Hello, ladies and gentlemen, thank you for joining us both in person here in London and those of you that are joining us virtually on the webcast. I'm David Mulholland, head of Investor Relations here at Nokia. I'm delighted to have Tommi Uitto, our president of our Mobile Networks business for today's progress update. We'll be focusing obviously on our strategy, technology, and the journey we see for the business as we have done in all the events so far. Before we get started, a quick disclaimer. During this event, we will be making forward-looking statements regarding our future business and financial performance. These statements are predictions that involve risks and uncertainties. Actual results may therefore differ materially from the results we currently expect. Factors that could cause such differences can be both external as well as internal operating factors.
We've identified such risks in the risk factor section of our annual report on Form 20-F, which is available on our investor relations website. In terms of the structure for today's event, I'll shortly hand over to Tommi for his presentation, then we'll have a short Q&A session. When that's over, those attending in person are welcome to join us for a brief drinks reception on the other side of the building, but you can follow us over. You will find the material for today's presentation on our website after the event. With that, let me hand over to Tommi. Thank you very much.
Thank you. Thank you, David. Hey, great to be here with you today. Great to see some real people. For those of you online, I have to tell you that you're missing something. We have a beautiful, sunny, crispy, wintry day here in London. We're busting some myths here. Every time I come to London to meet with British Telecom or O2 or Vodafone or Hutchison, it's always sunshine. I don't know what all that talk about the British weather is. Anyway, great to be here. This Mobile Networks update is about building sustainable leadership in wireless.
What I'm going to be sharing with you is how we're going to further strengthen our leadership in wireless, and how do we do that so that we can create value to shareholders on sustainable basis. This presentation will have four parts to it. First, I will describe the dynamics of our addressable market and especially the radio access networks and attached services market. I will explain why we believe that we are so well-positioned for growth as to where we are today. I will go into further detail of what are those future opportunities that we see where we can grow faster than the market and create sustainable shareholder value.
Then we'll quantify that as much as we can today without going into too much of guidance for the future, with some implications on our financial journey. With that, let's take a look at the market. This may be a familiar picture to some of you from the previous presentation that I made on the same topic. There are actually many points we can make on this chart, but this chart is showing the addressable market of radio access networks plus the attached services. In constant currency from 2021. So it's almost the entire addressable market of mobile networks. I also have the microwave radio link plus attached services market and some custom solutions, but this is the vast majority.
You see the evolution of the market value over the years. If you take a look at one of the data points, we see that there would be a growth of 2% CAGR from 2022-2025 during that three-year timeframe. Modest growth in the overall market. This market captures both the mobility voice, mobile data of the operators, as well as then the private wireless networks, which are built either by the or provided by either by the operators or then built, provided by other players, such as ourselves selling directly to the enterprise or through some other partners.
It's interesting to see that that 2% is sort of ironed out over the three years because you can see that there's a sort of, there's a little blip there. If you would compare our view on what we think is going to be the size of the market in 2023, it's some 10 percentage points, 10% higher than our view was about one year ago for year 2023. The market value in 2023 seems to be higher than we still thought one year ago. That would then suggest that there's growth in the market now from 2022 to 2023, and then we would come back a bit, but 2% CAGR over the three years' time.
What is also interesting, this hasn't changed from the last time, that within that 2%, if you start to extrapolate to what happens in the future, we see very significant growth in the addressable market in private wireless networks. 28% CAGR from 2021 to 2030, for the 10 years timeframe. That's, of course, a very significant part of the market. What has not changed since the last time when we talked about this is that we see an extended peak in 5G. First thing I want to say that we don't think 5G market has peaked yet. It's true that there are some markets where 5G population coverage is good. Take South Korea, take Finland, you know, take maybe United States.
In most parts of the world, 5G coverage is actually really poor. Even in Europe, we have something like 50% population coverage, and in most parts of the world, significantly less. Some 75% of the 4G base stations not yet been upgraded for 5G around the world. There's still quite some growth there. Plus, you have those two sort of overlapping curves with a little time shift. You have this basic voice mobility and mobile data by the operators, and then you have the private wireless. When you sum those two up, then actually you have an extended peak in the market. If we then get into the second part of why do we believe that we are so well-positioned to capture growth going forward?
We have said that we will be growing faster than the market. Let's just see first where we've come from, where we are today and what we're going to do next. Last year was the year of reset at Nokia, and for Mobile Networks, that was sort of natural continuation because we had already been running our Mobile Networks turnaround program in 2019, 2020, and first half of 2021 as well. Originally, I thought that the turnaround would take only two years to implement in terms of the operation. It took 2 and a half years, but it got done. It got completed in 2021.
When Pekka Lundmark and Marco Wirén came on board, they helped us design this new operating model, which became effective from the beginning of 2021, which has certainly made it a lot better and easier to manage this business. We moved away from this confusing matrix organization with blurred accountabilities and trying to manage the P&L somehow in the customer dimension and product dimension and, you know, it was unclear as to who is accountable. Now we have the divisional model with the four business groups, where they are almost like companies inside of a company. They are alone responsible for the P&L.
There was something else that was particularly or that was specific to Mobile Networks, which was that we also started to operate the product business together with the services business and of course the network management part. That's really how our customers see the network and how they build the network and how they buy the network. Finally, we organized ourselves for Mobile Networks according to how customers do this. That has made the business management a lot easier. With this improved P&L responsibility and accountability, we also got better visibility into the fixed cost into SG&A, and that enabled us to challenge, to streamline, to save cost in SG&A, and in particular in G&A. I mean, we didn't really reduce, say, in sales, customer-facing people, and we certainly didn't reduce marketing.
In the G&A space especially. I think we've said it, but it's remarkable that when we increased our R&D OpEx spend in Mobile Networks in 2021, half of that was funded from savings from G&A. Half of it. Despite of all of this, we have been able to do well with the operating margin as we will see shortly. We also last year, we launched some new product platforms, this was particularly important because we had to introduce better performing, you know, more cost efficient, more power efficient platforms based on System-on-Chip technology. We had been relying on FPGA technology for many key functions in a base station. Now we were able to introduce some great new platforms that were very well received in the marketplace.
Now we are in the accelerate phase, which is 2022 and 2023 and of course 2022 almost done. Where we are is we have created a high capacity and predictable R&D machine, and I will go into some further detail about that. That machine is going to continue to improve. We are also going to introduce, and we have introduced this year also some new platforms, both on the baseband side and in the radio products, some new dual-band, triple-band radios, and we will continue to do so in 2023. Our market share has now in radio networks has stabilized. For many years, we were losing market share. First, we stabilized it, now we are on the upswing. I will also show you some interesting data points on the market share growth and what we expect to happen.
We have been making investments in supply chain resilience, partly of course because of the learnings of the semiconductor crisis and supply constraints, but also partly because of the geopolitical situation and how that might be evolving. After this accelerate phase of two years, we talk about the scale phase after that, where we believe that we have what it takes to be the trusted partner for critical networks, both for CSPs and enterprise, as a supplier who has access to leading silicon technologies, be it five nanometers, be it three nanometers or alike. Already today we enjoy this position and this reputation amongst our customers that we are a trusted partner, somebody who operates on ethically well, somebody who has security designed into the products and into our operations.
That is of course, particularly important when we go for the private wireless networks that are going to be a sort of nerve system for not just humanity but for businesses. That is an obvious competitive edge that we're going to have. I will be talking more about this advanced silicon and why that is creating certain opportunity for us to grow faster than the market, because not everybody will have access to leading silicon. There are these growth opportunities that we have in the big picture in the long term over the coming years. Some of them may not be immediate, but they are there. The first one is enterprise.
