Nokia Faces Big Tests This Year In China And U.S.

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The next few months will be crucial for Nokia (NYSE:NOK) as it takes on Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG) in two of the world’s largest mobile markets, U.S. and China. The Finnish handset giant is launching its Lumia series of smartphones at China Telecom on March 28th and similar versions will be made available on China Mobile (NYSE:CHL) and China Unicom (NYSE:CHU) as well.

Early next month on April 8th, Nokia will also launch its second Lumia smartphone in the U.S, the Lumia 900, at AT&T (NYSE:T). With Andoid smartphones and the iPhone taking up the lion’s share of the smartphone market, Nokia will be hoping to use its Windows Phones to provide users as well as carriers with a competitive third alternative mobile ecosystem.

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Nokia has the carriers’ backing

The need for more competition in the smartphone market, not only in terms of hardware but also software, is being increasingly felt by both customers and carriers alike. A competitive third mobile ecosystem will increase the number of choices for customers and foster innovation in the industry. More competition will also put less burden on the carriers who are increasingly feeling the pinch of smartphone subsidies on their margins. It is no wonder therefore that wireless carriers in both of these countries have jumped on Nokia’s latest offerings to counter the growing dominance of the Android and the iOS in both these markets.

In the U.S., AT&T is rumored to afford the Lumia a “hero” status at its stores, which means that that the Nokia smartphone will benefit from a greater marketing push of not only its founding partners but also the second largest national carrier. Also, as part of the marketing campaign, the Lumia 900 has already been made the exclusive free phone for all AT&T employees. This will create greater awareness of the product among staffers at the carrier’s retail stores and help them promote the phones better. Nokia has had a steady Lumia debut in the U.S. with T-Mobile, and a successful AT&T launch should act as the next big catalyst, boosting Nokia’s U.S. plans.

As for China, its smartphone market is expected to be the largest in the world by the end of the year. With 3G penetration at a lowly 14%, the growth potential in this market is huge. Even the carriers here are actively trying to transition their huge 2G base to 3G. But they are also wary of the margin pressures that selling expensive 3G smartphones such as the iPhone entails. Nokia can alleviate these concerns by offering more handset choices at lower prices, or packing in more features for the same price. While the iPhone retails at an unsubsidized $775 in China, Nokia’s Lumia 800 is priced at a competitive $580 in many developed countries, about $200 cheaper.

Microsoft has also declared that it plans to grow its market share in China past Apple’s first before training its sights on Android. In Windows Phone, Nokia finally has a chance to compete effectively with Apple and Google.

Nokia’s hardware skills, which were never in question despite its falling market share, will help it offer well designed handsets at cheaper price points, undercutting Apple in emerging markets. Together with a competitive and an un-fragmented OS , it will be able to offer a consistent user experience across its Lumia portfolio, something which the plethora of Android smartphones in the market customized by handset makers lack.

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