October 26, 2017 / 5:57 AM / a year ago

UPDATE 1-Nokia posts weak network profits, sees market decline in 2018

* Q3 networks profit, sales fall more than expected

* Nokia lowers market outlook, sees more weakness in 2018

* Total profit jumps on the back of a patent deal (Adds detail, comments, background)

By Jussi Rosendahl and Tuomas Forsell

HELSINKI, Oct 26 (Reuters) - Nokia reported on Thursday weaker-than-expected quarterly earnings from its mainstay networks gear business, saying the market had turned more challenging and that it is set to decline in 2018.

The telecom network equipment industry is weathering the toughest part of a decade-long cycle as demand for 4G and older 2G and 3G network equipment subsides, and volume contracts for next-generation 5G networks remain a few years out.

Nokia's network sales fell 9 percent in the third quarter to 4.8 billion euros ($5.7 billion) while operating profit dropped 23 percent to 334 million euros. Analysts' average forecasts in a Reuters poll were 5.0 billion and 432 million euros, respectively.

The Finnish company estimated a 4 to 5 percent networks market decline for full-year 2017, compared to a previous forecast of 3 to 5 percent, and a 2 to 5 percent year-on-year fall for 2018.

"That decline ... is the result of the multiple technology transitions underway; robust competition in China; and near-term headwinds from potential operator consolidation in a handful of countries," Chief Executive Rajeev Suri said in a statement.

Swedish rival Ericsson last week reported its fourth consecutive loss-making quarter.

"For improvement in the networks business, it's time to look at 2019. There's no growth in sight before that," said Mikael Rautanen, analyst at Inderes Equity Research, with an "accumulate" rating on the stock.

Nokia's total profit in the quarter, however, jumped 20 percent to 668 million euros above all analyst forecasts due to a one-off payment of 180 million euros from a settled patent arbitration with LG Electronics.

Nokia also said it would pay a dividend of 0.19 euros per share from this year, up from 0.17 euros from 2016, and that it would buy back some more shares by the end of this year. ($1 = 0.8451 euros) (Reporting by Jussi Rosendahl and Tuomas Forsell)

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