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I'd like to start by focusing my comments today really on two key areas: first, the progress against our strategic initiatives; and second, how we position the business to succeed across varying market conditions. Beginning with our strategy that aims to build the network for the future through programmable networks and open API architectures. This will enable our service provider customers to deliver differentiated performance and new applications and new cases to monetize. The contract, and you remember that, that we signed with AT&T last year really paved the way for our newest agreement with MasOrange, which we signed during the quarter.

I would say our agreement with MasOrange was really the first open programmable network in Europe. It's a key milestone for us and the European telecoms industry. With this agreement, Ericsson and MasOrange will collaborate to lay the foundation for open programmable infrastructure that will drive technological advances and growth moving forward. It will allow differentiated connectivity.

And why is differentiated connectivity so important? Well, if you think about the whole radio stack -- and we are serving a massive number of different applications. We're serving anything from mobile broadband, fixed wireless access, mission-critical communication, but also AI eyeglass or AI-driven new applications. We have AR/VR glasses, all of them will require differentiated connectivity. And here, programmable connectivity plays a very important role.

That's why that's a key focus for us. But besides that, we also launched a number of enhancements to our portfolio, including more sustainable Massive MIMO radio with more than 25% energy savings and new RAN software capabilities that significantly boost performance and programmability. On the enterprise side, the joint venture we announced in September with 12 leading service providers to aggregate and sell network APIs represent a key milestone in redefining the telecom industry by creating the supply of network APIs across several continents. And we continue to see the momentum building for network APIs.

And during the fourth quarter, we also announced the name for the new venture, Aduna, and you can expect many more announcements to come in the future here. In enterprise wireless solutions, our strategic ambition is to further build out the go-to-market engine. Last year, we combined the activities under the Ericsson brand and announced a new enterprise 5G portfolio, including neutral host solutions to enable full indoor connectivity. Overall, we saw very good traction in the new portfolio in Q4.

So, as you can see, we are not standing still. We're taking actions to execute on our strategy to ensure that Ericsson remains well positioned for the future, while also laying the foundation to change the overall trajectory of the RAN market. Second, I'd like to provide some, call it, comments on the overall RAN market and how we're preparing ourselves for different market conditions. And you've seen that's been critical.

In 2024, the overall market continued to be quite challenging, and I would say continued to decline during the year. However, today, we are starting to see some very positive indications, and we have further reasons to believe that the overall market is starting to stabilize. And you saw in Q4, sales returned to growth for the first time in eight quarters, increasing by 2%. We continued strong growth in North America as well as growth in Europe.

Growth in data and new applications, that's what's going to drive the market over the medium to long term. But, you know, ultimately, and we've said this so many times before, the near-term market recovery is in the hands of our customers. But our confidence in a stabilizing market is growing, driven by positive customer discussions and interactions and that we see a return to our largest markets, the U.S. as well as Europe.

So, I think the frontrunner experience we have with the U.S. market can give us comfort that we are starting to see a change in sentiment. But regardless of the market conditions, we need to structurally improve our business through rigorous cost management, of course, but also improving our working capital and the capital we tie up in the business. That will strengthen our cash flow and balance sheet.

So, for example, during the past few -- well, year and years actually, we have taken a lot of actions to structurally take out costs, and you can see the results in our gross margin increasing by more than 500 bps to 44.9%. Market mix, IPR licensing revenue, of course, and the focus on the profitable segments in enterprise all contributed as well. In 2024, total headcount, internal and external, fell by 9,400 or 8%. So, it's just not in our gross margin where we're structurally improving the profitability.

We're actually taking opex out as well. And as you've all seen, the fourth quarter included significantly higher bonus provisions than last year and clearly above normalized levels during the quarter. So, underlying opex developed well and fell down or fell. Adjusted EBITA margin increased by 300 bps to 11%.

We're not yet where we want to be here, but we're making progress toward our long-term goal. Going forward, we're going to continue to strengthen our business and focus on operational excellence, and we remain committed to our long-term EBITA margin target. Over the past 18 months, we have implemented actions to structurally lower our working capital, together with the change in business mix following the completion of the large rollout projects in India that we had in 2023. We generated free cash flow of 40 billion during 2024.

And that puts us in a very strong financial position. Turning to capital allocation. Our first priority is to invest in R&D to maintain and grow our technology leadership across networks, enterprise solutions, and network APIs. Alongside R&D, we prioritize a strong balance sheet and attractive shareholder returns.

I would also say that we actually have a very well positioned portfolio today. So, we see possibility to do some smaller add-on bolt-ons, could be geographic, could be technology-wise, but what we have, positions us really well to organically develop the business, and we're very satisfied with where we are. So, today, you saw the board proposing a dividend of 2.85 per share, corresponding to a total amount of 9.5 billion kroner. I would say this is a testament to the confidence the board has in our strategy as well as the longer term.

So, as you can see, it was a strong end to the year. But now, let me comment more specifically on some of the market developments we saw in Q4. In North America, sales increased by 54%. In networks, sales increased by 70%, of course, driven by the rollout of our AT&T contract, but also strong year-end hardware demand and significant software traction with other large customers.

Sales in Europe and Latin America increased by 2%. The strength in Europe, in particular, benefited from the market share gains and strong deliveries. Sales decreased in all other regions, specifically, Latin America continues to be a market with intense competition and lower customer network investments. In Southeast Asia, Oceania, and India, sales decreased, primarily due to lower network sales in India after a record year in 2023.

