Business Update

Dec 3, 2021

Slides

Welcome to Ericsson's Business Update. Peter Nyquist will now open the call. Hi, all, and welcome to today's call, Building Block to Reach Profitability within Digital Services, with our Head of Digital Services, Jan Carlson. This is the first event of two. Next week, Tuesday, on December seven at 04:30 p. M. Central European Town, we have another one with Fredrik Ehling who is setting up our network business talking about the five gs and the RAM markets. So today, we will start with the presentation of thirty minutes with Tanjaan and then leaving about thirty minutes for Q and A. And please keep the questions that you have today in the area of Digital Services. With those words, I would like to hand over the word to you, Jan. So please, Jan. Thank you very much, Gerta. So thank you. Great to be here with you today. I'm Jan Carlson, and I have the privilege to head up Business Area Digital Services. I'll focus on two things today. Number one, I'll focus on some details on the nature of our five gs core business, the lifecycle commercial components of a typical customer contract, and then I'll also talk about the financial improvements we expect that our strategy will result in. But first, I want to start with our customers' situation. With what are we helping our customers to succeed? Let's highlight a few needs here which are central to our customers. Number one, our customers want to be capable of applying different commercial models to their offering and not be stuck in traditional bucket type of price schemes. And this is, of course, particularly important when they commercialize five across both consumers and enterprises. Number two, both consumers and enterprises obviously want their voice and data services to be delivered with agility, quality, and security. Number three, we see demands for much increased automation driven by the need to drive cost down, but also to achieve increased agility by reducing complexity. With the increased focus on the enterprise market, our customers require high performing programmable networks, which are open for different ecosystems to innovate on. And finally, for enterprises to fully make use of the low latency five gs services, it must be possible for the network edge to seamlessly meet the enterprise edge. Digital services portfolio areas or solution areas as we call them are all central to address these needs. And I'd like to give you a very simple overview of digital services software is used for, even if this might only be useful for a few of you on the call. The functions that our software solutions provide are essential to run and monetize a mobile network. A mobile device connects via an antenna and its radio base station to our core network software, which manages the routing of the traffic to and from the device to the Internet, to other devices, to enterprise data centers, to public cloud, etcetera. Now this core network is needed for all traditional services like voice and mobile broadband and for emerging five gs services like mobile gaming, virtual and augmented reality applications, and different use cases across industry vertical. So very simply put, we provide both voice core and data core software. We also provide charging, billing, catalog, order management, network management, orchestration, assurance software for our customers in order to be able to manage many different types of business relation, price model, and to deliver simple to very complex services speedily and efficiently. In line with changing customer needs and the market dynamics, we continuously evolve and evaluate the business competitiveness of our portfolio. And as you can see on the slide, the revenue share of the different solution areas ranges from 10 to 25%. And the split has varied over time, and we expect it to continue to do so. All five solution areas create strong customer value. All five are progressing well and all five are expected to contribute to Digital Services profitability. And on that note, reiterating from the Q3 earnings call, the BSS strategy we communicated in 2018 has been successfully executed and the gross margin is now in line with the group's average level. And all the 45 non strategic and critical projects we committed to address back in November 2017 are now managed. Packet Core has stayed flat relative to the other solution areas over the past three years. But based on the good business momentum and that the five gs core network transformation has just started, we expect Packet Core to grow faster than the other solution areas in the coming years. And to back that statement up, today we are winning cloud native five gs core standalone contracts across all geographical areas where five gs is being rolled out. We are gaining market share in, for instance, Japan, South Korea, North America, and Western Europe. Some market share gains include competitor swaps and that's easier said than done in this type of multiyear business at the heart, I was going to say core, of our customers' networks. Solid technical, solid commercial proof points are needed for a communication service provider, a CSP, to decide to switch supplier. With these forty five five gs core standalone customer engagements under our belt, 15 added since the October 2020, and more wins, which are formally signed or being formally signed with the contract, we have won five g quarter with 80% of the 20 largest communications service providers in the world by revenue. And here we only count you can