As said, the private wireless network market, which is the biggest part of my enterprise business now and in the future, that is something that growing by 28% CAGR, and there's really no reason why Nokia would not have a higher market share in private wireless networks than we have in the operator space. In the operator space, our market share today, even if we stabilized it, stopped the decline, and we have grown, we have started to grow. The reality is that our market share with the CSPs today is not reflecting the competitiveness of our products today and tomorrow. It takes some time to recover some of the losses from the past years in the CSP space. In the enterprise space, that's a nascent market.
It's a new market, and there's really no reason why we shouldn't have a better market share there. Another reason for that would be that enterprise customers, they want solutions. They want something that works. They are not in the business of making science out of slicing and dicing network elements into the smallest possible cube and then running reverse e-auctions to get them for the cheapest price from wherever. I mean, enterprise customers want solutions that work.
There's the geopolitical opportunity because already today we can say that and we can still say, this has been said before, but we've done the recalculation, that we have won approximately 50%, approximately half of all the value that operators have moved away from the so-called HRVs or high-risk vendors over the last years. That has, you know, the decisions have already been made in places like Canada, United States, U.K., Australia, New Zealand, Japan, some European countries, some more publicly, some more discreetly. There are more of such opportunities for a couple of reasons. One is one is, of course, the overall geopolitical environment.
The other one is what some people expect to happen to the competitiveness of those suppliers who may not have access to leading silicon or chip design tools in the future. Cloud RAN is an opportunity for us because even if Cloud RAN as technology has picked up maybe slower than some people would have thought, it is creating certain disruption, certain inflection point where we believe that we have what it takes to do better than the rest in this transition. In 5G Advanced, well, we now have the R&D capacity, predictability, operational quality to make it big. 5G Advanced will be a bigger thing in the 5G decade than LTE Advanced was in the 4G era.
There are seven particular feature solution areas I'm gonna describe, and I'll explain why Nokia will be the leader in 5G-Advanced. Let's first take a look in some more detail about what we have done to R&D. On the left-hand side, you can see the R&D OpEx expense 12-month rolling, going from about EUR 1,800 million- EUR 2,200 million on the 12-month rolling basis. We have increased R&D spend. You may recall that, my President and CEO, Pekka Lundmark, said that we will invest whatever it takes to restore technology leadership. Certainly, when Pekka came on board, he, of course, he scrutinized our turnaround plan and what we want to make out of it.
Once he understood it, both thumbs up and go ahead, we continued to invest even more in R&D. More than the spend itself, what is interesting is what has happened to the capacity in our R&D. If you look at 5G R&D capacity, from end of 2018 to end of 2021, in three years' time, we increased the headcount by 60%, but we have also concluded that the overall capacity grew by 130%. We have an average of 70% productivity improvement in R&D because of a lot of things that we did in the MN turnaround 2019, 2021. The best part is that it continues. This year I have another 11% improvement coming from productivity, even if we haven't increased our headcount.
My R&D teams and my R&D leaders, they have this hunger and this ambition to take things even further. Of course, the steps are now smaller, it's more incremental and sort of continuous improvement than painting with a big brush. They have excellent ideas that they still have going forward. I have commitments from my R&D for further productivity gains in 2023 and 2024. Knowing more or less based upon competitor intelligence, what our competition is doing, we have a reason to believe that even if our product has already become very competitive, it will become, relatively speaking, more competitive relative to other suppliers in the next couple of years. One piece of the whole puzzle is, of course, the chips, the System-on-Chip.
There are basically four distinct, three or four, depending on what type of a radio product it is. There are three or four distinct computing functions in a base station, where you need to have custom silicon if you are to make the highest performance, lowest cost, product cost, and lowest power consumption product, possible. You have those four functions, and you may recall that, we indeed had FPGAs in the beginning of 5G. Where we are today in 2022 is that we have ReefShark SoCs across the board. These were sort of time to market SoCs that, you know, we just had to develop as fast as we could with whatever we could make available.
Some of them are, you know, 10 nanometer, some of them are 14 nanometer, some even 28 nanometer technology. By the way, you should always be specific. Is it Intel 10 nanometer or TSMC 7? You know, you know the process nodes are not totally comparable. You get my point. These were time to market SoCs at that time. The chips that I have in development today, where we, in some cases, we have, of course, the samples already, the engineering samples working, and then testing continues and products are introduced in 2023. We have all bases loaded for all four computing functions. Layer 1, the physical layer in baseband. Layer 2+, also in the baseband.
RF digital front-end for the radio units, which together with the analog front-end is doing the analog to digital to analog conversion so that the thing can be processed in baseband. In Massive MIMO radios, you have layer one low and beamforming. You have 3-D digital beamforming, which requires also specific computing. I have all bases loaded now with chips that are coming to the market in products, mostly during 2023 and partly in 2024. The same applies. I mean, it's not like there's always 2-year cadence across the board, typically ASICs come with a 18-month, 24-month cadence. These are predominantly five nanometer technology.
At the time when five nanometer technology is mature, it's cost efficient, somebody else already figured out the early issues in some bigger industries and where they had a bigger need for five at this at that time. At the time when three nanometer is not yet technically or commercially making sense. Technically not mature and certainly financially too expensive. We have started to already make the decisions and started to make the specs for the future next-gen SoCs in ReefShark, which predominantly are three nanometer technology. You can see where we come from. From FPGA to whatever SoC to leading-edge, leading-edge SoC with five nanometer and then into three nanometer.
This, of course, has a big impact on product performance, product cost, power consumption, size, weight, wind load, this type of characteristics. Let's move on to South Korea and network performances. South Korea is a great place to make comparisons because it is the world's most advanced 5G market. Very wide population coverage, very loaded networks, very competitive market. 75% of traffic, mobile traffic already over 5G. Operators have RP increase with 5G subscribers compared to 4G. You know, they've done a lot of things right. Not the only place, but a great place.
The reason why we like to compare, and this is showing the downlink speeds and the uplink speeds, in between four different suppliers from summer of 2020 or Northern Hemisphere summer of 2020 to summer of 2022, is that there are three networks. We supply all three networks in some areas. There's another supplier who supplies all three networks, and then there's one who supplies two networks, and then the fourth one supplies one network. That's why you can have four bars here representing the downlink speed and uplink speed of different suppliers. We all supply dense urban areas, which is the toughest. You have, you know, lots of traffic, lots of load, lots of subscribers in those areas.
What this tells you is that back in the summer of 2020, probably no surprise to anyone, you really cannot say that Nokia would have been a leader in downlink speed. In uplink speed, it doesn't come across that clearly here because all numbers are so low. In the uplink speed, we were even 50% behind competition in the summer of 2020, which was a big problem for us at the time. Where we have come now, and you can see all suppliers typically improving because there's new features, new functionalities. Despite the traffic growth, we have been able to improve the throughputs. Where we were in the summer of 2022 in July, and after that we have continued to improve.
We already have taken the lead in downlink speed, and we have come on par with the uplink speed. With these particular spectrum holdings that they have in South Korea across the three operators and looking at just the 5G part, not the combined 4G plus 5G throughput, we have been able to get to 1.1 gigabit per second downlink speeds on average in these measurements. We've seen a 60% increase in the downlink speed over 2-year time and 60% improvement in uplink in just 1-year time. Of course, the key features to make that happen, if you like technology, would be 256 QAM modulation as well as sounding reference signal beamforming in uplink. Those would be the key features to get on par in uplink.
Of course, if we have been coming from behind, and of course others have not been standing still, if we can keep up the pace and if others don't pick up pace, you can imagine what's going to happen next. Now, if we look at the product portfolio, we can look at it at the high level like this in radio. We, we launched those new product platforms in 2021, so new Massive MIMO radio platforms, new baseband platforms. Starting from the Massive MIMO, which was particularly important for us because we were able to introduce SoC-based Massive MIMO products. Very well received by the market. Then we optimized the product for the 32 TRX use case because that is enjoying the biggest volumes in the world outside of China.
