable profit in Finland;
■ With the assistance of our income tax specialists, we evaluated
whether the sources of management’s estimated taxable income
were of the appropriate character and sufficient to utilize the
deferred tax assets under the relevant tax law;
■ We evaluated whether the estimates of future taxable profit were
consistent with evidence obtained in other areas of the audit;
■ We evaluated the entity’s recent history of profitability together
with management’s ability to accurately estimate taxable income;
■ We tested the completeness and accuracy of the Finnish deferred
tax balance to be recognized through tracing to supporting audit
evidence; and
■ We evaluated management’s disclosures to determine whether they
were in line with the requirements of IAS 12.
This matter is a significant risk of material misstatement referred
to in EU Regulation No 537/2014, point (c) of Article 10(2).
There are no significant risks of material misstatement referred to in EU regulation No 537/2014, point (c) of Article 10(2) relating to the parent
company’s financial statements.
216
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217
Financial statements Auditor’s ESEF assurance report
Independent Auditor’s Report on Nokia Oyj’s ESEF
Consolidated Financial Statements
To the Board of Directors of Nokia Oyj
We have performed a reasonable assurance engagement on whether
the iXBRL tagging of the consolidated financial statements included
in the digital files (549300A0JPRWG1KI7U06-2022-12-31-fi.zip) of
Nokia Oyj for the financial year 1.1.–31.12.2022 has been prepared
in accordance with the requirements of Article 4 of Commission
Delegated Regulation (EU) 2018/815 (ESEF RTS).
Responsibilities of the Board of Directors and the Managing Director
The Board of Directors and Managing Director are responsible for the
preparation of the report of the Board of Directors and financial
statements (ESEF financial statements) that comply with the
requirements of ESEF RTS. This responsibility includes
■ preparation of ESEF financial statements in XHTML format in
accordance with Article 3 of ESEF RTS
The engagement includes procedures to obtain evidence on:
■ whether the tagging of the consolidated financial statement’s
primary statements in the ESEF financial statements has been
prepared in all material respects in accordance with the
requirements of Article 4 of ESEF RTS
■ whether the tagging of the consolidated financial statements’
disclosures and identifying information in the ESEF financial
statements has been prepared in all material respects in
accordance with the requirements of Article 4 of ESEF RTS, and
■ whether the ESEF financial statements are consistent with the
audited financial statements.
The nature, timing and extent of the procedures selected depend
on the auditor’s judgment. This includes the assessment of risk of
material departures from the requirements set out in ESEF RTS,
whether due to fraud or error.
We believe that the evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
■ tagging the consolidated financial statements’ primary statements,
disclosures and identifying information in the ESEF financial
statements with iXBRL tags in accordance with Article 4 of
ESEF RTS, and
■ ensuring consistency between ESEF financial statements and
audited financial statements
Opinion
In our opinion, the tagging of the consolidated financial
statements in the ESEF financial statements
(549300A0JPRWG1KI7U06-2022-12-31-fi.zip) of Nokia Oyj for the
financial year 1.1.–31.12.2022 has been prepared in all material
respects in accordance with the requirements of Article 4 of ESEF RTS.
Our audit opinion on the consolidated financial statements of Nokia
Oyj for the financial year ended 1.1.–31.12.2022 has been expressed
in our auditor’s report dated 2.3.2023. In this report, we do not
express an audit opinion or any other assurance conclusion on the
consolidated financial statements.
Helsinki, 2 March 2023
Deloitte Oy
Audit firm
Marika Nevalainen
Authorised Public Accountant (KHT)
The Board of Directors and the Managing Director are also responsible
for such internal control as they determine is necessary to enable the
preparation of ESEF financial statements in accordance with the
requirements of ESEF RTS.
Auditor’s Independence and Quality Control
We are independent of the company in accordance with the ethical
requirements that are applicable in Finland and are relevant to the
engagement we have performed, and we have fulfilled our other
ethical responsibilities in accordance with these requirements.
The auditor applies International Standard on Quality Management 1
and, accordingly, an audit firm shall design, implement and maintain
a system of quality control including policies and procedures regarding
compliance with ethical requirements, professional standards,
and applicable legal and regulatory requirements.
