Nokia’s Flagship Lumia Likely To Make A Chinese Appearance This Week

by Trefis Team
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Nokia’s (NYSE:NOK) Lumia line could have a much bigger presence in China soon. The flagship Lumia 920T smartphone, of which a lot has been heard and seen in the past few weeks, could become available for sale as soon as this week, according to numerous Chinese reports. Nokia and China Mobile (NYSE:CHL) are expected to hold a launch event on December 5 to officially unveil the smartphone before starting to take pre-orders. [1]

This comes on the back of several reports claiming that the Lumia Windows Phone 8 smartphones are seeing impressive demand leading to sell-outs in multiple developed markets, including the U.S., Germany and Australia. A Yahoo China report goes as far as to claim that Nokia received more than 2.5 million orders for the Lumia 920 in less than a month since launch. To add perspective, this is just a tad shy of the 2.9 million sales that Nokia recorded for the entire Lumia portfolio during the previous quarter. With the world’s largest subscriber base of close to 700 million and 3G penetration of only about 11%, China Mobile presents a big opportunity for Nokia to make the most of the rising Lumia popularity.

See our complete analysis for Nokia stock here

However, Nokia faces an uphill task against the two well-entrenched ecosystems of Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG) to create a niche for itself and Microsoft. Apple, for example, might dampen the Lumia enthusiasm with its own iPhone 5 launch in China which is expected to happen later this month. Nonetheless, more carrier partnerships and better app support to drive Lumia sales will be key to Nokia’s resurgent hopes. We have a $4.50 price estimate for Nokia, about 40% ahead of the current market price.

Nokia has carrier 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., T-Mobile and AT&T were the early Lumia backers with AT&T affording the phone a “hero” status at its stores and making it the exclusive free phone for all AT&T employees to generate awareness. The marketing push ensured that the Lumia 900 was among the top three best-selling handsets at AT&T until July, a period of four months since launch. [2] With Lumia WP8, Nokia has signed on Verizon as well to gain more visibility and bolster its chances of penetrating the U.S. market

As for China, the smartphone market is expected to be the largest in the world by the end of the year. With 3G penetration at less than 20%, 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 800C offering. China Mobile is in need of a flagship smartphone that it can actively market in order to promote its 3G network, an area where it has lagged its competitors. (see China Mobile Needs To Step Up As 3G Growth Slows) It is pursuing an Apple iPhone deal, but government concerns over the high subsidies associated with the iPhone is a big deterrent. However, it may not be long before the iPhone arrives on China Mobile, so Nokia will be looking to the make the most of the opportunity while the sun shines.

Still, 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 has also announced the cheaper Lumia 610 on China Telecom, and will be looking to add other carriers soon.

WP8 has essential ingredients for success

Overall, the Lumia has seen decent traction build up with carrier support in the U.S. and China helping Nokia sell about 11 million units in all, with sales doubling in the first three quarters since launch late last year. However, where carrier partnerships have not been hard to come by, getting people to warm up to the Windows ecosystem has proved increasingly tough considering how well-entrenched Android and iOS have become as mobile ecosystems. The iTunes store and Google Play boast close to 700k apps respectively while there are only about 120K available in the Windows Phone Marketplace.

This is where WP8 offers both Nokia and Microsoft their best chance to find a place in the growing mobile market. While building Windows 8 and WP8, Microsoft ensured that both shared the same kernel and therefore inherited the same rich feature set that has made Windows a household name in the PC industry. This has helped integrate the two platforms closely, thereby making apps developed for either platform easier to port. Having a huge user base for its Windows PC platform will therefore help Microsoft generate significant support for the new integrated Windows8/WP8 user experience, from both developers and users alike, thereby driving the sales of Windows Phones in general and the Lumia in particular.

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  1. China Mobile’s Nokia Lumia 920T to be launched on December 5, UnwiredView November 30th, 2012 []
  2. Apple’s iPhone 4S is no longer the top-selling smartphone in the U.S.,, September 4th, 2012 []
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