Nokia 3Q results soar - global market share reaches 39%

The strong third quarter results of Nokia portrays the continuous dominance of mobile phone maker giant on the world telecom market. The profit soared by 85% to €1.56 billion from €0.85 billion. The company believes that around a billion cell phones were sold in year 2007 and Nokia sold 39% of them, up 4% from last year. Nokia expects that the mobile device market volume will be approximately 1.1 billion units in 2007, up from the approximately 978 million units Nokia estimated for 2006, approximately 12% increase.

The company sold mobile phones to new users in developing markets such as Asia-Pacific, Middle-East, Africa and China, where millions of new customers are entering the market every month. The company registered the net sales increase of 3% to €6.1 Billion and the operating profit increase of 78% to €1.4 Billion. In developed markets such as North America and Europe, multimedia rich mobile phones dominate the sales. The net sales increased 23% to €2.6 billion while the operating profit grew 57% to €575 million. Nokia says that the growth was primarily driven by N series phones, especially the Nokia N70, Nokia N73 and Nokia N95.

The strong growth of Nokia underlines the strong marketing, operations and global strategy, all of which Nokia seems to have implemented perfectly in a competent market. In addition, there is no doubt that Nokia has a broad as well as tightly targeted product portfolio that remains the key differentiating factor compared to its competitors.

To win the emerging market, Nokia has worked hard to increase the profit margins by reducing the operating cost and introduced several new phones to keep the prices up, thus selling more profitable phones across its range. Nokia understands that in these markets, customers have limited buying power and the use of mobile phone increases their standard of living and brings them information more quickly than without a mobile phone. Additionally, poor infrastructure and limited access to fixed line phones further increases the need of a cell phone.

However, its profit in developed market has come from net sales growth of multimedia rich mobile phones and improved profit margin from solid product portfolio. The situation in the developed markets is different than that of emerging markets. In these markets, new technologies and network upgrades has created a market for the mobile phones which can support high speed data access. In North America, most mobile phones are accessible to users thorough the telecom operators who sell the mobile phones at subsidized rate bundled with their rate plans. Thus the subscribers have relatively small range of mobile phones to choose from. And on top of it, telecom providers urge to offer different mobile phones to the customer than their competitors.

While it will be extremely difficult for Nokia to increase its market share beyond 40%, in the strong market conditions with growing demand of around 12% mobile devices every year, maintaining the market share is a challenge and reward both, huge enough. Despite the falling prices of mobile phones every year, Nokia has not only managed to sustain the profit margin but also increase it. Further, Nokia has started to expand its breadth with the acquisition of enpocket, to enter the mobile advertising industry and launch of Ovi, to enter the internet mobile services industry.

Nokia Ovi - A tough door to open

On August 29, 2007, Nokia unleashed its ambitious plan to offer mobile services under the umbrella of brand name Ovi. As the photograph of the presentation by Mr. CEO Olli-Pekka Kallasvuo, President and CEO of Nokia, says it all - Devices are simply not enough.

Under Ovi umbrella, Nokia plans to unroll a fleet of internet based services in the next coming months. Nokia has started with the basic and necessary services: photographs, maps, music and games. While Ovi aims to converge all services to a single platform; it also provides the flexibility to access those services from anywhere, a mobile device, PC or internet.

In the present world, the mobile services industry is not mature enough to fulfill the demands of subscribers. Telecom providers invested heavily to upgrade their networks to support higher bandwidth so that users can subscribe to such services, but the content and access to that content were not on par to persuade the subscribers to use these services. On an alternative path, mobile phones made it possible to access internet on their mobile devices and use all the services as they have been using from a desktop. New mobile phones, now come with full html browser, support this theory.

However, the launch of Ovi opens a new horizon for the mobile service industry by tightly coupling the mobile phone with the services offered to access the content. This will help Nokia to create applications, which will be easier to use and have better user experience. Very similar to what iPhone and iTunes are for each other, though on a much bigger scale. Nokia gives the telecom providers and end users a new offer - buy our phone and use our services to keep and access your content. And telecom providers keep doing what they are good at - managing networks.

Ovi also claims to provide consumers easy access their existing social network, communities and content along with acting as a gateway to Nokia services. The success of Ovi solely depends upon its ability to convince more subscribers to use its services and Nokia will expect less number of subscribers using services outside Ovi. Nokia will be counting on the quality of content, easy access, deployment, pricing and usability of such services to expect the user to switch to Ovi. However, the content providers on world wide web and competitors will not loose their customers to Nokia that easily. While it will be difficult for Nokia to convince an existing subscriber of such services to use Ovi, the penetration of such services are so low that there are plenty of new subscribers, who will be ready to opt for Ovi if they are offered with the relevant contents, lucrative pricing and easy access.

The launch of Ovi definitely puts Nokia ahead of its competitors Ericsson and Motorola. The telecom industry has a strong demand of such services, which so far, the market has been unsuccessful to deliver. In a recent press release on GSM World, a GSM global trade association, AT&T claimed to have more than 5 million 3G subscribers, which is still less than 10% of the overall mobile subscriber base.

The Ovi services will be launched in Europe first and subsequently they will make their move in America, as the trend has normally been. Few days ago, Nokia signed a deal with Telefonica, a Spanish telecom company, and the industry will carefully observe the first launch of Ovi and take notes of its success.

Nokia has definitely opened a new market of mobile services and soon its competitors will follow the same path. It will not be long before these services will be an value addition to the telecom providers and a reason for subscribers to choose a particular telecom provider.