Nokia aims new 100-euro-phone at emerging markets

Reuters.com | Wed Sep 21, 2005 10:56 AM ET164
By Rex Merrifield

HELSINKI (Reuters) - Mobile phone giant Nokia (NOK1V.HE: Quote, Profile, Research) announced a new folding handset on Wednesday to sell cheaply in rapid-growth markets like China and Africa.

The Finnish group and rivals, including U.S.-based Motorola Inc. (MOT.N: Quote, Profile, Research), have been competing to meet demand for mobiles in those developing markets, as well as Brazil, Russia and India.

The new 2652 model, a revamped version of its 2650 phone, will retail for about 100 euros from next month in China, the Middle East, Africa and Europe.

Kai Oistamo, incoming head of the division making the group's cheapest handsets, said Nokia was working with telecoms operators to cut the cost of owning and using cellphones.

Operators could offer mobile services for $5 per month -- and still make a profit -- given the right mix of phones, networks, services and regulations, Nokia said.

"When the cost of mobile services becomes this affordable, we foresee the growth curve in growth markets accelerating sharply," Oistamo said in a statement.

But analysts say Oistamo's division faces a tough task in making decent returns from basic models as prices fall in the chase for market share.

The 2652 is Nokia's 36th handset to launch in 2005.

Earlier this year, it launched the 1110 and 1600 low-end models intended for first-time users in developing markets such as Africa. Those non-folding models were originally expected to sell for 65-85 euros, with analysts forecasting prices would fall as larger volumes are shipped.

ONE BILLION NOKIA PHONES

The new phones are part of the mix Nokia hopes will help it achieve a 40 percent share of the global handset market. Researchers Gartner put Nokia's share at just shy of 32 percent in the second quarter.

Industry figures show there are now more than 2 billion mobile subscribers in the world and Nokia said it had sold its billionth phone.

While big volumes of lower-cost phones sold in emerging markets help to increase revenues, they reduced Nokia's average selling prices (ASPs) in the second quarter to 105 euros from 110 euros in the previous three months.

Nokia raised its third-quarter sales and profit forecasts last week, saying demand was strong and ASPs were holding up better than it had expected -- partially as a result of western European demand for more sophisticated replacement phones.

Shares in Nokia were down 1.5 percent at 13.40 euros by 1407 GMT, slightly outperforming the DJ Stoxx European technology index, which was off about 1.7 percent.

(Additional reporting by Daniel Frykholm)

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