Auditor’s Responsibilities
In accordance with the engagement letter, we express an opinion on
whether the tagging of the consolidated financial statements in the
ESEF financial statements has been prepared in all material respects
in accordance with the requirements of Article 4 of ESEF RTS.
We conducted a reasonable assurance engagement in accordance
with International Standard on Assurance Engagements ISAE 3000.
Auditor’s report
continued
Responsibilities of the Board of Directors and the Managing
Director for the Financial Statements
The Board of Directors and the Managing Director are responsible for
the preparation of consolidated financial statements that give a true
and fair view in accordance with International Financial Reporting
Standards (IFRS) as adopted by the EU, and of financial statements
that give a true and fair view in accordance with the laws and
regulations governing the preparation of financial statements in
Finland and comply with statutory requirements. The Board of
Directors and the Managing Director are also responsible for such
internal control as they determine is necessary to enable the
preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Board of Directors and the
Managing Director are responsible for assessing the parent company’s
and the group’s ability to continue as going concern, disclosing, as
applicable, matters relating to going concern and using the going
concern basis of accounting. The financial statements are prepared
using the going concern basis of accounting unless there is an
intention to liquidate the parent company or the group or cease
operations, or there is no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial
Statements
Our objectives are to obtain reasonable assurance on whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level
of assurance, but is not a guarantee that an audit conducted in
accordance with good auditing practice will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in aggregate, they
could reasonably be expected to influence the economic decisions
of users taken on the basis of the financial statements.
As part of an audit in accordance with good auditing practice, we
exercise professional judgment and maintain professional skepticism
throughout the audit. We also:
■ Identify and assess the risks of material misstatement of the
financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis
for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
■ Obtain an understanding of internal control relevant to the audit
in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the parent company’s or the group’s
internal control.
■ Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures
made by management.
■ Conclude on the appropriateness of the Board of Directors’ and the
Managing Director’s use of the going concern basis of accounting and
based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt
on the parent company’s or the group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related
disclosures in the financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on
the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the parent company
or the group to cease to continue as a going concern.
■ Evaluate the overall presentation, structure and content of the
financial statements, including the disclosures, and whether the
financial statements represent the underlying transactions and
events so that the financial statements give a true and fair view.
■ Obtain sufficient appropriate audit evidence regarding the financial
information of the entities or business activities within the group to
express an opinion on the consolidated financial statements. We are
responsible for the direction, supervision and performance of the
group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
We also provide those charged with governance with a statement
that we have complied with relevant ethical requirements regarding
independence, and communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence,
and where applicable, related safeguards.
From the matters communicated with those charged with governance,
we determine those matters that were of most significance in the audit
of the financial statements of the current period and are therefore the
key audit matters. We describe these matters in our auditor’s report
unless law or regulation precludes public disclosure about the matter
or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh
the public interest benefits of such communication.
Other reporting requirements
Information on our audit engagement
We were first appointed as auditors by the Annual General Meeting for
the financial year 1.1. - 31.12.2020, and our appointment represents
a total period of uninterrupted engagement of three (3) years.
Other information
The Board of Directors and the Managing Director are responsible for
the other information. The other information comprises the report
of the Board of Directors and the information included in the Annual
Report but does not include the financial statements and our auditor’s
report thereon.
Our opinion on the financial statements does not cover the other
information.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated. With respect to the
report of the Board of Directors, our responsibility also includes
considering whether the report of the Board of Directors has been
prepared in accordance with the applicable laws and regulations.
In our opinion, the information in the report of the Board of Directors
is consistent with the information in the financial statements and the
report of the Board of Directors has been prepared in accordance with
the applicable laws and regulations.
If, based on the work we have performed, we conclude that there
is a material misstatement of the other information, we are required
to report that fact. We have nothing to report in this regard.
Other statements
We support that the financial statements should be adopted. The
proposal by the Board of Directors regarding the use of the profit
shown in the balance sheet (and the distribution of other unrestricted
equity) is in compliance with the Limited Liability Companies Act. We
support that the Members of the Board of Directors of the parent
company and the Managing Director should be discharged from
liability for the financial period audited by us.