Even in China, they have actually now, switched from 64 to 32 to help some suppliers preserve chips. 32 TRX is the biggest volume. We have the industry lightest product in the wide bandwidth, 400 megahertz, bandwidth, high power product. That's important because in radio, power, output power means capacity and coverage. It is particularly important. It doesn't stop there. Obviously, as I said, with the new chips, we can make that even better. What is important here when you think of these products is, in the radio products.
The RF bandwidth, instantaneous bandwidth, occupied bandwidth, product volume in liters, weight in kilograms, power efficiency, how much of the input power you can turn into output power, and of course, from our perspective, product cost and serviceability as well. Now, if you move to the baseband. The layer one, layer two, layer three transport processing. What is important there is cell connectivity, how many cells you can support, subscriber connectivity, throughput, how many gigabits per second you can push through, scalability of the product, headroom, product cost, power consumption, and so on. And we believe that we have the market-leading product in baseband. GlobalData was analyzing our services capabilities, and one thing that we're particularly proud about is that they concluded that in network planning and optimization, we are the market leader.
What happens with these radio networks, even if it's sort of super sophisticated technology, but the real world out there is quite complex and, it's very difficult actually to make extremely high performance radio networks. You need to be doing the radio planning properly and the radio optimization properly. Operators can do that themselves, and then there are some third parties who can do NPO, network planning and optimization. We have proven it time and again that when Nokia's engineers in our services organization go and optimize a network with our digital tools, with our algorithms, with our digitalized tooling, we can get the best results in the market. Then the fourth example we picked here is our SON, the Self Optimizing Network solution. The brand name is AirScale SON.
That has been found many times by many analyst firms as the market leading SON solution and also multi-vendor SON solution. You can use the SON solution for optimizing the performance as well as, of course, the power consumption of the radio. It's interesting that there are some diehard customers of some of our competitors who are using our multi-vendor SON to manage the radio of my competitors. It tells you something about the competitiveness of that product. Energy efficiency has been, it has always been important. Power consumption has been important, but now even more so. Our operator customers in particular, they are really grappling with this topic of how to improve the energy efficiency. What we are doing is we are pulling all possible levers.
You can say there's four or five different levers that we can pull to reduce power consumption of the radio networks. This is important because in a mobile network, some 80% of the power is consumed by the base station sites and 80% by the radio unit. It, it's clear that this is an area where we have to invest, and that's what we are doing. First, we introduce new SoCs. As I said, when we move from 14 to 10 to seven to five to three nanometers, that helps improve power efficiency. There's the rest of the hardware platform. For instance, in radio, you would have improved power amplifier efficiency with better digital predistortion algorithms, where we are investing a lot of PhD work.
Another example would be our microwave radio link product, which is not today the main topic here. A big European operator group has told us that your microwave radio link is clearly the most power efficient, energy efficient in the market. That's hardware. We have software features, and this is linear software or deterministic software, where a human being decides what features are activated and what not. You have a lot of features that you can use to reduce power consumption. You can be switching cells off on particular layers of different frequency layers. You can be doing micro DTX or micro discontinuous transmit, which means that at the millisecond level, you don't transmit anything if there's nothing to be transmitted.
Kind of self-evident, but that's not how these systems used to work. Massive MIMO or MIMO muting, where you can, for instance, run a 64 TRX Massive MIMO as a 32 TRX when you just don't need the capacity. You can even go to deep sleep modes, where the base station is truly in deep sleep. You know, the one where we human beings should get at least one hour per night. Some of us get even two. You wake up the base station only when there's some traffic. Very important features. This is linear and deterministic. There's something even better, which is AI and ML.
In our AirScale SON, we use machine learning, for instance, where the machine is learning based upon previous weeks and previous days and previous hours as to when is the best time to start shutting down some particular parts of the base station without impacting overly negatively customer experience. That's just fantastic solutions, and there's more. You can do that either with the AirScale SON or in the Open RAN world, you can use RAN Intelligent Controller, which is a new network function sort of on top of the network. And then you have the rest at the site level. With our site solutions, we can make base station sites where it's zero footprint. Everything is up in the mast. Everything is outdoor. You don't need a cabinet that requires cooling, for instance.
If you have baseband hotels, where you concentrate a lot of baseband units into the same location, you can use liquid cooling so that you don't need air conditioning, which consumes power. If you have to use cabinets, then we have some all-in-one optimized cabinets that are optimizing the energy efficiency at the site level. Then there's some cool new stuff which is like how to use battery backup systems together with artificial intelligence or machine learning. For instance, we can run the base station on the battery when electricity is expensive. Then we can load the battery when electricity is cheap. Sounds very simple. Some of us do that nowadays at our homes, but it hasn't yet been done much in this type of networks.
Increasingly it will be. In other words, we have to pull all possible levers to make that happen. Then now I think we have the video, because you have listened to me, but there's a better way to do this, which is to ask or hear from one of my biggest customers in the world.
Hi everyone, I'm Neville Ray, President of Technology at T-Mobile US. T-Mobile is on a mission to build America's best network, offering customers unrivaled coverage and capacity where they live, work, and play. I'm delighted to say we're making tremendous progress. Leading that charge is our 5G network, which now covers 321 million people and is the nation's largest, fastest, and most reliable network. We are also America's fastest growing home broadband provider, another key growth area for the company. We are relentlessly focused on customer experience. It's at the heart of everything we do, and it shows. Our post-paid year-on-year churn rate is the lowest in the U.S. This would not have been possible without our technology partnership with Nokia's Mobile Networks. They've been a critical part of our successful journey for many years.
Nokia has real reason to be proud about the competitive nature of their radio products and the great service provided. All of this to say, our work is not done. There's a really exciting future ahead with the 5G opportunity, and we look forward to realizing this through our continued collaboration with the Nokia team. Thank you and enjoy today's event.
That was Neville Ray, President of Technology at T-Mobile US. We're super happy to work with Neville and his team. They drive us very hard, I'll tell you that. They're technically very capable and competent, and we would probably not be as good as we are today without them driving us so hard. There's more examples. You know, here's a couple of examples from the recent highlights that we have made public in terms of the technology leadership. One feature area in 5G where we decided to take the lead is in carrier aggregation, where you combine carriers from different bands or even the same bands into one carrier for, you know, ever higher data speeds for the users.
With British Telecom here in the U.K., we were the first one to show this first one in Europe to show this four component carrier, four CCA in the 5G Standalone network as one example, or similar with du in Emirates. MediaTek as a chipset supplier, one of the two leading chipset suppliers. We combine 300 MHz worth of spectrum for a carrier to get the world record speed in 5G, four and a half gigs. Telia Finland has nicely combined two interesting technologies in 5G fixed wireless access as an alternative to say, fiber to the home, but with slicing, because obviously you want to protect the user experience of the fixed wireless access users and the mobility service users and make sure that it works properly.
They were the first one to do that with 5G Standalone. The Google case is also fantastic. I just met with Google earlier this week, and it's just a great partnership we have with them, combining the best of both companies' technology assets. People talk about slicing, yes, and you can talk about slicing or like a segregating a logical slice of a network without making a separate network. You can talk about that at radio network level or network level, you know, radio transport core, which is something Nokia can do because we have the transport products as well. You can even extend slicing into the device.
With Google, of course, having Android, we extended slicing into the device so that we were able to optimize user experience with some particular applications like YouTube, over an Android device. We get into the area where we need rocket scientists like Giuseppe from my team to get into further detail in the Q&A. That would be AST SpaceMobile. AST SpaceMobile is a company from the U.S. who we believe has probably the best chances of succeeding, making a very good commercial business success out of non-terrestrial satellite network for mobile devices. They just recently launched the first satellite. It opened nicely.