Sales in Northeast Asia, as well as Middle East and Africa, also slowed. This was really due to investment levels slowing down following the recent 5G build-out in the frontrunner markets as well as some macro pressures from -- in Africa that we're all aware of. At the same time, we had good customer success in all of these regions in the quarter. So, for example, we announced a multiyear contract extension for 4G and 5G RAN with Bharti.

We also had a contract win of nationwide 5G deployment for VNPT in Vietnam. With that, I would like to hand over to Lars to go through the financial details.

Lars Sandstrom -- Senior Vice President, Chief Financial Officer

All right. Thank you, Borje. Let me start by giving you some additional points on the group before discussing the segments more in detail. Net sales in Q4 amounted to 72.9 billion, and organic sales were up 2%.

North America growth was strong for the third quarter in a row, and we also had slight growth in Europe for the second quarter in a row. The other markets declined, particularly India, where investments level have normalized after a peak in 2023. Adjusted gross margin was 46.3% in Q4, an increase from 41.1% in the prior year here. Margin improved with supply chain efficiency to focus on commercial discipline and a favorable market mix.

Opex in the quarter was 23.8 billion, up by 1.7 billion compared to the prior year, mainly because bonus accruals were above target levels in '24, having been below in last year. The cost-out activities continued to deliver savings. These balanced out salary increases and part of the higher bonuses. Adjusted EBITA increased to 10.2 billion with a margin of 14.1%, marking a significant expansion year on year.

Cash flow was strong at 15.8 billion. The improvements came from improved profitability and lower working capital. Let's move on to the results for the full year. Net sales amounted to 247.9 billion, and organic sales declined by 5%.

Very strong growth in North America was offset by organic sales declines in all the other market areas. The sales decline, which gave a significant volume impact on gross income, was more than offset by an increase in gross margin. Adjusted gross margin was 44.9%, an increase from 39.6% in 2023. Margin improved with a favorable market mix, cost reduction initiatives, including supply chain efficiency, as well as higher IPR licensing revenues and the focus on more profitable market segments in enterprise.

The result on gross income was an increase of 7 billion to 111.4 billion. Reported opex was up by 15.2 billion compared to the prior year, mainly because of the intangible asset impairment of 14.1 billion. Excluding impairments, total opex was 88.4 billion, which is an increase of 1.9 billion. This is mainly because the higher bonus accrual levels compared to 2023.

R&D investments continue to maintain technology leadership, for example, to accelerate delivery of some 5G features and to further improve operational resilience. Excluding restructuring, impairments and the discontinuation of capitalization of development expenses in enterprise impacts, R&D increased by around 1 billion in the year. SG&A costs, excluding restructuring and impairments, also increased slightly, primarily in segment enterprise with investments to improve operational effectiveness. Adjusted EBITA increased to 27.2 billion.

The margin was 11%, marking an almost 3 percentage point expansion year on year. And net income for the full year was 0.4 billion compared to minus 26.1 billion in 2023. Net income in '23 was impacted by the impairment of goodwill of 31.9 billion and in '24 by a noncash impairment charge of 15.3 billion. The effective tax rate for 2024 was 28%, excluding the impairment charges.

Cash flow was very strong at 40 billion. The improvements came from improved profitability and working capital resulting from a favorable market mix, customer payments, and efficient supply chain management. I cover this more in detail later. Let's comment on IPR licensing.

Q4 marked the fourth quarter in a row that a new IPR agreement was signed. This means at the end of 2024, most of the top 10 smartphone vendors were licensed for 5G. IPR licensing revenues increased to 14 billion in 2024, including retroactive revenue of around 1 billion from just over 11 billion in 2023. We are at a record run rate of 13 billion in recurring IPR revenue going into 2025.

There are further growth opportunities with a few additional 5G agreements remaining and the potential to expand in additional licensing areas such as automotive and IoT. With that, let's move to the financial trends. While the market conditions have clearly been challenging, we have been seeing a stabilization of sales in Q4. Rolling 12-month sales bottomed at Q3 '24.

The gross margin trend shows that the focus on growing the patent portfolio, the improved utilization of supply chain and cost actions are paying off. The more favorable market mix has also contributed. We have seen a favorable development of EBITA, which ended up the year at 27.2 billion, up by 27% compared to the prior year. The lower level of sales in the first three quarters compared to the previous year and increased operating expenses moderated EBITA margin improvement.

Let's move to the segments. In networks, organic sales increased by 5% year on year. North America grew 70% from very low levels last year with contract wins and a strong year-end software demand contributing. Sales in Europe grew slightly.

In the other markets, customers continued to be cautious with their investments, and the largest decline was in India, where the investment levels have now normalized after a peak in '23. Networks' adjusted gross margin was 49.1% with a favorable market mix or business mix, cost actions, and operational leverage in the supply chain all contributing. IPR revenues increased and benefiting from a further licensing agreement and contributed to the gross margin improvement. Networks' adjusted EBITA increased to 10.1 billion from 7.4 billion in the prior year, and adjusted EBITA margin was 21.6% in Q4 and 17.5% for '24 overall.