count these statistics in different ways we only count one customer one, regardless of how many five gs core contracts the engagement entails. Importantly, of course, nine of these customers are now live with full commercial offering. For instance, Singtel, Vodafone Germany, and SoftBank in Japan, meaning that the customer, the CSP and Ericsson, start to see revenue coming in from those contracts. In addition, we have a number of soft launched live networks, meaning that the commercial offerings are not yet available to their commercial customers, for instance, in Optus in Australia and Vodafone Spain. This is a very solid foundation to grow and expand our business as our customers evolve their five gs offering and consumer and enterprise customer base. In this area, customer decisions made now mean many years of future business. Their supplier choice of five gs core is a long term commitment. Almost all tier ones in North America, Northeast Asia, and Western Europe have made their choices by now. Smaller operators in North America, Northeast Asia, and Western Europe and operators of all sizes in Latin America, The Middle East, and parts of Southeast Asia, India, and Africa, with some few exceptions, are still to make their choice. So roughly 15% of operators worldwide have made their choice of five gs core vendor with 85% still to go. And this also applies for the Ericsson five gs packet core four gs packet core customer base of more than 300 customers. A big opportunity ahead of us to defend and hopefully expand our market share. With our proven maturity and experience in containerized cloud native technology, we anticipate that we will continue to lead the five gs core market and add more customers and live networks to this business. And a little bit of a reminder, in Telstra Australia, we were first with a live cloud native core network already in q two two thousand and nineteen, years ahead of some of our competitors. I've been speaking about Packet Core a lot here, but of course five gs Core and five gs standalone is not only about Packet Core products. A change in other areas like orchestration and DSS is needed to fully reap the benefits of the five gs standalone network. So you can really see five gs Core as a beachhead or an anchor offering to pursue business opportunities for Digital Services' full portfolio. Very simplified, our customers do not only need five gs packet core, they also need orchestration of services and cloud resources, They need assurance and signaling, policy management, five g voice, functions enabling monetization, etcetera, etcetera. And of course, all that software needs a cloud infrastructure execution environment to run on. To that end, we have harmonized our portfolio to address our customers' needs and to capture what we call the attached sales opportunity. We go to the next slide. So this is an example of a customer contract with a tier one CST communication service provider with a large initial scope with products from all of the five digital services solution area. Opportunities to monetize in new ways require new charging solution. Introducing cloud native software requires new orchestration solutions, and the list goes on and on. All driven by the technology shift to the five g core standalone architecture that follows the five g radio rollout in the five gs network evolution journey. Of course, with different customers, the initial contract scope spans from this type of almost full fledged contract to contracts that are small with, for instance, two or three core network functions and then expanding as customer plans evolve and mature. This slide shows the typical structure or phasing for a tier one large DSP with a very large network. And the dates that I'm sharing for the different phases, these three phases you can see on the slide, can vary depending on which use cases the customer will deploy. The less use cases, the shorter the phases. The more use cases, the longer. So in the first phase, the first, we call it network preparation phase, from contract to first go live, this phase can take nine to eighteen months, and it includes network and software deployment work for both the customer and for us with very limited sales for Ericsson. This phase also includes the development of customer and country specific requirements, if any. The next phase for the initial launch and customer onboarding can take nine to fifteen months with initial software sales and service delivery sales for us. So this is really the first time that we see the money out of the five gs core contract. And this phase includes of course continued deployment costs and lifecycle management costs for Ericsson. And the third phase, more long term, is really a multi year expand and upsell phase and includes subscriber and capacity growth, it includes the deployment of additional use cases, and it includes the deployment of any attached products that we manage to sell to the customer. And this phase generates recurring revenue for us across software and support and also revenue for any additional capacity, any additional use cases and new attached product sales. And costs are related to life cycle management of the deployed solutions and deployment cost of new use cases and new products. When I say life cycle management in the second and third phases, it essentially means to deploy software updates and upgrades. The timelines I just shared are for five g core deployments for large DSPs, also called tier ones in the industry, and at the current