They use our technology, our base station technology with their satellite technology to create this service where they can extend coverage of operators today into previously uncovered areas in such a way that their customers can use standard devices instead of using some clunky, separate satellite devices. Just a fantastic collaboration we have. And that's going to be also one of the areas of 5G Advanced, where we will see some new developments in NTN, non-terrestrial networks. Looking a little bit further to the future than 5G Advanced, the 6G. Nokia was chosen as the leader for Europe's 6G flagship project on research called Hexa-X.
We're particularly proud about that in terms of what we do in research and then the university collaboration and other technology institute, the collaboration we have in leading Europe's charge in 6G. As I said, our market share in radio has stabilized and is on the upswing. I will show you some market share related charts later. You may recall that somewhere there in 2019, we started to report publicly a so-called 4G to 5G conversion rate, which was important for us to demonstrate how well do we manage to win the 5G business when our 4G customers are making their 5G decisions. If you have 100%, then it means that basically all of your 4G customers choose you in 5G.
It can also happen that you lose some customers in the conversion or that you win some new customers, and these are netted against each other. Now, during the early, you know, 2019, first half of 2020, when we were still quite weak in competitiveness, we lost some customers. I mean, we lost share in radio in some little bit more than 20 accounts, either partially or completely. We started then also winning new customers and then what happened was when all things netted and when we had some particular headwinds in the U.S. market, the conversion rate dropped to about 90%. And then all things considered, it stayed. It sort of stabilized at about 90% in the subsequent quarters, and we stopped reporting it at the end of last year.
Now just for the, for the interest in it that, you know, what is it today? I mean, we are now missing a couple of quarters from in between Q1, Q2, and this is now the October figure. Taking into account the new customers that we have win and increased share, with some existing customers, we have actually now concluded that the conversion rate is up by 20 percentage points from that 90% to now to some 110%, excluding Mainland China, of course. Because in China, I have like 1% market share, 2% at best. It is very difficult for any non-Shenzhen-headquartered supplier to have any meaningful business in China. Like I said, so we lost.
Let's be, you know, complete here. We lost some share in some 20, a little bit more than 20 accounts. We have won completely new customers in 38 cases in the CSP space. Of course, many more in private wireless, but the big CSP cases are like this, 38 completely new radio customers, and the biggest ones would probably be Reliance Jio in India, the biggest network in the world outside of mainland China, 300,000 base stations. We are going to be a very significant supplier to Jio network. They previously had in 4G, they had another supplier and we managed to now grab a very significant part of the 5G business. There's no swap involved here because it's 5G Standalone from the outset.
There's no need to swap the underlying supplier. AT&T Mexico, we also took share from another supplier. Not the high-risk vendor, by the way. We took share from another one. CBN is a greenfield network in China. We only won 4%, but it's 19,216 base stations, to be precise. We also won. That's a greenfield. Proximus and Orange in Belgium, that's a high-risk vendor swap, 100%. Tele2, Telenor in Sweden, also a high-risk vendor swap in Net4Mobility joint venture. Just like Proximus and Orange have the MWingz joint venture. We increased our share in T-Mobile, Orange Poland. They have their networks joint venture. That's also a competitor swap.
We increased our share with KDDI and SoftBank in Japan and in Bell in Canada, and we won back TELUS in Canada. So this would probably. British Telecom, of course, is a case where we were already supplying some 1/3. Now we supply some 2/3 of the network. These are probably the biggest ones among the 38 plus 28 new customers or increased market share customers. I said, I forgot to say it, but indeed, most of these decisions, almost all the decisions taken against us were you would be swapped. They were taken in 2009 before that even, of course, but 2019 during my time, 2019 and first half of 2020.
There's always this time shift that when there's a decision like that against you start losing sales immediately. When you win something, there's always a time lag from the decision to the deployments to the first revenue recognition, like my CFO, Corinne, would be able to eloquently explain. The supply chain resilience, where we have been working very hard to improve the resilience, and we have shared with you earlier that we had some supply constraints that were holding us back earlier in the year. Now, in third quarter of 2022, we shipped the biggest volumes in my business since the start of pandemic and of course, since the beginning of the semiconductor crisis, which hit us in early 2021, hit everybody in early 2021.
Our sort of worst moment was at the end of second quarter when we had the biggest amount of backlog that we couldn't deliver on time. It's really late deliveries, if you will. At the end of third quarter, that had reduced by more than one-third, some 34% from my memory. It is further going down now towards the year-end. We have been able to improve our inventory health so that we are not living completely hand-to-mouth with some components and then having too much of other components. There's a better balance in the componentry. Supply remains tight, but that's to a great extent also due to the strong demand for our products.
The growth that we see in particular in 2023, for instance, in India. I forgot to say, it's actually very important to remember that I spoke about Jio. We also won our 45% of Bharti Airtel, who has the world's second-largest network outside of mainland China. They have 240,000 base stations, and we kept our 45% market share in this transition. Also very important deal. These two are now racing, if you look at what they have publicly said about how many base stations they are deploying, when are they pan-India. It's an arms race and of course, we are in a very significant part of it.
Now, there are also some signs in the market, in the sub-component market that it's easing for a couple of particular reasons. More capacity coming online in the semiconductor industry, silicon wafers or substrates, in particular, but also some demand decreasing, like in consumer electronics or personal electronics. Car demand probably is also coming down, but that doesn't really help because the EVs and hybrids are consuming so many chips that it doesn't really give you any relief. We have been building resilience, so we have been, as I said, normalizing, help making the inventory levels and the inventory quality healthier, and we have been mitigating the risk of different geopolitical scenarios of what might happen. We have been building strategic buffer component buffers.
We have also been regionalizing not just the component purchase where we can, but also, we've been regionalizing manufacturing and distribution so that we would always have at least two live dual sources. Manufacturing facilities and distribution centers for any volume product, so that if something bad happens in one part of the world, then we can cope with the other one. We've been improving the product design so that the, that there are fewer components that would have a single supplier, and that there are rather several suppliers for the same or then different type of component. We'd have multi-source components as well as then better reuse across different platforms that we have in RF and baseband. This work continues.
This is important because we need to meet this growing demand for our products for 2023, but also for the future because remember what I said about the big picture fundamentals going for us. Not just going for us, we're making them go for us. I spoke about the geopolitical opportunity, the Cloud RAN, the private wireless networks, 5G-Advanced, and so on. We need to prepare for that in our supply chain. If we then look at the future opportunities for this, it is still fair to say that 5G is still at the early stage of the entire life cycle. We are basically four years into the decade. You could say even three years because 2019 was a kind of hasty start.
You know, 5G should have been launched only in 2020. There's many reasons why it was done like this. If you just look at what's happening, it is still mostly eMBB. It is just evolved mobile broadband. Some fixed wireless access, which is, you know, somewhat corresponding. It is still early deployments, mass rollouts in many markets, but coverage is really poor still in most parts of the world. It has been distributed RAN with some centralized RAN with baseband hotels. That's where we are today. Increasingly, there's the 5G enterprise opportunity. This is very interesting that out of the more than 500 customers we already have, more than 100 are using 5G technology and radio, even if there is no URLLC or this RedCap functionality. I'll just explain that shortly.
It's just plain vanilla 5G, and yet they wanted to have 5G for private wireless instead of 4G. I think that's remarkable. We can imagine what will happen when we have URLLC and RedCap capable devices. You have the enterprise growth in the with the private wireless, and then you have 5G-Advanced during the second half of the decade. I'll go to some detail on that. In terms of the architecture, you will start seeing some more edge clouds with some further decentralization of platforms that are server-based and hopefully cloud native. Indeed, URLLC. It's interesting. It was actually standardized already in Release 16 in 2020, but the reality is that there are no devices yet available in the marketplace to support this type of ultra-reliable, low-latency communication wireless IoT.