Helsinki, 2 March 2023
Deloitte Oy
Audit Firm
Marika Nevalainen
Authorised Public Accountant (KHT)
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Financial statements Other
information
Forward-looking statements
Introduction and use of certain terms
Glossary
Investor information
Contact information
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223
224
227
228
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Other information Forward-looking statements
Introduction and use of certain terms
These statements are based on management’s best assumptions and
beliefs in light of the information currently available to it and are subject
to a number of risks and uncertainties, many of which are beyond our
control, which could cause actual results to differ materially from such
statements. These statements are only predictions based upon our
current expectations and views of future events and developments and
are subject to risks and uncertainties that are difficult to predict because
they relate to events and depend on circumstances that will occur in
the future. Risks and uncertainties that could affect these statements
include but are not limited to the risk factors specified under the section
“Risk factors” of this report and in our other filings or documents
furnished 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.
Introduction and use of certain terms
Nokia Corporation is a public limited liability company incorporated
under the laws of the Republic of Finland and registered to the Finnish
Trade Register since 1896. In this report, any reference to “we,” “us,”
“the Group,” “the company” or “Nokia” means Nokia Corporation
and its consolidated subsidiaries and generally Nokia’s continuing
operations, except where we separately specify that the term means
Nokia Corporation or a particular subsidiary or business segment only
or our discontinued operations. References to “our shares,” matters
relating to our shares or matters of corporate governance refer to the
shares and corporate governance of Nokia Corporation.
Nokia Corporation has published its consolidated financial statements
in euro for periods beginning on or after 1 January 1999. In this
report, references to “EUR,” “euro” or “€” are to the common currency
of the European Economic and Monetary Union, references to
“dollars,” “US dollars,” “USD” or “$” are to the currency of the United
States, and references to “Chinese yuan” or “Chinese yuan renminbi”
or “CNY” are to the official currency of the People’s Republic of China.
Additional terms are defined in the “Glossary.”
Forward-looking statements
Certain statements contained in this report constitute
“forward-looking statements.” Forward-looking statements provide
Nokia’s current expectations of future events and trends based on
certain assumptions and include any statement that does not directly
relate to any current or historical fact. The words “believe,” “expect,”
“expectations,” “anticipate,” “foresee,” “see,” “target,” “estimate,”
“designed,” “aim,” “plan,” “intend,” “influence,” “assumption,”
“focus,” “continue,” “project,” “should,” “is to,” “will,” “strive,” “may”
or similar expressions as they relate to us or our management are
intended to identify these forward-looking statements, as well as
statements regarding:
A)
B)
C)
business strategies, market expansion, growth management, and
future industry trends and megatrends and our plans to address
them;
future performance of our businesses and any future distributions
and dividends;
expectations and targets regarding financial performance, results,
operating expenses, cash flows, 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, income and margins;
D) expectations, plans, timelines or benefits related to changes
in our organizational and operational structure;
E)
market developments in our current and future markets and their
seasonality and cyclicality, including the communications service
provider market, as well as general economic conditions, future
regulatory developments and the expected impact, timing and
duration of the COVID-19 pandemic on our businesses, our supply
chain, our customers’ businesses and the general market and
economic conditions;
F)
our position in the market, including product portfolio and
geographical reach, and our ability to use the same to develop
the relevant business or market and maintain our order pipeline
over time;
G)
any future collaboration or business collaboration agreements or
patent license agreements or arbitration awards, including income
from any collaboration or partnership, agreement or award;
H) timing of the development and delivery
of our products and services;
I)
J)
the outcome of pending and threatened litigation, arbitration,
disputes, regulatory proceedings or investigations by authorities;
restructurings, investments, capital structure optimization efforts,
divestments and our ability to achieve the financial and
operational targets set in connection with any such restructurings,
investments, and capital structure optimization efforts including
our ongoing cost savings program;
K)
future capital expenditures, temporary incremental expenditures
or other R&D expenditures to develop or rollout new products; and
L)
the sustainability and corporate responsibility.
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Other information Glossary
Glossary
2G (Second Generation Mobile Communications): Also known as
GSM (Global System for Mobile Communications): A digital system for
mobile communications that is based on a widely-accepted standard
and typically operates in the 900 MHz, 1800 MHz and 1900 MHz
frequency bands.