early adoption of five g stand alone. And with the current industry maturity. With increased automation, we expect these phases to be shortened. For smaller CSPs, the timelines can already now be shorter because of less demanding requirements, smaller networks, or a willingness to go with a larger number of pre integrated software products from us. And the timelines can also be shorter when it's an existing customer. R and D at the bottom of the slide here is generic and it's fundamental, of course, foundational, you can say, for all the contracts. And as a reminder, we do not capitalize R and D and we have amortized all previous R and D capitalization. So staying in R and D, there is limited country specific and limited customer specific R and D efforts typically, but break ins and competitor swaps drive additional product customizations, which is one of the reasons we're increasing our development costs, our R and D costs in parallel with our market share gain. Let's go to the next slide. The five gs network evolution has started in the leading market region. 2025% of the subscribers are on the first version of five gs today, and the first version means five gs non standalone with new radio in combination with a node core architecture. Most, let's say practically all existing five gs deployments are focused on consumer use cases across NBD, mobile broadband, and fixed wireless access. And as the network evolves to the standalone deployment version, the basic enhanced mobile broadband offerings can evolve and advanced business to business and business to business to consumer offerings can be created and offered. In other words, the five gs enterprise opportunity can materialize and scale. And these new use cases will drive increased connectivity and core network capacity with new types of devices. For instance, starting with the advanced wireless WAN devices from Cradlepoint available today, managing connectivity to for instance sites and vehicle, the high definition five gs video cameras used for cable less, a remote live event and broadcasting production, and the latter not only adding devices to the network but requiring reliable massive uplink data capacity. To enable and support those use cases, there is also a need for additional DSS, OSS, and network functionality. For the enterprise opportunity, we developed portfolio capabilities used directly by the CSPs themselves and also by business area emerging business for the prepackaged solutions sold to enterprises via the communications service providers, for instance, the on prem private networks on this slide. In our latest mobility report, we forecast that this evolution will lead to more than four times increase in data from today to 27, and 62% of that traffic is expected to be on five gs. And by then, 80% to 90 of the subscribers in the leading market will be on five by that time dominated by the standalone architecture. While in the lagging markets, the penetration will be between 10% to 40%, most likely many still on non standalone architecture. In addition to deploying five gs for consumer use cases, market leading CSPs are trialing today the initial enterprise use cases, such as network slicing use cases and again today. And I I want to emphasize why we're saying on this slide that there's a significant difference in time between when market leading CSPs deploy five g and when the mainstream CSPs deploy them. We're talking years. Our strategic choices, our gained market position and the market evolution are the fundament for improving our performance towards profitability. Our long term target remains at 10 to 12% EBIT as visible to the right in the slide. And let's go through the main drivers to get there, sales, gross margin and OpEx. Let's start with sales. As you saw from the previous slide, the five gs core standalone market window is open and the contracted five gs core and attach sales will drive our sales volume. The net sales of the awarded five gs core contracts starts to become visible when the networks go live and the revenue from those contracts grows with a number of registered subscribers. So, LG Core revenue is starting now in late twenty one and will then continue to grow quarter after quarter. And like I said before, customer decisions made now need many years of future business. Their supplier choice of five gs Core is a long term commitment. With the continued evolution of our customers' five gs business and use cases, our leading position in five gs Core provides opportunities for additional sales in capacity, in core network features and in additional software solutions from other areas of the portfolio, what I described as the attached thing. Our ambitions with the CSP enterprise and service orchestration portfolios are expected to be visible in net sales in 2023 and onwards as dedicated networks business scales up and edge and network slicing based offerings are commercialized. Moving on to gross margin, we are on a gross margin improvement trajectory since early twenty eighteen, increasing our gross margin from 30% to more than 40% and this journey will continue. Our transformation towards software based solutions will lead to long term gross margin improvement through increased ratio of software and recurring revenue driven by five gs Core and the attached portfolio. Cloud native technology comes with a lot of advantages and one is the possibility to create an automated software pipeline with updates and upgrades from us as software provider all the way to the