EBITA improved due to higher sales and improved gross margins, partly offset by higher opex, affected by the before-mentioned higher bonus accruals and investments in R&D. In segment cloud software and services, organic sales were stable, with sales growth in North America offset by sales declines in the other market areas. Adjusted gross margin was 39%, improving from the prior year and benefiting from the delivery performance and higher software sales. The strategy execution with focus on commercial discipline and accelerated automation is paying off.

The improvement in gross margin was offset by higher bonus accruals, reflecting an above-target outcome in '24, which resulted in an EBITA margin of 9.3% in Q4 and 3.2% for 2024. In enterprise, sales declined by 7%. Enterprise wireless solutions grew by 19%, with strong growth in private 5G and neutral host solutions. Sales in global communications platform declined 17%, impacted by the decision to reduce activity in some countries and focus on more profitable market than product segments.

Adjusted gross margin increased to 54.3%, and adjusted gross income increased by 0.3 billion year on year despite the sales decline. The adjusted EBITA loss was minus 1.2 billion, with a decrease year on year, mainly reflecting nonrecurring impacts, in part related to the exit of certain businesses, as well as increased investments to improve operational effectiveness. To focus on improving the financial performance in the current portfolio continues at the same time as we also invest for the future. Turning to free cash flow, which was 15.8 billion before M&A in the quarter and 40 billion for the year.

We delivered a cash flow margin of 16% to net sales for the year, well above our 9% to 12% target. The increase in cash flow compared to '23 is due to the earnings growth and very strong working capital, as I mentioned before. Working capital benefited from the structural actions we have taken to improve supply chain, cash efficiency, and from market mix, particularly between India and the U.S. On top of this, strong collections and customer prepayments also contributed.

And this means working capital is now at historically low levels, and we expect this to partially reverse in '25. Net cash increased sequentially by 12.3 billion to 37.8 billion. And return on capital employed in '24 was 2.5%, this includes an over 7-percentage-point impact from the impairments. Next, I will cover the outlook.

Turning first to sales. For networks, Q4 continued the strong trend from Q3. So, the 2024 exit rate is high. Despite this, we still expect networks Q1 to be broadly similar to the average three-year seasonality.

We expect cloud software and services to be similar as well. In enterprise, sales will continue to be impacted by near term by the decision to focus on profitable markets and products. And next, turning to profitability and networks' gross margin. For Q1, the networks' gross margin is expected to be in the range of 47% to 49% with some initial impact from the timing of swaps in North America but still benefiting from a positive market mix.

And with still significant revenue declines in some markets, restructuring is expected to remain elevated in 2025, as we continue to adjust operating model and focus on operational excellence. With that, I hand back to you, Borje.

Erik Brje Ekholm -- President, Chief Executive Officer, and Director

Thank you, Lars. So, the global RAN market continued to be challenged in 2024. But I would say we were well prepared for this as we took actions early to adjust our business for a more realistic levels of demand. North America returned to growth in Q2, and we saw a stronger end of the year broadly as our networks' revenue returned to growth in Q4.

Looking ahead, we see further signs of the RAN market stabilizing. Our recent customer discussions indicate an accelerating interest around our programmable networks. And in many markets, there is a need to invest to keep network performance at a competitive level. It's encouraging, but we recognize that the exact timing of the investments that will be made.

Of course, those decisions are in the hands of our customers. We will continue to execute on our strategy to capitalize on the evolving market dynamics. This strategy is focused on building the industry's best-performing programmable networks that enable differentiated services and increased monetization opportunities for our mobile operator customers through new use cases, including exposing network capabilities through network APIs. In addition, we remain focused on the things we can impact, and that's, of course, how we run our business, including cost and working capital management, and naturally strengthening our product portfolio as well.

This way, we ensure Ericsson continues to be well positioned to create value for its stakeholders when the market fully recovers. Our goal is to make Ericsson a more profitable company based on the leading position in mobile infrastructure and to develop new use cases and monetization opportunities. This will change the trajectory of Ericsson, but also the telecom market that I would say the last decades have actually flattened out. And by changing these dynamics, we're into a situation where we'll see further investments in the network.

So, to sum up, in 2024, we took several critical steps in our strategy, and we'll continue doing so in 2025. So, on that note, I actually want to thank all my colleagues in the company for all their hard work. Thank you, team. With that, I think it's time for Q&A, Daniel.

Daniel Morris -- Head of Investor Relations

Super. Thanks, Borje. We'll move on to the Q&A now. [Operator instructions] And as usual, can I request one question per participant, please, so we have time to hear from as many of you as possible today.

Operator, if I can ask you to open the line, please? Super. So, our first question this morning is going to come from Andrew Gardiner at Citi. Andrew, please go ahead.

Andrew Gardiner -- Analyst

Thank you, Daniel. Can you hear me?

Daniel Morris -- Head of Investor Relations

We do. Yes.

Andrew Gardiner -- Analyst

Good morning, guys. Thanks very much for taking the call. I had one on the dynamics in the North American market. If I go back to the commentary you were making at the time of third quarter, you had a good result then, but you were expecting the sequential trend into 4Q was perhaps going to be a little softer seasonally off that stronger 3Q.

As it turns out this morning, you're showing us very good trends in the U.S. In particular, you're obviously highlighting the share gains. Lars, you briefly just mentioned swap-outs as well. So, I was interested in a bit more detail in terms of what's happening in the market, what indeed drove that upside relative to your earlier expectations.