3G (Third Generation Mobile Communications): The third generation
of mobile communications standards designed for carrying both voice
and data generally using WCDMA or close variants. See also WCDMA.
3GPP (The Third Generation Partnership Project): A consortium
comprising several standards organizations which develop protocols
for mobile telecommunications. The initial goal was to develop a global
technical specification for a 3G mobile phone system. Since then,
the operations have been extended and today the main focus is
on 5G networks.
Artificial Intelligence (AI): Autonomous and adaptive intelligence
of machines, where machines have the ability to perform tasks in
complex environments without constant guidance by a user and have
the ability to improve performance by learning from experience.
Bandwidth: The width of a communication channel, which affects
transmission speeds over that channel.
Base station: A network element in a mobile network responsible
for radio transmission and reception to or from the mobile station.
Broadband: The delivery of higher bandwidth by using transmission
channels capable of supporting data rates greater than the primary
rate of 9.6 Kbps.
Churn: A measure of the number of customers or subscribers
who leave their service provider, e.g., a mobile operator, during a
given time period.
4G (Fourth Generation Mobile Communications): The fourth
generation of mobile communications standards based on LTE,
offering IP data connections only and providing true broadband
internet access for mobile devices. See also LTE.
5G (Fifth Generation Mobile Communications): The next major
phase of mobile telecommunications standards. 5G is a complete
redesign of network architecture with the flexibility and agility to
support upcoming service opportunities. It delivers higher speeds,
higher capacity, extremely low latency and greater reliability.
6G (Sixth Generation Mobile Communications): The cellular industry
introduces a new generation about every ten years. The next
generation of technology is expected to be introduced by 2030
and is generally referred to as 6G.
Access network: A telecommunications network between a local
exchange and the subscriber station.
Airframe: Our 5G-ready, end-to-end data center solution that
combines the benefits of cloud computing technologies with the
requirements of the core and radio telecommunications world. It is
available in Rackmount and Open Compute Project (OCP) form factors.
This enables the solution to be very scalable: from small distributed
latency-optimized data centers to massive centralized hyperscale
data center deployment.
AirScale Radio Access: A 5G-ready complete radio access generation
that helps operators address the increasing demands of today and
tomorrow. The solution comprises: Nokia AirScale Base Station with
multiband radio frequency elements and system modules; Nokia
AirScale Active Antennas; Cloud RAN with Nokia AirScale Cloud Base
Station Server and the cloud-based AirScale RNC (Radio Network
Controller) for 3G; Nokia AirScale Wi-Fi; common software; and services
which use intelligent analytics and extreme automation to maximize
the performance of hybrid networks.
Alcatel-Lucent: Alcatel-Lucent Group, that has been part of the
Nokia Group since 2016.
Anyhaul: Mobile transport solution for 5G networks covering
microwave, IP, optical and broadband.
Cloud: Cloud computing is a model for enabling ubiquitous,
convenient, on-demand network access to a shared pool of
configurable computing resources (e.g., networks, servers, storage,
applications and services) that can be rapidly provisioned and released
with minimal management effort.
Cloud and Network Services: Our Cloud and Network Services
business group enables CSPs and enterprises to deploy and monetize
5G, cloud-native software and as-a-Service delivery models.
CloudBand: Our cloud management and orchestration solutions
enabling a unified cloud engine and platform for Network Functions
Virtualization (NFV). See also NFV.
Cloud RAN: Cloud RAN refers to all or some of the baseband functions
being run on a commercial off-the-shelf (COTS) computing platform
rather than purpose-built hardware.
Common Software Foundation (CSF): As a coherent software suite,
Nokia’s cloud-native Common Software Foundation is designed to
deliver applications that are hardware- and vendor-agnostic, and
easy to deploy, integrate, use and upgrade.
Converged core: Wireless and fixed access convergence within the
core. As we move towards a 5G standalone core, service providers
will be able to use a common set of control plane functions within the
core to manage both wireless and fixed user plane functions. The
ability of a unified control plane will simplify operations and provide
independent location, scaling and lifecycle management capabilities.
