Analysis: Even in emerging markets, Nokia's star is fading

Nokia phones once took pride of place in a Manish Khatri the Mumbai market, but now models made by Samsung Electronics to get the attention.
He has nothing against Nokia, he says, but it is better for business to push the most popular models.
This simple calculation is made in thousands of stores across India and similar emerging markets, where Nokia's rivals used to be a relative minnows.
For 14 years the world's largest seller of mobile phones, has been overtaken by Korea Samsung in the first quarter of this year, having already watched both Apple and Samsung leapfrog their lead in the lucrative smartphone segment last year.
In the popular story of Nokia's eclipse, it is Apple's iPhone that steals the light, but the company also loses its luster in the basic phone market, which has been a reliable generator of profits and led to the promise of years of strong growth in emerging markets.
No more.
Its a basic phone sales fell 16 percent in the first three months of 2012, and fell in four of the last five quarters, while competitors such as China, ZTE and Huawei have been growing rapidly.
In India, the second largest mobile phone market, with more than 900 million subscribers, Nokia's market has halved in the three years to 2011, when it sold 31 percent of the total 183 million handsets sold, according to Indian researcher CyberMedia.
Analysts say it is not able to keep with the changing tastes of the growing middle class, and, in a country where the thin-edge network operators do not want to subsidize phones, loses storeowners as Khatri, that influence buyers' choices.
"For vendors like us, we are faced with many problems from Nokia to get even the basic (demonstration phone) dolls to show the client," he said. "There is no push from the company."
He said his store, which sells about 500 phones a month, it is probably not a priority for Nokia, but Samsung was sending staff to visit.
LOCAL FAVOURITES
In China, the world's largest mobile phone market, operators began to play a more important role in selling phones, and this trend is working against Nokia.
"They prioritize domestic vendors on international companies," said analyst Pete Cunningham of Canalys.
In January-March sales here shrank 62 percent from a year ago. Its share of the market has been decreased to 24 percent last year from 39 percent two years earlier, according to research firm Strategy Analytics.
In Africa, too, its market slipped to 51 percent last year from 62 percent two years earlier. It is still before rivals because of its superior distribution on the continent, says Neil Mawston at Strategy Analytics, but must act to arrest the decline.
"Nokia is dried up like a puddle in the sun, and urgently need new products to refill the pool," he said.
Meanwhile, racking up losses, its shares lost more than three-quarters of its value in a year, and this week two agencies cut its credit rating to junk status.
Nokia says it is still investing to attract customers in these markets.
"Our mobile phones portfolio continues to be strong, especially in key markets such as India, Nigeria, Brazil and Mexico, where the Asha products receive a record high scores of consumers," said Mary McDowell, EGP Mobile phones.
She said the company would be announcing data plans for the new Asha 202 basic phone model with five operators in India on Monday.
Missing Touch
Analysts also said Nokia may be slow to react in a popular technology.
In emerging markets, for example, multi-SIM models were equal for people who want to take advantage of freebies doled out by competing companies, but there was no such Nokia phones until the middle of 2011.
Other expensive gap in their basic phone offering is a full touch screen model. Around 105 million such phones were sold last year globally, according to Strategy Analytics.
"Nokia has left the door open for Samsung and others to not give a full touch feature phone. The Koreans figured out three years ago, but Nokia does not have a product," said Ben Wood, head of research at CCS Insight.
"In the meantime, the prices of Android smartphones have fallen, and Nokia in the window of opportunity is almost closed."
Nokia is due to unveil a full touch 306 feature phone model in the coming months.
Slid Hall
"Nokia main challenge this year is to arrest the sharp decline in its flagship smartphone portfolio and use it to rebuild a positive halo-effect for the overall Nokia brand," said Mawston.
The company left its own Symbian smartphone operating system last year in favor of the largely untried Windows Phone alternative after Stephen Elop joined as general manager of Windows maker Microsoft. Symbian sales nosedived before the Windows models out on the ground.
This month began sales of the first Windows smartphones in China with an aggressive marketing campaign and huge advertisements in subway stations, in magazines and newspapers.
There are some positive noises coming from customers.
"I've just bought a new Nokia Windows phone and has not been widely used for its tile design, but the experience was quite good after half an hour. All the basic functions I need are there, and I'm beginning to think that Windows phones will," Wang Xiao said at his Sina microblog.
"Having an operating system is Windows-based does not excite me," said 22-year-old student Akshay Johar in New Delhi, looking at one of Nokia new Lumia models, but added: "The phone has great features, it looks good, the touch screen is a response. "
He is considering buying, he said.
About 27 million people need to make a decision this year, 55 million next year, and 94 million in 2014, according to analysts polled by Reuters.

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