live environment of the customers. We call this in the industry continuous integration and continuous deployment or CICD for short. And the increasing number of customers subscribing to this concept means also an increased number of software subscriptions that drives up our recurring revenue ratio. Investments in automation in our operations will make us more efficient across both R and D and service delivery or systems integration. Accelerated by the pandemic, we're approaching our next level of delivering services more efficiently through increased remote delivery, test automation and reuse of assets. And I want to emphasize that the gross margin improvement up to 22% are offset by the initial five gs core deployment costs associated with introducing new products to the market and the higher costs associated with swapping out some of our competitors. We underestimated the pace of our business success and the rate of swap out deals in our previous plans. Let's take bucket number three, OpEx. The evolution of our portfolio towards cloud native will increasingly create efficiencies in R and D. For instance, through easier reuse of contained pieces of software, less dependencies between different software modules, and easier to automate testing. Earlier this year, we decided to prioritize our long term ambitions to secure a market leading position with a competitive cloud native portfolio, especially related to five gs Core. We chose to not sacrifice the long term in order to reach short term goals. We are convinced that five gs Core is a vehicle for Digital Services' future and we're investing to ensure it holds true. And the consequence being a significant R and D investment in five gs Core, adding expense in the P and L short term, peaking at the end of this year and the 2022 to build value for the mid and long term. We also increased the R and D investments in service orchestration, including network automation of both core and radio and in evolving the portfolio to enable our customers to support their enterprise customers' digitalization using five g slicing edge solutions when doing so. So to conclude, we've made choices and we've set the strategic direction. And going forward in our strategy execution, starting with a business perspective, in the short term, we prioritize to grow revenue through five gs core and attach chain, which improves the business mix through an increased share of software and recurring revenue. We will continue to lead in five gs mobile broadband, but our ambition is to also capture five gs enterprise value together with leading customers with a clear strategy to expand their enterprise business. Looking at the portfolio, we focus our R and D investments to have our entire growth portfolio cloud native in orchestration solutions and to enable an increase in automation for both us and our customers. We're also evolving the portfolio to enable the emerging five gs enterprise business opportunity and with our portfolio and through contributing to business area emerging business portfolio. And this will just get stronger over time. And then from an operations point of view, we focus on accelerating our transformation, making it more streamlined for software based and industrialized solutions and increasing the cloud native and automation skills in the organization even more. Over time, we're aiming for a full customer adoption of cloud native and automation with the capability to, together with our customers, automatically update and upgrade our software in their live network. These priorities are the foundation for our long term success and are ever present in our decision making. We're convinced our strategic choices are the right ones, and our business momentum underpins it. We're past restructuring a major portfolio shift. In fact, the business area is really completely different to a few years ago in terms of competence, especially cloud native competence, in terms of portfolio, business profile, and business momentum. And I dare to say that the coming years are really all about strategy execution. With that, thank you very much for your attention, and now I'm very eager to hear and discuss your question. Thank you, Jan, for that presentation. And so the next step then, operator, is or Mark is to open the Q and A. So Mark, can you do that, please? Thank you. Mark, I don't have the vision yet. I don't see who's actually on the list. Can you maybe open up for the first question? I have okay, see it now. I think the first question is from Frank Maurer at DNB. Hi, Frank. Hi, how are you? You for taking the question. Good. Thanks for having this session. I think it's very helpful. And my first question is relating to actually the part that you mentioned about the CICD and gaining the bridge on R and D using that coordinated capability as a way to gain gross margins and operating leverage in the business over time. To deploy so far, from what I've heard from some industry contact, it's really that customers in the CSP space typically are quite conservative, right? And you also mentioned that increasingly, we have seen some buy more and more customers buying into the concept of CICD and the whole product being delivered more as a Software as a Service offering perhaps where you can actually gain leverage on economies of scale through a centralized way of delivering things. Would you say that, that is still challenging, especially with the Tier one customers that you were referring to. So would that be more easier to get acceptance