That would be important for, say, wireless robotics, where it's really important to have a robust and secure connection and be able to have very low latency so that you can accurately locate and position a moving object like a wireless robot. There are no devices for that yet, but they will come now in 2023 and then increasingly in 2024, which tells you that there's a lot of further potential in the 5G-based private wireless networks. RedCap, which is a different feature set for wireless IoT, that will be standardized in Release 18 and then come to the market for the second half of the decade. That is for connecting a very large number of relatively cheap wireless IoT devices that consume very little power, so sensors and that sort of things.
That will create further opportunity in the private wireless. There's the shift from 4G to 4G, 5G Standalone to Standalone 5G. That is happening now. That of course then enables operators to make different use of the spectrum assets as well as introduce some new 5G-specific services like say, Voice over New Radio. We will start seeing some 5G Cloud RAN and hybrid RAN deployments. It is not possible to go overnight into Cloud RAN. In reality, purpose-built RAN and Cloud RAN will be coexisting, which has some important implications, and I'll talk more about that. We in 2029, we can expect the first 6G launches.
I personally would hope that it would happen only in 2030. We know how this works. Everybody wants to be the first, then there's a race, and you balance, you know, the time to market and the risk and all that. We can of course expect to see trialing proof of concept well before that, 2029 as a commercial 6G. Plenty of work, plenty of mileage still with 5G technology, 5G-Advanced technology, because it's still basically just evolved mobile broadband, some fixed wireless access, some 100, you know, on our side. We are the biggest private 5G network supplier in the world. Some use in the private wireless, there's a lot more to be done.
Here you see, the segments, the industrial segments where we see private wireless networks potential. You have, we have already sold to more than 500 customers. Last time I checked was 515, and like I said, 100 of them or a bit more with 5G. You would have power, so electricity companies, water companies who would want to have their private wireless networks for coverage and security reasons, for instance. Oil and gas, oil rigs. You can count how many oil rigs and multiply that, so you get that segment. There's mining, which means mining companies for their operations, as well as mining equipment makers who want to use private wireless networks. That was one of our earliest segments where we managed to sell these things.
You have the transportation segment, where you would have railway operators, railway companies. You would have airport operators, airlines like Lufthansa. You would have airport operators, sorry, maritime or seaport operators and cargo handling equipment like Cargotec type of companies. Plenty of opportunity there, again, for certain performance reasons, security reasons, coverage reasons. You would have manufacturing, you know, wireless robots, for instance, manufacturing, warehousing, logistics. You have governments, public authorities and so on. You would have public safety, fire, police, first responders, ambulance. Also government and defense, very interesting segment for us, as well as then, some smart city use cases. I'm not gonna go to detail of this, but this is a good example of a utility case.
You can basically look at the private wireless networks in two different solution areas. You have wide area networks, which are for covering wide areas, and then you have campus networks, which are relatively small for very local coverage. This would be an example of a wide area network. We won this project, 450connect in Germany. Germany-wide 450 megahertz private LTE network for all electricity and water companies. Beautiful. You would have a campus network underground by Posiva in Finland, built by Telia and then Digita as a system integrator partner. This is about building a secure private wireless network underground. Obviously, there's no other coverage there. For security reasons and other reasons, they want to have it this way.
A campus network underground using Telia spectrum. Let's move on to a very complicated topic, which is, you know, there's a lot of hype about this and a lot of misconceptions about this. This is the two forms of RAN disaggregation, Open RAN and Cloud RAN. As a friendly reminder and quick reminder, what are we talking about? You can say that Open RAN is about disaggregating a base station horizontally into three different functions. You have the radio unit, then you have some of the base band in distributed unit, and then you have some of the base band in centralized unit or CU. There's also a fourth element or function, which is the RAN Intelligent Controller, which I spoke about earlier. It's not in the picture.
This whole thing would be connected to cloud core, which is not part of Open RAN. Of course there is open interface. There has always been an open interface between core and radio, unless we go back to CDMA days when you had to have the same supplier for core and radio. That's Open RAN. You can think of Cloud RAN being vertical disaggregation. You're separating hardware from software, and software you are even splitting into different layers. Like you have the container as a service layer, and then you have the you can have the application layer like DU and CU function in this case, DU and CU. Then you can have the orchestration. These are the different dimensions of disaggregation.
The reason why these both have been picking up slower than expected, is the following. Open RAN specifications are not quite yet complete and robust enough. They are not detailed enough. There are too many implementation options. It is not a plug-and-play today. You cannot go to the shop and buy somebody's RU and combine it with somebody's DU like Lego blocks. It takes system integration effort still. Another reason would be that, in that area, actually security is one area where the specifications still have to be made more complete.
Another reason is that some of the new suppliers, for whom the entry barrier was sort of reduced, by splitting the base station into three parts, their progress has been disappointingly slow in terms of their feature set, their network performance in the field, as well as their product cost and power consumption, because they have to use this type of server hardware, which I'm going to explain shortly. Now we are committed to Open RAN, have always been. We have contributed more to the Open RAN specifications than any other company. We chair or co-chair three of the 10 working groups.
It's just that whatever we do with Open RAN, we of course, have to be clear in our strategy that by opening the interfaces, we will need to win more from those suppliers who don't embrace Open RAN or who are otherwise not selectable than we would lose to some newcomers. Otherwise, why would we do this, right? That's the fundamental of our strategy. On the server side or Cloud RAN side, one of the reasons why Cloud RAN has not proliferated more or faster is that the server hardware is still very expensive in terms of product cost, hardware cost per sale, and it's also power hungry, power consumption per sale, compared to purpose-built. Purpose-built hardware still wins by a wide margin.
Another reason would be that people have not been able to yet make use of or reap the benefits of cloud computing as you would expect. I mean, the benefit of cloud computing here should be network operations efficiencies gained from orchestrating several different workloads, including the DU and CU. If you don't do that, then what is the benefit of Cloud RAN? If you don't have that, then there is no benefit. If somebody knows a benefit, they should tell me. We think that we understand the potential here. We have the capabilities to make this transition in such a way that operators get the best price and performance, the supplier diversity, the best of these both dimensions of disaggregation.
I'll just say that in the Cloud RAN dimension specifically, there are four cornerstones that we have to address to make Cloud RAN successful as a business, as a technology, as an industry. First of all, we do have to make sure that the server hardware is cost competitive in cost per sale and power consumption per sale, which it is not today and not in the foreseeable future. Number two, as I said, Cloud RAN cannot be built overnight, and then you throw away the old, and that means they have to coexist. The operator customers, they want to have service continuity. When they move from the purpose-built area to the Cloud RAN area or vice versa, they expect to have the same services, the same applications available to them, and the same network performance.
You need to have proper feature parity and performance parity from day one. As I said, really, the benefit of cloud computing, in this sense in Cloud RAN, is that you would get network operations efficiencies from orchestrating several workloads with the same orchestrator. Of course, to do that, you need automation, and you need to have the DU and CU software as cloud native. Cloud native is not something which is a yes or no, binary, 0 or 1. There are, depending on who you listen to, like 4 + 10 cloud nativeness characteristics and attributes. The question is, in this scale of shades of gray, how cloud native is it?
Most of the Cloud RAN solutions today in the market, the software, the DU/CU software is simply not cloud native. It is not fulfilling the requirements of cloud nativeness in most cases. Number four, of course, to make this truly a sort of ecosystem, then these different bits and pieces, both in the vertical layer as well as the horizontal dimension, would have to be interoperable and work well together. If we look at our Cloud RAN strategy, I mean, we certainly want to make use of cloud computing in radio networks. That is, again, it applies to the DU and CU function because the radio unit is exactly the same and most of the value is actually in the radio with Massive MIMO in particular.