Convergence: The coming together of two or more disparate
disciplines or technologies. Convergence types are, for example,
IP convergence, fixed-mobile convergence and device convergence.
Core network: A combination of exchanges and the basic transmission
equipment that together form the basis for network services.
CSPs: Communications service providers. One of Nokia’s
customer segments.
Customer Experience Management: Software suite used to manage
and improve the customer experience, based on customer, device and
network insights.
Digital: A signaling technique in which a signal is encoded into digits
for transmission.
Discontinued operations: The continuing financial effects of the HERE
business and the Devices & Services business. HERE was divested to
an automotive consortium and substantially all of the Devices &
Services business was sold to Microsoft.
Ecosystem: An industry term to describe the increasingly large
communities of mutually beneficial partnerships that participants
such as hardware manufacturers, software providers, developers,
publishers, entertainment providers, advertisers and ecommerce
specialists form in order to bring their offerings to market. At the heart
of the major ecosystems in the mobile devices and related services
industry is the operating system and the development platform upon
which services are built.
Enterprise verticals: One of Nokia’s customer segments. An
enterprise vertical represents a grouping of companies by an industry
(like energy or transportation) that offers products and services that
meet specific needs of that industry. Within the enterprise verticals
segments, we primarily focus on transportation, energy,
manufacturing, logistics and the public sector.
ETSI (European Telecommunications Standards Institute): Standards
produced by the ETSI contain technical specifications laying down the
characteristics required for a telecommunications product.
Fixed Wireless Access (FWA): Uses wireless networks to connect fixed
locations such as homes and businesses with broadband services.
FP5: Nokia’s fifth generation of high-performance IP routing silicon,
and the latest range of our AirScale 5G products.
Future X: A network architecture–a massively distributed, cognitive,
continuously adaptive, learning and optimizing network connecting
humans, senses, things, systems, infrastructure and processes.
G.fast: A fixed broadband technology able to deliver up to 1Gbps over
very short distances (for example, for in-building use, also called
“Fiber-to-the-Building”). Launched in 2014, G.fast uses more
frequencies and G.fast Vectoring techniques to achieve higher speeds.
GPON (Gigabit Passive Optical Network): A fiber access technology
that delivers 25Gbps over a single optical fiber to multiple end points
including residential and enterprise sites.
GSM (Global System for Mobile Communications): A digital system for
mobile communications that is based on a widely accepted standard
and typically operates in the 900 MHz, 1800 MHz and 1900 MHz
frequency bands. See also 2G.
GSM-R (GSM-Railway): An international wireless communications
standard for railway communication and applications. A sub-system
of European Rail Traffic Management System (ERTMS), it is used for
communication between train and railway regulation control centers.
Hexa-X: European Commission’s flagship 6G initiative for research
into the next generation of wireless networks. The initiative began in
January 2021 with Nokia as project lead, working closely with a strong
consortium of European partners.
Hyperscalers: One of Nokia’s customer segments. Hyperscaler refers
to companies like Alphabet (Google), Amazon (Amazon Web Services),
Microsoft and Meta Platforms (Facebook) that provide cloud solutions
at a global scale leveraging massive connected data centers.
Internet of Things (IoT): All things such as cars, the clothes we wear,
household appliances and machines in factories connected to the
internet and able to automatically learn and organize themselves.
IP (Internet Protocol): A network layer protocol that offers a
connectionless internet work service and forms part of the
(Transmission Control Protocol) TCP/IP protocol.
IP (Intellectual Property): Intellectual property results from original
creative thought, covering items such as patents, copyright material
and trademarks, as well as business models and plans.
IPR (Intellectual Property Rights): Legal rights protecting the
economic exploitation of intellectual property, a generic term used to
describe products of human intellect, for example patents, that have
an economic value.
IP/MPLS (IP Multiprotocol Label Switching): IP/MPLS is a routing
technique in telecommunications networks that directs data from one
node to the next based on short path labels rather than long network
addresses, thus avoiding complex lookups in a routing table and
speeding traffic flows.
IPR licensing: Generally, an agreement or an arrangement where a
company allows another company to use its intellectual property
(such as patents, trademarks or copyrights) under certain terms.
