Nokia under siege in mobile phone markets

Nokia CEO Stephen ElopCompounding the troubles of Nokia, the Finnish phone maker, Asian manufacturers are increasingly turning to free Android software from Google, which is popular with operators and consumers in cut-rate markets.

Nokia is already under pressure in the high-margin smartphone sector as Apple; Research in Motion, maker of BlackBerry devices; and Google seize market share, leaving basic cellphone business as Nokia’s most valuable part. That is now under threat.

“Three years ago Nokia’s position in emerging markets looked impenetrable, but low-cost chip sets and growing scale has helped a number of Asian manufacturers to price aggressively and seize market share,” said Geoff Blaber, analyst at mobile communications research firm CCS Insight in London.

“The ‘lean, mean phone-making machine’ that used to dominate the sub-$50 space has come under huge pressure from agile rivals,” he said.

Last week, Nokia abandoned hope of meeting key targets just weeks after setting them, blaming difficult conditions in China and Europe. Its shares slumped on skepticism about its strategy of teaming up with Microsoft for Windows Phone software in the smartphone war.

Tougher future

The battle for cheap phone market could get even tougher. Nokia has been able to rely on its brand and distribution chain across emerging markets, home to 1.7 billion mobile phone subscribers. But ZTE and its larger Chinese rival, Huawei Technologies, which have traditionally been in the network equipment business, are aggressively muscling in on mobile devices.

Demand for low-end cellphones has surged across emerging markets since the economic crisis began to ease. But Nokia’s sales of basic cellphones have fallen for three consecutive quarters.

In the January-to-March quarter, Nokia sold 84.3 million handsets other than smartphones, 2 percent fewer than a year earlier. “Nokia should really have begun this fight back two years ago, and leaving it so late in the day puts the vendor in a very tough competitive position,” said Neil Mawston, an analyst at Strategy Analytics.

The China factor

Some of the Asian vendors are hardly household names. But in China, the biggest threat comes from manufacturers that have effectively no name at all. So-called no-brand manufacturers — small Chinese companies using chip sets from Mediatek or Spreadtrum Communications — control 45 percent of the market. Nokia’s market share in China has shrunk to 19 per cent from 33 per cent two years ago.

No-brand Chinese manufacturers have expanded into Africa, India, Latin America and Russia in the past year. They sell more phones than Nokia, Gartner said. Analysts expect that those manufacturers will focus next on cheap smartphones running Android software.

In India, Nokia is in a bruising fight. The company is jostling with about 150 vendors in the world’s fastest-growing mobile phone market, home to more than 800 million subscribers, with mass-market phones selling for about $20 with basic features. Cheap phones and charges as low as half a cent a minute are fueling growth.

By adapting to local tastes, manufacturers like Micromax grabbed 7.6 per cent of phone sales in India last year, according to CyberMedia Research.

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