Was it more share gain under the new contract? Was it sort of the broader market coming back, inventory replenishment? A little bit around that would be really helpful.

Erik Brje Ekholm -- President, Chief Executive Officer, and Director

I can take that. Thanks, Andrew, for the question. It's a good question. And what we have seen, and that's why you see us talk more optimistically and confidently about the market starting to recover.

We actually have seen the investment levels coming up in North America. Part of it is, of course, to replenish from a very low inventory level that we've seen in the industry. And part of it is, of course, driven by, call it, the traffic growth and the need for connectivity. So, I feel that we saw a little bit broader base of purchases in Q4 than we may be expected when Q4 began.

Daniel Morris -- Head of Investor Relations

Thank you, Andrew. Moving to the next question, please. The next question is going to come from the line of Francois Bouvignies from UBS. Francois, your line should now be open.

Please go ahead.

Francois Bouvignies -- UBS -- Analyst

Hi. Thank you very much for taking my question. I have a question maybe more on the geopolitical side of things. We have seen, of course, Trump getting into elections and talking about the tariff potential.

And I was wondering your -- given your high exposure to North America, where your production is globally. Because when I look at your annual report on 20-F, I know you don't manufacture yourself, but you have like a significant portion of your revenue that's still in-house on the testing and assembly, which seems to be in China, but correct me if I'm wrong. And -- I mean, outsourcing is through EMS, which I assume is mostly in Asia. So, it seems that mostly your supply chain is coming from Asia.

And I was wondering, how should we factor the potential of tariff over time in your business? So, if you can help on that and -- does it change your strategy may be doing more in local North America? That would be very helpful.

Lars Sandstrom -- Senior Vice President, Chief Financial Officer

I can start. If you look at our supply chain, as you mentioned, we have production today in North America. So, where we are made in America for America. We have in Latin America.

We have in Europe. We have in Asia. We have in India. So, we have pretty broad-based production capacity that we are utilizing.

And we have the opportunity to move production between the different sites, both in our internal, but also with the external manufacturing sites that we have. So, that is -- it's not something that we do easily. It depends a little bit on the product mix, etc., of course, but we have this opportunity to work with the supply chain depending on what kind of decisions that we will see ahead of us. Having said that, of course, tariffs could have an impact going into 2025.

But I think we are all waiting a little bit to what is going to happen there. But we are working on that continuously trying to balance and utilize the system we have.

Erik Brje Ekholm -- President, Chief Executive Officer, and Director

And as you know, we built a factory in the U.S. I would just add that. We commissioned it, I think, 2019 or 2020. It's a few years ago.

In reality, preparing for a different geopolitical situation. And I think the whole world is moving from a cost-optimized supply chain to a resilience. You need to factor in resilience in the supply chain. And that's why we built up the U.S.

factory. And we're increasing the -- we're investing to increase that capacity in North America as well. And then we'll all have to see, just like Lars said, how will this look in reality and then adjust as much as possible. So, I think we just have to see with that question.

Lars Sandstrom -- Senior Vice President, Chief Financial Officer

I think also worth mentioning on tariffs, it's -- normally, it's not general tariffs. It can be different. There can be exemptions, etc. And we have seen that in the past where critical products for a market has been exempted from tariffs, etc.

So, it's too early to say what's going to happen. But of course, we are working and following this closely.

Francois Bouvignies -- UBS -- Analyst

Very clear. Thank you. Can I have a follow-up, or should I go to the queue?

Daniel Morris -- Head of Investor Relations

If it's very brief, we can take it.

Francois Bouvignies -- UBS -- Analyst

Yeah. I mean, just on the software dynamics side, you ended the year with a good software mix based on your comments. I was just wondering if you think that's going to continue in '25 or early '25? That's it. Thank you.

Lars Sandstrom -- Senior Vice President, Chief Financial Officer

I think when it comes to a single quarter, especially the fourth quarter, we tend to have a higher software mix, in this year as well, and maybe even a little bit exaggerated in the quarter. So, to see it as a trend is maybe too early to talk about.

Daniel Morris -- Head of Investor Relations

Thanks, Francois.

Erik Brje Ekholm -- President, Chief Executive Officer, and Director

But I think we should add there, the industry -- if you think what's actually happening, when we horizontalize the network, which, as you know, that's what we have been working on, that's the whole basis for the contract win in the U.S. as well as in Europe, it's an increasing amount of software that structurally is going to come. Then Q4 is, as Lars said -- but structurally, we are going to go into a situation of more software as opposed to hardware.

Daniel Morris -- Head of Investor Relations

Thanks, Borje. We're moving now to the next question. So, Simon Granath from ABG. Your line should now be open.

Do you hear us, Simon?

Simon Granath -- ABG Sundal Collier -- Analyst

Yes, I do. Good morning, and thank you for the presentation. I'd like to expand a bit on the traffic growth here because you do acknowledge in your latest mobility report that it's continuously decelerating here, and one could potentially argue that this is waiting on the demand for your products. Nonetheless, data traffic is still growing, and you do also expect this to continue.

But is it fair to assume that this shift is making you put even greater emphasis on margins over the longer term, particularly if this trend continues? Thank you.

Erik Brje Ekholm -- President, Chief Executive Officer, and Director

Thanks, Simon. So, it's a very good question. Data traffic growth will be what's underlying the demand for our products. Once you build out coverage, it's truly only data traffic growth.

