Nokia Will Soon Bring Lumia To Verizon As It Builds Carrier And App Support

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Nokia’s (NYSE:NOK) Lumia line could have a much bigger presence in the U.S. market soon. The company’s vice president of Worldwide Developer Relations, Richard Kerris, revealed in an interview with Neowin that a Lumia device could soon be on its way to the nation’s largest wireless carrier, Verizon (NYSE:VZ). [1] With AT&T (NYSE:T) and T-Mobile already offering the Lumia 900 and Lumia 710 respectively, adding Verizon could help Nokia’s addressable market in the U.S surge by more than 80%.

However, Nokia faces an uphill task against the two well-entrenched ecosystems of Apple and Google (NASDAQ:GOOG) to create a niche for itself and Microsoft (NASDAQ:MSFT). Nonetheless, more carrier partnerships and better app support to drive the Lumia sales will be key to its resurgent hopes.

We have a $5 price estimate for Nokia, more than 50% ahead of the current market price.

See our complete analysis for Nokia stock here

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 the U.S. and China have jumped on Nokia’s latest offerings to counter the growing dominance of Android and iOS in both these markets.

In the U.S., AT&T is backing the Lumia, affording the phone a “hero” status at its stores and making it the exclusive free phone for all AT&T employees to generate awareness. This means that the Lumia is not only benefiting from a greater marketing push from its founding partners but also the second largest national carrier. With recent reports about the Lumia 900 doing well at AT&T after the steady start at T-Mobile, Nokia’s U.S. plans seem to be working for now. Bringing in more CDMA-based carriers like Verizon and Sprint into its fold will be the next step in Nokia’s gradual plans to penetrate the U.S. market.

While Nokia doesn’t have a CDMA handset available in the U.S., it has already released one in China, the Lumia 800C, on China Telecom, and so it’s only a matter of time before the customized handsets are available on the CDMA networks in the U.S. as well. It is however likely that these will make an appearance only when the new Lumia devices on Windows Phone 8 are ready.

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 is huge. Even the carriers here are actively trying to transition their huge 2G base to 3G. China Telecom has already jumped on Nokia’s offering, and it shouldn’t be long before China Mobile and China Unicom also lap it up.

While selling the iPhone is more lucrative considering its incredible popularity among buyers, emerging market carriers are wary of margin pressures that selling such an expensive phone entails. Nokia can alleviate these concerns by offering more handset choices at lower prices, or packing in more features at the same price. While the iPhone retails at an unsubsidized $775 in China, Nokia’s Lumia 800C is priced at a competitive $570, more than $200 cheaper. Nokia also plans to bring the cheaper Lumia 610 to China soon.

App support to grow gradually

While carrier backing doesn’t seem very tough to garner, where Nokia faces the most significant headwind is creating an app ecosystem vibrant enough to counter Apple’s and Google’s growing presence. The iTunes store and Google Play boast of more than 650k and 600k apps respectively, while there are only 100k available in the Windows Phone Marketplace. Nokia and Microsoft are trying to bridge the gap by incentivizing app developers as well as partnering with some of the more popular ones to create exclusive content for the Lumia. [2]

The newly launched Windows Phone 8 could be the watershed moment for both the partners since the OS is built around many of the same core components as Windows 8. Not only will this help Windows Phone 8 inherit the much richer feature set of Windows 8 such as support for multi-core processors making future Lumia devices faster and sleeker but also integrate the two platforms closely, making apps developed for either platform easier to port and increasing the user base for app developers. Having a huge user base for its Windows PC platform could therefore help Microsoft generate significant support for the new integrated Windows8/WP8 user experience, driving the sales of Windows Phones such as Lumia.

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

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Notes:
  1. Nokia Windows Phones coming to Verizon soon, BGR, July 9th, 2012 []
  2. Nokia Lumia drives further ecosystem momentum with new app partnerships announced at CTIA, Reuters, May 8th, 2012 []
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