Out of favour

Once, the sun did not set on its empire—it was the ruler over all it surveyed and well beyond. Nokia’s writ ran across the entire mobile handset universe. Nowhere was this more obvious than in India, where the Finnish overlord dominion covered 70% of the land for well over a decade. But then, it grew complacent, not paying heed to its subject’s needs. While it slept, its rivals and a slew of newcomers quickly began encroaching on its territory. Today, the erstwhile champion holds just a meager third of its original kingdom. The fall from grace has been great. But like every great champion it has woken up and wants to regain lost ground. But it has miles to go before it can hope to do that.

Seventeen years after planting its flag in India, the world’s largest handset maker is finding itself sandwiched between cheap low-end mobiles imported from China and high-end smartphones from Samsung, HTC and the like. And really, it has no one to blame but itself. Nokia was unforgivably late in reacting to the two biggest trends in mobile handsets in recent years—dual-SIM and touchscreens. This time, when it finally did make it to the smartphone party, Nokia was the wallflower, clinging to the Symbian operating system, even as the world made clear its preference for Android and Blackberry was being crowned the king of business phones. The result: Nokia’s been battered at both ends. 

Still, Nokia says it’s not Finn-ished yet. It’s girding up to fight battles simultaneously. Apart from revamping its tech and marketing strategies, the company has partnered with Microsoft for its Windows mobile platform. Clearly, Nokia still hopes to win the epic battle in the world’s fastest growing telecom market and regain its lost glory. The question is: can it? 

Disconnected

Nokia’s troubles started in 2009 when the first dual-sim handsets were launched. Consumers could now have two connections on a single device and take full advantage of the tariff war being fought by operators in the country. But Nokia dismissed the dual-sim phones as a fad; and by the time it launched its dual-sim model in August 2010, these handsets had already taken over 40% of the market. The impact on Nokia’s marketshare was devastating—from 70% in 2007, IDC figures estimated its marketshare in December 2010 at 31.5%, with local handset vendors like Micromax and Karbonn cashing in on Nokia’s loss. Since then, dual-sim phones have reached further into the market and are no longer a lower-end phenomenon—Samsung, for instance, plans to launch a two-sim version of its top-of-the-line Galaxy smartphone very soon. That trend is showing in marketshare figures: dual and multi-sim phones comprise over 50% of the Indian market, according to Cybermedia Research. “These devices accounted for 55.8% of quarterly shipments (in Q3 of 2011),” says the report. 

Nokia India Manging Director, D Shivakumar admits the delay took a toll on the company. “We did not have dual sim [handsets] at the right time. It is a failure on my part and that of the organisation. We could have been significantly ahead [of the competition] if they had been launched on time,” he says. 

Playing catch-up with dual-sim is only part of the problem. Globally, when users were migrating to smartphones, Nokia did not have a competitive smartphone portfolio due to its reliance on the Symbian platform. The platform did not work well with touchscreen devices, which were becoming all the rage. “Nokia did not have intuitive devices available when Apple, Samsung and Motorola were offering them. Symbian devices could not compete with Android [the OS used by Samsung, HTC, LG and Motorola, among others] and iOS platforms,” says Anshul Gupta, Principal Research Analyst at Gartner, the world’s largest tech advisory firm. The handset numbers don’t reflect changing customer preferences—yet: Nokia is still the leader. But IDC’s Q3 numbers show that Android has overtaken Symbian for the first time to become the most popular platform in India. 

Aiming for a resurgence

Now, Nokia is scrambling to get its India strategy right, at both ends of the spectrum. While it’s launched a slew of dual-sim phones in the past six months, it’s also upped the ante in the smartphones with the Lumia series of Windows phones. Indeed, the company is aiming for 50% marketshare in 2012 on the back of its new launches: apart from Lumia, it’s counting on the new mid-range Asha series (priced between ₹4,000 and ₹8,000) to drive up sales. 

That’s slightly higher than the popular price range in India. According to Gartner, the average selling price of a mobile device is approximately $45 (₹2,300), with 75% of the devices sold costing below $75 (₹3,900) in India. And Nokia’s got that range covered as well, with its dual-sim range. Five new multi-sim handsets have been launched since April. Some have internet browsing facility and all are priced between ₹1,500 and ₹5,500. “We have rapidly ramped up our dual sim portfolio,” says Shivakumar.

By the time November started, Nokia had shipped around 18 million dual-sim devices globally, a significant portion of that in India. That’s helped it claw back some market share: from 25% in the second quarter of CY11 to 31.8% in the third quarter. “With innovation, you can differentiate. It shows that we can compete with low-cost players,” Nokia Chief Executive Stephen Elop said at a technology conference in December 2011.