And it's right. As you say, it is gradually declining a bit, and that's fair. I would say, though, what we are expecting to see, and that actually is a different question a bit. But when you start to think about future applications, so far, we come from a world where it's been mobile broadband to the consumer.

That's been demanding one type of traffic. What we see now in the future is actually a wide range of applications coming up. It's anything from AR/VR glasses, but I would single out one trend that's actually going to be very big for the traffic and start to impact network investments, and it's the whole AI. So, far, AI has been mostly on the training side, and that's fine.

But we're starting to see that come into applications. In enterprises, I'm sure there are going to be consumer applications. They may well be more voice controlled. So, you're using voice as the -- as quality operating system.

In that world, we see also a changing requirement on the network. So, the network needs to be prepared for the AI traffic. It's going to require more uplinks, going to require different performance of the network. That's actually, I think, maybe more important in the next few years as a traffic definition.

So, yes, overall traffic is probably going to continue to taper down. But I think the demands coming from the new applications that run on top will actually materially impact the way you need to invest in the network. That also need, of course, to impact the way you get monetized for the network. And that's why I think we're very excited about where we are on the demand for network equipment, but also the ability to monetize that through network APIs.

I think they all are starting to come together, making us a critical component in the -- in how AI will be deployed. So, I think we should -- when we think about the future, there is actually one -- I mean, if you only look at consumer mobile broadband, you can get a bit negative. But I actually think we need to look at the other side, which is starting to happen at a very different pace. I wouldn't rule out, that's actually what we see starting to happen in North America while we actually get the demand picking up there because the data traffic is per se growing at about the same rate as before, but the nature of the traffic is starting to change.

And I think that's what should bring us excitement. On the focus anyway, I think we need to have a very strong focus on operational excellence. And for me, that -- if we focus on operational excellence, we can actually say, OK, if the additional exciting data traffic growth takes 12 months, 24 months, or 36 months to be meaningful, at least we have a very solid core business. So, the focus on the margin is actually something we are not going to drop.

So, we need to have that as well, but the other part is equally important.

Daniel Morris -- Head of Investor Relations

Thanks for the question.

Simon Granath -- ABG Sundal Collier -- Analyst

Thank you so much. May I have a small follow-up?

Daniel Morris -- Head of Investor Relations

Simon, `I think we better just move on just because we have quite a long queue, but thank you for the question. Feel free to join for a follow-up at the back of the queue. If we can move on now to the next question, Sebastien Sztabowicz from Kepler Cheuvreux. Your line is now open, Sebastien.

Sebastien Sztabowicz -- Kepler Cheuvreux -- Analyst

Yeah. Hello, everyone, and thanks for taking my question. One question regarding the mix for the coming quarters, how do you see the mix evolving? And specifically attached to that, do you see any kind of opportunity linked to 5G Advanced going forward? It seems the U.S. operators are potentially preparing for more rollout of 5G Advanced.

Is this something that could positively affect your mix in the coming quarters? Thank you.

Lars Sandstrom -- Senior Vice President, Chief Financial Officer

If I start with the mix that you -- from a geographical perspective, we will -- we have had quite a good growth in the U.S., as you know, in North America. The growth rate as such will come down as we more come into stabilized rollout, etc. Still a bit of support. But of course, with -- the very high growth rate you have seen in the past quarters will calm down.

And then if there are then coming -- stabilizing in the market, some recovery in some regions, that could have somewhat of a negative market mix, but also on the rollout mix as such within North America. So, that is what we are trying to highlight here. And I think when it comes to the 5G Advanced roll-out, I think I'll leave that one.

Erik Brje Ekholm -- President, Chief Executive Officer, and Director

Yeah. I think it's a very good question. We're starting to see some traction on 5G Advanced. And so, we're in very good discussions.

So, I think that's the next step that's going to again give you the high-performance networks you're going to need for the future type of traffic. So, we're quite excited about that. But it's -- I would say if it impacts the next few quarters, I think that's too much to say, but we're rather encouraged by the traction we see.

Sebastien Sztabowicz -- Kepler Cheuvreux -- Analyst

OK, thank you.

Daniel Morris -- Head of Investor Relations

Thanks for the question, Sebastien. Moving on to the next question, please. Next question is coming from Daniel Djurberg at Handelsbanken. Daniel, please go ahead.

Daniel Djurberg -- Handelsbanken Capital Markets -- Analyst

Thank you, Daniel. And good morning. Yeah. A question on capital allocation, and obviously, also broad question, but the net cash increased some 12.3 billion.

You have a gross cash of 76 million after Q3 and net, 38 billion. And then you will have iconectiv adding some 10 billion, 11 billion to this. And you propose some 9.4 billion in dividends, hence, you will have a huge cash pile also after that dividend. So, the comment on the question is really how you think of the capital allocation, the cash you need for the operation, and the potential for any extra dividend, buyback or so or if you expect to do another quite lofty acquisition or anything else that we should bear in mind? Thank you.

Lars Sandstrom -- Senior Vice President, Chief Financial Officer

When it comes -- I'll start.

Erik Brje Ekholm -- President, Chief Executive Officer, and Director

Yeah.

