Finnish vendor blames competition in China and looming operator consolidation for declines at its networks business, talks up patent licensing arm

Nokia reported a weak performance at its networks business in the third quarter of the year and warned of an ongoing market decline in mobile networks in 2018.

The Finnish vendor posted net sales of €5.54 billion in the three months to the end of September, down by 7% on the year-ago quarter. Its top line was hit by a 9% decline in turnover at its networks business to €4.82 billion.

Nokia chief executive Rajeev Suri blamed technology transitions underway in the market, strong competition in China, and the threat of potential operator consolidation for what he described as "some challenges" at the vendor’s mobile networks business.

The CEO, whose upbeat commentary to the figures appeared to wilfully ignore the impact of Nokia’s poor networks performance – the business contributes 87% of total revenues – predicted a 2%-5% mobile networks market decline next year.

There were some bright spots for Nokia though, including in the networks business, where the vendor reported sales growth in global services and IP routing, as well as increases at its Middle East and Africa, and Asia-Pacific businesses.

"The performance of our patent licensing business was the clear highlight of the quarter," Suri said, highlighting the dispute the firm settled with LG a month ago.

Nokia and LG "have since reached agreement with them on a licence for a longer term than what was set out in the arbitration," Suri said.

He added that Nokia has approximately doubled its patent licensing revenue since 2014.

"I am also particularly pleased that in 2017 the growth in patent licensing has helped to offset the sales decline on the networks side," Suri said. "We have excellent momentum and considerable opportunity to further develop the business in 2018 and beyond."

Nokia’s non-IFRS operating profit grew by 20% to €668 million. Exactly half of that sum came from the networks business, which saw operating profit slide by 23% year-on-year. The growth in profit came from Nokia Technologies, which increased operating profit by 73% to €390 million.