from the more mainstream and smaller operators? And how do you would you manage customization requirements from customers and so on and really, in practice, gain that leverage? Thank you. Yes. No, great. Thanks for the question. So the you would not believe, you know, when we spoke about CICD three, four years ago, the level of awareness and interest and, you know, confirmed plans to to go down that route was not very high, but today, it it is very much the case. It it's a requirement for many operators. And then the, how to say, the the competence and the capability to actually go down the CICD route varies operator by operator. But I would say, to answer your question, that we have some of the biggest tier one CSPs in the world who are one of the most demanding actually with regards to, CICD. But you also see some of those more smaller, you know, tier three, tier two, tier three operators who are also very advanced. So it depends. It's not so much the size, actually. It's more within the CSP, you know, the the competence, the maturity, the level of investment, the level of preparation that they have done in order to go down this this path. And so it's it's not that I can't go to a country and say, oh, here, they will be more conservative. It's really, you know, defined by that particular CSP, how they work. And but over time, like we say in one of the final slides, we see that everybody will go down this route. It is absolutely fundamental. It's an opportunity, and it's a way also to improve quality and to reduce cost. So we I don't know if that answers your question, but it's how we see it basically. And we are so totally committed to go down this path. This is one of the opportunities we have with the new technology to be much more agile compared to how we've been operating in the past. Maybe another comment on this is, from a security point of view as well, it's extremely important to have this to ensure a higher degree of software freshness. It is also fundamental to implement the CICD. Thanks for the question. Thank you. You're good with that, Frank? Yes. I will have a couple of other questions as well, but we can take them later if room to ask perhaps. Sure. We will move to the next question. Thanks, Frank. I have the next question coming from Simon Leopold from Raymond James. Hi, Simon. Good morning. Good afternoon. I appreciate you guys doing this today. I imagine the question I have is fairly complicated. So I'm sort of looking for maybe broad strokes to understand a little bit more about the structure of how you present your contracts to customers. In other words, are these deals typically perpetual licenses? Are they subscriptions? Are they often written based on the number of subscribers that the operators have? So the first part is understanding what the mix is of contract types. The second part is trying to get a better understanding of why historic deals have been unprofitable in that I assume the scope of work was different than what you had assumed. I wanna understand why you couldn't charge the customers for a change in scope. It just feels to me that the contracts maybe weren't written well, and that's sort of the root of my question. Thank you. Great. Great question. So I'll take the first one first. So our contracts used to be more along the lines of perpetual licenses, but then with some capacity limitation. So not, you know, here you go. You can use the software for whatever you want, but some some boundaries, but more, more of the perpetual type. And we, like many others in the industry, have gone then from these perpetual licenses to, to more subscription based, licenses. And what we've seen is I didn't talk about it so much here. I I touched upon it, but I didn't really quantify it. We've seen a significant increase in our recurring revenue from late twenty seventeen to now in the end of Q3 this year on the back of this. It's both driven by increased support revenue but also by an increasing portion of recurring license revenues compared to what we what we had in the past. It's significant increase, and it gives us so much more stability when we go into a new year with this recurring profile. The contracts are also defined here, and it's essential when when I went through here the journey that our software can enable for the CSPs as, you know, we have to limit it by functionality, of course, capacity, and use cases. Is this for MBB? Is this for, massive IoT? Is this for critical IoT? Is this for slicing? So maybe the initially, the CSP, the the customer doesn't want to doesn't have defined plans to for all these different use cases and is not interested to spend x, you know, for all those, use cases. So it's really important there to be able to structure the contract in a way that matches what the the customer actually wants to use the software for. So I think we've we've become, as an industry, and and definitely, I'd say, as well here, much better at structuring our commercial packaging in a better way compared to what we did in the past. And then from, you know, what you talked about, change requests and so on, I think that we, I don't know how long you followed the example, but we had back in '17, we had 45 critical and nonstrategic projects where I think we have taken on a scope which was very large, and some of that scope was also coupled to transformation of processes and ways of working. So basically, you know, a BSS, a full stack contract, which is not just deliver this product and and, it will be accepted, but, you