Nokia’s strategy is now about offering variety at every level. Unlike competitors Samsung and Apple, which offer only touchscreen smartphones, the Finnish company’s portfolio includes touch-and-type instruments as well. That should find takers locally, believe analysts. Most Indians prefer devices with a keypad that can be used if the touchscreen stops working. Indeed, for a company that  lost marketshare because it failed to anticipate the craze for clamshell phones, Nokia’s making it a point to be present across all formats: regular keypad phones, QWERTY mobiles, touchscreens and touch-and-type smartphones. “In a market where the majority of customers are not technologically savvy [such as India], all these will co-exist,” says Shivakumar. 

The Smartphone Challenge

Going by the numbers, Nokia is still the market leader in mobile handsets across India. But the crown’s is looking increasingly shaky. The smartphone segment accounts for a minuscule portion of overall handset sales: barely 6% of the 213 million devices (expected sales) in 2011. iPhone may make headlines, but it’s not a serious threat—it’s not sold through regular retail channels and just 62,000 handsets were shipped to India in the quarter ending June 30, according to IDC. For Nokia, the real threat is Samsung.  

IDC’s numbers for the October quarter show that in the smartphone segment, Nokia still led with a shipment share of 35.3%, but this is down from 45.8% in the preceding quarter. Samsung, on the other hand, jumped from 21% in Q2 to 26% in Q3 and is eyeing the numero uno position in the segment by next year something that is affirmed by Ranjit Yadav, Country Head of the mobile & IT business at Samsung. 

Abhishek Chauhan, Senior Consultant, ICT Practice, Frost & Sullivan (South Asia & Middle East), believes ruling over the smartphone segment in the long run will be very challenging for Nokia in India. “Android has already proliferated and is a key challenge for Nokia. Sooner or later, Samsung could overtake Nokia as it is selling more in terms of value even though the volumes may be less than Nokia,” he points out. Already, Android has a 42% share of the smartphone market, ahead of Nokia’s Symbian. And shipments of Android smartphones grew by 90% in July-September in comparison to the previous quarter.

This is why Nokia is counting on its February 2011 tieup with Microsoft—Shivakumar has said that Lumia, the first product under the partnership, is the most important launch for the company. Under the partnership, Nokia has adopted Windows Phone as its smartphone operating system; for the first time, it is creating devices that doesn’t run on Symbian, which will continue to be seen on Nokia hansets until the transition is complete. Shivakumar believes Lumia’s youthful design, the new operating system and apps will prove a winning combination in the Indian market. The main targets for the new phone will be youngsters just entering the job market and those looking to upgrade their existing handsets. 

But analysts are cautious about the Windows platform’s prospects. “The true test of the platform’s viability will be a strong product pipeline and good customer uptake, with the resulting ability to attract a critical mass of application developer talent to compete with Apple and Android,” says Richard Dineen, analyst at HSBC Securities and Capital Markets. Apple had over 500,000 applications while Android had over 400,000 apps according to Q3 2011 estimates. In contrast, Windows Phone 7.5 has less than 40,000 apps while Nokia itself has over 116,000 apps. “We do not believe it is possible to gauge the Nokia-Microsoft partnership’s success on this front until well into next year,” Dineen adds.

Brand consultant Sunil Alagh, Chairman, SKA Advisors believes the company also needs to refresh its image. “It is no longer considered contemporary. Samsung addresses the market through innovation and youthfulness while newer domestic brands such as Micromax address them through pricing,” he says. His solution: make the brand younger. “Nokia is not a forgotten brand; it is just that it is now considered fuddy-duddy. It can be addressed by repositioning and bringing in new products that are contemporary,” says Alagh.

While Nokia claims to be addressing the youth segment through newer applications, devices and marketing campaigns, the reality seems to be different. Frost & Sullivan’s Chauhan believes Nokia is the preferred brand for the 35+ age group. Possibly it is the generation whose first mobile was a Nokia 10-15 years back and they believe in growing old with the brand. For the rest, Samsung seems to be the choice. “Nokia has lost a bit in terms of the strategy around smartphones while Samsung has created growth. I don’t see that reversing overnight,” Chauhan says.

Gartner’s Gupta has a piece of advice for Nokia: “When the Windows ecosystem develops and Nokia can bring mid-range devices based on the platform, it will change the game. There will be volume in the $300-350 price points and that is where Nokia can regain lost ground.” Will that really happen or will Nokia remain the wallflower at the Indian handset party?