LTE (Long-Term Evolution): 3GPP radio technology evolution
architecture and a standard for wireless communication of high-speed
data. Also referred to as 4G.
Mission-critical networks/communications: One of the key elements
of 5G. Mission-critical communications meets the needs of emergency
responders such as emergency operations centers, fire departments,
emergency vehicles, police, and search and rescue services, replacing
traditional radio with new communications capabilities available to
smartphone users.
Mobile broadband: Refers to high-speed wireless internet connections
and services designed to be used from multiple locations.
Mobile Networks: Our Mobile Networks business group offers
products and services for radio access networks covering technologies
from 2G to 5G, and microwave radio links for transport networks.
MPLS: Multiprotocol Label Switching, a routing technique for networks.
MSO: Multiple System Operators (MSO) are operators of multiple
cable television systems. The majority of system operators run cable
systems in more than one community and hence most of them are
multiple system operators.
Network Infrastructure: Our Network Infrastructure business group
provides fiber, copper, fixed wireless access technologies, IP routing,
data center, subsea and terrestrial optical networks – along with related
services – to customers including communications service providers,
webscales (including hyperscalers), digital industries and governments.
NFV (Network Functions Virtualization): Principle of separating
network functions from the hardware they run on by using virtual
hardware abstraction.
Nokia Bell Labs: Our research arm engaged in discovering and
developing the technological shifts needed for the next phase of
human existence as well as exploring and solving complex problems
to radically redefine networks.
Nokia Technologies: Our Nokia Technologies business group is
responsible for managing Nokia’s patent portfolio and monetizing
Nokia’s intellectual property, including patents, technologies and the
Nokia brand.
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Other information Investor information
Investor information
Information on the internet
www.nokia.com
Available on the internet: financial reports, members of the Group Leadership Team, other investor-related materials and events, and press
releases as well as environmental and social information, including our People & Planet Report, Code of Conduct, Corporate Governance
Statement and Remuneration Statement.
Investor Relations contacts
investor.relations@nokia.com
Annual General Meeting
Date:
4 April 2023
Place:
Helsinki, Finland
Dividend
The Board proposes to the Annual General Meeting 2023 to be authorized to decide, in its discretion, on the distribution of an aggregate
maximum of EUR 0.12 per share as dividend from the retained earnings and/or as assets from the reserve for invested unrestricted equity.
Financial reporting
Our interim reports in 2023 are planned to be published on 20 April 2023, 20 July 2023 and 19 October 2023. The full-year 2023 results are
planned to be published in January 2024.
Information published in 2022
All our global press releases and statements published in 2022 are available on the internet at www.nokia.com/en_int/news/releases.
Stock exchanges
The Nokia Corporation share is quoted on the following stock exchanges:
Nasdaq Helsinki (since 1915)
New York Stock Exchange (since 1994)
Euronext Paris (since 2015)
Symbol
NOKIA
NOK
NOKIA
Trading currency
EUR
USD
EUR
Glossary
continued
Non-Standalone (NSA): Network architecture that is built over an
existing 4G network.
Operating System (OS): Software that controls the basic operation of
a computer or a mobile device, such as managing the processor and
memory. The term is also often used to refer more generally to the
software within a device, for example, the user interface.
O-RAN: The term O-RAN refers to interfaces and architecture
elements as specified by the O-RAN alliance. O-RAN Alliance is a
specification group defining next-generation RAN infrastructures,
empowered by principles of intelligence and openness.
Packet: Part of a message transmitted over a packet-switched network.
Platform: Software platform is a term used to refer to an operating
system or programming environment, or a combination of the two.
PON (Passive Optical Network): A fiber access architecture in which
unpowered fiber optic splitters are used to enable a single optical fiber
to serve multiple endpoints without having to provide individual fibers
between the hub and customer.
Private wireless network: Private wireless is a standalone network
focused on industrial operational assets and users. A private wireless
network provides broadband connectivity, similar to a public wireless
network, but is owned and controlled by the organization that built or
purchased it.