You have the radio is the same between Cloud RAN and purpose-built. Here the CU and DU function, we are decomposing into microservices that can be run in containers. As a CaaS layer for container as a service in our blueprint solution, we have Red Hat because we have to have a blueprint solution. We are acutely aware that some of our customers would have different preference, so they might want to have VMware or Wind River. Okay. We will make our solution compatible with that. We also want to be sure that our Cloud RAN is compatible with the public or private service clouds of the hyperscalers because they have their own CaaS layer.
If you look at the hardware for DU and CU, the server hardware, it is okay to use x86 computing, general purpose computing for layer 2, layer 3, and transport function. It's not quite as good as purpose-built, but it's okay. We have our own product, but we are not religious or jealous about it because that's really not the name of the game here, optimized for Cloud RAN use case. We work with Dell and HPE to make sure that our Cloud RAN works, our DU and CU function works well in their servers if our operator customers want to build Cloud RAN using servers from HP or Dell. The same applies to the hyperscalers.
We are working with them also to make sure our Cloud RAN, DU and CU work well in their data centers if our customers want to, want to move DU and CU workload into their private cloud or public cloud. One point we want to make here is that this layer one computing in particular, it is so challenging that general purpose processors don't do a good job, and you need hardware acceleration. This was something that was very evident to the hyperscalers and the server makers from the outset because for them it's every day. They know that you need to have hardware acceleration for specific workloads. They have a lot of SmartNICs in their data centers. In any event, computing is going to a direction of workload-optimized, custom, computing.
We have our SmartNIC card for layer one computing that can be inserted into any of these servers. 5G-Advanced. Look, looks like I'm running a little bit late today. Seven different feature functionality areas. We are the rapporteur in 3GPP standard with the XR-related improvements as well as the uncrewed aerial vehicle solution area. You see a lot of different improvements here. Like I said, this is going to be a big topic in the 5G era. This just happens to coincide nicely where when these features and functionalities have to be introduced, the oldest 5G base stations start to be out of their life cycle. There's a modernization round.
We get to sell 5G base stations again, both to our customers as well as to our competitors' customers, in case we can use this inflection point. One such reason, of course, is the energy efficiency because the oldest 5G base stations in the market or in the networks are not really that power efficient. Let's move to the last section. Implications for our financial journey. This is looking at the past two years. We have made significant financial progress in Mobile Networks in the last two years. We are very proud about that. If you look at the sales development, then yeah, you all know that what were our difficulties in the past and why we were not growing and there were quarters when we were even declining. No need to go there.
We have been growing in the last two quarters and actually in the product business we have been growing in three quarters. We are gaining market share. We're growing faster than the market, and we expect to grow going forward. Our gross margins have been improving for two particular specific reasons. Product cost reduction, services cost reduction, better product and service mix, especially becoming lighter on the low margin deployment services business. It's more geared towards NPO and technical support and the product. We have also had some help from the regional mix.
If you look at our 22 core, 22 gross margins on a four-quarter rolling basis, we're actually quite proud about that this, despite of this inflationary environment we've been and component cost increases that we've been able to deliver that type of margins on a four-quarter rolling basis. The last one is the operating margin, where it has been hovering sort of there in the 9%, on a four-quarter rolling basis, 9% area, despite the fact that we have increased significantly our R&D OpEx, as you could see from one of the charts that I showed. That's what we've done in the past two years. Looking into 2023.
We know that many of you have had some concerns about how our business will develop in 2023, especially because some regional impacts or regional mix effects already it was said in Q3 that that would impact in in Q4, but in 2023 as well. You saw in our Q3 commentary that at the group level, we believe that our market will grow, addressable market will grow in 2023, and we will grow faster than the market. That's what we said. I'm not saying anything new. We have had good success in India with Bharti, with Jio. It's a very big market in in 5G, a key driver for the growth. Of course, we understand that you have had some concerns over then the margin impact of this regional shift.
We wanted to show you this type of structure as to how we're looking at this 2023 today. Today we cannot give you any specific guidance. That will happen with the fourth quarter results or Q4 results. Just to help you understand how we are seeing our 2023 developing. If you take. We still have one period, a little bit more than that, to go. We first need to see how 2022 is panning out and where we are landing. As directional vectors, yes, we expect a certain negative component or vector from this regional mix of the U.S. market being a little bit softer and then the India market taking a bigger weight in the mix. We have the positives.
We have supply chain normalization, which means less expedite fees, lower freight costs, as well as less open market purchases, where you have to pay huge premium to get some components from other than your supplier, where people are abusing the situation. We will have less of that. We will have product cost improvement. We are now still in the middle of the annual price negotiations with the component suppliers in the semiconductor space. Of course, with the situation easing, with supply easing, we can yield some benefits from there. Plus, we have some product design improvements, new platforms, smaller improvements that we can do in product cost as well as in our services cost thanks to the end-to-end digitalized tool chain. We will have the scale impact.
Our OpEx doesn't really move because of in any material way based upon the recent new customer wins. That means that then we can throw this OpEx mass over a bigger mass of sales margin and then get the positive impact on operating profit and on operating margin. Then there are some other smaller elements, and that's why we believe that this is the right way to look at our 2023. We now work with our customers to better understand what they're going to invest in, what are their CapEx plans in 2023, where are these component price negotiations landing in the next couple of weeks, so that we can then give you better visibility as part of our Q4 results.
We can look at a little bit longer term beyond 2023. First of all, like I said, we have stopped losing market share. We are on the upswing. Dell'Oro would tell you that we have been growing our market share in the recent quarters in 4G plus 5G, excluding mainland China. I also remember seeing in the Dell'Oro report that in 5G specifically, we have taken market share now in five quarters, consecutive quarters year-on-year. We're on the upswing. For the long term, why do we believe that we can improve profitability with this? The scale. There are still some 4G customers we will win in converting to 5G. We have new customers we can still win because of the reasons I explained.
The enterprise segment is there. The product is more competitive. It will become more competitive relative to other suppliers. There's further improvements, including also product cost and services cost. We have this 5G-Advanced opportunity ahead of us. The product or lifecycle maturity, we know from previous cycles that when you move from the coverage build-out more into the capacity build-out, margins will improve because you have more software, you have more capacity upgrades as opposed to cabinets and frames and this type of basic infra. We believe we can maintain efficient cost base. I don't think we have yet maxed out on the benefit of the new operating model, so we can gain further improvements in efficiency, in cost efficiency. With that, I will have the last slide and the key takeaways.
Like I said, 5G market from our perspective has not peaked. It will have an extended peak. Like we said last time, we maintain that view, and we are well-positioned to grow faster than that market. We gave you the growth figures. We have clear plans on how we will do that, how we will capitalize on these opportunities in enterprise, in this geopolitical environment with Cloud RAN, with 5G-Advanced, in particular. We have made significant financial progress, and we believe that the scale effects, the volume effects, can, in the short term, in 2023, offset some of the weaker regional mix. We'll provide more detailed guidance on that later. Thank you for listening this far, and I think we are now ready for some questions and comments and jokes and insults.
Thank you, Tommi. Thanks everyone for your attention during the presentation. We will now move to Q&A. As a reminder, these events are intended more focused on our products, technology, and strategy. I know we've talked a little bit about financials as well, but obviously, please keep questions focused on our Mobile Networks business. For those present in the room, if you'd like to ask a question, please raise your hand, and Alexi and Paula will come and find you in due course. If you're on the webcast, if you can send your questions to me by email, and I'll then put them to Tommi for you. With that, we'll take our first question from Andrew.
Thank you. Thanks for the presentation, Tommi. Just, first one on the 5G sort of peak plateau, point that you're making. I'm just wondering what kind of visibility you're getting today from your operator customers into their plans, certainly for next year, perhaps a little bit longer than that. I mean, I suppose first for next year, are you getting better visibility than you normally would, because of the component constraints, because of the lack of supply? Is that helping you in terms of the visibility? Then perhaps a little bit longer term, this idea of a, sort of a longer plateau, what are you seeing in those early markets, like South Korea, in terms of usage levels and operators needing to come back to add capacity or not, as the case may be?