know, simplifying catalogs for the customers, changing processes. And as we all know, right, these type of projects and projects are quite complex. So it might be so that we didn't write the contract well enough, but I think, a big part also of us having financial issues with those contracts was that the scope was simply very, very large. So we have gotten better. If if I take the BSS journey, if I double click on that, you know, the type of contracts that we have now with BSS are not with those high risk profiles. It's really we've learned our lesson. We have the score tissue here, on our back. Now we are much more precise in our contracting and make sure that what we commit to, we can actually deliver. So thanks for the question. Thank you. Makes sense. Simon. I'll move to the next question from Sebastian Stadtomovic from Kepler Cheuvreux. Coming back to the loss making non strategic project, Have you made any, I would say, progress on or do you see any issue in the execution of the remaining large non core project? And attached to that, are you still comfortable with the level of provision that you have on your books right now? And the second one, which is more linked to the swap cost. Could you help us a little bit quantify the size of the impact of the swap cost on your margin right now? And when do you expect the swap cost to decline or even disappear? Thank you. Great question. So the first one, the remaining few, which is why we don't report them anymore, have the the risk profile of any other project. So we have finalized the great majority, and the other ones are now basically as any other project. And I I think for me, it's I want to take the opportunity to really thank the teams that have worked so hard in concluding these projects. So it's really part of what we didn't do so well in the past and how we've executed on a decision we took. In terms of the impact of these competitor swaps on our margin, I can't I don't think I can quantify here on this call, but it has it definitely has an impact. It's it's but it's a you know, it's, in a way, a positive problem because what I said, these contracts are long term contracts. The customers will stay with the five g core supplier that they picked for for a long time. So, yeah, it has a temporary pressure, on our margins. The projects are a bit more costly to deliver compared to what we had planned. And what I've also mentioned is we didn't plan for these market share gains that we've seen when we set out here in 2018 and 2019 on our journey. So I would say really it's a little bit of a positive problem to have. Yes. It has a short term financial impact, but I am quite sure that the margins will become more continue to improve. I want to emphasize as well that beyond the five gs core, the pressure on the margin for the five gs core project, the SI margin, the service delivery margin across all other deliveries, be it VSS, be it OSS, be it cloud, continue to improve. So the the pressure is really related there on the SI side on five g core project and in particular with the competitor SWATS. I think maybe coupled to this as well is why it's so important for us to continue to invest in automation. This will also help us to continue to improve our service delivery margins and our gross margin. Great. Thanks, Jan. Thank you, Sebastian. We will move to Richard Kramer at Reate. Richard? Hey, Jan. Thanks very much. I guess echoing Simon's question, a lot of us are concerned that the long term contracts you're signing will have commitments for Ericsson, that are uncertain as you progress with the projects and deal with the legacy systems. And I guess you've addressed that up to the point you can. But my question would be slightly different, and it's also kind of for Peter. If we would look at a comparable software business, we would expect to have the management give us metrics like net dollar retention, annualized recurring revenue. I mean, Jan, I know you've seen some of our research on the software space, and you're familiar with those sort of metrics. Do you have a plan to give us those sort of metrics to measure the growth of the software base that you're building up over time in 'twenty two or beyond? I think it's a very fair question, Richard. So yes, I know I know that the top of that metrics that you see, especially in the SaaS industry, I think we should take it away, yes, sir, as a message here from the analyst community to give a little bit more visibility, especially now that we shift to a more recurring profile compared to what we had in the past. I think it's a very fair question, Richard. Okay. Thanks. And I guess on that, Richard, we have tried to be a little bit more transparent on special events like Sweden, but I hear you. And I think maybe on a more recurring basis as we report our quarterly results, if we can be more transparent here as well, I guess that would help. Yes. Thanks. Thanks, Richard. Richard. We will then move to the next question, which is from Pontus Wachmeter at SEB. Hi, Pontus. Hi, there. Thanks for this. It's very helpful. One question coming back to what you said that there's a significant kind of time lag between when the leading kind of, I don't know, quartile CSPs are investing in standalone five gs or core and when the majority catches up. I'm that is, of course, the definition of leadership in this and layering of it. But would you say that there is an increasing acceleration in catch up when because as you yourself have issued a study and we see a lot of