Lars Sandstrom -- Senior Vice President, Chief Financial Officer

When it comes to capital allocation, I think, as you know, our focus is -- first priority is to ensure solid R&D so we can continue. We are long term. We are in technology leadership, and we need to ensure that we continue to invest to maintain our technology leadership. So, that is key for us.

Yes, we're coming out with a good net cash position, but you can also argue it's coming back to more historical levels. When it comes to M&A, I think what we are looking at is where possibility could be is when it comes to bolt-ons within the product portfolio or some if there are geographical expansion, etc., but not any major investments in that area. And then going forward, we have -- the board has proposed an increase of dividend to show gradual improvements in -- or increases in the dividend capacity. And then going forward, I think that will probably be a question more coming into the coming years when it comes to further dividend or allocation to the shareholders.

Erik Brje Ekholm -- President, Chief Executive Officer, and Director

And I think, Daniel, I also want to take maybe another attack on this. And as I said, I think we can organically develop our portfolio. We have a strong position on the mobile network side. And what we have in the enterprise side, actually, we think we have a very solid base to develop that from.

So, we're very comfortable with our starting position. That means that we may add some geographic coverage, could add technology components in there. But I also say that we -- to think that we would do a bigger acquisition, we're not going to do that, for the very simple reason, we need to deliver on the ones we've done. So, I think we need to show that we can create the value for the shareholders and strengthening the company with the investments we've done.

So, we have a lot of work to do that before I would even remotely think about that question. So, that's not part of the way we work. What we are focusing on the -- we're, of course, always in the M&A market, but it's going to be the smaller add-on, bolt-ons, geographic expansions. That's what we will be focusing on.

Daniel Morris -- Head of Investor Relations

Thanks for the question, Daniel. Next question please. Next question is from Jakob Bluestone at Exane BNP. Jakob, your line is open.

Jakob Bluestone -- BNP Paribas Exane -- Analyst

Thanks, Daniel. Hopefully, you can hear me OK. I appreciate you haven't guided specifically for 2025. And I presume that sort of reflects some of the broader geopolitical uncertainties.

But I was just hoping you could maybe give us a little bit of sort of qualitative color around some of the puts and takes for revenues and margins. You've obviously mentioned potential risks around tariffs and sort of market growth. Are there any other things that we should bear in mind for revenues? So, for example, the fact you had a number of one-offs in '24. And then at the margin level, can you maybe just help us understand do you see your margins and sort of broader cost control? Does that -- you had your big cost savings in '24 as you sort of cut back as revenues were under pressure, does some of that going to reverse? So, could we start to see some margin pressure coming as you restart paying people more bonuses again, maybe some of the mix is a little bit different as places like India start to grow again.

So, just sort of interested on anything you can say qualitatively on '25. Thank you.

Lars Sandstrom -- Senior Vice President, Chief Financial Officer

Maybe you want to start on top line, and I can walk down the margins and costs.

Erik Brje Ekholm -- President, Chief Executive Officer, and Director

Yeah. I think what we see we come out of a period where '23, '24, I think we had, call it, almost two years of continuously falling sales. What we see is a much more stabilizing outlook. So, that trend of falling sales feels like we -- it's always dangerous to say that everything has changed, but at least we get more comfortable in the outlook of this stabilizing and actually returning to some more historic patterns.

So, I feel on the sales side, at least what we can see is a more positive outlook than we've seen the quarters before. So, in that sense, we've gotten more positive. And what's further giving that reason for positive is actually that the U.S. is returning to stronger growth.

The numbers don't focus on the quarter or year-over-year increase in North America because that's from a very depressed level in the year before. But think about it much more as we're seeing a broader-based recovery in North America. It's not only one contract. It's actually broader.

And when we start to see that with the front-runner characteristics of the North American market, they were the first to really deploy 5G, then the other markets came. It gives us the comfort that the market outlook is stabilizing. I think it's leaving the last few quarters. So, we see that to be a solid indication that we are in a good spot.

Then globally, what we have done, I would say, over the past few years, is actually to reduce the sensitivity to geographic mix. So, we have much less exposure to different regions growing differently. What may actually impact more on margins is the amount of rollout. If we have a large amount of rollout, it actually puts a bit of pressure on the margins.

And that's more important. And when you think about the future, we're probably going to see the AT&T contract move into more of rollouts and swap-outs that we saw in India the year before, etc. That may be, call it, impacting more than necessarily the sales mix. But if you look, the U.S.

used to be or has almost always in our industry been a front market coming back to growth and the broad-based growth we see Europe coming back to a bit of growth. It's going to be a bit choppy. It always varies by quarter, but at least it's getting more positive. We see Asia in the same way.

So, the market is shaping up to be relatively -- it's improving and stabilizing.

Lars Sandstrom -- Senior Vice President, Chief Financial Officer

Yeah. And we are still in a downward trend in -- outside of U.S. and Europe. And when that will we see, as we mentioned, in Africa where they have -- they are pretty hard hit by geopolitics and the difficulties they see, so -- and the competition in Latin America.

So, it is hard to see where are they, where is the trajectory turning there, so to say. And when it comes to margins, I think you mentioned it. There will be a bit of mix on the margin. So, there could be some pressure, not substantial, but holding us back somewhat.