How does that compare to your expectations?
Yeah.
Thank you.
I wouldn't say that the visibility into our customers' plans for next year is any worse or better than it normally would be. They are all going through their budgeting cycles now, and we're of course asking a lot of questions about, you know, what is your spend next year, and we have some good understanding what it probably is. Part of the reason is that, of course, during the semiconductor crisis, we have asked our customers to give us proper 12-18 month forecast, at least 12-month forecast. We've had that, and they owe us that. I wouldn't say it's any different. One thing that we always look at in this business is in the big picture, what is the coverage development by country per network? How well is it evolving?
Of course, with experience and insight, we can then also triangulate from that angle that how do we think operators will be deploying these networks. The supply side doesn't really impact. I don't see any of our customers making any particular comments of this way or that way because of supply capability. Yeah, supply situation is easing enough to not make people worried about that in terms of what they will be spending. It would be more about then the discussion of, you know, will there be a recession? How big and where and how deep and how long, and that type of things.
We'll take our next question from Sandeep.
Sandeep, please go ahead.
Hi. If you see your slide on the South Korean performance as such, really, which, you know, shows your position in terms of your product at this point, I mean, you lost a very, very major U.S. customer, in the past couple of years. I mean, does that position now help you at, you know, some of those big losses that you've had in Germany or in the United States, et cetera?
Yeah. In Germany it's a very long time ago since we lost any customer. I know that some of our competition likes to remind you about how we lost a customer like 10 years ago. I mean, that's a very long time ago, I wouldn't really go back to Germany. In the U.S., of course, the situation is that we have stabilized our situation. You know, we supply on a continuous basis. We supply a lot of 5G to two of the big three. The third one, we are still an important supplier to them. They have a lot of product in their network, we continue to work with them to see if there's opportunity for us to do more business together.
This overall competitiveness of course, or the improvement in competitiveness means that we are then in a best, in a better position to win back some of what we may have lost in the past. You see some of that. I mean, I mentioned TELUS in Canada. That would be a win-back case, for instance. We do see that there would be further opportunities thanks to the improved competitiveness.
I mean, what I'm trying to say is that, you know, you, as you said, that you have some existing, you know, 75% you mentioned of 4G base stations haven't been upgraded across the world. I mean.
Yeah
I don't know what that figure is in the United States and particularly with that customer, and whether you could actually keep some of that footprint that you had.
Yeah. I can't really speak on behalf of any of the operators there, so I'll just say that we work very closely with them. They are our strategic customer in many technologies, in many parts of the network. Of course, we always periodically we discuss radio networks with them as well. Thank you, Sandeep. We'll take our next question from Peter. Go ahead.
Thank you. You spoke about the reduction in production cost this year, and obviously we know that the new SoCs has had a significant impact. You say you have a new generation coming-
Yeah
next year. How important will that be in time to have a meaningful impact on cost in 2023, or will that primarily be a 2024 thing? Do you have any early thoughts on how the new restrictions on the chip side may impact the industry and yourselves?
Yeah.
Thank you.
Yeah. The retail chart was meant to be sort of the overall logic and descriptive of how this works, that you have basically, like 18 to 24 month cadence with these different ASICs. Sometimes you can design some of them in parallel. It's not like all chips came this year and then next year all chips come again. They come a little bit interleaved, if you will. The new chips, they have an important impact on the product performance, the product cost, power consumption, size, weight. In case of radio, it's important not in the basement. We would not give you particular details about how big the impact is. Just generally speaking, it is a important impact.
The next question from Felix.
Hi. A lot of fuss about the, excuse me, rising energy prices in Europe. I'm curious to hear, in your conversation with European operators, what do you think that will happen to their CapEx plans heading towards next year? Will they sort of push forward CapEx to, you know, protect their cash flows? Could the sort of situation even accelerate demand for certain software and hardware applications that could drive improved power efficiency?
Yeah. Yeah, I have not really heard of any significant discussions of, you know, shifting CapEx out because of the increasing energy prices. Operators know quite well that for them to be competitive, they will have to have proper coverage and capacity, including with 5G. There is very significant increase in the interest and actually the pressure on our suppliers as well to reduce the power consumption of our products. It can be pretty far-reaching as well in that some operators are even discussing shutting down 5G during the nighttime because 4G would be enough. In 5G, if you are to use Massive MIMO for those very high data rates, Massive MIMO radios do consume power, more power than traditional radios.
Of course, they are more power efficient per gigabyte transferred over the air. If there's not so many, you know, if you don't really need the speed, then 4G would be enough. I haven't really seen or heard a particular discussion of CapEx shift because of increasing energy cost. They are coping with that in other ways.
Thank you.
Very good. Sami.
Okay, thanks. Sami Sarkamies, Danske Bank. I have a question regarding upcoming Indian rollouts. Can you promise that you'll make good money in India? I think a lot of investors are concerned that as it has been a difficult market in the past, you might be faced with cost overruns. I mean, how are you protected? Think about, for example, the agreements. The rollout plans are very aggressive and.
Yeah
There's a risk for cost overrun, and, you may not even know all the component prices yet.
Yeah, yeah. Yeah, excellent question. Actually it's a very exciting market and I'm personally fascinated about the work that we're doing with both Bharti Airtel and Reliance Jio. Then there will hopefully be a third one soon because you know that VI, Vodafone Idea Limited, they also acquired 5G spectrum. They have not yet started the rollout, but they haven't announced the contracts yet. That, by the way, is another operator where we have 45% market share in 4G. It's very natural. Of course, we have to compete for that business, but it would be very natural for them to work with Nokia. In India, there were many parts in your question. I will answer them all. Our services delivery organization is just absolutely fantastic in India.
I mean, they do a super job in terms of the project ramp up, capacity of project management, subcontractors for the deployment, network optimization. We have always done very well in India in terms of the services delivery. If we have had project startup problems around the world and in new projects, they have certainly not been in India. From my memory now, I think we can deploy 12,000 base stations a month in India at the peak. So it is a very significant capacity that we have there. Then, in terms of the. Of course, we have been planning this for quite some time.
It was always, we didn't take it for granted, but we of course, expected that we would become supplier to Bharti Airtel, with whom we have worked, you know, 20 years in 2G, 3G, 4G, and now 5G. But we also started to work on the Reliance Jio opportunity very, very early, and we made all the proper preparations to make sure we have then the capacity. Both projects are very nicely ramping up. I'm sitting in the steering teams, and we're looking at, you know, all the deliveries, subscribers, the work, this and that, and it's progressing very well. In terms of the financials, it is true that India is probably lesser gross margin quality market than some others. However, these were sound business decisions. They are improving our operating profit.
They are improving our operating margin. There is no swapping involved. You know, you don't have to modernize anything. You don't have to auto swap or modernize your own base station, which always is something where customers try to get a discount. We don't have to swap our competition and give any swap discount. Reliance Jio, for instance, it's a standalone. They can keep the underlying 4G network. I'm very happy about how the India 5G battle is has progressed and turned out for us. Of course, it's a race every day, but very good progress we have there. Thanks.
Thanks, Sami. We'll go to Artem.
Yes. Hi, Artem from ICP. I would like to pick up your thoughts really, when it comes to R&D spend going forward and basically trajectory on that side. You have increased your R&D, quite substantially over past years. Now you have made a catch up, leading competition in some features and so on. Do you want some further, so to say, growth on that side?