other places where we are now actually seeing a difference in ARPU progression from the Tier one and the Tier two and the Tier three and churn CSP in certain markets and the difference is often how much they can deploy actionable five gs apps and stuff like that. So do you see this lag as possibly shortening? And is it high on the radar over the second and third tier guys, which are increasingly commoditized now? Okay. I think it's a super, super good question. And it's probably worthwhile hours to discuss that because Yeah. But you wouldn't have the core of that. No. No. But I I'll I'll I'll try to do the it's six sentence account. The you would think that, you know, this is going to be easier to deploy. This is going to be easier to to capitalize on in order to to launch new cases. But I, you know, I I I think that's, making a disservice here to to the industry and by stating that. I think if you look want to launch simple services, yeah. Fine. Okay. It's probably not that more complex compared to before. But if you really want to capitalize on the new five g based enterprise opportunity, you need to put in place a foundation, and and the previous question was alluding to that with regards to CLCD. CLCD is just one aspect of this. But imagine, you know, slicing. Do will I sell slicing to enterprises? Will I sell it to aggregators? How will I sell sell slicing? How how will I package it? What kind of parameters will I expose that slicing product, to to my customers? And then you realize, oh, wow. Okay. So I probably need to modernize my catalog. I probably need to modernize my order management. I probably need to modernize my definitely my orchestration, my service orchestration, my assurance. I probably need to put in place, better exposure capabilities both from a network point of view, but also how I expose APIs here to let others consume APIs, from my network. And you realize, okay, I need to put as a CSP, I have all these different use cases across different verticals that I want to to monetize, to address, but I need to put in place beyond just investing in five g core, there is foundational platform that needs to be put in place and the better I'm doing that, the more agile I will be at launching different use cases. And to then answer your question, do I see a shortening of the lag between or the the the delta here between the leaders and the followers? I'm not sure. I'm not sure. I think the if you did a survey here, let's say in Europe, how many CSPs in Europe have put in place a multi domain service orchestration? How many CSPs today here in Europe have put in place these, three GPT compliant, functions, exposure functions like NEF and SCAP? And I think we would be maybe a little bit surprised there that actually quite a few have not come very far. So yes, they are launching nonstandalone and some of them are launching standalone, but there's a level of investment here that needs to be put in place in order to really capitalize on that five g opportunity, and that there are no shortcuts, what I'm trying to say. You have to roll up your sleeves and put that platform in place, in order to reap the benefit. So I I and and I I know the digital services portfolio is complex, but, basically, what we're trying to do, I tried to give a little bit of a glimpse, you know, in the intro of enabling both simplified basic services and more complex services. This is exactly what we're trying to help CSPs to to do. I'm not sure if I answered your question, but I I tried. Yeah. No. I you did. But my kind of question is more, is this now increasingly noted at a high level in the CSPs that this is is there's their acceptance, Even if they haven't started yet, and there's a long way to go, but, you know, are they understanding this to a certain extent? And is it are they ready to take action in the coming years? Are they seeing it? I I I think there's a higher realization, but then the devil is in the detail. What does it actually mean? And there, I think, there's too many CSPs in my opportunity where that realization hasn't hasn't landed into concrete plans. Okay. This is what I need to do above and beyond what I'm doing today. So there's a great opportunity, and in particular, the CST is willing to partner, partner with hyperscalers, partner with aggregators, partner with, you know, different partners in the in the ecosystem, that is a great opportunity. But I am yeah. I think that there I wish there was more progress in landing this into concrete plans of of how to do it. Great question. Super good question. Okay. Thanks, Pontus, for that question. We will move to I think we have Frank Maier back from DND. Frank, welcome back. Thank you. Just additional question, if I may then, on a couple of competitive developments over the last week or actually announcements. So we've seen you mentioned first Japan that you've increased the market share in Japan. Last year, you announced this five gs dual core contract with KDVI. But this week also Nokia had a quite comprehensive announcement of various set of software add on software in addition to a number of VNS there. So to what extent are you still in with a significant share in KWD? That's my first question. And the second question on the competitive front is really with regards to what was the reference private networks that you mentioned as a kind of third layer of growth going forward. And we saw AWS now launching an offer in private five gs this week, potentially with using some small competitors of yours and so