Programmable world: A world where connectivity will expand massively,
linking people as well as billions of physical objects – from cars, home
appliances and smartphones, to wearables, industrial equipment and
health monitors. What distinguishes the Programmable World from the
Internet of Things (IoT) is the intelligence that is added to data to allow
people to interpret and use it, rather than just capture it.
PSE-3: The PSE-3 chipset is the first coherent digital signal processor
to implement Probabilistic Constellation Shaping (PCS), a modulation
technique pioneered by Nokia Bell Labs.
RAN (Radio Access Network): A mobile telecommunications system
consisting of radio base stations and transmission equipment.
SDAN: Software Defined Access Network.
SDN (Software-Defined Network): Decoupling of network control and
data forwarding to simplify and automate connections in data centers,
clouds and across the wide area.
SD-WAN: Software-Defined Networking in a Wide Area Network (WAN)
that simplifies and automates enterprise networks, seamlessly
connecting users and applications, from branch office to cloud.
SEP (Standard-Essential Patent): Generally, patents needed to
produce products which work on a standard which companies
declare as essential and agree to license on Fair, Reasonable and
Non-Discriminatory (FRAND) terms. Can also be referred to as
essential patent.
Single RAN: Single RAN (S-RAN) allows different radio technologies
to be provided at the same time from a single base station, using
a multi-purpose platform.
Small cells: Low-powered radio access nodes (micro cells or picocells)
that are a vital element in handling very dense data traffic demands.
3G and LTE small cells use spectrum licensed by the operator; Wi-Fi
uses unlicensed spectrum which is therefore not under the operator’s
exclusive control.
Standalone (SA): Network architecture that allows independent
operation of a 5G service without interaction with an existing 4G core
and 4G radio network.
Technology licensing: Generally, refers to an agreement or
arrangement where under certain terms a company provides another
company with its technology and possibly know-how, whether
protected by intellectual property or not, for use in products or
services offered by the other company.
Telco cloud: Applying cloud computing, SDN and NFV principles in
telecommunications environment, for example separating application
software from underlying hardware with automated, programmable
interfaces while still retaining telecommunications requirements such
as high availability and low latency.
Transmission: The action of conveying signals from one point to one
or more other points.
TXLE (Technical Extra-Large Enterprise): Technically sophisticated
companies, such as banks, that invest heavily in their own network
infrastructures to gain a key competitive advantage.
VDSL2 (Very High Bit Rate Digital Subscriber Line 2): A fixed
broadband technology, the successor of ADSL. Launched in 2007,
it typically delivers a 30Mbps broadband service from a street
cabinet (also called a Fiber to the Node deployment) over existing
telephone lines.
VDSL2 vectoring: A fixed broadband technology launched in 2011,
able to deliver up to 100Mbps over a VDSL2 line by applying noise
cancellation techniques to remove cross-talk between neighboring
VDSL2 lines.
Virtual Reality (VR): The simulation of a three-dimensional image or
environment that can be interacted with in a seemingly real or physical
way by a person using special electronic equipment, such as a helmet
with a screen inside or gloves fitted with sensors.
VoLTE (Voice over LTE): Required to offer voice services on an all-IP
LTE network and generally provided using IP Multimedia Subsystem,
which is an architectural framework designed to deliver IP-based
multimedia services on telecommunications networks; standardized
by 3GPP.
WAN (Wide Area Network): A geographically distributed private
telecommunications network that interconnects multiple local
area networks.
WCDMA (Wideband Code Division Multiple Access): A third-generation
mobile wireless technology that offers high data speeds to mobile and
portable wireless devices. Also referred to as 3G.
Webscale companies: Companies which are investing in cloud
technology and network infrastructure on an increasing scale to fulfill
their needs for massive, mission-critical networks.
WING: Worldwide IoT Network Grid is a managed service that offers
CSPs the ability to support their enterprise customers with global IoT
connectivity across borders and technologies.
WLAN (Wireless Local Area Network): A local area network using
wireless connections, such as radio, microwave or infrared links, in
place of physical cables.
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Other information Contact information
Contact information
Nokia Head Office
Karakaari 7
FI-02610 Espoo, Finland
FINLAND
Tel. +358 (0) 10 44 88 000
Fax +358 (0) 10 44 81 002
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