Yeah. We don't provide at this time any guidance on the future R&D OpEx spend on Mobile Networks or any part of the business. Let's see if we then do that in Q4 results. Not at this time. What I will say is that we are slowing down the headcount increase. There are some areas where we are still hiring, doing some balancing, rebalancing of the R&D. Then, like I said, we do expect to get further productivity improvements in our R&D operation that go above what you would normally expect as productivity gain in the world of business because of the improvements. I mean, this is the fantastic part that some of the.
I mean, we made a lot of improvements in the turnaround in 2019, 2021. Some of the, you know, 2021 improvements have just started to show the full impact in the marketplace. The teams have had further ideas on what to improve. They're just not running out of ideas. It's just fantastic. They have this ambition to make this a real clockwork.
Go ahead, please.
Yeah. Hi, Robert Sanders, Deutsche Bank. I just have a quick follow-up question on India. It looks like the sort of peak of 5G in India will be maybe 2025, so you've got quite a steep ramp ahead of you. I was just wondering if you could kind of size it, if it reaches 10% of your sales or something like that. Just looking at the margin dilution story, does it basically cease to become a operating margin dilutive element looking at 2024, or does it versus your 2023? Is, you know, are we through the worst of the dilution in 2023, or is it potentially gonna continue in 2024? Thank you.
I understand the question and I understand why you're asking. Unfortunately, I can't really give you specifics there. I mean, as to when the India 5G market will peak, is yet to be seen. I mean, we have a pretty good understanding of the operators' deployment plans, but then there are a lot of moving parts, and they may also change their strategy and so on. At this time, I can't say if the peak of the addressable market in India is in 2023 or 2024 or 2025. I just can't say that. I can't size the India market for you, at this time, unfortunately.
That's all. We'll take our next question from John hiding away in the corner.
You're well-connected.
Good man.
You know everybody.
Thanks for remembering me. Two quick questions on private networks. The first question is, I still struggle a bit with why would it be you versus the local network operator? You know, like Deutsche Telekom for Volkswagen or whatever, setting up a network and helping them out. It could use your equipment, but I just sort of struggle a bit about the go-to-market.
Oh.
The second question is, given that with in like national operators, we're talking about thousands and thousands of base stations, how do you size the size of the market? It feels to me that it's always gonna be a tiny fraction of your core business. In your slides, it feels like it's a bit bigger than that.
I'm a little bit skeptical, if I'm honest. Can you sort of talk through how you size it and how you get to those sort of numbers?
Yeah.
Thank you.
Thank you. Maybe I wasn't then clear enough about the go-to-market and how this channel works. Basically, our primary strategy is to work with and through our operator customers. We want to equip our CSP customers with the products and services so that they can build private wireless networks for their corporate customers, either old customers or new customers. It's then in those cases where none of our CSP customers in a particular country or where none of the operators would work with Nokia. If none of our customers in a particular country are interested in a particular case, then of course we will go sell direct or with some system integration partner or alike.
We don't want to be in conflict with our CSP customers. I mean, it doesn't make any sense. But if they are not interested, we will sell direct because if we don't, somebody else will. You know, we have our responsibility as a business. And this, maybe still, you know, we started this journey somewhere there in 2011, maybe. In the beginning there was a bit of a concern by some CSP customers on this, is there a channel conflict? Not anymore. They all understand it. We are bringing customers to them.
You know, if there are enterprise like a mining company in Chile who says, "Hey, we want the private wireless network from you because we heard about this Australian company that automated the mining vehicles with your private wireless using 4G because Wi-Fi is not working. You know, the equipment is colliding and stopping and whatever because Wi-Fi is not performing." We said, "Well, actually, you know, we have this customer, we have Telefónica Chile. You know, let's go talk to them and they can build it for you." We are bringing customers to them. The same applies to, you know, companies like Verizon, who is building private wireless networks with Nokia equipment. To your second question. These wide area networks, they can be hundreds or even thousands of base stations, so it's more of a CSP paradigm.
Uh, hundreds or thousands of base stations. And then, uh, the campus networks can be from a couple of, uh, base stations or access points into, say, a couple of tens. Uh, and, uh, so it is not the-- it, it's not a huge business yet, but it is growing very, very nicely. And, uh, and like I said, I don't really see why we wouldn't, uh, grow faster than the market there.
We'll take a few questions that I've had on email. This one's from Simon Leopold at Raymond James. What are Nokia's expectations for 5G core adoption in the U.S. and Europe, and what are the implications for Nokia?
5G core. Okay. This is more Raghav Sahgal's patch. Now I have to think a little bit. I know that at least T-Mobile USA has already launched 5G Standalone, built the 5G Standalone core. Now I do have to say that I don't remember, and maybe I shouldn't speak on behalf of the other operators. U.S. is a very advanced market. I mean, that we can say. You would expect that it's one of the markets where 5G Standalone is, and the Standalone core is built early because you need Standalone core for some of the new services like Voice over New Radio, and for some of the new features and functionalities in the wireless IoT. Slicing is easier to do with 5G Standalone.
You can do it in non-standalone, it's a bit clumsier. There are some particular good reasons where U.S. as an advanced market should make use of.
One other question was at Mobile Congress this year, we claimed and argued that we would lead in 5G-Advanced. What differentiates 5G-Advanced from today's 5G, and what are the implications and milestones you're looking for?
Yeah. There are those seven important areas. I mean, XR, to me, that's fantastic and that's why, you know, it's so cool that Nokia is the rapporteur in 3GPP. There will be improvements for how to make XR extended reality work in a great way using 5G network better than you can do with the basic 5G. That's big. You get further throughput improvements with the Distributed Massive MIMO where, you know, two different, you know, active antennas can be serving the same UE, and some beamforming improvements as well, some PhD level algorithm development. You have AI and ML into the network, functionally, which wasn't the case in the past as a part of a standard. You have energy efficiency, super important. You have then the RedCap, this. It's not a good marketing name by the industry.
It's reduced capability, but it's just to differentiate from the URLLC. You know, cheap wireless IoT connectivity. That's big because then you can really connect a very large number of objects in a wireless way. You have the uncrewed aerial vehicles, UAV. When the humankind starts to use a lot of drones controlled by 5G, it's obvious that we need to make some improvements in the 5G networks to be able to control drones that are probably flying a little bit higher than the usual UE on the street level. Then you have this non-terrestrial, so that we are complementing the terrestrial network with satellite-based systems. Lots of important functionalities. Much bigger than LTE Advanced was in 4G era.
A question from Fredrik Lithell from Handelsbanken. Some large European operators have been very vocal regarding their O-RAN support and their 5G rollout, like Vodafone and Deutsche Telekom. Do you feel they in any way have changed their view or muted their demands on O-RAN capabilities or lost interest?
I don't think so. We actually work very closely with them, including those two. So we are their technology partner to see how to mature the technology and how to make the most out of it. We very well understand their reasons and their rationale of why they want this. We want to be part of the picture in such a way that we of course make it a win-win so that we in this big picture, we win more than we lose.
A follow-up on that. Given the energy situation, is it realistic to push on with Open RAN, given the point you make around the benefits of purpose-built hardware from a compute efficiency standpoint?
Yeah. Again.
Can Open RAN ever catch up?
Indeed. The orchestration benefits would have to exceed the cost deficiency on more expensive hardware and higher power consumption. It is possible, I mean, but the technology still needs to prove itself.
Cool. Any final questions from the room? Nope. Thank you all for joining us today. Just as we close, I'd like to remind you that during the event today, we've made a number of forward-looking statements that involve risks and uncertainties. Actual results may therefore differ materially from the results currently expected. Factors that could cause such differences can be both external as well as internal operating factors. We have identified such risks in our risk factor section of our annual report on Form 20-F, which is available on our investor relations website. Thank you all for joining us.
Thank you very much.
For those in the room, we'll have a drinks reception on the other side of the hall, if you'd like to stay and have a drink.