on and pre integrate a lot of third party stuff and distribute that. But how do you see that perhaps you are a bit over engineered with that kind of telco CSP type of full stack product in the private five gs space, but rather you could see some data on the simpler solutions being pre integrated and distributed by web scalers like AWS or Microsoft in the future for at least a big part of that private five gs market? It's a super good question as well. So if I start with the first one, typically when especially a large Tier one CSP like KDDI atypically and you saw that in in the example that I shared on on the slide, you didn't see, 30 functions. We saw, I think, was 14 from from us, which is still, you know, really good. But typically, a tier one says, okay. I'm going to use somebody for policy. I'm going to use somebody for charging. I'm going to use somebody for user playing. I may be the same vendor for for control playing in Magic Core, And that's in fact what happened in KDDI. So KDDI picked us for Fagicor, with many functions. And, what you could see in that press release was that Nokia had been picked for policy and for charging, for UDM, I think. Those were the the main areas where KDDI selected Nokia. So this is, I would say, the norm is that you find that the CSP actually divides that, let's say, whole cake, just packet for Perseer, but the different surrounding functions across the different vendors. And this is just how it is. The 3GPP, it's the beauty here of being able to mix and match. I would say in the KVDI case now that we are super comfortable with the market share that we won and are doing our best here to fulfill on our commitment. On the second question, with AWS launch a few days ago in the private network area, I think first of all competition is good. Great to see the innovation here that they can bring to the market. We have a very competitive, private network solution, and the latest product or version is called EP five g. And what we've done there in terms of building a big, big, massive, you know, core that works, you know, with very high capacities. We've scaled it down. We've industrialized, you know, across radio and core and management something that we think is very competitive from a commercial point of view, very competitive from a life cycle managed deployment and life cycle management point of view. So we're really holding our own, and I think that's one of the benefits of of our of our offering is that it's tightly integrated. You don't have to go in and, okay. I'm the system integrator, and I have to take on all kinds of integration pains. Now what we have is something that is really pre integrated and also maybe why are we able to do that because we're capitalizing on the cloud nativeness of our of our software, it can scale up to very, very large volumes and it can scale down to very low volume. So let's see now how successful we are with our offering going forward. But to me, in general, I think it's just great to see the innovation that the hyperscalers can bring to the table. Great question. Thank you. Thanks, Greg. So we will move to the last question of the session, and that will be from Daniel Huber at Handelsbanken. So hi, Daniel. Hi, there. Thank you for the opportunity today. Yes, a comment on or a question on the nine live networks with the five gs core. And if you could perhaps comment a little bit on the remaining 36 to go live, if you have any comment on what to expect during 2022 and versus 2023 and late? And also how this could impact the momentum and revenue recognition for the OSS, BSS, etcetera, that you had quite good momentum with according to the Q3 Yes. No, I think so the other four solution areas are progressing well, both top line and bottom line. With regards to Packet Core, again, this is where like I the picture I tried to paint is that we have signed many contracts, now it's about reaping the the benefits of revenue from those. But to answer your question, we we expect a regular, you know, cadence here of of launches. First, soft, typically, operators will go soft first, but then full commercial. So, the cadence, I don't know if it's going to be one or two per month or three some months or four some months, but it's it's going to be and I think the biggest measure of our success apart from, you know, our progress, let's call it, during the next quarters will be these go lives of the contracts. All the contracts we sign when they go live, this is when we will, of course, see them a big revenue milestone in those contracts or at least initial revenue milestone of those contracts. So to answer your question again, regular cadence of the contracts we signed during 2022 with go live after go live. I think you've started to see it now. Things then went live in October. SoftBank went live. Optus went live here with the go live. TPG went live. Operating in Canada also had the soft go live just now. So it's going to be on the regular cadence here over the next weeks and months. Okay. And that sounds good. Thank you very much for the opportunity. You, Daniel. Thank you so much. And thank you all for the questions and for participating at this event. And as I said, in the beginning, we will have the second presentation in this sort of line of different events with Friedrich Gaitlin here on Tuesday at 04:30 p. M. Central European Time, so Thursday, December 7. So by that, thank you very much, Jan, also for making that Thank you. We will hear from you on Tuesday then. Thank you. Bye bye. Bye bye.