And on the cost side, I think coming out of the year here in '24, little -- somewhat elevated bonus levels, but going back a couple of years, you could argue that '23 was really a low year compared to the historical average. So, going -- looking into '25 for opex, that should be similar levels because we have an underlying cost inflation hurting opex and, of course, cost of goods sold as well, but we are continuously working with the cost reductions. And as we mentioned there in the outlook on the restructuring, we will -- they will be maintained on a higher level to mitigate some of this cost inflation pressure that we still see.

Jakob Bluestone -- BNP Paribas Exane -- Analyst

Understood. Thank you.

Daniel Morris -- Head of Investor Relations

Thanks, Jakob. Moving to the next question please. The next question is coming from the line of Andreas Joelsson at Carnegie. Andreas, please go ahead.

Andreas Joelsson -- Carnegie Investment Bank -- Analyst

Good morning, everyone. I just like to go back to Daniel's question on capital allocation, if I may. And this is just so we understand everything, everyone. As Daniel said, you have a strong cash position, you will have proceeds, you will have free cash flow also for 2025, I guess, given that you see a stabilizing outlook.

And just from a philosophical way, what is the argument for a company like Ericsson to have to have a net cash position? I understand you have had it historically as well, but what is the reasoning behind that, if I may? Thanks.

Lars Sandstrom -- Senior Vice President, Chief Financial Officer

I think it is our firm commitment to really ensure that we have capacity to do the investments in R&D over time. I think that it has been the leading star -- guiding star for the company for quite some years. And I think we also have -- if we go long back into history, felt that that has been hurting our ability to invest in when having not the right cash position, so to say. So, I think that is, call it, a bit of conservatism on that end.

But I think coming through 2025 here, we will continuously evolve and assess what is the right capital structure. And of course, start a discussion internally together with the board, and then, at that -- at the later stage and externally also, communicate how we look upon this.

Erik Brje Ekholm -- President, Chief Executive Officer, and Director

One philosophical thing, Andreas, that we very rarely talk about, but actually, our customers care a bit. They typically make 10-year commitments when they put our networks in operation. So, they would prefer that we are solid from a financial perspective, so they can comfortably make that commitment, right? So, to avoid to have that discussions and customer interactions, it's better to be maybe a bit conservative, as Lars said, on the capital. We talk a little bit less about that, but I think that's been a factor.

And here, I think it's going to take some time and has taken time for the customers to realize that we are increasingly becoming a software business. When we were -- if you go back 15 years, we were much more hardware-centric. And then, of course, it was a bigger question for the customers. As you move into becoming a software vendor, I think that capital -- I mean, the working capital becomes less and less and less.

So, I do think that that's going to change. But so far, that's been one of the things that's actually been important in order to capture customers. And we come from a spot in 2017, when this was a topic in every customer interaction. Hasn't been since then, but every customer I met were focusing on Ericsson going to stay live or you're going to turn around, etc.

That's not the question anymore, but we want to also be a bit prudent in that perspective.

Andreas Joelsson -- Carnegie Investment Bank -- Analyst

Thank you. Very helpful. Thanks.

Daniel Morris -- Head of Investor Relations

Thanks, Andreas. Moving on to the next question, please. Next, we have Sandeep Deshpande from JPMorgan. Sandeep, please go ahead.

Sandeep, we don't hear you yet. Can you check your mute?

Sandeep Deshpande -- Analyst

Yeah, hi. Can you hear me?

Daniel Morris -- Head of Investor Relations

We do now. Yes.

Sandeep Deshpande -- Analyst

Yeah. Hi. I have a quick question, Borje, about -- you talked about the stabilizing end market and particularly North America, but what -- is it the share gains that is causing the improvement in the North American market? Or is it the 5G Advanced? What is the next product to drive the growth from here given that 5G has been rolled out in the U.S. at this point and somewhat in other markets, clearly, not as much as in the U.S.? But the other part of the question is, do you need the 6G to happen anytime soon? And what is the timing of 6G? So, what I'm trying to understand is timing of new product to drive this continuing growth that you've seen in the second half of this year.

Or will we see a situation where in the second half of this year when the comps become more difficult and the growth suddenly weakens again?

Erik Brje Ekholm -- President, Chief Executive Officer, and Director

Well, if you -- first of all, I think 2023 was a very low year. So, if you look at the percentage growth in North America, it's actually -- I wouldn't focus on that. That's not going to be the predictive power going forward, right? So -- and our market is not that type of high growth that we saw in Q4. But if you look going forward, and if you actually look a little bit and dissect Q4 a bit, what you see is, of course, that a part of the increase in North America comes from the market share gain from that big contract.

No doubt about that. That's an important driver that moved into deliveries during the second part of the year. We started some in Q2, but in reality, it was second part of the year. So, that, of course, helped us.

But as I said, it's also a broader-base recovery. And then you start to say, why is that happening? Well, first of all, 5G has not been built out. 5G is at the early stages still. So, if you take the North American market, 5G stand-alone is not rolled out.

I think you probably live in London. London -- I mean, that in Europe, it's very limited build-out. 5G is hardly built out. Most of the time, when you get a 5G icon on your phone, you're basically on dynamic spectrum sharing using a 4G spectrum.

So, 5G has not been built out. We're still very early in that build-out. That's what we're starting to see in North America. The 5G -- the demand for 5G comes from growing 5G traffic, and we're still early in that build-out.

