Nokia continues to bank on low-cost smartphones

Days before the launch new Windows Phone 8, launches a sub Rs 11k Windows 7.5 phone in India

Last week when Nokia reported its sixth consecutive quarterly loss, it also underlined company’s  stronger-than-expected sales of feature phones, labelled as Asha series, across emerging markets. In fact, emerging markets helped the Finnish giant to push sales of basic features phones to 76.6 million units, up from 73.5 million units in the second quarter. On the other hand, Nokia's flagship Lumia series shipped just 2.9 million Windows smartphones in 3Q12 across 15 markets, which did little to halt a 28.6 per cent annual decline in revenue to $9.1 billion or do anything to reverse annual losses in operating and net incomes of $620 million & $966 million, respectively. The underlying lesson being -- affordability is critical in markets like these (includes India).

In India, Nokia remains focussed on servicing the entry-level feature phone and smartphone customer for now. The company announced a new sub Rs 11k Windows 7.5 smartphone, Lumia 510 (cannot be upgraded to the new Windows Phone 8 OS that launches later this week), that will make its way across retail shelves in next 15 days. Lumia 510 features a 4-inch display and will be upgraded to Windows Phone 7.8 (as and when Microsoft rolls out the upgrade), has a 5 megapixel rear camera, 800 Mhz Qualcomm processor, 256 MB RAM and 4GB of internal memory that cannot be upgraded further.

The low-cost smartphone segment, defined as models with a selling price of less than Rs 8000, is a strong growth opportunity for the mobile phone industry, according to the new NPD DisplaySearch Smartphones: Displays, Designs and Functionality report. “Low-cost smartphone shipments are forecast to double every year from 2010 to 2016, increasing from 4.5 to 311.0 million,” cites the report. Nokia seems to be pursuing the right track, say analysts.  

Nokia India director and head (Smartphone Devices) Vipul Mehrotra believes that budget-friendly Windows Phone devices will give the Finnish giant the much-needed market traction against the slew of Android devices (priced at Rs 6,000 and onwards) in market. “Our Asha smart-devices are outselling cheap devices from the competition and with the new affordable Windows Phone like Lumia 510, we are hoping to get the attention of young Indian buyers,” says Mehrotra. To make the deal sweeter, Nokia is also giving away Airtel users would get 500 MB 3G data for free for 3 months as well as a 3 month unlimited Nokia Music and MixRadio access. Nokia’s MixRadio allows consumers to stream music directly on phone, with ability to listen to personalized radio channels including offline listening.

Mehrotra did not seem to agree, when pointed out, that Nokia's inability to establish a foothold in the high-end, premium smartphone market - where margins exceed 20 per cent versus single-digit profit margins from feature phones - may not do the company any good. “Nokia adopted Microsoft's Windows Phone operating system to power a new generation of smartphones and that does not mean servicing the top-end market only. While we will continue to build the premium handset market with the new Windows Phone 8 OS, we have to also take the entry to mid-level customer into account,” he reasons. Nokia did not disclose whether it is willing to further lower the entry price of Windows Phone devices to sub 10k, but Mehrotra added, “We see Nokia Asha series to be critical in helping us upgrade the Asha series’ users into Windows Phone customer, as price barriers thin further.”  

Latest Gartner data suggests that Samsung’s share in the domestic market has risen from 15 per cent in 1Q11 to 49.8 per cent in 2Q12. “If Samsung continues this strong growth, it could end 2012 with more than 60 percent share — exactly where Nokia was at the start of 2011,” says Gartner. The research agency also pegs mobile device sales in India to reach 251 million units in 2013, an increase of 13.5 per cent over 2012 sales of 221 million units.