CEO STATEMENT
Nokia delivered excellent non-IFRS earnings-per-share in the third quarter of EUR 0.09; strong year-on-year group-level performance, with both gross and operating margins up significantly; and continued momentum in the execution of our strategy. Given this good progress, Nokia's Board of Directors plans to propose a dividend of 19 euro cents for 2017, up 2 cents from one year ago.
The performance of our patent licensing business was the clear highlight of the quarter. We reached a favorable arbitration outcome with LG and have since reached agreement with them on a license for a longer term than what was set out in the arbitration. With this fast and effective execution against our patent licensing strategy, we have approximately doubled our recurring licensing revenue from EUR 578 million in 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. We have excellent momentum and considerable opportunity to further develop the business in 2018 and beyond.
We also saw strength in many parts of our Networks business in the quarter. On the sales side, we saw constant currency year-on-year growth in Global Services and IP Routing as well as our Middle East and Africa, and Asia-Pacific regions. Orders were up in many areas, including Applications & Analytics, which logged its fifth consecutive quarter of order growth in Q3, showing the progress we are making in our strategy to build a strong, stand-alone software business.
On the profitability side, the overall Networks gross margin of 38.6% was up compared to one year ago, a remarkable achievement in the context of a market that remains challenging. In addition, Global Services and IP Networks and Applications delivered significant improvements in operating margin compared to Q3 2016, at 8.1% and 10.7%, respectively.
We continued to build momentum in our strategy to expand our customer base beyond communication service providers. Across the adjacent segments that we are targeting, year-to-date orders were up by double-digit percentages and sales were up by 8%, excluding the former Alcatel-Lucent third-party integration business that we are currently winding down.
We also added more than 60 new customers in these adjacent segments so far this year, including China Pacific Insurance Company, the first large enterprise win for our Nuage business in China. With cable operators, we won the first customer - WOW! in the United States - for our new products coming from the acquisition of Gainspeed, which we are also trialing with almost a dozen customers, including some of the industry's largest players.
These results reflect the power of our disciplined operating model and the advantages of our end-to-end portfolio. In a market where competition remains robust, operational discipline is a must, and it is a core strength of Nokia. Furthermore, as the market transitions to 5G, I believe that the benefits of our portfolio will become even more apparent given that 5G is about much more than Radio. It requires Cloud core, IP routing, transport of many kinds, fixed wireless access, Software-Defined Networking and more - and Nokia is one of the very few companies that is able to meet all those needs.
Despite the progress we made in the quarter, we experienced some challenges in our Mobile Networks business and see a continued decline in our primary addressable market in 2018. That decline, which we estimate to be in the range of 2% to 5%, 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.
In terms of the issues we are facing in Mobile Networks, I have noted in previous quarters that the R&D team in this business group has faced an extraordinarily high workload. Given this situation, we have seen some issues with the time taken to converge some products that have, unfortunately, impacted a small number of customers. As a result, Mobile Networks has experienced both revenue pressure and an increase in expected network equipment swap costs.
My team is fully committed to getting these things back on track and we are already seeing meaningful improvements. Field deployments of our new AirScale products were ramping up in all our geographies, including with key North American customers. These products help improve operator competitiveness, not just by addressing cost challenges, but also by setting a new standard for performance and flexibility. We also saw a meaningful increase in customer satisfaction scores.
I would also note that despite some additional investment required in Mobile Networks to maintain product leadership, we are committed to our EUR 1.2 billion cost savings plan in full-year 2018. These savings come at a slightly higher cost than previously expected, and we continue to assess opportunities to deliver further savings in the area of cost-of-goods sold.
Regarding our cash position, I am not satisfied with our performance in the third quarter and we are redoubling our efforts in this area. Maintaining our strong balance sheet is a clear priority.
In short, Q3 was a period in which we faced some challenges, but delivered good performance in many areas as well as momentum in the execution of our strategy.