So, I am -- I actually -- I don't know if we have not maybe been clear on this historically, but it's actually a low percentage that's been built out for -- and to have 5G, you need to build out mid-band. That's very limited build-out to be honest. So, we are still very early in the 5G build-out cycle. And if you look at what you would expect in the future, you should expect that 5G will have more base stations in reality than the 4G network because it's at higher frequency, so you're going to need a denser grid.

So, if we're going to get the full benefit of 5G with the low latency, the high performance, the ability to actually have many users in one cell site, we need to see much more build-out. And we're actually very early in that. So, I think the notion that -- that new growth, it actually drives from the growth in traffic in the underlying traffic. And that's migrating from 4G over to 5G.

And you will see changing nature on the 5G from consumer applications, basic mobile broadband download the video or stream music into much more advanced applications, voice as an operating interface. You're going to see AI traffic, and all of that will start to drive traffic in the new way. That's why you see us introduce new type of products, new type of Massive MIMOs, but it's not saying that it has to be a new generation or anything, it's actually introducing, call it, improved and strengthened products in the portfolio that improved energy efficiency, but also sell edge performance, for example. Can I touch on 6G, which is a very good question? It populates often.

I mean, 6G, if you think about it as a technology, probably going to get introduced 2030. It's something on that time frame. But what's more important is 6G is actually an evolution of 5G. So, we should think of 6G not as a new kind -- type of a generation where you upgraded from 3G to 4G or 4G to 5G, it was kind of a -- you needed also to upgrade the whole network.

Well, the 5G and 5G Advanced even more so will be cloud-based. You will have a new type of principles be structured in a horizontal way, and 6G will be more of an evolution on that. So, if you're going to move into 6G, you actually need to have the 5G network and the architecture of 5G built out already. Then you can benefit from adding new frequencies, new capabilities that 6G will give.

So, I encourage you not to think of 6G as a normal new generation. It's actually more of energy generation. So, it's going to change the nature of the industry. And I think this is important when we think about the horizontalization will actually allow the -- our customers, the operator not to have these cycles in investments as much, much more smoother investments.

But that means for us also, we are not going to see those cycles in the future, much more smoother based on the development of the demands of the network, call it, traffic volume and type of traffic. So, I think we're entering a new phase here where the -- where our customers will look different, we will look different. But I think that actually for us is a positive with less hardware components, more software content on our sales.

Sandeep Deshpande -- Analyst

Thank you, Borje.

Daniel Morris -- Head of Investor Relations

Thanks for the question, Sandeep. We've got time for one very short final question. We're nearly up for time. If we can take the last question, please.

The last question is coming from Joachim Gunell at DNB. Joachim, please go ahead.

Joachim Gunell -- DNB Markets -- Analyst

Thank you, and good morning. So, in 2024, I mean, the progress in networks has really stolen the attention here, and there's been a stellar performance. So -- but on cloud software services here, I mean, even including the IPR catch-up payments, the margin levels here on operating profit level has been fairly flattish. So, can you comment a bit on what you want to see in order to improve this trend going forward? And in relation to the more long-term 15% EBITA target for the group, where do you envision cloud software and services margins be in order to deliver on that?

Lars Sandstrom -- Senior Vice President, Chief Financial Officer

Well, I think -- sorry. When it comes to cloud software, we see actually a good underlying improvement. It doesn't have at all the same swings that you have in the network business, which is quite different. That's more of a -- you have the whole service component into that, etc., as well, which is quite a different margin profile on that.

It requires what we have done there, continued commercial discipline also driving the cost-efficiency and the whole delivery that we have in cloud software and services. But also, to improve margins further going forward and increase this pace, we need to continue to drive also top line here and start thinking on how do we address growth areas within the segments where we are active there. And that is a work that we are going into now. So, that would be, so to say, the add-on from the current strategy going forward.

I think that there are good plans and good hard work in that to make that happen, and we should see some signs of that already now in '25, I believe. But also, I think what they have done also is to really prioritize different parts of the group and reduced costs in some other areas really to make sure that we end up in the right cost balance and cost levels in different parts within cloud software and services. So, they should be able to gradually continue this more EBITA margin improvement journey and to start getting toward more in the mid, long term, double-digit level here.

Joachim Gunell -- DNB Markets -- Analyst

Thank you very much.

Daniel Morris -- Head of Investor Relations

Thanks, Joachim. Thanks, everyone, for joining. That now concludes the Q&A session. Thank you.

Duration: 0 minutes

Call participants:

Daniel Morris -- Head of Investor Relations

Erik Brje Ekholm -- President, Chief Executive Officer, and Director

Lars Sandstrom -- Senior Vice President, Chief Financial Officer

Borje Ekholm -- President, Chief Executive Officer, and Director

Andrew Gardiner -- Analyst

Francois Bouvignies -- UBS -- Analyst

Simon Granath -- ABG Sundal Collier -- Analyst

Sebastien Sztabowicz -- Kepler Cheuvreux -- Analyst

Daniel Djurberg -- Handelsbanken Capital Markets -- Analyst

Jakob Bluestone -- BNP Paribas Exane -- Analyst

Andreas Joelsson -- Carnegie Investment Bank -- Analyst

Sandeep Deshpande -- Analyst

Joachim Gunell -- DNB Markets -- Analyst

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Telefonaktiebolaget Lm Ericsson (publ) (ERIC) Q4 2024 Earnings Call Transcript was originally published by The Motley Fool